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Retail chains growing across India due to changing tastes of customers
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Friday, 29 November, 2013, 08 : 00 AM [IST]
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Vaibhav Verma, Manish Malhotra
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fiogf49gjkf0d The retail industry in India is certainly one of the highest revenue grosser industries currently in action as it contributes a significant amount of GDP to the national economy.
The fast-paced & dynamic transformations occurring in the retail market coupled with changing taste and behaviour of the customers has resulted in the growth of these retail chains all over the nation. Unlike the previous couple of years, it has been found that this area has reported tremendous growth in the overall food retail business by targeting potential avenues of the food. The debate today is no longer whether food and grocery retail in India would grow but rather how fast can it grow and what challenges need to be overcome.
Key Challenges in Food Retailing
Demand Side
• Penchant for fresh/home-made and value consciousness
The Indian consumer, unlike his Western counterpart, has a penchant for freshly cooked food over packaged food. This is a result of dietary patterns, poor electricity supply, low penetration of refrigerators and a family structure where one of the primary roles of the housewife is feeding the family. The Indian consumer is extremely value-conscious.
• Diversity of tastes and preferences
Multiple cultures, languages and religions have a huge bearing on the tastes and preferences of the Indian consumer. This will pose a challenge for players aspiring to develop a pan-Indian presence.
• Willingness to travel
Given the current density of retail outlets in India, retailers will have to motivate the consumer to trade convenience with price, range and ambience.
Supply Side
• Sourcing base and efficiency
The fragmented agriculture supply base coupled with an inadequate legal framework make it difficult for retailers and food processors to procure quality produce at competitive costs directly from farmers. The small size of the food processing industry further limits the supply options.
• Real estate availability and cost
Rentals account for 7-7.5% of the total costs for organised retail in India against global benchmarks of less than 3%. Real estate availability and costs will continue to remain a challenge in the retail industry with factors like adequate parking, ambience and proximity being the key drivers of footfalls.
• Manpower availability
As organised retail expands, there is expected to be a dearth of skilled manpower. The lack of institutions and courses for different aspects of retail management will have an impact on the overall supply of quality manpower.
Emerging trends in food retailing
• Big becoming bigger
Globally, retailers have realised that size drives profitability, not just through economies of scale in operations but also through higher bargaining power leading to better margins. While many players are entering the retail space in India currently, the growth stage will be characterised by rapid expansion and consolidation among these players.
• Rise of organic foods and health and wellness segment
Consumer attitudes and preferences are undergoing a shift owing to factors like increased disposable incomes, changes in lifestyle patterns, shift in age structure, increased number of working women and multi-cultural exposure. These would lead to increasing health- consciousness in the future. Organic foods and wellness products would be emerging opportunities in the years to come.
• Increasing focus on private labels
As competition in the organised retail market increases, discounts and promotions are expected to play a critical part in generating footfalls. To counter the impact on profitability, organised players will find it more attractive to promote private labels or store brands given their higher margins. The consumer too would benefit from lower prices.
As the organised food retail market matures in India, there would be an increased need for players to differentiate through marketing
Marketing is important for all kinds of businesses in the food industry and can provide invaluable recognition and output. Here are some hints and tips to show you how food marketing can help your business attract potential new customers.
Having an eye-catching website to attract your customers and using the correct food marketing literature is important in keeping your customers and gaining potential new ones. Social media can also provide an extensive networking system for your food business and can help to create good relationships within the industry. For example if you are a B2B business then you may want to use Twitter and Linkedin as a network to target restaurant managers, retail buyers, chefs and food directors. However if your business is B2C then the focus should be on Facebook to create brand loyalty as they are platforms that are directed more towards consumers.
Direct food marketing such as demonstrations in store, campaigns and articles in newspapers are all prime food marketing tools and something that a good marketing agency can arrange for you. They should also be able to create a reputation for your company within your industry and enhance brand recognition through press and events. Overall you need a good food marketing agency to help you, and one that is knowledgeable in food PR and marketing specifically.
Experiential marketing
Experiential marketing, which is also sometimes referred to as "engagement marketing," "event marketing," "live marketing," or "participation marketing," is a method of marketing that directly engages consumers by inviting and encouraging them to participate in the evolution of a brand. Rather than looking at consumers as passive receivers of messages, engagement marketing encourages participation from the consumer.
Experiential marketing at a retail level has become very common and is very important. Some examples of experiential marketing include:
In-store tastings - These can commonly be found in grocery stores. Food tastings engage consumers and invite them to sample products. This is a highly effective form of experiential marketing that will result in many consumers purchasing products that they never would have considered had they not tested the product in-store.
Live demos - Live demos are commonly found in shopping malls and department stores. Live demos are used to demonstrate to the consumer how they can use a particular product or appliance. Often participants will receive a coupon or sample of the product as a gratuity for participating in the demonstration.
Testing products - Product testing sessions, like testing hand crèmes and hair products, is a very common occurrence in shopping malls. Have you ever walked past a retailer in a shopping mall to be stopped by a sales representative who asked if you would like to test or sample a product? Or have you ever walked through the cosmetic and perfume section of a department store where a representative stopped you to sample fragrances or cosmetics? Often times, these representatives represent the brands. They are not employees of the retailer.
These examples are the essence of experiential marketing. There is nothing more engaging then inviting a consumer to try your product.
For experiential marketing to be effective it must be properly planned and executed. The brand should have a clear objective at the outset. If the offer will be a taste test, for example, how will the consumer be converted into a customer? Running a sale on the product the day of the experiential marketing campaign and/or offering coupons and/or discounts on a first purchase are excellent ways to entice the consumer to buy.
Your sales person is as important as your product. The sales person should be able to attract the consumer, establish a rapport, create a comfort level, knowledgeably answer any questions and sell product. Experiential marketing is an investment and money well spent, however brands often err when they send in entry level staff and/or students to fill this very important role. This type of marketing should be executed by skilled professionals who are trained in experiential marketing if you want to ensure that your investment results in the best possible representation of your brand.
Working with an experienced marketing company that specialises in experiential marketing can provide you with the skilled staff, expertise and consulting to make your marketing campaign a success.
With an increase in the number of nuclear families, working women and shifting of younger population to the urban cities in addition to increasing opportunities in the food sector, the Indian food retail industry is expected to explore lucrative avenues in the future. The significant rise in the income of the general population, overall economic growth of the retail market and drastic emergence of food retail chains has raised the success graph of the food industry in the recent time. The fact that Indian consumers are opened up to spend sufficient amount of their income on exploring international as well as local food seems to have gone down well with the food retailers.
Fuelling growth
The growing consciousness of the consumers to varied range of flavours & taste and the current population showing greater inclination to leading an inactive & convenient lifestyle is what made the retailers to shake hands with the Indian food market. The retail market has also come up with the idea of productively designing the format so as to target customer's depending upon their backgrounds and convert them into great returns. Hence, these food chains are strategically banking on women office goers, single working professionals, bachelors, and so on; which are currently increasing in the overall size and number and thus, get maximum benefits by satiating their stomach.
The increasing popularity of food stores in India is credited to the fact that Indians are more fascinated and thrilled to experiment myriad range of flavours from the Western kitchen. And, thereby further fueling the retail market to drive its way onto the Indian land and fuel its growth and development along with enhancing its own shares and profits. These retail outlets are also slowly gaining the status of enjoyment and celebration party themes, as one can gorge on a wide range of alluring and tempting foodstuffs with their friends, family, relatives, and loved ones.
Since ours is basically traditional and spicy kind of foodstuff with few delicious sweets and desserts adding up the menu. But, the international cuisine offers drastically different recipes with a mix of every flavour and taste, thereby making these foods a must-to-taste stuff on the tasting list. And, hence to splurge the Indian customers with the true flavour of the nation; the retailers have come up with various merchandising options with Chaat franchise being the most creative and successful one. It is evident from the changing lifestyle of the current population and the shift in the economic structure as well as age group that the next generation is getting gradually inclined towards multi-cultural food varieties and tasting patterns.
(The authors are assistant professors at Banarsidas Chandiwala Institute of Hotel Management & Catering Technology)
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