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Tata-owned Trent Hypermaket Ltd, which owns Star Bazaar, is not only resizing stores to drive profitability, but CEO Jamshed Daboo has taken a call to focus heavily on fresh produce, devoting almost a quarter of the store space to it.
“We want to start building our proposition in terms of selling fresh food. We are in fresh foods, but we want to strengthen that,” Daboo said.
Speaking to Business Line , the CEO said the retailer is looking at the critical linkages between the farm, the supplier and the consumer. “We want to take food retail in India to the next level in terms of quality, freshness, availability and pricing,” he said, adding that price of fresh foods in the store would be cheaper by 10-15 per cent than the local market.
The retailer is adopting new technology for the transportation and preservation of perishable produce. All the products are to be sourced locally. Apart from providing the best of fresh produce, including pre-cut fruits and vegetables, non-vegetarian and dairy products at the current 15 stores, Daboo is intent on building on the company’s inherent strengths. Smaller store sizes and being present in fewer cities makes perfect business sense.
Slow and steady
“We are creating business for a longer term, and not a three-year horizon,” he said. The retailer’s focus is to become a large regional player and get the model right, rather than go on an expansion spree.
The retail space of Star Bazaar stores would be cut down by about 50 per cent, to a manageable 30,000 sq. ft., to break even early.
Though the hypermarket division recorded a 21 per cent growth in total revenues at Rs 785 crore, the company’s annual report showed that operating loss was at Rs 64 crore. However, its same store growth (a key indicator of a retailer’s performance as it compares sales of stores that have been open for a year or more) went up to 7.9 per cent, up from 5.4 per cent, indicating that the company has started taking steps towards profitability.
The retailer has a very focused approach to its growth, despite the fact that it is witnessing stiff competition from both domestic players as well as international firms such as Walmart. As of now, Star Bazaar is concentrating only on Mumbai, Pune, Chennai and Bangalore, and has no intention to open stores in the North or the eastern markets.
Daboo maintained that the pace of launch of new stores would not be based on cheap real estate, but would primarily depend on traffic and consumer behaviour perspectives. “We do not see outside city limits stores as being sustainable,” he said.
Food, grocery
According to industry experts, most of the retailers, including Shoppers Stop-owned Hypercity and Future Group are focusing on food and grocery items, as it forms about 60 per cent of consumer spends.
On reducing the size of the stores, Daboo said, “Through our research we found that Indians shop in a very narrow band. This means, we don’t need to have 50,000 products in our stores. We can manage with say, 10,000 products.”
On the growth of the company’s private label brands, he said that currently about 30 per cent of the sales come from the in-house brands.
amritanair.ghaswalla@thehindu.co.in
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