Business - Interview Hypercity Retail mktg head

Though only two years old, HyperCity Retail, a 1,25,000-square-feet hypermarket in the suburb of Malad, Mumbai, has managed to make its presence felt in the suburb and adjoining areas, thanks to its size and merchandise mix. Plans are afoot to take the format to cities such as Jaipur and Bangalore. The company is confident the format will work the way it has in Mumbai. But this isn’t the only venture for HyperCity Retail. A second format in catalogue shopping called HyperCity Argos has been expanding its base in Mumbai. There are some six Argos stores in Thane, Mumbai at this point. All of this implies that Esha Anand, head of marketing and visual merchandising at the K Raheja Corp-promoted company, has her hands full. She took time out to respond to questions posed by FE’s Viveat Susan Pinto about HyperCity and Argos. Excerpts:

What is the average customer purchase at HyperCity like? From how far are customers coming to your Malad store?

The average cash memo is over Rs 1,200. We have customers coming from as far as Colaba, since HyperCity is a popular destination for shopping for many.

Is a customer from south Mumbai ready to travel north to Malad, when there are a number of options available on the way?

We do have customers traveling from south Mumbai to Malad. One reason is the range of products we offer. The space and shopping experience also helps.

Your target audience is upscale yet value-for-money shopping is something you focus on. Does it not create confusion in the minds of your target audience?

Great value is a benefit offered by all hypermarkets. It’s no different with us. Customers expect to save money when they walk into a hypermarket. I don’t think our target group (TG) grudges that in any way. We have positioned ourselves as a format that offers an assortment of products across categories. You can expect to discover something new whenever you walk in.

At a time when big-format retail is struggling to get the required footfalls, how are you making sure that HyperCity gets its fair share of visitors? What are its footfalls per day?

On weekdays, we get about 7,000-8,000 footfalls. On weekends, it’s upwards of 20,000. On a monthly basis, about 3 lakh customers walk into our stores.

What are you doing to ensure that customers come back to your store? What marketing initiatives have you undertaken for the same?

Let me tell you that customers from the immediate catchment area walk in more than once a month, while the ones from the extended catchment area walk in at least once a month. That doesn’t mean that we are idle because people come back to our store often. As I mentioned, we ensure that people get something new whenever they walk in. For instance, we’ve added categories such as pet food to our list of products on offer.

This has got an excellent response. We have private labels apart from national brands to choose from. I am not saying that others don’t do it, but our range is incredible. We encourage in-store activation via sampling of new products, demonstations etc. For example, we have cooking shows at our live kitchen, wide aisles and a number of check-out counters. This makes the experience exciting for people who walk in.

Is retail about scale and size?

Scale is critical for a number of reasons. It helps to improve the buying power of a retailer. When buying power is good, a retailer can negotiate procurement of products at an attractive price. The cost advantage he gets on account of this can be passed on to the consumer. This helps in customer retention. Secondly, systems such as supply chain, IT and technology have become critical for a retailer. When the scale of operations is huge, investment in these systems is justified. Otherwise it’s too expensive.

But is size imperative in retail? You haven’t responded to that.

To us size does matter. We would ideally not look at anything below what we currently are. But everything depends on how much area we are able to get in the cities we are planning to take the format.

What has been the response to Argos? Are Indians ready for catalogue shopping?

Yes they are. That is why the response has been good to Argos. Eleven product categories are catered to by Argos including furniture, home furnishings, kitchen ware, home maintenance, entertainment, technology phones and accessories, sports and leisure, personal care, toys and nursery, jewellery and watches. A customer can either call in, browse the web, look up the mail order book or visit an Argos store to place an order.

What is the performance of private labels vis-à-vis established brands at HyperCity and Argos? Please highlight in terms of sales.

I cannot give you sales figures. But are exclusive brands, what you describe as private labels, spans categories. We have Fresh Basket in food, Maxit in sports and fitness, Lauren Christopher and Tosca in home, City in fashion etc. In terms of the contribution to merchandise mix, it varies from category to category. It is 100% in fashion, 80% in sports & fitness, 10% in electronics.

Despite the focus on these brands, we haven’t ignored the established names as such. For instance, products from Waitrose, an international supermarket chain in the UK and Raleigh, the world’s largest bicycle manufacturer, are available at HyperCity. This gives us a distinctive edge and helps us differentiate our proposition from others.

Which categories do well for private labels? Similarly, which are the categories where national brands outdo the others?

Private labels work best in categories, which are not very brand sensitive or where there is lack of choice of brands. For example, home, furniture, sports, fitness etc. These are categories, which are predominantly non-branded, that is, very few national brands exist there.

In contrast, categories such as food, personal care and electronics have prominent national brands. They tend to outshine private labels because they are backed by high decibel marketing spends. Retailers like us, however, are competing with national brands in these categories too. Such as food for instance where we offer better products at very competitive rates. We’ve identified need gaps in the segment where we think customers are under-served.

A case in point is freshly-cut fruits and vegetables that are ready to cook and serve. Our brand Fresh Basket caters to that. We also provide clean and hygienically packed meat and fish. We have the finest assortment of international cheese.

All of this makes a world of a difference to consumers, who buy our products.

Can you tell me the margins you earn on private labels?

I can’t get into specifics. But I won’t deny the fact that private labels provide great value to customers as they do not have the huge marketing spends of national brands and therefore can be retailed cheaper to the latter providing better profitability to retailers.

What is your advertising budget? Will you stick to local media like you are currently or introduce a national campaign since you have a catalogue shopping format now?

Our advertising budget is 1.5% of our sales. We will continue to stick with local media campaigns for HyperCity and Argos since it exists in Mumbai only at this point. Once the formats move to other locations we will think of expanding the campaign.

Inflation is eating into the budgets of retailers increasing their cost of production. Inflation is also causing consumers to spend less. How are retailers such as HyperCity coping with this situation?

There are two or three points here. One, that we provide an assortment of products at great value so we are not perturbed about footfalls. People walk into our store anytime inflation notwithstanding. Two, our TG is upscale. They are not very worried about inflation. It doesn’t impact them severely. So they spend. This is reflected in the growth of luxury products at our store. It has grown because we can see people picking it up. They want to spend. Three, non-food categories are dominant in our store. We are less reliant therefore on food and can share some of the inflationary burden rather than pass it on to consumers. All this ensures that we continue to do well even in inflationary times