FMCG cos new mantra for modern retail growth

Driving consumption among middle and lower income consumers, collaboration between retailers and suppliers, understanding consumers is the mantra to grow modern retail in the coming days as the sector comes out of slowdown blues, say fast moving consumer companies (FMCG) and organised retail chains.

Some of the country's largest retailers such as Reliance Retail, Spencer's Retail, Future Group and consumer product companies such as Hindustan Unilver, LG among others gathered at the India Retail Forum in Mumbai to do an introspection on the journey of organised retail so far.

The organised retail market, which constitues only 5 per cent share of total retail pie in the country, saw the entry of big corporates such as Reliance Industries, Aditya Birla Group, Bharti among others in the last three years. Retailers closed their loss making stores as quickly as they opened hundreds of stores in the country to beat the slowdown as the economic downturn forced shoppers curbed spending and start downtrading.

Dwelling on the mistakes committed by organised retailers, Vineet Kapila, chief executive of Spemcer's Retail said: "The way modern trade came in is that players saw a billion of consumers, growing incomes and large opportunity. They thought if they throw in some capital, build brick and mortar, they will get business. However, things are falling apart since we have not done any homework on consumers, consumer habits etc,'' said Kapila.

Kapila said retailers need to understand consumers closely, build capacities and collaborate with different stakeholders associated with the business. "Companies such as HUL, Coca Cola and others build capacities over the years. Retailers also need to do that. Retail is business of billion moving parts. There should be collaboration between retailers, vendors, developres and so on'', he said.

Future Group chief executive said retailers have their mistakes in the last couple of years. "Retailers have realised there is no goldrush now. We have learnt what to do and what do now. Going ahead, when we build stores and front end, we can definitely collaborate on the back-end,'' Biyani said.

FMCG and durable companies said modern retail should clear value preposition for consumers and creating inclusive environment for kiranas.

"Today when consumers enter modern trade outlets, they don't have confidence that they get best value in thes outlets. They should have clear value preposition for different consumers,'' V Ramachandran, director of sales and Marketing at LG India.

Ramachandran said they were working with retailers to get right value preposition for consumers. Hemant Bakshi, executive director, sales and customer development, Hindustan Unilver, said challenge lies in driving consumption among the middle and lower level of consumers to drive the growth.

"In the areas where there is a concentration of high income population, modern trade has a penetration of 70 per cent, which is clearly ahead of our expectations. But big challenge is to find a consumer preposition for segments below higher income consumers who spend less in modern trade channels,'' Bakshi said.

HUL gets 90 per cent of its business from traditional trade, mostly from kiranas and standalone stores and rest from organised retail in the country. In some cities such as Bangalore, Chennai, with deep penetration of organised retail, modern retail accounts for 30 per cent of its business.

"The six million retailers outside modern trade feel organised retail as a major competition. So we have to create inclusive environment for them,'' Bakshi said.