Indian grocery shoppers demand more chaos

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Kishore Biyani, a self-made businessman whose company, Pantaloon Retail Ltd., is India’s largest retailer, recently spent $50,000 to improve his Mumbai store. The wide aisles and neatly-stocked shelves modeled after Western supermarkets just weren’t doing the trick.

Now thanks to Biyani’s remodeling, the store is messier, noisier and cramped—a more familiar environment for customers accustomed to fighting their way through chaotic street markets. Narrow, winding aisles were added to create traffic jams and force people to stop and look at the products. Wheat, rice, and lentils are sold in large buckets so that consumers can feel and smell them to ensure their quality. Biyani even discourages his staff from straightening up after shoppers, believing that his customers are less likely to check out a product if it is in neat stacks. He even throws imperfect produce into the mix:

For the average Indian, dusty and dirty produce means fresh from the farm, he says…[H]aving damaged as well as good quality produce in the same box gives customers a chance to choose and think they are getting a better deal. ‘They should get a sense of victory,’ he says. 

But not everything from the street made it into his stores. Haggling is still not allowed.

Biyani’s experience is just a vignette in a much larger story. India’s retail market is now $370 billion a year, but is expected to grow more than 55 percent in the next four years. According to the consulting group McKinsey, 97 percent of Indian retailing is currently “unorganized” in the form of 15 million small, family-run stores. And so far, the experience for foreign companies on the subcontinent has been less than pleasant: Retail giants Tesco and Carrefour have been deterred from entering the market and have pulled out of negotiations to launch joint ventures; others like Germany’s Metro have been plagued by uncertainty and troublesome government regulations. And now Wal-Mart wants to give it a shot.

But Wal-Mart is going to face a steep learning curve, as Biyani’s remodeling strategy suggests. Cracking India’s retail market is going to require something different than the usual smiley faces and “always low prices.”