Futurebazaar, D-Mart, Reliance Fresh/Smart, Metro, V-Mart are some of the key players in Indian FMCG retail market. I am currently working in Supply Chain Vertical of Reliance Retail Value (FMCG) Format.
Now that I work for one of the biggest retailer in India, I find myself intrigued to have discovered this entirely new perspective towards supermarkets in India. I recently visited D-Mart in nearby area. It was hard to miss the arrangement of products, pricing strategy, retail layout and thoroughly thought out marketing strategies to entice customers to buy more.
After submitting my bag and getting a token, I entered the store and the first thing that I spotted was Rasna Packets and Cold Drink bottles. It was hard to resist the temptation to grab those deals. Rs 20 off on a 2 Litre cold drink bottle. I have bought cold drinks all my life by paying extra Rs 5/10 cooling charges above MRP. How could I have possibly resisted the temptation? Apart from not having access to refrigerator, I know few things about Retail Store Layout. Anything and everything you see when you enter a retail store is something they very badly want you to notice and buy, either because of high profit margins or making a sure shot sell. With some little guilt in mind, I moved forward.
Unlike Reliance Fresh stores, D-Mart holds and sells a lot of GM (General Merchandise). I noticed Hand Bags, Shoes, Home Appliances and clothes as well. After reaching the other end of the store, I looked back and I could see much of the store. I could vividly notice bold and raised price tags everywhere. And surprisingly every price tag had at least a single 9 digit in it. That’s called Psychological Pricing. If its 199, our mind will interpret it as one hundred something and not as two hundred. Back in time when I was college going student and had limited money, I really liked buying those cheaply priced items. But now that I earn decently, I find myself uncomfortable trusting those unknown brands and cheap prices, especially clothing items. Unbelievable discounts, flashy price tags and cheap items coupled with modern retail store shopping experience has rightly touched the core of Indian shoppers.
Secret of Discount –
Since the advent of supermarkets, traditional line of flow of material from vendor to distributor to wholesaler to kirana store has been breached. We all, for long, have been accustomed to buying grocery at MRP from nearby Kirana store. Any amount of discount, even 3% or 5%, is bound to attract attention. Since I am currently working in Inbound (Procurement) Department of our warehouse, I happen to have access to information regarding the rates at which we buy material from different vendors like ITC, HUL, P&G and numerous others. Few surprising facts for you – For example – a 2 Litre MIRINDA Bottle worth MRP of Rs 90, we buy it from Hindustan Coca-Cola at the rate of Rs 52.55 which is 58% of MRP. That’s 42% discount on MRP. And it goes same for all of our other buying. We pay in between 40% & 70% of MRP to vendor. So, passing down 5-10% discount isn’t a big deal for us. Moral of the story – No one’s doing it as a social service entirely, it’s still business. So you better stick to your shopping list and avoid making impulse buying because of discounts.
Another fact – Even after so much of room for price margin, Walmart, the biggest retailer in world, operates on merely 4% profit margin. Very few big retailers in India are operating in profit zone. More about it sometime later.
A word of caution –
From our warehouse in Jaipur, we supply to 38 stores situated in different parts of Rajasthan. To meet the uncertain demand, we have to hold enough amount of inventory with us. On an average, we hold inventory of around 5 crores. Obviously, not all of it gets to reach store shelf before it expires. As per the process we don’t send any material with less than 35 % remaining shelf life to stores. So what happens to all that material? Again, it’s business. We don’t wish to sustain losses. We either send it back to vendor or sell it to local vendor through something called as Consolidator Sell. So everything with shelf life in between 10% & 35% is sold to local vendor at great discounts. What probably the local vendor does with the material? Most likely it gets sold to local kirana stores along with regular supply. So next time you are buying anything from local store, do pay attention to the expiry date.
Back to D-Mart –
On my way to exit, I noticed shelves just in front of billing counter loaded with chocolates, pens, keychains and other random stuff. The nearby aisles were stocked with what we call high value items like deodorants, beauty products. You are waiting in line for your turn at the billing counter. You made so long trip and didn’t buy enough. They are offering you another chance before billing to get rid of that guilt. Or how about you bought a kid with yourself and didn’t buy anything for him/her. If it’s here where they finally got you, they better encash on it as much as they can, using those chocolate and high value items.