09 May 2016 13:05 IST

From ‘kiranas’ to hypermarkets

The next time you pull out stuff from a shop shelf, think of the pioneering Foodworld store

No less than the inimitable MS Subbulakshmi, India’s premier Carnatic musician, inaugurated the 3,000-sqft Foodworld store (now Spencer’s) in 1996. The first day’s sales totalled ₹10 lakh. The store soon became an exclusive choice for promotional schemes and drew in more customers.

“They were only available to us and not to any other store. That was when we learnt the power of breaking into the supply chain. We also had significant branding opportunity for the manufacturer,” says Pradipta Mohapatra, former Managing Director, Spencer’s.

The choice of Chennai

Chennai was the headquarters of Spencer’s. Compared with other markets, it had some exposure to modern retail in Nilgiri’s, the Spencer’s of old (incidentally, in pre-independence days, the largest retail chain east of Aden, now Yemen) and TVS’ Shoppers’ Choice. Even in 1996, stores such as Nalli’s (in sarees) and GRT Thangamaligai (in jewellery) were evolved, and customers discerning. Real estate was cheaper in Chennai. At Foodworld then, rent was ₹15 per sq ft, against ₹60-70 in Mumbai and Delhi.

RPG set up an institute, open no longer, to train staff, especially frontline personnel. When other groups entered retail later, Spencer’s became a rich hunting ground to pluck executives from.

The impact

Modern retail then was too tiny to provoke protectionist protests. But, it had the mom-and-pop stores scrambling to modernise.

It gave rise to ‘superkiranas’ such as Amma Nana and Murugan Stores, which borrowed good practices from Foodworld, says Mohapatra. It opened up employment opportunities for several million people. However, organised retail’s revenues have not grown significantly. For a store to break even 20 years ago, it had to earn ₹1,200 per sqft per month. In 2006, stores were making just ₹600-700.

(With price inflation, it has touched ₹1,500 now.) Even as the bottom-line is “virtually non-existent”, cause for hope lies in the market expanding to smaller towns, which Mohapatra fondly calls “the Nellores”. There are even hypermarkets in these towns, 15,000-sqft affairs which serve as destinations for family outings and entertainment.

Organised retail is growing at twice the pace of the economy — 12-14 per cent annually. But then, e-commerce is growing at 100 per cent. No one, the world over, knows how it will pan out, but many retailers are getting ready for a hybrid model. They think it will be better than e-tail because of supply-chain strengths, says Mohapatra. So, the next time you pull out stuff from a shop shelf, think of the pioneering Foodworld store.