Rediff:

Large retailers are trying to make their small food and grocery stores viable by trying out new ideas. While some like Reliance Retail are converting most of these stores into a deep-discount value format, RPG Group’s Spencer’s is looking at the franchising route.

Anand Raghuraman, partner, The Boston Consulting Group, said it is extremely tough to make money on small food and grocery stores.

“It’s a crisis situation, and retailers are trying to find answers to some fundamental questions.” The problem is that retailers are straddled with a large base of small food & grocery stores — nearly 700 of them.

Reliance’s retail business reported an aggregate loss of Rs 557 crore (Rs 5.57 billion) on revenue of about Rs 4,000 crore (Rs 40 billion) for the year ended March 2009. Half of these losses came from the food and grocery chain, Reliance Fresh, which reported a net loss of Rs 249.30 crore (Rs 2.49 billion) on revenue of Rs 1,778.06 crore (Rs 17.78 billion); the rest came from other formats.

Retailers have been trying to figure out how they can make the small stores viable. Industry sources said that Reliance Retail is now looking at a heavy-discount format; the stores will offer very little service, no air-conditioning but prices will be much lower than kirana stores.

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