The adoption of organised retailing in India has been quite slow in comparison to other rapidly transforming economies throughout Asia. For a total population of a billion and a middle class population of over 400 million people, organised food retailing is still in its nascent stage in this country.
The curtain raiser
The major factor which fixes the adoption of organised retail is the well established food retailing system of neighborhood Kirana stores. The Kirana’s have proved themselves as capable enough to meet the customer’s daily needs. The only thing which the Kirana’s are lacking is the overall shopping experience from organised shopping centres and that’s why modern trade is making its way in the crowd. The trend in food and grocery retailing, however, has started with a growth concentration in the South. Though there were family owned traditional retail chains in South India such as Nilgiri’s as early as 1904, the retail revolution happened with various major business houses foraying into the establishment of chains of food retail outlets in South India with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. In the Indian context, a countrywide chain in food retailing has been pioneered by Big Bazaar and Reliance fresh only. Since then many big Indian corporate players have jumped into the lucrative business of establishing retail chains throughout the country.
Supply chain – ushered in modern retail
With the deep pockets in organised retailing it is very easy to put up shiny stores but the hard part is supplying them with fresh, clean and safe vegetables and fruits through an efficient supply chain that links farms and consumers, country and cities – here lies the revolutionary achievement. At the moment, India has one of the most fragmented produce-supply chains on the planet. 30 percent of all fresh produce is lost or gets spoilt before it reaches the market. On an average, after getting plucked from the field, the fresh produce passes through six or seven middlemen before a consumer can buy it; resulting in tortuous journeys, big markups and poor quality damaging the products at the end.
Therefore, one can say that the most rewarding effort lies in replacing the existing supply system with efficient network of international quality of supply chain but adapting it rightly to Indian conditions.
Supply chain in organised retailing is as important as somewhat of a cornerstone of any business; it has occupied the centre stage of modern trade. “The days of competitive advantages was all about marketing which is now a past. It’s now all about the supply chain” – speak the experts. Today the consumers are more inclined than ever to look at the small print on the back of packaging that tells them about the point of the production of the goods and the route of the supply chain through which the products were ultimately routed to the point of sale. In today’s just-in-time economy, retailers, manufacturers and service companies all have to depend on the chain of processes of production, procurement and supply of the products, components and services they need in order to meet the requirement from customers. They are majorly dependent on the suppliers and therefore, required to trust and honour the relationship for an uninterrupted service.
However, in today’s increasingly globalised, technically-automated and all the way connected society, the issues of trust and dependence are still not as clear as they should be. In fact, in conventional supply chain process, companies had to develop effective partnerships with their partners where trust and responsibility were not that importantly focused.
But in modern trade when companies those are usually competitors but come to work together on specific projects or joint supply arrangements, may become suppliers to each other, which necessitates the sharing of sensitive information and access to a degree of operations that benefit both the parties.
Moreover, supply chain management is becoming important not only as a mechanism for ensuring that products are on the shelves, but also it is vital enough for the sustainability of the players in the organsied retail industry.
Specifically in food retailing, it’s the freshness and quality of the product that matters the most and to achieve these two parameters retailers have started procuring directly from farms.
In the process the key component, the farmers are definitely upbeat about selling directly, but they are still wary. Although the retail chains wanted to ink a deal with the farmers and even tried out the partnership model, the point is that the farmer needs a fixed price and that too over a certain period.
So, now the retail chains have to pay the farmer a higher price, bear the cost for an effective cold chain system and other necessary infrastructure but also has to put a reasonable price tag on the products at the end.
But the key question still remains – that are pointed at the retailers only – Will farmers be benefited in the process? It seems to be a competition that will bring down the margins of costs but the savings will be pocketed by the retailers themselves because it is a different universe altogether. The farmers are needed to be taken care of by creating a win-win situation for both the sides otherwise the whole system might get collapse.
Eliminating the odds
The food retailing basket mostly comprises of fast-moving, short life cycle fresh products in offerings which demands a highly modified and a bit complicated supply chain process. Working with the suppliers and getting them in sync with the fast paced process pose a challenge for the organisations. To overcome the hurdles the key component that is needed to make it work effectively is the proper utilization of technology supported by highly evolved system of infor
