Looking at the chronology of the emergence of unorganised and organised retail formats, it is discovered that standalone next door retail stores came first, followed by chain stores and department stores. The latest retail formats have stretched the concept to cover the maximum retailing space showrooms that wear an expensive look, to hypermarts which have redefined the mundane task of grocery shopping.
All the big giants, in their greed to occupy the maximum retail space, have made huge investment announcements to open a large number of retail stores in various formats. However, hardly any of these big retailers realise the importance of quality over quantity. Opening large retail stores is not important but how many of these retail stores are running successfully, is important. Before going into an in depth analysis of the success rate of the retail formats in India, let us check out the various retail formats available in India.
Existing retail formats
All the big retail giants are in an experimentation mode and are trying several retail formats. The various retail formats available in India are:
- Convenience stores: These are small format stores located in populated urban areas, offering convenient location and extended operating hours
- Branded stores: These are exclusive company owned or franchised showrooms which provide complete range and certified product quality
- Specialty stores: These stores specifically focus on consumer needs and provide a wider range of products for the consumer to choose from
- Department stores: Department stores are larger in size and have a wide variety of products, organised into different departments
- Supermarkets: These are large self-service retail outlets or in other words one-stop shop catering to varied consumer needs
- Discount stores: These stores offer discounts on the retail price through selling high volumes and reaping economies of scale
- Hyper-mart: A hyper-mart is larger than a supermarket, sometimes with a warehouse appearance, generally located on the outskirts of the city. It offers a vast choice of products at low prices, with extended services such as cafeterias, etc.
Successful retail formats
The current retail scenario indicates the successful emergence of two retail formats in India, i.e., ‘hypermarts’ in organised retail and ‘standalone neighbourhood retail stores’ in unorganised retail. Hypermart is not a totally new concept in India rather it has its origin in ‘melas’ and ‘mandis’ of olden times. The sophisticated air-conditioned modernised form of these ‘melas’ and ‘mandis’, is now termed as hypermart. Indians used to visit these melas and mandis to buy grocery and daily need products, where all things used to be available at wholesale prices- similar is the concept followed by hypermarts. This is the reason that the hypermart format is more popular in India than other formats. But being popular still does not make hypermarkets the most lucrative, because of huge cannibalisation owing to so many competitors opening up stores within the vicinity, causing most of them to bleed.
Hypermarket format offers all the benefits of being an anchor to a retailer, with low occupancy costs, and thus enables him to be a successful. Future Group retail's success story arises from its hypermarket format, Big Bazaar. Others like K Raheja Corp's HyperCITY also reportedly have plans to expand their network to primary and secondary cities. Reliance Retail has also unveiled its hypermart format. Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular repeat purchases are a norm at such outlets.
The success of this format does not mean that small standalone stores are not performing at all. In fact, neighbourhood retail stores are running more successfully as they have also upgraded themselves to provide more convenience to the consumers. Moreover, it is human tendency, especially in India, to buy things from a trusted store where the retailer/shopkeeper provides not only quality products but also convenience at your door step, with a personalised touch.
Retail giants & retail formats
Future Group, the biggest retailer caters to a wide segment of consumers in the market with its various retail formats. Reliance Retail (RRL), the retailing arm of Mukesh Ambani-led Reliance group has a total of 15 retail formats selling various categories of products. Trent, a retail branch of Tata promises to bring a more distinct model to the retailing format, as private labels would account for 90 per cent of the products sold. K Rahejas’s Shoppers' Stop was the first one to open a department store in the early 1990s and currently operates 19 stores in 10 different cities in India. Mr Govind Shrikhande, Customer Care Associate and CEO, Shopper’s Stop Limited opines, “K Raheja Group has the formats of departmental stores through Shopper’s Stop, hypermarkets through HyperCITY, specialty stores for books through Crossword, gourmet food through Gourmet City, maternity & infant care through Mothercare, home through HomeStop, beauty & accessories through Arcelia, MAC, Clinique, Estee Lauder, etc.”
K Raheja’s other format HyperCITY carries a product range varying from foods, homeware, home entertainment, hi-tech appliances, furniture, sports goods, toys and clothing. According to Mr Andrew Levermore, CEO, HyperCITY, “We have experimented with small format food and grocery stores which did not work for us. Profitability of this format is not in sight and will deteriorate even further as increased competition brings down grocery margins. Our hypermarket format is a clear winner and break-even is achieved almost immediately.” According to Official Spokesperson, Spencer’s, “We opted for two formats: supermarket / convenience stores which are called Spencer's and hypermarkets which are called Spencer's Hypers. Spencer's hyper stores are destination stores covering an area more than 15,000 sq.ft. They offer everything under one roof. Shoppers can avail fantastic deals across all categories. Spencer's stores are neighborhood stores ranging from 1,500 to 15,000 sq.ft.” Bharti Retail Limited, a wholly owned subsidiary of Bharti Enterprises, launched its first neighbourhood format stores in Ludhiana, Punjab known as Easy Day. Similarly, the Landmark group also operates multiple formats such as hypermarket (Max), departmental store (Lifestyle), Shoe Mart, Funcity, etc.
According to Mr Ambeek Khemka, Group President, Vishal Retail, “Different retail formats provide different experiences to a consumer even though the core theme remains retailing. For instance, in a hypermart, products/articles are displayed in bulk to entice its target consumers to pick one and add to the shopping cart, whereas in a brand/specialty store only individual pieces are displayed and promotion is done by a promoter/sales executive.”
Size of each retail format
While trying to identify the retail formats of the stores based on the size of the stores, the industry was invited to respond about the size specification of each retail format. Mr Levermore says, “The term hypermarket is so misused in India. It is often applied to stores slightly bigger than 15,000 sq.ft. We do not believe that we can offer a true destination hypermarket below 1 lakh sq.ft. Our ideal size is 1.25 lakh sq.ft, which is likely to grow to 1.4 lakh sq.ft over the next five years.” In this context, Mr Shrikhande opines, “Both the department stores and hyper market are looking at spaces between 80,000 sq.ft to 1,20,000 sq.ft. However, small formats can be done between 750 sq.ft to 5,000 sq.ft each.” An official spokesperson from Spencer’s explains, “The convenience stores range from 1,500 to 15,000 sq.ft; anything above that is termed as Spencer's hyper.” According to Mr Basu, for a big store, the specification differs from that of the vanilla stores. The average size of any vanilla store would be around 1,000 sq.ft.
Consumer’s acknowledgement of retail formats
The speedy growth of the retail industry in India is a clear indicator of the fact that the Indian consumer has accepted the new retail formats. According to Mr Basu, “If we look at the growth areas in India, the top 15 cities cater to 33 per cent of the total urban population, but as high as 38 per cent of Sec A and B (the top two socio-economic consumer strata) of the urban population. The next 15 cities only add to another 7 per cent of Sec A and B population. So the focus of organised retailing will be restricted only to the top 15 cities in India. About 96 per cent of total organised retail is in the top 10 cities, of which the top six cater to 82 per cent. So, what I see is that retail formats like hypermarkets are accepted in the top 15 cities in India. And the type of people they focus on are mostly Sec A and B category of people.”
Mr Levermore informs, “The HyperCITY hypermarket format is very popular and enjoys extremely high customer entry. Its up-market positioning appeals to discerning, high income earners and therefore, the average basket size is much higher than industry norms.” In this context Mr Shrikhande explains, “All our formats are targeted at the same customer base, mainly urban, modern, fashionable, Sec A & B customers.” Ms Dipali Goenka, Director, Welspun Retail observes that, “The Indian consumer is evolving and realising the importance of quality with style. The Indian consumer has become house proud and is accepting organised retail formats. Hypermarts are still new but a well received concept in retail. Welspun Retail is already delighting millions of consumers across India with brands catering to distinct segments - from the value for money seekers, to the elite shopper, creating a benchmark in the home retail industry in the country through such formats.”
Mr Khemka opines, “Yes, the Indian consumer has certainly accepted the new retail format such as hypermart, and our success in the same is a living example. The people who shop with us are primarily of middle and upper middle class.”
An official spokesperson, Spencer’s opines, “The exponential growth in the Indian retail sector owes itself to the middle-class boom. Our shoppers are exposed to international shopping experiences, are aware of global brands, are discerning and most importantly have high disposable income. Plus, they look at shopping not just as a necessity but also as an opportunity to spend quality time with the family. In fact, the shoppers are ahead of us on the learning curve, owing to their global exposure.”
Hypermarts vs. standalones
From the above discussion it is discovered that hypermarts and standalone neighbourhood retail stores are performing successfully. But how many times have you visited a hypermart and organised retail formats and experienced the same convenience, customer satisfaction and personalised touch that you experience while shopping at a neighbourhood retail store from where you have been shopping for so many years? The answer is definitely ‘not many times’. A hypermart can provide very good ambience, variety, a new shopping experience, monthly discount schemes and offers but as for customer satisfaction, there are doubts.
Overview
Indications are obvious that a large number of organised retail formats have emerged in India and are giving tough competition to the unorganised small retail stores. No doubt these organised retail formats provide excellent ambience and comfort within the stores, which is sufficient to attract the consumers at least for the initial period, but it is difficult to keep the consumers attached for a longer duration. The reason for this being, lack of personal touch and convenience that a local neighbourhood retail store offers to its consumers.
The small retail formats have been there for generations and hypermarts have come into existence only over the last one or two years. These formats will without a doubt be successful, but it will take some time for them to attract the consumers’ attention for a longer duration.
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