The Aditya Birla Group’s retail venture is a little over a year old, but the company already has 430 supermarkets and could have 500 by the end of March. It could also have as many as a dozen hypermarkets by the end of 2008-09. But the chain, like other rivals, has entered the market at a time when the decibel level of protests against organized or modern retail is rising high, because it could affect the livelihoods of smaller vendors in the vicinity of such stores.
Sumant Sinha, chief executive officer of Aditya Birla Retail Ltd, and Russell Berman, the head of the company’s hypermarket business, talked to Mint about the company’s plans at the launch of its first hypermarket store in Vadodra. Edited excerpts:
It has been a little over a year since you started your retail venture, what would you say have been your biggest learnings?
Sumant Sinha, CEO of Aditya Birla Retail, says if you don’t give consumers a good experience, they are not going to come.
Sinha: There are so many of them, I don’t even know where to start. I would say one is that this business is not an easy business. There are a lot of issues and constraints—people is one, real estate is another, the lack of organization with regard to vendors or supply chain.
These are significant issues we have had to overcome. So, one key learning is that you cannot really depend on other people, you pretty much have to do it yourself. You also have to make an allowance for other people’s lack of performance. Also, consumers are pretty discerning. They are looking for a good deal, a good experience and if you don’t give them that, then they are not going to come.
Berman: The value proposition is a critical parameter in the behaviour of the consumer. They are value-driven and they know quality. I don’t think you can give them anything at any price, or at least not twice! That discerning sense is very clear and I hope that we have incorporated that in our hypermarket.
You talked about real estate being a challenge. Is it more so for a hypermarket where you need a large amount of space?
Sinha: No, it is the same for every format. Real estate is a very important part of the cost.
Can you talk about your plans for the hypermarket segment. How do you see that growing?
Right fit: Russell Berman, head of Aditya Birla Retail’s hypermarket business, says there is no competition with supermarkets.
Berman: Our objective is to open across India and we will lock down sites that we can afford. The real estate market can drive the opportunities that are available to us to open locations.
Will you look to open in the same place where the supermarkets are?
Berman: There is a complementarity. These are not competing formats in the same way that supermarkets are with kirana stores. I think the hypermarkets can fit into the retail fabric without an issue.
Is finding people an issue for you because you have entered the market when there are other retailers and you need to hire from them at higher salaries?
Sinha: I think getting good, trained people is certainly an issue. There are just not enough people in India who know how to run a supply chain, a store, or who have merchandising knowledge and there is not that much of a pool to hire from. It is not that other retailers have a huge pool of talent. It is just that the whole industry is being created from scratch. So, everybody has to do their learning.
Are you finding people’s attitudes towards retail changing as the industry goes through an image change and becomes cooler?
Sinha: It is. What helps is also that we are part of the Aditya Birla Group and that has some cache. It has been ranked as the best employer (in India, in a survey conducted by Hewitt Associates). So, that does help.
The new Rajasthan budget levied a 4% tax on all food and grocery sold in modern retail in the state. Already the Uttar Pradesh government has banned modern retailers and Kerala is mulling a draft legislation to control modern retail. Does this impact your plans at all? Is this becoming a bigger problem than you anticipated?
Sinha: It is certainly an issue. It is particularly, pertaining to fruits and vegetables. It doesn’t really affect anything else. I think we will find ways and means of getting around some of the issues. We do have five of our supermarkets in Jaipur.
Typically, anything between 5-20% of our sales come from fruit and vegetables and that will become 4% more expensive and that is not very healthy from our standpoint.
Are you also in Kerala and have you had trouble there?
Sinha: Yes we are in Kerala and we have had issues there.
Would you like to see some policy statement that addresses these issues?
Sinha: I don’t really know if...(the Union government)... can mandate a policy on this because this is a state subject and you need a number of licences from municipalities. So, if someone does not want to encourage retail stores, there are many way of doing it or stopping it. So, I don’t think you can mandate a policy.
Are you looking at other formats and any details you can share on that?
Sinha: We would be looking at other formats, but it is too early to share details on that.
Are you looking at any acquisitions?
Sinha: At this point, we have no plans.