Globonomics!

Consulting|Technology|International business

Has the retail bubble in India burst?

with one comment

I had blogged about retail opportunities in India about an year and a half ago here – https://ecofin.wordpress.com/2007/07/25/retail-opportunities-in-india/

It was not even an year ago that we witnessed almost every large corporate worth their salt open up stores in the name of “retail” looking for every opportunity to outwit and throw out your neighbourhood “kirana store”.

But, less than an year later, they have a sad story to tell.

Many of them have been shuttered down at most places (Aditya Birla More), some of them have gone into serious cash crunch (Subhiksha), some are downsizing (Reliance retail), some are closing stores where there were more than 1 store in close proximity (Spencers), some just don’t have sufficient quality in items being sold (Fresh) and some are just hanging on (Niligiri’s), some appear unscathed (Foodworld).

It’s not restricted to retail outlets of home consumers. There are outlets like LifeKen, Subhiksha Mobile (supposed to have been offering lowest priced mobiles) etc. that have also either gone perilously close to going kaput.

The erstwhile kirana store has at least temporarily emerged unscathed. Was it just that we Indians were not ready for this rapid change in our home shopping needs or was it just a case of too many large players jumping onto the retail bandwagon too soon and thereby not giving each other space to operate – a case of cannibalizing each other without a major differentiator in product offerings or is it the ‘so called’ slowdown effect running its domino effect on Indian retail?

The theoretical response to the success of our kirana stores is quite easy: They offer you the best consumer service (home delivery), personalized attention when you visit them, best quality items (farm fresh fruits and vegetables esp. with the regular sabji shop) etc.

Wholesale markets such as Bangalore’s KR Market – http://en.wikipedia.org/wiki/K.R_Market (that sources tonnes of fresh produce of fruits and vegetables) or Bombay’s Crawford market (http://en.wikipedia.org/wiki/Crawford_Market) will always see a big demand for fresh produce from local kirana store chaps or that neighborhood sabjiwala and that model has evolved over decades and centuries and cannot just be replaced due to it’s sheer convenience and cost effectiveness that the larger players will not be able to match.

To get the practical perspective, we will do some number crunching analysis on this shortly.

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Written by Naveen Athresh

February 25, 2009 at 4:00 pm

One Response

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  1. Did the organized retailers plan everything out? In the need to hurry to roll out stores, consume real estate, ink space & all that; it reminded me of 2000-01 dot gone bust:)

    Anaggh A. Desai

    February 26, 2009 at 10:09 am


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