After a phase of brisk expansion and equally quick shutdown after huge losses, corporate retailers are making a cautiously optimistic re-entry into the Indian market. In an interview with Kakoli Chatterjee, Spencer’s Retail’s Sanjay Gupta, executive director, marketing and business development, explains how this time the RPG Group firm is more careful about its business strategies, and how it plans to attract more footfalls while keeping the costs down.
Q: After the dive south, organised retail is looking up once again. When did the rebound start?
A: Spencer’s journey of revitalising the growth started around October 2009. We have steadily but cautiously grown since then with a keen eye on profitability.
Q: What kind of expansion plans does RPG have for its retail venture? What kind of investments have you lined up?
A: Currently, we have a trading area of close to one million square feet for Spencer’s. By the end of March 2014, we want to take it up to 2 million square feet. We aim to double our trading area in two years’ time. For this, we will be investing around Rs150 crore.
Q: How aggressive are you about the private label category?
A: We are quite bullish on our private label strategy. It accounts for about 17% of our revenues currently and we will push it up to 25% in the next 12 to 18 months. We are focused on staples, processed food, fruit-based beverages, home needs, general merchandise, non-stick and anodized metal ware, household plastic and basic casual apparel. All of these will drive our planned growth.
Q: What are the store formats that Spencer’s is mainly looking at?
A: We are going to drive growth through our large format strategy, by adding hypermarkets. We have found that shoppers at modern trade centres prefer shopping at larger stores offering merchandise across categories.
Q: What are the geographies that Spencer’s is planning to ramp up its presence in? Are you looking to have a presence in tier 2 and tier 3 cities as well?
A: As part of our plan to double our trading area in two years, we have adopted twin strategies of strengthening our market shares in our existing markets as well as plan for scalability in new geographies. At the moment, we are planning to ramp up our presence in Andhra Pradesh, Tamil Nadu, Karnataka, West Bengal, Delhi NCR, Uttar Pradesh and Maharashtra. We want to be present in tier 2 and tier 3 towns as well to expand our footprint.
Q: How are you dealing with rental rates?
A: The real estate market has also evolved with developers and landlords adopting a partnership approach as opposed to a landlord-tenant relationship. We continue to explore opportunities which are lucrative for both parties. Depending on what is suitable for us, we will get into pure revenue-sharing, part-revenue or part-fixed rents. Rental rates vary across markets and hence there are no fixed numbers that I can share. But to indicate a ball-park figure, rentals in the region of 3-3.5% of revenues as an upper limit seem viable for us.
Q: What were the major gaps in merchandise planning, stock management and fill rates for Spencer’s Retail?
A: The assortment of each store depends on strong regional bias to reflect local consumption. Some of the major initiatives have been getting in OPPs (opening price points) in KVIs (known value items) which the shopper uses to benchmark prices. We are using this strategy for staples and it has worked.
Fill rates continue to be an issue with these being in the range of 55-60%. Multi-level relationship building and joint business planning are some of the collaborative initiatives that we have undertaken to address these issues.