Sunday, March 12, 2006

Madiwala meets mall

Madiwala is the site of Bangalores well known bazaar. It is a market for fresh vegetables, fruits at pretty good prices (a few rupees lower than the retail prices) apart from other things. The vegetables and fruits that reach here do so through a chain of elaborate middlemen and agents and so on. It is a value eroding chain. At each step, there is loss of vegetables, weight and a loss in the final value passed onto the customer because of the commissions. The price of many a vegetable can be cut by almost 50% after factoring commissions and middlemen.

Foodworld, one of the first grocery chains (nothing like Walmart, these shops are small) off the blocks, is a retailer thats been around for a few years. They have tried various means of enticing customers, like bundling various products (one fast moving, one slow) among other things. The newest idea of theirs (which I think is inspired by Big Bazaar - and which in India is a no brainer) is low(est) prices.

For the first time, I could see that the prices for many of their items is lower than the wholesale market of Madiwala. At Big Bazaar, everything is below MRP, even if its only 10 paise. Foodworld hasnt reached that league, but the point that I make is that why shouldnt customers go to a Big bazaar which is passing the benefits of its efficient sourcing? Why should we try and defend the kirana, which is essentially an inefficient business model? Or a model that makes customers pay for its inefficiency?

More organized retail is more growth for the country. With the growth of urban areas, organized retail is set to boom. You aint seen nothing yet.

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