Samir Modi plans aggressive Twenty Four Seven expansion
Promoter Samir Modi looks to leverage Twenty Four Seven’s franchisee deal with Indian Oil to expand from 49 stores to 10,000 in five years
New Delhi: Eleven years after he founded India’s first round-the-clock convenience store company—Twenty Four Seven Convenience Stores—Samir Modi, the youngest son of industrialist Krishan Kumar Modi, is setting himself an audacious target that he believes is “the future”.
Modi wants to set up 10,000 Twenty Four Seven stores across the country—generating retail sales of about Rs55,000 crore a year (average Rs1.5 lakh sales per store per day)—in five years. This is a huge jump from just 49 stores (43 in the National Capital Region and six in Chandigarh) that the company operates at present.
But the target is achievable, said Modi. Most of the stores will be franchised—a new format that Modi is getting into. So far, the company only operated company-owned and managed outlets. Besides, the company already has an agreement with India’s largest fuel retailing chain Indian Oil Corp. Ltd (IOC) to open smaller stores at its petrol filling stations. IOC has about 24,000 petrol filling stations across the country.
“Even if we manage to open convenience stores at a fourth (or fifth) of IOC outlets, that would make the target of 10,000 stores achievable,” said Modi. Stores at fuel-filling stations are smaller—about 500 sq. ft—unlike the ones at high streets, which are spread over 1,000-2,000 sq. ft.
Over the next five years, Modi said, the company will require to invest about Rs2,000 crore in Twenty Four Seven, as he is getting into cost-and-revenue sharing franchising model for fast expansion of his convenience store chain.
The decision to expand the convenience store chain is not a sudden, but a well-thought out one. In 2013, Modi had hired a five-member team from Japan as consultants for Twenty Four Seven. The team, headed by Mura Matsu, had earlier advised the Tokyo-based Seven Eleven Japan Co. Ltd on process, systems and operations to run the convenience stores under the popular 7-Eleven brand.
“In July, I appointed Mura Matsu as the chief executive officer for Twenty Four Seven. He’ll spearhead the expansion,” said Modi. In the past couple of years, he added, the model has been “tweaked for perfection” with proper supply-chain and technology and the company is bringing software from Japan for operational management”.
Up until now, round-the-clock shopping wasn’t permissible in India as government regulations did not allow shops to be open 24x7. It was only in March this year that the Delhi government permitted shops to stay open round-the-clock.
According to Modi, there is demand for round-the-clock shopping, be it in emergency or a hop-in option or for impulse shopping, primarily because of the rise in double-income households, busy professionals and youth seeking instant gratification.
“Franchisee model will fuel expansion. Also, recent change in regulations will make things easier,” said Modi, adding that the required investments would come from Godfrey Philips India Ltd, the family’s tobacco business.
Twenty Four Seven, so far, remained a small business for the group. In the year to March 2016, its revenue stood at Rs170 crore and Modi hopes to end the current fiscal year with Rs230 crore sales.
However, Twenty Four Seven’s rival is In & Out, a convenience store chain managed by state-owned Bharat Petroleum Corp. Ltd that operates more than 12,000 fuel filling stations. It runs 157 convenience In & Out stores.
“A retail business built around convenience stores is a good business model. No company has a national presence in convenience stores and Twenty Four Seven is primarily present in the National Capital Region. Over the past decade, it has understood the business and replicating the 7-Eleven model should work. But it needs to capture markets faster than anyone else does,” said Mumbai-based equity analyst Sachin Bobade.
Twenty Four Seven may be the biggest bet for Modi, but not the only one. Modicare Ltd, the direct-selling company that Modi founded at 27, two years after the Harvard Business School alumnus joined the family business in 1994, is undergoing transformation. “For the past 12 years, this venture has been making losses. I came back to spearhead the business in May last year, dropped prices, changed marketing, the incentives structure and product packaging. It should start making profit from next year,” said Modi, who has been spending all his weekends doing road shows and seminars for Modicare, one of the early movers in direct-selling market in India.
For Colorbar Cosmetics Pvt. Ltd, his second venture after Modicare, Samir Modi has set a target of making it a Rs1,000-crore brand in three years. The company is growing at 60% annually.
Colorbar, which competes with brands such as L’Oreal and Lakme in India, had revenue of Rs200 crore (retail sales) in March 2016. The beauty and personal care products market in India was estimated at Rs74,700 crore, according to a report by market research firm Euromonitor International.
“Colorbar will go premium, focus more on existing distribution, essentially modern retail, and more shop-in-shops. Besides, each of these stores should be experience zones with sales representatives as beauty advisors for better interactive marketing,” said Modi.