Modern Retail formats in India
There are a number of formats in modern retail which emerged over the last century or so and have now become the standard the world over. They today rule the roost and have captured the bulk of the market share around the globe. Let us discuss these briefly.
A supermarket is a large food store of at least 4,000 sq.ft. (in Europe 5,000 sq.ft.) in size where the bulk of the sale is under the self-service system. Here the word ‘food,’ apart from eatables, includes all consumable items such as oral care, bath soap, detergent, cleaning materials, cosmetics, shaving aids, etc. which are purchased, used and again purchased almost every month.
There is however no rule that says that you cannot sell non-food items in a supermarket – many supermarkets have a medicine counter in a corner, for example. Within self-service or outside self-service, other products like plastic, garments, utensils, kitchen appliances and household goods can also be placed in a supermarket depending upon the customer demand and availability of space. The shopping trolley in a supermarket usually has a size of 60 litres.
The modern supermarket is an American invention. When the first one – called King Kullen – was established in 1930 by an Irish-American salesman Michael J Cullen (1884–1936) by introducing the concept of self-service, people thought everything at his store will get stolen and he will go bankrupt soon. But in the space of only one year, Cullen started seven more stores!
In the 1960s, the supermarket concept got maturity and was acknowledged around the globe. Interestingly, the first supermarket of India – Delhi’s Super Bazar – was started way back in 1967.
A supermarket may be of three types, which are discussed below.
As the name indicates, this is located within a densely populated residential area. This supermarket cannot and should not think of bigger catchment areas and a huge sale. This is the most suitable format for an owner-managed local retail chain.
Navjeevan Super Shop of Jalgaon, Pariwar supermarkets of Jalna, and Patel low-price supermarkets at Ambarnath (a suburb of Mumbai) are some examples of this format. It is advisable for most of the current grocery-selling shops of India to switch over to this format for their survival and growth. The strategy of this format is that it targets the monthly expenditure of a household and sells its day-to-day requirements.
As the name indicates, this supermarket format chooses the low price strategy and sells all the items at a discounted rate. This seems to be the mantra of many famous retail chains in India like D-Mart and so on.
A destination supermarket is a large one with a wide range of goods apart from food. In this format, the basket size is much more. Supermarket chains with national ambitions should choose only this route if they want to survive and thrive.
A convenience store is a scaled-down version of a supermarket. In this, the range of stock differs from location to location. In the USA, almost all petrol pumps are convenience stores too. In Thailand, China and Singapore, the convenience stores are like small supermarkets, selling mainly food items and vegetables.
At popular tourist spots, convenience stores mainly sell tourist-oriented products such as fast food, beverages and personal-care items.
This is again an American innovation by two brothers, Stephen and Phillip Masters. They set up the world’s first-ever discount store in 1930. These stores sell limited items at a cheaper price throughout the year.
The discount stores – which may or may not operate like a supermarket – are a suitable format for large-scale national as well as global chains. The most successful such chain is Aldi which started operations in 1960 and spread quickly to thousands of stores spread across 20 countries.
Hypermarkets are a French innovation that took off in 1962. The credit for this format goes to Carrefour, the retail giant of France. The original definition of a hypermarket was a large store of 25,000 sq.ft. with at least 25 checkouts, with tall ceiling, wider aisles, and lots of customer service. The modern hypermarkets however range from 50,000 to 100,000 sq.ft. in size. Some world-famous hypermarket chains include Carrefour, Tesco and Metro. In India, Big Bazaar, D-Mart, More and Hypercity are some examples of hypermarket chains. Unless a hypermarket has a monthly customer traffic of at least 1 lakh, it cannot be viable.
This format is an innovation of Sol Price (1916-2009) who started it in 1976 at Sandiego, USA. In layman’s language, this format is also known as cash-and-carry and is open to members only and not the general public. The current definition of a warehouse club is that it is a no-frill, no-thrill large-format store selling only to its members at wholesale rate.
A department store is over 10,000 sq.ft. in size, selling at least five different commodity groups, with a major thrust in apparel. This format is a French innovation. Bon Marche, the Paris emporium started by Aristede Boucicaut in late 1840s, was the first-ever department store in the world. The first such store in the US was set up by Alexander Stewart in 1848. Both the stores introduced the concept of fixed prices. Subsequent department stores were greatly influenced by the practices of these two innovators. Fixed price, quality merchandise, attractive interiors and one-stop shopping are the contribution of department stores in the field of modern retail. In America, furniture is a must-have category for a department store.
A department store may sell 5 to 50 different commodity groups. The entreprenuer, however, may not have the experience or expertise in all these categories and may also not have the needed capital.
Some world-famous stores in this format are JC Penney and Gap of USA, Marks & Spencer and Harrods of UK, etc. Prominent such stores in India include Shoppers Stop, Westside, Lifestyle and Pantaloon. The average ticket size in this format usually ranges from Rs 950 to Rs 1,250, with two-three SKUs.
The specialty stores specialise in a particular category or sub-category of goods such as footwear, sarees, dress material and jewellery. These are of smaller size compared to bigger formats and focus on quality and variety of the chosen category. Leading stores of this format include Toys ‘R’ US (toys), Bata (shoes), Nalli (silk sarees) and PC Jewellers.
This retail buzzword is actually not a format. A mall means a large building complex with a conglomeration of shops of various sizes and types, with fun, food and entertainment facilities. The first mall in India was set up in 1997 by the Goenka Group in Chennai, called Spencer Plaza.
A mall can never be successful until it has at least five anchor tenants, a successful hypermarket or a destination supermarket, an established department store, a multiplex, a food court and an outlet of a QSR brand such as McDonald’s, Domino’s or Pizza Hut.
The anchor tenants always pay much less rent than the market rate. Mall builders who forget this rule usually end up in failure.
Global retailers follow mainly four formats: hypermarket, warehouse club, super-centre and department store. Retailers interested in becoming national players should adopt any large format that is suitable. For the local level, the supermarket format is the best advisable.
The basic objective of all these retail formats is to attract customers and generate good sales. Therefore, they must focus on the needs and preferences of customers. The owners, promoters and the operations team should also understand their format’s USP and work accordingly.