Just goes to show that the logic of retail is dynamic, and to that extent retailers in Indias nascent market are bang on target for experimenting with home grown retail formats, rather than just relying on international tried and tested formats, since, as is evident, these are constantly changing to create additional value for the customer.
The value is that by providing easier and quicker access (these stores are located close to residential areas downtown and have smaller parking lots), they enjoy an advantage over Wal-Mart, which used to stick to the outskirts of towns, due to its vast size. A bigger advantage is that they are able to offer lower prices than even Wal-Mart sometimes, because they occupy cheaper real estate, do no marketing, and employ about four persons per store and often resort to selling closeout and stock-overrun merchandise. Dollar Tree stores for example, price everything at a dollar. The flip side is that customers from a lower income segment of $30,000 per annum comprise 51 per cent of their sales, compared to $40,000 per annum for a Wal-Mart, but some recent surveys show, the $70,000 customers are beginning to come in as well. To complete the retail cycle, Proctor and Gamble, now produces $1 priced Dawn dish soap in 18 oz pack sizes to fit the Dollar pricing of these stores. Makes sense if you see that 11 per cent of Dollar Generals sales comprise P&G products.
So, the next time you hear of an Indian retailer changing his/her format, its not necessarily a sign of not knowing the business, it could also be a case of evolving with the business. The example that comes to mind first is the RPG group. Their retail venture already comprises four different formats, and the companys just added a fifth to this. It had the FoodWorld grocery stores (2,500-4,000 square feet) for the longest time, across Chennai and other cities down South, to which they added a format of a music store and beauty products store, namely MusicWorld and Health and Glow. They then went on to introduce the Giant hypermarket format, and have now opened their first FoodWorld Convenio in Chennai with Indian Oil Corporation. This is a 1,500 square feet format retailing predominantly food items.
Similarly, the saga of coffee shops within bookstores and bookstores within coffee shops, or Internet cafes within coffee shops continues. Witness Crossword bookshop with a coffee cafe or Barista partnering the Corner Bookstore, or then a Reliance Web World outlet with a Java Green coffee bar.
Perhaps, one of the largest experiments with format, in terms of sheer size has been the Big Bazaar chain. What is interesting here is that the Pantaloon outlets of the same group have evolved from stand-alone apparel retail outlets to a large format, relatively low-priced department store format to say the Phoenix mills outlet of Pantaloon in Mumbai which is clearly more upmarket and fashion oriented. Similarly, the Shoppers Stop department store has a new buzz to it, as it evolves to an even more upmarket format with its newly-opened Mumbai outlet at Malad where it has reserved 2,000 square feet of space (the sections called Buzz) for Indias top designers.
Interestingly, while my last column talked of international retailers not necessarily rushing to invest in India in case foreign investment was allowed in the sector (primarily due to a poor regulatory framework, exorbitant real estate, and poor supply chain), Id like to add a caveat to that. Namely, that if foreign investors are to come in, theyd do well to experiment with new formats more appropriate to Indian conditions. With smaller formats, for instance, theyd get over the problem of not being able to find contiguous space of the required size in most city areas.
I should report here that foreign retailers have, in fact, already begun such experimentation overseas as well. Britains leading food retailer Tescos strategy for entering China is to try and buy a stake in Ting Hsin International (a network of 25 hypermarkets in China), while the same company is following a different strategy for Japan. It bought C-2 Network which is a chain of 82 small supermarkets and discount stores and a few cash-and-carries. C2, in turn, is planning on buying Fresh and Cost, a chain of 27 neighbourhood stores in Tokyo. According to retail industry specialists M+M Planet Retail, the emphasis on small supermarket and discount store formats is more popular with Japanese customers and since there are many such vulnerable retailers, Tescos strategy may be more successful than Carrefour and Wal-Mart who are investing in large store formats in Japan. What is relevant here is that three of the giants in international retail are employing different strategies for the same single market of Japan.
So, instead of the usual huge supermarkets most people talk of, maybe well finally also get to see tie-ups of the type Banaras House was once planning with the UK chain of small stores called International Grocers Alliance, in keeping with the fact that kiranas still dominate Indias retail space near completely.
Namita Jain is a retail consultant. She can be contacted at firstname.lastname@example.org