ArrowArtboardCreated with Sketch.Title ChevronCrossEye IconIcon FacebookIcon LinkedinShapeCreated with Sketch.Icon Mail ContactPath LayerIcon MailMenu BurgerIcon Opinion QuotePositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business Trends

Supermarkets gain traction in India with pricing and products

Traditional stores die hard despite modernization of the retail industry

India's highly fragmented retail industry is gradually modernizing, with more large supermarkets appearing, such as this DMart store in Mumbai.     © Mint/Getty Images

MUMBAI -- Supermarkets are popping up all over India's cities, highlighting the modernization of the country's retail industry, although small shops called kirana still manage to pull in customers.

DMart, a big supermarket chain known for its "every day low price" strategy, plans to increase the number of stores it operates by 30% to 200 within two to three years, while Future Retail, another operator, is set to expand its network of general merchandise stores and small supermarkets.

At a DMart store in northern Mumbai on a recent weekend, families, women in saris and other shoppers were buying spices, rice, snacks, detergent and other items. Prices at the store were evidently lower than those at another supermarket nearby.

Avenue Supermarts, which runs the DMart chain, focuses on keeping purchasing costs and retail prices low. Most of its customers are middle-income, and its stores are typically located in residential areas.

To hold down operating costs, Avenue Supermarts usually owns the land that it builds its outlets on. Although leasing property boosts short-term profit, landlords often demand steep rent increases when the leases are renewed. India's inflation rate is running at about 4% annually. Avenue Supermarts has opted to buy the land it needs for its stores, calculating that this will be better for the bottom line in the long run.

In the business year ended March, Avenue Supermarts opened 24 stores, its biggest expansion in five years, raising its shop count to 155. The retailer moved into the northern state of Punjab for the first time and added to operations in Maharashtra, in western India, and other states.

The company plans to open new stores at a rate of 20 a year going forward, aiming to raise the number of outlets to 200 within two to three years.

A Big Bazaar retail store Big Bazaar supermarkets sell food such as rice and beans by weight. (Photo by Akira Hayakawa)

Future Retail operates multiple supermarket chains, including Big Bazaar general merchandise stores and Easy Day small supermarkets. Big Bazaar, which handles a wide range of merchandise, including food, clothing, eating utensils and sundry goods, expanded to 285 stores in the year ended in March, with the addition of 50 new outlets.

Future Retail has created chains across India and built shopping malls in cities such as New Delhi. It plans to increase the number of Big Bazaar stores to 375 within two to four years.

To bolster its small supermarket operations, the company bought a rival's food sales business in the recently-ended business year. Including its newly acquired business, the company expanded its Easy Day and other small supermarkets by about 130 outlets.

Tata group, India's largest conglomerate, began building its Star Market supermarket chain with British retailer Tesco in 2016, focusing on opening modern, clean and spacious stores.

In addition to providing new services such as in-house meat, seafood and bargain departments, Star Market offers free home deliveries for purchases of 1,000 rupees ($14) or more. Loyalty cards are another innovation.

Star Market retail store Star Market stores appeal to higher income shoppers with organic vegetables. (Photo by Akira Hayakawa)

But despite the stiffer competition from large retailers, kirana shops are hanging on. Their prices are often higher that those of supermarkets, but their closeness to customers gives them a competitive advantage. These mom and pop stores are likely to continue to survive alongside larger retailers for some time to come.

You have {{numberReadArticles}} FREE ARTICLE{{numberReadArticles-plural}} left this month

Subscribe to get unlimited access to all articles.

Get unlimited access
NAR site on phone, device, tablet

{{sentenceStarter}} {{numberReadArticles}} free article{{numberReadArticles-plural}} this month

Stay ahead with our exclusives on Asia; the most dynamic market in the world.

Benefit from in-depth journalism from trusted experts within Asia itself.

Try 3 months for $9

Offer ends September 30th

Your trial period has expired

You need a subscription to...

See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

See all offers
NAR on print phone, device, and tablet media