In the existing scenario, the The 6Ten neighbourhood
Launched on March 27, 2007, nature of the Indian retail industry convenience store chain is a division neighbourhood convenience is highly fragmented and dominated of REI Agro Ltd, India’s leading store chain 6Ten’s retail by the traditional, family-owned producer and exporter of basmati rice, network has already spread stores. Rapidly changing lifestyles are, and offers products such as grocery to over 320 stores across however, making the proliferation items, FMCGs, and fruit & vegetables. NCR, Chandigarh, Mohali, of supermarkets, hypermarkets and Targetting middle class consumers Panchkula, Amritsar, convenience formats an emerging the convenience stores are typically Ludhiana, Ambala, and necessity. Opportunities in organised located close to consumers; the format Nagpur with 3,10,000 sq.ft of retailing are especially high with does not require the store to be located retail space on investment respect to the food retail sector. in main markets or on main roads. IGD estimates that in the Indian “The rationale of the 6Ten stores was of Rs.150 crore. The Rs.1,085- context, the value proposition for the to capitalise on our relationships at crore listed company REI convenience sector is limited as the the retail level. All 6Ten stores are on Agro Ltd plans to open 1,000 traditional kirana stores (typically not COCO (company-owned company- stores covering an area of more than 500 sq.ft in size) operate operated) basis. This format has 10 lakh sq.ft by FY 2009 and in this space – they are open long been developed to leverage on our 2,800 stores covering over hours, offer limited range, and most relationships. We feel that we will not 40 lakh sq.ft by FY 2011. importantly, are conveniently located. be able to achieve optimum results
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REI Agro has already laid a framework to develop
support infrastructure including the set-up of collection centres, processing, packing and warehousing facilities. The company claims to have in place the infrastructure required to cater to over 1,500 stores. At present the facilities are located in Delhi, Faridabad, Ghaziabad, Mohali, Ludhiana, Nagpur, Mumbai and Ahmedabad.
With organised retailing growing at
close to 40 per cent annually, there is certainly a huge untapped market for these stores in India. The company is targetting the space across states such as Punjab and Haryana to deliver household staples and shopping convenience to even tier II consumers. Given the current density of retail outlets in India, retailers will have to motivate the consumer to trade convenience with price, range and ambience. “There can be no doubt that the quality of the product and price are crucial for the success of any retail store. The supply chain for fruits and vegetables in India is characterised by inefficiencies. It is estimated that 40 per cent of the produce ends up in a franchised model. Our strategy The company is meanwhile, also as wastage. We need to improve is to locate our stores in populated exploring opportunities to enter efficiencies in the supply chain. This middle class areas,” says Sandip highway and railway retail, as there will ensure quality of products at most Jhunjhunwala, MD, REI Agro Ltd. is large scope in the same. REI Agro competitive prices. At REI Agro, are The company has entered into has started with one store in Delhi’s reducing wastages due to our strong long-term rental lease agreements Metro on a pilot basis and shortly will network and our supply chain. We for its expansion. “The rentals in the be launching few stores on the Delhi- pass on this saving to our customers. neighbourhood markets for smaller Chandigarh highway. The company We feel that the quality of our stores are much lower compared to the plans to wait for the response from products at most competitive prices main markets. Another 100 stores will these stores before expanding to other is the key to our growing customer be added by next month. We plan to areas. loyalty,” says Jhunjhunwala. open 1,000 stores by end of FY 2009,” confirms Jhunjhunwala.
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The second challenge is the setting
up of the back-end infrastructure. The company has entered into this business with a realisation that back end is the key to success in grocery retailing. REI Agro has already laid a framework to develop support infrastructure including the set-up of collection centres, processing, packing and warehousing facilities. The company claims to have in place the infrastructure required to cater to over 1,500 stores. At present the infrastructure facilities are located in Delhi, Faridabad, Ghaziabad, Mohali, Ludhiana, Nagpur, Mumbai and Ahmedabad. Adding further Jhunjhunwala speaks on the third challenge in the retail business – the availability of space for food retailing. Most stores of Focus on private labels 3,000 sq.ft or above are located on the As competition in the India’s main roads and in malls, which are modern retail market intensifies, not ideal locations for food retail, he discounts and promotions are believes. expected to play a critical part in “We are in the small store format, generating footfalls. To counter the located in densely populated areas. impact on profitability, organised None of our stores are located in players are finding it more attractive the main markets or on high streets. to promote private labels or store Our flexible format provides us with brands given their higher margins. greater flexibility in terms of locations. The consumer too would benefit from We are currently operating 320 stores lower prices. “Our focus is on wet and have further contracted over groceries. We enjoy a major advantage 400 outlets. With the experience of on the supply chain for wet grocery. locating and contracting over 700 We expect the quality and pricing stores behind us, we are confident of fruits and vegetable to drive the that we have adequately addressed footfalls. We have also started private the challenge of availability of space,” label for most products such as, rice, he says. pulses, wheat flour, tea, spices and The fourth challenge, according other stables. FMCG products such as to Jhunjhunwala, is the availability sauces, chocolates, juices, beverages, of trained manpower. As organised jams, biscuits, shampoo, moisturiser, retail expands, there is expected to hand washes, floor and toilet cleaners, Major roadblocks be a dearth of skilled manpower. The mosquito repellents etc. Our products Organised retail in India is still at lack of institutions and courses for are packed in our Real Magic, Mr. a nascent stage. Only 4.6 per cent or different aspects of retail management Miller and 6Ten brands. Currently, so of the market is organised. Among will have an impact on the overall private label products account all segments, food retailing, which is supply of quality manpower. for 30- 40 per cent of our sales,” the focus area of operation for 6Ten, “We are addressing this challenge Jhunjhunwala informs. is the least penetrated by organised with a massive ‘on-the-job training “We are focussed on the daily retail. The company believes that the programme’ for our employees. requirements of households, biggest challenge for retailing of food We have already set up a senior especially for fruits and vegetables. in the country is the setting up of a management team for our roll-out. In We feel that the key in Indian retail is supply chain. 6Ten, however, claims addition we have already employed not just to replicate models that have that it is uniquely positioned because more than 4,000 people, making been globally tried and tested, but to of its experience in food on one hand, us one of the largest employers in develop a robust and scalable model and relationships on the supply side the Indian retail industry,” adds that will adapt to the needs of the enabling them to set up a strong Jhunjhunwala. Indian customer.” supply chain, on the other side.