Let me start by defining a context with regard to the retail sector. There are broadly two kinds of players. One operates with a shop-keeper mindset. This implies that the business scope is limited, the person only buys and sells a product with an existing demand. They are usually stand-alone owner-operated outlets. On the other hand is a retailer mindset, diametrically opposite and focused on size and scale. This orientation leads to expansion and aggregation of volumes. Therefore, leading to better and bigger negotiating power.

Aspiring retailers

Shop keeper businesses with an appetite for growth would start venturing into expansion. This is already evident in the food and grocery space where stand-alone shops are beginning to open branches. An interesting example is the opening of a new branch by a Chennai-based store, “Amma Naana”. For decades this has been a stand-alone, destination store catering to shoppers from the upper SEC segments and even foreigners. After growing in size over the years, it recently opened another branch in Chennai. This is significant from the point of view of capturing and retaining the shopper profile potential in other localities of the city. It would be a natural progression for the store to now expand further and even foray to other cities.

Action in Tier 2 and 3

While such expansions are happening in larger cities by shop keepers who are trying to transition to a retailer mindset, the action in 2023 would be bigger in the tier 2 and 3 towns. Larger metros are already well served by various retail chains and kirana stores while tier 2 and 3 towns have not seen much action from national chains. This is set to change in 2023 where national chains would start looking at these markets more aggressively. An interesting opportunity which exists in small towns is the potential for takeover of a small local chain, even if it consists of few stores. A national chain might find the entry strategy into smaller towns to be easier when it takes over such chains thereby acquiring their existing shopper base while expanding their volume aggregation with a larger store. Going forward, it might even start opening its own stores. However, my view is that the entry point would be through take overs and mergers with smaller chains.

Another kind of merger and acquisition would happen across channels – offline and online. V-Mart recently announced the takeover of LimeRoad that is an online player. It is bound to pick up pace as this would enable cross-channel access to shoppers apart from increasing their shopper base.

Time of the Regionals

Regional chains that are already well set in their respective markets would start to dominate that market. A good example is the recent opening of a south based hypermarket type of chain in a 6,50,000 sq ft store in Madurai. Such a store with a size which is almost like that of a small shopping mall would not only serve as a destination in that particular town but also act as a destination store for all the smaller towns and other catchment.  Stores such as this are going to redefine the guidelines of catchment area because of their size and the range being offered.

Such regional players would play a dominant role in their respective markets. Having said that, it is an open question. Will they prefer to grow and compete on their own or end up being available for a takeover/merger with a national chain?

Kirana stores

Kirana stores have always been the most resilient segment of the sector and have thrived in spite of doomsday prophesies. Not only will they continue to do so but are slowly becoming an integral part of the national chain’s expansion plans and growth ambition. There are several recent instances of such integration apart from these businesses being a significant chunk of the Cash & Carry format’s customer base. The recent acquisition of Metro Cash & Carry’s India business would spur growth in this segment and in turn help to strengthen the kirana stores in terms of being able to leverage some part of the advantages of volume aggregation. In that context, these shopkeepers might be an extended part of the retail business orientation if they choose to consolidate their purchases from Cash & Carry outlets instead of patronising the wholesale markets.

Last, a word of caution with regard to the big ‘C’ (Covid). Although India seems to be in a better place than many other countries, the big ‘C’ has thrown surprises in the past and any such new aspect would obviously throw any crystal gazing out of focus.

V Rajesh is a retail and shopper behaviour expert who has authored several books, such as “The INDIAN reTALEs”, “Out Of Syllabus” and , “BREAK FREE”