How did the concept of Savemax develop?
I had moved to Canada to pursue higher studies and there I worked on various retail research projects, and undertook a first hand experience with an international F&B retail giant. After signing a couple of business deals with retailers in the US, I got inspired to open my own FMCG retail chain. My vision is to establish Savemax as a leading FMCG retail chain in India and offer a first-of-its-kind wholesale club retail model.
I started with a team of four people and launched the fi rst store in December 2011 at Sector 11, Dwarka in New Delhi. It was a small outlet measuring only 2,300 sqft. It received tremendous footfall and a mixed customer feedback. Following this, we launched our second outlet spread across 12,000 sqft at Pinnacle Mall, again in Dwarka, in April 2012. With the first two stores we experimented with a hypermarket format to understand the Indian market. Later we moved to the wholesale club model, which allows consumers to buy commodities at wholesale prices as the purchase is in bulk.
Our first wholesale club opened in Kalkaji, New Delhi. Spread across 40,000 sqft, the store provides a wide range of food items such as fruits, vegetables and groceries. It also offers personal and home care products, home furnishings, sports items, and cookware, among others. Various facilities are also available such as a restaurant, a live bakery counter, large aisle spaces, ample parking area, and a pleasant ambiance.
How do you select your location?
Our location strategy depends on how the model evolves. We are not shying away from opening in a mall. In fact, I feel that malls may have an apprehension in doing business with us as we are experimenting with a food court in our stores, which has a seating capacity of over 100, and this I feel may impact their Business.
How are you promoting Savemax?
In addition to the normal ATL and BTL activities, we have gone house to house inviting people to visit our stores. We are slightly loud in our communication. We believe that if we advertise in a newspaper, people might not notice us. They may consider it as another retail advertisement. Hence, our spending on communication is comparatively high. We are also getting customers through word-of-mouth publicity.
What is your target customer profile?
The wholesale business model is based on both business-to-business (B2B) and businessto- consumer (B2C) concepts. Currently, it is catering to large chunks of home makers and corporate caterers, hotels, restaurants, pubs, lounges, bars, quick service restaurants (QSRs), fast food chains, wedding planners, railways, flight kitchens, motels, schools, colleges, and hospitals. Our target buyers are people with an annual income of Rs 3 lakh and above, and the bulk of our sales is coming from them. However, we are receiving signifi cant footfalls from the higher income
bracket as well.
How do you manage your skus?
Initially, everyone tried to convince us that people will not pick up in bulk. But we believe that if we give right value to the consumers, they will surely opt for this. Normally, a hypermarket works with 10,000-12,000 skus, but we don’t go over 4,000 skus, which is the number a normal kirana shop keeps in a smallspace. The space that we have allocated per sku is huge. We have also given larger aisle spaces. Retail chains usually give 4 feet, but we have given 7.5 to 8 feet of space.
Which are your top selling categories?
The top selling categories depend upon the buying cycle of the consumers. For initial 10 days of the month, we see a lot of grocery and F&B items moving. A decent contribution of general merchandise is also there. However, FMCG contributes the larger chunk of our sales. We are planning to add some new categories shortly such as apparel. On the weekends, the average footfall goes upto 4,500. Average bill size also varies from the beginning to the middle of the month, with an average of around Rs 1,500-1,600.
Do you have a customer loyalty programme?
As of now, we don’t have any loyalty programme in place. The reason is that we did a lot of surveys and realised that there is a huge dissonance in the customer mindset about the loyalty programmes of retail chains. The customer has no clue of what the ‘points’ stand for, and how they accumulate. So we are trying to break that image. We are still developing a programme which is easy to understand, and which offers immediate redemption also. It will take another four to five months for us to launch it.
What challenges do you face?
Team building and supply chain are the two major challenges we are facing. Although we do have staff, getting the right person in the team is an issue – especially for people like us who do not have a fancy brand name behind us. So it is very difficult to sell intent in this country. That’s what we are Doing.
Supply chain is a chronic issue in retail. We don’t have a warehouse. We work on 100 percent direct store deliveries. Convincing every retailer and vendor partner for the same is also not an easy task. At this junction, we are not facing any real estate challenge. Property could be short in supply and it’s all about finding the right property. We prefer to buy land that we believe is a better proposition than leasing out.
What is the difference between Savemax and other retail chains working on the bulk buying model?
Unlike the other formats where certain products are being sold at a wholesale price or low margins and rest on maximum retail price, we offer all the products at wholesale rates. Another point of differentiation is that in our store customer would never get confused on what to pick up as we offer limited skus and are also in a process of reducing it further. For example, if we offer 20 variants of a product to choose from, at the end of the day there are only top 3 categories that move. So we are trying to experiment with only the top moving Categories.
To operate such a model, one needs to have a slightly different mindset. It’s more about the passion of passing on the benefit to the endconsumer. It is a trade-off. We have entered the Indian market quite late and are benefi ting from the learning gathered in the last 10 years. For some other retail formats, limitation of FDI exists. We don’t have any such limitations. With the kind of margins we are getting, I believe we should be able to cover the money by the end of the third year, although we are expecting the operational break-even to start in another five to six months.
What are your plans for the future?
The company is planning to open 18-20 stores in the next 3 years. We fi rst want to expand in the North and then venture outside through the warehouse club format only. We are in the process of signing projects in Kundali and Moradabad.