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Retailer with a Rural Heart and a Business Model Studied Globally and Taught at IIM-A

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The Hearty Mart chain of 16 rural grocery stores across the neighborhood and supermarket formats has been providing a modern retail experience to the bottom-of-the-pyramid consumers in semi-urban and rural markets in Gujarat since 2004.

Its unique franchise model has helped turn aspiring rural entrepreneurs into successful supermarket owners, besides creating a nurturing eco-system for supporting new retail ventures and opening up new entrepreneurial avenues for rural communities.

Its much-acclaimed franchise model has earned Hearty Mart widespread kudos, nationally and globally. The model has become a learning module and a case study in premier B-Schools, including the IIM-A and is also taught overseas for helping and hand-holding rural retailers with the right guidance and skills-set to become modern supermarket owners.

Apart from its food and grocery retail franchise business, Hearty Mart has also diversified into other sectors of the food business and has successfully created and built 9 micro-enterprises by partnering with micro entrepreneurs of villages.

HEARTY MART: FACT FILE

  • Retailer: Hearty Mart 
  • Launch Year: 2004 
  • Parent Company: Hearty Mart Pvt. Ltd. 
  • Company Headquarters: Ahmedabad 
  • Key People: Founder & Chief Mentor; Group CEO; Group Sales Head; Retail & Franchise Head; CFO 
  • Operating Model: Franchisee (FOFO)
  • Retail Format: Super Market / Neighbourhood 
  • Number of Employees: 100+
  • Total Number of Stores: 16 Franchised Stores
  • Distribution of Outlets/ Number of States and Cities: Gujarat State, 13 towns & villages of Gujarat
  • Buying/ Purchasing Team Members: 12 
  • Product Basket: 2,500 Products; More than 5,000 SKUs
  •    Same Store Sales Growth: 20% annually

How many grocery chains in the country earn the stripes to make it to a study project at India’s top and most prestigious business school? 

Well, Gujarat-based Hearty Mart has not only been a case study at IIM Ahmedabad and other leading Management institutes, its business model has also been taught globally at the European Case Clearing House for many years now. 

The Hearty Mart chain, which operates its flagship company-owned store in Ahmedabad and manages another 15 franchised stores in the villages of central, south, and north Gujarat under the Heart Mart brand, has earned national and international recognition for offering a modern retail experience to the bottom-of-the-pyramid consumers in semi-urban and rural markets across the State since 2004.

The story of Hearty Mart and its hugely successful franchisee model has also been covered by marquee international magazines like Forbes and Fortune, and leading Indian publications like Open magazine, The Economic Times, New Indian Express, Hindu BusinessLine, and others. 

The grocery chain has also been featured on CNBC, NDTV, ANI and other media outets. It was conferred the ‘Star Entrepreneurship Award’ by Indira College, Pune in 2010 and the ‘Rising Sun Award’ by eChai-MICA, Ahmedabad in 2016.

How the Journey Began

Hearty Mart’s storied retail journey started with a 1600 sq.ft. store at Vishala Circle in the Juhapura neighborhood of Ahmedabad, in February 2004. But the location and timing seemed hardly conducive to the birth of a new business. 

Following the bloody 2002 riots in Godhra, Juhapura had turned into a haven for Muslim refugees from all over the city and neighboring districts. The population had swelled to about 5 lakh, making it the largest Muslim neighborhood in Gujarat.

It was against this backdrop that Hearty Mart launched its first store, which was envisioned as a mini-supermarket for grocery and daily-need products and, in the aftermath of the riots, it came to be seen as a beacon of post-riot harmony and progress. 

The shop offered discounted prices, which were lapped up by the residents in the locality. At the same time, it offered a shopping experience that was modern and contemporary but without frills and yet fulfilled the desires and aspirations of people who missed out on big-brand organized retail. 

“With the aim of bringing convenience to the locality, the Hearty Mart maiden retail venture was modelled as an ideal neighborhood convenience store whose value proposition of ‘Sabse Khaas Ghar ke Paas’ offered the promise of being a one-stop-solution for meeting the daily needs of groceries, cosmetics, food grains and other basic merchandise,” says Nadeem Jafri, Founder & Chief Mentor, Hearty Mart.

Meanwhile, the influx of a large Muslim population into Juhapura created a booming demand for real estate in the locality, with the added promise of imminent future development. 

“The area was not congested unlike other parts in this neighborhood and we speculated good growth of the region in the near future. Vishala Circle in Juhupura was developing fast as a large number of affluent Muslims had moved in here and that gave us an opportunity to fill the gap with our supermarket for their daily needs,” remembers Jafri.

However, the Juhapura neighborhood, despite the value appreciation of its real-estate, still did not have a proper organized retail store, which could provide the convenience of purchase to its residents. 

Invoking an expression that refers to new and untapped markets as ‘blue oceans’, Jafri says that the decision to open Hearty Mart’s first outlet in Juhapura was a Blue Ocean strategy. 

Jafri’s acumen lay in spotting this gap and in identifying the opportunity to start an organized food and grocery store in the fastest developing area within Juhapura. 

“Although there were other superstores such as Reliance Fresh and Big Bazaar in Ahmedabad, none had ventured into restive Juhapura,” recalls Jafri.

The mention of Big Bazaar lights up a nostalgic link and an old cherished memory in Jafri. After completing his MBA from IMS Indore in 1998, Jafri worked in the media and advertising businesses for eight years. The idea to get into entrepreneurship with food retailing was born out of his frequent visits to a Big Bazaar outlet near his office.

“It was 2002 and I was working for an advertising agency whose office was located inside the Phoenix Mill Compound at Parel, Mumbai. Just opposite our office stood a Big Bazaar store. I used to visit the store regularly and enjoyed my shopping experience there. The merchandise on display left me very impressed. This was my first experience with an organized retail store of that magnitude and the impressions they left catalyzed my own deep desires to venture into Modern Trade retail,” remembers Jafri.

Two years on, Jafri quit his job to launch his own food & grocery retail business with a capital of Rs. 62.5 lakh, which he raised in partnership with a few friends in the real estate and hotel industry.

Hardships and Travails of Food & Grocery Business

However, Jafri soon realized how tough it was for a newbie entrepreneur to run and sustain a food retail business on a profitable basis.

Hearty Mart used every trick in the book – from customer loyalty programs and home-delivery services – to raise its bottom line, but progress was very slow. It required sales of Rs. 3.75 lakh a month to break even, and it was proving to be a stretch.

To support and finance his new business, Jafri turned to his family and friends for help. As someone who hails from Gujarat and is a native resident of Ahmedabad, it was natural for Jafri to look up to his relatively prosperous Cheliya Muslim community to support the venture. It helped that his uncle was the community head of the sect, making it relatively easier for Jafri to raise the capital from friends and relatives. 

“The initial five years of my retail journey were really tough as the store did not break even during this period. But disappointments and failures are a part of the entrepreneurial journey. As an entrepreneur, I was required to remain calm through this testing time,” reminisces Jafri.  

He left the day-to-day running of the store to his colleagues and took up a job selling space at Times of India and later, joined Grey Worldwide, an advertising company where he worked in an earlier stint. 

Jafri also started teaching advertising and organized retail at business schools such as Proton Business School, NRIBM, and Idea Foundation, in and around his hometown Ahmedabad.

He taught for six years in different colleges and B-Schools from 2006 to 2011. This experience, apart from buoying the financial survival of his debut business, also proved to be enriching and groomed him into becoming a mentor. 

It gave him a chance to interact and mentor young students and he came to realize that he was good at mentoring. “I took this learning to Hearty Mart and helped my team with the necessary mentoring and groomed them. I found a suitable role for myself I groomed our top leadership in my set-up and they, in turn, groomed their subordinates further,” shares Jafri.  

He attributes his success as a mentor to the support of the rural community he belongs to, which is into farming at the rural level and into the hotel/ restaurant business in cities. 

“I belong to the family of their spiritual head, and hence gaining their trust was easier for me. The mutual respect we have for each other – me and the community, has helped us grow together. They are ready to experiment on my ideas and take my advice positively and work on it to execute with perfection. My exposure to the outside world in media, advertising and communication industry and their knowledge of the farming and food-grocery products has created a winning combination as they produce the best of products while I find the ways to create a brand out of those products.”

At the same time, the initial setback in business taught Jafri two things, which helped to shape his onward entrepreneurial journey. First, the experience of dealing with students made him a better mentor to his business team and, second, the failure at his store inspired Jafri and his team to think more innovatively and create a unique retail franchise model for the business. 

How the Franchise Idea Became a Turning Point

“I feel that failure can act as a much-needed booster dose for would-be entrepreneurs. It can help ignite the fire in an entrepreneur and inspire him to do better,” says Jafri, recounting how, despite the continuing struggle to stabilize his business, he still went ahead and launched a retail franchise network, besides also foraying into the HoReCa segment.

By 2007, the Juhapura store business had started showing signs of stabilizing, providing the impetus for Jafri and his team to launch their rural franchising concept. The concept was born out of the learnings that Jafri and his team gleaned from entering into an unexplored Juhapura and provided them with the insights and courage to target other unexplored areas of rural Gujarat.

Finally, the page turned, and Jafri’s Juhapura store broke even on the positive side of the ledger in 2009. Since then, it has kept growing 15-20% annually, pulling in over Rs. 3 crore in revenue last year. “Had we succeeded in earning profits straightaway, we would have remained a one-store venture without innovation,” feels Jafri.  

“There are many aspiring entrepreneurs who would like to take up organized grocery retail as a business but feel handicapped to pursue their ambition. More importantly, the long-term strategy for growth in the retail industry is to have multiple stores. Even we wanted to expand in this manner but found that the lack of funds made it difficult. Hence, we came up with the innovative idea of expansion through franchise stores by tapping into the social network of rural community residing in villages,” says Jafri.

With the help of his team, comprising B-school graduates and senior partners at Hearty Mart, Jafri set up a Franchise Development Cell, whose objective was to provide a retail ecosystem to its franchises and work as a guiding force for them. 

Success Recipe Behind the Franchise Model

Right from its first franchise store in 2007, which opened in Ilol Talav village near Himmatnagar district, Hearty Mart has been working closely with rural retailers as their franchise partners. As on date, Hearty Mart operates a chain of 15 franchise stores at the taluka level, semi-urban centres and in rural villages. “My focus is on creating entrepreneurs,” says Jafri, who does not solicit franchise partners. “They should feel the need in their locality and come to us. They should be convinced about the business model.” 

That the first franchise store at Ilol village still continues to operate even 14 years after hitching its star to Hearty Mart’s wagon attests to the success and credibility of the latter’s franchise model. In fact, the renovation and expansion of the Ilol store is in the cards now and plans are afoot to increase the store’s size by adding one more floor to the existing infrastructure. 

“The parameter of success isn’t always the number of stores owned by a retail chain but about creating successful stores. Multiple loss-making stores, including those belonging to large retail networks, shut down regularly or risk closing down. We have witnessed many prominent food-grocery retail chains closing down their operations in the face of sustained losses,” observes Jafri.

On its part, Hearty Mart strives to work closely with its franchises to help them earn good profits. This unwavering belief that Hearty Mart’s own success is incumbent on the progress and performance of its franchises has resulted in most of the franchise stores doing good business in their respective villages and towns.  

The Dholka franchise is yet another case of successful organic expansion under Hearty Mart. The store was set up in 2012 and in 2019, the franchise partner added one more store at a different location in Dholka. Another franchise, in Pimpodar village, added an additional floor to his shop in 2016. 

“Our franchise supermarket owners have been very successful and happy in continuing their association with us. Our innovative model is discussed as a case study in premier B-Schools, including the IIM-A, and our business model is taught overseas for helping and handholding rural retailers with the right guidance and skills-set to become modern supermarket owners,” avers Jafri. 

But of all the deserving recognition of Hearty Mart’s incredibly successful franchise model, he counts the book titled “Super Market for Rural Customers – A Study of Community Oriented Social Enterprise in Gujarat” published by The Academic Foundation as the most special and best acknowledgment so far. 

“It is a dedicated book on Hearty Mart written by two research professors – Subrata Dutta & Munish Alagh – of Sardar Patel Institute of Economic and Social Research (an ICSSR Institute), Ahmedabad. They did a detailed research study on our business model. The US-based economist Dr. Abu Saleh Sharif has written a forward for the book. It is available online on The Academic Foundation website (http://academicfoundation.org/index.php route=product/product&product_id=853). I consider this as the best accolade on our work so far, as it has the potential to motivate young entrepreneurs to study our business model, get inspired and strive to do something similar or better than what we could do,” says Jafri.       

The result of the hard work it has put in to make its rural franchise model a success has won laurels for Hearty Mart and has further burnished its brand salience as a retail chain with rural heart. It has also paved the way for Hearty Mart’s entry into more villages in Gujarat. 

Today, its 15 franchise-operated stores in Gujarat’s rural market cover small towns and villages like Dholka, Ilol, Chhapi, Pipodar, Kakoshi, Vadnagar, Idar, and many more covering over 23,000 sq.ft. in retailing area.

While Hearty Mart also has bigger stores spanning 1,000-2,500 sq.ft. to even 6,000+ sq.ft. in towns like Ahmedabad, Dholka and Sidhpur, most of its 16 franchise outlets are smaller stores ranging from 300 to 550 sq.ft. in size depending on the demographic profile and real estate cost of the location. 

“A total investment of approximately Rs. 40-45 lakh is needed for opening a decent 1,000 sq. ft. store in a rural set-up. The net margin for the retailer is 7-8 per cent. This makes it a business of turnover. Typically, a 1,000 square feet store in a rural set-up would take around three years to break even,” informs Jafri.

To read the full story, buy the September 2021 issue of Progressive Grocer or subscribe to the magazine.

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