It’s Shashwat Goenka’s first visit to Chennai. The only son of Sanjiv Goenka, Chairman of the RP-Sanjiv Goenka Group, is here to inaugurate the first Spencer’s hypermarket in the city, where the hoary old brand originated.
The 23-year-old Wharton-educated Goenka, Sector Head, Spencer’s Retail Ltd, brings a fresh pair of eyes to the group’s long years in the retail business.
After all, the RPG group was the first to foray into organised retail in the mid-90s.
He seems to have learnt a lot of lessons – some good, some bitter - from the group’s past experience. One takeaway is that Spencer’s shouldn’t have had too many retail formats.
There were some problems with cost structure in its convenience store format, Spencer’s Daily. In the last three years it closed down 64 stores.
In an interview, accompanied by CEO Mohit Kampani, Goenka says his plan is to focus only on large hypermarkets, or hyper stores, as he calls them, for now.
“We will add 80 hypers to our existing 27 across cities in the next four years,” he says. This will entail an investment of around Rs 600 crore.
While the majority of its hypermarkets are located in major cities, 50 per cent of the proposed stores will come up in tier II and tier III towns.
The focus will predominantly be on the National Capital Region, Uttar Pradesh, West Bengal, Chhattisgarh, Andhra Pradesh, Tamil Nadu and Karnataka.
It will soon add two more hyper stores in Chennai, he says. “We have already tied up the required real estate for 68 stores,” adds Kampani.
Turnover
Hyper stores contributed 58 per cent of the company’s Rs 1,400-crore turnover last year. This year, with the new stores kicking in, it is expected to account for 70 per cent of the expected turnover of Rs 1,800 crore.
Spencer’s Retail expects to turn cash positive in 2014-15, when the turnover is expected to cross Rs 2,800 crore, asserts Goenka. Kampani adds that when the company’s present revenues of Rs 1,200 per sq. ft. a month rise to Rs 1,480 per sq. ft., it will break even.
To a question on whether he would prefer FDI in the company, Goenka says, “Before we explore possibilities, we want to turn this profitable.” And then, he adds that he would prefer a strategic tie-up with domestic players to FDI.
On the merchandise front, he plans to increase the share of non-food items from the current 25 per cent, “as profitability will be better there”. On the foods side, the plan is to increase the share of ‘unique’ offerings to at least 30 per cent from the current 5 per cent. By ‘unique’, he means exclusive products – some manufactured by the company itself, some co-created with others and some completely sourced from third-party companies. For example, it plans to bring in its own brand of wine – bottled in Argentina.