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Big retailers target India

Hypermarkets are rising as middle-class incomes grow and consumerism flourishes in a country long dominated by mom-and-pop stores.

July 28, 2007|Henry Chu | Times Staff Writer

MUMBAI, INDIA — "Spoiled for choice" is not usually a phrase associated with shopping in this country. But for two hours -- a lot longer than they'd intended -- Sunil and Alka Paralkar puttered through the aisles squeezing fresh fruit, inspecting packaged foods and checking out shelves of knickknacks at a gleaming "hypermarket" here.

"I've been shouting at her, 'We have to go,' " Sunil said, shaking his head at his wife in mock exasperation. Yet several minutes later, the couple were still browsing and adding items to their steadily filling cart.

The Paralkars are among the millions of middle-class Indians whose growing purchasing power has domestic and global companies slavering. As Gandhi's homeland increasingly tosses aside the simplicity he espoused in favor of an eager consumerism, retailers are trying to position themselves to catch the wave.

The result is the rise of a way of shopping that may seem second nature in the West but represents a major shift in India: supermarkets and hypermarkets, with groceries, appliances, toys and numerous other goods under one roof.

Such establishments are relative novelties in a land where even sophisticated urbanites -- or at least their domestic help -- are apt to pick up the phone and order milk and eggs from the corner store or to haggle over vegetables with a roadside vendor on a flatbed bike.

But changing habits of work and play in India's surging economy have made big one-stop stores a viable alternative -- at least for the small, but burgeoning, contingent of professionals with disposable income.

As Indian consumers who have lived abroad demand a range of choice similar to what they find in other countries, as young hipsters compare BlackBerrys and Burberrys and shopping becomes a recreational pursuit, big-box stores are now attracting thousands of customers a day.

"The reality is that the Indian consumer is exactly the same as the consumer in the rest of the world," said Andrew Levermore, chief executive of Hypercity, a hypermarket in Mumbai (formerly Bombay). "They're aspirational. They have a need for nice things, particularly the younger generation."

Overall, supermarkets, hypermarkets and discount stores account only for a tiny fraction of the retail market in India, but their sales still came to about $1.5 billion in 2006.

And although India's supermarket sales lag far behind those in Asia's other developing giant, China, analysts see enormous potential in the subcontinent. New shopping formats are forecast to grow 34% a year by the start of the next decade. Because of legal restrictions on foreign retailers, the expanding hypermarket chains so far are Indian, although some foreign companies, including Wal-Mart Stores Inc., have started partnerships with Indian firms.

Hypercity opened in May 2006 in a vast, two-floor, 120,000-square-foot space in north Mumbai, on a street already filling up with other boutique shops and an upscale mall.

The bottom floor resembles an American supermarket but with extremely wide aisles that are routinely cited in feedback forms as the aspect of Hypercity customers most like -- perhaps not a surprise in the densely crowded country of a billion people. The upper floor is given over to toys, electronics and home furnishings. There are two eating areas, a beauty salon and a 24-hour pharmacy.

The company studied the market for two years before diving in, and its research had not been entirely promising, Levermore said. For example, no one was sure how well packaged food, a big part of the groceries on offer, would sell to Indian housewives who regard meal preparation as their sacred duty.

But pre-packed food has proved a hit, including high-priced imported goods from the British supermarket chain Waitrose. The stock list was refined through trial and error. Mountain bikes are surprisingly popular. Western-style mattresses bombed.

About 25,000 customers a day stream in on the weekends. The average visit lasts more than 2 1/2 hours.

"A shopping expedition for the Indian family is a leisure pursuit right now," said Levermore, a native of South Africa. "There are not too many sports clubs or parks."

After a year, Hypercity has turned an operating profit in half the time expected, with revenue of $35 million. The company has six stores slated to open by March in New Delhi, Amritsar, Pune and Mumbai, and 22 others are under development.

Those plans are modest compared with some others'. Reliance Retail, owned by mammoth Reliance Industries, envisions 30 to 40 of its much smaller Reliance Fresh supermarkets in all of India's major cities. The first stores were launched last fall.

But to many social activists, expansion of such stores spells disaster for traditional corner establishments and their owners.

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