Category: Business

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Business India

Back to History – Aditya Birla Retail Limited – More for you..

The Aditya Birla group made a bold leap of faith in the year 2006, when they bought out Trinethra Super Retail, a long standing player in the organised retail business in South India. 
Trinethra itself was the result of consolidation of two other chains – Fabmall and Fabcity. The advantage that the group got from this acquisition was that it became a scale player at one shot in two states – AP and Karnataka – which were individual strong holds of Trinethra and Fabmall, before these two entities merged.

Trinethra worked on a direct store delivery model (hence had to be supplied through distributors). The entry of the Aditya Birla group brought financial muscle and organised operations to the centralised DC model. 

Post the takeover in 2007, a re-branding exercise was carried out – the stores were named – more – for you : signifying a value proposition to the consumer who shopped there. Like many others who bet big on the retail rush in 2007-08, more too went on a store opening spree – and like all of them, had to resort to closures when the going got tough.

However, more had one good experiment going  on even while the smaller stores were facing turmoil. ABRL was pretty much the pioneer in the large Hypermarket format, with a couple of stores operational in the West (Baroda and Aurangabad I think). In fact, ABRL Hyper used to be a separate chain back then, and was a separate entity in the ABRL eco system also. The results of this experiment with the large format paved ABRL confident expansion in other cities, and became a game changer of sorts, being emulated (or maybe the other chains also realised it at the same time) by other chains as well. 
Eventually, the Hypermarket model became the favoured expansion vehicle for this, as well as other chains.

ABRL also pioneered a few ahead of the curve initiatives, like a monthly promotions booklet in each super market store which contained information about the various promos across categories.


ABRL had also realised pretty early that as operations increased in scale, supplier development would become paramount. Their hypermarket team was one of the first teams in the country to on board vendors about the new purchase management system, and how they would eventually want to move to vendor managed inventory. 


While ABRL’s central team did initiate these and other pioneering efforts, in store execution and MIS integration between the southern states and rest of India remained operational challenges for a long time. Not really sure whether things have improved on this front since then. Another major challenge faced by vendors was the constant churn in personnel – new faces came in almost every 6 months or so. 


It is sincerely hoped that the ABRL team is able to bridge the gap between strategy and execution – it is really strong on the strategy and thought leadership front, and can leapfrog its rivals if it manages to get the execution piece right.


Landmark stores:
Hyderabad – Jubilee Hills Road No 36.
Bangalore – HAL Airport Road, Indira Nagar
Chennai – Anna Nagar

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Business India

FDI in Modern Retail – To be or not to be?

Over the past few weeks, we have been subjected to a huge hue and cry over the FDI in retail announcement and its sudden roll back – both the GoI and the opposition have presented their PoV – let’s try and  make sense of the key arguments from both sides and examine the issue from a balanced perspective.


1) Large retail will improve supply efficiencies and give better prices to the farmers – mostly correct – provided i) they get the rights from the APMCs to procure ii) Given the 1 mn population rider, conveniently located sources for a range of products may not be easy to find. 
A possible solution – get them to set up their own farms – start contract farming – this would ensure focus on productivity, better farm techniques and conservation efforts being made for the environment.

2) Prices for consumers will go down – Not too sure about this one – Given our creaking road network, where it takes five and a half hours to cover 250 km – (Delhi – Agra) – and the ever increasing costs of fuel – one cannot be too sure whether this would be an enduring phenomenon –but prices at Cash and Carry centres would definitely be lower than traditional kirana – of course – the consumer will have to spend time and money (and fuel) to go and shop from the Cash and Carry – which would be located at city outskirts ! 

3) Small retailers would get wiped out – Easier said than done – 
a. Finding real estate cheap at prime locations would not be easy – rent is one of the largest overhead of a modern retail outlet. All the prime locations – near residential colonies, high rises – are occupied by either our neighbourhood Lala ji, or by Indian modern retailers ( who had burnt their fingers in a mad store expansion race in 2007 – and are still struggling to recover from that adrenaline rush)

b. Store operating costs – Manpower, Electricity – are huge in a modern retail shop as compared to Lalaji. An anecdote – During a market visit in Hyderabad, a consumer complained to the store staff about the lack of air conditioning. This was in peak summer, and the chain was on a cost cutting drive – hence only fans were operational. Bottomline – glitzy exteriors will raise consumer expectations and consequently, operating costs. Given the erratic power supply situation in most of our cities, generators are only going to add to the confusion.


c. Convenience and friendliness of the kirana – most kiranas maintain credit accounts of the families they service. Can you even imagine that happen in a modern retail outlet ? Add to it the benefit of free home delivery, service on phone , and the occasion for gossip at the Lala’s counter !

d. Don’t underestimate the Lala’s ability to innovate – in the past five years since Modern retail has started expanding, a quiet revolution has been happening in the kirana outlets as well – they are becoming modern, adding self service and accepting credit cards too! Large retailers will not have it so easy!

e. The Journey to profitability at store level could evolve along two possible lines – franchising (like the Nilgiri’s model – which upgrades existing kiranas to self service) or rapid expansion of the Hyper format – which would allow for lower operating costs per square foot, higher range display, and a heavy mix of apparel, consumer durables and other high margin categories.

The Modern retail outlet would also need critical support from a few, “non policy” factors to be able to really succeed – namely –  

Readiness of FMCG companies to service modern trade – 
a. Modern retail today contributes nearly 5-7% to a typical FMCG cos’ sales. Given the strong reliance on traditional trade and wholesale, the SKUs available for a large number of products are suited for this environment 

b. To really drive business in the modern retail format, companies will have to introduce innovative packs (bulk packs – as the latest Nielsen shopper survey suggests), invest in shopper research and consumer understanding, deliver exciting promotions and the whole shebang – to really make modern retail work. 

c. We have to remember that unlike the Lala who has no qualms in selling whatever he is dispatched, Modern Retail is very finicky about Fill Rates. ( % of stocks supplied to order received) – levying penalty on firms who drop below agreed service levels. Managing this complexity would not be easy for FMCG firms as well. 

d. Plus, Modern Retail works on high margins, and credits!

Availability of cost effective work force and labour – A possible drawback of a large number of malls / hypers opening up would be on labour – people would be more keen to work in an AC environment, cleaning floors and toilets, but not be willing to be employed as labourers / loaders / unloaders – which would mean additional costs for the suppliers, coupled with delays in servicing.

It is also possible that it would do good to the government to organise this sector, as this would do away with “kachcha” bills and impact tax revenues too. 

To sum up, while the government, the consumers and commodity suppliers would stand to gain from the advent of modern trade, a magical, overnight transformation would be difficult to achieve – given the challenges faced by the suppliers, the infrastructure and the external environment – this, of course, is the “dhande” ka perspective !
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Business India

A brief history…part two

A Very Happy Diwali to all !


Carrying the Nilgiris story forward today – 


Nilgiris is probably the second oldest modern retail chain in India. It started off as a single store in Ooty, and gradually expanded to cover TN and Karnataka (it still has token presence in the other two states). 


Lots of stuff is available in public domain about the company’s takeover by PE group Actis in partnership with a Singapore based investor. See this and this. 


Niligiris is a shining example of great brand equity. Over the last 100 odd years, it has been able to continuously reinforce the perception of being a quality self service outlet that stocks great product range (imported as well as Indian), superb dairy products (especially the cakes at Christmas time) and reliable food stuff (pulses, sugar, rice et cetera). In some places, it sells liquor as well 🙂 


Nilgiris is based on the franchisee model – that is – if I am an independent kirana shop owner, I can ask Nilgiris to make me their franchisee, at an obvious monetary consideration. 
The store will then be laid out as per their guidelines, and I will get the benefits of better margins and discounts from suppliers by virtue of being a Nilgiris store (since all national suppliers have terms of trade with the organisation). 


This model obviously has great upsides and a few downsides, the obvious upsides being – 
1) Faster store addition – you have to visit Bangkok and see the 7/11 stores to understand the power of franchisee led expansion ! 
2) Lower operating costs – since stores are usually supplied on an individual basis, the brand typically has lesser investment in warehouse, manpower and working capital – hence it is easier (relatively) – to be profitable, and that is any day a huge challenge.
3) A win – win scenario for both store owner and the brand – owing to the previously mentioned facts.


However, the operating reality is not so rosy as it seems – 
1) Ensuring consistency across stores in terms of layout, merchandising and providing branding space is very very difficult to achieve – this is because the brand has no role in deciding the store layout – as it has had to adapt to a pre-existing physical entity.


2) Managing various franchisees is itself a challenging task, since each person is a separate business man, with his / her own set of expectations about the financial and other benefits from the business.


3) There could be a risk of older franchisees turning rogue and parting ways with the brand – since location is a critical success factor in retail – and the store is technically owned by an individual – it may so happen that the store owner has a falling out due to a mismatch in expectations, and may want to start his own stand alone store. Preventing this requires strong operational discipline, as well great relationship management between the brand and the franchisee.


4) Supporting loss making stores may not be a very feasible option for the brand.


Landmark stores –
Chennai – Near Ega Theatre – PH Road, R. K Salai, Adyar, T Nagar, Velachery, Ashok Nagar, Besant Nagar
Bangalore – Brigade Road, HAL Airport Road (Golden Enclave), Koramangala (left from Sony Centre), Opp IIM.


Nilgiris enjoys a good reputation owing to its focus on quality – and it is hoped that it can expand its footprint across India so that the rest of us can also savour the benefits!