Retail chains better value for money: BCG

Organised retail is offering an informal survey done some weeks earlier in four cities of India as the latest evidence for the need to relax controls on its entry and expansion.

Done by The Boston Consulting Group and released on Wednesday as part of a White Paper (position statement) on the subject by the Confederation of Indian Industry, it says organised retail stores offer six per cent more monthly savings on food and groceries compared to kirana stores.

The BCG survey is described as a ‘dipstick one’, meaning it was not a scientific study, but an informal one. It was done in the third week of December, in Coimbatore, Bhopal, Agra and Delhi.

It says a consumer with monthly family income of Rs 10,000 spends Rs 2,100 on purchasing food and grocery per month in organised retail stores vis-a-vis Rs 2,244 spendt in kirana stores, a saving of 6.3 per cent

According to estimates, nearly 60-65 per cent of consumer spending comes from food and groceries and the present food inflation of over 15 per cent is hitting consumers hard.

“Organised retail passes on some of its scale benefits to its customers, as a result of which it offers reduced prices. This money (savings) can be used to pay one month’s electricity bill or a premium for a systematic investment plan to secure a child’s future,’’ BCG said in the CII white paper on organised retail.

Raghu Pillai, chief executive and executive board member, Future Group, says the group tracks inflation in food and vegetables in its stores and found the inflation index is currently four per cent. “It means inflation in the basket of products in our stores are much lower than general food inflation,’’ he said.

The current size of organised retail is estimated at $28 billion (Rs 126,000 crore) or six to seven per cent of the country’s total retail market. It is expected to grow to $260 bn by 2020. BCG expects such growth needs an investment of $60 bn over the next decade.

“It (modern retail) will benefit consumers by making common goods more affordable, leading to a savings of $25-30 bn or almost 0.5 per cent of the GDP by 2020,” says Thomas Varghese, chief executive of Aditya Birla Retail and chairman, CII National Committee on Retail.

Retailers such as Birla Retail and D Mart are offering a six-seven per cent discount on the maximum retail price (MRP). Easyday, a chain run by Bharti Retail, recently started selling onions on a no-profit basis.

“We follow an MRP (maximum retail price) regime and cannot sell goods above that price. Hence, modern retail is helping to reduce prices,’’ said B S Nagesh, vice chairman, Shoppers Stop.

“If retailers get free access to capital, we can grow and help reduce the prices further,’’ Nagesh said.