Friday, July 21, 2006

Retail - the coming battle 2

As the biggies move into the retail space, there are battles to be fought and won at various levels.

A large format store needs to change the mindset of the customer - she has to go to a place some distance away and shop in bulk. That is not the "current" way of shopping in India. The current shopping method (especially groceries) in India is to pick up stuff on a JIT basis or on the way back from work or elsewhere. Today the kirana affords her the luxury of both home delivery and zero planning (if need be). The only persons who will go that way are those who own cars (well, you can use a bike...). Otherwise, these stores are places you visit, but necessarily buy anything or buy something small since you cannot carry it back easily on public transport. Having said that, the market size of "car grocery shoppers" is pretty big as big bazaar has discovered.

So, while, a "Walmart" may find the going easy at the level of the consumer who is used to going out and shopping for a month or so, it may not find these local victories so easy, especially with low margin stores like Subhiksha that do not really seek to change the mindset of the Indian consumer.

I believe, that the player to be watched in this space is Reliance. They have got the whos who of Indian industry and it will be interesting to see if these strategists have got the mind of the Indian customer right. I am pretty sure, that a Walmart Americanised model will not work in India. The Big Bazaar, the Walmart of India, if I may, has an interesting model, but it is closer to the American "drive and shop" model. With parking space and crowds both being a big issue at most Big Bazaars - we need to see what new entrants learn from these shops.

Apparently Reliance will have a mix of large format stores and small stores (I read that somewhere, cannot recall where) - now that is interesting. Its first tie up (acquisition) with Sahakari Bhandar (aha, nostalgia) in suburban Mumbai seems to have given it encouraging results.

There are many other fragmented segments - which may or may not be worth tapping. Buying in bulk saves money - so you order in bulk. For instance you can buy 25 kg of rice at 20 rupees instead of buying 5 kg for 23. Or sugar for that matter. Or even wheat. This used to be in vogue in certain areas. I remember lorries unloading 50 kg rice sacks for quite a few households in Mumbai. (Delivery used to be free if a few people ordered together). The Roshan Punjabi Atta delivery model is another example. You called up and they delivered atta in a bright coloured Bajaj tempo at your doorstep. Indeed Big Bazaar as well as Subhiksha offer "free home delivery" - which is a good idea for "non-car" shoppers. "Free home delivery" is something the consumer is used to in an Indian groceries context and getting totally rid of that will be tough. So what will Reliance come up with? Somebody who will take your take your order from the kirana down the road and pick stock from the store and deliver it home? This is my speculation, but why not?

11 comments:

Ullas said...

Here is a intersting study of the retail business worldwide as well as in India.

http://www.sathguru.com/Note_on_Retail_Industry.pdf

Btw, the Margin Free Stores in Kerala are an example of chain stores that are small, but replicate almost the small model at all locations. I have visited a number of them and they almost have the same look and feel and mode of operation. Something different than the usual cornerstore.

More about Margin Free Markets is at
http://en.wikipedia.org/wiki/Margin_Free_Market

Neelakantan said...

Which is why it will be interesting to see how the space shapes up. What will Reliance address - mass markets, niche markets or a mix?

deena said...

Sangam Direct from HLL offers a fairly efficient home delivery service. I have reviewed it at
http://www.frugal.in/sangamdirect.html

Anonymous said...

I was looking at all the Real estate Signs California I happened to find the abslote best price in california with this company... Great service...

Anonymous said...

charlottesville real estate Was the Site I arrived at when I was offered the best real estate deal in my life you must contact this company.

Anonymous said...

I recently found real estate signs from DEESIGN, The Best value and customer experience a realtor will ever have, hands down.

Anonymous said...

Nice Blog. I will keep reading. Please visit my blog at:

The Internet Marketing Genius, Carael Knight

Anonymous said...

Very interesting blog. With valuable information and tips.
It is a pleasure to read, even the archives.
Take the time to visit the following info at Click Here!"

Anonymous said...

This is a great Blog! But if you want to really
earn money from home work with a system that is
good and is as simple as owning your own
ATM Cash Machine!
ATM CASH

Anonymous said...

This is a great Blog! But internet marketing costs money.
If you want to start for the price of a burger to supplement
your income you need a simple method. No PPC cost, no list!
Just some of your time! You can work at home with a system
that is as good as owning your own ATM Cash Machine!
ATM CASH

Anonymous said...

Subscribe to Free 7-Day E-Course on advanced Internet marketing strategies. Learn how to add 22+ Reps a Day to your Downline: Residual Wealth Factor