Spencer's to focus on big stores for volumes

Spencer's Retail, the Rs 800-crore retailing arm of the RPG Group, has scaled down its plans to open smaller-sized stores and increase large format stores to increase volumes, improve supply chain efficiencies and achieve better branding, a top company official said.

Spencer's plans to open 100 small-sized stores called Spencer's, mostly in the range of 3,000 to 4,000 sq ft, by the end of this financial year as against the earlier target of 200 such stores and will open 50 hypermarkets called Spencer's Hyper, spread over 25,000 to 70,000 sq ft, instead of 35 such stores planned earlier.

"Large formats are much better for branding and to have an array of merchandise such as live kitchen, fish, chicken and so on. Besides, it is much easier to supply to one store of 30,000 sq ft instead of 10 stores of 3,000 sq ft," said Samar S Sheikhawat, vice-president (marketing), Spencer's.

Spencer's Hyper has 71,000 stock-keeping units (SKUs) dealing with 34,000 items, while the smaller stores have about 3,000 to 4,000 SKUs. Customers spend an average of Rs 500-600 per trip to hyper stores, while at smaller stores, they spend half of that, Sheikhawat said.

Retail analysts say having large hypermarkets are economical due to higher sales volumes and negotiable property rentals. Private labels will do well in hypers rather than in smaller stores due to space availability, they said.

"It is difficult to sell private labels in smaller stores which mainly store food and grocery items. Hypers can store more apparel and non-food items which carry high margins,'' said Purnendu Kumar of retail consultancy Technopak Advisors. Apparently Kishore Biyani, the promoter of the Future Group, is also focussing on his hypermarket chain Big Bazaar and low-cost models such as no-frills store model KB's Fair Price Stores, small convenience store format Big Bazaar Best Deals, rural retail venture Aadhar, and home solutions venture Home Town.

The Future Group plans to open 300 Big Bazaars in the country by 2010-11 with a turnover of Rs 13,000 crore. The group plans to add 35 odd stores by the end of June 2009 to take its total to 135. Spencer's has nearly 365 Spencer's stores and 35 Spencer's Hyper stores now. The company plans to invest Rs 1,500 crore in opening new stores across the country and eyes a turnover of Rs 1,500 crore by the end of the current financial year.

Recently, Spencer's consolidated its five formats into two for better branding and consumer recall. Spencer's earlier formats — Express, Daily and Fresh — were done away with to focus on its small-sized Spencer's and larger stores Spencer's Hyper.

The scaling down of smaller stores is not having an impact on planned investment as that is based on trading area which would remain the same after hypermarkets are opened, Sheikhawat added.