Modern retail in India is growing – both in terms of floor space and sales. However, some of the major retail giants – Reliance Retail, Aditya Birla Retail and RPG Group’s Spencer Retail – are yet to break even. Retail industry experts say that these companies have yet to get the formula right when it comes to store formats.
Going by my observation of their store format choices across Indore, Kanpur and Bhubaneswar, Reliance Fresh has opted for a medium sized supermarket format store, opening its stores in busy residential localities, with good visibility and centrally located stores. More and Spencer’s on the other hand, have opened more stores in shopping malls. Throughout these 3 locations, I have noticed more footfalls in Reliance Fresh when compared to the other two. This, in my opinion, can be explained by the fact that in India, a shopping mall is still a place that is more than just a casual visit. The size of a mall can be slightly intimidating to the average Indian who is used to jostling amongst other people to shop for vegetables or groceries. People plan when to go to malls, they dress up decently and will usually need to take a car, or atleast a bike. On a Sunday morning, I can walk up to the nearest Reliance Fresh in my shorts - get some eggs, milk, bread and other articles for breakfast. However, if I were to go to a mall to do this casual bit of shopping, I would think thrice. Same goes for women. They will dress up, and will want to be dropped by their sons/husbands in a car. The car has to be parked, a lift/escalator has to be used, baggage to be deposited, time has to be spent waiting at the billing counter, again the escalator and the parking routine will ensue. On the way, a cone of icecream or a cup of sweet corn will also be bought. When will you want to take so much time out for shopping? Only when you aren’t going to buy just bread, milk and eggs, but a whole lot of other groceries, maybe a fortnight’s or month’s stock, and when you get serious discounts for bulk shopping. The importance of discounts for bulk shopping cannot be understated, since the success of Big Bazaar hinged on this point.
So what’s there to learn from the above insight? Reliance Fresh is probably targeting small-ticket, frequent customers as much as less frequent, big-ticket customers. I have seen neighbouring tea shop owners come to Reliance Fresh to buy milk too, which is unthinkable in a mall. I had initially thought that it will be difficult for modern retail outlets to sell vegetables, but seems that is not the case. In the case of vegetables, I am guessing that Reliance Fresh is doing better than the others, primarily because people like to buy vegetables and then consume them within 3-4 days. More and Spencer’s, going by their choice of locations, are more fit for the couple/family who go to watch a movie over the weekend, complete their groceries and food shopping for the fortnight, have dinner outside and then come back home - in other words, a more immersive experience. Reliance Fresh can get away with crowded, smaller sized stores, while the others who are offering the immersive experience need higher service quality levels. Whether the choice of locations was undertaken keeping the end customer in mind, or whether it has come to be so is a question only the retail chain managers can answer. But I sincerely believe that in order to get the store format formula right, the management needs to pinpoint its target customer, understand the format and location that would pull him to their store and then take a decision regarding the store format, rather than the other way round.
