Column : Retailers need to get ‘hyper’
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The biggest mistake Big Retail made was to compete with kiranas instead of playing to its strengths
This year, Kishore Biyani's Future Group will celebrate its fifteenth anniversary. Biyani must be a happy man because although not everything has gone his way—in April, he sold off the apparel business to the Aditya Birla group—he has managed to build a business that any foreign retailer would love to get its hands on. Biyani was an early mover, having started out in 1997, and, given his talent for spotting prime real estate, very soon Pantaloon stores were mushrooming across the country. His success inspired several others to venture into the retail space, but most of them—Subhiksha, Vishal, Trumart— made a mess of it, leaving very few profitable enterprises. Even Reliance Industries, with all its access to resources—money and people—hasn't quite got there yet. Whether Walmart, with its worldwide experience, wins remains to be seen, but chances are high it will; it is, after all, a pro at sourcing and will not want for capital. And it will stay with its Big Box formula.
In fact, the big mistake that retailers in India made was to think they could outsmart the kiranas—in hindsight, the biggest casualty has been the convenience stores that simply couldn't match the convenience of kiranas in terms of home delivery and credit. Those that believed they could come up with private labels, so as to have a price advantage, realised that these can be be popular only in very few categories and that customers don't really want to move away from the established brands. It's not surprising then that so many small stores were shut down, some of them within months of being opened—the Aditya Birla Group closed down more than 50 stores.
Not that larger stores weren't shut down. An exhaustive study by CLSA—"Seven or Thirty"—on the prospects for the organised retail sector in Chindonesia, points out that there was a 29% contraction in the modern grocery retail format store base in 2009 and since then retailers have stayed with hypermarkets, moving away even from supermarkets. CLSA, however, has come up with an interesting and somewhat intriguing statistic: it says Indian convenience store companies earned sales per sq ft of $273 in 2011, which is close to levels seen in China of $290 per sq ft and surprisingly also near levels of $292 recorded in the US. The number for India seems to be on the higher side given the relatively higher share of vegetarian stuff as also the relatively smaller share of ready-to-eat or pre-cooked foods that Indian stores stock. Anecdotal evidence suggests that most stores didn't make as much: in fact, they were struggling to cross revenues of R700-800 per sq ft per month and, if the numbers had been better, so many of the KB Fair Price outlets, for instance, wouldn't have shut shop.
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