Damodar Mall, chief executive officer of the grocery retail business at Reliance Retail Ltd. talks about the ever-changing consumption habits of the Indian consumer and the premiumization of the consumer at every price point
Damodar Mall, chief executive officer of the grocery retail business at Reliance Retail Ltd. is widely considered among the top retailing minds in India. He is the author of the book SupermarketWala – Secrets to Winning Consumer India, which offers insights into the behaviours of Indian consumers and the ways to crack India’s consumption basket.
In a freewheeling interview with IndiaRetailing, Mall talks about the growth of supermarkets in India and their potential; the ever-changing consumption habits of the Indian consumer and the premiumization of the consumer at every price-point—from value retail to top-end products. Edited excerpts:
About 30 years ago, you went for a project in Brazil. You came back to India thinking India should have its own supermarket chains. Are you surprised by the proliferation of branded food and grocery stores in India?
Sao Paulo and Brazil were the inspiration points. It gave me the trigger with which to start thinking why not modern retail in India as well? If it can happen in an emerging market like Brazil, it can happen in India. Although the idea for me started in Sao Paulo, I learned from Raigad Bazaar, Sahakari Bhandar, Apna Bazar and other such retailers. The journey has been exciting.
It has taken longer than I thought but it is worthwhile because such a large market and it is an emerging market and at the same time an asserting market. Many have tried to just copy-paste models from elsewhere in the world. People who have homegrown models based on learning about the Indian consumer and shopper seem to get it right. I think we are now at a point where the next inflexion of increased consumption and modernization is happening.
Do you foresee India as the largest food market? What kind of dominant role will modern retail play?
As incomes increase, as people want more choices, traditional distribution and traditional retail, become small. They remain smaller pipes. The bouquet of choices that this increasingly aspirational customer wants needs a platform like self-service, modern retail, corporate-owned digital commerce or entrepreneur-owned supermarket. Every income increase will need more and more aspirational products and choices to increase for the customer and digital and physical modern retail is the way to go.
Tell us about the supply chain we have built in the modern retail journey and where are we headed.
We are all learning. It’s the supply side model as well as the demand side, which is the consumer side model and the habit formation. The equilibrium of this has to be established. If the consumer is happy, but the supplier is not a viable operation, then the consumer is having a free lunch and the business is struggling. Therefore, these two have to come together. We need those habits formed and those service expectations created for the customer that can be sustainably serviced by businesses.
The good part is several of us are trying out different models, and different innovations and somewhere along the way we will find models that work both for the consumer and for the retailer or the service provider.
Quick commerce companies are delivering products in 10 minutes. But people argue that unit economics don’t work in their favour.
So quick commerce is something that consumers and shoppers love as long as there is free lunch. The real question is how consumers behave when they start paying a premium for the service or when they start paying a price for that kind of convenience. Where does the customer finally settle down? I don’t think that has played out yet here. I am no one to speculate, but as I said, because some serious players are innovating and trying out and tweaking their models, we will have the answer and the equilibrium soon.
Today the number of stock-keeping units (SKUs)has gone up to 30,000 or even more. Do we have still room to grow in terms of SKUs?
Choice in the middle-income markets is much larger. India is yet under-branded and under-consuming in many categories. So there is a lot of headroom for both expansion of the theatre of choice and growth of the business selling to the same set of customers as well. As you know, more and more people are getting recruited into the consuming class who are ready for modern retail offerings.
As choices grow, do you think hypermarket sizes will expand too in the coming years?
It is a Darwinian process. We keep growing as per the feedback we receive from the market. New categories get added to consumption. Adjacent categories like general merchandise also are booming. And choices increase not just in supermarkets, but even in things that sell around the supermarket business. Can value retail include plants and gardening? Can value retail include value fashion, which is everyday fashion for a chunk of Indians? When that happens, you can justify a much larger area. These are model building blocks.
But for the time being, the 30,000-50,000 sq, ft. stores are a sweet spot.
Some of the stores that we run are over 60,000 square feet and they are interesting. What happens is, if located well and populated well, bigger stores have a higher catchment area. The smaller the store, the smaller the catchment.
Larger stores have higher throughput as well.
Correct. But then you add destination categories. For my daily food replenishment, I will travel X distance. But if I have to buy something for my home improvement or if I have to buy suitcases for my travel, or if there is a party or a puja at home and if I am inviting people, I will travel 10 kilometres for it. So as stores become bigger, as long as this destination character is added to the stores, they will become interesting for people to travel to. We see it happening all the time.
As you mentioned, India is at a very interesting inflexion point in retailing where value retailing is growing and premiumisation is happening at the same time…
It is such a large market that every niche is a segment which is viable. In our gourmet store like Freshpik, we sell the world’s best strawberries to people who are already eating strawberries. But in our value store like Smart Bazaar, we sell strawberries to people eating bananas. Both are premiumising. It’s a different definition of premiumisation. The recipe can be different, but everybody is premiumsing.
So that is good news for retailers like you.
It is good news for everyone who wants to play the India market. If you want to be exclusive, then there is a market there. We run gourmet Freshpik. India can today take about 50 Freshpik stores, but Smart Bazaar, probably 5,000 Smart Bazar stores is what India can take. Is the fresh food segment viable? The answer is yes. But then you are playing a smaller opportunity. We are playing all physical digital value, mild premium, and real premium. We are playing all the segments.
Executives at large FMCG giants complain about discounting by supermarket operators, comparing them with online players.
If I have to do business in Bengal, I have to learn to speak Bangla. If I were to do business in Andhra, I have to learn to speak Telugu. If I have to learn to do business in modern retail, brands have to learn to speak the modern retail language. And in modern retail, whether physical or digital, a deal is the TRP. It’s how customer attention comes to your brand. Otherwise, the attention can go to your competitor. Brands are getting adjusted to play on this new platform.
This is the effort that the brands need to put in. When the customer walks into my store, she is asking me two questions: What’s new and What’s on deal? I have to answer these questions. If, as a brand, you say: She bought my brand last time, therefore, she should buy my brand again whatever the price, you are living in 1990.
In 2024, the customer is far more open to considering new choices. It’s like a monthly swayamvar. She has the power and the self-service format. I do nothing. She picks whichever brand she finds more attractive. Those brands—that want to be sleepy and take the customer for granted—struggle. Those that say I want to be dressed up well every month so that I win in the monthly swayamvar, she takes them home that much more often. It is a dating platform.
That’s interesting. You have used the analogy of a dating platform on other occasions as well.
Many categories are getting branded now. The loyalties and the mind share fixation about brands hasn’t happened and we are a theatre of choice. And the customer is in a mood to explore. She needs to find out what’s new and I call this the equivalent of dating or swayamvar if I have to use a traditional Indian expression.
Each time she is there, she is willing, as long as the brand is within the half-a-dozen choices that she considers feasible. She is looking for who is wooing her most this month, and I am the platform. This flirting by the customer increases consumption. Instead of buying her regular pack, she buys a bigger pack. When the bigger pack goes home, consumption goes up. We know this across categories.
People up-trade and up-trading is difficult in India if you merely service demand. I ease that up-trading for the customer. It is beneficial for brands but this entire uptrading and consumption increase journey is happening in my language which is the modern trade language or the ecommerce language. Brands need to learn the language, then everybody will flourish.
