According to a new study published in Economic times, Indian consumers are still visiting local kirana stores (mom n' pop stores in India) while they love the shopping experience of malls. Besides, the bulk shopping that they do at these modern retails stores, there are the daily top-ups to do at the local groceries (Kirana Stores) and the perishables that have to be bought daily. For Kiranas the proximity is the major advantage.
Considering the largest retailer, Pantaloons (through Food Bazaar), does not think it a bright idea to compete with them, discount retailer Subhisksha still fine-tuning its format. “There is a huge opportunity in home deliveries and the trick is to beat the kirana stores at their own game,” says R. Subramaniam, Managing Director, Subhikhsha Retail.
Today home delivery services comprises a mere 5% of the leading food retailer turnover but the players like Wadhwan foods, pyramid retail’s True Mart, Subhikasha are expecting to generate more than 20% of their total revenue from the home delivery services.
Having set up multi-channel distribution systems after buying Sangam Direct, the home delivery channel of HUL, Wadhwan Foods would be exploiting the synergies between its store and non-store formats. For instance, it would now have the call centers operating on behalf of Sangam Direct or to direct calls to its nearest Spinach outlets to service customers. Sangam Direct was operating under central warehousing concept which is time consuming as well as it incurs more cost.
Here Kiranas leads the organized retailer due to there reach in the market. In order to increase the reach in the market the organized sector should include a Hub and Spoke model in their supply chain. Instead of going for the centralized warehouse, small-sized convenience stores are likely to be the ones to crack the home delivery format.
The organized retail stores have to match with the consumer expectations. Kiranas are already offering this programme which includes stock rotation and loyalty programs, along with credit and discount policies. The organized retail stores still have to learn a lot from the kiranas.
By
Santideep Sahoo
ICFAI Business School
Hyderabad
Considering the largest retailer, Pantaloons (through Food Bazaar), does not think it a bright idea to compete with them, discount retailer Subhisksha still fine-tuning its format. “There is a huge opportunity in home deliveries and the trick is to beat the kirana stores at their own game,” says R. Subramaniam, Managing Director, Subhikhsha Retail.
Today home delivery services comprises a mere 5% of the leading food retailer turnover but the players like Wadhwan foods, pyramid retail’s True Mart, Subhikasha are expecting to generate more than 20% of their total revenue from the home delivery services.
Having set up multi-channel distribution systems after buying Sangam Direct, the home delivery channel of HUL, Wadhwan Foods would be exploiting the synergies between its store and non-store formats. For instance, it would now have the call centers operating on behalf of Sangam Direct or to direct calls to its nearest Spinach outlets to service customers. Sangam Direct was operating under central warehousing concept which is time consuming as well as it incurs more cost.
Here Kiranas leads the organized retailer due to there reach in the market. In order to increase the reach in the market the organized sector should include a Hub and Spoke model in their supply chain. Instead of going for the centralized warehouse, small-sized convenience stores are likely to be the ones to crack the home delivery format.
The organized retail stores have to match with the consumer expectations. Kiranas are already offering this programme which includes stock rotation and loyalty programs, along with credit and discount policies. The organized retail stores still have to learn a lot from the kiranas.
By
Santideep Sahoo
ICFAI Business School
Hyderabad
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7 comments:
its exactly true local kirana stores are providing home delivery facility but its free of cost in my SIP i was residing at banjara hills & a local vendor provide us free home delivery service. as mention in the article other retailers are earning 20% profit through their hub & spoke model & through their centralized call center method also where u can place your order and get the items at your door step, its there by local cart vendors also in Delhi every day they go through the streets and suppose if u are not there at your home & want to purchase vegetables u can simply call them & they will drop it at your place on credit basis because of trust factor among customer & vendor but in case of big retailers this scheme is not available but they believe in cash & carry concept. SO I would like to say that to sustain in market & compete the kirana & local vendors these big retailers have think about the Indian physique also......
beating the kiranas at their own game might prove difficult. author has correctly metioned that 'trust factor' might prove vital. Costs for home delivery for local kiranas is almost nil. If retailers are looking to beat them using a call center set up i don't think it will b easy. just compare the efficiency of delivery u get from the kirana store and the pizza guy!
The article is very good in the sense that if u want to win in local market u need to win over the kirana stores.
But its not that easy at all;
first: the kirana sotre people have very good personal relation with his customer, they devlop a sense of cameradery in them, often we see that these guys are invited to family functions also, building this is amount of personal relation is a formidable task for chain retailers.
Second: we know kirana is something very personal to a Indian hosewife, the majority portion of indian women, & i dont think they will call to the call center of a retailer to give their orders, simply because they want to touch n smell the food items. Even if subhiksha providing home delivery service, its the lady comes & place the order after checking the items & then tells the guy to carry it upto the house(this is my personal observation).
Third: Competing directly with local kirana could also provke political interference in the matter, as we know left is alwys ready for that, infact they are lobbying for restricting the fdi in retail or direct entry of any major retailer.
so i think these are the major aspects to ponder upon in directly facing the kirana stores.
Good dude, nice topic, i found it very interesting to read.
Keep it up man.
Naveen Shukla
My Blog
My intelligent friends have left nothing to mention in this topic. Only one thing that i would like to add is that the Kiran shops have the ability of influence the buying behavour of the customers, which is virtually nil in super markets. They could influence the consumers in two ways, first; since the shop owner is also the credit provider thus his opinon is always valued by the customers who purchase on credit and second many a times customers seek the kiranawala's opinon before purchase especially in new products. Having said this it does not mean that these Kiranawalas have a fair playground in this segment, a major chunk of their business has already been snatched by biggies in retail sector. Coming to the home delivary part of this article i must say that the home delivary make more sense for both seller and consumer when the volume of purchase is considerably large, which in the case of household consumption happens once in a month, for kirana's the path ahead is strewn with difficulties and challenges.
I accept your comments on my article. In every comment i found a single factor i.e.Trust.
I want to ask you one question that do you believe in the pizza guys from diffrent trusted brands like domino's,pizza hut?yes.Simillarly if some body come from Subhiksha and deliver you what you have ordered with zero charge,within half an hour as in domino's then what could be your feeling?
Another issue is the COST.If a organised retailer can capture a large market then it can easily attain the economy of scale and also WIN the TRUST of its old customer as well as the prospective one.
I agree shantideep, but practically its impossible because in P&L account
expenditure will shoot up & and again they will have to maintain another section of distribution line which will be cumbersome for any format format store..
In spite of this, initially they can go for phased wise customer delivery service by which first they will have to analyze the effect of their effort on sales. If it shoots up and getting good profit margin then alright otherwise they can change the strategy and go for another one.............
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