Will third wave be better?

First wave of small format food store came to India alongwith organised retail in 90s: Foodbazar, Vitan, Subhiksha, Trinethra, Fabmall were a few notable names. Made perfect sense in the country of millions or Kirana's. With sub 20% gross margin and intense competition from the locals with entrepreneurs at the till, it was not an easy game. All playing the discount game in convenience format had a natural death while some of the full price chains survived organically and through consolidation.

Foodworld, Vitan, Subhiksha, Trinethra, Fabmall : Took the first move in organising Indian food retail in 90s.

Second wave came around 2005. Spinach from DHFL group, Reliance Fresh from Reliance, More from Birlas, EasyDay from Bharti-Walmart venture, Spencers from RPG group, 24SEVEN from Modi Enterprises : this time the format had big blessings. Scale up happened quicker, business models were stronger e.g. EasyDay was a $100 Mn plus chain in just 2.5 years with 70% stores at operating profit. Story got better for sure.

Second wave in 2005 : Spinach, Reliance Fresh, More, EasyDay, Spencers, 24SEVEN...a better story indeed.

2020 ushered the third wave for small format food retail. This time initiative came from a different breed : online players going omni channel. Amazon, Bigbasket, Licious, FreshtoHome....everyone seems to be on a large scale offline plan and well funded. There are merits for online businesses going off-line: a) It provides revenue generating advertising, gives much better ROI than a billboard in the same locality b) It builds a stronger, trustworthy brand impression c) It gives opportunity to conduct controlled experiments and to have first hand dialogue with customers d) Last mile delivery gets shorter leading to cost saving and improved service experience. We have seen a few success stories in other categories e.g. Lenskart or Nykaa.

Third wave in 2020 : Amazon, BigBasket, Licious, FreshtoHome...

A few points of caution : If you are not making money online or not on a path to profitability, having offline stores will not do the magic. Retail success, in simple words is about generating best possible margin by efficient sourcing while keeping costs under control. Distributed fulfilment with offline stores would add to cost, esp. on managing consistency & quality, will affect operational economics and increase capital expenditure. Offline retail needs different mindset and different skillsets, so creating a separate SBU would help.

Shakeouts happened in every wave, many became memories while some survived. Second wave was good for the format. Will it get better third time?