Super Mart Retailing Marketing

BACKGROUND

Amal Bose an IIT-IIM alumnus pass-out decided to get into the business of Food and Groceries. He started a Super Mart Retailing Services in March 1977 in Barasat, WestBengal. He thought that if he needs customers who are already buying products from their neighbourhood retail shops, he should lower the prices of the products and make them available in convenient locations where it would be easy for the customers to get them.

Super Mart started expanding rapidly by March 1999. In the next 15 months, the number of stores was increased from 14 to 50, and by the end of 2002, the tally in West Bengal stood at around 130. Soon he started his business outside the states. By September 2008 the no. of stores became nearly 1,100. It became India’s largest food and groceries retailer by the number of stores. The growth of Super Mart even attracted Peter Desai, a reputed Indian entrepreneur, to acquire 10 per cent stake of the chain.

THE RETAIL SECTOR

Due to the saturation faced by retailers, India stood first as a prime destination for investment in the retail sector. By 2010, there were about 300 new malls, 1,500 supermarkets and 325 departmental stores.

Due to high shopping revolution in India, there was a heavy international retail investment and a more liberal (FDI). Many of the investors started planning huge investment but the food and the groceries constituted the main category of the sector (46%) and the apparels was fastest moving category.

THE COMPANY AND THE NEW CONCEPTS

Super Mart launched as a deep discount budget store where products can be bought at a lower prices as compared from the other retail market. This concept has brought after understanding the market research that concluded that consumers gave more value on proximity, lower prices, and quality.

Super Mart soon became a Game changer in the Retail business by providing the products at lower prices that can target the lower and middle class people. They offered point on each sale but customers came to know its benefits later.

It believed that in India, the customers did not need one-stop shopping instead they need shops which are nearer to them. This eliminates the direct sourcing from the manufacturing resulting the costs and availing cash discounts if cash payments are done.

TARGETING REPEAT PURCHASES

When many retailers wished to be a one-stop shop for the consumer, Super Mart decided to focus on FMCG (Fast Moving Consumer Goods) categories where margins are very low.

He believed that, for cross-selling of products to succeed, products should be inexpensive in comparison with the market.

MEANWHILE IN DELHI

Vinay Agarwal joined Super Mart as a Regional Head with 15 years’ experience of working in the FMCG industry. And now the retail sector was booming so many big Indian business houses were entering the market and spend lots of money in it.

Vinay had a fund of Rs. 1.5 billion to open 180 stores and a DC for NCR region. He looked for stores to buy at lower rentals and by June 2006 he started 157 stores.

The Super Mart started selling products at a very low margin of 1%-2%. The volume of the products very high because of the lower prices it was offering.

As per the directions from Kolkata Head office, Vinay was ordered to continue the opening of store although there would be reduction in sales. The company is not dependent on an IT infrastructure and does manual billing and relied on its price to get more consumers. Despite the request of Vinay the company did not introduce any loyalty points for the customers and it does not have a proper IT set-up. As a results payments to the vendors delayed and the merchandiser started sending goods based on their perceptions.

PROBLEMS

All of sudden in 2008 stocks stopped coming to the stores and store shelves went half empty. The staff has to face the anger of the customers.

Upon investigating, Vinay found that the company has not cleared the payments of the vendors from last 3-6 months so they stopped sending the products.

But it was just the beginning of problem, within one month employees also went to strike as they also did not receive their salaries and as a result Vinay said to take the goods from the stores in place of salaries.

No result came out after several call to the Head Office and one day MD Amal Bose mailed the regional heads that the company had temporary problem of working capital and to handle the situation and manage the vendors.

In Nov. 2008, there was a raid on regional office as the company had not deposited the provident fund. And after 2 month FDA ordered Vinay to cancel operation at DC in Noida for 20 days and cancelled licences of 3 vendors who failed to implement health and hygiene conditions.

As a result Vinay has to close many of the stores in the NCR region as the rents were high and it was not possible to carry out operations at such high rates. Pressure was at its peak and on Feb 2009 Vinay received a mail that company has decided to close all the stores in the Delhi NCR region.