Priya Ahuja, a housewife who used to buy fruits, vegetables and grocery from a Reliance Fresh outlet that opened a year ago in her locality, has now stopped visiting the store. “Initially, most of the people in our locality were fond of visiting clean and organised shops to buy food and grocery. But then, we realised that buying from the street vendor was much more cheaper and convenient than going to Reliance Fresh,” she said.
The charm of organised retail seems to be fading among the consumers as they find kirana stores and street vendors offering them better deals in terms of credit as well as free home delivery services, thus saving on time and petrol used for travel. Organised retailers such as Reliance Fresh, Subhiksha, Spencer’s and Sabka Bazar cannot match these facilities that gives a consumer cushion during a slowdown.
Shopping in an air conditioned store was like a new experience for most middle- and lower-middle class people. After the initial novelty, people have started comparing the benefits offered by kirana and organised stores.
“When Sabka Bazar had opened in our area, we had lost a substantial number of our customers for the first six months, but now most of them have come back as we offer better pricing on branded products, one month credit and free home delivery to our consumers,” said Dipin Khurana, who runs a Kirana store in Kalkaji, Delhi. The Indian retail sector is pegged at $370 billion, of which organised retail accounts for $16 billion. Organised retail has witnessed a decline in growth from 25-30 per cent in 2007 to 15 per cent in 2008.
Lured by the potential, retailers rushed into expanding their business without a differentiating model, analysts said. Most retailers relied on price discounts, which were mostly on their private labels, to attract customers. But, they failed to make a mark on the consumer’s psyche.
“A consumer wants to buy what he sees in the advertisement. The discounts offered on private lables by retailers have failed to attract the customers,” said Purnendu Kumar, associate vice president, Technopak.
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Organised retailers promote bulk buying by consumers in order to get maximum discount on deals. However, due to losses and salaries cut, people are not interested in buying extra to get discounts. “I used to buy everything extra to benefit from discounts offered by Sabka Bazar. But now I buy only the required quantity as we want to be prepared for any tough time ahead,” said Deepshikha Ujjwal, who has now buys from a kirana store located in front of her home.
Down trading by customers has not helped value retailers such as Big Bazaar and Vishal Retail and it has started reflecting in their same store growth, which has declined 4 and 12 per cent, respectively.
In south Delhi, many Subhiksha stores have shut down as they were not able to compete with the kirana stores. “An year ago, when Subhiksha had come to our vicinity, all the small store owners thought this is the end of our business. But one year down the line, Subhiksha’s pharmacy, food & grocery and vegetable mandi stores have shut down,” said Kishore Kumar, who runs a chemist shop in Lodhi colony in Delhi.
“In the West, people like to buy once a week or once in two weeks from a hyper market. But in India, this trend did not last for long, especially when people want to save on everything, including travel cost,” said, Raghuraman Anand, director, The Boston Consultancy.
Organised retailers have also been struggling with high rentals and inappropriate store location. “Our rentals account for 8-10 per cent of our total operational cost, whereas kirana stores do not pay any rental and that makes them more competitive against organised retailers,” said Samar Shekhawat, vice-president (marketing), Spencer’s Retail. Spencer’s had to shut 56 stores in 2008 as they were not giving business to the company.