Organized Retail (Spencer's) vs Kirana Store

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Assignment 2
Organized Retail (Spencer’s)
Kirana Store

Indian Retail Market

India is the only one country having the highest shop density in the world, with 11 outlets per 1000 people (12 million retail shops for about 209 million households). Rather we can see the democratic scenario in Indian Retail (because of low level of centralization, low capital input and due to a good number of self organized retail). Indian retail is dominated by a large number of small retailers consisting of the local kirana shops, owner-manned general stores, chemists, footwear shops, apparel shops, paan and beedi shops, hand-cart hawkers, pavement vendors, etc. which together make up the so-called “unorganized retail” or traditional retail.5 The last 3-4 years have witnessed the entry of a number of organized retailers6 opening stores in various modern formats in metros and other important cities. Still, the overall share of organized retailing in total retail business has remained low. Nevertheless, the macroeconomic landscape indicates that the domestic retail industry has immense scope for the modern as well as traditional retailers to co-exist. Through a balanced regulatory framework and competition policy, both the traditional format and the modern format can continue to grow, eventually closing the gap between the organized and unorganized sectors. Organized retailing will: (i) promote quality employment; (ii) improve business process practices; (iii) spur investments in support industries; and (iv) enable the modernization of the fragmented traditional retail industry. Modern retail business focuses on maximizing customer footfalls and capturing rising volume and share of the customer wallet. While the competition strategy is largely price focused, the model works by: (i) improving sourcing efficiencies; (ii) expanding product assortment; (iii) differentiating service; and (iv) enhancing the store ambience. Thus, there are four drivers of modern retail’s “one-stop shopping model”: price, product, service, and ambience. Spencer’s Retailer

Spencer’s differentiates itself on product quality, assortment of imported food products, and shopping experience. Leveraging on the perception of high-quality imported goods that was attached to the old Spencer’s & Co. brand name, Spencer’s business strategy focuses on an array of food-related products and activities spanning across intercontinental and domestic culinary, and chef demonstrations. Spencer’s follows the “duck and duckling” (pyramidal) strategy for its retail expansion and cost benefits in back-end procurement; it has a small set of destination stores (Spencer’s hyper), followed by the supermarket format (Spencer’s Daily), and a larger set of convenient store format (Spencer’s Express and Fresh) located close to the local neighbourhood. The company incorporates the cluster approach in its “hub-and-spoke” business model to gain economies of scale in sourcing, logistics, and promotional activities around its multiple retail formats. Each state is more or less regarded as a cluster consisting of a small set of hyper, in between supermarket format stores, and a larger set of express stores. The spread of stores serves as spokes to a single distribution centre, the hub. Each hub also functions as a central point to a number of repackaging centres, and collection centres in the cluster region.

Spencer’s Retailer vs. Kirana Stores

A typical outlet of Spencer’s is about 5600 sq ft providing employment to average 23 people per retail outlet. The annual sale per square ft is around Rs.7700. If this numbers are compared with the Kirana stores (unorganized retail outlet) the shop is of size appr. 500 sq ft, run by 2-4 people and annual sale per square is not more than Rs. 1000. The two retail outlet can be compared on four parameters: price, product, service, and ambience.


Spencer’s & Co brand name, Spencer’s differentiates on high-quality food assortment....
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