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Spencer’s eyes Rs 500 crore revenue by 2020 from e-commerce

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Sanjiv Goenka-owned jumped on the Omnichannel bandwagon last year, after acquiring Delhi-based grocery e-tailer meragrocer.com, which was eventually turned into spencers.in. Now, after running a successful beta version of the online portal for employees, officially launched its online services in Kolkata and NCR last month. The company aims to expand the service in six to seven cities over the next 12 months.

Spencer’s eyes Rs 500 crore revenue by 2020 from e-commerce
The company has a clear focus on threading online convenience with offline experience even as it eyes a revenue of Rs 500 crore by 2020

While grocery e-tail in India had a dream run until early 2015 – with million dollar investments making headlines every day – the inherent limitations of the business model led to less-than-expected growth, forcing many companies to either roll-back operations from many cities or shut shop completely.

However, Spencer’s Retail, with 38 hypermarkets and 12 supermarkets – while not oblivious to challenges – is confident about its offerings. The company has a clear focus on threading online convenience with offline experience even as it eyes a revenue of Rs 500 crore by 2020.

The country’s fourth-largest food and grocery retailer also has aggressive growth plans in the brick-and-mortar format with large format stores and non-food categories being a clear focus.

, who heads the retail business (Spencer’s Retail) of RP-Sanjiv Goenka Group, spoke to Indiaretailing.com about his e-commerce venture, its future plans, and how it aims to differentiate from the competitors.

Last year, Spencer’s acquired Meragrocer.com to test the online grocery space. What has been the response?

The Spencer’s online portal was recently launched in Kolkata and NCR. The initial response has been overwhelming from our shoppers. Before officially launching earlier this month, a beta version of the online portal was tested on the Meragrocer server (app and website), for our employees. We spent months improving the interface and the experience basis feedback from our employees, and finally launched our online portal for added convenience to our customers with the same trust and same quality that Spencer’s stands for.

What are your e-commerce expansion plans? Which other cities are you planning to launch online services in and by when?

Spencer’s stores are physically located in over 35 cities across the country. Going forward, we would want our Omnichannel experience (e-commerce and brick-and-mortar stores) to touch a majority of our customers. In the immediate expansion pipeline, we are looking to expand the e-commerce service to metro and Tier 1 cities where we currently operate, with a plan to be operating in six to seven cities in the next 12 months.

What are the expectations in terms of revenue contribution from the online space vis-a-vis offline channels?

We expect to start with online revenue being 2-3 per cent of our offline sales, going up to 10 per cent of the overall sales (in the cities where we will offer our Omnichannel experience). We expect the net revenue to be about Rs 500 crore in the next five years.

Spencer’s also has private labels. Will these also be available online?

Spencer’s private label brands are available online through our portal and app, for shoppers in Calcutta and NCR.

Are there any plans to join other e-marketplaces and grocery e-tailers?

None yet, but many are under discussion. We do not see selling on them as cannibalization of sales through our own portal, so yes, we may join them as a seller.

What is your view on differentiation and sustainability of the e-grocery business?

As a company, our aim is to provide our customers an Omnichannel shopping experience and steadily revolutionize the way shopping is done in India. Our e-commerce venture brings Spencer’s wide range of food, grocery, household and gourmet products to customer’s doorstep and provides the same Spencer’s quality at the best prices with a promise of quick three hour delivery. The catalogue boasts of more than 20,000 products to choose from with the flexibility to pay from multiple payment options like Cash on Delivery, Card on Delivery, Online Payment, among many others.

Our focus is not on customer acquisition but rather serving our existing offline customer well by providing them with an enhanced user experience and reaching out to them at various walks of their lives. This is our biggest differentiator, which will allow us to become profitable in our online business.

Almost a year after gaining a lot of traction, e-grocery businesses in India seem to have hit a speed bump. Your views.

It will be difficult for us to comment on this, since every person must have his or her reasons. However, it is a known fact that the e-grocery business did not pick up as quickly as was anticipated by many of us. Moreover, among operational challenges, the high levels of expense involved in acquiring customers and building new brands probably did not make it a sustainable business model in the long run.

You must have also revamped your brick-and-mortar format to fulfill the e-commerce orders timely.

There were not many changes made to the offline store. Only the back-end of the offline business was integrated with the front-end of the online business to create synergy in overall working of the business. The whole idea was to leverage our existing network of stores and sweat those assets further through selling online.

How are you planning to fulfill the logistics and delivery mechanics?

Spencer’s has always stood for quality and trust. With the online business as well, we will strive to adhere to high quality standards and on more than 99 per cent cases have fulfilled our delivery promise. We have set up a separate e-commerce fulfillment team that takes care of ensuring on-time and quality delivery of our online orders. We have put systems and processes to make us more effective.

Spencer’s is planning to go big on large format stores to improve store profitability. Tell us something about that.

Yes, Spencer’s will be focusing on hypermarkets. Hypermarkets allow us to not only sell food items, but also non-food items such as apparel, home and kitchenware. Margins and average selling prices are higher for these categories, resulting in higher returns for us. Spencer’s has been a food-first retailer, and consumers know us more for our food than our non-food assortment. Consumers view us as synonymous with quality, and hence their preferred food destination, and now we plan to extend a similar offering in the non-food space. From a consumer perspective, it becomes easier to shop everything from grocery to clothing to home needs under one roof.