Another evidence that stands as a testament to the fact that consumer behavior cannot be learnt from school textbooks and slideshows in a meeting room. Rob Cissell, CEO of the value retail chain- format at Reliance Retail exemplified how he comprehended with an ongoing trend in the shopping arena that Kirana store owners have been employing. His experience with direct interactions with his consumers at the store enlightened him with a fact that his 3 years experience with Walmart in China could not garner him.
Consumers decided to switch to hypermarkets when they understood that the local kirana shop owners have been travelling 100 Km to buy at a wholesale market. They were assured of taking a right decision with respect to their switching, when they were greeted with better prices and a better price range when they stopped by Reliance Mart. A number of hypermarkets other than Reliance Mart have been witnessing their stores filled with kirana owners especially during discount seasons. This has turned out to be more viable for them in comparison to the discounts that the FMCG (Fast Moving Consumer Goods) companies have been offering them.
If you have wondered why even the spacious air-conditioned malls seem to be crowded like a flea market, the kirana owners have constituted a major part of the crowd. They do not leave any stones unturned to get hold of the yearly, monthly, and weekly offers that these hypermarkets endow in order to grapple with the grim atmosphere.
Hypermarkets have indeed turned out to be an ideal destination for the kirana owners to shop with the huge margin on offer. An Independence Day offer in one of the hypermarkets rendered a Kirana owner two-litre bottle of Coco Cola at Rs. 39 that actually costs Rs.65, paving way for a margin of a huge 40%. On the other hand, he would have procured a much lesser margin of 9%, had he bought from a company distributor. Ganesh Patil, who owns a small grocery store in Borivali (Mumbai), is one of the Kirana owners who has been employing this clever technique to earn more. His last purchase at a Hypermarket accounted to Rs.80, 000 that rendered him a margin that is more than twice that a company distributor would have offered. This amoral technique has however left retailers like Reliance Retail frustrated, whose discounts are intended to benefit consumers and not resellers.
A few hypermarkets have already counteracted by discouraging buyers from the purchase of a large number of products from a single category. The discount offers will not allow them to buy more than 12 pieces of products. Does this throw some light on the contentious issue of FDI retail in India?
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