Since launching its first outlet in the year 2000 inside a Gurgaon condominium at a time when modern trade food and grocery stores were nowhere on the retail horizons of the Millennium city, needs supermarket has grown to add 26 large, medium and small stores to its kitty, clocking an admirable run rate on various parameters of retailing excellence along the way.
Moreover, the grocery chain has been able to hold its own and clock steady growth in a hyper-competitive market dotted with big-box national retailers and other supermarkets. Read the story to know the secret sauce behind Needs Supermarket's success recipe?
Quick Takes and Insights
- Big is Beautiful: With 26 stores spread across big, medium and small formats ranging from 4,000-6,000 sq.ft to 18,000-28,000 sq.ft. and all of them running in prime locations across Gurgaon, Needs Supermarket is shifting its focus towards building only bigger stores, which it believes make more business sense.
- Be Where the Competitors Are: In its choice of location, the grocery chain prefers going where its competitors are and be next to any store that is already performing well as it is easier to tap into an already flourishing business than creating one from scratch.
- Customer Connect: A) The supermarket chain believes that building the trust factor with customers is extremely important to FMCG retailing because trust cannot be bought and can only be built over time. B) In Gurgaon, where convenience is king, customers will keep coming if you have a store that offers
- Don’t Undercut, Discount with Discretion: The retailer does not believe in otherwise popular-selling strategies like discounting and cross-merchandising as they don’t work in a market like Gurgaon where people are globally exposed and very quality-conscious.
- Lease Over Rental and Revenue-Sharing: The store chain has adopted the lease model over rental or revenue-sharing structure because it believes there is greater transparency operating under the lease model and also greater control over operations.
- Private Labels Don’t Always Work: In a market like Gurgaon where customers are extremely brand-conscious and have quite rigid tastes and preferences in relation to the products that they consume and buy, Needs Supermarket has gone light on introducing its own private label.
- The Winning Formula for Shelf Management: The space allocation ratio is determined by major factors that influence the product’s uptake: Preferred products; New Launches; Discounted Products; Space for Hiring by Manufacturers; Sales Volume.
Needs Supermarket: Fact File
- Retailer/ Brand Name: Needs Supermarket
- Launch Year: 2000
- Parent Company: Needs Supermart Pvt. Ltd.
- Company Headquarters: C-001, Supermart-1, DLF Phase 4, Gurgaon, Haryana
- Key People: Ajay Dhar, Managing Director; Arun Khattar, CEO
- Operating Model: Lease
- Retail Format: Convenience/ Neighbourhood
- Number of Employees: 125
- Total Number of Stores as on 31.07.2021: 26
- Number of States and Cities present in: 2
- Total Retail Space: 56,160 sq.ft.
- Annual Turnover: Rs. 80 crore for FY 2021-21
- Average Sales Per sq.ft: Rs. 40
- Average Bill/ Ticket Size: Rs. 550
Same Store Sales Growth: 4%
Back in the late 1990s and the early noughties, when Modern Trade Food & Grocery was a distant concept in India, one man was frenetically looking for the right model to launch his own store. His epiphanic moment came when he came across a store named “Nanz” in Greater Kailash 1, Delhi.
For Major Murli Dhar (retd.), that was the moment when he realized the time had come to step out and turn his dreams into reality. Now that he had found the right model, he set about to scout for a suitable location to launch his store. His search for an ideal place to set up his store took him to Gurgaon, which was then in the midst of a runaway real estate boom with shiny condominiums, building projects and chrome-and-glass offices springing all over the place.
“New housing societies, most of them in the premium category, were coming up in Gurugram then and my late father felt there couldn’t be a better place than to open a store close to one of these prime condominiums,” says Ajay Dhar, Managing Director, Needs Supermarket.
And so started the journey of the biggest independent Food & Grocery retail chain of Gurgaon, which opened its first outlet in Supermart 1, DLF Phase 4 in October 2000. “We were literally the first modern grocery trade outlet to come up in Gurgaon. It was a time when the concept of ‘Self Service Super Markets’ was new to the city but people were warming up to it and our first outlet began receiving a good response over time,” says Arun Khattar, CEO, Needs Supermarket.
That first store is still running, a strong testimony to the brand’s resilience and deep consumer connect that Needs Supermarket has been able to forge in the market. In the early days, sales were slim and it took a few years before the store started to pull in robust returns and good customer traffic. “On average, the store sales then were not more than Rs. 2000 per day, as there were very few families staying around in the vicinity of the store. Only on weekends, we used to see higher sales of around Rs. 10,000-12,000, but over the past decade things have really turned around well,” says Dhar.
In fact, the elder Dhar’s strong belief and intuition to venture into Modern Trade Food & Grocery retailing has paid off well. Needs Supermarket currently operates 26 supermarket and convenience stores — spread across large, medium and small formats — with most of them located inside Gurgaon, whereas one is based out of Delhi. “We have big stores but not necessarily hypermarkets, medium-sized stores and small stores that are located in some of the prime condominiums in Gurgaon,” informs Dhar, who continues to ably steer his retailing company into new markets and build on the legacy left behind by his father.
Along the way, while Dhar has ensured that Needs Supermarket stays on the growth track — his 26 stores now spawn 56,160 sq.ft. in retailing area that earned over Rs. 80 crore in FY 20-21. At the same time, he has also shut down a few non-performing stores. “During the past 20 years of our operations, a couple of our stores were shut down, as they were not viable to the firm’s growth. We had, in fact, 28 stores until sometime ago but we closed down a few of them.”
Dhar believes that there is long runway for growth ahead. “As far as the organization’s growth is concerned, we plan to open four new outlets in the current financial year. Two of these would be in Noida and the other two would be in Gurgaon. After adding these outlets, we anticipate our revenue to grow an additional Rs. 25-30 crore within a year.”
Store Size, Location and Ownership Structure
With stores spread across big, medium and small formats, the size of Needs Supermarket stores varies according to their location. “We have medium and big stores ranging in size from 4,000-6,000 sq.ft to 18,000 sq.ft. and 28,000 sq.ft. for our biggest store. The sizes are in response to the market demand and we can put up a 50,000 sq.ft. store if we find the right market for it,” says Dhar, adding that the size of smaller stores is anything between 400-1,000 sq.ft. Currently, Needs Supermarket has 18 small stores located in the various condos across Gurgaon.
Out of the 26 stores, most of them are leased. “None of our stores operate on a revenue-sharing basis because I don’t want to get involved in that. I feel there is greater transparency operating under the lease model and you also have greater control over operations,” says Dhar.
With over 20 years of business experience in operating Modern Trade Food & Grocery stores, Dhar says that Needs Supermarket has been able to create a brand name for itself by virtue of its presence across the prime condominiums in Gurgaon. “I think the time has come for us to move now to bigger projects as about 70 per cent of the turnover comes from our bigger stores,” he shares.
The rationale for bigger stores is based on the underlying dynamics between rentals and sales — a very important factor in the retailing business. “Rentals keep increasing even as the sales of small stores are limited. Typically, if you are catering to five hundred families in an area, that number remains more or less the same for a store serving in a particular location,” explains Dhar.
Elaborating the point further, he says that if a store has a catchment of five hundred apartments, it will be lucky to service 50-60 per cent occupancy for those apartments. “It will be never more than that. At the same time, your basic sales are limited to certain product categories like milk, eggs and bread. So, in my personal opinion, it makes more sense for me to open bigger stores than the smaller ones,” reasons Dhar.
Outlining his philosophy on the location strategy for his stores, Dhar says that he would ideally prefer to go where his competitors are. “Any store that is doing well, I would prefer to be next to that store in the hope of tapping into an already flourishing business. Normally, stores see their sales increase if there are other similar stores around. It’s like ‘the more the merrier.’ Actually, if there are two or three adjacent stores in an area, sales for all those stores don’t go down but increase because a clutch of stores help to attract more customers.”
Brand Identity and USP
The experience of over 20 years in the food & grocery retailing business gives Needs Supermarket a wealth of knowledge, expertise and understanding of customer behaviour and expectations. It has helped the retailer to serve the customers better as per their dynamic requirements. “As a brand, Needs Supermarket offers a personal touch to the customers, which is missing in most of the brands in competition. The customer does not feel any assistance deficit once they are in the aisle, shopping for themselves,” says CEO Khattar.
He adds that long years of experience has also helped the retailer to stay updated and offer new products — both domestic and imported — on its shop shelves. “Our in-house supply chain and distribution helps us efficiently manage our stocks for a total of 35000+ product SKUs at our bigger stores. With such a wide variety of products, customers recognize Needs as a one-stop shop committed to fulfilling the customer’s requirement under the same roof.”
Also, as the oldest among modern grocery stores to have struck roots in Gurgaon long before the likes of Big Bazaar or other brands stepped in, shoppers recognize and relate to the Needs Supermarket brand name easily. There is a sense of trust that the brand name evokes among the customers.
“The trust factor that we enjoy with customers is a very valuable asset, which has been built over a period of time and by doing the right thing. You cannot buy trust and that’s for sure,” asserts Khattar, adding that location is another big drawing card for Needs Supermarket. “Our stores are right in the middle of very high densely-populated areas.”
When Needs Supermarket started opening its stores in Gurgaon, it used to see a lot of nuclear families visit the shops. Not surprising then, its sales data showed that ready-to-eat products were very popular and the fastest-moving among the product categories. “Now, I feel that things have changed with the times. Today, we have a very mixed kind of clientele. A lot of customers today come along with their kids and there is a fair share of customers who are growing old in years,” says Dhar.
So, if until 15 years ago, about 70-80 percent of Needs Supermarket’s clientele comprised nuclear families, today it sees more of upper middle-class families visiting the stores. This could be perhaps also due to the fact that the retailer does not offer too many discounts at its stores, although there are quite a few schemes running round the year.
As a one-stop solution for all customer requirements under food & grocery, Needs Supermarket aims to provide its customers with a complete range of non-food and food items. The major chunk of sales comes from Fresh Fruits and Vegetables, Grocery, Dairy and Frozen Food Products.
“Between food and non-food, the ratio would be around 60:40. About 60 per cent of our products are food articles spread across categories such as breads, bakery, cereals, pulses, biscuits, cookies, jams and jellies, preserves, marmalades, pickles, pastas and noodles, coffee, tea, juices and drinks, spices, rice, flour, oils, among others,” says Khattar, adding that the non-food category comprises household products, personal care, child care, among others.
New and Emerging Products
Khattar says that consumers today have become more aware of the products in the market and are also very health conscious.
With greater health consciousness, consumers are inculcating some major changes in their lifestyle, which is facilitating the
sales growth for related products. These products include organic food, sugar-free edibles, gluten-free products, low-calorie food items, protein-rich cereals and natural fruit drinks.
“The demand for these products is increasing day by day and their sale potential is constantly on the rise,” points out Khattar. Talking about the trends in the food category, he says that organic and healthy foods have shown great promise in the recent past and he expects them to keep doing better in the future as well.
“There are quite a few product categories that are picking up well though they still make for a small percentage of the total sales. I would say that gluten-free and organic products are picking up well. Over the next 10 years or so, organic can become a very big market on its own. Today, however, the organic range is still limited and these products occupy not more than five per cent of our shelf space.”
Ready-to-eat products have also continued doing very well in recent years and are among the fastest-moving products at Needs Supermarket. “But from what I have observed lately, people have also taken to increasingly cooking at home these days. So, sales of frozen chappatis and breads are no longer as brisk as it used to be earlier,” notes Khattar.
Private Labels Vs. National Brands
Needs Supermarket enjoys its dominant footprint in Gurgaon, which is a major hub for multinationals and IT companies. Most of the customers residing in the city belong to the corporate culture or come from business families. These customers are extremely brand-conscious and have quite rigid tastes and preferences in relation to the products that they consume and buy.
“Such customers prefer buying branded goods only, which is the reason that private labels are not very popular with them. As our customer preference and leanings are more toward the quality-conscious and branded products, we have introduced our private labels in very selected categories where we are doubly sure of sourcing consistently only quality products,” points out Khattar.
Currently, the retailer sells its private labels under categories such as Pulses, Rice and Bakery products. “Once we brought in our private labels, we have seen good customer response due to their superior quality and competitive pricing.” Pointing to the sales split between in-store brands and established brands respectively, Khattar says that it is 60:40 for pulses; 20:80 for rice, and 50:50 for bakery.
Shelf Management and Merchandising
At Needs Supermarket, the Space Allocation Ratio is meticulously derived after looking closely at the major factors that influence the product’s pick-up: Preferred products; New Launches; Discounted Products; Space for hiring by Manufacturers; Sales Volume.
Also, the shelf management is implemented along the lines of how the customers would like it to be. Generally, breakfast products are placed at the front and products like pulses and edible oils at the back. In terms of sales mix, a higher ratio is captured by the food category at 60% and the rest 40% comes from the non-food category.
Khattar states that an otherwise popular-selling strategy like cross-merchandising doesn’t work in a place like Gurgaon where people are globally exposed and well-travelled. “Shoppers at our stores are very sure of what they want to buy so trying to sell them anything else other than what they want does not work. On our part, we try to focus on products with high margins by keeping them on the shelves at an eye level.”
In doing so, the retailer also keeps into consideration the average height of Indian women so that the shelf height for such products is neither very high nor very low. The more expensive products are usually kept at a higher level. “There are certain products that you look for and there are products that you just go for and buy. Our basic sales come from the latter kind.”
Marketplace and Competition
Over the past two decades, Gurgaon has become a hub for the retail industry because of the presence of numerous retailers with different product mixes, facilities and services. Thanks to the speed and level of development that the city has seen over the years, any new Indian or International retail chain wants to open its first outlet here, which has led to an overall growth of the retail industry.
“Shoppers in Gurgaon are used to and enjoy a high standard of shopping experience, which is now at par with the retail industry in the western world. So, competition is thick and only the fittest and most innovative retailers can hope to survive,” opines Khattar.
He says that Needs Supermarket has not only survived but has been also been able to thrive even in the face of intense competition. “The reason for this success is due to the fact that we have been quite adaptive to the changes in the retail landscape, which has helped us in quick decision-making that is in step with the market trends.”
By being adaptive to the changes in the market and customer preferences, Needs Supermarket has been able to retain and add to its customer base year after year. “We have been able to maintain our customers for over two decades now because of the exceptional service, the variety we offer, and the attention that we give to our customers.”
Khattar also feels that Gurgaon is a better market for his retail chain as it is still a growing market. “Unlike Delhi, where customers can be touchy about price, in Gurgaon convenience is king and if you have a store that offers choice, fair pricing, and convenience in a clean, hygienic environment, customers will not fail you. And there is still plenty of room to grow and it will take be some years before there are enough stores to cater to the local population.”
Still, the growth today in Gurgaon is not what it was until a couple of years ago, and hence the decision to move to new and emerging markets in Delhi and Noida. “I am looking for growth, which I hope to find in the other markets of Delhi-NCR. So, while we will continue with our focus on Gurgaon, we will keep exploring for new opportunities to grow.”
New Concepts and Innovations
Over time, Needs Supermarket has worked towards improving the efficiency of its operations and on making the shopping experience better for its customers. “We have come up with quite a few innovative ideas that help us stand out from our competition. Our experienced purchase team and in-house supply chain ensure a very smooth and efficient management of inventory through all our 26 outlets. The AIS (Automatic Inventory System) ensures that all the outlets maintain an optimum level of inventory, preventing excessive stock or shortage of products,” says Khattar.
The retail chain has its own online store — needsmarket.in — which offers free home delivery service in Gurgaon. Besides, it also has a Shopping App to cater to its online shoppers. But, as Khattar says, “at Needs Supermarket, both online and offline modes of shopping have their own separate clientele and there are very few people who use both the channels.”
By having its own online store, app and free home delivery service, Needs Supermarket ensures that its customers have a more convenient way to buy, to know what products to purchase, and to get those products sitting at home. “But, at the same time, the chances of indulging in impulse purchase are higher if customers actually visit the stores. Sellers get to sell more products, so I would definitely prefer my customers to visit the stores than buy things online,” opines Dhar.
Business Lessons and Covid Learnings
The challenges and threats that came up with the Corona virus outbreak were new and completely unexpected for every industry. Businesses found out that there was barely any time for planning or to implement the necessary changes that would have facilitated the smooth running of operations.
During the first phase of Corona, there was a lot of panic amongst customers due to the unawareness and uncertainty involving the nature and duration of the lockdown and the changes that would ensue. This led to panic-buying and stockpiling, which in-turn spoiled the demand and supply equation.
“During the first phase of the lockdown, stock procurement was our top priority in order to meet the sudden rise in the demand. This required strenuous day-to-day planning and expanding our reach to every corner of the NCR. The significant increase in the footfall meant that we had to be very careful and particular regarding the covid protocols so as to ensure maximum safety and hygiene,” reveals Khattar.
But thanks to its painstaking efforts and determination to face the challenges, Needs Supermarket was able to introduce new services and controls. The retailer ensured that the accommodation and transportation facilities and medical support was extended to the staff for their safety and well-being. “Looking back, we believe that we have emerged stronger and better after this crisis with an enhanced team spirit and motivation.”
As for the retailing lessons gleaned from long years of experience in the business, Khattar says that one gets to learn all the time. “Every time something happens, it is a new learning because you were not expecting it to happen. You learn about how you can put a check on pilferages, keep track of the company TOTs with distributors, so on and so forth. So, learning never stops.”
Why the Economy No Longer Influences Grocery Sales
The prolonged lull in India’s economy and the widespread disruption caused by the Covid crisis has left many retailers despondent. Many of them are still keeping their fingers crossed even while desperately hoping for the festive season ahead to bring back some cheer to their overall sales.
Managing Director Dhar thinks that food and grocery sales don’t have much to do with the state of the economy any more. “Until 10 or 15 years ago, it was a known fact that Diwali had the potential to double or triple your sales. But over a period of time, people have become smarter and more intelligent. So, rather than spending on gifts to give to their extended family and friends, they now choose to spend their money in buying gold or investing in assets for themselves and their children.”
As a result of this trend, those big spends on gift hampers worth ten thousand or five thousand rupees have come down drastically. Instead, what many people are doing is to send electronic greeting cards to their friends and they prefer spending their festival budget on buying something useful for their own family and children.
Dhar feels that it is not a correct interpretation to say that the gifting trend has slowed down only because the economy is downbeat and consumer sentiment is at a low ebb. “As far as the companies and corporate clients are concerned, most of them have already been paring down their gifting budget for a while now and gifting is now restricted to only select clients.”
Further, the gifting trend is now no longer limited to Diwali. It is spread all the year round by way of various celebrations and festivities carried out by companies, and by individuals and families, on different occasions like birthdays and the other special days sprinkled throughout the year. “However, owing to the Covid crisis that has put a kibosh on all such celebrations, there could be some pent-up sentiment waiting to be released,” surmises Dhar.
CEO Khattar says that the festive season usually brings along an uptick in sales for products like chocolates, Danish cookies, and Haldiram snacks like packaged rasgollas. In keeping with the trends and the spirit of the festive season when people like to indulge and gift bakery products, Needs Supermarket will revamp and expand its bakery section as well.
“Dry fruits and nuts used to be big in the gifting category but now a lot of new flavors have come into vogue and people are going for dry fruits coated with chocolates instead of just plain dry fruits. A lot of people are now going for exotic fruits, which was not the case earlier,” notes Khattar.
Looking ahead, Needs Supermarket plans to further expand its footprint and its operation base beyond Gurgaon to different cities such as Delhi, Noida and Jaipur. “We have finalized our plans to open two more stores in Noida in the near future as part of our expansion strategy. Further, we will also be opening two more outlets and they would shortly be up and running in Gurgaon as well,” reveals Khattar.
With four new outlets coming up in this financial year itself, the organization is eying a 25% growth in its income. “In the past 3-4 years, we have already moved to Delhi, besides opening another store in Gurgaon on the Golf Course Road as well as also launching another 28,000 sq.ft. store in Gurgaon. Moving forward, we should be opening more stores in Delhi and other places in the NCR as well.”