What's in store

A study of supermarket shoppers' habits has some important insights for retailers.

The typical Wal-Mart customer earns less than the US national average income. And some reports say that one in five customers does not have a bank account; that's twice the national average.

The Indian approach to big-box retail is slightly different. The less affluent still walk down to the corner store and call the bania to deliver their month's provisions.

It is the better-off who drive down to the mall and spend hours pushing trolleys down the aisles of supermarkets, dropping in packets of instant cereal and cookies they would have never bought otherwise.

Or is it? The findings of a new study of modern retail customers suggest something else entirely "" extrapolated to the entire market, the results could have important strategic implications for retailers and manufacturers.

Delhi-based market research consultancy Market Pulse spoke with close to 350 consumers in Delhi, Mumbai and Chennai to understand their attitudes to modern retail and their spending patterns. Here's what it found:

Because you're worth it
Market Pulse conducted exit interviews outside outlets of major retailers such as Food Bazaar, Reliance Fresh, Spencer's and Subhiksha "" so these were all people who are already converts to the modern format retail cause.

It had taken them almost three times as long to reach the convenience store, but they were at the supermarket for the wider range of products (the biggest benefit, according to 25 per cent of the respondents), the lower prices on branded products and the special promotions and schemes (22 per cent each).

Shoppers in Delhi were closest to their shopping destinations, whether kirana or modern format (12 and five minutes, respectively), while those in Chennai had travelled the farthest (23 minutes, compared to nine to the corner store).

More than the distance they travelled, though, it is the demographic composition of the shoppers that is strategically significant. 
 

SOCIOECONOMIC CLASSIFICATION OF SHOPPERS AT MODERN RETAIL OUTLETS (in %)
	Delhi	Mumbai	Chennai	Overall
SEC A	80	53	23	56
SEC B	18	26	36	26
SEC C, D, E	2	21	41	18
Source: Market Pulse Research

A considerable proportion (44 per cent) belong to the lower socioeconomic categories: only 56 per cent are from SEC A. They aren't all that well off, either "" half the respondents have monthly household incomes of under Rs 20,000, while 26 per cent earn less than Rs 10,000 a month. (Even if you discount the large segment that didn't disclose its earnings, the tilt is very obvious.) 
 

AVERAGE SPEND PER VISIT (in Rs)
	Delhi	Mumbai	Chennai	Overall
Modern retail stores	663	1,515	247	798
Kirana stores	316	400	252	325
	SEC A	SEC B	SEC C	Overall
Modern retail stores	925	610	633	798
Kirana stores	332	306	334	325
Source: Market Pulse Research

The skew is most remarkable in Chennai, where just 8 per cent said they earned over Rs 20,000. On average, consumers spend 19 per cent of their monthly household income on shopping at modern retail outlets "" 30 per cent in the lowest income groups and 7 per cent for those earning more than Rs 30,000 a month.

For a third of those belonging to SECs C, D and E, the biggest draw of the supermarket is the lower price and promos.

The question to manufacturers and retailers, then, is obvious: are you doing enough for these customers? Are you making it easy for them to buy from your stores, in a size and at a price that suits their pockets and their needs?

Strategically placed displays and smaller SKUs (stock keeping units) will encourage trials, but pay attention to the packing as well. Make sure the products are spill proof and the carry bags are sturdy "" the goods have to be lugged back home, after all.

Kiranas are here to stay
Not that consumers are doing all their shopping at the big box. The kirana store still scores over the supermarket on several counts and the study only reiterates what we know about their advantages.

The biggest plus point (30 per cent ticked this option), needless to say, is that it is within walking distance. There's also the personalised attention, where the shopkeeper calls when fresh stock comes in or runs up a tab for you (13 per cent each).

There's another benefit at the corner store "" you can get cheaper, unbranded versions of most consumer products. Nineteen per cent considered this the key benefit of kiranas.

The implications? The corner store is here to stay. Remember, it accounts for a gargantuan 94 per cent of the $320 billlion organised retail trade in India. That ratio isn't going to change anytime soon, so manufacturers would do well to pander to the convenience stores.

Understand and play up the differences in shopping habits "" stock up at supermarkets, top up at kiranas "" and offer the different stores different products. Stock kiranas with smaller SKUs that fit in with top-up and trial purchases, and save the supervalue packs for the hypermarkets.

For the retailer, there is an obvious opportunity to tap into the latent demand for private label products. Global private label sales are already close to $1 trillion and their share of consumer packaged goods is expected to increase from 14 per cent in 2000 to 22 per cent by 2010 (Nirmalya Kumar and Jan-Benedict Steenkamp, Private Label Strategy). Retailers can reach out across the spectrum of consumers by offering private labels of varying price and quality.

I came, I saw, I bought
What do shoppers pick up from the supermarket? The study shows that the most frequent purchases are of commodities (60 per cent), personal care products (55 per cent), fruit and vegetables (51 per cent) and home care products (50 per cent).

The numbers for personal and home care products are higher in Mumbai than other cities. But everywhere, the essentials "" bread, milk, eggs and so on "" remain the preserve of the corner store.

On average, consumers visit modern retail outlets close to four times a month "" SEC A consumers are more frequent visitors, more than once a week.

They spend nearly Rs 800 on each visit (Rs 247 in Chennai), compared to the Rs 325 they fork out at the convenience store. Mumbaikars spend the most (Rs 1,515), but they also have the lowest visit frequency (1.8 times a month).

There is a correlation between frequency of visits to the store and the average spend per customer (kirana store spends are lower, for instance, but frequency of visits is likely to be considerably higher). Frequent promotions and limited-period offers are likely to increase footfalls at these outlets, then.

Earlier this year, Wal-Mart redrew its business strategy to make sure it addressed all 200 million customers who trundle down its aisles.

Whether they are the low income brand aspirationals, the wealthy deal-seekers or the value price shoppers, the discount giant is seeking to understand what motivates its loyalists to continue shopping at Wal-Mart "" and then making sure there's plenty of that around when they come calling. Perhaps it is time Indian big boxes went the Wal-Mart way.