IMAGES Retail speaks to Biyas Roy, Executive Director, Arambagh's Foodmart Pvt. Ltd. on how a chain of stores selling processed and ready-to-eat chicken items has evolved into becoming one of the top Food & Grocery retail chains in Eastern India with a footprint across all major cities of Bengal. Arambagh stores occupy a format that is positioned between the neighbourhood kirana store and the larger supermarket, with average store size of 700 sq.ft. approximately.
Excerpts from the interview…
Please share the growth journey of Arambagh's Foodmart chain of stores.
Arambagh's Foodmart,a chain of convenience retail stores, was started in the year 2000, following the concept of the international ‘7- 11’ chain. The first Foodmart was converted from the existing Arambagh’s chicken chain of stores selling processed and ready-to-eat chicken items, with the idea to add more value for the existing customers. We operate as small-format self-service retail outlets of an average size of 600-1,000 sq.ft. area. The chain has now expanded to 56 stores, out of which 33 are in Kolkata and 23 in other cities of West Bengal.How do you look at your retail format as strengthening your business model?
Arambagh's Foodmart is a neighborhood supermarket - a unique format that positions itself between the neighborhood kirana store and the supermarket that offers modern ambience and attractive promotions. OurUSPs SPs are developed more in the line of convenience or ‘value for time’ along with value for money.
Apart from attractive promotions, good quality grocery and competitive pricing, a bunch of convenience factors are offered such as quick checkout, free home delivery for any order amount and order over telephone. We off er five categories - food, grocery, toiletries, frozen and RTE - to our consumers.
Our stores are strategically located in densely populated localities yet at important junctions to attract flying customers. 90 percent of daily household needs are available within 10 minutes of reach or delivered free.
Do you have any Omnichannel strategy?
We do not have any Omnichannel strategy. Online retailing is particularly challenging in food and grocery where delivery time as well as freshness of food are critical and inventory management is a challenge. Our stores are small and run on a lean inventory, and hence backward integrated online retailing has to be done through warehousing, which is difficult to be integrated with brick-and-mortar. They are essentially two different businesses and I wouldn’t say online is a natural value addition/forward integration for brick-and-mortar retailers.
High-Street or Mall - which is your preferred location and why?
Convenience stores are always located on high-streets. This is because the customers of a convenience store are local residents or flying customers. Ease of approach is one of the values offered by a convenience store. Consumers may travel to a mall for spending a fun evening with family or for the experience of shopping at a super or hypermarket, but not for shopping basic household items at a convenience store. Furthermore, telephonic order, free home delivery on any amount are some added services offered by a convenience store which are best done being in the neighborhood.
Throw some light on the innovations introduced in-store to enhance customer experience.
Our main in-store experience, which is also one of our key differentiators - has been the employee-customer relationship. Many of our employees have been with us since the inception of the company as are a large portion of customers. They have become a part of one big family. Elderly customers have depended on our staff for not just delivering their groceries, but also for suggesting buying options, sometimes they drop in just to have a quick chat over a cup of tea. Customers have truly made our stores a part of their household.
Share with us the tech advancements that you have introduced in 2019?
We work with a fully integrated software system that covers production, purchase, inventory management, retail sale, B2B sale, vendor management, accounts and taxation. Each process is automated and provides all necessary control measures.
Inventory management is done through an automated replenishment system based on sales projection, lead time, required stock-cover and payment norms of vendors. In 2019, the automated replenishment system has been upgraded to include many different parameters to take care of purchase cycle and non-purchase cycle sales, promotional items, new launches etc.
How has been your growth in 2019? Highlight the achievements.
In 2019, the chain’s growth has been modest. We have been concentrating on strengthening our foothold in North Bengal and bringing the unit to profit. We opened few more stores in Siliguri in 2019.
Our main achievement in 2019 is to turn our North Bengal stores profitable. The cities of the north have been mostly dominated by local kirana stores offering deep discounts and extending credit, and that is why, we were struggling with low footfall. After 3 years of educating customers about modern format retail, this year we have successfully shifted their preference to service, quality and value rather than simple price-cuts. We have got the north market ready for modern format grocers.
Share with us the expansion plans of the brand.
We are cautious with our expansion strategy. By the end of 2020, we will be covering rest of the Tier II cities of West Bengal and add more stores to the cities of North Bengal. As of now we have no plans of expanding outside Bengal.
Please share your views on East India’s retail market. According to you, how much has it grown or developed in the last 3 years?
The East India’s retail market has been a conservative market even a few years ago. The conservative middle class has been old-fashioned in its choice of stores, products, and purchase and payment channels. As store/brand stickiness was high, creating loyalty and retaining customers was easier. A large part of the older generation still continue to do so.
However, over the last few years evolving middle-class with rising disposable incomes and growing aspirations for improved living standards especially among the Millennials have brought in drastic change in shopping patterns in the East.
Consumers now have become more conscious of value, fashion savvy, brand savvy and tech savvy. They are demanding quality, service, value for money and experience of shopping all at the same time. Emergence of new retail formats and offering value-added services are attracting more conservative middle-class consumers in both rural and urban areas of the East. At the same time creating stickiness for one particular format now comes with a higher price to the retailer.
Elaborate on the opportunities and bottlenecks for modern food retail chains in the East.
Increase in disposable income and customer aspirations for better lifestyle, growing young population with the attitude and willingness to spend, increasing urbanization and aspiration of rural areas to catch up - have all contributed to a larger urban or urban-minded population that values convenience, coupled with the higher propensity to spend. Tier II and II cities in the East still have a low share of organized retail and comparatively low real estate prices, and hence present a gold mine of opportunities.
One of the major challenges for modern food trade in East India is the shrinking of margins. A big chunk of modern food retail comes from national food brands where retailer margins are fixed by brand owners. Margins are the only source of income for a retailer unless he has his own Private Label. In many cases the margins are reduced by the brand owners and maintaining a profit becomes a struggle for food retailers.
Another major bottleneck is to find and retain quality manpower for manning the fast-evolving retail setup, particularly the front end. Aversion towards hard work and higher propensity of young recruits to change jobs frequently - result in high attrition rates and higher retention costs. Lack of good real estate and soaring real estate costs in urban areas are also a grave challenge for expansion.
Is the market attracting investment in modern food retail chain? Why or why not?
The initial era of consumption boom and expansion frenzy saw investors scurrying to fund the growth. After two or three levels of funding, investors are now looking for a positive ROI. They now expect retailers to have a definite and long term revenue model. The market is now consolidating, retailers are almost done experimenting and are finding their niche, with specific values to offer.