Buy two get one free, seems to be the philosophy of the organised retail sector. Globally, big retail chains have captured the markets by offering attractive schemes and heavy discounts, offering stiff competition to the unorganised sector. And that's turning out to be the case in India as well.
An ET survey on the retail market shows that retail chains such as Big Bazaar and Vishal Mega Mart are offering attractive schemes and selling products at cheaper rates. For instance a kg of bottled Maggi tomato ketchup costs Rs 74 at Big Bazaar as against a maximum retail price of Rs 84, which a mom-and-pop store would charge. Also one can buy a two litre bottle of Sprite for Rs 38 at Vishal Mega Mart instead of paying a market price of Rs 42 at a local store.
Says Harminder Sahni, principal & associate director, Retail & Annuities Practice-KSA Technopak: ”These big stores can afford to offer discounts not only as they order in bulk but also because they work closely with suppliers. For instance if Food Bazaar works closely with Hindustan Lever to offer them better display and demo opportunities in the stores thus saving them large sums of advertising, then HLL may be able to offer better price and service in return. ”
Adds Ram Chandra Aggarwal, MD, Vishal Retail Private Limited. ”We are committed to offering better service and value to the customer. As we offer better prices, people will buy more, creating a demand led growth, which would eventually lead to more employment generation,”
So, is this change going to wipe out the mom-and-pop stores of the unorganized Indian market in the years to come? A local shopkeeper running a grocery store in East Delhi says,” With Big Bazaar in the neighbourhood, there was an initial threat of our sales going down. But nothing actually happened.” Mr Sahni adds there is huge value attached to proximity and convenience due to which the neighbourhood stores will not go anywhere and will co-exist with the organised sector.”
But in the future, small retailers will look very different because their products, merchandise range and look will change to fit with the changed consumer's demands.”
Moreover, mom-and-pop stores far outnumber the big retail chains. According to a report prepared by Indian Council for Research on International Relations (ICRIER), only about 2% of the retail trade in India is in the organised sector as compared to more than 75% in developed countries. In contrast, it is estimated that there are over 15 million retail outlets in India.