Sep 5, 2008

Mktg - Q&A;Hypercity CEO

Four years ago, in early July, Andrew Levermore arrived in Mumbai at the invitation of Ravi Raheja and B S Nagesh, to take a look around the city before deciding whether to take up their job offer.The sight that greeted the CEO of HyperCity Retail included flooded streets, cratered roads and fallen trees. Not the best of first impressions. Yet, the opportunities in the retail sector, Levermore found, were too good to resist, so he signed up and moved his family in. With that began a journey to set up what has turned out to be one of the most successful retail formats in India. Four years since launch, the HyperCity mall in Malad in the western suburb of Mumbai continues to pull crowds. Three more are set to open in other cities. But Levermores task is over, and he will return home by the end of the year. He talks of his experiences in Indias emerging retail industry in an interview with Tanvi Shukla.

Excerpts:How did it all start?

I began visiting India six years ago. But the trips were always short business visits. Then Ravi Raheja and B S Nagesh approached me to head a new retail joint venture of Rahejas and Shopper Stop. At first I wasn?t very keen but K Rahejas vision and approach was very inspiring.

Why were you apprehensive?

Indian city lifestyle is quite unlike in South Africa where we are very used to five-bedroom houses with a garden and pool. The small apartments of Mumbai would have been a drastic change. But the retail opportunities here, especially for a big-box format, were very exciting and we decided to shift for 2-3 years.

What were the challenges that you faced in the beginning?

There were no big-box stores in India at that time. No one understood how 120,000 square feet of retail space would work since it was three times of the biggest that India had back then. Also, there were many categories which hadnt been introduced such as sports equipment. So it was difficult convincing suppliers about these things. I feel we got off to a successful start because of the talented core team. I personally handpicked 19 members who in turn handpicked the rest. From there on, it was simply refining our plan, acquiring property, setting up the supply chain, training people and branding and marketing the product.

What are these new categories that you just spoke about?

Well, we introduced sports equipment to modern retail. Then we brought in mountain bikes. Difficult to believe, but we sell ten bikes everyday. Ask our customers why they need mountain bikes in a city such as Mumbai. Maybe to beat the portholes on the roads or the traffic jams. Childrens education and skill development was another area we focus on. Then pre-cut vegetables. When we initially surveyed customers, not one said they would buy pre-cuts. So we moved on apprehensively. But today, we sell two tonnes everyday. Bakery and imported foods were also new categories.

HyperCity has seen a huge delay in its projects.

This is also a problem that haunts other retailers… Yes, one of the frustrations was the delivery of the property. Since India is seeing many first-time retail developers and they themselves are in the learning stage, the delays and errors are several. Also, to buy property, you have to deal with multiple owners. For one property, we had to negotiate with 20 different owners. The licence infrastructure has not changed in the last five years. So the person who had to handle one application now gets twenty everyday.

So when do we see more stores opening up?

Three stores are almost ready with the fittings almost complete. While the one in Vashi is regular size, Jaipur will see a slightly smaller version suitable to the city and Bangalore would be 20% bigger than the one in Malad, Mumbai. All three got delayed by two years. We have 31 commitments for store outlets out of which eight should come about in less than two years. We are opening up in cities such as Amritsar, Ludhiana, Hyderabad and Chennai.

What went wrong with the small,Express format, which was tested in Jaipur?

It was an interesting experiment. We got a bit carried away with it. The fact is that kirana stores, which are unique to India, are highly efficient, offering the most convenient service and giving their customers monthly credit. We were not offering any of these but simply competing through our well-lit and clean stores. There is no chance that would have worked. Small formats will find it very tough in India. We have already shut three of the four Express stores in Jaipur and the fourth one will go as HyperCity opens.There are reports about food and grocery chains slowing expansion because of losses.

Do you think they will have to roll back or exit the small formats?

I don't know what they intend to do but we have learnt from our own experience that small formats are not the way to go in India and we are certainly not going to be in that business. What we will focus on is catalogue retailing, Argos, apart from large formats. So wherever we have a big box we will introduce catalogues too for consumer?s convenience.

How has the industry evolved in the last four years?

The changes are dramatic. There was a distinct absence of leisure and entertainment here when I first came. Modern retail has given people opportunity to get out of their home and spend some leisure time at the malls. This has also given birth to impulse shopping. At HyperCity, 40% of the trolley load is impulse buying and our format works on impulse options right from shampoos to tennis racquets. Also, the width of the food and grocery range has doubled in these four years.

Has the customer also evolved?

Yes, most definitely. Initially she was very impressed by what modern retail introduced to her. Now she expects that. She has become a lot more demanding. Consumers are becoming more experimental and there is also a strong demand for luxury now.

Where is the next big opportunity?

It's in furniture and home category. With more and more youngsters moving out to live independently in urban areas, we will see a strong growth in those categories. Also, with health consciousness growing, there will be a boom in not just foods but health equipment, too. Indian housewives are not too comfortable with the idea of working out in a gym next to some model and so home-fitness equipment have begun to sell well.

Is the industry facing the heat of slowdown?

The slowdown is there in the level of optimism of the retailers. Maybe because they are not achieving the results they wanted. The slowdown is also there in terms of footfall. But the basket size continues to increase as well as the conversion ratio of those visiting our stores. So the growth momentum has been maintained. But yes, the fact that there is 20 times more retail space where we were the only ones present effects our business.

You started this business from scratch and established it successfully. And now you're leaving. Do you feel the job here is done?

The job is never really done. Ideally I would have liked to see at least five stores operating, but I guess I?ll still see three more. But yes, as far as picking up the right people, conceiving a plan and executing it successfully is concerned, that has been achieved.

So why are you returning?

My younger son has been longer in India than back home. Yet, both are after all South African children who love outdoor activities. They miss rock climbing, biking, swimming and so on. My family would like to go back to the big open houses with a garden and pool and good roads around. It was initially agreed that I will be here for two or at max three years. The tenure has now stretched to four years. And I will still be on the board, acting as a non-executive director. I will be visiting 3-4 times annually and will act as a consultant to HyperCity too.

Who will succeed you?

A worldwide search is on and we have shortlisted 10 highly experienced retailers. The decision will be taken soon.

Where does Levermore head from here?

I am still to decide between two job options that have in South Africa. It depends which suits me more.


tanvi shukla said...

hi..... was surfing the net for something and stumbled upon your blog. Good to see that you found the interview i did so interesting :)

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