09 May 2016 13:21 IST

How Foodworld sparked modern retail, 20 years ago

First store in Chennai, now a Spencer’s, to celebrate pioneering day

Don’t be surprised if nostalgic customers walk in and garland the store manager at Spencer’s at Chennai’s CP Ramaswamy Road on Monday. This store, once known as Foodworld, is celebrating 20 years and represents the country’s first stab at organised and modern retail, now projected to almost double to $1trillion by 2020. May 9 will henceforth be celebrated as Supermarket Founding Day in India, says Pradipta Mohapatra, then Managing Director of Spencer’s, an RPG group enterprise. (RPG and partner Dairy Farm of Hong Kong parted ways in 2005 and the chain was renamed Spencer’s. Foodworld is a Dairy Farm brand.)

Mohapatra recalls: “RPG was keen on retailing. We ruled out electronic goods; margins were low and there was evolved competition even then. Garments and fashion were out. The manufacturers/brand owners controlled the supply chain. There was a big gap in food/grocery, with the exception of Nilgiri’s, not yet a chain store. We knew value would come from aggregating large volumes and a stable supply chain.”

Also read: From ‘kiranas’ to hypermarkets

The ‘modern’ factors

“A survey said consumers were not unhappy with kirana stores. A conjoint analysis, however, revealed the annoyances. New and imported products were not available. Customers suspected the shopkeeper was hoarding the freebies promised. Prices changed with demand and season. A huge revelation: younger customers wanted to choose, they resented the owner pushing the brand of his choice. This did the trick for us,” elaborates Mohapatra.

Typically then, kiranas carried 600 SKUs (stock keeping units), in 400 sqft stores. Foodworld decided its stores would be five times larger. “They would be self-service-style, for consumers to browse, hygienic and temperature-controlled. They’d offer great price stability. There would be automated billing. Stocks and front desk would be linked. All this constituted modern retail, though now it also means a large chain,” he adds.

Consumers wanted all this but didn’t want to pay even a rupee’s premium above the kirana. Foodworld then decided that every day at least 50 SKUs — items bought in bulk or frequently, rice, potatoes, detergent — would be far cheaper than any kirana, comparable to wholesale prices. “And with that, we were in business.”

(With inputs from Vinay Kamath)