Mumbai: Even as general organized retailers try to consolidate or face closure under the impact of the economic downturn, at least two chains are looking to expand their gourmet retail businesses to new cities.

Industry resurgence: The turnaround for Spencer’s Retail and Nature’s Basket comes in the midst of a bad year for organized retail. Harikrishna Katragadda / Mint

Nature’s Basket Ltd, a division of Godrej Industries Ltd that currently has eight stores in Mumbai, has launched two gourmet retail stores in Delhi and plans to open another 15 stores in the next two years. The company will open more stores in Mumbai and Delhi and also expand its presence to Bangalore.

Spencer’s Retail Ltd, which has gourmet sections in five of its retail locations, plans to open 20 more such sections in its stores across the supermarket and hypermarket formats in the next two years in Delhi, Mumbai, Chennai and Hyderabad.

“Gourmet retail is dominated by large standalone departmental stores and stand-alone stores in popular markets like Khan Market in Delhi and in premium residential areas," said Debashish Mukherjee, principal at consulting firm A.T. Kearney.

“These stand-alone stores are opening new branches in malls and even retail chains like Spencer’s are now expanding their presence into gourmet retail," he added.

Five-year-old Nature’s Basket, which repositioned itself from being a fruits and vegtables store to a gourmet outlet in 2008, is now close to breaking even on its operating costs, chief executive Mohit Khattar said.

“As a food and grocery retailer, our average sales were approximately Rs3,000-5,000 per sq. ft per annum. All stores were in the red. Today, we are six-eight times that throughout and (are) close to operational-level break-even," Khattar said.

“Being only a fruits and vegetables vendor seemed to be limiting not just in terms of overall sales potential but (also) from a profitability perspective," he said.

Mohit Kampani, vice-president (merchandising, food and fast-moving consumer goods) at Spencer’s Retail, which operates 18 hypermarkets, 12 supermarkets and 118 daily convenience stores, agrees that going gourmet offers better returns.

“Gourmet retail requires on an average 40% more investments per sq. ft compared to a supermarket store, but the margins are 60% higher per sq. ft and they help (to) bring in a new category of shoppers into the store and increase the average bill size as well," he said.

The turnaround for Nature’s Basket comes in the midst of a bad year for organized retail, which saw businesses such as Subhikhsha Trading Services Ltd shut down.

Supermarket chain Spinach, part of the Wadhawan Group in Mumbai, has not had fresh stock for the past three months, and chains such as Reliance Retail Ltd, Aditya Birla Retail Ltd and even Spencer’s Retail have had to resort to extensive consolidation of stores.

Even GourmetCITY, a world foods store with a gourmet cuisine counter, by hypermarket chain HyperCITY Retail (India) Ltd shut shop in October.

In contrast, Nature’s Basket’s overhaul of its operations into the gourmet segment, including the hiring of team members who had some knowledge of its offerings, product sourcing and even the store layout, seems to have worked in its favour.

From fruits and vegetables, the store also branched into fine foods, a wide range of boulangerie (breads and baked foods) and delicatessen (prepared foods such as sandwiches).

“We needed to identify and develop new sources for importing fine foods into India. We needed to develop an understanding of the right products, the right brands and the right price points," said Khattar, adding that the chain’s entire sourcing, distribution and stocking strategy had to be remodelled.