Birla Retail becomes realistic to turn profitable

Aditya Birla Retail Ltd (ABRL), a unit of Aditya Birla Group, is scaling down its operations to attain profitability in all stores in the next three years, a top company executive said here today.

The retailer is likely to miss its earlier revenue target of $4 billion (Rs 18,400 crore) by financial year 2014, as it closed down a number of unprofitable stores and did not open the number of stores planned, the executive added.

“We want all our stores to be profitable by 2012. We are becoming realistic now,’’ said Thomas Varghese, chief executive of Aditya Birla Retail, told Business Standard.

“We may not achieve the earlier target, as we have slowed down significantly and closed down many of our unprofitable stores. There is no point in making losses for long.’’

ABRL, which had plans to have nearly 1,500 supermarkets and 150 hyper stores by financial year 2010, has 632 supermarkets and five hypermarkets under the brand ‘MORE’ and ‘MORE Megastore’. The company closed down nearly 70 stores in this fiscal year for reasons such as high rents, catchment issues and poor footfalls, he said.

“We will add at least 10-12 hypermarkets every year. We will consolidate and deepen our cluster approach in case of our super markets. Once we sort out our supermarket strategy, then we will open 100-150 supermarkets a year,’’ Varghese said. The company was planning to add 200-300 supermarkets a year earlier.

According to sources in the group, it is part of Aditya Birla Group chairman Kumar Mangalam Birla’s strategy to have a profitable retail venture within the group. The group entered into retailing in 2006, with the acquisition of Trinethra Super Retail, the South-based chain of stores.

ABRL is not alone in adopting such realistic approach as rents shot up and footfalls dwindled during the slowdown in 2008-09.

Kishore Biyani-led Future Group also slowed down its plans, with the group likely to have its targeted retail space of 30 million sq ft by financial year 2013 instead of financial year 2011 as planned earlier. Reliance Retail and Spencer’s closed down 50 and 150 stores, respectively.

ABRL, which draws around 19 per cent of its revenues from private labels, plans to take it to 30 per cent in the next three years. The company has around 292 products and 15 categories fast moving consumer products (FMCG).

Birla is opening its sixth hyperstore in Thane tomorrow.

Focused Approach
“We thought of different formats, but settled for supermarkets and hypermarkets. We want to make hypermarkets profitable in the first year of operation,’’ Varghese said.

For instance, ABRL conducts three focused group discussions with prospective customers to understand what they want before opening any hyperstore. The company started the process with its Aurangabad store in June last year.

The company’s senior executives visit at least 35-40 homes in the neighborhood of a store and engage families for 3-4 hours to know what kind of furniture they use, their food preferences, utensils they use and so on. “All this is part of our deep dive into consumer homes. We want to sell what our consumers want and not what they do not want,’’ he said.

Varghese said the company would focus on per employee productivity than increasing employee count in a big way.

As part of My More Store (MMS) experience, every ABRL executive, including the CEO, has to work in the store for 8 days in a year as a customer sales associate (CSA) and handle jobs such as cashier, deliveries and so on. “If they do not do it, then they do not get their increment.”