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Grocery Chains – Largest Segment of Retail – Part -1

February 13, 2009


India grocery retailIn continuing our coverage on the Retail Chains in India, this is the last segment – Groceries, the largest segment of Retail. We will cover the Grocery chains in two parts.

Food and grocery is the largest segment and it occupies around 74 per cent (US $ 200 billion) of total retail market in India. The organized grocery retail constitutes 20 per cent (US $ 6 billion) of organized retail industry. It is growing at the rate of 11 per cent per annum. [2007-08]

There are more than 1500 organized grocery chains in 2008 run by big corporate housed or retailers and it will increase to 5000 by 2010. Grocery chain format in India include Hypermarket, Supermarket, Convenient stores, Cash and Carry wholesale. Many chains are coming up in townships and malls.

Hypermarkets: Hypermarket is combination of a general merchandise store and the supermarket with over 50,000 sq ft of retail space. Hypermarkets have categories or sections for food items, book shop, apparel section, household appliances, cosmetics, electronics items and so on. Hypercity, Big Bazar, Star Bazar are the example of hypermarket. Currently there are less than 100 hypermarkets in India, operated by 5-6 big retailers.

Supermarkets: Supermarkets are self-service format offering a full line of groceries and other produce with between 4,000 to 10,000 square feet of total selling area. These stores normally carry approximately 5,000 items. Some of the examples of supermarkets are More, Reliance
Fresh and D-Mart

Convenience Stores -These are small self-service retail outlets with less than 2,500 square feet of retail area and located near residential areas.

Cash and Carry Wholesale – India allows 100 per cent foreign direct investments in wholesale cash-and-carry ventures that sell only to other retailers and businesses. 51 per cent foreign direct investment is allowed in single-brand retail. Franchisee arrangements are permitted in retail trade.

Grocery Retail Market Scenario:
Key factors responsible for the growth of grocery retail are increase in disposable income of consumers, growth of service sector, changing demographic trend like increase in nuclear family, easy availability of credit, economic growth and changing shift in attitude of people towards shopping. Average spending of Indian consumer is Rs. 8,000 per month in these stores.

India is witnessing increasing number of nuclear families and also the dual-income families where both husband and wife are earning which means higher consumption spend. The attitude of people toward shopping is changing from just normal regular purchasing to recreational and enriching experience. Most of the families especially in urban cities go for shopping on Sunday in malls. They are increasing considering shopping as a part of family outing activity.

In the next part, we will cover supply chain for Grocery retail and look into actual store chains.

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