All the discussion about the government allowing the entry of retail giants like Walmart into India, ended up in traditional stores being portrayed as hapless victims. Well, the reality seems to be far from it!
According to IBEF, the size of India’s retail sector is currently estimated at around $450 billion and organized retail accounts for around 5% of the total market. While traditional retail is expected to grow at 5 per cent and reach a size of US$ 650 billion (about 76 per cent), organized retail is expected to grow at 25 per cent and reach a size of US$ 200 billion (24 percent) by 2020. Traditional trade, which includes Kirana stores, small grocers, chemists and paan-beedi shops, has a high penetration even in countries like Philippines, Mexico, Egypt, Morocco and Nigeria, as high as 80%.
Traditional retail formats, known by many names across the world – Mom & Pop stores (USA), Kirana Stores (India) and Sari Sari Stores (Philippines) are essentially variations of the same basic format. They are family-owned and operated as small businesses, characterized by long operating hours and stocking a variety of categories ranging from RTE foods and grocery to household products. Since these stores are not very large, variety is typically seen in the form of width rather than depth.
In India, we are dependent on these small stores for all our quick daily shopping needs. Traditional stores have many unbeatable advantages – location (near residential areas), personal bonding with the shopkeeper, credit facility for regular customers and even home delivery! Since they are small in size, Kirana stores can be found at every nook and corner in residential areas. This makes for very comfortable shopping for every kind of consumer.The traditional format also suits the needs of those consumers, who are uncomfortable in a plush and well laid-out, and sometimes intimidating modern retail environment. This is the main reason why Big Bazaar recreates the messy ‘village haat’ like atmosphere in their mega stores.
Of course, the modern format stores are heralded as the future of shopping, with several advantages like a wide variety of products, opportunity to browse and select new products and brands, convenience of many product categories under one roof, clean and organized shopping environments, easy billing, and most of all, providing an enjoyable shopping experience. On the negative side, however, they are generally far from the heart of the city and require special planning to visit, with challenges of transport, parking, etc.
Looking at it from a marketer’s perspective, in a traditional store, the salesman can influence the consumer’s purchased brand. So some part of the sales budget of big FMCG players is set aside for incentives to retailers for pushing their products. On the other hand, in a modern format store, the shopper makes his/her choice by browsing through a wide range of products and marketers can only use promotional activities such as in-store advertisements, consumer offers etc to influence his/her choice. Because of the space and organized layout of mega stores, consumers tend to browse, which often results in impulse purchase, especially when attractive displays have been put up. Marketers are increasingly realizing that the modern format can also serve as an ideal platform for the launch of new products.
So it seems that the modern format is ideally suited for planned, monthly shopping needs, and for certain kinds of consumers. Traditional format stores, on the other hand, are firmly entrenched in our hearts and minds, and not to mention, the shopping habit in India.
Do you think you can ever move completely away from your Kirana store to a modern format store?
This blog post is written by Lalatendu Mishra, Manager – Analytics, Brandscapes Worldwide and Surabhi Jain, Associate Insight Consultant – Brand Strategy, Brandscapes Worldwide. Lalatendu’s unique sense of humour helps his analytics team manage the long working hours. Whereas, Surabhi’s jokes are dreaded by all who know her 🙂
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