Lots Wholesale Solutions plans to invest Rs 10 bn in India over next 5 yrs

Lots Wholesale Solutions is hoping to learn from the experiences of early entrants in the wholesale market in India

Nobody remembers the second Indian woman who crossed the English Channel or the second Indian person to reach the summit of Mount Everest. Why? Because we live in a society where only the No 1 or a pioneer is revered. So everyone — be it corporates or individuals — seems to be in a hurry to get there. They crave to become the first entrant or the top dog in their respective fields even though it comes at a huge cost and risk. But the good news is that even a late entrant or a second fiddle can make substantial profits and at times outperform the pioneer after learning from their experiences. 

Lots Wholesale Solutions is hoping to make the most of being a late entrant.

Having entered India's $60 billion wholesale market this year, Lots Wholesale Solutions operates two stores in Delhi. A 100 per cent subsidiary of Thailand-based Siam Makro PCL, Lots Wholesale Solutions has a store each at Akshardham and Netaji Subhash Place in Delhi. Well-connected via the Delhi metro, on an average, the two stores register footfalls between 600 and 1,500 on weekdays. The company hopes its flexible store formats, cluster-led expansion and customised product assortment will give it an edge.

The company plans to invest over Rs 10 billion in India over the next five years and aims to open more stores by moving beyond Delhi and the NCR.

In its expansion strategy, the company appears to follow the footsteps of competitor Metro AG, the German wholesale and food retail company, which started operations from one of the top four metros. Metro was the first organised cash-and-carry operator to enter India in 2003. It opened its first store in Bengaluru. As of now Metro Cash & Carry runs 27 stores, out of which 20 have been opened in the last seven years.

Tanit Chearavanont, managing director, Lots Wholesale Solutions, says, “We will follow a cluster-led expansion model focused on north India. Our third store is coming up in the year, taking the total count to three in our first year of operation. Apart from metropolitan cities, we are also keen on exploring tier II and tier III cities which support population upwards of 10,000,00.”

The company’s phased expansion approach is in contrast with another rival, Walmart, which went all out to conquer the cash-and-carry market in India by opening multiple stores in quick succession. The company opened its first cash-and-carry store in Amritsar in 2009. It opened its 22nd store in Ludhiana, Punjab, in September this year. Walmart India plans to open 50 cash-and-carry stores over the next five years. Like Walmart, cash-and-carry player Reliance Market too has scaled up operations rapidly. It opened its first store in 2011 and now has 45 stores.

Most cash-and-carry players in India began by investing in huge store spaces. Encumbered by high cost of real estate and scarcity of strategic locations, almost all of them revisited that strategy. As these companies expanded into more cities, they opted for smaller-sized stores. 

“Given the challenges of real estate in Delhi, we have decided to keep our store format a little flexible. Both in size and layout our stores are different from typical cash-and-carry stores which are enormous. One thing that is common between our stores is that they are close to the micro markets and they are right in the middle of the catchment areas,” says Sameer Singh, director operations, business development and expansion, Lots Wholesale Solutions.

In its home country, Thailand, the chain has stores spread across 10,000 square feet to 1,00,000 square feet. In Thailand, the evolution of store formats has been dictated by the need to be closer to the customers. In India too the company is willing to look at different store formats. Here, it is looking at an area of 45,000-50,000 square feet as ideal store space in the centre of a city. 

Like its contemporaries, the company is focused on attracting kiranas and HORECA (hotel, restaurant, catering) segments. It has 50,000 registered customers in these two categories. Chearavanont says in Thailand, 50 per cent of the sales for Lots Wholesale comes from private labels. The business has grown in double digits over the last two decades. The company will formalise its private label strategy for India by the first quarter of 2019. Taking a cue from local mandis, the company is also incentivising buyers by offering them credit facilities.

Lots Wholesale is replicating the digital-led model followed by Walmart and Metro Cash & Carry in reaching out to kirana stores and other smaller customers. It is helping to digitise the back-end operations at grocery stores, deploying sales and inventory management solutions. The team is also using predictive technology to help map the customer buying behaviour and offer them customised services.

Though a late-entrant, Lots Wholesale Solutions is confident that network efficiencies will kick in once it opens more stores and expands into new markets. Currently, the company sources the products it offers from across India. It has a warehouse spread across 40,000 square feet in Hassangarh (Rohtak), Haryana. Going forward, Lots Wholesale Solutions hopes to set up collection centres at many more locations to enable efficient sourcing.