One of the big questions today is what kind of format is going to succeed in the country. Is it going to be the hypermarket or is it going to be the supermarkets? If it is the supermarket, then what is the right size?
The conventional thinking is that hypermarkets are going to wipe off the rest of the formats. This, however, is not true.
The Indian consumer is going to plug for the format which suits her needs. The primary drivers of this choice are access, price and range. The hypermarkets do score in price but the supermarkets, being located near the neighbourhoods are far more convenient. The range can be of quite a reasonable width in a smaller format also.
The Indian consumer for the modern trade unlike his counterpart in the west is hamstrung by clogging traffic, poor roads and lives in larger cities. The other factor in favour of a small-format store is the fact that she would prefer to buy in small quantities over the month and the average ticket size in India still remains low.
At the same time, the Indian customer loves a bargain and the only way she is going to go long distances is when she eyes the prospects of cheap prices and bargains. Big Bazaar has got it right here and so we are going to see massive price wars between large format stores. In order to win, the large-format stores are going to have to offer large price leverages to the customer.
The brands and the efficiency of the format also make substantial difference. In countries like England and France, the hypermarkets have a more than fifty per cent share of the formats because Tesco and Carrefour are efficient and strong. In most of Europe however, the hypermarkets have about one third of the market and the supermarkets (4000 sq ft to 25000 sq ft) have close to sixty percent of the market.
But the hypermarket story is just really beginning in the country and we are about to see serious excitement in the space.
The overall investments also bear this pattern of split between supermarkets and hypermarkets. Of the $40 billion investments in retail in the next five years, about one third is flowing into hypermarkets and one third to the supermarkets
Subscribe to:
Post Comments (Atom)
-
A friend has commissioned a project on "Futuristic Business Opportunities" with some ISB students and that set me thinking about ...
-
I was so elated when my son was born and this is what I wrote when he was nine months old. What is interesting is that , I still feel the sa...
-
The joyful pandemonium over economic growth faintly amuses me and reminds me of the games that able gentlemen play in the corporate boardroo...
1 comment:
"The Indian consumer is going to plug for the format which suits her needs"
I agree completely, the UK has seen a host of formats that plug in to the mode of the consumer, eg - M&S Simply Food conveniently located at major train stations to provide for time starved commuters, a developed petrol station forecourt category for those that drive to work, as well as large format out of town supermarkets like Tesco Extra for the families monthly shop.
Such formats are essential in the UK as they tap in to consumer behaviors, providing convenience and choice.
India will develop along similar lines, in fact even more so. Consider India's size and scale and the markets within the Indian market - urban versus rural India, the increasingly sophisticated middle class versus those with little disposable income.
Indian retail brands need to respond to the 'breadth' of the market, developing formats that provide the right product mix in the right location at the right price. Retail sector maturity will bring with it new formats.
Dominic
www.india-insights.co.uk
Post a Comment