FDI in multi-brand retail: Kirana stores bet on client loyalty

Most mom-and-pop neighbourhood stores across big cities in the country claim it would be business as usual, even when big foreign retailers set up shop in India. This is despite traders' associations opposing the recent recommendation of the Committee of Secretaries (CoS) clearing 51 per cent foreign direct investment (FDI) in multi-brand retail.

The strong points of kirana stores are their proximity to the consumer and fast delivery. However, many of them are trying to keep pace with the times and are upgrading their infrastructure, such as—making the shelf displays attractive, computerisation, taking online orders, offering loyalty programmes and installing air conditioners.

And as brand expert Harish Bijoor points out, medium-sized kirana outlets in the country are focusing on customer service. In Mumbai for instance, the smallest of retail players have started delivering even a single aspirin if ordered on the phone, he says.

“The entry of foreign players would definitely increase competition, but surely not provide the same comfort to the customers as the traditional stores do,” says Amit Kakkar, owner, Shop Next Door, Noida, a satellite town near Delhi.

The kirana, or the mom-and-pop outlets, store products according to local demands, says Kakkar.

“I always had a computer in my shop, but its only now that I have tied up with a website aaramshop.com for online orders,” he says.

“We are changing with the times and emphasising on providing more comfort to the customers while they shop,” says another store owner in Delhi. He has centralised AC in his store. He, however, refuses to admit it had anything to do with FDI in multi-brand retail.

In Kolkata too, kirana shops do not perceive FDI in multi brand retail as a threatening proposition. “People come to us to buy their daily requirements. The discounts that the big stores offer, we give them on the MRP,” says Ravi Agarwal, owner of Shri Krishna Stores in north Kolkata. “Why will they want to travel for hours to get their supplies, even if it is a weekly outing,” he asks.

Others, however, argue multi-brand upscale stores which already exist in metros and big cities such as RPG-owned Spencer's Retail and Future Group-owned Food Bazaar, have not been able to dislodge their client loyalty.

Prabhat Joshi, owner of another departmental store in Mumbai says his outlet provides home delivery facility plus 10 per cent discount on all products. And it's the trust built over the years which brings the customer back to his shop.

Vineet Kapila, president, Spencer's Retail, in a recent interview to Business Standard, had said that “most people will go to a Spencer's once a week, but will go to the mom and pop store everyday”. “FDI will make the space more competitive, but I don't see it driving anyone out of business,” he had told this newspaper.

“Unorganised retailers, within the vicinity of large organised retailers, experience decline in sales and profits during the initial years of entry of the organised retailers. However, this adverse impact generally wanes over time,” says Kishan M Bhat, Engagement Manager (Market expansion) at Zinnov Management Consulting.