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You outperformed other hypermarkets with 14 per cent same store sales growth. What is the reason behind that?
Having spent time on refining the operating model and reducing costs, we are now focussed on driving top line sales. We invested more in promotional campaigns during the period and increased our marketing spending to over two per cent of our sales compared to 1.5 per cent last year. We launched new promotional properties such as ‘Blockbuster Weekends’ each Friday, ‘Mandi Monday’ and ‘Win-Win Wednesdays’. The latter two focussed on increasing sales of perishables. Besides, apparel performed very well with sales and volumes increased significantly. We achieved 11.5 per cent of our sales from apparel, up from 7.5 per cent 18 months ago and we are making good progress towards our target of apparel, reaching 15 per cent of sales. Hence, a combination of all these factors and a bit of luck helped us to achieve 14 per cent growth.
Hypercity said it is planning to have 22 to 24 stores trading in the next three years. Don’t you think it is very aggressive, given that the economy is down?
We have to be careful. Today, our consumer appears to be confident. But the market remains challenging and the consumer can quickly change his mood. We are not going for dramatic expansion. Opening three to four hypermarkets each year means we are confident about the business model, but certainly not overly aggressive. Our strategy is to further expand in the cities where we are already present. With a focus on Mumbai, Hyderabad and Bangalore, where we would open one new store in each city this year. The next financial year, we would enter Noida with two stores, our first in the National Capital Region.
How is the response for your smaller stores?
Customer response to our first compact hypermarket has been really encouraging. As you walk into our 30,000 sq ft Bangalore whitefield Inorbit store, it feels big. We have given the same amount of space and attention to food as our larger stores, improving the presentation of our perishable and grocery ranges. Furniture and large electronics are not stocked in the store, but all other categories are available. Going forward, about 60 per cent of our stores would be large stores .
It does not make sense to always expect a developer to be able to offer 60,000 sq ft space for a hypermarket. But malls do really benefit from the customer footfalls that hypermarkets attract, so this looks like a winning combination.
Hypercity had this premium positioning. You have also started talking about value deals and competing with value players. Don’t you think it would create confusion in the minds of consumers?
I don’t believe that the words ‘premium’ and ‘hypermarket’ should be put in the same sentence. There are players who aim at being the cheapest. We believe in offering our customers great value, which is quality times price and a great shopping experience. By investing in more promotions, we are ensuring that our value for customers is even better and we have been able to attract new customers with our Blockbuster weekends and ‘Win Win Wednesdays’.
When do you think Hypercity would achieve break-even at ebitda level and net level?
We are profitable at a store level and pushing hard for company level profitability. We continue to focus on the key drivers of profitability, sales and margin growth along with cost control. The final lever to pull is the right sizing of a couple of stores. In Amritsar for example, we have already brought down the size of stores from 140,000 sq ft to 60,000 sq ft. This is taking time as we have to do it jointly with developers.
