Wadhawan draws up plan to make Sangam profitable

Mumbai-based Wadhawan Food Retail (WFRL), which runs Spinach brand of outlets, has chalked out plans to turnaround Sangam Direct, a home delivery retail business it bought from Hindustan Unilever, in the next one year.

Wadhawan bought loss-making Sangam from HUL in April last year.When HUL sold Sangam, analysts raised serious concerns about the viability of the direct-to-home model as a couple of such experiments by Food Bazaar, Mumbai-based Haiko among others did not take off.

NEW LOOK

Wadhawan bought Sangam Direct "" a loss-making home delivery business "" from FMCG major Hindustan Unilever in April last year

The Mumbai-based company is planning to close additional DCs and RDCs of Sangam in a phased manner and start supplying from outlets in six months

The firm plans to sell fruits and vegetable, non-veg products and frozen items among others

Spinach outlets will also have attached basements and warehouses to stock the more supplies

The main reason cited for the failure of the model was lack of touch and feel factor and difficulty in fast deliveries. Sangam required nearly 24 hours to deliver the products.

Says Pinakiranjan Mishra, a partner with Ernst & Young: "Indians are not accustomed to buying fruits, vegetables and groceries without the touch and feel. Secondly, once they realise that the prices offered by online format is not cheaper, they prefer going to the physical stores." "Ultimately, the companies should be able to deliver within a short duration which is the strength of kiranawalas,'' Mishra said.

Turnaround plans
WFRL is working on the ways to plug these loopholes. "We will make our outlets as points of distribution. We will reduce the delivery time from 24 hours to two hours gradually,'' said Kapil Wadhawan, director of WFRL.

Currently, when customers call Sangam's call centre, the order goes to distribution centres (DC) which will redirect that to redistribution centres (RDCs), from where products reach customers.

Wadhawan is also planning to close additional DCs and RDCs in a phased manner and start supplying from outlets in six months, to reduce costs and time on distribution.

The company will have a common DC for Spinach outlets and Sangam, and RDCs will be integrated with Spinach outlets. Besides, Spinach outlets will also have attached basements and warehouses to stock the more supplies. In six months, products will be directly supplied from the Spinach stores.

Currently, the firm sells only groceries and FMCG products through Sangam. Pushpamitra Das, chief executive of Spinach says, the company also plans to sell fruits and vegetable, non-veg products and frozen items among others, once the integration process gets over.

"At present, we are working on all the cost areas to reduce it and improve the efficiencies ,'' Das said, adding Sangam has grown 15-20 per cent every month and added nearly 30,000 to 40,000 additional customers since it was taken over by Wadhawan.

Higher efficiencies
On the technology front, the company has done many changes to improve efficiencies, says Das. Number of seats in the call centre was reduced to below 100 from 150. Due to the improved efficiencies, the number of calls that are getting converted has gone up by 20 per cent, he said.

The company also has cut down the advertisement costs by 40 to 50 per cent. HUL was spending huge money on advertisements. Now, WFRL is revamping the website which will be up in three months. It is also working on the formats wherein the customers can take in the deliveries at any place of their preference. "In next six months, you can see Sangam in a new look,'' he said.

National roll-out
Wadhawan is planning to take Sangam across the country in the next six months. First, the company will launch the format in the metros such as Kolkota, Bangalore, Delhi and tier-II cities such as Pune as part of its national roll-out plans. Incidentally, HUL could not take Sangam beyond Mumbai after six years of its existence. Sangam was set up in 2001.

"We will take Sangam to cities wherever we have our network of stores. Once we take it to other markets, it will increase our topline,'' said Wadhawan.

The company has nearly 180 stores including that of Spinach and acquired chains such as Sab Ka Bazaar in NCR, S-Mart in Bangalore, management contract to run Maratha Co-operative in Maharashtra and Home Store.