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Why Heritage Fresh welcomed demonetization

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November 8, 2016 was a very important day in the history of India, the world’s second largest emerging market. Prime Minister Narendra Modi made a historic announcement – (pulling large currency notes – Rs 500 and Rs 1000 – out of circulation) with immediate effect. The long-term objective was to cleanse the system of corruption, tax evasion and the generation of black income. Despite the good intentions, many argued that it struck a body blow for economic activity in India.

Why Heritage Fresh welcomed demonetization
Heritage Fresh welcomed the move saying it will pave the way for digital payments, aid the process of financial inclusion and the overall transformation in the economy will translate into long-term benefits for the industry

In a country where nearly 90 per cent of transactions are carried out in cash, a bold move to transform the region into a ‘cashless’ economy has led to a long unending debate. As the debate still continues on the pros and cons of the unprecedented move, here is a look at its effect on one of the key sectors – the Indian Retail industry.

India’s Retail sector, which is worth $300 billion with a 10 per cent contribution to the GDP, was one of the most impacted sectors by demonetization.

While the unorganized Retail Industry – which comprises Kiranas, Kiosks, Street Markets and multiple brand outlets – was impacted initially due to a liquidity crunch, the organized retail chains like welcomed the move saying it will pave the way for digital payments, aid the process of financial inclusion and the overall transformation in the economy will translate into long-term benefits for the industry.

Reason for Growth Post Demonetization

Heritage Fresh, a leading food and grocery retail chain in South India, was one of the frontrunners in adopting alternative provisions for payment methods for their tech savvy customers, as early as July 2016 and way ahead of the demonetization announcement. The brand had already envisioned and predicted the emergence of plastic money and mobile wallets as the preferred methods of payment in the future.

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The company observed a very interesting trend in the payment patterns prior and post demonetization. As a regular trend, the company consistently registered 60 per cent of the transactions in cash, 30 per cent in plastic money, 7-8 per cent in meal coupons and 1-2 per cent in mobile/digital wallets. There was a marginal increase in m-wallet payment options at frequent intervals.

However, the trend changed drastically post November 8, 2016, as demonetization struck a major hit to cash transactions. Consequently, there was a spike in cashless transactions, plastic money transactions surged and an unbelievable increase was observed in m-wallet payments.

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Ever since, the company has witnessed an exponential growth in m-wallet transactions with its share climbing to 8 per cent of the overall transactions until February 17. This is even when cash transactions are now at 40 per cent of all transactions from a low of about 25 per cent in December 16, with digital wallets transactions growing rapidly month on month.

This seamless transition towards digital economy could only be realized because of the vision and robust mechanism set by the Heritage fresh team. To enable rapid adoption of cashless transactions by customers, the Group focused on providing exhaustive training to the store cashiers for understanding various payment options and helping the cash strapped customers with various payment options to avoid purchase hindrances.

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Strong value proposition, wide product offering and a positive shopping experience helped Heritage Fresh gain market share in modern trade.

This strategic move helped the company drive footfalls in the stores and increase conversion rates to push sales. Thus, Heritage Fresh became a part of this unique journey along its partners and to provide a cashless experience to customers and steer towards digital India.

Heritage Fresh Factoids

  • Number of Stores: 125 & growing
  • City Wise Break Up of Stores: Hyderabad – 72 | Chennai – 35 | Bangalore – 20
  • Store Format: Supermarket (2500 sq.ft. to 6000 sq.ft.) -New ‘Heritage MART’ Hyper format-over 10,000 sq.ft.
  • Trading Space:  4.5 lakh sq.ft. and growing
  • Footfall: 2 million per month & growing
  • Shopper Profile: 70 per cent customers are between 25- 55 years of age with a monthly income of about Rs 50,000+ per month (Mostly Sec A1). Less than 50 per cent of Heritage Fresh’s SEC A customers fall in the high income bracket