Overcrowded malls, long queues for billing, waiting to park the vehicle have become a common experience for customers. To make shopping a better experience for the customers the shopping malls have come up with several offers to lure the customers to shop on weekdays in order to avoid overcrowding on the weekends. But this has also not solved the purpose. It goes back to the demand-supply theory – the malls are less and the customers are far too many. Having said this, a major chunk of the local kirana/ mom-n-pop stores which fall under the so called ‘unorganized retail’ category bear the brunt of it all in terms of reduced sales, even lower margins. The retailers under the unorganized retail type are able to offer services like home delivery, credit period, delivery of products on a need basis, option of returning the stuff back to the retailer in case it is not good, etc. In spite of the fact that they offer more non-tangible benefits, they are still loosing ground to organized retailers.
Turning around their business has become the need of the hour for the retailers. For this, they are taking several steps:
- Give a longer credit period
- Sell a price lower than the MRP (maximum retail price) thus taking a cut on their margins
- Increased frequency on home delivery of products on need basis
- Give the whole customer experience a personal touch – giving sweets, gifts to customers during the time of festivals
- Take orders on the phone
- Some have also gone to the extent of hosting their websites in order to promote the products and offer of the day
The above steps have slowed the ground losing process for these mom-n-pop stores. The battle may have been won but the war is not over yet.
According to a McKinsey report published in September 2008, called 'The Great Indian Bazaar: Organized Retail Comes of Age in India', organized retail in India is expected to increase from 5% of the total market in 2008 to (14-18)% of the total retail market and reach US$ 450billion by 2015.
One thing still favoring the mom-n-pop retailers in India
- Land market regulations: Unclear land titles and red tape creates barriers to entry and business turnover
- FDI restrictions: Reduce competitive intensity among domestic players
One approach to deal with the arising situation is as under:
The mom-n-pop/ kirana stores need to come together and form an association within a shopping area/ community. For example retailers 1, 2, 3 and 4 decide to form a cartel and work together on improving sales for each other. Retailer ‘1’ sells readymade garments, retailer ‘2’ has a restaurant, retailer ‘3’ sells groceries and retailer ‘4’ has a snacks cart. Now in a hypothetical situation where in say a customer goes to buy readymade garments shops for say Rs. 5000/- and the retailer gives him a shopping voucher worth Rs. 250/- which he can redeem at the restaurant owned by retailer ‘2’ provided his bill amount is in excess of Rs. 1000/-. Now in case the bill amount is more than Rs. 1000/- at the restaurant, the customer gets a voucher worth Rs. 50/- which he can redeem at the groceries store provided he shops for Rs. 500/- or more. Now in case the bill amount is in excess of Rs. 500/- the customer gets a shopping voucher worth Rs. 20/- which he can use at the snack cart provided his bill is more than Rs. 100/-. The sharing mechanisms should be worked around in a manner where in all the ones involved in the association can benefit out of it.
Another approach to deal with the above mentioned situation is:
The mom-n-pop/ kirana stores selling similar stuff but located in different localities need to come together and form an association. For example retailer A, B, C and D are in similar business of selling readymade garments but are located in non-competing areas. They can come together and can engage in bulk sourcing from the supplier. Since the city of delivery is the same there will not be any extra transportation cost involved as well. This will give the retailers an opportunity to play around with margins.
Only an ‘out of the box’ thinking will be able to revive the mom-n-pop/ kirana stores. They really need to act fast else face phase out or elimination by the bigger organized retailers.
3 comments:
Very insightful article that provides a lot of sound advise to the smaller retailers.
Interesting points Ritesh.
It seems in the long run both channels will co-exist. As both cater to different needs.
The kirana store offers you a quick and precise experience, where you go to buy - what you really need to buy and that too quickly.
The malls offer a different experience, where you select through more options, buy what you need, as well as what you might need and you are ready to spend more time here.
Interesting perspective, something needs to be done, isint it hard to perceive what small time store owners need to do from a corporate perspective, throwing big numbers and bold strategies.
The strategies proposed here are insightful but how many corporate hours and manpower would it take to break the backbone of any such small scale coalition or strategy.
Their interests have to be safeguarded by governing monetary and regulatory agencies, else its a known lost battle to the world of credit, corporate supply chain and procurement.
The bigger chains have to be segregated and kept at bay from main residential areas. And people living in communities have to take a stance of doing business with their sabzi wala, kirana store et. al.
In a society where respect of a human to other is fast depleting doing business with an individual hawker will be tough, and thats where corporations are striking hard.
My individual feeling is that its not a battle of monetary or financial stance, its about how society has to evolve, educate and mature to again feel as a kutumb as it used to, and thats the best way to win this one.
Post a Comment