LABEL Issue V
The sales
from the convenience or
neighbourhood store
lesson
learnt being the economics of
formats currently
operating a convenience store is very
stands at Rs 16-Rs 20 per sq. ft. per day as
complicated as real estate and catchment
against Rs 35-Rs 40 per sq. ft. per day,
areas in urban areas is pretty complex.The
which industry experts consider is the
retailer also realized that it had neither
minimum value required for viability
taken into consideration nor bargained for
whereas rents eat up somewhere around
the kind of 'unmanageable losses' that
15-20% of the retailer’s revenue, compared
could arise in future before venturing into
to the global average of 10-15%. There is a
the convenience store space. The retailer
huge mismatch between the rents paid
also realized that the traditional grocers
and the actual sales that take place in
or the Mom & Pop stores have an edge
these formats.
over the organized retailers in the small
store format and the traditional grocers
On the contrary, renting larger spaces in
can leverage their strengths like customer
malls gives companies better negotiating
relationships, home delivery
power and better deal on rents as per
small purchase , credit facilities etc. The
retail industry experts. For an anchor
retailer has understood the fact that it is
tenant per sq. ft. costs are lower. Large
very difficult
stores also generate additional incomes
consumer who is already exposed to too
through sub-letting spaces for shop-in-
many conveniences offered by the
shops and in-store advertising. In today’s
traditional kirana stores . It
scenario shoppers increasingly are looking
recognized the fact that it is very difficult
to migrate to shopping at large format
to operate in the
stores for ease of range, better offers and
business with an inevitable high-cost
their
structure.
time
management.
Store-level
even on a
to satisfy the Indian
the
has also
low-margin grocery
profitability is also better in such formats.
Hyper stores have
In the lieu of these facts the Spencer’s
contributed 70 per cent of the company’s
group has decided that it will focus on
expected turnover of Rs. 1,800 crore. All
large format stores i.e the Spencer’s Hyper
the aforementioned reasons have shifted
stores and has indicated that it will try to
the focus of Spencer’s towards opening
remodel its existing 105 convenience
large format stores which is an easier way
stores and future ones on the lines of the
to achieve scale and subsequently to
kirana stores and global convenience
expand with smaller formats.
stores like 7-Eleven in order to curtail the
This year Spencer’s
losses and maximize the profit.
The spencer’s group learnt a lot of lessons
from the group’s past experience. The first
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