Showing posts with label Spencers. Show all posts
Showing posts with label Spencers. Show all posts

22 August, 2021

Happy Birthday Madras - the Retail capital of India

I have always argued that one of the reasons why the British traded with our country for a long time was our ethical business practices coupled with abundant natural resources which have been bestowed on our land for centuries. Tracing India's roots to King Ashoka's reign or to the fledgling empires of the Chola Dynasty, trade was a very important aspect of the way India has been governed. While the fabric of the Indian ecosystem, spread across the length and breadth of the sub-continent cannot be taken away, there is a strong link to the very first organised retail establishment which was set-up by the British towards the end of the 19th Century in the erstwhile Madras. 


The Spencer’s Store and Higginbothams Bookstore, which are still edifices on the city’s famed Mount Road are over a century old. The current structure of the book store, once eponymous with everything books and which boasted customers such as Clement Atlee, former British PM, Shri C. Rajagopalachari, the former Maharaja of Mysore among others, was rebuilt to suit the needs of a sprawling bookstore in 1904. Mr. Abel Joshua Higginbotham arrived first in the city in the early 1840s. Over time, he purchased the Weslyan Book Shop run by Protestant Missionaries in Madras and renamed it with his own. He was the Sheriff of Madras in 1888 and 1889. After his death in 1891, his son, CH Higginbotham ran the company from the turn of the century until 1925 when John Oakeshott Robinson purchased the company and ran it until India’s independence. Subsequently, it was acquired by the Amalgamations Group and is managed by them, till date. 


Spencer’s as we all know, was set-up in the city in 1863 by Mr. John William Spencer. In 1895, the then largest Department store in the continent with 80 departments was constructed and inaugurated to the use of public, mostly the British. The store had a large number of imported items which came in Ships from Britain and all over the world for the comfort and use of the Brits living in the Madras region, one of the largest and most important bases of the Queen’s Establishment. Over time, the company changed hands many times until it was acquired by ace Indian businessman RP Goenka in the 1980s. 


India’s first FDI in Retail was by the RPG Group with Dairy Farm International, Hong Kong in the mid-90s which lasted for a decade and a half. The first “Foodworld” store was set-up at RA Puram in Chennai where I was a Store Manager early in my career from 2002-2004. After the JV ended, the RPG Group (now RP-Sanjiv Goenka Group) renamed it as Spencers. The place where the first Department Store in India was established in the 19th Century now houses the eponymous Spencers Plaza, which was rebuilt after a major fire in the 1980s. I have vivid memories of visiting the older plaza where a number of films have been shot at.


Pic Courtesy: Viveks.com
Pic Courtesy: Viveks.com


The city has many notable brands which are now popular not just in India but across the world, be it retail chains or FMCG Brands. Viveks & Co., one of the pioneers of Consumer Durables retailing, was set-up in the year 1965 at Mylapore, Madras. Giri Trading, a retail chain which specialises in selling Hindu spiritual & puja related products has an established presence in the US, the UK, Europe, Middle East, South East Asia and Australia. Ambika Appalams, a favourite snack food brand which has now grown to become a neighbourhood retail chain has fans and followers all over the world and exports their goods to over 50 countries worldwide. Butterfly Home appliances, a pioneer in kitchen related items and TTK Prestige, have a pan-India presence today with huge levels of customer interest online and offline. New age apparel brands like Basics Life and Indian Terrain have gained international acceptance of their designs and styles and have been well appreciated by western counterparts. On the food front, Hotel Saravana Bhavan was a must visit for those visiting the town, now replaced by Sangeethas and Adyar Anandha Bhavan. And on the entertainment front, Sathyam Cinemas was the first regional stand-alone multiplex chain to expand across the country. 


There are numerous examples of Retail glory that my Madras boasts of and I shall remain eternally grateful to the city which has given me an identity and beyond. 


HBD Madras. 


30 August, 2018

Would Pricing alone entice Customers?

This is my 21st year in Retail and I am still not amused that the Indian consumer’s love for discounted prices has never waned. Back in the late 90s when I first encountered a modern Retail outlet at Mandaveli at South Madras where my mother sent me to check out the new Store since the Sugar that was sold there was cheaper and of better quality than at the Ration Shop we would buy regularly, I was quite amazed at the whole set-up. It was a nice shop on RK Mutt Road with a bold red signage and white font which read “Subiksha” meaning prosperity in Sanskrit language. That the Indian Consumer has been price-conscious is known, but what’s interesting that almost all products in the country is today is sold at MRP – of course there are exceptions.  In categories like Electronics, the concept of Maximum Retail Price is just for Statutory Prices – to satisfy the Tax authorities. It’s been more than a decade since Electronic items were sold on MRP, barring new releases of Mobile Phones – Apple retains MRP for quite a long time since launching new product ranges while most other Brands cannot and do not retain MRP for more than 2 weeks since launch. 

In Fast Moving Consumer Goods (FMCG), MRP has always existed and will remain so, thanks to the MRP Act which governs pricing of consumer products. However, most Retailers of all sizes – S, M, L or XL or XXL (pun intended) offer or atleast promise to offer products below MRP. Subiksha’s initial success was due to a Brand promise that “Every product was priced below MRP” including Medicines which was an instant hit. The Retailer carefully priced products a rupee or more below – but at least One rupee lower than MRP which was a rarity those days. Even Kiranas wouldn’t reduce so much from the price of products, however would offer credit to consumers which was the first example of ensuring “Customer stickiness” a buzzword today. Over the years, most other Retailers have played on the Price and used it to their advantage. India’s first organized Grocery Retailer Foodworld had exciting price-offs on special days and this would draw crowds to the stores. Foodworld also launched Private Label products – “different cover, same product” which was cheaper by 10-20% across Spices, Ketchups and so on. A few years later, Food Bazaar came up with the premise of EDLP, a term coined originally by Sears in the 1960s USA which was popularised by Wal-Mart later on. 

Every Day Lower Price by Food Bazaar meant that there was no need for the consumer to worry about price change gimmicks; prices were low every day on a whole lot of items which kept / and keeps driving footfalls to the stores till date. On 26 Jan. 2006, Big Bazaar celebrated “Maha Bachhat Day” or “Big Savings Day” which was sort of similar to Black Friday and Thanksgiving weekend shopping in the West. The result was overwhelming and the Retailer has steadily increased it to 3-4 days now culminating with a weekend. In 2012, Flipkart ran “Big Billion Day” which was a runaway hit while also upset thousands of customers because they couldn’t get their hands on many products which were sold out in seconds and the delivery of products took more time than usual. Proof, that Indian consumers are extremely price-sensitive and will embrace price offers all the time. While this article is mainly focussed on Grocery, the competitive / discounted pricing works for every other product that’s sold in retail – from Agarbathis to Audi Cars, Furniture to Apartments (sans GST, as they advertise!).


I happened to visit D-Mart at Salem in Tamil Nadu, India this week. I have visited one of their outlets in Mumbai 8 years before while exploring setting up CCD within their premises. I was awed by their offering. Almost every product was on discount – below MRP to be precise. No crazy promos, no confusing promotions, buy this and get that and so on. Simple, straightforward discounts as we Consumers like it. In no time, I was carrying a basket and when I went to the Billing counter, I was informed by the girl I was to pay Rs. 901. Unbelievable that I picked so many things. But frankly, there was more to do than pricing which stuck me – the store was spic and span. For a grocery cum Hypermarket in a Tier 2 town with a population of less than 20 lakh population, that was surprising. The girl, when I asked said the store was seven months old and is filled up to the brim on the weekends with Customers shopping till late in to the night after the city is shut. Says something about us.

15 July, 2018

We are Chennai…

It was long pending but took a drive all the way up to the latest entrant in Chennai, the newly opened (partially though) VR Chennai, a Retail Centre spanning over 6 lakh square feet (in the first phase) adjoining the outer ring road, just outside the acceptable (hic!) city limits.  Planned and executed by Virtuous Retail, a Mall Management Company which has its Mall's presence at Surat, Bangalore and Punjab, the Centre is almost an oasis, what with a fantastic spread of Retail, F&B and Entertainment Opportunities in the anvil. 



The Mall is located north of Koyambedu, west of Anna Nagar and just after the Arumbakkam flyover. That this place existed for a huge strcture such as a Mall to come up came us a surprise to many in the city including a lot of Retail Professionals. 

So why does Chennai need yet another Mall while the existing ones are not providing double digit returns to Retailers? Why yet another Multiplex while the number of cinema goes has been steadily decreasing over the years, thanks to alternate entertainment options such as OTT Apps? Why should Brands invest heavily in yet another Retail  experiment (of sorts) while the existing Retail spaces are yet to be fully sweat?


Frankly, I have no answers on behalf of the whole of the Retail Fraternity. But here are my observations.

Chennai has historically been a high-street market, despite the so-called evolution and revolution of Malls and Shopping Centres in India since 2006. One of India’s first shopping centres came up at Chennai in the late 1990s – the iconic Spencers Plaza. It was a welcome break for shoppers who would otherwise throng the likes of T. Nagar, Purasawalkam fraught with heat and humidity while Spencers (as it was nicknamed) was the first a/c mall in India (Crossroads was just coming up in Mumbai but had entry restrictions while Ansal Plaza in Delhi was non A/c). Spencers was a super hit from day one with the second and third phases coming up in bursts but that’s when the High street Market continued to dominate and thanks to a property-ownership model at Spencers, leasing larger spaces was a challenge. And the mall slowly lost its sheen.

For a city of its size, there are just three malls of a reasonable size & scale -  Express Avenue, Phoenix Market City and Forum Vijaya Mall which together have about 20 lakh soft of actual Retail (minus the Cinemas). Interestingly, these three Malls form a nice Triangle while seen on a Map. The earliest entrant City Centre (Mylapore) failed due its own inefficiencies while the Ampa Mall (Arumbakkam) did quite well in its early years and slowly added fatigue & monotony; A suburban Grand Mall (at Velachery) sitting on a gold mine lost due to internal challenges of choosing the right sort of Clients. Then there is a Marina Mall on OMR which is yet to take off fully while the Spectrum Mall at Padi is a non-starter. MARG, the construction to research conglomerate lost out on a fantastic opportunity with it’s Mall structure half complete and lying idle for more than 5 years. 



So why a new Mall now?

I personally think that this Mall is a breather for Shoppers to avoid the congested bylanes of Anna Nagar and its periphery and head to this wonderful premises instead where they get an equal share of shopping, dining & entertainment.  For Retailers, this is a boon come true of sorts. Reason: The city had expanded in the deep south on OMR a decade back; it expanded towards Tambaram five years back. However, the western suburbs have been neglected for long. With so many thousands of people heading to work all the way up to Sriperumbudur daily, there is a huge chunk of middle class settlement happening in this part of the city. Also, there are very few options where a discerning Shopper gets satisfied with variety which VR Chennai is sure to offer.



I hope PVR Cinemas open soon, with a slew of films slated to release starting with Kamal Hassan’s Viswaroopam in August all the way up to November when Superstar Rajnikanth’s 2.0 will release after the recent Kaala. Now the question is will they be able to fill the cinemas, especially with newer challenges every day.

05 May, 2017

Inventory Management

For any retailer, Inventory Management is about maintaining the right level of stocks at the right place at the right time. If this is achieved, then the Sales can increase by atleast 30-50%. Sadly, it isn’t so easy. The “Fill Rates” as they are called refers to the amount of stock level that’s maintained at the Retail stores. It varies according to formats, location, pricing strategy, etc. In Grocery Retail, a fill rate of 80% is considered to be healthy while in fashion, it is ideal to have 90% and above. It may not even be relevant in Gold Jewelry while in Consumer Durables, it is normally about the breadth of brands and models one carries.


I set-out earlier this week to buy some general merchandise for our new office. As always, I prepared a list and walked in to one of the oldest Grocery stores in the neighborhood. The first thing I asked – a dustbin, wasn’t available. Really? And then I asked for another thing, which wasn’t available. And then another thing and the same answer. This sends a very negative imagery about the store to the potential customer. In Retail, it is estimated that over 70% of customers always purchase more items than they had originally come to buy provided a wider range of items are available and also the Retailer maintains a level of excitement at the store. In just a few minutes, I knew how the store was being managed since products of the same category were kept for display in two locations inside the store! Really felt bad for the store and the Retailer Brand that there is scant focus on merchandising & visual merchandising. But the god thing was I also picked up something which caught my attention at the cash till, which I had not written in my list. Smart placement, I would say.


Soon, I reached out to another store closeby for purchasing the rest of the items – now this is the last thing that a customer wants to do – store hopping for essentials. And trust me, while e-commerce has chipped in to some extent in offering a wider range, even they haven’t been able to crack the Hyperlocal delivery where such products are delivered in the fastest instance. At this store, I picked up the stuff I was looking for, thankfully got what I wanted and bingo! Picked up a few more things which I hadn’t planned to purchase. Again, because it was displayed near the Cash tills.

Inventory Management at a Retail Store has been automated for well over 2 decades now, from running simple software solutions to implementing complicated ERP solutions from top IT Companies. Sadly, even then, the fill rates in India in the Grocery store business continues to be less than 60%, sending Customer Experience to very low levels. I would also say, Indian Customers have been very nice to Retailers by being lenient loyal to such retail stores, shopping frequently at the same store even though the Retailer provides a poor experience. When I try to analyze, it’s partly tech-related but more importantly, the attitude of the front-end staff make all the difference. If only they displayed the products that have arrived from the Warehouse and also send out feedback of what’s not available! Wishful thinking.

I reiterate that Retailers can improve not only their Sales but also their margins by managing Inventory better. But it is a discipline to be followed daily.

13 May, 2013

Shaswat Goenka–Hearlding new frontiers at Spencers Retail

 

Shaswat Goenka

After dabbling with various sectors in the Rs 14,000-crore RP-Sanjiv Goenka group for about a year, Shashwat Goenka, 23, son of group chairman Sanjiv Goenka, has taken charge of Spencer's, the retail chain, from April 1. In an interview with Namrata Acharya & Ishita Ayan Dutt of Business Standard, he talks about his personal mandate and the road map for the Rs 1,400 crore business. Edited excerpts:

What goal have you set for Spencer's?
I assumed the role of sector head from April 1. What is most important at this point in time is profitability; that's where we are all trying to go. That will be the focus for the coming year and the year after. Spencer's is aiming to deliver Ebitda (operating earnings) breakeven at a company level in the third quarter of 2013-14 and be Ebitda-positive on a full year basis in 2014-15. That's the overarching short-term goal.

Spencer's has missed its breakeven deadline quite a few times. What makes you think you would be able to achieve it?
Well, each time we have done better. We have achieved breakeven at store-level but company level is what we want to achieve.

How do you plan to get there?
We want to increase our footprint. We will go up to two million sq ft from 900,000 sq ft currently and will expand in the north, east and south over the next four to five years.
We will achieve it over the next few years. The other important thing, obviously, would be operational efficiency.
In terms of offering, we would look at increasing international foods and regional foods. Value-added fresh is one of the areas we would like to explore.

Doesn't the fresh segment have one of the lowest margins?
We have very good margins in the food business compared to our competitors. Margins in apparel are obviously much higher but our margins in foods are good.

Any new formats for Spencer's on the anvil?
We haven't thought of any. We want to grow in hypermarkets.

Is the rationalisation process for Spencer's over?
Last year was the rationalising and consolidation process. We have exited Pune. In the past two years, we have closed 65 stores. Now, we want to start growing and in the hypermarkets.
Earlier, we had hyper, super, daily and express stores. Now, we have hyper and dailies and a few of the old express stores are still functioning.

Why did you exit Pune?
We wanted to become stronger where we are. So, we wanted to focus on the north, south and east. After we get that strong, we will revisit the west.

Why do you think the response from foreign retailers has been muted, after FDI (foreign direct investment) has been cleared?
I think people are interested. They just want to figure it all out before they come in.

Do you see foreign retailers as a threat to Spencer's?
Walmart and its likes coming in will help us. We can learn a lot from them. Back-end infrastructure will improve. There are basic infrastructure issues in India, like roads. Also, cold chains or dairy chains, for instance, are not very well developed.

A lot of options were being explored at the back-end by retailers. Any progress on that front?
We are open to FDI at the back-end but we haven't been approached by anyone.

Spencer's was exploring the IPO (public share offer) option. When is it likely?
That's something we definitely want to do but right now, the focus is on profitability.

Would you look at getting into the cash and carry format?
We have not looked at it. We want to be profitable and then explore other things.

24 May, 2012

The Dangerous Minimum Guarantee Model in Retail Expansion

Aggressive store expansion means two things – heavy capital expenditure and lots of people to manage the stores. Every brand worth its salt wants to boast an extensive Retail store network across the length and breadth of the country no matter what the store level EBITDA is. While there are various ways to expand its network, some of the commonly used ones by Retailers are Franchising (more on that in my next column) and CoCo – Company Owned Company Operated model. While Franchising could mean faster expansion, there are chances that the Retailer may lose control on the quality of customer experience among other things. The CoCo model is very expensive to scale-up unless backed by a solid VC / PE Firm. One of the other means to raise funds for expansion is through the Capital Market – recently Specialty Restaurants that runs the Mainland China, Oh! Calcutta, Sigree and other restaurants debuted their IPO, the first of its kind in the F&B Industry in India (while Jubilant Foods which runs Dominos Pizza in India is also listed, it is not in the Restaurant business but into Casual Dining). Retailers like Café Coffee Day, Dominos, Foodworld, Spencers, Zara, Tommy Hilfiger and many others have invested heavily on their own in terms of store expansion across the country, while others like McDonalds, Pizza Hut, Madura Garments, Reebok, Adidas, Benetton, Nilgiris, etc. have taken the Franchisee model.

Reebok Store 1

There is another alternate model – One of the easiest ways that a few Retail Brands have taken to, which is known as the “Minimum Guarantee” model where in a Second Party is appointed to manage the store(s) on behalf of the company while the Retailer itself invests on the business. Let me explain this in detail. Assume that the store fit-out costs for a 1,000 sft store is Rs. 40 Lakhs plus stocks to the tune of Rs. 50 Lakhs, then the Retailer invests Rs. 90 Lakhs to set up the store and also bears the Security Deposit to the landlord (6 – 10 months’ monthly rent).  Once the project work is completed, the store is handed over to a second party, also known as a Managing Partner or a Managing Franchisee who is responsible for the day-today upkeep of the store. All direct and operating costs such as manpower, electricity, rent and incidental costs are taken up by the Retailer and the Partner is also paid a lump-sum ranging from a few thousands to a couple of lakhs – just to operate the store everyday. The logic is, if there were to be an Area Manager to micro-manage the store (and a cluster of them in each city / region), then the costs would be substantially high. And hence the Managing Franchisee model. The partner also has sales based incentives, that is if the store achieves a set target, then he receives a further commission, usually as a percentage to sales. In many cases, the Partner leases his own property to the Retailer, which means the Rental income comes back to him! In a few cases, either the same partner operates through kith and kin or through friends and relatives who become partners! And then, there are incentives for introducing new partners and locations in other cities. This is indeed a vicious cycle.

In the name of faster expansion and quick growth, many Retail Brands have resorted to this practice. While there is nothing wrong in this approach, the Managing Partner usually gets the cake and eats it too. Without any investment, he has a full time job, a respectable retail profession and a handsome income too. While it is not clear whether the practice has been globally prevalent and if yes, from when – it is quite popular in the Indian Retail scenario over the past decade. While Retailers like Madura Garments have stuck to the tested Franchise model of “Buy and Sell” merchandise (that is the Franchise has to purchase all the merchandise with a small percentage of returns back to the company), others like Reebok, according to press and media releases in the recent past have opted the Management Partner model.

DSC00153 (2)

There is no correct or wrong way to expansion. As long as the means are ethical and law-abiding, there is no problem. But concerns arise when there is maniacal expansion with sometime, ulterior motives of helping / supporting some known people to become Management Partners. At the end of it, the Customer decides on the success or otherwise of the brand. And that’s what matters.

15 May, 2011

Paribartan! Retail revival in West Bengal?

My initial happiness started worrying me after sometime – after all who wouldn’t want to achieve their Sales targets! When I was told earlier in the day that the store would close by 4pm, I was a bit happy as I could go home early. But that day, I stayed on, for I wanted to see the people’s leader who would be walking down Park Street with her followers. Yet another protest; yet another reason to bunk work, thus grinned Mr. Bannerjee, my senior colleague in his typical Bengali accent- not that he was complaining, but he was more concerned about reaching home which was at suburban north Calcutta since most taxi drivers would take off from work and those plying would demand double charges. Along with Musicworld, where I was the Operations manager 10 years ago, most other retail stores & F&B outlets along the stretch downed their shutters early due to a protest march organized by a relatively lesser known regional party, The Trinamool Congress. “So where is their leader”, I asked my colleague Sandeep Mallick. “There you see, that short lady in hawai slippers, she’s the one” he replied. I was stunned that such a simple looking person could lead a party and a few thousand followers –for her party as well as her protest march that particular day. I was more familiar with an erstwhile woman Chief Minister of Tamil Nadu where I came from, who would adorn more jewelry than that of a model who poses for Jewelry brands would until she vowed never to wear any ornaments after the ruling DMK put her behind the bars citing various scams. After 10 years, she is back in power today and is expected to run the state in a few days, hopefully more efficiently than the decade that passed by.

music_0701.jpg (250×180)

Just a few months back (in 2001), the Communist Government had assumed power, this time with a new Chief Minister though, Mr. Buddhadeb Bhattacharya, after the octeganerian former CM Jyoti Basu relinquished the seat of power. Buddhadeb, over the next 10 years tried his best to bring reform and change the business landscape but the fundamentals of his party would not allow him to take brave steps too often. And the rest, as they say is History. Singur and Nandigram were bitter memories that the industry would like to forget. Prestigious projects moved out of the state due to government apathy and the worker’s lethargy. The overall mood in the Retail Industry which peaked all over the country in mid-2000s didn’t have much impact in the state, thanks to a workforce that quite didn’t enjoy working in the modern retail formats. Though money was good, many felt that the jobs were lowly and probably they deserved better. A typical middle class Bengali who reads atleast two newspapers every day, one in English and one in the local lingua, is quite updated with the latest within the Organized Retail set-up across the country. Recently, I was a speaker at the “East India Retail Forum”, organized by IMAGES Retail, India’s premier retail publication in Jan’11. There were over 100 retail honchos across the spectrum who attended the event and the mood was upbeat about the impending Retail transformation that’s on the anvil. Miracles are certain, they believed and I too did, given the slow but steady change in mindset that I had seen over the past year – on my first visit to Kolkata after 10 years since I moved in 2001, I wrote on my twitter (@shri611) “so much has changed, yet nothing much has actually changed here!” What I meant was while there were new high rises and a strong immigrant workforce that had moved in, the old-timers remain what they were, reluctant in some cases to change and a few even questioning why they should.

IMG_8243

All that is about to change thanks to the latest verdict in the state elections where the Trinamool Congress has won a 4/5th majority, ousting the Communist rule after 34 years. It was a shocker to see the outgoing Chief Minister, the Finance minister and many others losing their seats in their respective bastions. Just goes to show that the average Bengali was fed-up – and probably wants a change urgently. He deserves, that’s my belief too. I started my career in Kolkata, way back in June 2001 when I reached the Howrah station all alone, with four bags and loads of dreams, to build a successful professional career. Wasn’t sure if Retail was my cup of tea (or coffee, as I am responsible these days for increasing the café count for India’s largest coffee retailer) but I stayed on. I had just one friend, Hemanth Subramaniam, a former classmate at college who lived in Calcutta those days with his parents who came to pick me from the railway station. The city was over crowded by my Madrasi standards, I thought. And the city roads were congested and there wasn’t even a supermarket to buy toothpaste and shaving cream, I thought. But my first few days at Musicworld changed all my thoughts – that Retail was indeed where I would remain. My circle of friends and well wishes grew over time, so much so that I was hosted four farewell parties when I departed in just a year! 37 Chowringhee, a building that stands proudly, built during the British era was one of my favorite inspirations that housed the Corporate Office of ITC Ltd. at whose factory near Chennai my father toiled for over 30 years to build a family and careers of my sister and myself. I had a lot to give back to the city of joy, where the loner in me was treated every other weekend by someone or the other at Someplace Else or Flury’s, at Tantra or London Pub! During my recent visits and interactions with so many people including those from Government functions as well as those in private establishments, I see an urge, an immediate intention for embracing modern ideas, Organized Retail included.

IMG_8252

I am neither a political analyst such as those who feature in “We the People” or “Breaking at 9” nor a mediocre journalist who screams on Tv or writes sensational headlines in newspapers to grab attention – just a Retailer at heart, by profession and choice. Apart from Musicworld & Spencers from the home grown RPG Group, The Ambuja Group and Forum have built several malls in the state while national retailers including Café Coffee Day, The Future Group (Big Bazaar, Food Bazaar, Home Town, Brand Factory), Shoppers Stop, Reliance Retail, PVR Cinemas, Pizza Hut, KFC and many others are all expanding rapidly across the state. A Central Mall is expected to open in Kolkata soon! What I look forward is just a better Retail scenario – one that the Bengali deserves and one which can change their lives and lifestyle quite well. Hoping for a “Paribartan” that would put Kolkata on top in the Indian Retail Map in times to come.

04 April, 2011

David vs. Goliath – Retailers and Kiranas. Long Live David.



I was actually not so surprised to see the store closed for a few days, although really felt bad about it. The first time I entered the store ever since I moved to my new locality, I really didn’t get the right vibes – somehow, these psychological factors work a lot in Retail. The store was in a good location, with grand visibility due to a small curve around, was located in the upper ground floor, which means one has to take a few steps to reach the store and even had unlimited car parking facility along the road side. So, there were actually no concerns about the location per se. But once inside the store, I somehow felt that this store wasn’t doing too well. The category mix was just fine, although in my first visit (which was during the first week of the month), I didn’t get as many as 6 items in the monthly shopping basket. The staff attitude was good – atleast not so bad given the indifference that we see at many other similar retail stores. The stench (of Non-Veg Food) for a hard core veggie like me was unbearable – the fresh meat section was located deep inside and the smell was all around. This usually happens because the store staff does not run the air conditioning throughout the day – a little compromise to save electricity bills which could have such an impact that it detracts otherwise loyal customers into the store. Last but not the least, this was only one of the three Food & Grocery stores in the vicinity of 5 square kilometers – no way could “competition” have been a reason!

I am referring to “Spencer’s” Retail store – my alma mater, my first University after my B-School education. In my early years at the erstwhile Foodworld which was a Joint venture between the RPG Group and Dairy Farm International, Hong Kong, I realized my love affair with the Retail business – a conscious decision taken to stay on in Retail during one of those self-introspection moments which is why where I am. Indeed, I am greatly thankful to the Management support that I received during my initial days – I was fresh into the system and was the only MBA Store Manager – an unwarranted attention within the company, but those who had employed me had a thought and plan behind. It was the most prestigious store I was handling, at RA Puram in South Madras which was also the first store of the group way back in 1997. Foodworld was already a household name by 2002 when I joined, and hence didn’t require marketing the brand. Those were the days when I would stand at the doorstep, welcoming customers as well as hearing their feedback when they were exiting. I had a superb team to manage (rather, one that I was part of) and the store used to attract high-profile customers like film stars and celebrities of their own right! In late 2005, DFI and Spencers split their JV and the RPG Group created its own Retail stores under the iconic “Spencer’s” branding. The rest as they say is history. 

Today, Foodworld and Spencer’s co-exist, especially in the southern markets such as Chennai, Bangalore, Hyderabad etc. Loyalties have split and each of them have their own loyal lot of customers. Spencer’s was inching a step ahead due to its original brand-recall while Foodworld was remembered for building the organized Retail space. Over the years, Spencer’s faced stiff competition from national players such as Big Bazaar, more. , Star Bazaar, etc. which opened large format stores and hence had to create its own avatar, Spencer’s hyper. While the move did work to its advantage, its success would be keeping it going.  

So what really was plaguing the store I referred earlier? Not many actually. One of the biggest competitors for organized players in this space is not its peers, but the local Kirana. He has also grown over the years, form 200 sft mom and pop outlets which used to sell off the counter to large air conditioned self-serviced stores with mechanized billing, spanning 2,000 sft and a range that can never compete with others. One of such players is doing brisk business in my locality – a group of Malayalee entrepreneurs who returned from the Middle East who may have tried various sources of employment and finally settled on the age-old Retail formula. The store is cluttered with merchandise – a phenomenon that our Indian customers like a lot. Organized Retailers have tried cleaning up the store as much as possible, which eventually attracted only the elite (who incidentally don’t cook at home always). Indian shoppers like the butt & brush effect, something we are used to in wet markets once upon a time.
Here are a few reasons why the Greenland scored brownies against Spencer’s;

·         Merchandise Offering – One of the key success factors for the Food & Grocery business is availability of goods – a make or break reason. If during the second or third visit the customer doesn’t find products that she wants, she would not enter the store again. This was one of the main drawbacks in my opinion. While the Spencer’s brand name pulled shoppers inside, they left the store empty-handed.
·         Store Ambience – Fresh Meat in my opinion was a wrong move – an inclusion which could have been avoided. Little do we realize the maintenance involved in managing the ambient temperature within the store. Also, price-wise, there wouldn't be any great advantage over the local markets, so I wonder why the had to try this. 
·         Home Delivery & Extended shopping hours – while Spencer’s had “staff” employed, Foodland had “family and friends” employed to serve customers. There would be a guy who takes phone calls through the day and goods delivered (for as low as a bill of Rs. 100) within a few minutes – From NAN to Noodles, one could just order over a phone. Also, the shop would open as early as 7am and would close after all customers have left- close to 10.30pm.
·         Staples – It is a given fact that the biggest draw for organized F&G Retailers is Staples, a category that managers spend a lot of time on. These are expected to be crowd pullers and hence a lot of analysis is undertaken to ensure the right product is available at the right time at the right price. Unfortunately, even the strong-hold of Spencer’s could save it from closure
·         Fresh Fruits & Vegetables – this, I guess was one of the strongest proposition. While Spencer’s had better products within the confines of an air-conditioned store, Greenland displayed them outside in the open. Availability was never an issue and pricing was reasonable.
The above scenario is pretty interesting, given that the debate on FDI in retail is raging by the day. My hunch is that FDI will indeed be allowed around Q3 this year. Three states (Tamil Nadu, West Bengal & Kerala would have positive results on the Congress Party & its allies) are up for Assembly elections next month, the results of which will play a major role in the Centre deciding on FDI in Retail. The anti-FDI guys have always batted citing the livelihood of small entrepreneurs and Kiranas but the situation described above is certainly not a lone incident. There are hundreds of organized small-format Retail Stores that are facing the music across the country. Hence the question is who actually is David? Certainly not the kiranas! With over 12 million small unorganized retail stores across the country, they are indeed the Goliath. The best is yet to come and I am enjoying each passing day in this exciting Organized Retail Industry!




22 September, 2010

It was a Sunday afternoon and a lazy one at it. And that’s just when someone at home asks for a pack of NAN 3 – a health substitute from Nestle SA that’s given to children. Given that it is a product not available so easily and usually procured from Pharmacies or Drug Stores, no one at home is willing to hit the road and that’s when the friendly Kirana comes to remembrance. One phone call and it would be delivered in a few minutes, suggested one of the members at the household. The next minute, someone was making the call and the friendly voice at the other end was actually prodding for further purchases if the family needed something else. A few other items were included and it was promised the stuff would be delivered shortly. And indeed, it was. In the next 15 minutes, there was a young boy at the door with a bag full of items for well over Rs. 500/-. This can happen, most probably only in India. We as a nation are not yet fully used to shopping in a cycle – although we see major crowds at the large hyper and super markets, consumers miss out buying many things – either they are out of stock or they are out of their shopping list. This is very unlike in the West where there has been an evolution of shopping habits, usually during the beginning of the month, or even on weekends, well in advance for the week ahead. But here, most times we prefer the “just-in-time” way.
 
While the debate and discussion regarding opening up FDI in Retail has prevailed for long, there is little doubt that Organized Retailers could offer such services. “Free Home Delivery” is usually advertised at many Supermarkets like Foodworld, Spencers, Nilgiris and even a few Hypermarkets like Total, Food Bazaar but they all come with riders – that the distance should be within a 3-5 km radius, the total bill value should be above a certain level and that the delivery could take between 2- 6 hours depending on the day of the week and place of delivery. Naturally, since the cost of operating is far higher for Organized Retailers than the neighbourhood kiranas. The big boys need to maintain books of accounts, a mini truck or a van to deliver and a driver to drive (not to forget the maintenance of these vehicles) and many other internal processes. All these are negated with the local kirana. Depending on the level or urgency, the kirana is willing to deliver at the earliest and usually within the locality and most of them operate in one.
Cash & Carry Retailers (are they actually retailers?!?) such as Metro AG have been operating in India since 2001 and most recently Wal-Mart in a JV with the Bharti Group has been operating such stores in Punjab under the trade name “Best Price”. These stores usually sell their wares to the smaller kiranas, hotels, restaurants, etc. who in turn retail to end users and consumers. Since the large Organized Retailers order their goods directly from the brands and suppliers, they are able to pass on higher margins to the kiranas who in fact benefit from this exercise. This has been a strong point supporting FDI in Retail all along since many in the industry believe that it would do well in the long run for the Retailers, the Kiranas and the Consumers.
 
It is quite natural to see more deliveries over the weekends, festivals days and specials events such as Cricket Series and Public holidays as there are more people to consume at home. Not just the kirana stuff, even door-delivery of food and other beverages seems to be on the rise. Last Sunday along with the morning newspapers, there were pamphlets from atleast three restaurants in the area – all small time local operators. An A4 page size pamphlet cluttered with a whopping menu of more than 100 items printed in two colours on the back and front size. But who cares! As long as the food is tasty and delivered on time, nobody bothers. What’s important is not just quick service but the quality of products. Kiranas and small-time eateries take greater care while packing, transporting and delivering as these simple steps are their real “Brand Ambassadors”. If all three were good the first time, chances are they would be called again.
So, no matter how many large Retail formats open up in this country, one reason why Kiranas will remain in business is “convenience” – a fact that most of us live by.

Long Live Kiranas! Long Live Home Deliveries!

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