Modern retailers knock on local grocers’ stores

In a unique and interesting development that signals big change in Indian retail, modern trade formats such as Spinach, Reliance, Spencers and Food Bazar are in talks with traditional grocers (kiranas) to stock and distribute their private labels (in-store brands) in categories like food, home and personal care across the country.

Organized retail store are considered as the biggest threat to the traditional grocers. But it is not like that. The organized retailers have found a win-win solution which will benefit both of them.
Food items are the highest sold products in the organized retail store. Almost all the retail stores have their private labels (Brands owned by the Organized Retail Store itself). It brings extra revenue for them.

The private labels are usually cheaper by 20 to 25% compared with national brands. So customers prefer to buy as they trust the retail store. The margins for the private label are two and half times higher than on regular FMCG brands. The organized retailers in order to increase the sell of their private label want to sell them through the traditional grocers. It will make increase the awareness of the brand among the consumer and their brand bigger.

The retailers usually get fewer discounts on national brand. Again the margin is also low on these brands. They usually sell the local brand which is cheaper for the consumer and give higher margin to the retailer. So for traditional grocers this is a good proposal that they will sell the private labels and get good margins on that as well. This will affect the national brand adversely. As the Indian consumer is very conscious of price, there is chance of shifting preference from national brand to private labels. The national brands are already having price war among themselves in various category of products ( Like HLL and P&G on detergents). This is a threat for them from the organized sector.