In the late 2000s, when several corporate houses had entered or planned to enter the promising organised retail sector, the country also saw a nationwide emergence of motley groups opposing the rising number of branded stores in India.
Small vendors across the country staged street protests and ransacked branded outlets, fighting the entry of corporate titans in the retail business and opposed the opening up of the sector for foreign investment. The possible entry of Walmart became the lightening rod for the retail protesters.
Currently, as the prospect of opening the sensitive sector for overseas investment looks brighter than before, the retail opponents have been dormant rather than active, with not even the signs of the usual street protests.
One answer could lie in the narrow alleys of east Delhi, which is the capital?s strongest retail market in term of sales and a strong bastion of kirana stores. In 2007-08, dozens of branded stores sprang up in the neighbourhood marketplaces, including Reliance Fresh, Subhiksha, Spencer?s Daily, KB Fair Price, Aditya Birla Retail?s more., etc. Most of the branded stores have shut shop since.
Small shopowners in many urban areas, who saw the air-conditioned grocery stores as a threat to their businesses, saw those stores vanishing one after another from their crowded bazaars.
In the late 2000s, several corporate titans such as Reliance Industries, Aditya Birla Group, etc, entered the sector, at a time when organised retailing was touted as the next sunrise sector in the country, after information technology and telecommunications. In a bid to outdo each other and to get a head start, many of them saw smaller format stores?that took competition directly to the kirana stores in their traditional bastions of bazaars and narrow alleys?as the winning mantra with the idea of expanding swiftly to turn profitable faster. In 2006, top officials at Reliance Retail had talked about their plans to open thousands of grocery stores in a format called Reliance Fresh over the next five years, and Chennai-based emerging star Subhiksha Trading Services talked about ?carpet bombing? various cities with hundreds of its low-frill discount stores.
What was seen as a winning retail formula became the biggest casualty of the economic slowdown that hit India in late 2008. Various modern retailers closed at least 3,000 smaller format stores in India during the slowdown period; it included the demise of Subhiksha, which shuttered about 1,600 outlets.
What seemed an imminent threat to small vendors is no longer perceived to be the case. Retail executives, market watchers and even small store owners have realised that it is hard to beat mom-and-pop stores in their forte of understanding the needs and patterns?personalised services, credit, among others?of their target customers.
A chief executive of a large retail firm recently told me that the modern retailers were not able to succeed in the small store format as the branded outlets did not offer any additional benefits to consumers except for air-conditioning.
And the air-conditioning that is supposed to provide a comfortable shopping experience to consumers is making big retailers sweat as it adds to overheads, and results in many stores becoming unviable. Meanwhile, kirana stores in many cities devised new methods to stay competitive. Many of them installed air-conditioning, created aisles, introduced trolleys, computerised billing and started accepting credit cards. Not only that, the traditional stores stock products relevant to their neighbourhoods?sticking to packaged foods in areas like Bangalore with its tech workers, but adding gourmet foods, wasabi paste, morels, refried beans and the likes to cater to the upmarket residents of, say, south Mumbai. On top of that, kirana stores formed groups in many cities to gain better bargaining power with distributors and offered discounts to consumers.
Even after big retailers are coming out of their shells to expand, the smaller-store format is almost off their radar. While Reliance Retail is expanding larger hypermarkets, it is regularly closing many of its smaller Reliance Fresh debut stores. Aditya Birla, Spencer?s, etc, who are currently focusing on the larger stores are also going slow on smaller stores.
The slowdown from 2008 to 2010 has been seen by many in the retail industry as a blessing in disguise as shrinking consumer spending forced organised retailers to become efficient in the supply chain, to focus on the right model or to close stores with no hope of turning profitable in the foreseeable future. Most of the retailers say they have emerged better off after the slowdown as they learned to be more efficient and to cut costs. One thing they say in chorus: it?s hard to beat the kirana stores, at least in the foreseeable future.
rasul.bailay@expressindia.com