Hyper City Retail, part of Mumbai-based K Raheja Corp, which also owns the Shoppers Stop chain of department stores, has called off plans to launch convenience formats, ExpressCity, announced last year. The retailer is instead shifting its growth plans to focus on the big box format and multi-channel retailing.
Officials said it made better business sense to focus on larger formats since the profit margins in convenience formats were too low. The current crop of convenience formats, including Subhiksha, Reliance Fresh and Spencers, are struggling with the challenges of operating a low-margin grocery business in the face of spiraling real estate costs, high supply-chain costs and tough competition from the traditional formats.
Hyper City CEO Andrew Levermore said: “The experiment with the convenience format has been put on the back burner for now. It is clear that the Hyper City format delivers greater returns than the small formats in the retail space, so we have decided to expand Hyper City. We may revisit the small convenience format experiment at some point in the future.” Sources said huge rentals charged by property developers made low-margin businesses unviable.
As a result, retailers are grappling with the issue of delayed property developments and challenges of seizing the right locations at the right price. Industry players say the retail business has been impacted by spiraling real estate costs and a weak back-end and supply-chain.
Currently, the company is accelerating the roll-out of seven additional big format stores this year. Its maiden Hyper City store at Malad in Mumbai has completed two years and the company recently launched a multi-channel, catalogue and internet retailing format, Hyper City Argos. It had set up its first convenience format ExpressCity in Jaipur as a market tester.
In mid-2007, Hyper City Retail had announced plans to roll out as many as 300 smaller grocery stores in the next four years. ExpressCity was to sell vegetables, fruit and food items and the stores were estimated to be spread over 3,500-5,000 square feet.
The company had announced plans to stock pre-cut and refrigerated fruits and vegetables, apart from refrigerated ready-to-cook food products and 12 meal options as well. After the test-launch in Jaipur, the original plan was to launch four additional stores and then work on a pan-India presence.
