CASE STUDY

SILVER JUBILEE OF INDIAN HYPERMARKETS

Modern Supermarket Ltd., a chain of hypermarkets, was established in 1992 with the development
of ideas like globalization and liberalization. It began with a single store in an opulent part of Delhi
and has enjoyed the lion’s share in the retail industry since then (in Tier-I cities). Modern
Supermarket Ltd. , by far, owns the largest store chain (in terms of area covered) in India, with 30
outlets operating across the 7 Tier-I cities of the country including Delhi, Mumbai, Chennai,
Kolkata, Pune, Hyderabad and Ahmedabad.

Modern Supermarket stores provide a one-stop shop for all daily needs – including groceries,
confectionery, cosmetics, over-the-counter drugs and other FMCG products – across several
international brands. The products offered are often exclusive in nature and thereby, the
prices charged for such products is higher than the market rate.

All stores are owned and operated by Modern Supermarket on a standalone basis and are in posh
residencies with frequent customers. The operations including purchases, pricing, marketing,
location, staffing, and training are centralized and are the corresponding decisions taken by the
Board of Directors at the Delhi Head Office. Although this results in delays in decision-making,
the consequential action plans are effective and uniform.

Due to the advent of convenience retailing in India and the rising popularity of such hypermarkets
around the globe, Modern Supermarket stores were able to acquire a major chunk of the market
and experience years of unabated expansion.

THE GROWING RETAIL INDUSTRY

Since the beginning of the 21st century, the country has witnessed an unstoppable wave of rapid
urbanization, with the corporate lifestyle spreading its wings in Tier-II and Tier-III cities. The
urbane culture has opened up a market for convenience retail and one-stop shopping which was
earlier serviced by ration shops and single brand retail stores. The rapid growth will make this
industry worth more than $1 trillion by 2026. The flow of foreign direct investment in the retail
sector is estimated to be $50 billion till 2020 owing to the relaxed FDI norms, favorable government
policies and enhanced market space.

Need-O, a global hypermarket chain, capitalized on this shift by franchising its stores in Tier-II
and Tier-III cities. It provides infrastructure, back-end technology and an established brand name
to the franchisees who operate the stores in high density localities. The quantum of operations,
revenue and services vary from store to store depending on the locality and income of the
residents. Need-O has created a network of retail stores with high end products available at
affordable rates.
 In a recent address, the Prime Minister of the country, too, appreciated the fast-growing chain
that is supplementing the government’s efforts to harmonize the socio-economic differences
among states. However, his speech was also marked by a sense of disappointment towards Indian
companies- his main contention being their focus on already developed Tier-I cities. The
allowance of FDI in the Retail sector has also proven to be somewhat toothless in revving up
growth in the backward regions of the country.

Boom of the e-commerce industry has disrupted the services and sales of hypermarkets like
Modern Supermarket in Tier-I cities with a substantial customer base now being serviced by e-
retailers. E-commerce companies comply with Just-in-Time inventory and thereby, bear
minimum costs allowing them to penetrate the markets with cut-throat prices. Demonetization
has prompted a shift to cashless operations, providing further impetus to e-commerce
companies.

In a nutshell, Modern Supermarket is facing ever-increasing competition looking to serve an

almost saturated customer base. Owing to higher costs, Modern Supermarket cannot charge
prices any less than the competitors. These are some of the problems that exist from the bird’s
eye view of the industry.

Meanwhile, the Board of Directors at Modern Supermarket, Delhi has been communicated a
word of caution by the market research team. They have been presented with the following
numbers to provide a snapshot of the internal problems of the company:

Gross Revenue (2016-20)

Industry Modern Supermarket

FY 16 FY 17 FY 18 FY 19 FY 20
 %

4.5

3.5
3

8%
CUSTOMER SATISFACTION
(ON A SCALE OF 1 to 5)
TO 5)

MODERN NEED-O E-COMMERCE OTHERS

Concerned by the declining market share and profits, the Board of Directors has appointed
you as consultant to identify the underlying problem and formulate a comprehensive plan
that aims towards rectifying it. You must go through the industry and company
information and provide specific solutions to the various problems. The solutions should
help your client retain its market share and improve its current financial performance and
market position. ( Maximum words 400)