Organised retailers should use a compact hypermarket concept to tap into India's significant retail opportunity as they can compete head-to-head with kirana (mom-and-pop) stores, a new study has revealed.
Management consultancy firm AT Kearney, which publishes the annual Global Retail Development Index (GRDI), has issued a study on how retailers can tackle India's $435 billion market.
According to the report, given the sheer size of the Indian retail market, it is no surprise that many West Asian retailers, most recently Lulu, have announced that they are looking to expand retail operations to India.
Urban India has, however, been a difficult market for organised retailers to tap into.
Despite years of trying, modern retail accounts for only 7% of the roughly $435 billion Indian market and retailers are still trying to figure out how their hypermarkets can penetrate Indian cities, where neighborhood stores and local merchants, called kiranas, continue to dominate the more populated urban areas.
As per the report, compact hypermarkets are just the right size. They are 4,000-6,000-square-foot stores that offer the amenities of hypermarkets, but are smaller and easier to navigate.
While people in major cities want the advantage of modern retail, AT Kearney's study found that people are rarely willing to travel more than 15 to 20 minutes from home to shop.
"Proximity, therefore, will always be a major differentiator and large hypermarkets cannot penetrate every urban area profitably, while neighborhood stores do not carry enough goods, so compact hypermarkets is the obvious answer," the report says.
Unlike India, hypermarkets are an increasingly growing retail format in West Asia. Two of the largest markets in the region -- the UAE and Saudi Arabia -- have embraced the modern retail trade concept and are slowly migrating from souk to hypermarket shopping.
The UAE is leading the trend with a couple of retailers holding around 60% of the market.
