Showing posts with label Fruits. Show all posts
Showing posts with label Fruits. Show all posts

21 March, 2014

Reliance wins handsdown

The first store for Reliance came up in Hyderabad. It was a grocery retail format and many skeptics wrote off the idea, citing intense competition in this segment. Gross Margins are low, two-digits and net margins, if any are a mere 4-6%. So, how would the company ever make money? Further, there were already established players in this segment, especially in the South (of India) such as Foodworld, Spencers, Food Bazaar, Nilgiris, FabMall, Trinetra (now together More), Fresh @ from Heritage Foods – the list could go on! But patience and perseverance has helped the company in the long term. According to a report in the most respected Hindustan Times newspaper, the company would become the largest Retailer in India by Sales in 2013-2014. The company is expected to close the year with $2 Billion in Sales, approx. INR 12,000 Crores. And it made a meagre INR 78 Crores last year and has made INR 278 Crores in 2013-14. That’s not bad at all. The company has been able to achieve scale over the past 7 years and its many Chief Executives of respective businesses have built the business brick by brick, sweating and toiling between Board Rooms and Store fronts.

Take a quick look at how the numbers stack up;

Reliance Retail

It’s a commendable achievement for Reliance Retail to achieve this position. Those who know me well would now agree what I have been saying ever since Reliance joined the fray in the Retail sector. I predicted right in the beginning that they are here for the long term. With a cash pile of INR 90,000 Crores and managing the largest Oil refinery in the world, Reliance has real deep pockets. And its Chairman Mukesh Ambani is not someone to open and shut businesses. Its not in their blood. Dirubhai Ambani, the patron founder of the group tht every household in India should have a Reliance product in some form or the other. The group created a furore in 2002 when the Reliance Mobile network was launched with an exciting Rs. 501/- package making it the most affordable mobile phone of its times. Similarly, they forayed into various other businesses and turned around all of them, albeit patiently.

One of the biggest reasons why Reliance has been able to reach where they are is also because of steadfast focus in the formats that they have opened and operated. They just have one Hypermarket, One Digital Electronics Format, three formats in Fashion, one in Jewelry and half a dozen international brand tie-ups. Makes it easy to focus on scaling up each vertical constantly. Reliance operates small supermarkets which compete with Kiran Stores and other organized players such as Spencers, Foodworld, Food Bazaar, etc. Reliance hyper directly competes with Metro AG, Best Price (Bharti Retail), Hypercity (K Raheja Group), Total (Jubilant  Retail), Big Bazaar (Future Group) nd other local wholesale markets and APMC operated mandis. In the fashion segment, Reliance Trends is positioned against Lifestyle (Dubai based Landmark Group), Shoppers Stop (India’s largest Department store Chain) and Pantaloon (now owned by Aditya Birla Group). Reliance Footprints has a unique positioning and doesn’t have major names for competition except Metro and Mochi who have a pan-India presence. Reliance Jewels competes with the local jewelry stores in each micro market. Reliance Brands such as Diesel, Quicksilver, etc. compete with their international competitive brands.

This is just the beginning. Look how Reliance is going to grow leaps and bounds in times to come. I am still sure that they wouldn’t have a JV with the global biggies such as Wal-Mart, Carrefour, etc. They would rather grow organically in times to come.

The game gets more interesting.

12 April, 2012

Forecourt Retail–More returns per Sq.ft

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The Apurva Chandra Committee appointed by the Union Government of India to review the proposals made by the Associations and Unions of the owners of over 40,000 fuel stations in India to increase their margins has proposed a few charges to be incorporated which are as below;

  • Rs. 2 to fill air for two-wheelers
  • Rs. 5 to fill air for four-wheelers
  • Rs. 20 to fill air in a truck or a bus
  • Rs. 2 for Drinking water / Toilet usage etc.

“These are the maximum suggested charges. The RO (retail outlet) dealers would be at liberty to charge lower rates” the committee said in its report reviewed by the Economic Times, India’s leading Financial daily. Currently these services are provided free, and pumps are penalised if they do not offer these facilities. The committee, which submitted its report last year, justified user charges as dealers required to employ additional staff to man these services. The Federation of All India Petroleum Traders (FAIPT) has threatened to go on an indefinite strike from April 23, 2012 onwards in case their demands are not fulfilled, among which are to increase their dealer margins on selling petrol and diesel which is Rs. 1.49/- and Rs. 0.91/- respectively at the moment. The committee had summarily rejected fixing the commission as percentage of the invoice value (proposed by the dealers as 5%) and recommended a 33% increase in dealers’ commission on petrol and 23% in diesel.

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To me, it seems ridiculous to say the least to charge for value-added services such as water and toilets, let alone filling air in the tyres! Not that patrons would mind paying these small change – but for a Government appointed panel to propose such recommendations is going back ten steps – with all the modernisation and world-class looks and amenities of fuel stations in India, which started off more than a decade ago.

Petrol & Diesel are essential commodities. While Diesel (prices) are regulated by the Government, Petrol was deregulated a few years ago. Public Sector Undertakings like Indian Oil Corporation (IOC), Bharat Petroleum, Hindustan Petroleum, etc. and private players such as Shell, Essar and Reliance are free to price petrol as per their wishes. The price adjustment is executed once every 15 days and it usually goes up or down by a few paise – small change at a rupee level, though it could run upto Rs. 10-15 for a full tank of fuel of 40 litres. Petrol price itself is usually hiked once every 3-4 months by the Oil PSUs which also allows the private players to proportionately increase their prices. Private players price their commodities a bit higher than the PSUs citing lack of subsidies by the government which are liberally showered by the Union Government. Diesel, which is the main fuel used to ferry people and products in this country is almost a sacred commodity – tweaking prices by a few rupees has seen severe backlash over the years and is left untouched – swelling the losses incurred by the oil companies.

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Forecourt Retailing, or having Retail outlets within a Fuel Retail Station is not very popular in India, although it has been a practice to have some convenience shops within its premises selling chips and candies. In the West, it is common to see supermarkets, grocery stores, gift shops, coffee shops, fruits and vegetables and so many categories of items being sold in such outlets – they bring additional footfalls to the RO as well as provide alternate, incremental incomes to the RO owners. In India, it hasn’t taken off very well, except for the one of success claimed by Bharat Petroleum and Hindustan Petroleum with their respective convenience stores. Café Coffee Day, India’s largest café chain with over 1,250 outlets at the moment is the only national player apart from McDonalds to have a significant presence at Fuel stations. And this seems to be only growing. "Between verticals and formats we keep looking at opportunities for expansion," said K. Ramakrishnan, President – Marketing in an interview to The Hindustan Times recently.  The other verticals where CCD is expanding include transport hubs, malls, multiplexes, highstreet, residential, premium institutions (such as hospitals and educational institutions), and highways. Highways are an important component for retailers like CCD, where finding reasonably lower-rental locations is easy, especially within fuel stations. Customers are familiar with the brand and therefore stop by at their outlet while refuelling their cars and refilling and relaxing themselves. McDonalds too operates many outlets on the highways, mostly within petrol stations. The RO dealer, in return for renting space gets either a fixed rent or even a revenue share on Sales.

Rather than charging additionally on value-added services like filling air and drinking water or for usage of toilets, it would make sense to create a strong value-proposition by exploring various retail formats within the ROs. Reliance Petroleum, which operates and manages over 600 ROs in the country includes a restaurant in most of its outlets. These were earlier operated internally by Reliance in the name and style of “A1 Plaza” but were later outsourced, given the better understanding of F&B players like Kamat Yatri Nivas who manage some of their prestigious locations. While the luxury of space allows to operate F&B outlets and other large format stores in the Highways (where overall rentals are cheap), it may not be possible within the city limits where space is at a constraint and while people are in a hurry. In these cases, it may make sense to sell small ticket items such as magazines and popular books, candies, chocolates, wafers etc. This wouldn’t require heavily trained staff while at the same time can get incremental revenues too.

It is only in the interest of customers, fuel dealers and Retailers that we move progressively – in a direction that is to the mutual benefit of all rather than recommendations like above where basic amenities are charged for! Pity!

25 January, 2012

Retail Store Opening Time

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I recently received an email from Reliance Mart that they would opening their stores at 8am! The email newsletter was a bit incomplete in most respects – it doesn’t talk of its existing store timing (including opening and closing) and the list of all stores or a contact number such as a Customer Care number or a Toll Free number. It is anybody’s guess why this particular retailer would want to open so early – given that it is a Hypermarket format. In the footer of the communication, the cities where they operate is mentioned, most of which are non-Metro cities, which I guess could be the main reason for this move. In metro cities, people (Read: consumers) leave to work by 8am and return back around 8pm, hence most of the modern shopping environments including Malls, Supermarkets, Hypermarkets and Specialty Retailers open their stores only by 11am. Also, this is a huge cost-saving for retailers – lower usage of electricity and other utilities; staff can work in a single shift; most importantly, it provides time to set-up the store in the mornings – stock fulfillments, “facings” of products on the shelves and a sound briefing session to the staff.

At Foodworld, (a Supermaket chain part of the erstwhile RPG Retail) when I used to work in Chennai 10 years ago, we experimented opening the store at 7am – really early by Organized Retail standards. But what we realised was that we built a strong loyalty among the local residents and the neighborhood. Customers started coming in early to pick up vegetables that would have landed fresh at the store; and along with bought a packet of bread and some milk. And a few other daily use things too! I remember, we used to interact with regular customers and they would feel happy to be at the store so early! I guess this is one area where Kiranas cleverly take a lead amongst Organized Retailers. A typical kirana store opens by 7am and starts brisk business early. And closes as late as 10.30 or even 11pm at times.

The Government’s rules and regulations are not helping Organized Retailers either. Law states that women employees (who contribute to a significant percentage of the work force in the front-end of Organized Retail in India) cannot work beyond 9pm and should be escorted back home by the employer. Almost no one follows this though, thanks to lax overseeing by the respective agencies and authorities. The retail stores cannot function beyond a certain timeline, which is 8.30pm in Kolkata, 9.30 pm in Chennai and so on. Recently, Star Bazaar, part of TRENT Retail (owned by the TATAs) and Total Hypermarkets, part of Jubilant Retail based out of Bangalore extended their store closing time to 12.00 midnight, a welcome move by regular customers who heaved a sigh of relief since they could comfortably shop during the late hours! Mustafa, a local retail giant in Singapore, for example, is open all night and sees regular customer flow all through! I was told that the contribution of business between 9pm and 8am is almost 20% since tourists hop by after the city closes down.

Mustafa Singapore

With FDI in single brand retail already in place, it is anybody’s guess if more and more Retailers would want to keep the stores open late night or open early since the International Giants might want to pump in more money and experiment if customers walk in late at night. While this may work for certain categories such as grocery, household, furniture, etc. it may be obvious that fashion is not something that could work. After all, that category of customers would we wining, dining and partying late night than shopping! Café chains such as Café Coffee Day, Barista, Costa, etc. keep their outlets open until late in the night while book store chains such as Crossword and Odyssey usually wind up early. The case may be a bit different at Airports, where a majority of International Travel happens during the night and therefore, most of the Retailers are open all through the day and night.

There are a few advantages for Retailers to have extended store opening time;

  • Customer Service – During the lean hours, Retailers can provide better customer service, a typical measure to increase conversions
  • Loyalty – Retailers could offer bonus loyalty points (if they are operating such a program) to those who shop during such a stipulated time
  • Understanding Consumer Behavior – Since customers would be shopping under a more relaxed environment, they may tend to show a better behavioral pattern which may be useful to Retailers
  • Targeted Promotions – Retailers and Brands could run specific promotions during such times to increase penetration of certain SKUs

The drawbacks though, would be;

  • Increased Operating Costs – Retailers would have to shell out additional salaries to staff who work during such extended times as well as incur other overheads
  • Sustenance – Such a move, if it is experimental only for a short while can dent the brand image of the retailer among customers, leaving them confused
  • Managing the network – If the Retailer has stores across multiple cities, then it may be forced to maintain uniformity across all locations

Having said that, I believe there are hardly few Retailers who would want to try this venture. For, success is not something that comes without repeated attempts!

03 October, 2011

Dasera – Diwali Dhamaka for Retailers

A former colleague of mine, a Swiss gentleman once quipped that everyday in India is a festival day! Well, he was right in a way, maybe not quite literally though. With so many religions and diverse cultures, indeed every day may have some form of festival in India…

This October month is one of those rare ones – that benefit Grocery Retailers, typically supermarket and hypermarket chains like Food Bazaar, Reliance, Spencer's, More, SPAR, EasyDay and others. Navaratri / Dasera, which commenced on 27th Sep continues into the first week of October and Diwali will be celebrated during the last week of the month. Typically, the monthly Grocery shopping happens once a month, usually in the last week of the month gone by or during the first week of the current month. But in this case, families would have to shop twice, and probably more quantities than usual – roughly 1.5 to 2 times the average quantities. Navaratri is celebrated in different forms and signify different things for people across the country. in Tamil Nadu, Andhra and Karnataka, families set-up dolls at home – popularly known as the “Kolu”. During this period, Goddesses Durga, Lakshmi and Saraswati are prayed and celebrated three days each. Every evening, women folk and children visit houses of neighbours and are fed with “sundal” – the nine grains, one each every day. Now – this category is shopped for extensively before the festival commences which may not be consumed so much otherwise through the year. Also, the visitors are gifted small household articles usually made of plastic and this category also sees an increase in sales during the period. Fruits, which are distributed benevolently, see a surge in price and hence consumers prefer shopping at Supermarkets and Hypermarkets for a better bargain.

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In Gujarat and West Bengal, it is more a societal occasion. While Hindus celebrate it the most, people across all walks of life join into the celebrations. While “Dandiya” – an art form of dance is the most happening one in Gujarat, the Bengalis install huge “Pandals” which showcase Goddess Durga in different forms. People visit Pandals day and night and wear new clothes (in Bengal) while late evening Dandiya sessions are regular during the week. And obviously, new clothes are something that every one looks forward to! Even Western / Foreign brands (like Benetton seen below) join in the festivities by promoting themselves during this period.

Just around the corner is Diwali – the festival of lights and the biggest grosser for Retailers across categories. This festival is also celebrated in its unique way across the country. While families shop for Electronics and Gadgets, Home Furniture, Clothing and Accessories, sweets for distribution and consumption is a big hit too. Retailers and Brands have already started advertising for the ensuing Diwali as well and is expected to step up their promotions starting this weekend.

If there is one category that sees a low, it’s liquor and alcoholic beverages. People generally refrain from visiting bars / consuming such beverages due to the ensuing festivities but things are indeed changing. And hopefully, this category will support Retailers in November which is expected to be one of the lowest months  for business since there are not major festivals (duh) until the Christmas season commences. Anyway, wishing each one of you Seasons’ Greetings and of course, Happy Shopping!

31 May, 2011

Hypermarkets–The latest poster boy of Modern Retail

The first thought that came to my mind was – “Will this store be THE game changer for this Mall?” Not that it had weak anchors otherwise, but somehow this store, I believe would attract most number of footfalls. Time will prove, and I hope my assessment would be correct in this case too. I am referring to HyperCITY from the K Raheja Group which opened a few weeks back at Royal Meenakshi Mall - Hulimavu, a lesser known suburb in South-East Bangalore which houses one of the largest new-age residential settlements of those who are employed in IT, ITES and the BPO Industries, mainly due to the cost effective availability of housing requirements as well as reasonable accessibility in terms of time and distance to their respective workplaces. A maiden attempt by a group of enterprising entrepreneurs, I would say this is another brilliant model for Neighbourhood malls – self sustained with most aspects of modern retail within its precincts. Other anchors include Cineapolis, the Mexico based multiplex chain with its first cinema in South India, CROMA – the electronics store from Tata Retail (TRENT) and many others.

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The store is located on the upper ground floor facing the main entrance and the lower ground floor of the mall with direct access to the basement parking areas – a smart move by the Retailer to encourage shoppers to enter the store directly after they park their vehicles.  However, after finishing their shopping from the Upper ground floor, one would have to pass through the lower floor to access their cars – a bit of walking around the store though, which could be inconvenient during peak shopping hours. The store is well laid out – the lower ground floor offers Grocery and other Home needs while the upper ground floor with all other categories including Electronics, Toys, Apparel, Furniture, even Bicycles and many more. My guess is that the lower ground would remain more crowded – for two reasons; one that it has brilliant view from outside and would naturally attract mall visitors, and two that it houses the core categories which shoppers would come looking to save for – grocery, fruits and vegetables and household items. What I liked the most was the “fresh section” – Maybe it was the first day and hence everything looked very nicely displayed but still, the way the categories were planned was commendable. Also, they are located deep within the store, another smart idea to pull customers inside and thereby making them walk through the store. Meat & Poultry located close by could prove to be a disadvantage if the exhausts and HVAC are not maintained well – an issue that many retailers are trying to grope with.

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The store interiors are typical of a Hyper – no false roofing, basic tiles on the floor, tube-lights running through the length and breadth of the store and focus lights on merchandise that’s on offer. While it does reduce the Capex to a large extent, it also showcases the store as being simple and straightforward – a stark contrast to the luxury stores at high-end malls that sometimes stink of grandeur and austerity! After all, hypermarkets should also look what they profess – savings, savings and savings. And HyperCITY is indeed very good at it. On the store launch, Mark Ashman, CEO, HyperCity Retail (India) Ltd, told the media, “HyperCity is committed to fulfilling the aspirations of the local people by providing them a world-class shopping experience. Our customers will enjoy the convenience of international shopping from over 44,000 products at great value under one roof.” And all this over a mere 60,000 sft.!

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With their continued focus on convenience, experience, quality and savings, there is something that this Retailer has been doing right. Apart from stacking the right merchandise, I guess its the speed at which they have been growing. Often accused (not in a real sense though) of being slow in terms of store expansion and growth, HyperCITY has got its act right. With only 10 stores across the country, the group has managed to understand the business well – they have opened at interesting catchments across cities to ensure that they are not just in the race to grab market share but also to make money at the store level. With an investment of upto INR 2 Crores per store, the Retailer has been cautious about its overall Operational profitability which seems to be getting better by the day. Specific to this Mall, none other than the Hyper is going to be the the main anchor that would attract thousands of shoppers every month! Those who come to shop would indeed pass through the other Retail stores, Food Courts & Restaurants and m\Movies would complete the entertainment bit as well. This store is not an exception, but Hypers would become the Poster boy of Modern Retail and the Darling of Mall Developers soon.

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!




A short flight that I enjoyed…

On 4 Nov. ’24, I stepped down from my role as Executive Vice President, Minmini app. Touted as the world’s first hyperlocal social media pla...