Big retailers plan big by thinking small

By rolling out low-priced corner shops, big retailers are attempting to find their fortune at the bottom of the retail pyramid. Saurabh Turakhia & Radhika Pancholi report.

While organised retail is not going to hurt small retailers, according to a report released by New Delhi-based Indian Council For Research on International Economic Relations on Monday, big retailers are planning to become bigger by thinking small.

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By rolling out low-priced corner shops, big retailers are attempting to find their fortune at the bottom of the retail pyramid. These new formats are in direct competition with small kirana stores.

The Future Group, which created a shopping destination for middle class with its Big Bazaar outlets, is now quietly expanding its KB’s Fair Price stores after launching the format in August 2007.

Subhiksha, the chain of neighbourhood stores started by IIM graduate R Subramanian, was the first one to come up with the bottom of the-pyramid strategy.

With 70 KB’s Fair Price Shops set up already and plans to have 1,500 stores in the next 18 months, Future Group is betting big on the format. KB’s Fair Price Shops are managed by six people and they do not have air-conditioners. You do not get home delivery facilities and shopping bags.

And customers are already getting a hang of this format, which is expanding mainly in the top seven cities. Naina Mehta, who lives in Western Mumbai suburb Kandivali, is one such customer. "The prices here are cheaper than even my local kirana shop," she said. Daily necessities such as sugar are available for as less as Rs 9 per kg (it costs Rs 14 in a typical store).

Damodar Mall, CEO (innovation and incubation), Future Group says that the stores serve customers who don’t frequent the destination places like Big Bazaar. There are three sections --- grocery, FMCG and general merchandise --- with consistently low prices.

“Lesser range of goods (about 300), bulk sourcing, no-frills, non-air-conditioned environment and low set-up, operations and management costs give us our efficiencies,” Mall said.

However, some feel that it is early days and this is at best an experiment in the Indian market.

Although one may tend to compare the KB's Fair Price Shops with Subhiksha, Arvind Singhal, chairman of consulting firm Technopak Advisors, says that there is no direct comparison. Mohit Khattar, president (marketing), Subhiksha Trading Services, feels that new entrants haven’t yet established their propositions clearly. The challenge from local kirana stores is the big concern.

Organised retail constitutes only 8 per cent of the total retail market, according to a study done by consulting firm Deloitte Haskins &Sells.