Mom and pop stores will continue to remain relevant in India: McKinsey

As organised retail evolves, mom and pop stores will continue to remain relevant across both large and small towns in India, said a new report.  

The report by the management consulting firm, McKinsey & Company projected that India is likely to be a $ 450 billion retail market by 2015. Further, organised retail is expected to grow from the current 5 per cent of the total market to 14-18 per cent of total retail in 2015, it added.

The report suggests that retail in India can be profitable but not with ‘cut and paste’ global formats. Profitable retailers will need to keep four mantras in mind as they explore this high potential market, it said.

First, develop innovative formats for material differentiation for which three decisions will be critical – where to participate in the retail value chain, which geographies to play in and what price points to offer.

Second, craft a customer-insight driven merchandise strategy to stimulate consumption and lock in core customers.

Third, create an efficient retail operating platform consisting of a self sufficient system of suppliers, logistics providers and even loyal shoppers.

Finally, build an evolving organisation with an empowered front-end selling team that “owns” local catchments.

Thus, the greatest challenge will be to maintain the organisation’s focus on profitability while cultivating flexibility,  the report said.

“Not all Indian households will shop in these new stores. Of the current 204 million households in India, we estimate that only about 13 million households are comfortable and have the income to patronise organised retail.

The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next 8 years,” said Ireena Vittal, Partner, McKinsey & Company and co-leader of the Retail Practice.