Food Retailing: Indian Perspective

Food Retailing in India is witnessing a progressive change with the emergence of the hypermarkets/supermarkets and rapid expansion of organized retail sector in India across various parts of the country. With the world’s second-largest population and rising composition of Middle-Income group, India has emerged as the world’s most attractive retailing destinations especially in the Food & Grocery segment. This growth trend is expected to be steady, and the analysts estimate an increase in the population by 475 million by the year 2030.

Though organized retail sector has shown an impressive performance over last few decades in the Food Retailing industry in India, still the traditional retailers or the unorganized retailers rule the industry till date. Traditional retailers contribute towards more than 80% of the total sales in the Indian market, and Kiranas (mom & pop stores) continue to rule the food retailing industry. Organized retailing is gradually and impressively expanding its operations in India with the rise of modern retailing formats like supermarkets, hypermarkets, mall culture, convenience stores and various other forms.

Multiple factors such as higher economic growth, rising per capita income & buying capacity of the consumers, population growth and changes in the demographic parameters, socio-cultural changes, brand proliferation and innovations in technology play a vital role in influencing the retail market conditions.

The Indian Food Retail Model is largely characterized by the coexistence of various retail formats operating both in a disorganized and organized manner. The details of which are given below:

• The Hawkers operating on the roadside or the mobile retailers who sell their products by moving from place to place by using a pushcart or vehicle.

   

   

• Kirana format is equivalent to the mom and pop stores popular in the US.

   

   

• In the Organized retailers’ category mostly covers Discounters (example Apna Bazaar and Subhiksha), Value for money stores like Nilgiris, Experience stores and Home Delivery format like Dominos.

   

For our understanding, Food as a specialized sector in retail has been categorized into Food & Grocery segments and Food Services. Food & Groceries is further subdivided into packaged & branded foods, fresh groceries, hygiene & toiletries products and unprocessed dry groceries. On the other hand, food services include catering services, fast food centers, restaurants and other services. Day to day purchase requirements is fulfilled by small retailers/shops, baniyas, haats, ration shops and cooperatives. The small retailers offer the facility of buying on a credit basis and equally provide the service of delivery at the doorstep.

The impressive performance of the organized sector in Food Retail industry in India could be attributed to changing lifestyles and buying preferences of the consumers. Earlier, the consumers preferred buying fresh food at affordable prices. But in the present scenario, consumer preference for grocery & food shopping has changed with increasing preference for visiting malls, hypermarkets or supermarkets. The consumers with higher income capacity prefer visiting these chain stores since they have the advantage of buying various products in one location, though the products are priced slightly higher. The modern retail outlets offer the facility of payment by cards or net banking, which facilitates convenience in payment techniques and the consumers need not have to carry cash everywhere. But this service is not provided by traditional retail stores. In comparison with urban India, rural India is still dominated by the traditional retail stores since the per capita income is relatively low of rural households.

In the present scenario, the modern retail format is mostly dominated by the Indian players, but recently due to the changes in the FDI policies and economic reforms introduced by the Indian government, foreign players have also entered the Indian retail industry. The top five retailers in the Indian market who are ruling the industry are: the top position is held by Future Value Retail of Future Group. Big Bazaar and Pantaloon are the hypermarket retail formats of Future Value Retail which have earned impressive revenue volumes for the Group. Reliance Retail occupies the second spot in the Indian retail industry; the reason behind its success is its focus on the value proposition and low prices of the food & grocery items. Reliance Retail operates various formats like Reliance Super, Reliance Fresh, and Reliance Hyper Chains.

After Future Group and Reliance Retail, the next in the line are Mother Dairy, Aditya Birla Group, and Spencer’s Group. The other key players in the Hypermarket segment are Easy Day Market of Bharti Retail, More Mega Market of Aditya Birla, which have been equally performing well in the organized retail sector in India. As per the reports of 2012, Supermarkets in India have witnessed an impressive growth by approx. 16% in the year 2012 in sales volumes, which is still on the rise consistently.

In recent times there has been a growth in the franchise openings of foreign food chain players in India like Dominos, Pizza Hut, McDonald’s, Subway, Café Coffee Day, Barista and many others. These retail formats operate throughout the country and have revolutionized the entire retail functioning. These formats, to a great extent, have been able to resolve the supply chain limitations, ensured delivery of products at the doorstep of the customer and have been helpful in enhancing overall customer satisfaction.

Moreover, the present day consumers are more aware and literate. They have a good exposure to the latest developments in the market globally due to the easy access to internet facilities and satellite television. In the present scenario, the consumers are in a much better position to judge the quality and prices of the products, perform a comparative evaluation of different brand offerings, and then they make a thoughtful purchase decision. Today, the consumers are more vocal and aware of the consumer protection rights and have strong knowledge of the authorities which are involved in safeguarding or protecting the consumer interests/rights. These factors have given rise to an increasing inclination or preference for the organized retail formats in the food industry.