By Sagar Malviya
Barely a week after the world’s top retailer Walmart ended its association with Bharti Group, its British rival Tesco has moved a step closer to entering the $450-billion Indian retail market with the Tatas launching a neighbourhood convenience store format modelled on Tesco Express.
Tesco Plc, the world’s third largest retailer, has a partnership with Tata Group’s Trent under which it provides back-end support and retail expertise to the Indian conglomerate’s Star Bazaar hypermarkets.
Tesco Hindustan Wholesaling, the Indian unit of the British retailer, supplies merchandise including some of its own labels, to 15-odd Star Bazaar outlets, sized anywhere between 40,000 sq ft and 80,000 sq ft and selling food and grocery to apparel to consumer durables.
The new format, Star Daily, is completely different. The first Star Daily outlet, opened in Pune last week, is just about 1,800 sq ft in size and stocks mainly fresh foods, groceries and essential items, a person aware of the store launch said. “Similar to a kirana store, Star Daily is kept open almost 15 hours starting at seven in the morning,” the person added.
Both Trent Hypermarket and Tesco did not respond to an email query. Globally, corner shops — such as 7-Eleven in Japan, Taiwan, Thailand and Singapore, Lawson in Japan and Oxxo in Mexico — are among the largest retailers in their respective markets, reflecting the growing business of small outlets in several countries despite the presence of international supermarket and hypermarket chains. Even Tesco runs more than 1,500 convenience stores averaging 2,200 sq ft in small shopping precincts in residential areas and countryside in the UK.
In India, ubiquitous kiranawallahs generate more than 90 per cent sales of consumer products industry.
Analysts say high sales volume will be the key to Trent’s success in the convenience store space. “The newer format can help them (Tatas) penetrate better catchment areas, but volume needs to be maintained to compensate for the higher overhead costs including real estate,” Devangshu Dutta, chief executive at retail consultancy Third Eyesight, said.
So far, Trent Hypermarket has been relatively conservative in its retail expansion despite rivals adding hundreds of stores each year. In fact, it did not open a single Star Bazaar store last financial year, but managed a 21 per cent increase in total revenue to Rs 801 crore.
It reported loss of Rs 72 crore. There are speculations in the market that the Tatas will take the acquisition route to expand its retail business. “There can be a good acquisition opportunity for Tata in the form of Bharti Easy Day, which has a similar format, if they decide to sell it off,” an industry veteran said on condition of anonymity.
Interestingly, Trent is entering the neighbourhood grocery market after some of its rivals have already burnt their hands in this space. Retailers including Reliance Fresh, Aditya Birla More and RPG Group’s Spencer’s Retail started expanding into smaller formats few years only to shut dozens of such outlets and shift focus to big-box stores or hypermarkets.
For instance, Mukesh Ambani-owned Reliance Retail has decided not to expand its 2,000-sq ft Reliance Fresh stores in the neighbourhood and instead focus on 7,000-9,000 sq ft Reliance Super stores. Future Group, the country’s top retailer, has invited kirana store owners and local entrepreneurs to operate its small format KB’s Fair Price stores. “The economics of operating a neighbourhood store is very complicated as real estate and catchment areas in urban areas is pretty complex,” Rakesh Biyani, joint managing director at Future Group, said.
The group plans to scale up from 200-odd stores now to 1,000 in the next two years. Others, too, now plan to return to this market, with some caution. Spencer’s Retail, which was forced to shut over 64 small-format stores in the last three years, had indicated to remodel its existing 105 stores and future ones on the lines of the kiranas and global convenience stores like 7-Eleven.
Similarly Aditya Birla Retail, which has shut more than 100 stores in the last two years, plans to open 100 supermarkets this fiscal.
Source:The Economic Times
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