STRATEGIES TO 'DEAL' WITH INDIA'S EVOLVING SHOPPER

By: Dipita Chakraborty, ED, Nielsen

‘Deals’ being offered at Modern Trade act as the main driver of sales

FMCG spends at Modern Trade on the upswing even as Traditional Retail sales remain buoyant

India’s retail environment is increasingly attributing its dynamism to a changing and evolving shopper rather than merely depending on retailer investments and changes in legislation. In this new era of Indian retailing, the mindset shift occurring amongst Indian shoppers now exerts a strong influence on the development of India’s retail industry.

For instance, Modern Trade in India is now recovering from the slump it experienced a year ago. In fact as per the Nielsen ShopperTrends study conducted in 8 metros and 3 mini-metros in 2011, volume at Modern Trade is up 32 percent in 2010 vs. 2009, in FMCG categories. In comparison, Traditional Trade grew by 20 percent during the same period. However, the number of Modern Trade stores grew only by 6 percent during this time, and were therefore only a small driver of the overall sales expansion. No doubt the Indian shopper is discovering the modern retail experience and is increasingly shopping there, as is clearly evident from the increased spend at Modern Trade stores.

According to the study, the number of shoppers who have visited a Modern Trade outlet (supermarket/ hypermarket) in a four week period has increased from 30 percent in 2010 to 37 percent in the current year, a 25 percent increase. Moreover, this year we see a rising proportion of Modern Trade loyalists among cross-over shoppers (i.e shoppers who visit both Modern Trade and Traditional Trade stores): more shoppers are spending most of their FMCG budget at a modern retailer store – up at 21 percent compared to only 14 percent from a year ago.

What is evident is that we are now beginning to see the emergence of a modern trade loyalist, a shopper who might shop at both formats but prefers to allocate most of their spend to purchases made at Modern  Trade outlets.  In fact, a little over half (56 percent) of Modern Trade shoppers fall into this category. This shopper is also younger compared to the traditional trade shopper.

The Real ‘Deal’

So what is driving sales at the Modern Retailer? The study shows it is the increased ‘Deal’ Seeking nature of the Indian shopper. The Indian shopper has increasingly become a Deal Seeker – some of them even switching stores for a better deal. And amongst the rest, many actively search for promotions while shopping - particularly when shopping in the modern trade format. The Nielsen ShopperTrends reveals that the propensity to look out for deals is far more pronounced among Modern trade shoppers than Traditional Trade shoppers. The format itself along with the increasing focus of big retailers to promote their deals has resulted in the Modern Trade shopper consciously looking out for promotions while shopping.

Of course the deal seeking nature in shoppers is driven by two primary factors, rising inflation and the increased accessibility of the modern retail format in an urban environment that makes shoppers increasingly aware of the various deals being offered by retailers.

The deal seeking nature is further proved by the affinity of the Indian shopper towards Private Label. Despite it being early days for Private Label in India, it is already close to 7 percent of Modern Trade sales, compared to only 1 percent for China. The Private Label phenomenon has leapfrogged in India compared to other Asian countries for many reasons: the value conscious Indian shopper, their familiarity and comfort with unbranded/generic products, and the focus on quality of Private Label products on behalf of the retailers.

The findings of the study indicate that the Indian shopper today is also more open to trying new products/formats: 30 percent of shoppers enjoy trying out new brands/products, up from only 19 percent a year ago.  With more space available to display more products, Modern Trade clearly has an advantage. Modern Trade has also clearly established itself as the “go to” outlet for several categories, including most personal care and household care categories as well as some food categories. 

The ‘Kirana’ Advantage

Despite the rise of the modern trade in the country, the traditional ‘Kirana’ store too continues to be strong. The main factors driving this strength are the convenience of access, availability of home delivery, and trusted relationships between the shopper and local grocer. Interestingly, according to the Nielsen study, shoppers also perceive Traditional Trade to be “cheaper”. While Modern Trade retailers are seeking to promote their chains on the basis of value pricing, among the segment of shoppers who are Traditional Trade loyalists, there is a perception that they get better price value from their local grocer.

Typically, the relationship with the local grocer is built over time and is a personal one, still making it a very viable option for many urban shoppers. The perception that the ‘kirana’ is cheaper is based on the actual discounting followed by some local grocers coupled with the product portfolio at the neighbourhood grocer being more attuned to the specific needs of shoppers in that locality.

Despite the strength of Kirana stores in sheer number, the number of Traditional Trade loyalists are decreasing in areas where Modern Trade penetration is significant. At the end of the day, understanding the evolving needs and shopping habits of the India shopper will hold the key to the success of retailers, no matter which format they operate in.

About Shopper Trends

ShopperTrends is a global consumer research study conducted in over 50 countries to understand shopper attitudes and behaviour. In India, ShopperTrends is conducted in 11 cities: the top eight metros (Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad, Ahmadabad & Pune) and three 20 lakh-plus cities (Nagpur, Jaipur, Indore). The target respondents include main grocery buyers and influencers; males/females aged 18- 65 years in SEC A, B, and C households. The study is conducted through a door to door methodology. We interview over 3300 respondents across the 11 cities.

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