Supermarkets: The future of retail

A supermarket offers a wide range of everyday commodities under a single umbrella, relieving consumers from having to shop from scattered business hubs. 

With people getting busier day by day, retail trading at supermarkets is expected to grow across Bangladesh, particularly in the urban areas. 

Importing this Western concept in the late 90s, retail chain Agora opened the first superstore in the country, followed by Meena Bazaar. Their prime targets were the affluent class who travelled abroad and were exposed to the western lifestyle, while the primary goods being sold were imported products. 

Back then, most consumers – especially those belonging to the middle class – found supermarkets to be too expensive.

Later in 2008, supermarket Shwapno (dream) started its journey with a vision to make a nationwide retail chain where all strata of consumers could come and shop. "One Shwapno for all" was its mantra.

From the very beginning, Shwapno, operated by ACI Logistics Limited, wanted to follow the mantra utilising its bonding with a vast network of farmers. Its "Seed to Shelf" vision connects farmers directly with consumers, eliminating the middlemen. 

Initially, consumers were not impressed due to substandard housekeeping, hygiene as well as product availability. The footfalls dwindled and the total number of Shwapno outlets dropped to 37 from 70. 

To make Shwapno a proper supermarket, its operators had to address all these limitations. In 2012, Shwapno revised its category strategy and promotional tactics to attract more customers. 

Shwapno started by cutting down prices, so that the perception of the middle class would change towards supermarkets. New branding strategies were put into effect. Outlets got facelifts and product portfolios expanded. 

After the marketing policy was revised, consumers – mostly belonging to the middle class and the upper-middle class – started shopping at Shwapno outlets. Currently, Shwapno has 130 outlets. Among these, 61 are its own outlets while the rest are franchises. 

Prospect of supermarket

The fast-moving consumer goods manufacturers and suppliers still prefer traditional trading through grocery and department stores in the kitchen markets. Supermarkets in Bangladesh hold only 1.6 percent share of the $16 billion retail market.

Consumers are not yet aware that supermarkets are safer than kitchen markets. Many of them do not know why the meat on display has to be kept within 2-4 degree Celsius temperature. 

In kitchen markets where the temperature varies between 30 and 40 degree Celsius, perishable food items might easily be contaminated by bacteria, which cannot be killed even after boiling. Due to a lack of awareness, people still do not mind buying from these unhygienic places.

The retail chains, specifically Shwapno, have invested heavily to keep the produce – fish, meat and milk – fresh within the proper temperature window. The quality of water used to clean the food items is also maintained properly. 

Although this raises costs, but consumers expect the same prices [charged in kitchen markets].

To meet this demand and keep customers coming to supermarkets, Shwapno has to adjust the price of products. This is holding back the industry. 

However, things seem to be getting better. 

While Shwapno's growth has been estimated at 20 percent per year, traditional trade at kitchen markets is growing at a rate of 5-6 percent. This suggests that customers are shifting from traditional retail markets to supermarkets. 

But this could be much higher like that in the neighbouring countries. Supermarkets in Sri Lanka share 43 percent of the county's total retail market. In India, the share is 8-9 percent while those in Myanmar and the Philippines hold over 50 percent of the countries' retail market shares. 

Supermarkets are also good for the government due to the transparency of their businesses. 

The government can get its revenues and ensure food safety. Enforcing rules and regulations on supermarkets are much easier compared to the traditional trade. 

Shops in kitchen markets can easily circumvent regulations and refrain from paying revenues. 

Consumers, are also in safer hands. If they feel like they are being cheated, they cannot hold anyone accountable at the kitchen markets. But they can come to supermarkets, lodge a complaint against unsatisfactory customer care and get replacement for substandard or expired products. 

If all else fails, they criticise the brand on social media. 

At present, Shwapno buys 50 percent of its vegetable and fish directly from farmers, ensuring fairer prices for them. Shwapno is the first member of the Global GAP (Good Agricultural Products) in Southeast Asia. Shwapno applies the Global GAP principles to its business practice to ensure the supply of safe food and pesticide-free crops. 

Moreover, the supermarket industry has created thousands of small and medium enterprises, and resulted in employment generation for hundreds of thousands of women. They set up boutique houses, farmhouses and factories and supply to retail chain shops. 

Shwapno is a purposeful company working to empower people, particularly farmers and consumers, with their rights to get fair prices. 

Barriers to growth

Although supermarkets contribute more to the national economy, the government is still busy promoting traditional trade. 

Corner stores and kitchen market traders do not have to charge value added tax (VAT) to their customers. On the other hand, consumers have to pay five percent VAT if they shop from supermarkets. Many consumers are price sensitive and they do not want to pay extra. 

Without government incentives or fair policies, no industry can grow. 

The supermarket operators are not asking for favours from the government. All they ask for are fair policies and a level-playing field. The government might promote traditional trade, but it needs to consider the employment scopes supermarkets are creating for the growing number of educated youths. 

The growth of the supermarket industry is now over 20 percent, and it could have been 60 percent, ending up holding one-tenth of the total retail market sector. 

Our society is rather rumour-oriented, and supermarkets are often blamed for minor mistakes. A rumour on finding a rotten fish at a supermarket counter will be spun out to sound like all the products there are unsafe. 

Consumers should carefully check the products before purchasing them. Even if they purchase an expired product, they should claim replacements. There is no point spreading rumours.

Many organisations, including the Bangladesh Standards and Testing Institution, are working on food safety, but none of them work in harmony. There should be a single body with a single food policy standard or protocol for all stakeholders. 

Establishing microbiological laboratories would be more effective than operating mobile courts against reputed retail chains. Testing food standard is not a retailer's job.

Farmers use pesticides. When they are harvesting, are we allowing them enough time so that the pesticide residues get biodegraded? This is called pre-harvesting tenure. In our survey, we found that the procedures are not being followed in many cases. The farmers are not educated and the government should train them on harvesting pesticide-free crops. 

More integrated and comprehensive approaches should come in place. Inter-value chain has to be made stable and a proper benchmark should be followed. 

The future of retail 

Within the next 5-10 years, supermarkets will be built in all district headquarters and suburbs of Bangladesh. 

E-commerce is expected to grow by a remarkable 10 percent growth rate. The retail industry will embrace many new forms of technology, including artificial intelligence for price forecasting and probation allocation for assortment optimisation. 
People will see the use of robotics in the next five years in warehouses. Within a decade, drones will supply products directly to consumers' houses. Supermarkets will hold at least 10 percent share of retail trade in Bangladesh in the next seven years.

Sabbir Hasan Nasir is the executive director of ACI Logistics Limited.