The long tail of grocery retailing …

Grocery retailing is considered by most as the toughest nut to crack in any new market. More so in India where Reliance’s Fresh initiative ran into some serious trouble in the Hindi speaking belt.

But apart from the political resistance I guess grocery retailing is here to stay- atleast in the metros amp; sub-metros. With the Food World and Big bazaars of the world setting their shops in most localities – it has gradually changed the way people buy grocery.

Now most of the families go to a Big Bazaar to get their monthly supplies and seek only the “top-ups” from the kirana guys. So to that extent its not the neighbourhood kirana store that got hit- it was the bigger departmental store run by the lala. It was this departmental store which was earlier the place to replenish your monthly stocks- he had the best offers from FMCG co’s, was known for the highest quality of masalas amp; cleanest dals. And now, his ever so loyal customers now do their shopping at the malls on Sunday- while having a day out with the family.

For a typical family of four- the one time grocery purchases can run upto Rs. 4000-5000/- per month. The top-up on the other hand is stuff that never made it to the monthly list or where the inventory assesment went wrong or consists of products procured on short notices (like the ingredient for special food cooked during fasts/festivals)… which run into a healthy Rs. 600-750 /- per month.

Its these top-ups that are currently sustaining the kirana shops ,apart from the households that havent migrated to the “buying-groceries-at-the-mall” concept.

As I look at it, most retailers, will sooner-or-later need to identify a strategy to hit this long-tail effectively… Indian consumers will need something closer for their ad-hoc needs, someone who can do home delivery w/o a minimum billing commitment etc. Currently its just the kirana shop, but if the same convinience comes with assurance of quality amp; advantage of price that a branded player provides- its a no-brainer as to which way the consumers would go.

So how do the retailers attack this long tail of demand effectively:

– They can look at non-offline channels. A home delivery model where the order is placed online or on the phone. This would require investments in smaller warehouses- which can then be used as centers for home delivery of monthly purchases also.

– Partner with Kirana stores to gain maximum reach. If a customer can get the same price & assurance of quality at a kirana- they would prefer the kirana that has partnered with Big Bazaar as against the one which hasnt. This approach has some obvious challenges- how to keep the kirana owners margins intact, how to ensure that there is no last-mile adulteration or price mis-management etc etc. But if somehow the retailer is able to crack this model- he would have taken his brand to the doorstep of the consumers.

– Choosing the store location more innovatively. Most of the top-up items can also wait a day or two. Also given that more households are now moving towards a dual income nuclear family structure- it might make sense to have your store next to prominent office complexes. So that the working couples can pick up their weekly or daily top-ups on their way back home.

In summary- the Indian Grocery retailing will see a lot of localized innovation. It might not happen immediately- but as soon as the big names migrate a large chunk of customers away from the kirana stores- they would start asking themselves- “What next?” and thats when they would start looking at the long tail of grocery retailing !