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The Indian modern grocery retail industry is in trouble. As I mentioned in my previous blog, here are some of the reasons why. As I said before, I don’t have a mantra or blue pill to solve the problems but here are a few things that retailer must look at.
Differentiation is one lever that retailers can look at. But that’s 30K feet level. Let dig a little deeper…
Price is definitely not one of the differentiators. Most of the retailers are selling at or close to the MRP which is not what Wal-Mart did in the US. The mom-and-pop shops suffered big time in the US because Wal-Marts of the world were actually cheaper. Our guys are not a position to – the FMCG players are too strong to be arm-twisted for better prices. Their presence in the market for long and the fact that they have huge distribution networks does not help. Most of the people are not making money even at operating level…
So what can Indian giants provide as differentiator?
The novelty of “AC stores with aisles in which you can wheel your own cart and pick your stuff” is over -
- More often than not the AC does not work. Couple it with the fact that stores are designed for an AC…
- You can go in there to buy chicken and come out as fried chicken yourselves! The aisles are cramped, thanks to the soaring (or rather soared) real estate prices. This especially hurts people who have seen the wide aisles in the western economy.
- Wal-Mart opened their large stores mostly outside the city. Does not work here. We neither have so many cars, nor good infrastructure. We need to be close to the population.
- Picking your own stuff is no fun if merchandise not easy to locate. I know retailers are spending time and money on SPO, merchandise display etc but locating something that you need is a pain. Accentuated by the fact that aisles are narrow and displays poor.
In short convenience that “convenience stores” provide is missing. Personalized service. Home delivery. Close to home. Variety. Flexibility. It’s all missing. May be many of these things are missing in the west as well but it’s taken care of by variety and price. The mom and pop shops are anyway killed by the larger chains. They are not there anymore to provide you the personalized service. Especially in the US. Fortune’s “KB’s Fair Price” is an attempt to “go down”(ironical!) to the level of convenience stores. In my view, it’s a good thought. Lets see how it goes.
The traditional convenience stores struggled for a while when the novelty of the big guys hit their revenues. But they are all back. And stronger.
One area that believe retailers should focus on is FFV… Will cover this piece in my next posting…
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Friday, April 24, 2009
Friday, April 17, 2009
The fall and fall of Indian Retail Industry
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The euphoria is over! The talks about “400 stores today and 4000 stores tomorrow” are over. Some of them are busy closing stores. Someare are busy cleaning the top brass. The folks who wrote “the rise and rise of Indian retail” are busy writing obituaries… the ones who want to make more money (there opportunity in every crisis!) are busy writing “the fall and fall of Indian retail”. Let me get this essay across before the best-selling books are back on the shelves! (I bought a book on retail that costed me Rs 1,000… that was the most expensive book that I bought in year 2008!)
This is essentially true for the grocery retail. The other retail formats like fashion are still able to sustain to some level.
Let me be more specific. It’s the so called “modern grocery retail” which is under trouble… the conventional grocery retail was always there (people were eating, are eating and will be eating!) and will continue to thrive – that’s my take. One might tend to hide behind the global economic phenomena but the fact is that the with or without the macro-economic happenings, the so called modern grocery retail was under trouble…
One of them - damn cheap incluing the electronics(!), I believe, was a ‘pyramid scheme’ – if you know what I mean. It was like a chit fund that depends on exponential growth of investments and/but are bound to fail. Certainly.
Others, who were more “systematic” in their approach, did not really focus on the Indian requirements. No one really tried the kaizen approach. I really appreciate the Bharti/Wal-Mart guys who have quietly opened a few stores in Punjab and are trying to get the right model out. This is very unlike the Wal-Mart approach in the US which is what others tried to copy!
In my view, the great Indian movement was bound to fail because no one really tried to get the model right. I dont really have the magic-pill here but I do have some views around some of the points of failure. Will cover the same in the next edition! Bye for now… See you soon…
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The euphoria is over! The talks about “400 stores today and 4000 stores tomorrow” are over. Some of them are busy closing stores. Someare are busy cleaning the top brass. The folks who wrote “the rise and rise of Indian retail” are busy writing obituaries… the ones who want to make more money (there opportunity in every crisis!) are busy writing “the fall and fall of Indian retail”. Let me get this essay across before the best-selling books are back on the shelves! (I bought a book on retail that costed me Rs 1,000… that was the most expensive book that I bought in year 2008!)
This is essentially true for the grocery retail. The other retail formats like fashion are still able to sustain to some level.
Let me be more specific. It’s the so called “modern grocery retail” which is under trouble… the conventional grocery retail was always there (people were eating, are eating and will be eating!) and will continue to thrive – that’s my take. One might tend to hide behind the global economic phenomena but the fact is that the with or without the macro-economic happenings, the so called modern grocery retail was under trouble…
One of them - damn cheap incluing the electronics(!), I believe, was a ‘pyramid scheme’ – if you know what I mean. It was like a chit fund that depends on exponential growth of investments and/but are bound to fail. Certainly.
Others, who were more “systematic” in their approach, did not really focus on the Indian requirements. No one really tried the kaizen approach. I really appreciate the Bharti/Wal-Mart guys who have quietly opened a few stores in Punjab and are trying to get the right model out. This is very unlike the Wal-Mart approach in the US which is what others tried to copy!
In my view, the great Indian movement was bound to fail because no one really tried to get the model right. I dont really have the magic-pill here but I do have some views around some of the points of failure. Will cover the same in the next edition! Bye for now… See you soon…
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