Its been a year since I have been closely associated to Real Estate Sector. Don't know if I can consider myself fortunate or unfortunate, but from the time I joined in April 2008, I have been witness to the slide in the Real Estate sector.
Being part of the Retail Advisory Team, I have been fortunate enough to meet various Retailers and Developers. Each interaction has been a learning experience and with the market situation being so dynamic and volatile, the saying "Change is constant", appears to be bit to cliche.
Everyones trying to adapt to the changing market. Retailers reducing store sizes, changing formats, inventory optimization to name a few. On the other hand Developers have gone in for revenue share, minimum guarantee etc.
Given all this, I am still in awe of the kirana stores, who everyone pronounced would DIE with the advent of ORGANIZED RETAIL. The last couple of years have seen supermarkets cropping up in every nook and corner.
However, alls not well. While the kirana stores are still fighting it out, the last couple of months have seen a lot of supermarkets shut shop. It really made me wonder as to how these kirana stores have managed to pull it off.
1> CREDIT - A simple, but very vital feature of Kirana stores. Being present in literally every street of this country, and literally knowing every person on that street, goods on credit is easily available. Compare this to a supermarket where even if you are 1 Rs short, you would have to probably drop off an item from your shopping list. Surprising as it may be, I found myself too buying more from my neighborhood kirana store as he literally stocked up what ever I needed. Right from a lock(as i keep losing my keys often) to a comb( I keep losing it in my house :) ). Though he might not have an IT database or an MIS system, he clearly knows what his customer wants. A case in point. Me being a 'Hide n Seek' biscuit lover, had asked my kirana storewala twice for it. He didn't have it then. The third time I went, he had it stocked up. Compare this to a supermarket where they wouldn't really care for what I wanted.
2> ADAPTABILITY - The beauty of India is its diversity and with this diversity comes a huge difference in peoples consumption patterns. If Gujrathis like a lot of Ghee in their Chapatis the Tamilians would like a lot of sambhar with their Idli. So are the national chain of supermarkets able to gauge this. Well I hope their IT systems help them out with this. All I know that is kirana stores know to the dot as to what their customers want. To customize your stocks to a particular location is no easy task. We have easily aped the concept of supermarkets of the West, but they are no way close to the diversity we have in India.
3> TICKET SIZE - Indians generally follow the JIT(Just in Time) system of cooking. This means, they buy curd, milk, fruits etc. which would just last for a day or two. A lot of this is because of the Indian psyche of not stocking up much at home. Blame this on the decades of erratic power supply which could spoil the food items. Things have improved in terms of penetration of fridges, generators. However the Indian psyche hasn't changed much. Compare this to the American consumer who generally buys a weeks to a months supply. This is primarily because of the better power situation over there. So what does this mean for the Indian supermarkets. How do they offset this ?
4> REAL ESTATE COSTS - India is governed with lower labour costs and higher real estate costs. Compare this to America which has higher labour costs and lower real estate costs. To further negate the real estate costs in America, the Wal Marts and the Carrefours of the world are located around 15-20 kms outside the city. Now try aping this in India, and your in for a rude shock as it would easily take you an hour to do 15 kms. I know the above mentioned example is for Hypermarkets. Case in point, would you travel 3 kms to a supermarket , when you can get all the stuff you need at the end of your street.
Also the kirana stores are clearly at a huge advantage, as they normally don't take great "Retail locations", hence the rental they pay is really low. They do not invest in labour as its mostly owner run. Nor do they invest in fit-outs, lighting etc. Also, tonnes of stuff would be stacked up in the minimum possible place. So simple as it pay seem, its a really ingenious concept !!! The Kiranawala has manged to negate the Real Estate as well as the labour cost.
5> GOODWILL - This is something which is intangible, but I feel plays a big role. I mostly get back late from work and would land up not having any thing to eat for dinner. I once remember reaching the nearby supermarket at 10 and the guard shouted that the computers were shut off and they were going to close the store. Dejected, I decided to carry on home. There was a kirana store just next to my house and he already put his shutters down. Thought I'd still give it a shot in the dark, and asked him if he had bread. He gave a broad smile, and happily opened his shop again just to give me bread. This is Goodwill people, somethings am pretty sure a supermarket will never be able to give.
6> EXPERIENCE - I have been in Muscat for 16 years, and organized Retail was existing there way back in the late 80's. I remember whenever my family used to go shopping, there used to be ample space in the alleys. In fact, there was enough space for 2 trolleys . Compare this to our very own Indian supermarkets where there isn't even space for 2 people to pass by and you would inevitably land up rubbing against each others bodies.
I wish to conclude with a simple -
Have we really understood the Indian Consumer ?
To end from where I began, Change is constant. If you cant change at the pace change is happening, then the weakest would always get weeded out.
From what I observe, the Kirana stores are here to stay.
