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Lure of the hypermarket

As consumers in India warm up to shop at hypermarkets to take advantage of the greater variety and deals such destinations offer, retailers spot their chance. Rachit Vats writes. Modern retail statistics

business Updated: Apr 22, 2012 22:35 IST
Rachit Vats
Rachit Vats
Hindustan Times

Once every month Nidhi Jamwal, a freelance journalist and homemaker in Mumbai, wheels a trolley down the aisle of Star India Bazaar, a hypermarket chain. The range of choices and value-for-money deals make her happy and keep her coming back. "You get good deals on bulk buying and at the same time, there is more variety," she said.

Chumki Sen works with a multinational company and lives in Gurgaon. She visits Spencer's Hyper twice a month with her husband and two children. "In a place like Gurgaon, it's difficult to spot and trust a kirana shop. Spencer's is well organised and there are no quality issues," she said. The only thing she has to do is be more organised with her shopping needs and plan.

Meena Kumar, a housewife, is spoilt for choices - there are three hypermarkets and one supermarket store near her house at Mira Road, a Mumbai suburb. She prefers to shop at the hypermarket stores of Big Bazaar, Star Bazaar or D' Mart, her reasons also including destination shopping, with the pleasure of planned and unplanned buying opportunities.

"The immediate benefit of shopping at any of these hyper outlets is that you instantly become the king. The ambience is good and there are better deals across categories with more choice. And you get everything under one roof," said Kumar.

Some prominent hypermarket chains in India include Spencer's Hyper, Reliance Mart, Star India Bazaar, Big Bazaar, Bharti Easy Day Hyper, Hyper City and Spar.

"If consumers can get everything in a dozen varieties, and under one roof, they are bound to go there," said Sandeep Gupta, MD, Protiviti. "Every retailer in the market is revisiting their strategies. A new ecosystem, wherein the acceptance of modern retail is growing, accommodates hypermarket stores better."

While the segment has taken time to take off, retailers are now plugging into the hypermarket opportunity. In India, any retail store occupying over 50,000 sq. ft. space is termed a hypermarket. Such stores are normally within metro and city limits, while in the Western markets, hypermarkets are typically outside city limits.

"For a retailer, any metrics in a large format store automatically translates to more profits. Such stores are more efficient because of scale and area," Mohit Kampani, chief - operations & merchandising, Spencer's Retail, said.

Industry reports say that while hypermarkets in India have grown from 116 in 2008 to 307 in 2012, supermarket and smaller format stores have actually come down by 604 outlets in the same period.

"The notion that large format stores take more time to break even is a myth. At an operational level, most professionally run, big group stores break even from two months onwards," said Kampani. Spencer's is looking at adding six-seven hypermarket stores every year. Each such store takes Rs. 4-4.5 crore investment to set up.

"There is a trend where consumers prefer the hypermarket because of a combination of best prices and destination shopping," said Mohit Bahl, partner, KPMG Transaction Services. "For retailers, in most cases, large format stores are anchor stores and are able to negotiate lower rents, often getting free rents for the first few months. The topline is higher and owing to larger volumes, retailers are able to manage their supply chains better."

The gestation period for large hypermarket stores is anywhere between 3-5 years. Compared to a supermarket store, the average billing at a hypermarket store is usually five times higher. Modern retailers, who have played with various formats and at times burnt their fingers, are beginning to look more keenly at the hypermarket opportunity and the next wave of expansion, say experts, will see a growth in hypermarket stores.

First Published: Apr 22, 2012 20:33 IST