The Hindu Business Line : ‘Kiranas and local grocers will survive’

Chennai, Nov. 13 The big format retail stores may have revolutionised retail but small retail, the kirana store owner or local grocer will continue to survive and thrive, said Mr Rajeev Karwal, Director, Milagrow Business and Knowledge Solutions (P) Ltd, a start-up venture that provides management capital for micro and small and medium enterprises. Mr Karwal had worked earlier with Reliance Retail, Electrolux, Philips, LG and Onida.

Difference in margin

Speaking at the CEO Connect Forum of the Department of Management Studies, IIT Madras, Mr Karwal said that international retailers had a margin of 30 per cent while the Indian retailers had to operate with margins of between 4 and 8 per cent. The Indian consumer had managed to bring down prices with bargaining and value-conscious buying. He said big retailers were finding the extra spends on infrastructure, electricity, training, technology, security and advertisement were shaving off a considerable part of their margins. Besides this, organised retailers who were listed will also have pressure from stock markets to deliver higher earnings.

He predicted that organised retailers will take 10 years to penetrate even 20 per cent of the market.

He said that the traditional retailer could not be dislodged since the supply chain management was not yet good enough.

It required deep pockets since farmers needed to be paid in cash for two crops in advance.

Survival ability

Talking about the survival ability of the local grocer, he said that the personal touch provided by him - in giving home delivery - multiple times, in sending your favourite brands, or in granting credit could not be replicated by bigger retailers.

While there was no doubt that big retailers would also grow in this market, he said, manufacturers would have to realise that the bulk of the products would be sold through the traditional small retailer.

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