Retailers Borrow ‘Kirana’ Wisdom to Push Sales
Large-format
food & grocery retailers are adopting the kirana-store model, some
considering roping in neighbourhood entrepreneurs to run their outlets
Domestic
supermarket chains, which ran into stiff competition from ‘kirana’ shops at the
very start of their operations, are changing tack to beat the mom-and-pop
stores at their own game.
The food and grocery retail arms of Future Group, RP-Sanjiv Goenka Group, Reliance Industries and Aditya Birla Group are fast adopting the kirana-store model — offering customers more fresh products, a larger variety of ready-to-eat items, and grocery and personal-care products in smaller packs — to add pop to sales.
These retailers believe that the new model will help them expand faster in middle-class neighbourhoods.
“To fight kiranas and survive in neighbourhood retailing, large retailers have to revamp their smaller formats with a mix of merchandise similar to that offered by kiranas and differentiated ones like those offered by global convenience stores,” said Mohit Kampani, chief executive of RP-Sanjiv Goenka Group’s Spencer’s Retail. The efforts of large-format food and grocery retailers to increase market share have been blighted mostly by the popularity of kirana stores, the shoe-box size shops that have been the mainstay of middle-class India’s grocery shopping for decades.
To break into this game, some retailers like Spencer’s and Kishore Biyani-led Future Group are also considering roping in kirana-store owners and neighbourhood entrepreneurs to run their outlets.
Kampani admits the country’s modern retail industry went wrong on the neighbourhhod retail format since they were trying to shrink their existing hyper-marts, which led to closure of several such stores. “The cost structure is high for small stores, and unless the merchandise mix and format is right, it is difficult to make profit,” he said. Perhaps, the only kirana-store-like service that the big retailers will not be able to match is offering goods on credit. “It will impact cash flow and something we cannot match up to,” said Kishore Biyani, chief executive of Future Group. Still, retailers are hopeful. Spencer’s, which was forced to shut over 64 small-format stores in the last three years, wants to remodel its existing 105 stores and future ones on the lines of the ‘kiranas’ and global convenience stores like 7-Eleven.
The retailer plans to stock up on smaller grocery packs, soaps, lotions, and ready-toeat products and fresh produce. In Kolkata, it is experimenting with taking orders over the phone. Depending upon its success, Spencer’s may roll out this pilot project in other markets too.
The Future Group, which runs the country’s largest listed retail entity, is inviting kirana-store owners and local entrepreneurs to operate its smallformat KB’s Fair Price stores. The group plans to scale up from 200-odd stores now to 1,000 in the next two years.
Similarly, Aditya Birla Retail, which has shut more than 100 stores in the last two years, plans to open 100 supermarkets this fiscal. While the company didn’t comment on whether the new stores could replicate local grocers, Pranab Barua, business director for its apparel and retail business, said, “The company plans to experiment with store sizes in the supermarket business model.”
Mukesh-Ambani-owned Reliance Retail has decided not to expand its 2,000-sq ft Reliance Fresh stores in the neighbourhood. Instead, it will focus on 7,000-9,000 sq ft Reliance Super stores that will have a differentiated offering for consumers, a senior Reliance Retail executive, who did not wish to be named, said. Reliance, which aims to open 50 Reliance Super stores this fiscal, also plans to introduce smaller packs and let consumers decide the size of their purchase.
“Competition from kiranas is impacting profitability of Reliance Fresh, whereas the Supers are still performing better,” the same executive said.
In India, modern retail has expanded only in the last five years. To attract foreign investment, the government last year allowed FDI in multi-brand retail. The kirana setup, however, has remained unfazed, which explains why large retailers are concerned.
According to Retailers Association of India, modern retail in India accounts for 7% of the country’s estimated 2.5 lakh crore retail market. The penetration of modern retail as a percentage of the total market has been growing at a snail’s pace. Experts attribute this to slower-than-expected expansion of retail giants who are still unable to crack the neighbourhood-retailing story. Retailers, however, feel that the large size of the kirana market will make it difficult for corporates to upstage the competition. “The kiranas can still provide tough competition to retail biggies, who need to improve their customer service and adapt merchandise as per the catchment areas. Moreover, since consumers are unlikely to patronise a single store for their purchases,” said Kumar Rajagopalan, CEO of Retailers Association of India.
While a large percentage of Indian consumers still vouch for the convenience of kirana stores, the balance is slowly shifting towards large retailers.
A Nielsen study last year said the growing affinity for better value, a more comfortable and modern store experience, a wider variety of categories and brands, as well as compelling deals are driving shoppers to walk into modern trade stores even as they rely on their neighbourhood ‘kirana’ to top-up their need for quick purchases at close proximity.
The food and grocery retail arms of Future Group, RP-Sanjiv Goenka Group, Reliance Industries and Aditya Birla Group are fast adopting the kirana-store model — offering customers more fresh products, a larger variety of ready-to-eat items, and grocery and personal-care products in smaller packs — to add pop to sales.
These retailers believe that the new model will help them expand faster in middle-class neighbourhoods.
“To fight kiranas and survive in neighbourhood retailing, large retailers have to revamp their smaller formats with a mix of merchandise similar to that offered by kiranas and differentiated ones like those offered by global convenience stores,” said Mohit Kampani, chief executive of RP-Sanjiv Goenka Group’s Spencer’s Retail. The efforts of large-format food and grocery retailers to increase market share have been blighted mostly by the popularity of kirana stores, the shoe-box size shops that have been the mainstay of middle-class India’s grocery shopping for decades.
To break into this game, some retailers like Spencer’s and Kishore Biyani-led Future Group are also considering roping in kirana-store owners and neighbourhood entrepreneurs to run their outlets.
Kampani admits the country’s modern retail industry went wrong on the neighbourhhod retail format since they were trying to shrink their existing hyper-marts, which led to closure of several such stores. “The cost structure is high for small stores, and unless the merchandise mix and format is right, it is difficult to make profit,” he said. Perhaps, the only kirana-store-like service that the big retailers will not be able to match is offering goods on credit. “It will impact cash flow and something we cannot match up to,” said Kishore Biyani, chief executive of Future Group. Still, retailers are hopeful. Spencer’s, which was forced to shut over 64 small-format stores in the last three years, wants to remodel its existing 105 stores and future ones on the lines of the ‘kiranas’ and global convenience stores like 7-Eleven.
The retailer plans to stock up on smaller grocery packs, soaps, lotions, and ready-toeat products and fresh produce. In Kolkata, it is experimenting with taking orders over the phone. Depending upon its success, Spencer’s may roll out this pilot project in other markets too.
The Future Group, which runs the country’s largest listed retail entity, is inviting kirana-store owners and local entrepreneurs to operate its smallformat KB’s Fair Price stores. The group plans to scale up from 200-odd stores now to 1,000 in the next two years.
Similarly, Aditya Birla Retail, which has shut more than 100 stores in the last two years, plans to open 100 supermarkets this fiscal. While the company didn’t comment on whether the new stores could replicate local grocers, Pranab Barua, business director for its apparel and retail business, said, “The company plans to experiment with store sizes in the supermarket business model.”
Mukesh-Ambani-owned Reliance Retail has decided not to expand its 2,000-sq ft Reliance Fresh stores in the neighbourhood. Instead, it will focus on 7,000-9,000 sq ft Reliance Super stores that will have a differentiated offering for consumers, a senior Reliance Retail executive, who did not wish to be named, said. Reliance, which aims to open 50 Reliance Super stores this fiscal, also plans to introduce smaller packs and let consumers decide the size of their purchase.
“Competition from kiranas is impacting profitability of Reliance Fresh, whereas the Supers are still performing better,” the same executive said.
In India, modern retail has expanded only in the last five years. To attract foreign investment, the government last year allowed FDI in multi-brand retail. The kirana setup, however, has remained unfazed, which explains why large retailers are concerned.
According to Retailers Association of India, modern retail in India accounts for 7% of the country’s estimated 2.5 lakh crore retail market. The penetration of modern retail as a percentage of the total market has been growing at a snail’s pace. Experts attribute this to slower-than-expected expansion of retail giants who are still unable to crack the neighbourhood-retailing story. Retailers, however, feel that the large size of the kirana market will make it difficult for corporates to upstage the competition. “The kiranas can still provide tough competition to retail biggies, who need to improve their customer service and adapt merchandise as per the catchment areas. Moreover, since consumers are unlikely to patronise a single store for their purchases,” said Kumar Rajagopalan, CEO of Retailers Association of India.
While a large percentage of Indian consumers still vouch for the convenience of kirana stores, the balance is slowly shifting towards large retailers.
A Nielsen study last year said the growing affinity for better value, a more comfortable and modern store experience, a wider variety of categories and brands, as well as compelling deals are driving shoppers to walk into modern trade stores even as they rely on their neighbourhood ‘kirana’ to top-up their need for quick purchases at close proximity.
WRITANKAR
MUKHERJEE & SAGAR MALVIYA KOLKATA/MUMBAI ET130520
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