Retailers back at hypermarkets for growth

Mukesh Ambani’s Reliance Retail probably signalled the arrival of hypermarkets when it opened the first big-box store spread across 165,000 sq ft in Ahmedabad four years ago. But things did not quite work according to plan and the retailer downsized its largest store within the first year of operations. The focus then had shifted to neighbourhood stores under Reliance Fresh brand.

On a comeback, the retailer is now rejigging the hypermarket story with Reliance Mart. Others like Dutch retail chain Spar, K Raheja’s HyperCity and the country’s largest retailer Future Group too are banking on the hypermarket format to ring in profitability and differentiation.

“The neighbourhood convenience store concept has not done well and it’s a learning for all of us in the industry. The big-box model can offer the choice to customers which a convenience store cannot. It’s also clear that financial viability will rest in the big stores as the small format stores do not have a feasible business model,” says Damodar Mall, director for food strategy at Future group, which operates stores like Big Bazaar. 

The economic crash of 2008 halted the hypermarket push as real estate and cash crunch became big hurdles for big and small players. Hardly any hypermarkets opened in 2008-09 with even smaller format retailers struggling to stay afloat. The now-shut discount retail chain Subhiksha had added some 1,400 neighbourhood stores in just two years during the boom period only to be wiped off by 2009.

Reliance Retail says hypermarkets will be a strategic growth driver within its retail play. There are 16 Reliance marts operational currently. Future Group is ramping up the Big Bazaar ‘Family Centre’ model which is typically 75,000 sq ft stores offering service facilities such as beauty parlour and gymnasium. “We have ten stores now and will have two each in the big cities going forward,” Mall adds.

“Large format stores will be the model for profitability considering they operate on economies of scale. If retailers get the supply chain in place hypermarts have the potential to get huge footfalls as they are more than just a place to shop at,” says Anand Mour, VP-FMCG & retail at brokerage firm Indiabulls Securities. 
 
Source  –  The Times of India