New thinking on organized grocery retail in India

When R Subramanian became an entrepreneur and started a retail chain called Subhiksha, there were not many entrepreneurs in India. In his family too, there were no entrepreneurs. After obtaining an engineering degree from the Indian Institute of Technology-Madras, he decided to join Indian Institute of Management-Ahmedabad as he was sure about one thing -- that he would not leave India to go abroad.

Ten years after Subhiksha was set up, the retail chain had around 500 outlets all over India.  According to Subramanian, "there was no great logic behind entering the retail market in 1997. We made a study of two areas: software and retail. Between software and retail, we thought we were a bit late for software as Satyam, Infosys, Wipro, TCS, etc had already established by then. We didn't want to be a small and late entrant. In retail, we would be one of the early entrants, so we would have the learning curve much to our advantage. We allocated a Rs 5 crore (Rs 50 million) corpus to it and entered the retail business. There was a lot of thought process behind it. We wanted to attract not the top end customer but the aam aadmi.... From our research of three months, we found that consumers prefer buying groceries from closer home. So, we decided to set up 1,000 sq ft shops all across the city and not a 10,000 sq ft big store at one location in Chennai.

The next question was why would he come to our store abandoning the existing store? It had to be the price, because ultimately there is no difference between the branded products like say Boost or Surf or such things. So, we decided to sell branded products at a lower price.

Everybody has been asking me, are you worried about Wal-Mart coming to India? Ultimately Wal-Mart is also going to be run by people like us. The point is you need not worry about anybody's entry. There is a huge potential for growth in India. There is potential for another ten people to come in.

Ultimately the share of the unorganised kiranas will come down and the share of organised sector will go up because of the efficacy in buying and distributing. Also, this is an extremely low margin business. Ultimately, everybody has to sell within the cost. It is not that we are geniuses; we have been in the business for ten years, and we have made enough mistakes and learnt from them.We made our mistakes when we were small. The bigger you are, the mistakes will cost you more."

Where is the pioneer now?  We all know, rest is history!

Organized grocery retail have to face many problems. before emerging as a winner, but definitely it will emerge as a winner @ one day.
Thanks for referral, Chitra & indeed good sharing.

thanks for the referral Ms.Chitra Bannerjee and Mr.Virag Shah.
Nice one.

Thanks for the referal. Very nice illustration. We all prefer to go to the old conventional type stores for reasons already mentioned by the members. Sometimes we lose faith in the commodities sold by these shops because of deterioriation in quality, increase/variation in selling price and incorrect weighing and poor packaging. We then move to the Organized Stores only to find that we have gained in some items and lost in others. In addition we pay a heavy parking fee for the vehicle, wait in queue for billing and end up with only wasting more time and little value for money. The upcoming Retail Stores need to regulate their pricing policy to make customers feel happy after walking out of the stores. Some offer return of parking fees and sometimes additional discount on on bulk purchases.  

Yes Ms. Chitra, Organized retail still required new thing. But it may be difficult because mass people in which lower class, middle lower class, middle class and some extent level upper middle class are prefering mostly  provision store or kirana store by near their home. Many factor are there behind buying product from provision stores like relation, image, warantee-gurantee, exchange product, good discount, credit facilities, time saving,service, convineincy etc.



We may see that very crowd in organized retail but if you analyse volume wise, you will not get much volume any organized retail. They are also provide promotional scheme discount by ad but still not generate much volume. And in organized retail mostly upper class and middle upper people are visit.



In organized retail , you will see mostly volume in house hold , f.m.c.g item.Still they are trying and attracting people by vary strategy. But very difficult to take market hold.


Yes, we can sya that next generation or in future of organized retail will bright. Because todays genration are prefering to buy from organized retail..

once again thank u ma'am

Beautiful study.  I appreciate you for taking pains to post this.  I dare not to enter into an organised retail shop.  I have my perception on the pricing strategy of these retails.  We usually purchase fruits in dozens or in fragmentation of it but not on weight.  Organised retail shops sell the fruits on weight.  This is undoubtedly a loss to the customer.  And the price tag of these fruits in organised retail shops are generally much higher.  But as far as vegetables are concerned there is not much difference I find.  The cost of maintenance will definitely will be levied on customers.  This is an additional cost for the consumer.  Long queues for paying bills is a headache.  I just hate in standing queues to pay my bills.  Why should I go in line when I am paying for something.  It is the headache of the store keeper to keep his customer at ease.  We dont have any personal intimacy with these store management whereas in  pop & mom shops we will be received graciously.  We miss this here.  In my perception I believe that I am a customer for them, they need to respect because I am making them the business.  There may be some other reasons I value the above.