Consolidation on agenda for global retailers

All international retailers have now realised "it is better to be strong in a few countries than be weak in many," says Louise Spillard, director (international), IGD, a UK-based research firm on food and grocery retailers worldwide. Speaking to Raghavendra Kamath on the sidelines of Indian Retail Forum, Spillard said that international retailers such as Wal-Mart, Tesco and Carrefour were consolidating in their home markets before embarking on overseas sojourn. Excerpts:

How international retailers are expanding in overseas markets now?

In 1990s, many retailers such as Carrefour, Tesco and Ahold expanded very quickly in overseas markets because the Euroepean retail market was small then.

In certain markets they failed because they did not get the right scale, absence of leadership and so on. So now they are evaluating their portfolio and deciding which is the right market to invest. Moreover, they are consolidating in their home markets. Wal-Mart is consolidating in Mexico and the US while Carrefour and Tesco are investing in Europe.

What are the formats followed by these retailers in these countries?

If you look at Carrefour and Wal-Mart, they had only hypermarkets few years ago. But in a scenario of changing consumer demand and markets, they have changed their formats. Today, Carrefour is experimenting with discount chain Dia in France, China and other countries. Wal-Mart has Sam's Club, Super Centres and so on. Tesco has convenience stores in Thailand, discount format in Czechoslovakia, supermarket in South Africa, general merchandise store in the UK. The reason is that it is difficult to have a 1 lakh sq feet store in all the cities. I also heard that the Indian retailers are experimenting with hybrid formats. But it is difficult to say which format is better for India since it has a heavy concentration of kirana stores unlike China.

What are the trends in private labels in foods and groceries in the West?

In Europe, we are seeing a trend of development of premium brands in food and groceries. But in India, it looks very difficult since retailers should have the scale to buy those products and for manufacturers the capacity to supply them continuously.

What is the winning formula for retailers for these markets?

A mix of strength at home markets, format diversification, back-end efficiencies and understanding your customers are essential elements of winning formula for retailers. Retailers are also going for swapping of assets in Europe to save costs.