G for Grocery Retail – Then Vs. Now

From shopping grocery at Kirana stores to Government Ration Shops to one of the first organized retail shops in India to the supermarkets and hypermarkets and finally now with my own mobile Apps for Grocery, I would say I have been lucky to see them all. My tryst with Grocery shopping is cut to the early 90s when I would accompany my father to the state-run TUCS shops and PDS shops and bring, rice, dal & kerosene kept on the back of our bicycles. During the late 90s, a retail shop named Subiksha opened in the heart of South Chennai – a store similar to a PDS but a bit modern with staff in uniform who assisted customers with their shopping needs and a computerized bill to support the transaction. I remember cycling 5 kms to buy 3 kgs of sugar, which would save us 10-12% than buying from the neighborhood Kirana shop. I used to be amazed at how shopping was revolutionized in the late 90s with the advent of “Shop n Stop” a modern retail store close to my house in Royapettah that encouraged self-service, which was not just a fancy thing but also a very convenient one.

I was fortunate in the early 2000s to join and work with RPG Retail’s Foodworld Supermarkets, which was one of the earliest organized retail stores in India. From consumer offers to world class shopping experiences, the company paved the way for future entrants with this format of retailing. When I joined the Future Group, I witnessed how a humble 1,500 sft of a supermarket had morphed itself into a hypermarket with Food Bazaar spread over 10,000 sft at its largest outlet then in 2004 and that too on the fourth floor of India’s first seamless Mall, Bangalore Central. Till date, our family has shopped only at Food Bazaar in over 95% of cases. That’s some loyalty, rather just the convenience of shopping the entire household I would say. Late 2000s was the challenging periods for Retail, although not as worse as what we’ve been witnessing for the past 24 months. Hypermarkets reduced their sizes and have found the 4,000 sft model as their sweetspots and are still tweaking their models.

Since the turn of the decade in 2010, we have seen online retailers come and go and behemoths like Big Basket stay on with a supposedly proven model. I would like to cite the example of IBuyFresh.com which was the online effort of Kovai Pazhamudir Nilayam, a Coimbatore based Retail store that started with fresh Fruits & vegetables and later moved on to the Grocery & Household segments. The e-commerce start-up, which was serving over 800 orders a day in just 6 months of commencing shut down abruptly one day due to viability issues. Others like Peppertap and Local Banya raised millions of dollars to eventually shut down their ventures leaving smaller players like my own Hyperlocal start-up Oyethere.com in jeopardy, what with Investors sitting on the fence not wanting to experiment on new models any further.

Much has been spoken about Amazon’s self-service, self-check-out store in America which is a dubbed as a smart-store where customers pick products off the shelves which get billed while picking-up and the check-out is super quick with just a tap of their credit cards or mobile phones (NFC payments). Grocery shopping worldwide and in India has been seeing a lot of new opportunities, of course with challenges but perhaps, remains the most interesting retail format.

F for FDI in Food Retail

Much has been spoken and written about the opportunities and perils of allowing Foreign Direct Investment in Retail, especially in the Food & Grocery business. At the moment, only locally procured farm goods and other products manufactured in India can be sold in organized retail stores with FDI. Unfortunately, the top Food Retailers in India including the Future Group, Reliance Retail, RPG-SG led Spencers Retail, etc. do not have foreign investors. Most of the retail chains are reeling under heavy losses and have not been able to scale their businesses beyond existing geographies.

Carrefour and Auchan have shut shop while Walmart has severed it’s tie-up with Bharti Retail and is on it’s own for a while now. Tesco has always had a back-end arrangement with Tata Retail and it continues to be just that. And there is no news of any other international Food Retail chain getting into India in the near future. Interestingly, Amazon and homegrown start-ups Grofers and Big Basket have applied FDI proposals to FIPB for operating in the food & grocery space, perhaps in e-commerce, which is gaining ground every passing day.

Big Basket started operations in 2011, is well funded at the moment and works on an Inventory model in gross violation to existing FDI rules. BB has a warehouse where its products are purchased, sorted and stored. Customers order online/mobile apps and BB delivers the said products from their Warehouse to customers at their doorsteps. BB also procures products from local retailers for quicker delivery and for items that they do not carry. Needless to say, BB hasn’t made a single penny in profits and continues to mount losses.

Grofers started similarly as Big Basket and built ghost stores (outlets with products but no name board and consumer shopping) but then modified its business model to a Hyperlocal model where it currently picks products from neighborhood stores and delivers to customers.

Others like Peppertap, Zopnow, etc. have tried their best raising Investments but have failed to make a dent and have shut shop or have morphed in to delivery companies. Amazon Now currently operates only in Bangalore and is app-based. Customers order on the Amazon Now Mobile app and Amazon picks the products from The Future Group run Food Bazaar & Shopper’s Stop’s Hyperlocal format “Hypercity” Stores and delivers products to customers in a scheduled manner. This is the entity perhaps to whom the FDI license is being sought for.

Incidentally, I have been operating “Oyethere” which has a website and mobile apps on Android and iOS which are not only Hyperlocal but also Convenience formats. Customers can order products from our website or apps and we pick products from the nearest Retail outlet with which we have tie-ups and deliver to customers in 30-300 mins which is our Unique Selling Proposition (USP). We have been around for a year and half now with minimal investments and are on the verge of getting well funded shortly.

Food Retail is a hot space both offline & online Retail and we are playing a wait & watch game with what the Modi-Government is up to. Let’s hope for the best.

Retail horoscope 2017

There have been predictions written about sun signs and moon signs. So, I set-out writing one for the Retail Industry in which I complete 20 years this year . These are not purely fictional but I see things going this way. Take a look and let me know what you think.

Kirana Stores

The largest Retail segment, the sem-organized and unorganized Kirana Stores are set for a huge overhaul. With the onset of demonetization, Kirana stores do not have a choice but to go digital. All this while, most of them have been collecting cash for sales which mostly go unaccounted causing a great loss to the exchequer. This will change in 2017. From Bank EDC machines to Mobile Wallets, they will start accepting every form of money other than cash. A robust y-o-y growth is also seen in this business model.

Supermarkets

Neighborhood Supermarkets from large retail chains have already been making a comeback. Nilgiris is leading from the front through Franchising, while Aditya Birla More seems to merge with Future Group, and so would Heritage Retail this year. None of the supermarket chains have an online presence due to reasons best known to them. I don’t see any change here. Heritage is experimenting something but I am not sure if they would be scale up like the Hyperlocal players. Margins will be strained and even store profitability will be a challenge. I see more consolidation in 2017 among the medium sized players.

Hypermarkets

The most abused retail format of the last half a decade, the Hypermarkets have come a full circle. As I write this article, the store sizes have come down from 25,000-45,000 sft to as low as 8,000 sft. While poor availability of retail space is one of the reasons, the sheer ability to sell higher volumes like in Western markets is the core reasons. Indian customers prefer fresh products, be it rice or atta or oil or vegetables and fruits. Also, the households are smaller in size, so are the kitchens and refridgerators. Quite obviously the trolley size will be smaller. With most Mall spaces exhausted and almost no new Mall of any significance across major metros, Hypers may look for standalone sites in suburban areas.

Apparel Retail / Specialty

With a chunk of this format having moved online, from Diapers to Accessories to shirts to dresses, this offline retail format would see more store exits in 2017. The franchisee-dominated model will find few takers and loss making / average performing stores will be closed or consolidated. Malls are already operating at an average 15-25% vacancy of Vanilla Store locations and this year will be worse with burgeoning rent and maintenance cost (the CAM Scam!). Consumers will move towards E-Commerce for specialty retail and will be fine to shop even with limited or nil discounts due to the convenience it offers. Bad year for Retailers in this space which will see many small and regional Brands winding up.

Consumer Durables Retail

With E-Commerce already swooping a majority of consumer durable retail sales, such Retailers will be left in the lurch. Brands, who have initially supported offline retailers in the mid-2000s have started balancing their act with e-commerce. 2017 will see a swing in their loyalties towards e-commerce players. With tighter margins, higher rentals, surging operating costs, many such Retailers dealing in Consumer Durables will consolidate their store count while many would shut stores which are not making enough profits. Overall very challenging year for retailers in this space.

Jewelry Retail

The most affected sector after Demonitization is this retail format. Various media reports suggest how some leading players made a killing on 8^th and 9^th Nov. 2016 after the Prime Minister made the historical announcement. With 90% or more of their business in cash, and it’s quite well known how much of them get accounted, Bullion retailers will face heat the most. A significant number of stores would be thrown out of business. Large chains which have PE Investments made based on PPTs and Excel File projections will face a blank wall, with valuations diving deep and would find the going very tough. Extremely tough year for Retailers in this space. The market will dictate terms in May around Akshaya Trithiya when consumers go bonkers buying bullion.

Food & Beverage

With the Industry having matured in the last decade, it is time for consolidation for F&B Retailers. With scale in place, players like CCD, Dominos and McD will now consolidate their presence and focus on store EBIDTA. New initiatives such as Home Delivery and signing up with delivery companies will bring more business while a tired economy will put pressure on attract store footfalls. Outlet sizes will reduce by 30-50% across formats. There is a sudden upswing in specialty bars and pubs and this trend will continue. A growing and discerning set of gastro-enthusiasts will mean new entrants and new formats are on the anvil. Interesting space for Startups in this space.

 E-Commerce

It’s been 10 years since Flipkart the market leader was born. Sadly, this year would be the most challenging to the company that made e-commerce take off in this country where less than 10% of the Retail Industry is organized. With 1,000s of e-commerce companies of various sizes and shapes, names and offering in the market, the space would see a blood bath this year too. Most such companies which did not have a significant differentiator will have to bid adieu. Less than a Billion Dollar will go in to investments in existing companies while new startups will find the going tough. Amazon will consolidate itself in the market and will become a household name with higher market share and mind share. Hyperlocal Market places which connect offline retailers online will have a good run, since this model is reasonable new to customers. There will be some consolidation in this space too but new entrants will carve a niche. Reasonable investments are expected in this space.

Consumer

A weak economy, struggling to grow since the last 5 years will mean strained purses for consumers. They will be cautious this year on spending and will demand quality and service from Retailers than ever before. 

Why I suspended Oyethere Delivery!

This was an idea that I set out with while studying at NIIT in 1996, that one day I would be able to order pretty much anything on my computer and it would reach my doorstep within minutes or hours. That it took me 20 years to realize that dream is another story. Thus was born Oyethere.com, my hyperlocal ecommerce marketplace which delivered (yes, we are past tense right now) products to customers within 30-300 mins from the time of delivery. We started with Tender Coconut, being the only website in the world where you can order one, and moved on to Patanjali, Grocery, Household, Books, Baby products and more. We delivered special T-Shirts with pics of matinee idol Rajnikanth and his signature dialogues printed on them ahead of the release of Kabali. In Sep. 16, we delivered authentic eco-friendly Ganeshas (Clay Pillaiyar) for the Chathurthi festival. And then we shut down. Meanwhile, we got noticed on media, print, radio and Tv for our unique efforts. But potential investors remained myopic. A few of my friends came forward to support me with small sums of funding when I reached out to them around Aug. 2015. That investment came along for a year. We were not “burning” money; no full page Ads, no high-decibel paid digital campaigns and so on. We did not even hire the so-called elite and erudite Digital Marketing Agencies who sadly learn their business at our cost.

 Meanwhile, Swiggy, by far one of the most funded hyperlocal delivery companies in India reported a 65-fold increase in losses as per a report on Live Mint. Yes, you read that right. Here is a quick analysis of what they did;

Revenue for FY 2016: INR 23,59,00,000 (commission on transactions)

Revenue per day in FY 15-16: INR 6,55,278

Daily Transactions: Approx. 21,843 @ Rs. 30 per transaction as commission

Losses for FY @015-16: INR 131,18,00,000 (INR 131 Crores)

Which means, Swiggy spent Rs. 204 (Edited) to get a transaction!  This is Wow.

In the meanwhile, Oyethere was revenue compliant from day one. We made Rs. 5 per tender coconut from the roadside vendor. And 5-25% margin from our partners such as Patanjali, CDS Supermarket, Odyssey, Brown Tree & so on. We had between 1-4 delivery boys at the max and were delivering between 1-10 orders per day. We broke even our Opex from Day one. Absolutely NO CAPEX. I was spending frugally on Marketing offline & online, while also meticulously building PR & positive visibility all around. Sadly, we didn’t have backers. Those who promised the moon and beyond (on investments) backed out citing market conditions. We didn’t have access to popular and noteworthy Entrepreneurs & Angel Investors who funded startups out of Delhi, Mumbai & Bangalore.

On Nov. 1, 2016, I decided to suspend operations temporarily until we get a decent amount of funding. Talks are on currently with various people, but sadly most Investors neither understand Retail nor Investing. So there is a big gap between what I propose and what they understand. For sure, Oyethere will not make losses like others. No way I shall allow that to happen. But that, only when we get the next round of funding. Till then, I am on a break. 

Chennai Shopping Festival

For the first time, Retailers in Chennai have come together to create a one of its kind Retail Promotion. Titled "Chennai Shopping Festival" (CSF), this is organised by the Retailers and for the Retailers of Chennai. My own start-up Smiling Baby, a baby store that caters to the needs of new born kids upto six years is a member of Retailers Association of India (RAI), an Industry body that represents our needs and requirements to the Government and other bodies. Under the auspices of RAI, members of the organisation have come forward to create a marketing property which is CSF. The idea was rolled over on our WhatsApp group by a member, seconded by a few of us and actioned by all of us in just a week's time from start to finish. We have built a simple website that provides information about the various participating stores and their offers. Take a look here.

http://www.chennaishoppingfestival.com/offers/28

Over 30 leading Retailers from Chennai spread over 300 stores in the city including Viveks, Odyssey, Basics Life to name a few have come forward to join in this promotion. The big highlight of this promotion is Uber has come forward to ferry passengers to select Retail Store locations by using the code CSF150 (One Free ride worth Rs. 150 for new users!).

We at Smiling Baby also have a few interesting offers.

Smiling Baby is located at E-135, 6th Avenue, Besant Nagar, Chennai. Ph. 044-43507015 / 9176300015. Open All days from 10am - 9pm. Over 100 brands are available at competitive prices across categories such as Baby Care, nursing & Feeding, Maternity, Cosmetics, Baby Gear, Toys & Games, Apparel and Accessories. The store is the ONLY Destination Store for Medala, world's best mother care brand and houses the entire range of Medela products such as Breast Pumps, Maternity Hygiene, Feeding bottles and so on. One can also find world's other leading brands such as Chicco, Pigeon, Fisher Price, Himalaya, Johnson & Johnson and many others.

Once cam also shop online at www.smilibaby.in where the products will be delivered the same day or the next day with a Cash on Delivery option other than paying by Credit / Debit Cards at the place of delivery using mobile EDC machines.

Do spread the word; visit the website and click the "Get Offer" button so you receive an SMS to your mobile. Happy Festivities. Happy Shopping.