Trends that may influence Indian retail in 2018
Let me start by defining a context with regard to the retail sector. There are broadly two kinds of players. One operates with a shop-keeper mindset. This implies that the business scope is limited, the person only buys and sells a product with an existing demand. They are usually stand-alone owner-operated outlets. On the other hand is a retailer mindset, diametrically opposite and focused on size and scale. This orientation leads to expansion and aggregation of volumes. Therefore, leading to better and bigger negotiating power.
Shop keeper businesses with an appetite for growth would start venturing into expansion. This is already evident in the food and grocery space where stand-alone shops are beginning to open branches. An interesting example is the opening of a new branch by a Chennai-based store, “Amma Naana”. For decades this has been a stand-alone, destination store catering to shoppers from the upper SEC segments and even foreigners. After growing in size over the years, it recently opened another branch in Chennai. This is significant from the point of view of capturing and retaining the shopper profile potential in other localities of the city. It would be a natural progression for the store to now expand further and even foray to other cities.
Action in Tier 2 and 3
While such expansions are happening in larger cities by shop keepers who are trying to transition to a retailer mindset, the action in 2023 would be bigger in the tier 2 and 3 towns. Larger metros are already well served by various retail chains and kirana stores while tier 2 and 3 towns have not seen much action from national chains. This is set to change in 2023 where national chains would start looking at these markets more aggressively. An interesting opportunity which exists in small towns is the potential for takeover of a small local chain, even if it consists of few stores. A national chain might find the entry strategy into smaller towns to be easier when it takes over such chains thereby acquiring their existing shopper base while expanding their volume aggregation with a larger store. Going forward, it might even start opening its own stores. However, my view is that the entry point would be through take overs and mergers with smaller chains.
Another kind of merger and acquisition would happen across channels – offline and online. V-Mart recently announced the takeover of LimeRoad that is an online player. It is bound to pick up pace as this would enable cross-channel access to shoppers apart from increasing their shopper base.