Supermarkets Make a Tryst with Record Sales on Independence Day

Top retail chains posted their highestever weekly sales in the six days to Independence Day, when heavy discount offers lured buyers to splurge on daily household products, apparels and consumer durables.

Retailers such as Future Group, Reliance Retail, Bharti Retail, RPG Group’s Spencer and K Raheja Corp’s HyperCITY — helped by active participation of several consumer product companies — offered deep discounts across product categories to push volumes at a time when consumer spending is slowing and there are fears of poor monsoon rains impacting demand.
“Consumers are looking at savings more than ever before,” said Rakesh Biyani, joint MD of the country’s largest retailer, Future Group, whose 164 Big Bazaar outlets across some 90 cities saw more than 8.1 million visitors during the week ended August 15. “We have been working to integrate our supply chain to bring down prices as far as possible.”
Several suppliers, including Coca-Cola, Britannia and Procter & Gamble, participated in special Independence week deals, helping retailers to offer higher discounts than before.
Darshana Shah, business head for marketing at HyperCITY, a hypermarket format run by Shoppers Stop, said increased vendor participation as well as entire malls going for sales helped pull in the crowds. “The sale was definitely better this year as we had stronger and bigger deals since market sentiment was soft,” she said. HyperCITY also increased its spend on marketing this year at around 2% of overall sales. During the week, Big Bazaar outlets sold more than 1.4 lakh packs of a combination of 5 kg of rice and sugar each with 5 litre of edible oil, and more than 1,500 tonnes of detergent. LED TVs, mixer-grinders and induction cookers were among the other top sellers at Big Bazaar, officials said.
Spencer’s Retail said its same-store sales increased 24% year-on-year during August 11-15, driven by beverages, health and beauty, bakery products and staples that saw over 30% sales growth. Sales of FMCG household products grew over 50% while liquor sales rose 30%, Sanjay Gupta, executive director (marketing & business development) at Spencer’s Retail, said.
Such discounting, however, reflects the escalating pressure on retailers, whose sales are slowing during non-discounted periods. “Because of the slowdown sentiment, consumers have been withholding purchases, so companies are trying to push volumes through discount seasons at retail chains,” said Mayank Shah, group product manager at Parle Products, the country’s largest biscuit maker.
But those volumes come at the cost of bottom lines, he added. Earlier this month, credit rating agency Fitch said same-store sales growth of retailers slipped across lifestyle and value-based formats in the quarter ended June, adding that it expects retailers to combat slowing sales by offering discounts.
“However, this may lead to an erosion of gross margins,” Fitch said, while revising the outlook for the Indian retail sector to negative from stable for the first half of this fiscal due to sustained decline in the discretionary spending ability. A slew of factors such as economic slowdown, deepening crisis in Europe, high food and fuel prices has impacted consumer sentiment in the country, slowing sales of everything from cars to carpets.
Some retailers use inflation as a marketing tool. A case in point is Bharti Retail’s “freedom from inflation” campaign at Easyday stores, which help people fight inflation by providing quality merchandise at low prices. Retailers such as Reliance Retail used the week to increase their customer base. Reliance introduced discount offers such as ‘double the difference’ price guarantees across various product categories.

The small-store owner is too important, nimble and innovative to be bumped off by big-box retailers in India.

Kirana RIP? Not Yet.

The arguments for and against FDI in retail are, at a generic level, valid on both sides. However, since the devil is usually in the detail, the facts about India’s small retailers and suppliers, the conditions stipulated for FDI, and recent experience with the effects of domestic modern retail need to be viewed together before the likely outcome pronounced. The big fight is about whether this new policy will kill small shops, massively destroy livelihoods and take away GenNext’s opportunities. Facts suggest otherwise. Consider the kirana, the one most feared to be at risk. About 5-6 million of the 8 million FMCG-stocking kiranas are in rural India, and are totally safe, as the new ones can only come into the top 53 cities.

R Sriram, founder of Crossword and retail expert, tables two insights. One, in many big cities, kiranas are already not participating in the growth offered by the newer settlements like Gurgaon or Powai, because without their advantage of historically-priced real estate, they are not viable. Two, increasingly, small shopkeepers’ children are getting better educated and want to exit ‘sitting in the shop’ as soon as possible, just as small farmers’ children are exiting farming. Sadly, the country’s retail density has been increasing in recent years, not driven by passion or profit, but because of lack of options — hopefully that will change. It is true that traditional income streams of small shops in the vicinity of a large supermarket plummet; but we have seen that they soon recast their business model, exploiting the inherent advantages they have that the supermarket cannot emulate: free, prompt and no-conditions home delivery, superior and customised customer relationship management, khaata- credit and willingness to stock small quantities of something used by only a few people in their catchment — a classic ‘long-tail’ strategy. Notice two more things: even in upper-class areas in large cities, despite large retail chains in the vicinity, the small vegetable vendor and kirana continue to find a place in the household’s shopping basket. The kirana also continuously morphs, and is already moving to a more specialised and selective portfolio. We will find them variously choosing to become more of a convenience store (7-Eleven-type), or fresh-food store, a home-delivery store, maybe even express-format franchisees of large retail, and so on.

Another reality check: how much consumption capacity do even the top 50 cities have? Seriously, how many more Ikea, Zara, Walmart, Tesco and Best Buy can a Surat, Kanpur or Indore absorb, in addition to more Big Bazaar, Megamart and Croma? Further, foreign specialty retailers targeting the rich consumer will create never-before custom, and not at the expense of existing shops. Two decades ago, we had the same hue and cry that Indian brands would be wiped out; but they got better and bigger than they would have had they been left unchallenged. Now for the suppliers. Large suppliers will lose the pricing power they had with small retailers and nobody on any side of the FDI debate is grieving for them. Small suppliers, even without FDI, are being mercilessly squeezed by middlemen. The hope is that large retail chains, unlike the broker middleman, have more incentive to pay more because they have customer loyalty and a brand to build; in exchange for steady, loyal, consistent quality supply, they will pay more, guarantee offtake, improve product and production efficiency. The FDI norm of at least 30% sourcing from small scale pushes this further. Walmart potentially could kill the small suppliers of anything by importing 70% from China cheaper; but loads of small traders are already doing the same, flooding our markets with Ganesh murtis, chappals, clothes, watches, etc.

The Achilles’ heel for a lot of skilled artisans, specialised producers, grass roots innovators, etc, is market orientation and marketing. Producer collectives have managed to organise themselves on the supply side using government assistance schemes, but they struggle to manage the demand side. That is the missing link that large retailers in vendor development mode can provide, just as the auto industry has done to ancillary suppliers. Both sides agree that customers will gain because large chain retailers can provide better for cheaper, given the discounts they get through buying large quantities and sourcing smartly. Customers will also get a wider range, more innovative products and more comfortable, truthful and informed shopping environment. Poor customers won’t get discriminated against, because the hypermarket is anonymous, transactional, classless and nonjudgemental. They may not get better service because the small Indian retailer is the champion of good service, from atta to electrical, the likes of which we haven’t yet seen any big retailer match, anywhere in the world. That’s another reason why he will always survive.

Before we fight further, consider this. This network of commercially-savvy supplychain linked small retailers is an invaluable asset: as one report said, they are not ‘unorganised’ by any stretch of imagination; we agree and have refrained from using this phrase in this article! It is unlikely that Indian jugaad will let this network disintegrate. Perhaps in rural India, where they would have been more hard hit had the big-box retailers been allowed, they would have been garnered by banks as new extension counters for financial inclusion.

economictimes.com: RAMA BIJAPURKAR INDEPENDENT MARKET STRATEGY CONSULTANT

Charging for plastic bags at shops pays off.

Customers have been carrying cloth bags to stores in order to avoid paying for the carry bags available; this has led to a 54 per cent dip in their sale

It’s working! Ever since the Environment Ministry decided to make customers dip into their pockets and purchase plastic carry bags in retail stores across the city, shoppers have been giving them a wide berth, leading to the desired dip in sales.

Cross Branding at Supermarkets

Big Bazaar Carry Bag

Say no to plastic: Retail stores and malls have been charging customers
Ra 3-5 for plastic carry bags.  With the introduction of carry bag charges customers have started bringing carry bags to avoid the charges resulting in cross branding at different outlets, above pic shows customer bringing the Big Bazaar carry bag at D-Mart outlet. 

According to a study conducted by the Retailer’s Association of India (RAI), the sale of plastic bags has declined by 54 per cent. A survey conducted by the organisation revealed that while 65 per cent shoppers had welcomed the environment-friendly move, 20 per cent had given a lukewarm response to it, while the remaining 15 per cent had opined that the move should be done away with.

Kumar Rajgopalan, CEO of RAI, said, “We have received an overwhelming response from the shoppers. Only a small percentage of the shoppers are reluctant to pay up for the plastic bags, but we are sure that they too will see the benefits of the move soon.”

He added that shoppers had been noticed getting their own cloth bags for shopping trips, ever since the rule was implemented, and this had led to the low consumption of plastic bags.

However, Rajgopalan added that the unorganised retail sector is yet to warm up to the recently imposed norm.
“We hope that smaller retailers too start charging their customers for the plastic bags that they provide. We have already spoken to the BMC, urging them to ensure that the law be made applicable on all traders, big and small,” he said.

Officialspeak
Environment Secretary Valsa Nair Singh said, “We have received a great response from the citizens. We have asked the BMC to frame stringent laws that make the norm applicable to all retailers.”

Future Group to build wholesale markets

Agre Developers, a Future Group company, formerly known as Future Mall Management, has struck a deal with Bangalore-based developer the Sattva Group to build a wholesale trading market on the lines of Dubai’s Dragon Mart and China’s Yiwu wholesale market. This is the first of the eight businessto-business (B2B) markets that the company is planning to start across major cities in the course of the next few years. These trading hubs will stock general merchandise, IT peripherals, hardware products along with other commodities typically spread across a 5-10 acre space. The BSE listed-company will also be getting into the infra-logistics and retail infrastructure business. 

Kishore Biyani had merged his real-estate business with Kolkata-based developer Sumit Dabriwala into Agre Developers to strengthen the retail major’s foothold in the realty space. The retail to financial services group runs stores like Big Bazaar and Food Bazaar.
Sumit Dabriwala, MD, Agre Developers, told TOI, that the strategy for the company going forward will be to tie-up with strategic partners to facilitate the opening of these tradings hubs and also to build infra-logistics across the country. Agre Developers will work in tandem with Future Supply Chain, the logistics and supply chain vertical of the group, on the infra-logistics business.
“Even as the demand of logistics in the country expands, supply of good quality logistics infrastructure is extremely low. This is where we will work with Future Supply Chain and also with other logistics companies,” Dabriwala said.
The company will look to plough about Rs 500 crore of equity across the three formats and is evaluating the possibility of inviting strategic partners into each of these businesses. The total outlay on the three business verticals will be around Rs.3500 crore over the next five years, said Dabriwala.
“While the wholesale trading and the infra-logistics business will be in partnership with another entity, the retail infrastructure vertical of the company will be operated independently.
“On the retail infrastructure side, the mandate is to play a bigger role which will start right from spotting the location of the mall to designing the mall, determining the tenant mix, sub-leasing the mall and managing it over the life cycle of the transaction,” Dabriwala pointed out.

Big bazaars score over kiranas

EARLYthis year, when escalating prices were crunching household budgets, modern retailers were more responsive in cutting or holding prices of day-to-day products than traditional retailers, thanks to their ability to check operational costs bargain hard with suppliers and launch private labels.

According to a study by The Nielsen Company, modern retail dropped prices by more, or increased them by less, for more product categories than traditional retailers, or kiranas, between the last quarter of 2009 (Oct-Dec) and the first quarter of 2010 (Jan-Mar).

“The power of modern retail lies in the scale and efficiencies which we have built over the years,” says Kishore Biyani, CEO of Future Group that operates retail formats such as Food Bazaar, Big Bazaar, Pantaloon and KB’s Fairprice stores.

The Nielsen Shop Census study compared prices of 47 commonly used items including toothpastes, washing powder and confectionery. Modern retail dropped prices by more, or increased them by less, than traditional retailers for 29 product categories while traditional retailers did better in 18 categories.

It collected data from 16,000 stores (11,000 urban and 5,000 rural, in both modern and traditional retail) in 462 towns and 1,427 villages.

During this period, the rate of inflation, as measured by the Wholesale Price index, was hovering around 10% and food inflation was more than 12%.
In the past two years, modern retail has been able to significantly cut operational costs related to real estate rentals, energy costs and increase persquare-feet productivity of employees leading to savings in people costs.
They also launched private labels to get a better grip on selling prices and profit margins, and some savings were passed onto customers.

Higher collaboration with small and medium suppliers as well as distributors of large FMCG companies helped them cut costs in transportation and logistics.

Efficiencies of scale helps one source the goods closer to the manufacturer says Mr Biyani. In 2009, Big Bazaar sourced 26,000 tonnes of rice, 4 crore pieces of clothing, 20 lakh suitcases, 36 lakh mixer-grinders, 45,000 manufactured beds, 20 lakh bedsheets and 19,000 LCD TVs. Each of these figures will be higher by a minimum of 30% for the year 2010, he says. “Such large sourcing allows us to get better prices directly from manufacturers and producers.”

Big Bazaar is the largest player in the segment contributing over 33% of modern retail sales. Other top retail formats competing with traditional kirana for essential purchases include Reliance Retail, Aditya Birla Retail’s More and Spencer’s Retail.

Kumar Rajagopalan, CEO, Retail Association of India, says strong sourcing power helps modern formats offer better prices. “They have done away with the extra level of intermediaries,” he says.

Meanwhile, grocers too are working on protecting their turf by leveraging on their strengths such as customer relationships, home delivery, credit facilities and expanding their product portfolio.

Top FMCG companies such as Hindustan Unilever, Procter & Gamble Marico and Godrej have begun adopting kiranas, teaching them category management and effective merchandising to counter big retailers and their private labels.

Bharatiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom-and-pop stores, has formed city-centric associations that negotiate directly with manufacturers such as Unilever and P&G and do away with any middlemen.

This helped kiranas offer 5-20% discounts on MRP of branded products like detergents, shampoos soaps, oil and atta.

“When prices rose due to inflation some kirana stores offered customers the option of paying in instalments apart from extending them credit for a month,” says Vijay Prakash Jain, secretary general of BUVM that comprises 17,000 state and district-level associations across 27 states.

Interestingly, kiranas managed the prices of items such as detergent bars toilet soaps, shampoo, packaged tea and iodised salt better than modern retail, according to the Nielsen study.

Currently, traditional retail, both grocers & chemists, constitute over 95% of total sales in the country.

Modern trade at just 3-5% of the total national industry sales, had grown aggressively at over 35-40% contributing to over 15-25% sales for most consumer goods companies last year.

Retailers Work under one roof by sharing space.

Now Rival Retailers Work under one roof

SHARING SPACE TO EXPAND SPECIALTY CHAINS

THEY are fierce rivals in the marketplace, but big retailers such as Future Group, Reliance Retail, RPG Retail and Aditya Birla Retail now tap each other’s synergies to expand their specialty chains.

So, walk into a ‘Central’ mall of Kishore Biyani’s Future Group and you may well see Reliance TimeOut, the gift-music-book format of Mukesh Ambani’s Reliance Retail. Reliance’s optical chain Vision Express shares some premises of Birla group’s ‘More’ hypermarkets, while RPG Retail has rolled out 20 Music World stores inside Future Group’s Big Bazaar outlets.
“Retailers have now realised that they alone cannot manage all categories on their own, how much hard they may try,” says Arvind Singhal, chairman of retail consultancy Technopak Advisors.
Future Group CEO Kishore Biyani says it’s a win-win model for both retailers and customers. “The retailers can exploit each other’s synergies in non-competing categories, which ultimately helps the customer get a wider choice from the same store,” he says. “We are open to locate our specialty stores in other’s premises, if such opportunities come up.”
There has been a flurry of deals and expansions in the $20-billion organized retail sector over the last five years since companies such as Reliance, Aditya Birla and Bharti entered the turf and started floating specialty chains on their own or in tieup with foreign players.
“There are obvious opportunities to associate with each other, provided the brand positioning of the stores match,” says Bijou Kurien, president and chief executive
(lifestyle) of Reliance Retail.
He says that this model of co-locating stores could emerge as a way to expand. “We understand each other’s issues like constraints in standalone expansion and profitability.”
The concept of shop-in-shop within largeformat stores such as hypermarkets is selling like hot cakes among garment and other single/limited product retailers because it saves them the cost of operating standalone stores and gives access to a captive consumer base of the large format.
Also, specialty shop-in-shop owners need not worry about associated costs like security, civil engineering and air-conditioning, says Mr Singhal of Technopak.
Retailers say running a shop-in-shop costs at least 25% less than a standalone shop of the same size.
These deals mostly follow a revenue-sharing model, but retailers say there is no standard formula on the percentage of revenue shared. It depends on the customer traffic the large store is able to drawn.
In some cases, there could be sharing of shop-floor employees, sharing of loyalty schemes and payment counters.
“The model of collaborative expansion will drive efficiencies,” says K Dasaratharaman, president (speciality retail) of RPG Retail, which plans to more than double the number of its music-and-movie chain Music World outlets inside Big Bazaar. “We are talking to few others like Aditya Birla Group to expand on this model,” he says.
Shoppers Stop vice-chairman B S Nagesh says the chain will explore this model to expand its book retail chain Crossword. “Distribution has emerged as the key point in the country,” he says.
Reliance Retail
Reliance DIGITAL — Consumer durable & information technology
Reliance TRENDS — Apparel & accessories
Reliance WELLNESS — Health, wellness & beauty
Reliance FOOTPRINT — Footwear
Reliance JEWELS — Jewellery
Reliance TIMEOUT — Books, music & entertainment
Reliance AUTOZONE — Automotive products & services
Reliance LIVING — Homeware, furniture, modular kitchens, furnishings SPECIALTY CHAINS OF BIG RETAILERS
Future Group
PLANET SPORTS — Sports lifestyle NAVARAS — Jewellery aLL — Fashion for plus-sized people DEPOT — Books
RPG Retail
MUSIC WORLD BOOKS & BEYOND
Tata Group
LANDMARK — Books, music, gifts, movie

Value segment posts Impressive retail growth.

WHILE the economy is showing clear signs of a recovery, there is reason enough to believe that a brief tryst with economic downturn has forced free-spending Indian consumers to tighten their purse strings. Value apparel retailers posted faster growth rates of 7-8% in the past two months, compared with premium lifestyle retailers, which continue to record flat or marginal growth.

After several months of declining sales, value retailers such as Big Bazaar, Vishal Megamart and Pantaloon have witnessed a smart recovery, while mid-priced and premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth, according to industry estimates.

“Broadly, value retail segment has regained an average sales growth of around 7-8% in the past two months, while lifestyle formats are growing at around 0- 4%,” said Rahul Mehta, president of Clothing and Manufacturing Association of India (CMAI). Consumers are clearly not in a mood to shell out a premium, and apparel retailers are now working around the current consumer sentiment, said Mr Mehta. “Lifestyle formats are recording flat growth rates and, in fact, growth was (-)3% in January,” said BS Nagesh, managing director & CEO of Shoppers’ Stop.

Retailers are hoping for an upswing in the lifestyle segment by September 2009 on account of festive buying. Analysts believe that economic turnaround will first benefit the value retail, which would propel the future growth in organised retail sector. In April, Pantaloon, with value and lifestyle sales ratio of 60:40, has marked a sales growth of 23% and 18% in the respective segments. It was 5% and 4% in March, and there was a negative growth in December. Provogue recorded (-)9% sales growth in December. However, in April and May it rebounded to 10-12%, based on same store sales, said Nikhil Chaturvedi, MD, Provogue India.

Roughly, value and lifestyle segments share the organised apparel retail market in a proportion of 3:2 in tier-I and tier-II cities, and recorded an year-on-year growth of 10-12% in the corresponding months of last year. Organised retail has been under pressure since September last year. Apparel retail was worst hit during the period. With consumers starting to cut back on spends, most of the retail outfits suffered negative growth in the second half of the last year. However, with the start of new financial year the organised retail sector has seen a gradual improvement.

GOING SLOW

Value retailers like Big Bazaar, Vishal Megamart and Pantaloon witnessed a smart recovery
Mid-priced & premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth Retailers hoping for upswing in lifestyle segment by Sept ’09

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