Grocery shops have a taste of competition
While big players struggle to maintain the footfalls, the small shops start reinventing themselves
Tucked away in Mylapore market is Vennila Department stores whose owner J. Muhilan has a story to tell. It is a saga of survival. “We have been here for over 26 years. When they came, we knew everything would change, but we believed in our strengths,” he says.
In the process, the neighbourhood friendly shops transformed not just to combat the competition from the big branded retail chains but also to reorient their business.
“The retail supermarkets are centralised and offer discounts we cannot even think of. Our profit margin has shrunk, as much as by 20 per cent, but we manage to retain our customers,” he says smiling, jotting down in his register ‘V-care shikakai' that a customer has asked for.
It was an onslaught of big retail players on the humble grocery stores like that of Muhilan five years ago. Though not an unknown commodity, given that the first Foodworld store was opened here in 1996, what hit the ‘provision' shops most was the pace at which the change happened. A chunk of the supermarkets came up after 2006 making Chennai a city with the largest penetration of modern supermarket stores in the country.
Many of the supermarkets, however, had to go in for consolidation of their operations in 2008 in the wake of economic slowdown. “Every player had to close at least 10 outlets in the city,” says Raja Nagarajan, a retail expert.
The story, however, is not about the retail bigwigs, but about the neighbourhood shops taking the competition head-on. The lure of high-speed transactions, attractively arranged goods next to broccoli and bell peppers was there to stay without destroying the existing network of over 15,000 grocery shops in the city.
While the big players struggled to maintain the footfalls, the small shops started reinventing themselves. Many of them focussed on customer comfort, which for long they had neglected, such as redesigning their shops, promoting self-service, air-conditioning, trolleys, computerised billing, and started accepting credit cards. Some of them also introduced uniforms for salespersons, made sure the personnel are trained to handle customers, focussed on extending their free delivery zone, even while retaining the association with old customers. It was the personalised service that mattered to many customers.
One of the first acquaintances that Prajeetha Viswanathan, new to Adyar from Kerala, made was the next door provision shop-owner, J. Arunachalam of Jayalakshmi Stores. “Getting the desirable amount of grocery item is important for smaller families, which big stores don't offer. And the wholesale price fits into our budget,” she says.
With his shop located in an area, which boasts of a Nilgiris, Heritage and Spencer outlets, Mr. Arunachalam does feel the heat. “The customer base is not increasing. Young people prefer going to bigger shops.” But it is the prompt service levels that help them stay afloat. That means sending a person to deliver a packet of wheat bread and six eggs, minutes before the shop is closed. Most of the supermarkets insist on a minimum amount of bill for free home delivery.
There, however, are certain aspects that the retail showrooms have promoted which the shops find it difficult to replicate. Mr. Muhilan gets apprehensive the moment a customer walks in with a Sodexo coupon. “If he buys oil alone, I will face about one per cent loss. These coupons have also contributed to the drop in our profit margins. Moreover, the manufacturers have also reduced our profit margins.”
“Unlike bigger outlets, our delivery time is three to seven days and some of us do not accept credit or debit cards,” says S. Nirmal, running a wholesale shop in Broadway.
Any change in the operations for the small stores also entails more investments. Considering that the cost-conscious middle income group households is the mainstay of their business, it becomes difficult for the stores to pass on additional expenditure. “Households crunching their expenditure due to price rise are turning to us now,” says Mr.Muhilan.
Labour shortage is another problem for the shops. “We have started giving extra benefits. Those who are punctual to work and not take leave get Rs.1,000 more a month,” says K. Harish Jain of Shah Bhabutmal and Co in Broadway.
The closure of many outlets of the retail chains in the last three years, however, does not mean that the threat for the local shops is over. “The acceptance of organised grocery retailing has been slow but is here to stay. The bulk of the population is aged below 30, who prefer the supermarket experience,” says Mr. Nagaraj.
And with the city expanding, the focus will be on spaces near gated communities coming up in the suburbs. “Real estate brochures on upcoming projects carry ads of super markets as attractions. A supermarket next door is a must if you live on outskirts,” says Ashriti Kumar, a resident of Perungudi.
Even parking has become important to bring in customers, with which large format super markets by their presence in malls are influencing shoppers, says Mukund Chokhani, Vice-President, Retail, Jones Lang LaSalle.
But procuring real estate spaces, besides investing on infrastructure to meet the length, width and display of the stores, cold storage facilities, air-conditioning drives the retail revolution and the results are often unpredictable. “It became very difficult to meet the rentals that went high in 2008. Places along coastal Andhra Pradesh, including Vijayawada and Vizag, unaffected by real estate prices, did not see these closures,” says Mr. Nagarajan.
Ultimately, it is the customer preference that makes the difference. Shanthi Premiyah, a resident of Puruswalkam shopping for fancy items for Christmas, says for her daily use provisions the neighbourhood shops are a better bet. Whereas G.Sudha, a working professional, says: “The ambience also matters. Even If I did not have a list to buy, scanning through the shelves of these shops would remind me. Something my local kirana stores cannot offer.”
Little wonder that many neighbourhood shops now stock products relevant to their neighbourhoods with packaged foods, adding gourmet foods, wasabi paste, refried beans alongside murukkus. Some have replicated organised retail stores in format. There is no signage of discounts or low price, but they offer differentiated shopping experience recognising frequent shoppers to pass on a certain per cent discount at the billing counter. “I have seen them grow into this modern store, but I get the same feel that makes me comfortable. I can always replace the item if I have a problem,” says V.R. Arunachalam (67), a regular at Murugan Stores in Adyar.
The logistics of distribution and wastage need to be managed well, and the local player who knows the pulse of the people, does it well. “The best example is local retail fruit markets (Pazhamudir Cholai) here will have a juice counter next to ensure the wastage is minimum. Bigger players cannot go into such micro visioning,” says Mr. Nagarajan.
Among other things, customers are conscious of the distance of the store from their house, availability, quality, not wanting to stand in a queue and price and sometimes extra benefits such as credit. “Supermarkets are super for a reason, but your neighbourhood store owner is super in many other ways.
I can call him any time for a can of water, a branch of curry leaves and a packet of mustard seeds, can I do that with these big players?,” says Kalpana Raghuraman, a 36-year-old bank employee.
(With inputs from Vasudha Venugopal, Liffy Thomas and Lavanya.M)