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| Pick and choose: Of the 56
Reliance Fresh stores in the country, 21 are in Hyderabad |
Drive
some 10 minutes from the Hyderabad airport into the city, and you
enter the new and happening 'shopper's belt'-it's a 5 km-long stretch
that starts at Begumpet and goes all the way up to Banjara Hills,
Hyderabad's best-known neighbourhood. Dotting the stretch are a
variety of malls and stores-there's Shoppers' Stop and Pantaloons
at Begumpet, rival Lifestyle a few blocks further down. Then you
go past some local malls like Babukhan, Amrutha and Kalanikethan
and reach Kishore Biyani's Hyderabad Central. It is close to Banjara
Hills, where GVK is now busy building its 650,000 sq. ft mall. Footfalls
are not a problem on the belt. From afternoon right until the shutters
come down around 10 p.m., you'll find these temples of consumerism
packed with ardent devotees. Walk into a mall like Central, and
you'll find the place swarming with shoppers-young couples, middle-aged
men and women with kids in tow, and the omnipresent mall rats.
Retailers are, of course, not complaining. In fact,
the modern retailers, who first arrived in the city tentatively
way back in 1997, seem to be revelling in their discovery of Hyderabad.
Indeed, in some sense, the city has become the launch pad for
players with national plans. Choupal Fresh, ITC's fresh food retail
chain, was kicked off from Hyderabad in August last year; Reliance
Retail chose the city as well to launch, two months later, its
own fresh food chain, Reliance Fresh. And in January this year,
the Aditya Birla Group snapped up city-based grocery chain Trinethra
Super Retail's 170 stores (spread across four South Indian states)
for an undisclosed amount to signal its entry into food retail.
When other established retailers such as Sanjiv Goenka's RPG and
Trent (of the Tatas) wanted to launch their hypermarkets and retail
outlet six and eight years ago, respectively, they chose Hyderabad
too.
| WHY RETAILERS
LOVE HYDERABAD |
| There are several reasons, but here are
some of the more important ones.
Real Estate is Relatively Cheap: Compared to a rental
of Rs 85 to Rs 250 per sq. ft per month in Bangalore or
Rs 215 to Rs 305 per sq. ft in Mumbai for prime areas, rentals
in Hyderabad are still affordable at Rs 65 to 120 per sq.
ft
It's Sufficiently Cosmopolitan: Acceptance of modern retailing
is pretty high in the city, thanks to its diverse crowd
employed in knowledge industries such as IT and pharma.
According to Technopak, Hyderabad ranks fifth in terms of
market potential value
It's Not a Discount Market: While the penetration of organised
retail is high, there is not much of discounting that happens
here-a problem that retailers in cities such as Bangalore
have to deal with
It's a Growing Market, but Off-sight: How does that help
retailers? Basically it allows them to experiment with their
formats and fine- tune them till they are good enough to
be rolled out nationally. So a mistake won't be fatal |
| THE WHO'S WHO OF RETAIL HYDERABAD |
| Most of the big players have a presence in
the city. Reliance Retail: Reliance Fresh was launched
in Hyderabad in October 2006 and has 21 stores (around 50,000
sq. ft) in the city. This is out of the 56 stores that Reliance
has across the country, covering a total area of 120,000
sq. ft.
Aditya Birla Group: Has acquired 90 per cent stake in
Trinethra Super Retail, which has 63 stores in Hyderabad
out of a total of 170 in South India. The Group intends
to commit all the necessary resources in terms of funds
and efforts that this space would need
Future Group (Pantaloon Retail): Currently has two Big
Bazaar, one Central, two Pantaloons, one Brand Factory and
four Food Bazaar outlets and specialty retail formats like
Collection I and EZone. By the end of 2007, it plans to
open another 5 Big Bazaar, 3 Pantaloons and 8 Food Bazaar
outlets
RPG: Has been in Hyderabad for over seven years now and
has 15 stores covering a total trading area of 1.5 lakh
sq. ft. The company plans to double this to 3 lakh sq. ft
by June this year
Trent (Tatas): Has been present in Hyderabad with its
Westside outlet since 1998, which is spread over 12,000
sq. ft. This is its second store after Bangalore and the
company plans to open more stores in the future
Landmark (Lifestyle): Has one major outlet here, the second
in the country after the flagship store in Chennai. Spread
over 47,000 sq. ft, it opened in 2001
Shoppers' Stop: Opened in 1998 (its third outlet to be
launched in the country), the store is spread over five
floors and covers an area of 66,000 sq. ft. There are plans
to add another store in the city this year
Subhiksha: Made its foray into Hyderabad in October 2006
and in the last four months has set up 34 outlets, covering
a total area of 54,000 sq. ft. Plans to have 42 stores in
Hyderabad by March this year |
| RELATIONSHIP RETAILER |
| A local retailer thinks up innovative ways
to lock in customers. Sitting in the conference room on
the second floor of their Spartan office in Punjagutta,
executives at Heritage Foods are keeping an eye, literally,
on their nine stores across Hyderabad. They have the option
to either centrally monitor or have distributed monitoring
(using their laptops). Several windows open up on the screen
showing the different outlets and one can zoom in on any
one of them for a closer look. This monitoring results from
being connected to a network of close circuit television
(CCTV) cameras showing everything that's happening at the
stores, including customer traffic, queues at the check-out
counters, and even cleanliness of the stores. "Monitoring
helps us better understand the shop floor realities and
increase our speed of response," says S. Jagdish, Vice
President, Retail Division, Heritage Foods (India). CCTVs
are a small part of the technology that Heritage uses. Its
retail business runs on JDA Retail ERP package, and its
dairy division uses Oracle Apps 11i ERP. Heritage has also
invested in a virtual private network, which connects all
stores, warehouses and offices, using a 2-MBPS (mega bits
per second) link.
In response to competition from bigger players, Heritage
intends to grow home delivery as a business stream. It even
runs a call centre that can take customer orders (minimum
value Rs 200, with an option to pay by credit card at home
upon delivery) and make sales calls to customers. Customers
of Heritage Dairy (everyday milk buyers) can place grocery
orders via the milk vendor or, shortly, online. "The
crucial issue," says Jagdish, "is trust, and we
want to ensure that the customer gets the same deal and
quality sitting at home." Apparently, one way to deal
with competition is to make sure that your customers never
have to leave home for their daily needs.
|
Is Hyderabad's emergence as the new retail hot
spot a matter of design or chance? When big money is at stake,
few retailers leave anything to chance. Therefore, if Hyderabad
finds itself today as a test market for modern retailing, it's
for good reason. "In Hyderabad, both the share of organised
retail (modern trade) and the share of consuming population is
twice that of other cities," says Kishore Biyani, Chairman,
Future Group, which includes Pantaloon Retail of Big Bazaar fame.
"There are several other factors in favour of Hyderabad at
the moment," adds R. Subramanian, MD, Subhiksha Trading Services.
"One of them is that the city has relatively low property
prices and rentals compared to the other big cities," he
says. For instance, according to real estate consultancy Cushman
& Wakefield, high street rentals range between Rs 65 and Rs
120 per sq. ft, while at malls, rentals cost Rs 100 to Rs 150
per sq. ft. In bigger cities such as Delhi or Mumbai, high street
rentals start at Rs 200 or so per sq. ft.
 |
| No, it's not a railway station: The
two Big Bazaar outlets in the city have seen sales grow at
a phenomenal rate |
That means retailers, who typically measure their
performance on sales per square foot of retail space, get better
return on investment in Hyderabad than most other cities. In terms
of share of rentals to sales, those in the trade put the figure
at 5 per cent for Hyderabad, compared to 3.5 per cent of Chennai
and 7.5 per cent of Bangalore. On the face of it, Chennai appears
cheaper, but here's where Hyderabad scores: It is not a major discount
market like Chennai or Bangalore. Again, retailers estimate that
store discounts in Chennai are as high as 4 per cent, compared to
1-1.5 per cent in Hyderabad and Bangalore. Finally, getting your
store up in the city takes less time compared to some others. Reliance
Fresh opened in Hyderabad first largely because it managed to get
the back-end and the front-end in place here earlier than in other
locations. "We recommend Hyderabad as a pilot city to many
of our clients because it has a diverse and interesting mix of consumers,
and that allows retailers to test a lot of parameters (be it demographic,
income-related or cultural) in just one market," says Harminder
P. Sahni, COO, KSA Technopak.
 |
| Garden fresh and no dearth of demand:
ITC's Sivakumar |
The 'interesting mix of consumers' that Sahni
talks about is the large cosmopolitan crowd that Hyderabad boasts
of, thanks to its it and pharmaceutical industries. The interesting
point, however, is that since it is a less 'mature' metro than Mumbai
or Bangalore, retailers can come in with pilot formats and fine-tune
them along the way, without upsetting or surprising consumers (see
Why Retailers Love Hyderabad). Says S. Sivakumar, Chief Executive
of ITC's agri-business division: "The cosmopolitan nature of
Hyderabad lends itself to multiple learnings that could be of use
when rolling out to other locations." Raghu Pillai, President
& Chief Executive (Operations & Strategy) Reliance Retail,
points out something that must be unique to Hyderabad: "We
have found that while there could be micro-level detailing and changes
in terms of products demanded, the demand at stores is quite location-neutral.
The demand for fruits and vegetables, for example, is equally encouraging,
be it Banjara Hills or Chintal Basti (a lower middle class neighbourhood)."
Willing Consumers
 |
| Ready to deliver at your doorstep:
Heritage's Jagdish |
Retailers who have been in the city far longer say
that the city has been a consistent performer. A case in point:
Lifestyle International. It arrived in the city way back in 2001,
and has seen its sales of apparel and children's products grow faster
than in other cities. A majority of its loyalty card customers come
from the city. "Lifestyle Hyderabad is our best performing
store in India," says Shankar Suryanarayan, Vice President
(Marketing), Lifestyle International, which has just revamped its
47,000 sq. ft store in the city.
Pantaloon's Biyani also says
that same-store sales growth in Hyderabad is the highest among
all Big Bazaar locations. "Our second Big Bazaar came
up in Hyderabad and is at Abids (an old shopping area). It happens
to be at the centre of the city, where resident population does
not increase much. Yet, our sales at the store continue to grow
at a phenomenal rate," he says. That has to do with the profile
of the consumers in the city (see Southern Promise). Compared
to 26.50 per cent in Bangalore, more than a third of Hyderabad's
consumers are in sec A & B; the average monthly spend on food
and groceries by sec A&B households in Hyderabad is Rs 4,900,
compared to Rs 3,500 in Chennai and Rs 4,320 in Bangalore.
However, the city's advantages may not last forever.
As more and more organised retailers pour into the city, history
of other former retail sweet spots such as Chennai will repeat
itself here. Rentals will go up, discounting will become fiercer,
and consumers will get more demanding and less loyal. "Please
remember that at the end of the day, it is not like a factory
location that you have one location and you are stuck there,"
says Sivakumar of ITC. "You need to be elsewhere as well
and it is just a question of sequencing."
Hyderabad needn't rue its inevitable evolution.
Retailers will keep investing in the city for different reasons.
Biyani's Future Group, for instance, plans to open another five
Big Bazaar stores (there are two already), three more of Pantaloons
(two currently), one Home Town (home improvement store), and two
malls (being developed by its property arm Kshitij Retail), besides
others. "All this put together, we are making close to Rs
1,000 crore investment in the city," Biyani says. Mall rats,
rejoice.
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