Stationery And Related Products Purchase Evaluation: Fill & Download for Free

**************LONG ANSWER; PRECISE STATISTICS AND IN DEPTH ANALYSISSeeing as there is a lot of opinion floating around, let us take a look at some hard core statistics of this trade, as well as current research which proves quite conclusively that this is just a political brouhaha, and that there is no danger to the Mom-n-Pop store format in India."I had occasion to visit the market today to stock up on provisions, and I decided to cross-check my personal hypothesis by talking to a Reliance Fresh Outlet and a couple of my regular Kirana Stores. These are almost next door to me, and more importantly, are less than 100 yards from an EasyDay SuperstoreThe Kirana Owner was pretty candid in his analysis. He said "Dhanda kam hone kaa to sawaal hi paida nahi hota sir. Peheli baat to har cheez ke daam badh rahein hain, doosri baat hum graahak ke baju mein hi baithhe hain. Pichhle teen saal mein humaaraa dhandaa to badhaa hi hai, ghataa nahi. Itnaa zaroor hai ki kisi din 5000 ka maal biktaa hai to kisi din 3000 kaa."Translation: Business has gone up in the past 3 years. I asked him about the past 3 years simply because it has been around 3-5 years since the modern format stores- the big chains extended their presence in Indore. I live in one of the biggest but oldest suburds in Indore City with several major colonies. There are 2 major LFR outlets within 1.5 Km of each other servicing a major residential region of the city, and these retailers were in the immediate vicinity of the superstore. A perfect example of co-existenceAt Reliance Fresh, I talked to the billing counter clerk. His feedback was there were around 300 - 500 walk-ins per day with an average billing of around 100000 - 150000 per day. The purchasing habits of customers were heavy purchases in the first week of the month followed by sporadic purchases spread through the rest of the month. I was frankly surprised at the low average billing and queried him on it. His response was a big learning for me: "Sir, It is not like that. Yes, average billing in the rest of the month is low for normal days - but on scheme days the offtake is greater. Retailers - nearby retailers - tend to stock up on various commodities (especially oils) and products in bulk whenever we launch a good scheme. The walk-in I told you about are purely retail customers". This tends to confirm my observations on my various visits to superstores when I have observed bulk purchases happening. It was nice to have confirmation of my observations."First, the proof of my analysis:Rightsizing modern retail - Hindustan TimesConclusions:The higher strata of society will be tapped by the LFRsThere might be an initial slack in monthly sales turnover from kirana stores in the short term, especially in the vicinity of LFRs, but over the long term this will be compensated by alterations in stocking patterns, population growth, service improvements, cost advantages of the kirana setupOrganised retail - LFRs -are already in India in the form of the Indian chains. This is a normal development of the market - consolidation, experimentation with formats etc are normal features in a growing, developing market. The influx of Large Format Retail stores had already begun in the form of departmental stores and the local superstores. These were small shopkeepers who grew big by virtue of their business acumen. Hence, whether FDI comes in or not, Large Format Retail stores will continue to increase in number. It is only a question of a matter of time...Each format is facing its own competitive environment, and that includes both opportunities as well as dangersThe Kirana Format is in no danger of extinction given its range of services, width of distributionDiscernible shift in purchasing patterns for certain classes of products with cosmetics and related products increasingly being sought from Modern Retail, and groceries holding their own in KiranaThe Proof of the Arguments stated above:The enclosed article clearly mentions that breakfast cereals, packaged rice, air fresheners, liquid soaps etc have a nearly 33% sales offtake out of total sales from LFRs. That is a huge share: one-third of total industry. Keep in mind that LFR contribute 1% of Food and Groceries industry sales...The customer profile consuming the above items will mostly fit into the affluent classes for Cereals and Air Fresheners, Upper Middle and above for Packaged Rice and Liquid Soaps. This confirms the observation no 1 and observation no 6 above. Next, the article also confirms the importance of home service, personal touch with the consumer, as outlined in observation no 5 in my earlier postsThe main problems are the ground reality of retail in India with particular reference to the Food and Grocery Segment. That is why its contribution from Modern Retail is at a dismal 1% whereas other categories are far ahead in terms of contributions. "While Food and Grocery items contributes 11% of the revenues of the industry - this forms only 1% share of the total category revenues including Organised and Unorganised Formats. By comparison, Clothes and fashion is at 23%, Footwear 48%, Durables 12%, Books 13%. Organised Retail seems to be facing major hurdles in this category because of fragmented and localised nature of demand and a host of local tastes and brands to contend with, A massive unorganised and well-serviced retail network, Intra - category competition and the wide spread of the Indian Market." - (Article No 2)The real problem is the nature of the Indian market. That does not mean that Organised Retail is doomed; far from it. But the growth will be slow and painful. You will have to build it up brick-by-brick. The expectations of rapid growth are frankly wildly overstated in this category. It will be a growing category; but the local realities of tastes, preferences, infrastructural constraints etc mean that the pace of growth will be muted.The second point is that Organised Retail needs to ask itself some serious questions in terms of growth targets, locations and towns to be targeted, store formats and size, in-store depth and range. Rather than be all things to all people, they will have to position themselves properly. Simply opening stores and targeting footfalls will not lead to achievement of the magic numbers! It is the bills generated and their content that counts. That is what needs to be done! Irrational store and growth targets and expectations will only hieghten the pain for the chains. The overall shopping experience has to be great, yes. But this will by itself not pull in customers. This is a basic need. The shopping experience will help only marginally; or it will help by not giving a customer any reason to shift. For example, lines at billing counters. Regardless of how much fun quotient you give the customer, you are going to lose clientelle if your billing lines are anything more than 2-3 customers deep. People will simply walk out and purchase from the local kirana. The industry needs to understand that it is competing for share-of-wallet; not with other Organised Retailers! The need of the hour is tempering of expections, and proper positioning of the stores... and the acceptance that LFR (Organised Retail) will co-exist with the local kirana in India!Earlier Research on this Topic:http://www.icrier.org/pdf/Working_Paper222.pdfIndia Retail MarketFrom My Blog:I have been arguing in my writings that the threat to kirana stores in India does not exist, and that the 2 can co-exist.... interested parties may refer the above researches that have been conducted in India circa 2008 & 2010. I admit that these are a bit dated, and might need to be re-validated. However, I have not observed any difference in any of the cities in which I have made queries and observations; the trend seems to be the same as before. Not one of the small retailers I have spoken to in any city has told me of a decline in business volume or profit.The key finding of the report are encapsulated below:1) An initial fall of 23% in terms of volume. This loss is made up in the subsequent years2) No evidence of a decline in overall employment in the organised sector3) Closure rate of the small kirana store @ 1.7% due to the Organised Retail Phenomenon. Total Kirana closed were @ 4.2%. Out of this 4.2%, only 1.7% were due to organised sector factors4) Competitive response from traditional retailers through adoption of technology and improved business practices5) Extension of credit to customersFar more interesting is the anaylsis of the impact of / on customers1) Increased Consumer Spending2) Proximity is a major advantage of the small retailerIncreased Consumer SpendingThis is something all of us should have observed! We do tend to pick up far more items when the full range is displayed in front of our eyes: that 10-rs pack of chocos; those cakes and tit-bits; small tinkers that we spot on shelves; the odd item with a deal too good to refuse; the latest kitchen gizmo; that shiney kitchen aid; that bunch of hankies we dont need; all those lovely toys for the kids... the list can be endless.ProximityAn Organised Outlet will be at least a km away - if not more. The very fact that the local kirana store is right next door is in itself a powerful advantage. This is particularly important since needs arise in a normal household practically everyday. Further, quite a few items are usually forgotten in our trips to the mall - or the brands we need are not available.Both the above do not explain why is it that kirana concept is not only surviving, but also thriving. The adjustments made by this category can be said to be:1) Convenient Timings2) Credit Facility3) Lower wait time in-store4) Personalised Service5) Smaller Pack Size Availability6) Consumer Goodwill7) Home Delivery8) Facility of open goods: loose sale of packaged goods9) Local Brands Stocking10) Knowledge of Consumer Preferences11) One-stop shop concept, with a wider range of products being stocked - viz. stationery, batteries, bakery items, snacks and sweet meets, ice cream, soft drinks,12) Friendly replacement and return policies13) Innovative new products especially in impulse categories14) Perishables like milk - esp home delivery on coupons15) Bill payment support to nearby households and other services16) Stocking of all new product launches - faster than even the chainsThe above small items, taken together, are creating a powerful force that is retaining the customer profile. On the customer front, what is happening is that the share-of-wallet, which was earlier 100% to the local kirana market, is now being shared between the organised retailer and the kirana merchant in a few segments of the market. For the lower segments of the population, the facility of smaller pack sizes, loose goods and credit are together ensuring stickiness. In fact, these last 3 factors are powerful strategies, given India's demographic and income profile. As an example, I have frequently found that a 100g pack of my brook bond herbal variant of Red Label is not stocked by malls. I can think of quite a few other similar cases...The other major factors in the equation are1) Increased Consumer Spending2) Increased Prices3) Increasing Households and Population4) Increase in Per Capita IncomeThese factors are growing the overall market: which is creating space for all the players!India has 14 shops per 1000 people - 1.5 Crore retail outlets, and it would be being optimistic in the extreme to expect a handful of Organised Retailers to kill of the unorganised sector. Yes, the Organised Retail Sector is Growing rapidly - the figures are 36% y-o-y, but the main drivers of business as on date are different. In the Food and Grocery segment, the three identified differentiators are conspicuous by their absence.First, this space has a widesrpead, well penetrated market, with each locality and each house being properly servicedThere is limited scope for value addition - tangible value addition- in this category for the consumer.These are low-involvement purchases and customers do not think and evaluate purchases too much - they are habit-formation categories - and habits are the hardest to breakProper servicing of this unorganised sector by the companies. One has to understandthat for the FMCG category companies, this market is the bulk volume generator. Further, since logistical challenges are limited due to small SKU sizes and low absolute prices per SKU, each store is properly stocked with even the latest products. The critical point here is that the advantage of new products / full ranges is not present for the Food and Grocery Sector. Organised Retail is competing not just with the small retailer but also the industry norm of weekly servicing of each outlet in the entire nationThe fundamental drivers of business in this category are thus different - quite different. So are the ground realities. This category is one of the most streamlined and organised categories, as also the most competitive among all the products categories. Easy logistics, Low SKU Price in absolute terms (how much does even a premium biscuit cost - 50 rs? Contrast it to one shoe- 750/-), established systems and habituated customers create an entirely different paradigm of businessThat is not to say the Food and grocery as a category will not grow in Organised Retail - it will. It is one of the top 7 categories. However, the fact remains that today, in the Food and Grocery segment, the share of Organised Retail is only 1% as opposed to more than 10% for other categoriesLFRs - Large Format Retail chains - have been around for some time now, and have completely failed to make a dent on the retail landscape. We have already seen the advent of supermarkets, and they have yet to kill off the small retailer. What is happening is that in the vicinity of these stores, local kirana business is getting impacted by a few percentage points over the short term. Over the mid- to long- term, this can be easily overcome :firstly by the attendant increase in populationsecondly by a change in stocking patterns andthirdly by an increase in personalised serviceSize of the Indian Market, which makes full coverage nearly impossible . India is a very distributed market, with a Kirana store every 50 yards from a residence. That coverage is going to be hard to beat, and is unmatched anywhere.The small irritants: lack of home delivery beyond 3 kilometers / minimum billing requirement; long lines at billing counters could add up to a lot, and make your regular retailer the preferred optionThe presence of a large number of small and local brands especially in the provisions space, which will largely be ignored by the LFR stores. This problem is exacerbated by the decision making heirarchy in organised retail, as well as by the lack of personal touch with the consumer. By contrast, for the local kirana stores, the decision maker is in constant touch with his market and is aware of local preferences and consumption trends, and is in a position to make quick decisions. This is simply because of one largely ignored psycho-sociological factor: the consumer will rarely, if ever, tell the large supermarket that he prefers such-and-such a brand. Whereas, this same consumer will be far more upfront with the local store with whom he has been conversing for years.The implication could be a change in stocking patterns at the local kirana store, with a lesser preference and focus on cosmetics and a greater emphasis on provisions. Secondly, we might also see a change in depth of stocking, with small to medium size packings being available at the kirana store, and the full cosmetic range being available at the LFR. This can already be observed in the market: the 2- and 3- Re single use pouches can be seen in local stores, but not in the major stores. As another example, in my home we purchase only a select brand of atta that is not stocked by the nearby supermarket...It would require each chain to set up something like 5 - 10 stores in just one city like Indore to properly cover the city - extrapolate this number to India, and you have a massive investment outlay... this in a crowded market, with Reliance Fresh, More, Easyday, Big Bazaar etc all already having a significant presence. Large majority of consumers are 2-wheeled, and LFRs do not have conducive home delivery policies. This means that only people with cars can shop at these LFRs, or customers from the immediate vicinity. This significantly limits their potential area. Further, the problems in relation to provisions - demand of the local brands combined with their sourcing policies will also serve as a further deterrent.Not only that, each chain has its own in-store brands, and will thus not encourage the local brands which will be available in the local stores.The perception of supermarkets being costly will also deter a large number of consumers from tapping into these outletsThe lower financial outlays of the local kirana stores will mean significant cost-savings, which can subsequently be passed on to consumers. This is already a feature in the mid-level stores- i.e. the local supermarkets like Gokul in Raipur and Prem in Indore, wherein you can already get similar or lower prices as compared to organised retailThe other perspective is the advantages that can be had from organised retail. Please note that I state organised retail and not FDI...Concentration of buying power will lead to a reduction in middle men, and a better price realisation to farmers. It might also lead to lower consumer pricesThe dangers of FDI / Organised retail overpowering local guys will not hold good in a market as varied and distributed as India... see coke-pepse example below for detailsThe benefit to the supply chain side will be tremendous, since organised retail will perforce either have to invest themselves, or bring about an atmosphere that will engender investing in cold storages, for exampleThe benefit of economies of scale will also benefit everyone in the system

Big Four Firms are huge and not restricted to Chartered Accountants alone.Initially, Big Four Firms provided accounting and auditing services, however, with time, they expanded horizontally and today they hire Professionals across various qualifications and experiences. This is because of the services that they provide today. This is the major reason why the Big Four Firms are becoming ‘too big to fall’, the reason why Price Waterhouse Coopers still holds strong globally, even after the Satyam scam and many more unheard cases. An organisation organises itself in such a way to make provision of services easier and therefore, understanding the departmental structure is the best way of understanding the nature of services.The structure is a little complex and unique, owing to the Service-oriented business catering variety of services across various industries.The classification in the Big Four firms is a little complex and you are not just known by your department but also the industry you work in and the services that you provide. So a person is known by his Service Line, Industry, Sub-industry sector, Department, Location and the Designation.E.g. Rahul Desai (Manager, Assurance - Auditing, Mumbai, A&T - Transportation)Here, Rahul works in Assurance service line, his industry would be Automotive & Transportation, and sub-industry sector in Transportation companies. He works at the Mumbai Office of his company and his department is Auditing, designation Manager.The following flowchart will explain the usual structure of Big Four Firms:Usual Service Lines -Assurance ServicesTaxation ServicesAdvisory ServicesTransaction Advisory ServicesBusiness Support Services (Non-revenue department, internal administration purposes only)These departments are further divided into various categories as you can see in the image as well.Usual Service Industries -At the same time, the Big Four firms are also further divided into various industries. This is a recent change and while some firms have already completed it, some are in the transition phase.Automotive and TransportationTechnology, Media and TelecomGovernment and Public SectorFinancial ServicesPower and UtilitiesConsumer Products and RetailBanking and Capital MarketsReal Estate, Hospitality and CommunicationEach of these industries is further categorized into various sub-sectors e.g. Technology, Media and Telecommunication would have three sub-sectors as it appears in the name. The sub-sectors are not very strict, a person may be involved in different sub-sectors, however, the service industry remains the same in all cases.Assurance Services -This is where the most of the Chartered Accountants work and CA Students work as it is a legal requirement for the purpose of auditing. However, the assurance department is not exclusively about Auditing. Areas like Accounting Advisory,The major subdivisions are:Statutory Auditing - They provide auditing and allied services including Income Tax Audits, Transfer pricing audit and Other Certifications. They also do Group Reporting and Audits of Consolidated Financial Statements.Accounting Advisory - They help companies resolve complex accounting issues like accounting in case of mergers and acquisitions, accounting in case of the First-time adoption of IndAS. This department majorly consists of experienced professionals.Assurance Services - Various other types of other Auditing and Certifications where independence is a requirement e.g. SOX audit. This does not include Internal Auditing.Fraud Investigation and Dispute Resolution - This is an emerging area and as the name goes, they help investigate financial and accounting frauds or resolve disputes between companies or within companies.Taxation Services -This is also a department where the majority of employees have Chartered Accountant qualification, however, the number of Articled trainees is very low as compared to the Auditing department.The major subdivisions are:Business Taxation - They provide services in relation to Income Tax and other direct taxes to Corporates and even to individuals. They also provide services in relation to Appeals and Assessments.Indirect Taxation - They provide services in relation to Goods and Service Tax, and erstwhile Excise, Service Tax and other local sales tax. All indirect taxation related services including appeals and assessments are handled by this department.International Taxation - The companies which have a multi-national presence or if there are individual assignments in relation to taxation of cross-border transactions, the same is handled by this department.Transfer Pricing - Transfer pricing study reports are prepared by this department. They also evaluate and confirm various transfer pricing transactions and assessments of the same. The Transfer Pricing audit is not conducted by this department.Transactional Taxation - Taxation services in relation to specific transactions like corporate restructuring, mergers and acquisitions, complex purchasing arrangements, etc.Global Employer Services - Taxation services for the companies in relation to its payroll and other contractual employees.Advisory Services -This a department where people from different educational backgrounds work together to provide all kinds of services. This is the most growing sector of the Big Four firms and definitely the biggest source of revenues for the firms. The auditing clients are lured into these services so that even after rotation, the firm can still generate revenue on the basis of relations developed.The major subdivisions are:Internal Audit - Yes, against the common misconception, internal auditing is a part of Advisory services and not Assurance services. Assurance services require Auditors’ independence, however, internal auditing does not require the same, as auditors report to the management. It is interesting to note here that this department includes Chartered Accountants and Software Engineers working in same teams.IT Advisory - This department provides services in relation to Accounting ERPs. They help companies in the implementation of ERPs in the company and also furtherance of the same or resolving issues in relation to the same.Risk Advisory - As simple as its name, the risk advisory department identifies risks and advises ways to mitigate the same, sometimes even implement the solutions. These risks primarily relate to accounting and finance or the reporting processes.Cyber Crime and Security - A very emerging area and growing at a very high rate given the increase in the inclusion of internet in multinational accounting and reporting. However, accounting is not the only angle as this department also conducts cyber security audits.Performance Improvement - They dig deep and identify issues which may impede the performance of the daily functioning of the company and its processes. E.g. Trade receivables department is sluggish and the sales entries are posted two days after the actual sale. This department will help them improve this timing.Transaction Advisory Services -This service line does not regularly deal with the client, it only provides one time services in relation to specific changes that are occurring in the company. However, these are important transactions and therefore, the company seeks professional pieces of advice which this department provides, from the Financial angle.Mergers and Acquisitions - All the top mergers and acquisitions that you hear about every day in the news are actually being handled or performed under the guidance of this department. The accounting and taxation angle is already handled by the Assurance and Tax departments; this department looks after the core financial issues and the arrangements made. They advise companies in relation to the valuation and share exchange/issue ratio.Corporate Restructuring - When there is restructuring, this department helps to handle the financial end, while accounting and taxation angle is already handled by the Assurance and Tax departments. They advise the various ways of improving the company’s financial structure and the divisions, whether to spinoff, sell or expand.Project Finance - If the company is taking up new projects, this department helps it to understand the finance that might be required, the way to finance the need and the future course of action thereon including the working capital management thereon, in relation to the project. This involves a lot of forecasting financial numbers.Valuation and Business Modelling - Valuations of companies are useful at the time of initial public offering or subsequent offerings. The same is also helpful at the time of mergers and acquisitions or sometimes while selling off an arm or assets of the company. This department values the assets and net worth of the company, the value of shares or the value of the investment.Due Diligence - Investors often request due diligence to be conducted before they invest in the company. Due diligence ensures that the company is clean from all angles and it is safe to invest in the company. This department evaluates the company and provides due diligence certificates to the investment company or the venture capitalists.Business Support Services -This department does not provide any services to external clients, but this is just the administration wing of the Big Four Firms. There are so many departments, offices and employees in the company, and thereby, so many needs of each department. This is a central department (at each location) which helps the functioning of all the other departments mentioned above.So just like a normal company has Finance department, Human Resources department, Procurement department, etc. the Big Four firms also have these departments.Human Resources - People who hire, recruit, organise training, address issues, execute increments, bonuses, promotions and also the separations.Information Technology - To solve all IT related issues that employees face, including the internal development of softwareRisk Management - This department evaluates the processes of its firm, especially the Assurance department where the independence and other educational qualification are mandated by the company. This department ensures that the firm complies with all its requirements.Brand Management and Communication - This is kind of internal Public Relations department (usually located in one or two offices like Delhi and Mumbai in India) which ensures that the public appearances of its partners and employees are seen through, managing campaigns - both internal and external and even the social media management, all are included in this department.Accounting - Accounting of the firm itself.Payroll - Handling the payroll processing and payments, the tax deductions and compliance with labour laws.Knowledge Management - These teamsTrade Payables - Managing the payments to the vendors providing services to the firm itself.Trade Receivables - Managing the invoicing to the client and the receipt thereon, of the firm itself.Finance - All banking transactions, payment processing and other financial needs or analysis of the firm itself.Procurement - Purchasing assets like laptops, furniture, etc. or routine purchases like cafeteria supplies, stationery supplies, etc. or business requirements like books, software, etc.Administration - Managing the office, housekeeping, front desks, telephones, business cards, letterheads, etc.Travel Desks - Since the Big Four firms provide services which involve visiting client locations and also internal travelling across the firms' offices, it also has a department which handles all travel books.Resource Management - This team looks after allocation of employees to various teams/projects/assignments, since this is a service-oriented business and the teams usually change after every assignment.ConclusionBig Four Firms are big, very big! Not sure if ‘too big to fall’, still they are mammoth firms which ensure their survival very well. Their competition isn’t with the local firms, that would be an absolute misconception. The way these firms have widened the scope of their services, while they provide opportunities to the professionals from various backgrounds, they also pose a threat to the business of the existing companies providing those services.

Answered in detail here:How will FDI affect the retail sector in India ? :Very, very detailed answer: sorry. No way to answer this in short!Cut-Paste from answer above:**************LONG ANSWER; PRECISE STATISTICS AND IN DEPTH ANALYSISSeeing as there is a lot of opinion floating around, let us take a look at some hard core statistics of this trade, as well as current research which proves quite conclusively that this is just a political brouhaha, and that there is no danger to the Mom-n-Pop store format in India."I had occasion to visit the market today to stock up on provisions, and I decided to cross-check my personal hypothesis by talking to a Reliance Fresh Outlet and a couple of my regular Kirana Stores. These are almost next door to me, and more importantly, are less than 100 yards from an EasyDay SuperstoreThe Kirana Owner was pretty candid in his analysis. He said "Dhanda kam hone kaa to sawaal hi paida nahi hota sir. Peheli baat to har cheez ke daam badh rahein hain, doosri baat hum graahak ke baju mein hi baithhe hain. Pichhle teen saal mein humaaraa dhandaa to badhaa hi hai, ghataa nahi. Itnaa zaroor hai ki kisi din 5000 ka maal biktaa hai to kisi din 3000 kaa."Translation: Business has gone up in the past 3 years. I asked him about the past 3 years simply because it has been around 3-5 years since the modern format stores- the big chains extended their presence in Indore. I live in one of the biggest but oldest suburds in Indore City with several major colonies. There are 2 major LFR outlets within 1.5 Km of each other servicing a major residential region of the city, and these retailers were in the immediate vicinity of the superstore. A perfect example of co-existenceAt Reliance Fresh, I talked to the billing counter clerk. His feedback was there were around 300 - 500 walk-ins per day with an average billing of around 100000 - 150000 per day. The purchasing habits of customers were heavy purchases in the first week of the month followed by sporadic purchases spread through the rest of the month. I was frankly surprised at the low average billing and queried him on it. His response was a big learning for me: "Sir, It is not like that. Yes, average billing in the rest of the month is low for normal days - but on scheme days the offtake is greater. Retailers - nearby retailers - tend to stock up on various commodities (especially oils) and products in bulk whenever we launch a good scheme. The walk-in I told you about are purely retail customers". This tends to confirm my observations on my various visits to superstores when I have observed bulk purchases happening. It was nice to have confirmation of my observations."First, the proof of my analysis:Rightsizing modern retail - Hindustan TimesConclusions:The higher strata of society will be tapped by the LFRsThere might be an initial slack in monthly sales turnover from kirana stores in the short term, especially in the vicinity of LFRs, but over the long term this will be compensated by alterations in stocking patterns, population growth, service improvements, cost advantages of the kirana setupOrganised retail - LFRs -are already in India in the form of the Indian chains. This is a normal development of the market - consolidation, experimentation with formats etc are normal features in a growing, developing market. The influx of Large Format Retail stores had already begun in the form of departmental stores and the local superstores. These were small shopkeepers who grew big by virtue of their business acumen. Hence, whether FDI comes in or not, Large Format Retail stores will continue to increase in number. It is only a question of a matter of time...Each format is facing its own competitive environment, and that includes both opportunities as well as dangersThe Kirana Format is in no danger of extinction given its range of services, width of distributionDiscernible shift in purchasing patterns for certain classes of products with cosmetics and related products increasingly being sought from Modern Retail, and groceries holding their own in KiranaThe Proof of the Arguments stated above:The enclosed article clearly mentions that breakfast cereals, packaged rice, air fresheners, liquid soaps etc have a nearly 33% sales offtake out of total sales from LFRs. That is a huge share: one-third of total industry. Keep in mind that LFR contribute 1% of Food and Groceries industry sales...The customer profile consuming the above items will mostly fit into the affluent classes for Cereals and Air Fresheners, Upper Middle and above for Packaged Rice and Liquid Soaps. This confirms the observation no 1 and observation no 6 above. Next, the article also confirms the importance of home service, personal touch with the consumer, as outlined in observation no 5 in my earlier postsThe main problems are the ground reality of retail in India with particular reference to the Food and Grocery Segment. That is why its contribution from Modern Retail is at a dismal 1% whereas other categories are far ahead in terms of contributions. "While Food and Grocery items contributes 11% of the revenues of the industry - this forms only 1% share of the total category revenues including Organised and Unorganised Formats. By comparison, Clothes and fashion is at 23%, Footwear 48%, Durables 12%, Books 13%. Organised Retail seems to be facing major hurdles in this category because of fragmented and localised nature of demand and a host of local tastes and brands to contend with, A massive unorganised and well-serviced retail network, Intra - category competition and the wide spread of the Indian Market." - (Article No 2)The real problem is the nature of the Indian market. That does not mean that Organised Retail is doomed; far from it. But the growth will be slow and painful. You will have to build it up brick-by-brick. The expectations of rapid growth are frankly wildly overstated in this category. It will be a growing category; but the local realities of tastes, preferences, infrastructural constraints etc mean that the pace of growth will be muted.The second point is that Organised Retail needs to ask itself some serious questions in terms of growth targets, locations and towns to be targeted, store formats and size, in-store depth and range. Rather than be all things to all people, they will have to position themselves properly. Simply opening stores and targeting footfalls will not lead to achievement of the magic numbers! It is the bills generated and their content that counts. That is what needs to be done! Irrational store and growth targets and expectations will only hieghten the pain for the chains. The overall shopping experience has to be great, yes. But this will by itself not pull in customers. This is a basic need. The shopping experience will help only marginally; or it will help by not giving a customer any reason to shift. For example, lines at billing counters. Regardless of how much fun quotient you give the customer, you are going to lose clientelle if your billing lines are anything more than 2-3 customers deep. People will simply walk out and purchase from the local kirana. The industry needs to understand that it is competing for share-of-wallet; not with other Organised Retailers! The need of the hour is tempering of expections, and proper positioning of the stores... and the acceptance that LFR (Organised Retail) will co-exist with the local kirana in India!Earlier Research on this Topic:http://www.icrier.org/pdf/Workin...India Retail MarketFrom My Blog:I have been arguing in my writings that the threat to kirana stores in India does not exist, and that the 2 can co-exist.... interested parties may refer the above researches that have been conducted in India circa 2008 & 2010. I admit that these are a bit dated, and might need to be re-validated. However, I have not observed any difference in any of the cities in which I have made queries and observations; the trend seems to be the same as before. Not one of the small retailers I have spoken to in any city has told me of a decline in business volume or profit.The key finding of the report are encapsulated below:1) An initial fall of 23% in terms of volume. This loss is made up in the subsequent years2) No evidence of a decline in overall employment in the organised sector3) Closure rate of the small kirana store @ 1.7% due to the Organised Retail Phenomenon. Total Kirana closed were @ 4.2%. Out of this 4.2%, only 1.7% were due to organised sector factors4) Competitive response from traditional retailers through adoption of technology and improved business practices5) Extension of credit to customersFar more interesting is the anaylsis of the impact of / on customers1) Increased Consumer Spending2) Proximity is a major advantage of the small retailerIncreased Consumer SpendingThis is something all of us should have observed! We do tend to pick up far more items when the full range is displayed in front of our eyes: that 10-rs pack of chocos; those cakes and tit-bits; small tinkers that we spot on shelves; the odd item with a deal too good to refuse; the latest kitchen gizmo; that shiney kitchen aid; that bunch of hankies we dont need; all those lovely toys for the kids... the list can be endless.ProximityAn Organised Outlet will be at least a km away - if not more. The very fact that the local kirana store is right next door is in itself a powerful advantage. This is particularly important since needs arise in a normal household practically everyday. Further, quite a few items are usually forgotten in our trips to the mall - or the brands we need are not available.Both the above do not explain why is it that kirana concept is not only surviving, but also thriving. The adjustments made by this category can be said to be:1) Convenient Timings2) Credit Facility3) Lower wait time in-store4) Personalised Service5) Smaller Pack Size Availability6) Consumer Goodwill7) Home Delivery8) Facility of open goods: loose sale of packaged goods9) Local Brands Stocking10) Knowledge of Consumer Preferences11) One-stop shop concept, with a wider range of products being stocked - viz. stationery, batteries, bakery items, snacks and sweet meets, ice cream, soft drinks,12) Friendly replacement and return policies13) Innovative new products especially in impulse categories14) Perishables like milk - esp home delivery on coupons15) Bill payment support to nearby households and other services16) Stocking of all new product launches - faster than even the chainsThe above small items, taken together, are creating a powerful force that is retaining the customer profile. On the customer front, what is happening is that the share-of-wallet, which was earlier 100% to the local kirana market, is now being shared between the organised retailer and the kirana merchant in a few segments of the market. For the lower segments of the population, the facility of smaller pack sizes, loose goods and credit are together ensuring stickiness. In fact, these last 3 factors are powerful strategies, given India's demographic and income profile. As an example, I have frequently found that a 100g pack of my brook bond herbal variant of Red Label is not stocked by malls. I can think of quite a few other similar cases...The other major factors in the equation are1) Increased Consumer Spending2) Increased Prices3) Increasing Households and Population4) Increase in Per Capita IncomeThese factors are growing the overall market: which is creating space for all the players!India has 14 shops per 1000 people - 1.5 Crore retail outlets, and it would be being optimistic in the extreme to expect a handful of Organised Retailers to kill of the unorganised sector. Yes, the Organised Retail Sector is Growing rapidly - the figures are 36% y-o-y, but the main drivers of business as on date are different. In the Food and Grocery segment, the three identified differentiators are conspicuous by their absence.First, this space has a widesrpead, well penetrated market, with each locality and each house being properly servicedThere is limited scope for value addition - tangible value addition- in this category for the consumer.These are low-involvement purchases and customers do not think and evaluate purchases too much - they are habit-formation categories - and habits are the hardest to breakProper servicing of this unorganised sector by the companies. One has to understandthat for the FMCG category companies, this market is the bulk volume generator. Further, since logistical challenges are limited due to small SKU sizes and low absolute prices per SKU, each store is properly stocked with even the latest products. The critical point here is that the advantage of new products / full ranges is not present for the Food and Grocery Sector. Organised Retail is competing not just with the small retailer but also the industry norm of weekly servicing of each outlet in the entire nationThe fundamental drivers of business in this category are thus different - quite different. So are the ground realities. This category is one of the most streamlined and organised categories, as also the most competitive among all the products categories. Easy logistics, Low SKU Price in absolute terms (how much does even a premium biscuit cost - 50 rs? Contrast it to one shoe- 750/-), established systems and habituated customers create an entirely different paradigm of businessThat is not to say the Food and grocery as a category will not grow in Organised Retail - it will. It is one of the top 7 categories. However, the fact remains that today, in the Food and Grocery segment, the share of Organised Retail is only 1% as opposed to more than 10% for other categoriesLFRs - Large Format Retail chains - have been around for some time now, and have completely failed to make a dent on the retail landscape. We have already seen the advent of supermarkets, and they have yet to kill off the small retailer. What is happening is that in the vicinity of these stores, local kirana business is getting impacted by a few percentage points over the short term. Over the mid- to long- term, this can be easily overcome :firstly by the attendant increase in populationsecondly by a change in stocking patterns andthirdly by an increase in personalised serviceSize of the Indian Market, which makes full coverage nearly impossible . India is a very distributed market, with a Kirana store every 50 yards from a residence. That coverage is going to be hard to beat, and is unmatched anywhere.The small irritants: lack of home delivery beyond 3 kilometers / minimum billing requirement; long lines at billing counters could add up to a lot, and make your regular retailer the preferred optionThe presence of a large number of small and local brands especially in the provisions space, which will largely be ignored by the LFR stores. This problem is exacerbated by the decision making heirarchy in organised retail, as well as by the lack of personal touch with the consumer. By contrast, for the local kirana stores, the decision maker is in constant touch with his market and is aware of local preferences and consumption trends, and is in a position to make quick decisions. This is simply because of one largely ignored psycho-sociological factor: the consumer will rarely, if ever, tell the large supermarket that he prefers such-and-such a brand. Whereas, this same consumer will be far more upfront with the local store with whom he has been conversing for years.The implication could be a change in stocking patterns at the local kirana store, with a lesser preference and focus on cosmetics and a greater emphasis on provisions. Secondly, we might also see a change in depth of stocking, with small to medium size packings being available at the kirana store, and the full cosmetic range being available at the LFR. This can already be observed in the market: the 2- and 3- Re single use pouches can be seen in local stores, but not in the major stores. As another example, in my home we purchase only a select brand of atta that is not stocked by the nearby supermarket...It would require each chain to set up something like 5 - 10 stores in just one city like Indore to properly cover the city - extrapolate this number to India, and you have a massive investment outlay... this in a crowded market, with Reliance Fresh, More, Easyday, Big Bazaar etc all already having a significant presence. Large majority of consumers are 2-wheeled, and LFRs do not have conducive home delivery policies. This means that only people with cars can shop at these LFRs, or customers from the immediate vicinity. This significantly limits their potential area. Further, the problems in relation to provisions - demand of the local brands combined with their sourcing policies will also serve as a further deterrent.Not only that, each chain has its own in-store brands, and will thus not encourage the local brands which will be available in the local stores.The perception of supermarkets being costly will also deter a large number of consumers from tapping into these outletsThe lower financial outlays of the local kirana stores will mean significant cost-savings, which can subsequently be passed on to consumers. This is already a feature in the mid-level stores- i.e. the local supermarkets like Gokul in Raipur and Prem in Indore, wherein you can already get similar or lower prices as compared to organised retailThe other perspective is the advantages that can be had from organised retail. Please note that I state organised retail and not FDI...Concentration of buying power will lead to a reduction in middle men, and a better price realisation to farmers. It might also lead to lower consumer pricesThe dangers of FDI / Organised retail overpowering local guys will not hold good in a market as varied and distributed as India... see coke-pepse example below for detailsThe benefit to the supply chain side will be tremendous, since organised retail will perforce either have to invest themselves, or bring about an atmosphere that will engender investing in cold storages, for exampleThe benefit of economies of scale will also benefit everyone in the system