Ajita Shashidhar

Andrew Levermore discusses retail models for the Indian market and what the kirana stores can do to stay relevant to the consumer.

So, do you think that the hypermarket format is the best retail model for the Indian market?

Yes, indeed. Keeping in mind the poor infrastructure facilities (in terms of roads) India has, a customer is more likely to seek out a one-stop destination where he/she can buy everything at one go.

The other side of the story is that as this one-stop destination could be far away for many shoppers, a retailer has to offer something great to encourage people to travel that far. Not only should the prices be more affordable, the retailer should also make sure that he offers something new to the customers. It could be a new category of products, tempting promos or a fabulous product launch.

I definitely think that hypermarkets have a great future in smaller markets too also.

So, will the traditional kirana stores be on their way out?

I don't see kiranas going away. While the big stores would play the role of a one-stop destination, the kiranas in the long run would emerge as convenio stores to fulfil the top-up needs of the consumers.

What I would like the kiranas to do is form a buying co-operative. A 1,000 kiranas placing an order with an FMCG company would be higher than the orders of organised retail. This would give them better margins and pricing. This has been done in South Africa where buying co-operatives of mom-and-pop stores enjoy equal buying powers as big retailers.

The kiranas would need to build a personal relationship with customers by home-delivering small items free of cost and therefore play the role of a convenio store.

What are the challenges facing organised retail in India?

The biggest challenge to my mind is that of the supply chain. In the UK, for instance, the daily vegetables and fruits are delivered in 40-feet air-conditioned containers. As the containers are refrigerated, the shelf life is more. In India, it is done with the help of 15-35 trucks and there is lot of wastage as the shelf life here is much shorter.

On the other hand, we have a handful of FMCG players supplying to 12 million kirana stores. There are multiple layers of distribution that have made the FMCG players distant from the retailers. It will take a long time to have a relationship that a Coke has with a Wal-Mart or Tesco in the West.

Do you think FDI in retail would be allowed?

Relaxation in FDI rules is inevitable. The reason why the Government is refusing FDI is to protect the kiranas. But whether it's HyperCity or Wal-Mart, they are all big box stores and the impact on the kiranas would be the same.

What are the other significant trends you expect in the coming years?

I expect a lot of consolidation by 2008. There are too many malls coming up. Gurgaon, for instance, has some 38 malls coming up on one road. In the next five years, there would be hundreds of options for the consumers, and unless the mall developers ensure that they have the right product mix and other amenities such as parking, most of them won't make money. In fact, a mall with too many floors also may not work.

How different is HyperCity from the other Indian retail brands?

Most hypermarkets in the West are targeted at entry-level customers. But in India, the difference between the rich and the poor is too vast. We are targeting the upper and middle-income groups. And, we are the only ones doing it. We have the widest choice of products and all that is wrapped up in excellent pricing.

What kind of a growth are you expecting in the first year of operations and what would be the various areas of focus?

We are expecting a turnover of Rs 12.5 crore in the first year, and our focus this year would be to improve our first store.

Today, almost 30 per cent of our merchandise consists of in-house labels. As we build credibility as a retail brand, it increases the levels of trust in the consumer. We plan to introduce some more house brands in food and grocery. We plan to build private brands to more than one-third of our business. This will see an even better value offering for our customers and better returns for our shareholders.

We are also working on an expansion plan, and in the next two years we would be in 20 cities in India.

One of the major challenges that the Indian retail industry has to encounter is lack of trained manpower, especially at the floor level. What kind of initiatives are you taking to tackle this problem?

With the retail industry at a high-growth stage, the talent pool available is insufficient to meet the industry requirements. More so, with so many new players in the market wanting a chip of the same talent pool, you constantly keep bleeding your talent, especially in the front end.

This could be arrested through attrition control methods or by having a strong knowledge management mechanism in place.

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