Sahara India has finally given concrete shape to its retail ambition. It has announced an initial investment of Rs 3,000 crore to open 800 Sahara 'Q' Shops in 60 cities and towns across five states - Bihar, Jharkhand, Rajasthan, Uttar Pradesh and Uttarakhand. The shops will sell food and grocery items.
The food and grocery market in India was around $325 billion in 2011 - 69 per cent of all retail-- and is expected to grow to $425 billion by 2016 at a compound annual growth rate of 5.5 per cent, according to Technopak Advisors report, Emerging Trends in Indian Retail and Consumer: 2011.
In the first phase, the stores will house products under 73 different categories including staple food items, processed foods, personal care and home care and lifestyle products and home merchandise which will be produced under exclusive tie-ups with manufacturers. The company wants to sell only its own range of products.
At a press meet held in Delhi on Monday, Sahara India Chairman and Managing Worker Subrata Roy said the company plans to scale up operations to 998 cities and towns by March 2013. Besides providing employment to some 143,000 people, Sahara will rely on its existing network of salespeople - currently engaged in other endeavours of the company - to generate demand and bring in customers. Sahara's various financial services have a depositor base of 65 million people across the country which it will initially tap. It expects to generate revenues of around Rs 15,000 crore in the next 12 to 18 months.
|Food and grocery market size is estimated at $325 billion in 2011|
The segment is expected to grow at over 5 per cent over the next four years
Sahara Q Shop will be competing with Future Group, Reliance Retail and Spencer's Retail
The announcement comes at a time when retail sector is going through a tough phase with most players restructuring their businesses
to cope with the slowdown in demand. "The kind of growth Sahara forecasts is possible but may be difficult to achieve in the short time-scale, given the current situation" says Harminder Sahni, Managing Director, Wazir Advisors, a retail consultancy.
Like many other FMCG companies, Sahara will be using the hub-and-spoke model for product distribution. Some 305 warehouses, situated around 50 kms away from the point of demand, will serve the retail outlets. However, the actual sales will include both store visits and home delivery. Sahara is banking greatly on the latter. The customers will place their orders through call centres and products will be delivered to their homes. "While we will not stop customers from visiting stores, our business model is designed in a way that we don't have worry about footfalls at our stores," says Romie Dutt, CEO, Sahara Q Shop.
Although the company claims to offer affordable products, experts say the grocery retail segment is a highly competitive one where Sahara will face tough competition from many entrenched players and kirana stores. Also, retail stores have in-house private label brands which are priced lower than branded products. "The key to growth will lie in their supply chain efficiency and how they are able to service the customer with competitive pricing," says Sahni.