March of the KB?s Fair Price

The retail industry is witnessing a sea change of innovations. In an interesting lowdown, we see the new trends that are catching up in the market scenerio.

The Indian Panorama

With a population of approximately 1,155,347,678 and an ever-rising GDP, India offers worthwhile opportunities to retailers. The 2006 Global Retail Development Index even named India the most alluring country world wide to enter the trade and retail market. Realising the opportunity, a rush of foreign retailers like Metro, Walmart and Carrefour etc have entered into the Indian shores. Taking lead, even our Indian counterparts are not lagging behind in increasing their footprints. Big Bazaar, More etc are our answers to them. These big box retailers are now innovating with small models for that wider reach. If Big Bazaar introduced Fair Price, Heritage Fresh brought in its Parlours.

KB’s Fair Price has entered the Indian retail scenerio alongside mom and pop type of stores, which occupy close to 98 per cent of the industry.  Then we have supermarkets, hypermarkets and big box retailers called Cash and Carry stores in India like Metro, Bharti Walmart and Big Bazaar etc to meet the day to day need of restaurant owners, offices and institutions. They even make a point to source 90 per cent of their merchandise locally because of benefits like:

• Accelerated Indian Economy
• Reduced Waste
• More efficient supply chain

The entry of Cash and Carry operations has minimised the middlemen in the supply chain by linking farmers to retailers, thereby minimising wastage of fresh foods and vegetables as well as helping control inflation by allowing cheaper goods for whole sellers and retailers.

Small shop suitability     

People prefer Cash and Carry stores because of the heavy discount they get due to economics of sale. But these big stores are not located everywhere, they are very few. So, Kirana stores fill in that gap for the daily consumption of essentials. Now, even Fair Prices are coming alongside them to give them fair competition. Basically, targeting the mid segment and lower segment, they are the best bargain hubs. Another one is Heritage Fresh parlours from Heritage Fresh Group. As these big box retailers have understood the importance of wider reach they are coming closer to their customers in smaller models. Fair Price is interestingly giving competition to kiranas. HF parlours are concentrated only in south so they are not that big threat as of yet.

Fair Price Model

Built on same size of a rough 800, 100 or 1500 sq ft they get an easy entry on any road side and even next to some Kirana while giving them fierce competition. Presently, there are approximately 192 stores across cities such as New Delhi, Mumbai, Bangalore and Ahmedabad.

Each outlet offers 350 to 400 SKUs (stock keeping units) with best prices in staples food range and FMCG products including oil. Similar to 'kirana' outlets, their target clientele is middle and low income category. The aim is to offer quality and affordability with discounts. The stores are simple with no add-ons. The store displays all fast moving SKUs. The company has opened its warehouses all over in India.

The marketing strategy is to offer quality but affordable products which will boost volumes. This business model has resulted in repeat customers. In urban cities 70% of customers constitute the lower and middle class and KB's intends to capitalise on this segment.

Keeping in view of its middle-low income focus, KB's has not resorted to any media advertisements to highlight its presence in the cities. Instead it has opted for leaflets to create an awareness of its shopping benefits.

Food items constitute the major chunk of products, which has seen 25-30% growth. The stores display 150 staple foods, which include 18 to 20 varieties of rice.

These no frill shops while enjoying the advantage of economics of sale sell at heavy discount price. One can walk out with a 25 percent discount on his total bill, and sometimes even 50 percent with their offers of 2 for the price of 1. Products are displayed in cartons and not even the ubiquitous shopping bag is provided free of cost to shoppers. This format with a tagline “Bachat Hi Bachat” (Savings and Savings), is structured in a fashion that allows it pass on maximum savings to the customers.Well, who wouldn’t get lured by such bargain shops?

An official shares on ground of anonymity, “ We could well afford bargain due to economics of scale. Moreover, there are no frills like advertising or plastic bags, no decoration, no ACs, the walls are simply painted, our staffs are efficient etc. In this economy, retailers have to fight for every rupee that the consumers are willing to spend. One way of doing that is by organising sale. We also have certain days like “Sabse Saste 4 Din” where we give heavy discounts for a couple of days. Like this time, we are offering I kg sugar with every 5 kgs of Atta this independence week”.

Unfortunately, one may not find his favourite sauce, or biscuit or even cooking oil on the ground that the stock is limited to essentials and cheap brands only. So, one can avail only day to day essentials and that too limited consumption items. And unlike Kiranas that refill their finished stocks immediately to keep up with the requirements of the customers, Fair Price discount models wait until their truck arrives confirming to the economics of scale, so many a times, their shelves are empty.

Kiranas will still exist

Kiranas are getting a tough competition from Fair Price but can still enjoy advantage over them by way of

• Offering credit which these discount offering stores do not give
•  Superior quality products. Remember the discounted products of fair price are mostly inferior in quality including their private label
• Perishable daily use items like bread, eggs, curd and milk etc.
• Refrigerated products like butter, cold drinks, cheese etc.
• Wide range of brands compared to discount stores which keep only limited wares
• Free home delivery

So, where a house-wife can rejoice in good bargain by way of heavy discounts, schemes such as 2 for the price of 1 etc, some people will still prefer to remain loyal to Kiranas for its advantage of wider variety and quality. If both can safe guard their individual spaces, they can co-exist.