“Super Markets are considered as a symbol of modern trade”- This is the thought which has to be trashed at the first place. It’s time to realize the difference between modernization and westernisation
What do you think is the basic advantage of a super market over our traditional kirana wala? I would say its ZERO when compared to the adverse functionalities. Technology is all about increasing throughput while reducing overheads (labor, space, cost, etc.) and inventory. But the happening is the opposite.
Super markets are ready to pay an average of 12K / month salary for billing and 10K / month for rack stacking and maintenance. We see promotors of different products on floor deployed by distributors or brand owners to influence customer purchase. An average Staff number per store is around 6.5 taking Chennai, Coimbatore and Madurai into account, which does not include promotors or Shop in store representatives.
Around 20% of the modern retail outlets are renovating and 8% of them are expanding. This is a misleading stat which gives an illusion of growth, but it reflects the pressure of the store owner to have a huge display, large collection and a positive differentiation from their next-door competition.
Cost of everything has raised while the margins are thin. When we say thin (7 – 8% on MRP), it is the margins of the fast-moving items which boosts up the store’s turnover. What is sold more is stacked more. When we analysis the products which sell more, they are the once which had spent fat bundles for promotions (85 – 90%) and once with long years of existence (10 – 15%). The distributors of high selling goods have a demand over the shop keeper in terms of margin, placement and payment. Does it mean that all the products on the store give thin margins to the store? No, there are products of mid-sized Indian companies which neither have funds to go for superior add promos nor have stone hearts to give an inferior product, which give high margins to super market.
When these companies (mid-sized) look into costing 30% (approx.) on the MRP is their actual cost of manufacturing + micro margin, 10% (approx..) marketing overhead, 30% (approx..) for supper stockiest and distributors and 30% (approx..) for retailers. They work on a thin line to have market presence as no distributor or a super market will like to have products with low familiarity.
When it goes to familiarity, its again politics of media. It’s not very rare that we end up buying a new brand based on its package and promises, if they are displayed to us on the first place. We often end up buying a new broom stick or a peanut candy with unfamiliar or no brand names on it (All that is happening just because of the absence of MNCs in that product range). So it’s not that there is no market for products that do not have TV advertisements scrolling, it’s a myth that retailers believe and the hard work of media and MNCs to keep the myth alive and strong.
This is how things work, since the MNC’s have a hold on the retailer, they stock more. Massive stock gives a wow advertisement on the rack, which is the best-selling tactics. Since they stock more, new products find very less space to stand (They are almost not visible). “What is sold more is stacked more” – is a wrong statement. “what is stacked more is sold more”, even though mid-sized companies offer high margins to retailers, the shop owners fail to see this effect. Which is a common thumb rule for a kirana walla, “promote what gives you more”.
No new product or a product based company can survive in the current modern retail layout. This is a structure build by the corporates for the corporates. Super Markets will keep closing down, new un-matured investors would keep opening new store, mid-sized quality based companies will go bankrupt.
The only way to get out of this circle is to change how the super-markets think. They should think like the man standing behind the counter, where customers are not allowed into the store. They should give more placement for products that fetch them more money (profit not turnover), they should prioritize payments for what has moved and not based on the pressure to fill racks. In total, a super market should function based on the principles of a local Kirana walla.