Thriving in the shadow of big retail

Most kirana and mom-and-pop stores have been able to hold their own against the might of India Inc’s giant retail formats. Can they survive in the long run? Business Today walks into five such stores in the metros to gauge the pulse of unorganised retailing. The verdict: Don’t write them off, yet.

Mumbai
The door-to-door edge

For Prem Patel, having a grocery store in an upmarket township in Thane, on Mumbai’s outskirts, seemed a great business opportunity back in 2001. The potential was clear-cut at that time: 5,000 families, and not a single grocery store. Patel and his brothers put up Neelkanth General Stores over 350 sq. feet and rode the gravy train for the next three years. Then came the rumble in retail.

Reliance Fresh, Spencer’s, Spinach, Godrej’s Nature Basket invaded the area by setting up large-format stores within a 500-metre radius of Patel’s humble store. For the Kutchi-Gujarati trader, the options were to either get steamrolled or to counter the threat. He chose the latter. Patel couldn’t compete on space, variety and ambience.

Neelkanth general stores Location: Township in Thane, on Mumbai’s outskirts Competition from big retail: Godrej’s Nature Basket, Spinach, Spencer’s, Reliance Fresh Survival strategy: Focus on timely delivery

Where he could score over the organised players, though, was on the service front. “We started focussing on customer attention and timely door-to-door service,” says Patel. For instance, he made sure that the customers calling in got their groceries—even if it was just a loaf of bread— within 30 minutes. Such home delivery is available between 8 am and 10 pm. Unsurprisingly, Patel spends more time on the phone taking orders than dealing with walk-ins. That the township has its own mini-telephone exchange encourages residents to call as many times as they want as the calls aren’t charged for. Patel isn’t complaining. Over the last many years, the display of the shop hasn’t changed; and Patel is in no mood to encourage credit card usage. Not that he didn’t want to innovate. For instance, after years of stocking just items like wheat, pulses, spices and other food items, in 2006 he started a small vegetable counter at the entrance of the shop. That didn’t work for too long, as the builders asked him to get rid of it.

Such setbacks notwithstanding, Patel is unwaveringly focussed on delivery. Discounts are a no-no. “People are more bothered about timely delivery of goods than the discount they get,” he quips. He clams that despite the presence of four organised retailers, his business and margins haven’t been hit. If that’s true, it’s doubtless a feather in Patel’s cap, considering he gets a credit period of just four days—as against 10-15 days for organised retail—and profit margins offered by distributors are lower than those doled out to the large-format stores. Patel for his part prefers to focus on what he has that the big boys don’t enjoy—lower overheads.

—Virendra Verma

Bangalore
Tamarind from Tumkur, anybody?

Shoppers at B.N. Srikantiah & Sons, a 42-year-old kirana store in Jayanagar—the upscale commercial hotspot of south Bangalore—often rub shoulders with celebrities. Film stars of yesteryears, poster-boy techies and politicians in power occasionally drop in.

There is actually little need to visit this shop, whose brand value is hugely disproportionate to its 600-sq. feet size. Just a request over the phone brings orders to customers’ doorsteps. Home delivery can mean a distance of anything from 1 km to 15 km. “We do care about costs, but we care about customer loyalty more. Many have been our customers for three generations now. My grandfather B.N. Srikantiah started the first shop in Gandhibazar in 1928, on an investment of Rs 200,” says B.N. Shankar, 38, an engineering graduate in telecommunication, who opted to run the family business along with his younger brother B.N. Ramesh, 34. The shop has 14 employees.

The brothers are unperturbed by the big retailers— Spencer’s, More, Food World et al—in the neighbourhood. “Our business has been growing at a steady 8-10 per cent every year. We did see a fall in 2005 after retail chains set shop but that was only for a brief period. Those customers who temporarily migrated returned, realising that we gave them a superior product, service and experience,” Shankar says.

B.N. Srikantiah & Sons Location: Jayanagar in south Bangalore Competition from big retail: Spencer’s, More, Food World Survival strategy: Build personal relationships with customers

As this writer talks to the brothers, a customer drops in, asking for some medicines. After clarifying that his shop is not a pharmacy, Shankar points out that kirana shops in general, and his own shop in particular, have changed so much over the years that they are often mistaken for a medical shop. They have turned so organised and clean.

So, what is it about this shop that ensures it’s still relevant— and therefore viable? S.N. Murthy, 58, a senior advocate and a second-generation customer at B.N. Srikantiah, provides a consumer perspective. “We have been buying food articles from them for the last 40 years. They are so clean and pure that they can be straightaway cooked without a second look. These are not soaps or shampoos that you can buy from anywhere.” Murthy adds that he doesn’t even check the shop’s bill. Shankar adds: “We maintain a personal relationship with customers, respond to their needs, educate them about new products and encourage them to try them.”

To be sure, B.N. Srikantiah & Sons goes the whole hog to please customers by sourcing items from far-off places— jaggery from Kolhapur in Maharashtra and tamarind from Tumkur, Karnataka, being just two examples. Small wonder then that the proprietor reveals that Infosys Founder N.R. Narayana Murthy’s family buys some varieties of flour from this shop.

The display of products in the shop is quite contemporary, but Shankar knows that his unique offerings— something the big retailers can’t match—are his food articles, like raw rice rava, chilli powder and condiment flour. So, he keeps adding them, all home-made. “We sell these products only after my mother Vimala approves,” says Shankar. Such quality control would doubtless be the envy of Big Retail.

—K.R. Balasubramanyam

Kolkata
No AC, no MRP, just VFM

Arrey, they live on stunts,” sneers grocer Rakhal Chandra Dey, about Big Retail. “They will say ‘MRP Rs 70, our price is Rs 60’, but the best part is that we are already selling at Rs 60! We don’t talk of MRP (maximum retail price).”

Grocers in Kolkata have been affected by the entry of Big Retail, and most of them don’t have the financial strength or even the ideas to fight back. Dey, 50, who owns a grocery in the famed Gariahat market in south Kolkata, is a case in point. His first problem: The design of the “modern” building owned by the Kolkata Municipal Corporation in which the shopkeepers were relocated. Gone are the cool interiors of the high-ceiling British-era buildings.

Welcome to stuffy interiors sans airconditioning or even air circulation. Less than 10 minutes from Gariahat market is a sprawling Spencer’s of Sanjiv Goenka, that opened in mid-2008 after a prolonged standoff with local hawkers and politicians. Goenka’s position is that his customers are from a different strata, with different needs, and that Spencer’s is not out to trash the small store.

Rakhal Chandra Dey Location: Gariahat Market in south Kolkata Competition from big retail: Spencer’s Survival strategy: Sitting and waiting for old customers to come back

Today, Dey claims he has lost 35-40 per cent of his business and that he has had to reduce his staff from six to four. “Retail chains have had a huge effect. Many of us have closed down, the rest has cut staff,” says Dey. “What can we do if customers prefer retail chains? We don’t have the money to buy advertisements on TV or to buy goods at big discounts or even give away items free,” he adds.

However, Dey says he is getting back customers, who realise that prices at Big Retail are not always what they are made out to be. There is nothing new that he can offer, beyond his trust. “We always had home delivery for those who wanted it.” He claims some of his old customers relocated to the extreme north, but come all the way to him for their monthly purchases. “We will stay and survive… India is not about five Pantaloons or six Spencer’s…it’s about the crores of small businessmen like us.”

—Somnath Dasgupta

Chennai
Mom & Pop (& Daughter)

U. Mammusa (63) opened Farida’s in 1966 at Dr Rangachari Road, Mylapore. The shop was around 500 sq. feet, had an asbestos sheet and had to be cleaned every two hours. There were no other shops in the vicinity and very few houses, but Farida’s had the advantage of being located bang in front of the residence of the physician of former Tamil Nadu Chief Minister M.G. Ramachandran.

After some years, Mammusa took the space next door, using it initially as a godown to store extra provisions. The total area now spanned 1,000 sq. feet. The shop was in line with the times. A few dusty shelves were lined with provisions and hired hands used to scramble on stools searching for goods to be served. “It was dirty, messy and inconvenient,’’ admits Mammusa, but he knew no other way.

In 1996, when the first Food World store was set up just half a kilometre down the road, Mammusa was worried. To compound his woes, he was in danger of losing his shop— the plot owner planned to sell it to an apartment builder. Mammusa mustered Rs 9 lakh by way of a bank loan and assistance from the Tamilnadu Foodgrains Merchants Association and acquired the property. The loan was paid off in a few years, giving him a rent-free establishment. Farida’s was then completely knocked down and redesigned to look modern and convenient. By 1997, the shop had a pleasing interior, much like Food World (now Spencer’s), but without the air-conditioning and shopping carts.

Farida’s Location: Dr Rangachari Road, Mylapore Competition from big retail: Spencer’s, Nilgiris Survival strategy: Avoid bulk sourcing; store not more than a week’s inventory

“We had to struggle to retain our customers,” shrugs Mammusa. Goods worth just a few rupees were delivered at home, customers could opt for packages of different weights (compared to fewer options at organised retail stores), they had the option to return items (something that’s difficult at Big Retail, thanks to the billing software), monthly credit facilities were offered, and a credit card usage facility installed. The struggle has been worth it. Today, along with Spencer’s there’s also a Nilgiris store in the vicinity, but Mammusa isn’t fazed. “In December (2008) there were Spencer’s managers asking me how I managed my inventory,’’ he grins. Mammusa keeps goods that will last for a week and no more.

Big Retail’s biggest mistake, says Mammusa, is in sourcing, as they lap up anything extra the manufacturer offers for the same price. This results in stagnating inventories and contamination of stocks, which add to costs. “They need at least Rs 2 lakh to Rs 3-lakh sales per day per store to make good profits,’’ he estimates. “A store like Farida’s makes do with sales of Rs 25,000-30,000 and 150 customers per day.

With help from his eldest daughter Meherunissa who has been closely involved in running the shop for 12 years, Mammusa intends redesigning and improving his shop. A separate cosmetic section for women has already been introduced while air-conditioning is on the cards.

—Nitya Varadarajan

Delhi
Creative outlet

It’s called Mediways Chemist but, along with medicine and cosmetics, this outlet in Mayur Vihar in East Delhi, also sells groceries, both branded and unbranded. Over the past two years, Mediways has been hemmed in by some serious competition—Reliance Retail is just 200 metres away whilst Spencer’s, Subhiksha (which is shut for the time being) and 6Ten (from the house of one of north India’s leading basmati rice exporters) are within a kilometre’s radius.

“I remember when there was a flurry of new store openings by big retail chains, many of our regular customers got lured by these stores and temporarily started buying from them,” points out Sanjeev Singhal, who had flagged off the departmental store 12 years ago.

The operative word in Singhal’s statement is of course “temporarily,” as the prodigal customers who went away are back once again. After an initial slide in sales following the opening of Big Retail, Singhal wasted little time. He embarked on a renovation spree, added more racks to display his products and stocked up on more goods in order to give discount offers. “Today, we bring in discount and freebie schemes regularly on both branded and non-branded items.

Mediways Chemist Location: Mayur Vihar Competition from big retail: Spencer’s, Reliance Super Survival strategy: Word-of-mouth publicity

As the margins on products get squeezed in discount offers, selling in large volumes helps us maintain the same levels of profits,” Singhal explains. His discount and freebie schemes have gone down well with the people in the locality. “Via word of mouth, people come and ask specifically about discount offers,” he says.

In the last few months, Singhal has also upped his employee headcount from eight to 10. “We have become more flexible with our home-delivery services. Earlier, no orders for less than Rs 100 were entertained. But now we are giving free home delivery for orders as low as Rs 40-50. What also makes us stand out vis-à-vis the big retailers is the superior quality of our products,” says Singhal who recently got his shop’s name printed on the carry bags. “I think these big retailers will gradually vanish. So, all I have to do is to keep up with our current services and meet customer’s satisfaction,” he says. You don’t have to believe him, but you’ve got to admire his confidence!

—Manu Kaushik