Posts Tagged ‘Reliance’
With increased exposure to global brands, latest internet communications, and desire for better lifestyle, the consumers today are looking to use the global, trendy, life-style oriented products and are demanding more in terms of the shopping experience, simplicity, quality products, and value.
The evolution of Modern Trade is just meeting the demands of these consumers and together causing rapid growth in modern retail. With increased exposure to Modern Trade, the consumer today is becoming more and more comfortable and loyal with Modern Trade. Nielsen says that a fifth of the Urban India Shoppers now regularly shop at Modern Trade stores. (refer http://www.indiaretailing.com/upload/ContentImage/Market_Research_pdf/NielsenShopperTrends110912.pdf)
Technopak forecasts that the penetration of Modern Trade in India will triple to about 15-20% in the nextfive years by 2018.
From the consumer point of view, modern trade results in:
- Consumers feel that they are smart buyers
- Increased availability of choice in brands and categories
- Promises better prices and value to the consumers
- Better quality products
- Enjoyable shopping experience with product and brand voyeurism
- Perceptual benefits of improved standard of living
Consumers feel smart as they have more control in Modern Trade
With increased brand choice, freedom to browse the products, and the visibility of deals and promotions, the modern trade consumer perceives his buying experience as a smarter way of buying things. It also leads to the consumer willing to experiment more, buying new brands and categories in the modern trade store. It is observed that the modern trade consumers look to buy large packs and aggressively look for promotions, trying to get more value out of every buy.
A family shopping experience with enjoyable product and brand voyeurism
The modern trade consumer is most likely to be accompanied by family and friends, and is not so likely to shop alone. It is increasingly seen that kids sit in the shopping cart, and the mother and father discussing about the product. This increases the fun in the buying experience and provides more opportunity for the retailers to increase the basket size and increase interaction with wide array of brands.
Moreover, the large displays, islands, and the strict arrangement of brands always make the consumers be voyeuristic of the brands and products. This makes them checkout products that were never in their consideration and drop it in the basket. Modern Trade consumers’ willingness to buy new products and niche variants is making manufacturers add high-end variants to upgrade the consumers.
The rise of mini-modern stores to meet the “modern consumer” needs
The Sarvodaya supermarket in Mumbai is an example of a growing trend of traditional stores adopting modern practices to meet changing consumer needs. There are about 100 such stores in Mumbai, and this trend is soon catching up in smaller towns too.
The future implications of Modern trade evolution are obvious as more and more consumers flock to the modern trade stores, and as more global retailers look to enter India after the FDI approval.
Cash and carry is a membership based retail store selling limited SKUs in bulk packs. Cash and carry has a membership requirement. Customers are usually members of the club and pay an annual fee in order to continue their membership. It is not like any other retail outlet where in one can go and buy items. It is limited to only certain members like wholesalers, semi-wholesalers and retailers. For example, METRO Cash and Carry India & Wal-Mart Cash & Carry, which are well-known to most people, are a good example of this format. Some of the recent entrants into this format are Carrefour and Reliance Retail.
Cash and carry models are able to sell at lower prices because of the basic, no frills format of the stores, volume of sales, low cost location and lower inventory carrying costs. Cash and Carry offers private labels as well as branded goods. The first Cash & Carry format store was opened in India by METRO in 2003. Most of the Indian companies want to tie-up with the International companies, and vice-versa, as 100% FDI is allowed in this format. This helps the Indian companies to learn the international best practices and technologies. The German company, Metro was the first one to enter the country. If you want to shop in Metro, you need to have a sales tax number with you and it is meant basically for retailers and distributors and not for consumers. And, you cannot shop for less than Rs 1,000 and, in product offerings, you cannot buy two to three, you have to buy six or more pieces of one particular product. Currently, Metro is present in six cities, present in all the Agricultural Produce Marketing Committee (APMC) licensed states.
Indian retailers are interested in venturing with foreign retailers as we do not have capability to manage the operations for a cash and carry format. We do not have the expertise as developed countries do. Cash and carry format requires a strong backend support. Foreign players are looking for joint ventures with local retailers because they are interested in MBOs or retail outlet, apart from cash and carry format. Having an Indian partner gives them local support and they enjoy the chance to capitalize on a network, which is already established by the local player.
Most of the purchases for the hotels business happen through a network of purchase managers, who have long-term relationship with, let’s say, 200 suppliers. It is very unorganized. It is a challenge to convert that habit to a unified buying structure in large hotels. Now Metro supplies the Taj and Oberoi on a national basis. This means those guys had to change the entire system of purchasing and orient themselves to one particular supplier. It takes some time to get convinced of these changes. There are now dedicated supply-chains to these hotel chains from the Cash & Carry stores.
The Cash & Carry format in India is still in its infancy and will face a lot of changes. They need to develop new channels, and optimize their supply chains for more profits. Also, it is to be seen on how the Cash & Carry format business will be affected with the government keen to allow FDI so that the global giants can set their shops in the streets.