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Retail giants no threat to 'mom & pop' shops

business Updated: Jun 24, 2007 11:18 IST
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Notwithstanding apprehensions among small-time shopkeepers that the entry of retail giants will pose a threat to their existence, some organised retail networks here feel there is "ample space for all" in the sector.

Top officials at Subiksha, which has a network of 750 supermarkets across the country, and Spencers Daily, which has a strong presence in south India, are unanimous in their view that new entrants like Wal-Mart or Reliance Retail would not pose a threat to them or the "mom and pop shops".

Mohit Khattar, President (Marketing), Subhiksha, feels that in a country like India, there is plenty of space for everyone and the organised supply chains represent just a "miniscule" portion of the sector.

Echoing his view, Samarjit Singh Shekhawat, Vice-President (Marketing), Spencers Daily, said organised retailers account for only three to four per cent of the total business.

"Around 96 per cent business is still in the hands of the neighbourhood mom and pop shops. So there is no question of us, or for that matter Wal-Mart, posing any threat to traditional retailers," he said.

Moreover, the nature of business done by the traditional sector and the organised retailers is different, he said.

"You go to a supermarket for your monthly or weekend purchases or for a shopping experience. But for day-to-day purchase local shops are quite handy."

Meanwhile, 'kirana merchants' feel the organised retail chains cannot make much impact on their customer base as their higher establishment charges will not let them always provide goods at cheaper rates.

A 'kirana merchant' in the neighbourhood cannot be wiped out as long as customers are conscious of prices, quality and convenience, Madras Kirana Merchants Association secretary Kailash Kothari said.

Moreover, small shops have a strong presence in rural and suburban areas, he said.

"Maybe, 10-15 years down the line, the bigger retailers can pose a threat to us. But we also hope to change ourselves to adapt to the new situation," he said.

Some neighbourhood shop owners, however, beg to differ.

"I lost several of my regular customers once a nearby supermarket started offering onions and potatoes at Rs eight per kg irrespective of the prevailing wholesale rate," said A Anandan, owner of a provision store in a residential colony in the city.

Lured by advertisements for cheap onions and potatoes, several people drop in at the supermarket and end up purchasing all they need, be it provisions or vegetables, at higher prices than neigbourhood shops, he claimed.

Shekhawat, however, admitted that there is likely to be a "shake-out" in the sector with some supply chains concentrating on prices, some on quality and others assuring a shopping experience.

The sector may also see new joint ventures, mergers and acquisitions, Shekhawat said.

The supply chains are mulling adopting various marketing techniques to boost growth.

Subhiksha, which already has 750 shops, will double its strength in one year, said Khattar.

"We are also looking into retailing of some of the best brands in a variety of products."

The chain would also enter Kerala, Rajasthan and West Bengal, he said.

Subhiksha has already ventured into the booming market of mobile phones, while Spencers is mulling retailing of electrical and electronics goods.

Spencers is also exploring the possibility of expanding private label sales.

According to Shekhawat, the supply chain has over 2000 items ranging from provisions to home care products and food to garments, which are sold under the company label.

The number of items was expected to grow to 5,000 in two years covering a wider range of products.

The 10 per cent contribution of such products to the total profit is also expected to rise to 25 per cent in five years, he said.

"We are able to provide the private label products at a discount o 15 per cent with the same quality of any leading brand."

The products are gathered from the same manufacturers providing goods to leading brands to assure quality. But the absence of middlemen and advertisement costs enables the chain to cut prices, he said.

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