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Small stores show the way on bill savings

Small stores show the way on bill savings
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First Published: Tue, Feb 19 2008. 01 39 AM IST

Updated: Tue, Feb 19 2008. 01 39 AM IST
Shyamala Balasubramanian, 48, travels about 5km from her house in Mayur Vihar Phase III in the Capital to the Big Bazaar hypermarket in Noida, a New Delhi suburb, once or twice every month — to save some money.
Close comfort: Dairy shop owner Virender Choudhry prefers to buy from the neighbourhood Shanti Bazar because of the convenience of home delivery.
“A visit here in the first week is a must every month,” says Balasubramanian, as she stands in queue to pay for a trolley-full of groceries for her family of four. “I can save Rs400-500 on a bill of around 4,000 (rupees) and also I get gifts.”
Balasubramanian is one among tens of thousands of shoppers who have discovered the pleasures and benefits of shopping at supermarkets and so-called modern or organized retail outlets — benefits that are touted in eye-catching ads in the papers and on television channels.
Only, it turns out, bigger isn’t always cheaper.
When Mint presented a copy of Balasubramanian’s bill to a local grocery store, or kirana, and asked it to repeat the order, the result was surprising. Shopping at the local grocery store would have saved Balasubramanian a bit more. Balasubramanian? was? picked randomly, as was the kirana that was asked to repeat the order. To be sure, not all the items the housewife picked at Big Bazaar were available at the kirana.
As organized retail begins to take root in India, the tussle between it and small stores has taken on a new pitch: Companies operating modern retail stores claim they offer wider choice and cheaper prices. This has forced smaller shops to innovate and get competitive with pricing to keep their traditional customers.
Turning modern: Shyamala Balasubramanian does her grocery shopping at Big Bazaar on the first Sunday of the month, after her banker husband?draws?his?pay.
The stakes are so high now that the Union government has commissioned a study to map the impact of organized retail on small shopkeepers and vendors to a private think tank, the results of which are still officially under wraps although they have been ready for a few months.
In December, Mint carried the findings of this study that showed that small retailers in areas where organized retailers had opened stores had seen a fall in revenues and profits and that consumers were happy with the advent of organized retail because it meant convenience and lower prices for them.
Big Bazaar is part of Pantaloon Retail (India) Ltd, India’s largest listed retailer.
Balasubramanian isn’t complaining about the air-conditioned, well-stacked aisles at her supermarket. She usually does her grocery shopping at Big Bazaar on the first Sunday of the month, after her banker husband draws his pay. On this particular weekend, she bought items ranging from toothpaste to tea and her total bill that day was for Rs3,410.
Mint tried to compare rates for the items Balasubramanian purchased at Big Bazaar from a small grocery store located a few hundred metres from the hypermarket. For a start, only 30 items were available at Grover Store at Atta Market in Noida against the 48 items on the Big Bazaar bill that Balasubramanian showed Mint.
Mint then attempted to find out the total bill of only the comparable items at both the mom-and-pop store and the hypermarket. The total bill for the 30 like-to-like items, including staples from sugar to sunflower oil, at Big Bazaar was Rs1,812 compared with Grover Store’s Rs1,723—a saving of Rs89 at the neighbourhood grocery store.
One expert said the result didn’t surprise him.
“I think where modern retail scores over traditional stores is not necessarily on price, but on the overall value proposition, which includes the 4Cs — convenience, comfort, choice and cost,” said Jayant Kochar, managing director of retail consultancy firm Go Fish Retail Solutions.
“From time to time, modern retailers claim to be cheaper or even cheapest—but that is easy to manipulate by including a couple of loss leaders in the basket of products being considered. Overall, it is unlikely that any particular modern retailer will be significantly cheaper for any extended period of time,” he added.
A loss leader is a product that modern stores decide to offer at a significant discount, knowing that they will lose money on this, but hoping that they will attract enough people to their stores who will then buy other products on which they will make profits.
To complete the exercise, Mint also picked, at random, a shopper who bought groceries at a kirana and compared his bill with what it would have been had he shopped at a supermarket.
Dairy shop owner Virender Choudhry prefers to shop from the nearby Shanti Bazar grocery store at Indira Market in Noida. “Big Bazaar is far,” he said though the hypermarket is barely 500m away from his store. “Also, they (the neighbourhood store) deliver the goods at our home.”
To see if shopping at the local store disadvantages him in any way, Mint picked up his bill, and using the same methodology of picking only comparables, asked Big Bazaar to fill the order.
Choudhry bought things ranging from sugar to shampoo and shopping at Shanti Bazar for those items cost him Rs159 less than it would have at Big Bazaar.
Rajan Malhotra, chief executive at Big Bazaar, said that while kiranas operate on low cost and can offer a good price, an accurate comparison between them and modern retail stores would only be possible when the number of stock keeping units at each is taken into account.
“On select stock keeping units they can always be cheaper to the consumer, but on the larger basket, obviously, we are cheaper,” Malhotra added.
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First Published: Tue, Feb 19 2008. 01 39 AM IST