To many deep-pocketed retailers, taking their brand to somnambulant towns and townlets located in the backwoods of Bharat, would look like a mug’s game. Why go swinging around such jejune markets when there are greener pastures to graze on? However, for 9to10, a Siliguri, North Bengal-based grocer, these sleepy urban clusters had the potential to be turned into piñatas for profitable business with the right strategies for store formats, product assortment and customer centricity.
9to10 currently runs 27 stores located in small towns across North Bengal, Bihar, and Sikkim. By setting up stores in places that usually fly under the radar of big retailers, it has held up the bar for successfully demonstrating how independent retailers can make modern, convenience grocery retail thrive and flourish in the underserved markets of the country.
Though 9to10 has been a first-of-its kind local modern trade grocery retailer to set up shop in many of the provincial towns and the backwaters of North Bengal and bordering areas of Bihar, its successful business run has inspired other retailers including the big brands to follow suit.
As an urban agglomeration — Siliguri, the second-largest city in West Bengal and known as the gateway of North-Eastern India — has a trendy retail milieu with easy access to major consumer brands and top retailers. But while the uptown and downtown parts of the city can make any consumerist dreams come true, there are several upcoming pockets away from the beating heart of the city where urban development and commerce is still waiting to break out but not far from the surface. Quite a few of these locations are now witnessing a swirl of development even as an increasing number of well-heeled settlers keep moving in and continue raising the overall profile of such neighborhoods.
As the simmering strain of aspiration and consumerism keeps gathering force in these neighborhoods’, one would have counted on top retailers in the city to pour on the fuel and unleash people’s purchasing power. But while big-box retailers like Big Bazaar, Reliance Smart/Fresh, Spencer’s, et al have been flying their flags in the city for many years now, their presence has been skewed more toward high streets and up-market areas than away-from-centre and out-of-the-way parts of the city.
Two brothers in their strapping twenties — Rahul Raj Prasad (28 years) and Karan Raj Prasad (24 years) — were looking to hang their shingle and they sniffed a business opportunity in plugging this retail gap. Their family owned a parcel of land in a fast-gentrifying part of the city where the brothers decided to open a modern trade grocery supermarket.
Taking an entrepreneurial leap of faith
But the decision itself was fraught with uncertainties around the viability of the business and its worthiness. For one, the chosen locality already abounded with mom-and-pop corner shops in baklava-like profusion. Did it make sense to open a modern grocery outlet in a part of the city where the consumer psyche was well-baked and deeply ingrained toward buying from traditional kirana shops? Why rush in where the tried and tested retailers had held back?
Ignoring the warnings and caveats of the Debbie Downers, the brothers decided to move ahead with their decision, counting on their own instincts, gut feel and youthful nous. “We launched our grocery retail brand by opening a 5,500 sq.ft. 9to10 supermarket in October 2018 to serve as a one-stop destination for catering to all household and grocery needs under one roof along with other product categories like home utensils, crockery, kitchenware, and a range of electronic home appliances,” says Co-founder & Director Rahul Raj Prasad.
The brothers’ bold gambit paid off and they were able to cash in on the serendipitous moment. The store soon transformed into a shopping cynosure with beyond-the-expected traffic and custom. “The sales for the first week came in at Rs. 12 lakh, which was much beyond our expectations, but it reaffirmed our faith about making the right move in the right direction,” reminisces Rahul.
“Our store became a lightening rod and magnet for shoppers and transformed the grocery shopping experience for people living in the neighborhood,” says Karan Raj Prasad who carries the mantle of the business as Co-founder and Director, along with his elder brother.
The thumping public response to their debut store took the brothers up in a pleasant surprise. It set up their hopes for a quick roll-out of new stores and business expansion. The brothers realized that there were quite a few areas in and around Siliguri that could be profitably mined for the modern grocery business. However, whereas they had taken a seat-of-the-pants approach to deciding on the location for opening their debut store, their next moves had to be more thought through and mapped out well.
Fortunately, the two brothers had a few aces up their family’s sleeve — only the cards had to be picked and played well. As long-time settled residents of the city, the Prasad family came with a business standing of their own and their risk-taking instincts were sharp on the button and well acuminated to making the right moves and a sure-footed play for business.
Betting on the franchise model for growth and expansion
“If the first store created a firestorm of buzz in the sedate, less hustle-and-bustle part of the city, the second held up the bar for showing how independent retailers can make modern, convenience grocery retail thrive and flourish in parts of the city that have been generally overlooked and lay beyond the ken of big, mass retailers. Like the first, our second store set tongues wagging not just among consumers but also among the city’s business and commercial covens. People started enquiring with us on how to set up similar stores in other localities, which proved to be a trigger for us to embark on the franchisee route for expanding the 9to10 brand,” recounts Rahul.
The franchise model has helped 9to10 to quickly take off the blocks and stamp its presence in mostly virgin markets with plenty of opportunities to capture the white space. Since starting off in 2018, the brand added 5 stores within the first year of operations; it launched 12 new stores in the second year; and has brought another 10 new stores under its brand stable in the third year.
Currently, 9to10 runs 27 stores, spanning over 50,000 sq.ft. of retail trading, which includes its own company-operated 6 stores and 21 franchise stores. Together, the stores collectively tip the revenue turnstile with over Rs. 50 crore in annual sales.
The size and format of stores vary with the smallest at 900 sq.ft. in the convenience category and the biggest at 5,500 sq.ft. in the supermarket category. “About half the number of our total stores are less than 2,500 sq.ft. and belong to the neighborhood convenience store format; about 40% of our stores are between 2,500-3,500 sq.ft. and come under the supermarket category; 10% of our total stores are above 3,500 sq.ft and can be said to belong to the mini-hypermarket category,” informs Karan.
Depending on the locality and size of the store, it takes about Rs. 25-28 lakh for a convenience format 9to10 store to be up and running. Franchises are required to pony up Rs. 2 lakh as a one-time license fee for taking the 9to10 brand. They are then required to make investments toward raising the infrastructure for the shop by way of the necessary fitments and stocks.
Karan says that most 9to10 franchise stores manage to break even within 2 years of operations. “Most of our convenience stores that are not more than 1,500 sq.ft. are able to clock Rs. 1 lakh sales per day in their first year, and if it goes up to Rs. 1.5 lakh to Rs. 1.75 lakh per day in the second year, they are able to break even and glide on the path of positive revenues in 1.5 to 2 years of operations.”
The bigger stores, above 3,500 sq.ft., on the other hand, are able to ring in higher sales on a daily basis due to their higher scad of SKUs that could touch the 15K mark, larger repertoire of merchandise including imported products and also because some of them have an add-on HoReCa division and even a sweets parlour that act as a pedal to accelerate sales.
9to10 stores are scattered across the districts of north Bengal, Bihar, and Sikkim. Five of these stores, covering about 20,000 sq.ft. of retail space, are company-owned and company-operated. The other stores are all franchise owned, of which 1 store in Sikkim has former India footballer and captain Baichung Bhutia as a franchise owner.
Even in Siliguri where 9to10 has 8 stores, most of them are located on the city’s outskirts. The others have come up in small census towns of North Bengal, along the “Uttar Dinajpur” belt and the adjoining areas bordering two other other States and the hilly areas of West Bengal like Sukhiapokhri and Kurseong.
Sweating sales according to store size and format
Compared to the regular grocery products sold at the smaller convenience stores, the profitability of bigger 9to10 stores is much higher as they also sell imported food items, HoReCa products, a range of general merchandise goods, including home appliances, crockery and electronics. Plans are afoot to add a toys section as well to the bigger stores. “Profit margins for imported chocolates like marshmallows, candies and jellies are 100% compared to 10-15% margins for most domestic food products and those imported chocolates sell like hot cakes in places like Siliguri,” says Karan.
“Also, restaurants here are regular buyers of our imported sauces, cheese, jams and dry fruits, which again fetch fat margins. Even in the domestic category, our bigger stores stock general merchandise items like Jockey innerwear, Milton kitchenware and a crockery and electronics range, all of which bring in a 40-60% margin compared to most grocery products,” adds Karan. Talking of the sales spilt and share, he says that about 40-50% of sales at 9to10 supermarkets comes from the food section; 30% from the non-food section, which includes items such as toothpaste, deodorant, detergents, female and personal care products; 15% from crockery and other general merchandise categories; and 5% from its sweets parlour and the live-food HoReCa section.
Launching modern grocery beach-heads in the boonies of Bharat
Retail often acts a proxy to the state-of-health of the broader economy. When 9to10 took up the gauntlet to launch its stores on the outskirts of Siligury and along the “Uttar Dinajpur” belt of North Bengal and its bordering areas, these places were seemingly like pimples on the face of an unexplored landscape that had remained frozen in amber for long. Finding a modern grocery outlet in these places was like looking for a hen’s tooth and their relative isolation proved to be the proverbial canary for the big retailers. The well-off and big branded retailers chose to give these locations a go-by and focus on more progressive and promising sites.
Elucidating on how 9to10 stores have been instrumental in changing the retail profile of many small hick towns, Karan says: “Instead of waiting for people to come to our stores, we have cut a path for our stores to enter unexplored markets and elbow our way into the hearts and minds of the people living in these localities. Our stores act as platforms to serve the unspoken, unmet needs of customers, sparking their imagination and leading to product discovery and product improvements. Also, though the stores are mostly located in underserved markets, they are not a glorified version of kirana stores with POS and billing systems alone. Our stores offer the whole enchilada of modern trade experience: better products with a gamut of choices/offers/schemes across different categories, competitive pricing, pleasant shopping and customer service boosted by customer-satisfaction enhancing hardware and software technology. In the process, we have been able to uncover new business opportunities and new audiences.”
Going by the gold mine of positive reviews and press coverage that 9to10 stores have garnered in the local and regional media, the brand sure has made an impact and earned a fair degree of consumer mindshare in the communities it serves. To cite an example, take the 9to10 store in Islampur, a small town with a 98% Muslim population, located at a distance of about 60 km from Siliguri, and in the North Dinajpur district of West Bengal. Agriculture is the town’s economic and employment engine and a high share of the population is engaged in agriculture with construction gigs being the next option. Due to the relative isolation of Islampur and lack of social and physical infrastructure, the town is a considered as an economic laggard compared to other districts and towns of West Bengal.
“Even we had our apprehensions when we opened our 1500 sq.ft store in Islampur, which was the fourth 9to10 store and the first-of-its-kind modern grocery outlet to come up in this place. But when we opened the store, people came flocking in droves and to our amusement everyone was calling our shop a mall. Despite the pressing crush of shoppers who were drawn to the store, we did not expect sales to cross a lakh of rupees on the opening day. But to our surprise, the collection came in at a little above Rs. five lakh, exceeding our wildest expectations,” says Karan, recalling how the store had to be kept open until midnight even after turning away late visitors.
He says that the Islampur store continues to register strong and steady sales, ringing in above a lakh of rupees on a daily basis, which prompted the retailer to open another store in a different location. News travels quickly and word on how 9to10 was raking in the moolah with its Islampur store must have gotten around fast. In less than three years of the launch of 9to10 store in Islampur in 2019, a Reliance Smart store has now popped up, broadening the choice of consumers and spicing up its once drab and dour retail landscape.
“In many of the places that we set afoot 3-4 years ago, the big bulls of grocery retail are now hoofing down. However, in these places, a cluster of 8-10 kirana stores in a locality that could be collectively smaller in size than a big brand’s single retail showroom, end up ticking more business in a day than the bigger, national brands. 9to10 is not competing with the big bulls of grocery retail; rather, in the areas that we operate in, we have become the big bull for those smaller kirana shops that are competing for the same business that we are after,” says Karan.
“For well over decades, places like Islampur, Ramganj, Chopra, Phulbari, Naxalbari and Khoribari in north Bengal, and Kishanganj and Thakurganj in Bihar, had remained one-eyed towns without any semblance of modern grocery retail until 9to10 set foot and upended the whole shopping experience of the people in these parts. For years, these places wallowed in retail penury with huge issues related to product quality, availability of stocks, and consumer options. People were used to planning their trip to bigger cities for making major purchases. Now those same people are voting with their feet for our stores in these places,” says Rahul, adding that about 5-6 of such smaller stores (900-1500 sq.ft) in these localities keep the revenue turnstiles turning with some 100,000-1,50,000 rupees of sales per day.
The road map ahead
Though 9to10 has been a first-of-its kind local modern trade grocery retailer to set up shop in many of the provincial towns and the backwaters of North Bengal and bordering areas of Bihar, its successful business run has inspired other retailers including the big brands to follow suit. “Most of these places were virgin markets when we first stepped in but they are now fast transforming with the entry of other major brands, leading to an intensifying competition for share of the grocery pie in these markets. For sure, the competition is only going to grow stronger in the times to come and we are positioning ourselves to build on our distinct retail identity and stay ahead of the curve. Retail models like quick commerce and other start-ups are now looking to peck and sink their teeth into these fast-growing and emerging markets; so defending and protecting our bastions is going to be our top concern even as we extend our sight lines for further growth and taking our brand to newer markets and outposts,” says Rahul.
“We are also in the process of setting up a HoReCa division in Gangtok, Sikkim, which will cater to about 500 hotels and restaurants in the region,” adds Rahul, underlining the ambition to grow not only as a retail brand but also as a complete solutions provider for the HoReCa sector by catering to all their grocery needs.
“Hotels and restaurants have a high turnover and operate on higher profit margins and hence retailers like us have huge scope and opportunity to improve and enhance profitability by serving this market and catering to their bulk requirements. We have our sights set on the new emerging markets in and around Siliguri and other fast-growing townships in North Bengal and the adjoining areas of Bihar like Purnea and Kishanganj, Sikkim and its bordering hilly districts and gateways like Darjeeling and Kurseong. There are a lot of hotels and restaurants coming up in these areas and we would like to become the preferred supplier for all their grocery needs,” says Karan, offering a snapshot of the retail trajectory of 9to10 over the next few years.