What's biting the Indian Retail Industry

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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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