Food and grocery retailers like Spencer's, Trumart and Spinach have begun aggressively pushing small appliances into the domain of routine consumer purchases to push up the average ticket size of daily purchases and help profit margins.
Consumers are being egged on to buy competitively-priced small appliances like mixers, toasters, grinder, sandwich-makers and frying pans, enabling retailers and thereby ensuring higher footfalls. Grocery retailers are looking at ways of improving profitability at a time when margins on grocery products are falling sharply in a competitive market.
While the retailers are currently pushing national and regional brands on the shelves, plans are on to have their own private label brands in this category. The emphasis on small appliances comes as food and grocery retailers are looking to complete the spectrum on food and non-food products within their stores.
“As a category they may be small now, but they push the value up. Anything which has value and meets the daily needs of consumers is considered,” said Upamanyu Bhattacharya, chief executive officer, Trumart. The company also plans to introduce a range of small appliances by January 2007.
Similarly, Spencer's - the food and grocery format from RPG - is also looking at the option of having own labels in small appliances. “As a category, small appliances are growing over 60 % year-on-year. So it is an opportunity which cannot be missed,” says Jitu Mehta, president, Spencer's Daily. Spinach, another retail chain, is also looking at this category seriously.
“It makes sense as our positioning is that of a neighbourhood store. So we have to meet the daily needs of the consumers and small appliances today is a part of daily household needs. If we are selling bathroom slippers and the extension cords as daily needs, why not small appliances,” questions Dipankar Halder, chief executive officer at Spinach.
The move also spells more competition for traditional consumer durable retailers. In addition, for food and grocery retailers, appliances offer a much higher margin than the average food and grocery sales. “If the average grocery sales are around Rs 400, the ticket size from small appliances is higher,” said Mr Bhattacharya.
Retailers are confident that they will be successful in garnering a larger chunk of this business, away from the conventional consumer durables retailer in due course. “These traditional formats trigger an extra demand within the stores. While there will not be a complete switchover from traditional retailers, it is a sensible business model for the modern trade,” said Mr Mehta.