Mumbai: Trent Hypermarkets Ltd, Tata Group’s retail venture with UK-based retailer Tesco Plc that operates the Star Bazaar hypermarkets and Star Daily supermarkets, will expand to 200 stores in 20 cities by 2018 in partnership with state-run Bharat Petroleum Corporation Ltd (BPCL), according to a top company executive.
The expansion is part of the second largest oil marketing company’s shop-on-go initiative which was launched about three months ago. With shop-on-go, BPCL will offer home-delivery services for food and groceries to its customers for which it will use the Star Bazaar stores as the back-end. Additionally, Trent Hypermarkets will open its Star daily stores at the BPCL outlets.
“We have tied up with Trent for our shop-on-go venture. A customer would place the order on BPCL’s website shopongo.in. BPCL will do the invoicing and our cooking gas delivery boys would deliver the order baskets. The back office will be run by Trent and we are integrating, our software and accounting,” said a senior official from BPCL on condition of anonymity.
The Trent Hypermarket joint venture operates in states like Karnataka and Maharashtra which allow foreign firms such as Tesco to own as much as 49% stake in retail chains.
However, online trading has a different set of foreign direct investment (FDI) rules under the e-commerce marketplace model which forbids companies from holding inventory. Hence the JV cannot offer its own online delivery services.
Currently, BPCL and Trent are running a pilot in Pune’s Magarpatta zone and planning to expand it to Jaipur and Indore. BPCL will get a share in the sales that will be made through its website, the BPCL official said.
“We (Trent Hypermarket Pvt. Ltd.) are doing a trial with BPCL’s online initiative, shopongo.in. We are supplying groceries to them from our store at Magarpatta, Pune,” said a spokesperson from Trent Hypermarket Pvt. Ltd. The company did not elaborate on the details or plans of the partnership.
The BPCL official said the pilot in Magarpatta has been successful and the company is planning to expand in other zones in Pune. For BPCL, the entire exercise is aimed at increasing footfalls, brand recall value and revenue generation from non-fuel retail businesses.
“The customer acquisition is done by our liquefied petroleum gas (LPG) dealer and delivery boys. We also have society based communication. This is only a three month old venture and our basket size is at par with anyone in the business,” added the BPCL official.
At BPCL’s fuel retail outlets, the company will have Star Daily stores or co-branded BPCL-Star Daily stores. Trent will also help BPCL bring in its own private labels, the official said.
“For Trent Hypermarket, a partnership like this (with BPCL) makes sense as it gets an additional channel of business without much investment,” said Pinakiranjan Mishra, partner and national leader – retail and consumer products, Ernst & Young SPL (EY).
To be sure, online retail is an important part of modern retail and most brick and mortar retailers are looking at multiple channels like stores, Internet and mobile phones to provide services to their consumers.
Currently the modern retail market size is estimated to be Rs87,100 crore and estimated to grow to Rs1.7 trillion by 2019 in India’s top six cities, according to a February report by Knight Frank India Research. Also, penetration for modern retail is expected to substantially grow from a fifth to a quarter of the overall trade in these cities in the next three years, largely driven by omni-channel, said the retail property consultant in the same report.
There are 41 Star Bazaars spread across three formats. Ten of them are hypermarkets of approximately 50,000 sq. ft—the large-size format it initially preferred when it started in 2004. Of the remaining 12 are Star Market and 19 Star Daily outlets, which came after the partnership with Tesco in 2013. The Daily is up to 5,000 sq.ft and the Market is 5,000-15,000 sq.ft. A majority of these stores are located in just three cities of Karnataka and Maharashtra—Mumbai, Pune and Bengaluru.