Saturday, May 19, 2012

Modern retail chains not catching on in India

Modern retail chains entered the Indian market four years ago, but Indians still prefer to do their grocery shopping at neighbourood stores.

Organised retail makes up only eight per cent of the market.

For daily essentials, shoppers still prefer to buy from neighbourhood shops, citing convenience and familiarity with location and products.

"For us, those places (high end retail stores in malls) are very costly. They are an expensive affair," shopper Sushil Kumar explained.

"Here (at the smaller shops) we can negotiate the price of some of the things we get in branded stores. We are more comfortable with the people in these shops. That is what our mindset is like."

Many shoppers buy groceries on a daily or a bi-weekly basis, because of lack of storage space in their homes.

Because the kirana stores, or local grocery shops, are located in residential areas, it is convenient for shoppers to buy products fresh off the shelves.

"Everyone (who is) working comes to these kind of stores on a daily basis, because you cannot go to a mall and purchase something from the mall for everything," shopper Kamaljeet Kaur said.

"You have to come to these stores, and these are more convenient to us, especially who are working."

Consumers said that even though their neighbourhood stores are cramped and have poor displays, they would rather shop here than drive to a bigger store, hunt for parking spots and spend time searching for their daily needs.

"There aren't malls in all parts of the city and, often, not enough parking space is available at the existing ones. They are very crowded as well. So the local customers like (to come to) the neighbourhood markets," shopkeeper Trilochan said.

But multinational companies and local manufacturers of fast-moving consumer goods say this will all change.

Products like shampoos, soaps, soft drinks and ready to eat snacks are finding more buyers in the larger retail chains. 

Companies that have invested heavily in creating and branding their products are keen to see modern retail shops grow in popularity in India.

But foreign direct investment into the US$550-billion retail market in India has long run into political obstacles.

If the government is able to build a consensus then companies like Tesco and Walmart could set up shop in India.

Till then however it will still be the neighbourhood grocery store that holds sway in India.

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