(Chetan Sangoi is a speaker at the forthcoming RAI Retail Leadership Summit : RLS 2013.
As part of the preparation for the interview with Chetan Sangoi, owner of Mumbaiís well known Sarvodaya Super Market, I went online to look for the website to collect some background information, and was surprised to see that it didnít exist ! The interview that follows has some interesting snippets on a successful retailerís view of the online space, on the weaknesses of large chain store players and advise for kirana retail. Read on.
RA : I just did an online search for your website but couldnít find it. Do you not have a website?
CS : No, we donít have a website. How much is the net used anyway? The numbers that are being thrown around in the media donít count. Not even in Europe and America. Do you know, for instance, that it took Amazon 10 years to break even Ė though it has a presence only in the higher margin lifestyle segment.
Value retailing is very different. If online was so important why Wal-Mart and Carrefour are continuing to open new stores Ė even in America where internet penetration and literacy is so high.
People are day dreaming. Letís be clear, in a supermarket the customer is the housewife. They are the decision makers. How many of them go online? It is as simple a question as that. People need to touch, feel, test, try Ė this is basic human nature. The internet or mobiles canít give you that.
RA: You have now grown Sarvodaya to 3 stores. What gives you the confidence to compete with the large retail chains?
CS: The Sarvodaya supermarket is a 40 year old business that started with a single store in Dadar West, in Mumbai in 1972. In 2002, we renovated the 2,500 sq ft store to upgrade it to modern (defined as self-service) retail. Since then we have set up a 40,000 sq ft hypermarket in Sangli and a 10,000 sq ft hypermarket at Vashi ( Mumbai). It is the 10,000 sq ft format that we will be moving forward with. We expect to open at least another 2 stores in Maharashtra.
We are not scared of large format retail. Our strength is that we understand the family basket.
Do you know in Sangli the Big Bazaar has closed down? In fact we are now operating a Sarvodya store in the same premises Ė and that too profitably. Thatís because we understand the needs of the area. Donít ask me how we determine that Ė it is our trade secret. But what I will share is that at Sarvodaya, we recognise that unlike the West which is individual centric, Asia is family centric. The housewife has to keep in mind the needs of each and every member of the family Ė the in-laws, the husband, and the children. When we open our new stores I personally get involved in deciding which SKUís will be carried in the store. Once that is decided, then refilling becomes the job of the local team.
Also the large format stores are so undifferentiated. For a customer there is no difference between stores run by Reliance and that run by the Tataís. We look at them as training centers for our customers Ė who eventually come to us for satisfaction.
Even overseas Wal-Mart and Carrefour are exiting Indonesia. In the US itself 50% of the grocery business comes from the large chain store. The balance 50% is from small independents Ė Jews/ Patels / Chinese. And this is the case in mature markets. In India the crowding is in the large cities. Go to the smaller cities and towns. There is so much opportunity.
RA : Large format stores are known to complain about fill rates and the lost opportunity that goes with that? How do you address that?
CS : Fill rate is no problem for us. A number of the big chain store retailers have set up central warehouses to help them buy from the brand directly and get some incremental margin. But they wonít send a vehicle to a shop till there is a minimum load. This creates delays and poor fill rate. Sale/ consumption get linked to delivery and not customer requirement. The fact is that brands already have a fantastic distribution. Maggi is available at Rohtang pass ! Use the system. Donít create a parallel system. Sarvodya has no central warehouse. We are ready to sacrifice some margin and ensure better fill rates. It is simple maths.
RA : What is your advice to other Kirana retailers?
CS : Shut small stores. You need a min 2500 sq ft. to have a credible offer. In the future this will expand to 5,000 sq ft. The number of product categories and variety has become so large that this is the minimum space required to display a credible offer. Just look at all the new categories that have added on - frozen foods, instant foods, flavoured yoghurts. Each of these has a variety and product across multiple brands.