Modern grocery and emerging market consumers: a complicated courtship.

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Modern grocery and emerging market consumers: a complicated courtship.

In some emerging markets, the response to modern grocery stores has been muted. What is a modern grocery store?

Just 20 years ago, modern food retailing seemed ready to conquer all of the world’s consumer markets. Ambitious European grocers have disappeared from supermarkets and supermarkets, and have begun to look beyond the continent. China, India and other emerging markets have particularly high expectations, in these markets, the rapid growth of consumer spending herald unprecedented demand, there will be a large number of varieties, wide channels and bright lighting.

In the 1990s, the term “modern grocery retailing” essentially represented a handful of multinational grocers, including Ahold, Aldi, auchan, carrefour, Costco, Lidl, Metro, Tesco and Walmart. Widely believe that the retailers to enter any market will lead to the disappearance of traditional trade – family food chain, small independent shops and informal traders at the time accounts for most of the grocery market. Common expectation is, although there will be local differences due to the particularity of the culture, but in each country, will eventually made up by the pattern of modern retailing: all supermarkets and hypermarkets, convenience stores and discount stores.

These assumptions turned out to be wrong. The global grocery giant is struggling to survive in many emerging markets. Traditional trade has proved resilient. The market and channel structure of each emerging economy has formed a distinct pattern.

Why did it happen? If so, what did the multinational grocer do wrong? What does this mean for the future of modern retail in emerging markets?

The disadvantages of big-box stores.

To understand the gap between early expectations and reality, it is useful to study the roots of two typical modern trade patterns: supermarkets and supermarkets. Especially large supermarket – whether in the form of Europe (including food is to choose a lot of non-food items) or its north American supermarket (” super center “for success will be food and groceries into ordinary commodity discount) is widely considered to be unique. By providing tens of thousands of products in huge buildings outside or on the edge of town, supermarkets can run on a level of productivity that other grocery stores struggle to match. Big-box operators deliver these efficiencies to consumers at lower prices,

In its first foray into other developed markets overseas, major retailers relied heavily on supermarkets. French retailer, Auchan, Auchan, Carrefour (Carrefour) and Promodes the first few years of economic reform in Spain opened a large supermarket in Spain, they quickly gained a large part of the country’s overall grocery sales, and determines the market structure of the until today.

Europe’s expansion is an exciting growth prospect, but it is the growth potential of emerging markets that is more attractive to retail leaders and investors. Over the years, the potential has become clearer: by 2025, we expect emerging markets to spend $30 trillion, or nearly half of global consumption. 1

When multinational grocers enter emerging markets, they again rely on well-run grocery stores in the developed world. But in retrospect, the super market prosperous country obviously has several common features: network is good, the ownership or rising rapidly rising, a decent wage and the stability of the employment of the middle class, rural and suburban families have enough space in the home in proportion to the grocery store. In addition, these markets are mature and many women are not returning to work after having children, so they have time to go to and from shops during the day. Supermarkets rely heavily on consumers’ time, travel and storage capacity.

In emerging markets, retailers are encountering a completely different situation. Consumers are not rich, living in urban areas; Many have no cars of their own, unable to go to the relatively distant shopping destination, without the space to shop at home, or all of the above.

New respect for localism.

Things are further complicated. Emerging markets are not just different from developed markets, but emerging markets are different in an unusual way. That was true in the 1990s, and it still is today. Based on our study, the involved in Asia, eastern Europe and Latin America 10 retail research in developing countries, and more than 20 local retail and consumer expert interviews and channels to increase the data analysis of the market – we have formed the factors hindering the research on the modern trade growth in emerging markets.

On the demand side (customer) from retailers and suppliers (retailers) can provide customers want way, different factors determine the retail ecosystem of each country. All in all, these factors make a great difference in the level of modern trade development in the world.

For example, in terms of demand, shopping habits have been proven to be largely localized and deep-rooted. Emerging market consumers tend to prepare meals, cooking more than developed market peers, they are used to grocery shopping in the open market or a small community, the grocery stores provide familiar fresh food and household items. They do not necessarily think that modern retailers’ customer service is superior to traditional trade. India’s little kirana stores customers – in residential areas or near the small family owned stores from the owner of a personal service, free door-to-door delivery and credit card and cash rebate benefit.

On the supply side, a very important factor is the irregularity of traditional trade: many small retailers rely on family and friends to work without pay, because have shops and not pay the rent, not pay corporate tax. Modern retailers see this informality as a major challenge when competing with local retailers. A European supermarket chains found that due to the procurement and supply chain process better, its considerable operating cost advantage is offset, because it is in the tax, while local competitors do not pay taxes.

Another major factor affecting modern trade is public policy. India’s restrictions on foreign direct investment (fdi) which limits the development of modern retailing, on the contrary, in China, the city government is based on its level of economic activity and attract foreign investment evaluation, which makes them tend to support the modern trade. As a result, the penetration rate of modern trade in China’s big cities has increased significantly over the past 15 years.

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