With the aim to break even in the next two years, K Raheja Group-promoted hypermarket chain Hypercity, which recently opened a store in Bangalore, is planning to downsize a few stores and increase the share of its private labels to increase margins.
“We are downsizing a couple of ‘extra-large’ stores by 15 to 20 percent of the store size. In terms of the way forward, we plan to launch 70,000 to 75,000 sq.ft stores in tier I cities and 50,000 to 55,000 sq.ft stores in tier II cities,” said Mark Ashman, CEO, Hypercity.
On how the resizing will help the retail chain, Ashman said, “It would benefit us in terms of trading off the excess space, reduce our cost of operations and provide larger offerings to customers.”
He also informed that the store rentals in the first two years range from 5-6 percent of the total cost, depending on store to store, while it goes down to 3.5-4 percent after reaching the maturity level, ie, over 2-3 years.
The contribution of private labels in Hypercity’s total sales is around 22 percent and the company is planning to increase it to 25 percent over the next 24 months. “We already have private label penetration in fresh, processed and packaged products, staples, homeware, furniture, sports and apparel and exclusive brands such as Waitrose. We have recently introduced private labels in packaged consumer goods such as sauces, papads, household cleaners, small appliances, etc and plan to penetrate further in these categories.”
He added, “Over the next 12-18 months, we plan to launch private labels in dairy products and aerated drinks.”
Hypercity currently has 10 outlets in India.