In a change from most developing markets, large retail chains in India have been consistently beaten in sales performance by small traditional retailers, or kiranas, according to The Economic Times.
Convenience stores set up by companies like Reliance Fresh, More, Indiabulls, Spencer’s and Subhiksha are facing mounting losses as the low-overhead kiranas claim back customers as the initial hype surrounding the big retailers’ openings wears off.
Industry officials said convenience format stores have to deal with high wastage in the supply chain and high operational costs as well as fierce competition from the kiranas for the low-margin food and grocery market.
“After the initial hype, the new formats have begun losing steam with consumers turning back to local kiranas for regular purchases,” an unnamed industry official told The Economic Times.
“Burdened by consumer expectations of more frills compared to the no-frills kirana formats, the new convenience formats are shelling out 30 per cent higher costs on rent, energy and other overheads like security guards, bar codes, ACs and bright lights. The throughput per square foot does not justify the expenses involved,” the official said.
HyperCity Retail recently pulled out of the convenience store space, and Spencer’s Retail – an RPG Enterprises group – announced it would close 40 shops across India that were operating at a loss.
“What kind of conveniences can modern retailers now offer with an inevitable high-cost structure. It makes no sense to be in this space,” said Andrew Levermore of HyperCity Retail.
Bhartiya Udyog Vyapar Mandal, the largest national association of kirana stores, plans to open another 100 outlets in New Delhi, Bangalore and Kolkata.
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