The kirana whiplash
Local retailers in Alwar, Rajasthan, are fighting Big Retail and have lessons for their kirana brethren elsewhere.
-km drive from Delhi, Alwar comes across as another dusty Indian town crowded with small kirana stores. It is a lazy autumn afternoon on a Thursday but the Big Bazaar store in the town is teeming with customers. Amidst the throng, the Kalras are busy shopping for groceries. Tarun, 34, a businessman, and his wife Meeru visit Big Bazaar four or five times a week. "We get everything under one roof and don't have to bother about car parking as there is enough space here," he says.
And, indeed, the Kalras are not in a small minority. Organised retail has made big inroads in Alwar. This small town of some three lakh people has stores of two retail giants - Future Group's Big Bazaar and Bharti Retail's Easy Day. "It is because of our competitive prices and good ambience that we have been able to push up sales of our branded products in a city where brand awareness is pretty low," says Anand Adukia, Zonal Head (Rajasthan and Gujarat), Big Bazaar. The store had sales of over Rs 18 crore in the year to June 2010 - almost 70 per cent more than the average sales of stores in towns comparable to Alwar.
A 10-minute walk from the Big Bazaar store is Pansari Bazar, a bustling market in the heart of the city. At one kirana shop, Subhash Jain, the fifth-generation owner of the Tansukh Rai Kanhiya Lal Jain store is busy at the counter attending to customers. He confesses that sales have been hit by the onslaught of modern trade. Over the last four years, his sales have been stagnant (Rs 30,000 per day) and the profit margins have come down from 10 per cent to about 5 per cent now. "With the arrival of modern retail, our customers are gradually migrating to big retailers. The shift is more evident in the middle-class and the upper middleclass category as their aspiration level is high and they want to try out new things," says Jain, 48, a postgraduate in commerce, who opted to run the family business with his two brothers.
The Jain brothers, though, have taken the competition head-on. They offer free home delivery for orders above Rs 1,000 anywhere in the city and only sell packaged food items. Their strategy is to neutralise the biggest attraction of organised retail: proximity. An ICRIER 2008 study says that areas where traditional stores have head-to-head competition with organised retail outlets, sales of small stores dropped eight per cent and profits nine per cent.
The Jains are also stocking up on cheaper variants of big brands. "Customers demand packaged products. Also, certain customers demand low-cost products so we are trying to cater to them as well," he says, adding that there is some reverse migration of customers who are not satisfied with the services and products offered by modern retail.
Other kirana shop owners at the Scheme No. 2 market in Alwar have a similar story to tell. Consider the example of Grover General Store, a grocery store. In May this year, when Easy Day opened a 2,500 sq ft outlet in Alwar, sales at Grover General Store dropped by half in the first two months. "I started my business in 1986. For the last few years, the business was growing steadily at around 10 per cent annually. With the entry of big retailers (Big Bazaar and Easy Day) of late, the business dynamics have changed dramatically," says Jagdish Grover, the owner of the store. But he has refused to throw in the towel. He now sells products at cheaper rates than big retailers. "Some of our highest-selling items such as biscuits, cold drinks, namkeen and packaged atta are always offered at a discount. For example, a two-litre Pepsi is sold for Rs 60 at Easy Day, but we are selling it at Rs 55," he says.
Grover says he now understands the benefits of building better customer relations. Unlike big retailers, regular customers to his store can buy on credit and he also does home delivery. In a small town like Alwar, people make frequent and small purchases and find shopping from local grocery stores convenient. "You don't find people going to Big Bazaar to buy bread or jam," he says, adding that while profit margins have halved to 5 per cent he expects to end the year with 20 per cent higher sales than last year. "Many of our customers who had switched to the big retailers are now coming back," he says, echoing the Jain brothers.
Like Grover there are other kirana store owners in Alwar who are crafting battle strategies to deal with the new competition. Four years back, Dinesh Khandelwal started his kirana store in Scheme No. 2 before the big daddy of modern retail - Big Bazaar - opened its store in Alwar in July 2007. Khandelwal says he is relatively unperturbed by the invasion of big retailers. "My shop is identified with quality products across Alwar," he says and maintains that is a key reason why his sales haven't been impacted. "There is a large section of the population which gives preference to quality over price," he says. Khandelwal, though, has other problems. He is concerned about who's going to run the store in the future.
"I have two kids studying in school, and both show a disinterest in the business," he says. Manohar Mason, Managing Director of Bangalorebased retail solutions provider Pentagon Communications, says a reluctant next generation is the biggest threat for traditional retail. "The future of kirana stores, which constitute over 90 per cent of the entire retail sector in the country, depends upon the inclination of the next generation in running family businesses. There are better employment opportunities available in small towns now," says Mason. By all accounts, then, the going will be tough for kiranas.
And, indeed, the Kalras are not in a small minority. Organised retail has made big inroads in Alwar. This small town of some three lakh people has stores of two retail giants - Future Group's Big Bazaar and Bharti Retail's Easy Day. "It is because of our competitive prices and good ambience that we have been able to push up sales of our branded products in a city where brand awareness is pretty low," says Anand Adukia, Zonal Head (Rajasthan and Gujarat), Big Bazaar. The store had sales of over Rs 18 crore in the year to June 2010 - almost 70 per cent more than the average sales of stores in towns comparable to Alwar.
The Jain brothers, though, have taken the competition head-on. They offer free home delivery for orders above Rs 1,000 anywhere in the city and only sell packaged food items. Their strategy is to neutralise the biggest attraction of organised retail: proximity. An ICRIER 2008 study says that areas where traditional stores have head-to-head competition with organised retail outlets, sales of small stores dropped eight per cent and profits nine per cent.
Other kirana shop owners at the Scheme No. 2 market in Alwar have a similar story to tell. Consider the example of Grover General Store, a grocery store. In May this year, when Easy Day opened a 2,500 sq ft outlet in Alwar, sales at Grover General Store dropped by half in the first two months. "I started my business in 1986. For the last few years, the business was growing steadily at around 10 per cent annually. With the entry of big retailers (Big Bazaar and Easy Day) of late, the business dynamics have changed dramatically," says Jagdish Grover, the owner of the store. But he has refused to throw in the towel. He now sells products at cheaper rates than big retailers. "Some of our highest-selling items such as biscuits, cold drinks, namkeen and packaged atta are always offered at a discount. For example, a two-litre Pepsi is sold for Rs 60 at Easy Day, but we are selling it at Rs 55," he says.
Grover says he now understands the benefits of building better customer relations. Unlike big retailers, regular customers to his store can buy on credit and he also does home delivery. In a small town like Alwar, people make frequent and small purchases and find shopping from local grocery stores convenient. "You don't find people going to Big Bazaar to buy bread or jam," he says, adding that while profit margins have halved to 5 per cent he expects to end the year with 20 per cent higher sales than last year. "Many of our customers who had switched to the big retailers are now coming back," he says, echoing the Jain brothers.
Like Grover there are other kirana store owners in Alwar who are crafting battle strategies to deal with the new competition. Four years back, Dinesh Khandelwal started his kirana store in Scheme No. 2 before the big daddy of modern retail - Big Bazaar - opened its store in Alwar in July 2007. Khandelwal says he is relatively unperturbed by the invasion of big retailers. "My shop is identified with quality products across Alwar," he says and maintains that is a key reason why his sales haven't been impacted. "There is a large section of the population which gives preference to quality over price," he says. Khandelwal, though, has other problems. He is concerned about who's going to run the store in the future.
"I have two kids studying in school, and both show a disinterest in the business," he says. Manohar Mason, Managing Director of Bangalorebased retail solutions provider Pentagon Communications, says a reluctant next generation is the biggest threat for traditional retail. "The future of kirana stores, which constitute over 90 per cent of the entire retail sector in the country, depends upon the inclination of the next generation in running family businesses. There are better employment opportunities available in small towns now," says Mason. By all accounts, then, the going will be tough for kiranas.
