Sagar Malviya, The Economic Times
New Delhi , September 24, 2012
Last week some 100 grocery shopkeepers gathered in the capital, not to demonstrate against FDI in retail, but in the hope of being selected as franchisees for Kishore Biyani’s neighbourhood store format KB’s Fair Price.
So what gets the average kiranawallah excited about joining the country’s top retailer when opposition leaders are in the streets saying the government’s decision to allow foreign investment in multi-brand retail sounds the death knell for corner shops?
"We don’t have to run around for different purchases. The margins offered by Future Group will be much better compared to existing wholesalers we are dealing with," says Arun Singhal, who runs a kirana store at Khanpur in South Delhi and has now signed for a KB’s Fair Price franchise for the same location.
Last month, Future Group initiated a franchisee movement calling for entrepreneurs to operate KB’s Fair Price stores through a nine-year agreement with a three-year lock-in period by paying a one-time registration fee and initial working capital.
Till now, nearly 170 KB’s Fair Price have been running as company-owned outlets. But starting next month, Future Group will give complete ownership to entrepreneurs planning to open KB’s Fair Price stores in lieu of royalty.
"We have seen our store earning more than double than that of the kirana store at the vicinity because of better sourcing and planning," says Sachin Rokade, who has been running a company-owned KB’s Fair Price since the last six months and now wants to own one as a franchise.
But what’s in store for Future Group? It gets to sell goods to these entrepreneurs as a wholesaler and at the same time enjoy a buying clout with vendors for its other formats such as Big Bazaar and Food Bazaar too.
"Over the years, we have realised that convenience stores is a very attractive format," Damodar Mall, director at Future Group, says. "Kirana stores have to deal with lots of vendors and petty issues that make them inefficient. We know from experience that… single-point sourcing can help them attract more customers and do business profitably."
Mall adds that KB’s Fair Price will also get a branding boost with mushrooming of such neighbourhood stores.
The Confederation of Indian Industry, the National Scheduled Caste Finance and Development Corporation (NSFDC) and the Future Group have recently initiated a public-private partnership to build and develop entrepreneurs from the scheduled caste community.
These entrepreneurs will run retail outlets under the Future Group’s brand ‘Aadhaar’ in rural areas and KB’s Fair Price outlets in semi-urban and urban areas. The project will be supported and financed by the NSFDC through its channelising agencies in different states.
But what really was the trigger to push its smaller store format when the company over the years made a fortune by selling through larger supermarkets and hypermarkets?
Experts feel this will give Future Group an advantage when global convenience store retailers look for partners in India. "Any retailer would look at players who have experience in running similar formats. So apart from scale of business, expertise in small store format would make Future Group a preferred partner," Devangshu Dutta, CEO of retail consultancy Third Eyesight, says.
The need for such initiatives also stems from the fact that ubiquitous neighborhood stores in the country are doing brisk business despite burgeoning of modern retail outlets in the last five years.
Globally, corner shops such as 7-Eleven in Japan, Taiwan and Singapore, Lawson in Japan and Oxxo in Mexico are among the largest retailers in their respective country, reflecting the growing business of small outlets in several countries despite the markets being opened for retail giants. Future Group too is trying to replicate a similar scalable corner shop business in India and plans to add over 900 stores to its 170-odd KB’s Fair Price in the next two years.
Just last week, it acquired Delhi’s convenience store chain Big Apple that operates 65 stores in the National Capital Region for around Rs 62 crore in an all-cash deal. These shops are expected to be rebranded KB’s Fair Price.