India’s Retail Business Space

Over last couple of years, India is witnessing so many new comers in retain market segment. This space is already getting over crowded! Leaving apart other retain market segments like electronics, apparel etc, let’s look at vegetables and grocery retail in recent times.

India has been predominantly dominated by next door, ‘pops-and-mom’s store’, or next door ‘kirana dukan’. But, what we are witnessing in current time is a systematic retail business, in the form of Relience Fresh, More, Subhiksha, Spencer etc.

Historically, Indian consumer is cost sensitive and some retain players seems to have understood this. Unlike in US, where people can drive for an hour to get to a WalMart, Indian consumer tends to look around their home for grocery. Traditional cash-and-carry kirana shops provided this kind of facility so far.

Now, the current players have an uphill task in providing the goods at low cost, matching the Kirana Shop cost to be successful in business. The biggest challenge is the real estate. Retailers need to find a space, which is nearer to most of the consumers. And any space with-in city limits costs more in India. In addition to this, logistics is another challenge, with poor road infrastructure; shipping takes more time and money.

Subhiksha seems to have overcome the cost of infrastructure with their unique business plan of having their stores in places which are less costly. Also, The reason why a Subhiksha can price HLL goods so much cheaper than the corner kirana store is not so much that HLL gives it to Subhikhsa cheaper (there is some of that too) but primarily because Subhiksha knows how to make money by turning inventory faster at a rock bottom margin.

The great success of WalMart in US is because of consumer segment they target at, and the lowest cost they provide for goods. Their infrastructure management and supply chain have been key reasons for this success. Example, they always have WalMarts out side city limit.

What we need to observe is WalMart’s entry in to India, where their key success points will be challenged by Indian conditions. In a wise move, they have decided to enter with an Indian partner. This retail market segment is the space to be watched.

But, in all this, consumer is going to be benefited. That’s all we want!