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The death of the Small Retailer? January 5, 2007

Posted by Vijay in Business, India, Retail, Trends.
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With the advent of large cash and carry stores like Walmart, Metro, and the Indian giants like Reliance etc looking into this space, the retail sector has suddenly become hot. Everyone wants to exploit the great Indian middle class. Apparently we have money to spend 😉

While all this is very exciting, the arrival of these “Gorillas” will definitely have an impact on the small retailer aka the neighborhood provision store. There is a danger that pretty soon they will be wiped out. Even chains like Food World will find it difficult to compete. I went into the Reliance Fresh store in Hyderabad and was amazed at the scale. The big boys can pump in money and drive others out of business.

The same thing happened in the USA and history will repeat itself.

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1. Veena Shivanna - January 5, 2007

Apparently.. There is a compitition.

All said & done, we buy our provisions in a single shop past 35 years, he is our vendor. Don’t raise your brow, that doesn’t mean I don’t shop in these retail shops… The elders generations takes so much time to accept this history repeat thing you know… 🙂
I sometime feel the customer service, the quality is better there.
Atleast the care they show & the way they talk is entirely a blessing, Food world people do it .. but still….something is missing tara annisutte 🙂 idella nuclear family navarige artha aagalla bidi!! . Luxury, comforts, easy… the list grows. 🙂

Shivanna stores in Mysore gnaapakakke banta ?
Any Organic Farming shops anybody knows here? I was speaking to my cousin who is a farmer & he said he is planning to do some organic farming & rain water harvesting.. I am so impressed.

2. Veena Shivanna - January 5, 2007

aa 35 years nalli naanirodu bari 4 years maatra.. We includes me my in-laws, my husband etc.,
We sometimes includes my parents also.. 🙂 depends on the context!

3. Vijay - January 5, 2007

Veena: The point I was trying to make is that it will be difficult for the small people to sustain… for anyone to sustain they need the old customer BUT need new ones as well…

Your cousin will be in great demand… all the Reliance, Pantaloon etc will be jostling with each other to get his produce…

4. praneshachar - January 6, 2007

vijay
it will be like thats what we were discussing couple of days back and we all felt yes it is question of time these retailers will find it very difficult and have to thinkof alternatives. bigger fish will eat all the small one ultimately it customer who will suffer here.
family bonded stores for grocessory cloths etc., was a need of the day earlier because in moffusils there were very few players and for getting good stuff you depend on some trusted by you.
a great chunk of retailers will find it very difficult to sustain it is only matter of time.
kala chakra urulidante life na phases badlagta irutte

5. Murali Partha - January 6, 2007

I know why I will continue to patronize the “kaka or the shettaru angadi”. I do not have to worry about the parking! And phone maadidhre, manege thandhu haakthare.

I think the level of customer service will play a key role in determining how much longer they will survive. But yes the question now is not “if” but “when” the small fish will be put to sleep for ever.

6. Vijay - January 6, 2007

Murali: Sad.. but true

7. M O H A N - January 8, 2007

True

The retailer beats these big boys in
a) Customer service – more important than anything else – a phone call gets the whares to house
b) No long standing queues – a high priority for me
c) Credit : will take the same plastic card after 20 days – till date no “recovery agents”
d) If goods are bad, he takes it back with out questions

Sadly we should patronize such retailers and AVOID big boys for our own good. But isnt a lower price tag a big moving factor for many?

cheers
mohan!

8. Vijay - January 8, 2007

Mohan: Good takes.. only issue for the small guy is sustaining… look at the USA… the neighbourhood grocery store is all but gone.. even in the smaller towns..

9. M O H A N - January 8, 2007

Yes vijay,
A study has proven that around 6 miles radius of a new WAL-MART, local retailers fold up!!!

My only hope is INDIA – the great country of contradictions. Hoping against hope that this does NOT happen in our own bengalooru.

10. praneshachar - January 8, 2007

hope after hope let us pray atleast for another century or atleat 5 to 6 decades both will run paralel and it is nice due to customer service and other benefits of bonding etc., if our retailers are able to hold on to their customers it will work. but for various reasons coupons issued by co., offers announced by these big shops etc.etc., people get attracted even though at the end you pay up for buying some of things you dont need to encash the offers and that way you are the looser but after all all human beings are tempted and get trapped except few like us in this blog you are choosy it; is not that you dont visit these big shope but you are cautious in your buy hope all will agree in case not agree to disagree and continue

11. Vijay - January 8, 2007

So, how can we make it happen? (in other words How do we ensure their survival?

1. Is it by patronizing them?
2. Do they need to organize themselves into a bigger buying block?
3. Do they need to find a better means to sell (maybe use newer technologies like the mobile)?

How???

I would be interested to see Food Worlds reaction to this? At this point I think they are in more danger than the small neighbourhood guy.

12. M O H A N - January 8, 2007

All the above 3 points vijay needs to be done.

Food world already has gone thru the termoil ( former spencers) but doesnt seem to have a clue about where its going.

All the foodworlds, fabmalls, big bazars are just hoping that “wal mart” goes away by magic and assumes that if their pie is not touched in last couple of years – it wont be touched for ever.

Wal mart crushes these retailers when it talks to a prospect like colgate and say how much would it cost for you to ship me 300 tonnes of your toothpaste and the answer is about 60% less than a retailers MRP – this is the last nail in the coffin.

To beat them, the retailers have to gang up.

13. Murali Partha - January 8, 2007

I disagree on point 1 of yours Vijay! You cannot patronize a business model that is not the most efficient one possible – even if the intent is very noble. Simply because it cannot be sustained.

But your points 2 & 3 can be combined by somebody like Food-World or Reliance to come up with a radical business model. FW or Reliance could co-opt all the mom and pop shops as their *exclusive* franchise outlets – and in no time and for minimal investment they would have a distribution network that would be the envy of the entire retail industry. They should then invest in technology that allows them to control the inventory, prices, etc – every single aspect of these front-end stores. They would anyway be able muster the scale required to get the same price advantage that Walmart will try to leverage, and continue to provide the customer service we are used to.

Easier said than done – but worth considering!

14. Vijay - January 8, 2007

Murali: Interesting thought…

15. praneshachar - January 8, 2007

great ideas coming out wonderful murali partha if it happens nothing like that yes the retail network then will be in every corner of the country and it will be very difficult of dislodge a comined strength than slowly weed out one by one individually. that is the message team work is much stronger hope some thought like this weill work yes some creative person in the Relinace chain or Food World sees this and acts at least in a small way and enlarge their spectrum

16. Vijay - January 9, 2007

Hey Mr. Wonderful Murali 🙂 (thanks Praneshachar for the new name)..

I certainly hope someone comes up with the business model you suggest… unfortunately I dont think this kind of teaming strategy exists with Reliance or FW.. However I heard that the Big Bazaar people were looking at this business model for Tier-2 Cities…

17. Veena Shivanna - January 9, 2007

Vijay,
Today I noticed a hoarding while driving to office,
Its from TESCO… There is a picture of an old lady with a vendor boy standing with a bag.
The caption was interesting…’ she can’t come to the shop so they will come to her’.
Interesting..!! I remembered your this blog post.

Murali Partha avare, It reminded me my marketing management text book, no wonder a COO can write all these. Vijay next meet ge ivarannu karkond banni, if he is in bangalore.!!

18. Murali Partha - January 9, 2007

Madam Veena,
Please – I have already been embarrassed enough by Vijay. I am a COO, ONLY because I am the senior-most of the 10-15 people in my firm. I still have a long way to go to before I truly deserve such a tag. Not that I am being humble, (I am not humble by any stretch of the imagination!) – I am actually embarrassed by this designation and wish Vijay had not mentioned it.
Yes I will make it when you all meet next. I am very much looking forward to meeting everyone.

19. Veena Shivanna - January 9, 2007

Murali avare, Whoseever visits Vijay’s blog has to pay this price (being embarassed), some try to disown & some tries to own this state of mind. Its nice of you to “sound atleast very humble!”
Don’t worry much, all is fair in blogging & commenting. Will look forward to meet you. 🙂

Vijay sahebre, yaakri paapa ivaranna istond goL hoykoteera ? 🙂

20. M O H A N - January 9, 2007

Murli sir, dont believe veenakka,
Am an example who reguralry visits vijays blog and he has never done anything emberassing!!!

Sorry veenaakka
mohan!

21. Vijay - January 9, 2007

Veena: Seems like I have Mohan’s support 😉

Murali: Please … such humility…its embarassing ME

22. praneshachar - January 9, 2007

only one word great guys/gals
happy to read all comments
yes vijay is not embarassing any one he is making a statement on facts at least I believe that
it is also needed quite a few will be publicity shy etc.,etc., so someone has to project them like vijay doing it for “wonderful Murali Partha”
yes Murali I am also looking forward to meet you

23. Vijay - January 10, 2007

Ok…ok.. I need to support Veena here…I know what she meant by “embarassing”…. as far as embarrassing Murali .. its ok.. Murali next dose is on me 🙂

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