Future Group To Open 30 Big Bazaar Outlets By 2012

Priyanka Joshi, a schoolteacher in western Mumbai, buys her monthly provisions from a Big Bazaar outlet 2 km from her house, but gets bread, eggs and even rice from an old grocery just outside her society.

“There are usually great bargains for branded products in new retail formats. However, for the day-to-day grocery items such as bread, biscuits, sugar or pulses, we depend on neighborhood stores, where they understand specifications of our kind of rice and pulses. Such stuff is not available in modern retail chains,” says the mother of two children.

Most urban consumers in the country, like Priyanka, are crossover shoppers, frequenting both modern retail and neighbourhood groceries for different needs, says a new study by The Nielsen Company that strengthens the case for allowing multinationals such as Wal-Mart and Carrefour enter the $410-billion retail market in India .

Coming in at a time when the government has revived the debate over allowing foreign direct investment in multi-brand retail by seeking feedback from various stakeholders that has ministries, opinion leaders and small and big businessmen lining up on either side, the one-year-long study clearly suggests that modern retail and pop-and-mom shops can coexist.

“With the shopper moving fluidly between modern and traditional trade, both sides of the retail universe are well positioned to cultivate shopper loyalty and marketers have multiple points of sale to influence the same shopper,” says Roosevelt D’Souza , executive director at The Nielsen Company.

The study, conducted among 3,000 plus shoppers across 11 cities and Nielsen’s national panel of retailers during the 12 months ended September last, suggests that the valuehunting Indian consumer visits modern trade formats such as Hypercity, Big Bazaar, Spencer’s , D’Mart , More and Reliance Fresh for her monthly purchases, while frequenting traditional groceries for her daily purchases.

“I avoid going to the large formats to pick up a few daily essentials. I hate waiting in long queues and getting bar codes checked,” says Sarita Joshi, a homemaker living in Nerul, an eastern suburb of Mumbai. “It is equally tough returning products to big retailers or getting the money back which my neighbourhood kirana takes care of with just a phone call,” she adds.

Grocers are betting on their unique strengths such as customer relationships, home delivery and credit facilities, besides expanding product portfolio, to hold their ground against increasing competition from big retailers, which account for only 5% of the total retail market but are growing 30% a year.

“Our services such as buying back sold goods, home delivery, monthly credit and customised groceries are very difficult for modern trade to replicate,” says Ramniklal Jadavji Cheda, president of Retail Grain Dealers Cooperative Society, the biggest mom-and-pop association in Mumbai with around 9,200 members.

Also, many grocers now place purchasing orders jointly to bargain better with suppliers and sell products at competitive rates.

A Fair World

Allowing foreign direct investment in multi-brand retail has been a vexed issue for many years now. It returned to the public domain when the commerce ministry came up with a discussion paper in July, inviting views from all stakeholders.

Last month, world’s largest retailer Wal-Mart’s CEO Mike Duke flew down to the country, days before US President Barack Obama’s visit , to hard sell the benefits of international competition in multi-brand retailing to Indian consumers as well as small grocers.

While commerce and industry minister Anand Sharma and the Planning Commission have supported FDI in retail, those opposing the idea include micro, small and medium enterprises (MSME) ministry and communications & IT ministry, besides different associations of small retailers.

The biggest fear is that the arrival of the likes of Wal-Mart , Carrefour and Tesco will lead to a huge loss of jobs in traditional retail sector, which is considered the second-largest employer in the country after agriculture with more than 20 million people across some 12 million shops and accounting for more than 95% of total sales.

The latest Nielsen study allays that fear

The Indian shopper, it says, flits across formats to buy different items from each store type. For instance, they visit neighbourhood paan shops for salty snacks and chocolates, chemists for deodorants and milk beverages, and modern trade outlets for branded grocery and liquid toilet soap.

While modern trade is driving sales of premium household and food categories, traditional trade has begun selling more personal grooming products such as hair conditioners, fragrances, deodorants and hair dyes than ever before. Diapers, liquid soap, washing products and squashes are selling equally big from both the channels.

Grocers Grow Smarter

Price is a big factor though. Of all the shoppers who participated in the Nielsen study, nearly 40% said they know the prices of most items in both modern and traditional trade formats, while 45% said they notice a difference in prices between the two formats.

Big retailers have an edge here, thanks to their ability to check operational costs, bargain hard with suppliers and launch private labels.

According to another Nielsen study, modern retail dropped prices by more, or increased them by less, for more product categories than traditional retailers, or kiranas, between the October-December 2009 quarter and the January-March 2010 quarter.

Small grocers too now offer decent discounts to consumers, thanks to joint purchases and tieups with top consumer product companies such as Hindustan Unilever , Procter &Gamble , Godrej Consumer Products, Dabur and Marico .

Bharatiya Udyog Vyapar Mandal, the biggest association of mom-and-pop stores in the country with more than 5 million members, has formed city-centric associations to negotiate directly with manufacturers and do away with any middlemen. This has helped kiranas offer 5-20 % discounts on MRP of branded products like detergents, shampoos, soaps, oil and atta.

They are helped by FMCG players, which are facing increased competition from private labels, or own-brands , of big retailers and are under constant pressure to increase retailers’ margins. Programmes such as Hindustan Unilever’s ‘Perfect Store’ and Dabur’s ‘Parivar’ adopt kiranas and teach them category management and effective merchandising to make them more engaging and presentable.

“Stores are a reflection of the aspirations of any society,” says Godrej Consumer Products executive vice-president , marketing, Tarun Arora. “Although modern trade is roughly around 6% of total retail, traditional stores have learnt a lot from it and consumer companies like us have become catalyst in the process , resulting in the emergence of crossover shoppers,” he adds.

All this has left consumer the winner. She gets never-before bargains from modern retail and never-before service from small grocers . “Attitude of kirana owners has changed a lot, especially in areas where catchments of modern retailers and mom & pop stores are the same,” says Ashwin Merchant, a Mumbai-based independent marketing advisor.

The country’s largest retailer Future Group’s director, food strategy, Damodar Mall says that any format, whether traditional or modern, that meets consumer needs effectively will do well. “Modernisation of all trade is in favour of the consumer,” he adds.