This fast-growing, omni-channel, convenience commerce player is harnessing the power of technology to serve consumers within 15-30 minutes through its brick- and- mortar stores and instant delivery App round the clock, 24/7, throughout the year. Globally, convenience retail is over a trillion dollar industry but paradoxically it has only a fleeting presence in a country as young as India, which has over 900 million people below the age of 35 years. As a young nation, there should logically be hundreds and thousands of organized and standardized convenience retail stores to cater to the requirements of the young generations.
Globally, convenience retail is over a trillion dollar industry but paradoxically it has only a fleeting presence in a country as young as India, which has over 900 million people below the age of 35 years. As a young nation, there should logically be hundreds and thousands of organized and standardized convenience retail stores to cater to the requirements of the young generations.
“However, most international retail chains have been conspicuous by their absence in India and it’s been barely a few months that a global multinational convenience retail chain set foot in India. So, instead of waiting for an international convenience retail chain to open and expand in India, we decided to launch an Indian model of an international convenience retail chain,” says Aastha Almast, the 36-year-old Co-founder & Business Head of The NEW Shop, a home-grown, 24/7 convenience retail and quick commerce platform that operates both offline and online stores.
As a 24/7 convenience commerce platform with retail and online stores, The NEW Shop (TNS) offers food, FMCG, and hyperlocal deliveries. The convenience chain retails fresh food and FMCG products such as packaged food, snacks, tobacco, beverages, pet care, over the counter, ready-to-eat food, personal care, home care, hygiene, stationery, and other necessities.
Creating an Indian Model of Convenience Retail for the World
Based out of Delhi-NCR, The NEW Shop has two other young and spunky co-founders — 29-year-old Charak Almast, who is also the Operations & Finance Head; and 30-year-old Mani Dev Gyawali, who doubles up as the Technology Head. The triumvirate set up a company called Accelerate ProductX Ventures Pvt. Ltd in 2019 with the aim of building modern convenience offerings for the masses by opening affordable convenience retail stores to cater to all categories of consumers.
The company launched its maiden convenience retail store in a residential area in Delhi under the brand name The NEW Shop (TNS) in December 2020. The TNS debut store in Delhi was meant to be a minimum viable product, or MVP of sorts, and was meant to act as a template for scaling up if the model proved viable. “The model became an instant hit thanks to the efforts that we put into for perfecting the unit economics, finessing the technology to act as foundational bedrock to the business, and by doubling down on delivering great customer satisfaction. Our focus on these factors helped us to expand rapidly and we grew exponentially from 3 stores in January 2021 to 45 operating stores at the end of the 2021 calendar year,” says Charak Almast.
Currently, TNS operates 70 stores spanning about 50,000 sq.ft. of retailing space. About 50 of these stores can be found across thick residential clusters in places like Delhi, Noida, Faridabad, Gurgaon, Lucknow, Agra, and Ahmedabad. In Delhi, for instance, TNS stores can be found at places like CR Park, east of Kailash, Chattarpur in the South; Madhu Vihar, Laxmi Nagar, Surya Niketan in the East; Shakti Nagar and Ashok Vihar in the North; Punjabi Bagh, Subhash Nagar, Rohini in the West; and Karol Bagh and Paharganj in Central Delhi.
Hitting on Best Location Strategy for Convenience Retail
More TNS stores are expected to come up in residential areas and mass transit hubs —railway stations, airports, highways, tourist attractions, and petrol stations. The offline stores will also double up as online stores and fulfillment centres that provide instant hyperlocal delivery within 1.5 kilometers of all locations. “Our location strategy is to allow the customers to order from The NEW Shop to any destination within 15-30 minutes and also make it possible for the customers to walk into the nearest TNS store in the same time span,” says Aastha, adding that the stores follow a flexible operating model comprising a mix of leased and franchise stores.
As an innovative retail company, the brand also has few stores on revenue-sharing model and most of its stores at airports, highways, bus and railway stations work on this model. As far as transit hubs are concerned, TNS stores are running at airports in Mumbai, Lucknow and Ahmedabad and at railway stations like Anand Vihar in Delhi. “We plan to have about a thousand TNS stores at these transit hubs in the next couple of years besides expanding the TNS footprint in the residential clusters through the franchise route,” states Aastha.
For a convenience retail format ideal for transit hubs, TNS has been remarkably successful in exploring opportunities and sewing up partnerships for mass scale opening of stores at major transit points with big real-estate and transport players like the Indian Railways, the Adani Group, Cube Highways, among others. “We have already perfected the residential model and now are exploring to expand our store footprint across new horizons such as airports, highways, railways, tourist attractions, and petrol stations,” informs Charak Almast, Co-founder and Operations & Finance Head.
Most TNS stores in the residential areas measure about 600-800 sq.ft. and stock about 2K SKUs on average whereas those at the transit hubs like airports span around 400 sq.ft. However, TNS now plans to open even 1500 sq.ft. stores and will soon be opening bigger sized stores at airports and at other transit hubs.
By way of the stores’ operating structure, TNS follows two models: Franchise-owned Company-Operated model; and Franchised stores on revenue-sharing partnership. The Covid pandemic led to new models springing up in the real-estate space and the revenue-sharing model is one of them. It is a flexible model that helps the landlords to make productive use of their assets by ensuring them a fixed share of the revenue from the brand.
“We have found the revenue-sharing model to be a perfect fit for our stores along the transit hubs and it’s a win-win recipe for both the retailer and the landlord. Thanks to our strength in data analytics, we are also able to figure out the revenue potential for a particular store. We are able to calculate and work with the numbers backwards and figure out if a location is feasible for our store and the amount of revenue that a particular store can pull in,” says Co-founder and Technology Head Mani Dev Gyawali.
TNS has its own warehouses and sources its products directly from the brands, which is then distributed to all its stores. In some cases, the sourcing is done through the distributors of the brands, but in most cases it is done directly from the brands themselves. “We have direct partnerships with most of the brands sold at TNS outlets, and it is one reason why our supply chain and logistics costs remain less than 1% of our total sales. Outsourcing the supply chain to a third party or to intermediaries keeps you guessing about what your fill rates will be and at TNS this challenge has been taken care of by its super-efficient tech and centralized inventory management system,” says Charak.
A Quick Commerce Model of Convenience Retail
“We like to call TNS a quick commerce convenience retail company not just because we do home delivery but also because our stores are located at a walking distance from where our customers are. As a retailer, quick commerce to us means bringing the convenience of retail closest to where the consumers live. It means setting up TNS stores in a way that consumers can easily walk down to our shops for making their purchases or they can place their orders through our App for quick and convenient delivery within 15-30 minutes, seven days a week and throughout the year,” says Aastha.
“Our vision is that whether a customer comes to our store or places an order through our App, the delivery time or the walking time to our store will always be about 15-30 minutes. So one can have products delivered to the doorstep within 15-30 minutes or the same customer can walk down to our nearest store, which will also take 15-30 minutes, and buy the product in person,” adds Aastha.
The quick commerce service model of convenience retail that TNS is building stands on a bulwark of three pillars: omni-channel; profitability; and sustainability across all parts of the business. To be a truly omni-channel, quick commerce player in the convenience retail industry, TNS is harnessing the power of technology to serve consumers within 15-30 minutes through its brick- and- mortar stores and its instant delivery App at all times of the day and 24/7.
The retailer has, in true earnest, made technology the catalytic fuel to power TNS’s growth. With technology powering TNS’s rock-solid business model, the retailer is already moving fast along the path to profitability. “Thanks to the amazing technology at TNS, our cost of operations and unit economics are the best by any industry yardstick. We incur the lowest cost on transactions, we run the most cost-effective customer acquisition program in the industry, and we work on very good margins — in fact, our current gross margin is over 28% and comes to Rs. 560 per sq.ft., which is a very good number and we are extremely happy about it and working to take this number even higher,” says Aastha.
Operations and Finance Head Charak says that TNS relies on multiple strategies to achieve its enviable gross margin and unit economics. “Retail unit economics is best measured by the metrics of sales per sq.ft. and gross margin per sq.ft. With our stores between 600 sq.ft. and 800 sq.ft, the average monthly revenue per store is Rs. 15 lakh and sales per sq.ft. works out to Rs. 2000, which is very high compared to our competitors or by the industry standards.
Among the most effective strategies that TNS employs to keep its business numbers healthy is to sell live food and beverages (comprising fresh items such as sandwiches, burgers, Indian meals, ice-creams, desserts, pastries, etc.) in a big way as it is a high margin category. Typically, 20% of the total sales at TNS outlets come from live food & beverages. For squeezing better margins in the FMCG category, TNS relies on a mix of legacy MNC brands — which are typically low margin-high volume products — and products from MSMEs and startups that offer decent margins but may not be big sellers like the established FMCG brands.
“The SKUs at our stores are assorted in a way that gives TNS high margins on the sales it makes,” points out Charak, adding that about 20-25% of the SKU mix varies from store to store in different locations. For example, TNS stores at transit hubs stock about 80% of packaged, ready-to-eat-and-serve F&B products and the rest 20% comprises gifting products, small travel accessories, and personal care and hygiene products.
For residential localities, about 20-25% of the product mix belongs to the Fresh F&B category comprising fresh items such as sandwiches, burgers, Indian meals, ice-creams, desserts, pastries, etc. Another 20-25% of the product basket belongs to the packaged F&B category; another 15% comprises tobacco and tobacco-related products; grocery (regular masalas, pulses, etc) and dairy products (fresh milk, paneer, cheese, dahi, etc) make up another 15-20% of the product mix; and the rest is taken care of by personal care, hygiene, baby care, pet care products and electronic accessories and gadgets.
Ask him about the competition, and he says that apart from 2-3 big brands in the 24/7 convenience retail segment, there’s a huge swathe of business competition and the competitive landscape is huge. “We are competing with the General Trade comprising kirana stores, with paan shops, and with QSRs as we also serve fresh food in the form of sandwich, burger, salads, etc. Then, there are other Modern Trade grocery stores because people always have the option of going to these bigger stores or coming to The New Shop. Similarly, we are also competing with pure play quick commerce online players like Swiggy, BlinkIt, Instamart, among others.” As we are growing, we are taking away market share from each of these, because our standardized and quick access touchpoints.
Cutting-edge Technology at the Front and Centre
“We knew, right from the very beginning, that inventory management was something that would make or break the business and so we created a perfect technology solution to take care of this part of the business. Right from the point when the product leaves the brand’s warehouse, our tracking system kicks into gear allowing us to track the product at the warehouse level to the shop shelf level. The system enables us to track who is handling the product, who transferred the product to the delivery van, who drove that van and to which store, when was the stock received at the store, who received the stock…and every other information to the last detail until the product finds its way into the hands of the customer,” says Gyawali.
Another technology highlight at TNS is that it has its own in-house created POS system. Even the top retailers don’t have their own POS system and they depend on tech providers to build it for them. But the best way to capture all the data and make sense out of it is to have a POS that is specifically created to meet your brand’s needs and operational requirements. “We have built our POS to run on open source software like Linux or Google Chrome, which makes the cost of the complete system come to only a fraction of the cost at what most POS systems are available today in the market. Another hallmark of TNS’s POS is that it has a built-in MIS-kind of system for the franchise owners and this feature accords an exceptional degree of transparency to all sales and transactions and allows the franchise to attract sales in real time,” adds Gyawali.
With so much of data pouring in, data science and analytics play an important role at TNS. The segregation and analysis of data helps TNS decide on the SKU selection for different stores. It also helps the retailer to decide on what packaging or flavours will work for stores in different locations. On the whole, data analytics helps the retailer to predict what kind of products and assortment will work for different TNS stores. “Almost 80% of the SKUs might be the same for multiple locations across a particular city but we play around very ingeniously with the remainder 20% of SKUs, which keeps changing from store to store depending on what the customers are really looking for and buying,” reveals Gyawali.
New Concepts and Innovations
For any customer visiting The New Shop, the store’s design and lighting are two features that stand out prominently. A visitor to any TNS store cannot miss noticing that the outlets are slightly more lit than one would expect a grocery store to be. To a casual visitor, a TNS store looks more like a fashion showroom than a typical grocery outlet. The design and lighting is done in away to appeal to the core TG of TNS — shoppers in the 13- 35 years age bracket.
“Our customers say that they find lots of positive-energy vibes and soothing ambience at our stores. As a result, young customers are inclined to hang out more at TNS stores. So, whether it’s a mother with her child coming to the store for an ice cream, or a youngster ambling in for some French fries, they feel that the store and its design elements syncs naturally with their lifestyle and daily regimen. The minimalistic look and feel of TNS stores, with its bright and attractive black, white and yellow colours, is something that definitely resonates with the young-gen shoppers,” says Aastha.
Another standout feature is the visual merchandizing at TNS stores. “It’s something that one doesn’t come across most grocery stores because most of them sell on the premise of offering attractive discounts. However, we are not a store for people looking out for discounts; rather we are like a lifestyle store providing convenience. So, we have put in a lot of creativity in how the products are displayed, and how the stores have amped up their visual merchandizing quotient with some deft tech-savvies and interactive features, adds Aastha.
Also, TNS stores are known not only for selling products but also for providing many services that customers require in that hyper-local area. So, apart from selling fresh food and beverages, TNS stores also provide services such as cash collection, courier, photocopy and printing, and car wash at stores along the highways. In fact, in the recent past, some TNS stores have also provided Covid vaccines to people living in the vicinity. “We have the physical real estate space in the form of TNS stores and it is our biggest asset. We think that any whichever way we can make that space available for multiple uses and create maximum utilization of our real estate is the biggest innovation that we have thought of in retail,” notes Aastha.
TNS has also brought in a whole lot of new innovation in the quick construction of stores — with stores put up in less than 15 days with prefabricated modules of the shop structure and design. Then, there is the amazing technology that TNS has created for store automation, more accurate customer data, and an amazingly predictive inventory management system. “The most defining innovation at TNS is that both its back-end and front-end runs on technology that is the best-in-class and ensures that the format becomes the most profitable in the retail industry,” says Gyawali.
Future Plans and Road Map Ahead
In keeping with the pace and growth momentum with which TNS is blazing ahead, the target is to reach 250 stores in CY 2022 and it is pushing all the right buttons to meet that goal of achieving a five-fold growth over the CY 21 (45 stores). “We are also looking to maintain an equal order contribution of 50% each from both online and offline channels for the next 12 months. Going forward further, we have set a growth target of 10X over the earlier year and we plan to have 500 TNS stores by CY 23 and scale up to 10,000 stores by CY 2029. We also want to take the TNS brand overseas by setting up shops in regions like south Asia and Africa, which do not have the facilities for organized and standardized convenience retail yet,” reveals Aastha.
To fund its expansion plans, TNS has secured and stitched up investment plans and capital requirements for the next 2-3 years. “Our business model has been able to attract a lot of investor interest, especially from international venture capital firms who have seen how convenience retail with an omni-channel model has evolved in many parts of the world to grow and become an industry worth billions of dollars. Investors who see the potential and promise of the convenience retail market in India and have put their faith in TNS’s omni-channel convenience retail model,” says Aastha.
As things stand now, TNS is already making big moves in north India and has a marked presence in Delhi-NCR where it plans to ratchet up its expansion further. The brand is also present in Agra and Lucknow in the North, besides being in Ahmedabad in the West. “We have partnered with the Airport Authorities and are expanding at airports across the country. Our location focus is densely clustered residential areas and also the transit hubs like airports, railway stations and highways,” concludes Aastha.