Give customers their space

The K Raheja group was the first in the country to venture into large-format retail when it started the departmental store chain, Shoppers' Stop in 1991. Back then, retail did not sizzle as much as it does today.

Now, as Shoppers' Stop trades on the stock exchange and has 20 stores under its name, the K Raheja group has ventured into the hypermarket format with the 120,000-sq ft HyperCity in Mumbai's western suburbs. This is the group's first move into food retailing, but this time around, it has anything but a first mover advantage. Food retailers like Food Bazaar and Spencer's have already been in India for five years.

But late entrants have their advantages, or so HyperCity claims. For starters, the late entrant can look at gaps left open by the existing players, or even steer clear from where others have gone wrong. HyperCity Retail India's CEO, Andrew Levermore and vice-chairman, B S Nagesh claim to have looked at evolved retail concepts in the West to shape the HyperCity model. In a discussion with Business Standard, Nagesh and Levermore talk about how they have picked up lessons from the international chains like Tesco's and Carrefour, while still not blindly copying western formats.

In a large-format store there is real temptation to utilise every inch of space for merchandise. But when HyperCity was being set-up, the idea was to ensure that the customer does not feel intimidated by the size of the store. Thus, the store is designed keeping in mind the customer's need for space and to also ensure that the store is not crowded with merchandise.

For instance, during the peak hours assuming that 3,500 customers are present in the store, they would need more than 27,000 sq feet of free space to move around comfortably.

Each customer occupies approximately 9 sq feet along with a trolley. Taking that into account, close to 35 per cent of the store space is for customers to move around"" there is enough space for three trolleys to move at the same time in between two racks.

Also, after having studied consumption habits of customers, the merchandise was split into the appropriate mix of food and non-food. Stocking only food was not an ideal option, as margins in the food business are not sustainable.

International chains like Tesco or Carrefour had proven that stocking only food was clearly not the way forward. In the past, a dominant share of revenues in these stores came from food.

But as competition in the retail sector increased, this revenue stream came under pressure as margins from food declined. Ten years ago, 75 per cent of Tesco's merchandise used to be food. At present, only 56 per cent of the merchandise is food. The non-food merchandise has grown from 25 per cent to 44 per cent.

We did not have to follow the same experience of shifting to more non-food categories after margins in food come under pressure. Also, Indian formats did not require a large space for categories like consumer goods. In India, the range of consumer goods available is extremely narrow.

For instance, there would be close to 1,000 varieties of toilet soap available in large-format outlets abroad, but there are less than 50 options of toilet soaps in India. Large-format stores normally are tempted to copy the West. But we chose what is right for India.

The ideal mix was to have more than 50 per cent of non-food merchandise, which would include everything from electronics and apparel to even sports goods. This would keep margins safe. The other way to shore up margins was through private labels.

In the case of categories like apparel, we stock only private labels "" 100 per cent. In the case of household utilities like cutlery, the stock of private labels is as high as 70 per cent.

It's not just the non-food category where the brands are exclusively sourced. Even in food, we have exclusive arrangements with Waitrose, a UK-based brand that stocks organic food to juices.

Then it was a pick and mix strategy that was chosen for different sections of the store. For instance, the furniture section picked up tips on display from the global chain, Ikea, minus the knock-down kits, while the fresh food section was modelled on lines of stores in South Africa.

Similarly for sourcing merchandise, we looked at the best sources across the world. For instance, for bed and bath linen, the source was India, while for crockery it was China.

The other challenge was selecting the location. The options were to either set-up a store where there is no competition, or be surrounded by competition. We started right opposite Inorbit mall, as the location was already attracting crowds.

So far, the store gets 25,000 footfalls on an average over the weekend. The check-out counters too are created to help ease the payment process. Customers can use hand-held scanners and start the billing process even as they shop. Our offering is to give customers more each time they shop. That we live up to our promise that there's more to discover.