Number of modern food & grocery stores dip on rising rentals, power costs & online rivals

Western-style grocery and food stores have shrunk in India, with outlets closing down and expansion completely put on hold. Net closures in 2014 were estimated at about 180 stores amid high rentals, competition from online retailers, and higher power and manpower costs, , according to internal data of a leading consumer goods multinational.

The executive V-P of sales Mr. Sidharth Singh at the maker of Horlicks milk drink, Sensodyne toothpaste GlaxoSmithKline Consumer Healthcare said that “What has been happening is online companies such as Amazon and FLipkart are giving stiff competition to organised retail trade on ‘big days’ such as January 26, August 15, or long-holiday weekends. The incentive to go out and shop for grocery on such ‘big discount days’ is being capitalised by online retail sites selling on discounts across categories, which is impacting organised trade.”

Even though online retailers sell a very low percentage of grocery and food items, they aggressively discount home products, apparel and other general merchandise, which bring down the margins for physical retail stores, hurting their profitability in a big way.

The chief executive of another large consumer multinational firm said its analysis showed that organised retailers in India closed several outlets in 2014 alone, although he did not have numbers for how many were relocated or added during that period.

“Our data says we have stopped supplying to nearly 450 stores — big and small in both smaller cities and metros in 2014 on account of their closure,” the person said, asking not to be identified because of the sensitivity of the matter.

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