Vaibhav Singhal, MD & CEO, Savemax, speaks to Progressive Grocer about the business and customer proposition of his hypermarket stores, private label strategy and his
plans for expansion and growth…
How many Savemax stores are currently in operation? What is their format and where are they located?
There are currently four Savemax stores in hypermarket format under operation. These are located in Delhi (Kalkaji), UP (Indirapuram) and Haryana (Kundli, Karnal). The total retail space under operation is over one lakh sq.ft.
How much investment goes into setting up each store?
It’s about Rs 4-5 crore.
What is the range of merchandise at your stores?
All our stores sell a wide range of merchandise in categories such as FMCG & Grocery, Fresh, General Merchandise, Lifestyle, Consumer Durables and IT, Bakery, apart from also having a Food area. Our private label in grocery (Purani Dilli) forms the bulk of sales followed by leading FMCG brands such as HUL, P&G, RBI, Amul, etc.
What is your strategy for merchandise display and management?
Our stores have display philosophy of a modern warehouse. Usually, only the top cartons are opened for the customers to pick directly from the carton. Efforts are being made for large palletized displays on big industrial racks.
What is your market positioning? What is the typical customer profile at your stores?
We are a modern wholesale retail chain dedicated to bringing our customers the best possible prices on all the products throughout the year. We strive to provide wholesale rates to retail customers and operate with a very simple philosophy of keeping costs down to pass on the savings to our customers. Our customer profile varies because of the catchment, but typically middle and upper middle class form the bulk of our customer base. We have a very high stickiness index for our customers; typically we retain the customers for long, hence the profile has not changed.
Can you give us the details of your sales split in various product categories?
Typically Grocery, FMCG and F&V constitute 75-80% of the sale share. The rest is divided between CDIT, GM and Lifestyle.
What is the price range of products at your stores? Which price band is the most popular with customers?
Because of the broad categories that we keep, there is a huge price range from as low as Rs 5-10 for chocolates/candy to as high as Rs 1-2 lakh for high end LED TVs. But FMCG/ Grocery typically move in the Rs 100-200 price bracket.
What is the SKU count in your stores?
Typically we carry 4,000-5,000 select SKUs in our stores. We don’t want to confuse the customer by giving endless choices. We give special emphasis on keeping good quality articles only.
What is the location strategy for your stores– malls or high street?
Our ideology is to be close to the customer. Hence we prefer locations that are easily accessible to the customer and have good parking spaces. Customers who understand our “Wholesale rates to all” value proposition typically prefer coming to us.
How much time does it take for the store to break even?
Typically a store should operationally break even in 12-15 months.
Which are the new and emerging categories and why do you think they have market potential?
Services through brick and mortar stores like maintenance, repair, travel booking, etc, are still a largely unexplored opportunity in India. We believe that they will play a signifi cant part in the future.
What is your private label strategy? In which categories do you have private labels? What percentage of the overall sales do these contribute to?
Currently we have our own brand of Purani Dilli pulses, rice, spices, dry fruits and sugar in Food/ Grocery. Purani Dilli contributes a significant percentage share in grocery sale as well as in the overall sales. We plan to enter into more categories of Food and Grocery where we can provide superior quality to the customers. Our private labels contribute about 10 per cent to 11 per cent of the total sales. We also have another private brand “K3 Signature”. Under this brand we provide GM, Apparel and Non food products like Houseware, Home Decor, Pooja Thali, etc. We are developing this brand and have had some very good results for it. We are therefore further aligning resources and capabilities to strategically use this brand to provide quality products at affordable prices.
Can you tell us about the details of promotional activities that you undertake at your stores. What has been the impact on business?
We use traditional avenues to reach our customers, which include regular newspaper ads, leaflets, banners, hoardings, munaadi, etc. We believe in giving the customer a gimmick-free experience where the customer does not feel cheated. Hence there are no specific big months/days for special promotions. All our products have discounts throughout the year for all customers. This approach has given us consistently increasing sales and better customer stickiness rating.
Do you have tie-ups or collaborations with brands for category insights and better category management?
We have our own internal analysis team to provide category insights.
What are your views on collaboration between retailers and brands?
It is important to have a collaborative approach to successfully serve and delight the customer. This happens only by knowing the customer needs and feedback, which a retailer can understand (as a retailer is the nearest to customer) and funneling the feedback to the manufacturer/brand.
Which have been the instances where you have partnered with brands to build new categories?
There have been many such strategic tie-ups, where both have mutually benefitted. These are ongoing engagements. A simple example is the in-store demonstrator provided by brands, which helps increase sales.
What are your future plans by way of expansion and growth?
We have lined up stores to open at Punjab (Ludhiana and Mohali) and Ghaziabad. We plan to have seven lakh sq.ft. of retail space by 2017-18 with at least 20 stores. We have Uttarakhand, Punjab, UP, Delhi, Madhya Pradesh, Chhattisgarh, Maharashtra, Gujarat, as target.
Will you concentrate on growing online or on taking your store count up?
We believe that this is not a question of either/or. In the present connected reality it is important to have strategic presence online also. The way and form is still under discussion.
What do you consider to be your strengths and achievements so far?
Our strength lies in grocery sourcing. We provide the highest quality pulses and rice at the best prices.
What is your current supplier base and at what rate is it growing? How do you ensure suppliers stick to quality standards and efficiency norms?
Currently, we have about 500 suppliers and we will reach about 700 suppliers soon. The QC team at stores, active customers and store feedback ensure that quality standards and efficiency norms are maintained. Our central buying team actively scans the market for newer and better products. We have allowed the buying team to take decisions that help to provide high satisfaction to the customers.
What is the extent of your direct sourcing and how do you do it? Are there specific product categories where direct form of sourcing is a better approach?
We have a very robust direct sourcing team. We also have an office in China to get quality products. A lot of GM products like buckets, containers, etc, can be better sourced from China.