Modern Trade ,the New Market Place

Suddenly Modern trade has become a buzz among most b2 c businesses , no firm that wants to grow big can ignore this segment , so you have fmcg majors , apparel firms , consumer durables , and even Telecom majors focussing on Modern Trade !

So what is Modern Trade ? for starters this is the terminology given to the new day giant retail organisations that have become the new day market place for the Indian consumers , so for example for a brand like Levis , Shoppers stop would be part of the Modern trade account list as Levis retails out of it and contributes a % of its turnover which might be equal to its turnover from say 1000 MBO's ( multi brand outlets ) or more ! The best case study of Modern trade is the P&G and Walmart partnership , which of course has grown to mammoth proposition , at one moment it was known that 30 % of P&G worldwide turnover came from one single entity Walmart ! P&G had its own share of woes with this overdependence , we will discuss that later ,lets move on ..

Currently Modern trade acccounts for a stated 5 % of the total retail market in India , with majors like Metro , Walmart expanding and Carefour etc on the sideline 5 % would be history soon !

Channel of relevance and needs Structure :: This is a full time assignment for most b2c players , and there is a great degree of allignment thats happened in most b2c organisiations, this is treated as a seperate channel, seperate teams work on this , as this needs a different set of skills than the traditional retail channels handling , in management jargons , its all about account management !!, but in reality is nothing but building relationships which was what was happening earlier too with the old channels!

Is There a danger in the share of modern trade going up in firms ?

yes there are danger to the firm , any overdependence on this channel is a sure fire way to get arm twisted , for instance P&G had to bow down to pressures to Walmart , with 30 % , global sales , the blogs guess is that there might have been no other choice .There is a constant battle for higher margins between brands and modern trade firms ( see the cost structure below, you will know why )and there would be some brand drop outs for sure , so the hose in whose out list is going to be awaited with baited breath .

For the consumers ,there might be bad news ! here is why ...

With brand sales share going up in Modern trade and with the modern trade cost structure being something like this

Rent: 5-7%
– Salaries : 3-4%
– Overheads: 2% ( % of turnover ) who will bear these extra costs ?, it works this way, modern trade client >>push >>>to manufacturer ( brand ) >> push >>>to the end consumers ( you & me !!) , yes MRP 's are likely to go up ,yes this would not be the only reason for MRP increase !

Like it or not , Modern trade is here to stay for sure , Modern Trade success is an art by itself , pls read the earlier post in this blog under April 08 ,titled Modern trade _ how to succeed ..more later

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