With the opening of first store in Pune and announcing its retail plans, the Aditya Birla Group has finally joined the crowded retail space. And from the voices in the media, its not far when the group has a pan-India retail presence.
Organised retailing is just 3% of total retail market but still a debatable point whether the Birlas are an early or a late entrant. Since Pantaloons, Spencers, Subhiksha and Reliance have already set up a good base, ‘More’ stores may find hard to invade the territory which these stores have already captured in their respective locations.
But even then, key factors which may influence the buying pattern of consumers hinge on convenience in terms of distance from home, pricing and giving the right product-mix catering to different social and economic class. Since, organised retail has thin margins and high costs of around 15% to the revenues (as compared to 5-6% of local grocery stores), retail companies should promote more their in-house brands which have a higher mark up.
Aditya Birla ‘More’ strategy to offer budget and high value private labels under ‘More for you’ and ‘Select’ seems to be like successful UK’s Tesco model of having separate labels with separate quality and prices for the same product category.
Till Bharti-Walmart enters the market, the key competitor for ‘More’ shall be Reliance Retail as they have similar store formats and product offerings. But the real tough part will be when these two companies launch their hypermarkets, in which Pantaloon’s Big Bazaar still rules the space in terms of nationwide presence , and then differentiation would play a key role.
But like telecom, when the markets get mature, there are not many differentiating factors in terms of pricing and service quality, similarly once few big players get established in retail market, each one would carve a separate niche of their own with their own sets of customers and markets.
Find this article at: http://www.labnol.org/india/corporate/aditya-birla-more-surviving-in-the-retail-space/348/
Tags: aditya birla, location, more, prices, reliance retail, retail, supermarket, Corporate, India
Reader Comments
The growth of organised retail in India will be a boon for consumers. Because of stiff competition between various players in modern trade, they (modern trade players) will have to pass major margin to consumers. They will also bound manufacturers to supply them goods in their store brand. These private label products will be cheaper than brands provided by manufacturer. This will gradually cause Indian consumers to think of “value for money.” This will benefit Farmers. This will also cause small manufacturers to challenge giants (as small manufacturers, in comparision with big companies, are capable of providing products at cheaper rate because of little or no expenditure on infrastructure and promotions). This will finally cause to check inflation.
Written by Amit Kumar on 10.29.07