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Small traders dream big, put retail sector on growth path
Raghavendra Kamath in Mumbai | January 04, 2008
A channel run by a local cable operator in West Delhi's Mahavir Enclave is airing commercials of Super Value Store, a local outfit trying to lure customers with a combination of offers and discounts.
This is an early sign of ambition from the store's owner Jinendra Kumar Jain, 43, who was content with his small grocery shop until he met Hindustan Unilever executives two years ago.
The multinational installed and paid for self service counters and display shelves in Jain's 2,000 sq ft property. In the process, it also changed his outlook to business.
India's retail industry, which is in the middle of rapid growth, has already scripted success stories fit to be the subject of a Bollywood film. There is the documented story of Vishal Retail's Ram Chandra Agarwal, who in 20 years has moved from a 100 sq ft shop in Kolkata's Lal Bazaar to a turnover of Rs 600 crore (Rs 6 billion) a year.
However, in keeping with the current trend in Bollywood, these stories refuse to end and are spawning sequels. A number of small outfits in metros as well as small towns have begun to chase the retail dream. Magnet, D-Mart and Foodland Fresh in Mumbai and Delhi's Garg Dastak and Big Apple are increasingly dotting the landscape.
To the towns
The ambition has also spread to smaller towns. Spicelife in Pune, Dhiraj Sons in Surat, Sunday to Monday Hypermarket and Valdel Retail in Bangalore and Purti Supermarkets in Nagpur are in growth mode.
"Most of them are one-city chains planning to expand. After understanding the home market, they want to move out and grow," says Damodar Mall, CEO, Incubation and Innovation, Future Group.
HomeCare Retail, which owns Magnet Hypermarket, is already selling vegetables to compact discs in Mumbai, Pune and Ahmedabad. It is planning to open 50 hypermarkets and more than 100 supermarkets all over the country by 2010, entailing an investment of nearly Rs 1,000 crore (Rs 10 billion).
A lot of work
"Back-to-back meetings, endless travel, interviews, visiting stores take most of my time," says Ashok Maheshwari, HomeCare's managing director.
In his late 30s, Maheshwari quit Mumbai-based retail chain D-Mart two years ago to start Magnet with two other investors. "Once we become a national player, we want to get into retail-related ancillary services," he says.
His former employer is not resting on its oars. D-Mart plans to open 35 to 50 supermarkets and hypermarkets across the country in the next two years, for which it has already selected the space.
Quality not price
A venture of Radha Kishan Damani, associated with the stock market, the company already has 11 stores in Mumbai and Ahmedabad. "We do not want to open hundreds of stores across the country like big retailers, but give quality products at good prices," says an associate of Damani.
Forty-five year old Raju Shete has already made his Foodland Fresh chain a familiar name in pockets of Maharashtra.
When he took over from his father in 1979, the annual turnover of the family business, which calls itself Radhakrishna Group, was Rs 7 lakh (Rs 700,000). It is estimated to be about Rs 500 crore (Rs 5 billion) now.
The company claims to be the largest food and grocery retailer in the state. Global private equity firm Warburg Pincus has 25 per cent stake in Radhakrishna Foodland.
"We will have national presence,'' says Ivan Rodrigues, vice-president, formats and marketing, Radhakrishna Foodland.
Garg Dastak had two stores in South Delhi, but Sanjay Garg and his brother, who have taken charge of the family business, have opened three in Gurgaon.
"In five years, I want 15 stores in Gurgaon. We will consolidate here and then look at other cities, like Noida," said Garg, adding that his family had not thought of such expansion earlier.
M S Ramaiah is planning to scale up family-owned Valdel Retail, run by his sons M R Jayaram and M J Shantharam. The company owns FamilyMart, 12 Centra and 8 Dailies in Bangalore. It plans to open 25-30 stores in south India.
Industry-watchers say small retailers need to scale up to cope with competition.
"You cannot have one store in Mumbai and plan another in Delhi. It does not make sense since you have built your back end and supply chain properly. For instance, Big Apple in Delhi can think of going beyond the NCR since they have built a strong network there," says Purnendu Kumar, associate director of retail consultancy Technopak Advisors. Scale is critical in obtaining better prices, manpower and properties.
(With inputs from Anil Urs in Bangalore and Nayantara Rai in New Delhi)