Thailand based Siam Makro plans to invest Rs 1000-1200 crore in the next five years with a plan to set up 15 wholesale cash and carry stores across north India. The company, which is going to launch its first ever wholesale cash and carry store in New Delhi in the mid week of July, is also equally ecstatic about coming up with an e-commerce channel for the Kiranas in India, in two months of its first store launch. Additionally, the company is optimistic of creating around 5000 direct, indirect employment in the country in a span of next 5 years.
What is your strategy for India when the existing two big players are not doing well as per reports?
India is a big market. To give a little background, we are a Thailand based group and our parent company is Siam Makro. We acquired their stake from SHV in 2013 and the plan was to take the brand all over and open more stores across Asia. When we took over, we had about 65 stores and we decided to build the story there.
After that we said what’s next? So, we decided to look at India, China, Cambodia, Indonesia, Myanmar, and spread all around there. So gradually we started doing our market studies and India turned out to be a potential market. You can’t avoid being part of India’s growth story because everything seems to be congregating from here, so we decided to start from here. Coming from Thailand, we are dealing with very similar customer groups. And over 28 years of our experience in the industry gives us confidence to invest in India, and replicate that success here.
Wholesale and food is in our DNA, so performance of other players in the market is not a deterrent for us. We know the business model, we know where we are, our heritage is very strong, we understand the food business, so, we said we can bring that and build on it.
How long do you think it will take? 4-5 years to build up the capability that you are looking at for the country?
The idea is to have a large base because once you have a critical mass, you can leverage on economies of scale, get the best buying rates, be able to move volumes. So,having 1-2 stores will definitely not serve the purpose. That’s why we said let’s look at about 1000-1200 crore investment, look at 15 stores in next three years to build on that critical mass for us. So, the first phase is to focus on North India, build around here following our cluster strategy and gradually move to other parts of the country.We do not want rush into launching 100 stores right away, we want to take measured steps and a very pragmatic approach to the whole thing. We want to get our business model right, get theright product, build a robust supply chain, hire the right talent pool, look at real estate availability and get the right store formats.
What is the toughest area for you to build for the country? Is it the supply chain or real estate?
For us, the first phase was to get the right team members then figure out what kind of infrastructure is needed to build our operations. We have built a robust team and are ready to launch our very first store in India. Our team is simultaneously working on setting up an evolved supply chain model that is unique to this market.
So far, what is your building up experience?
Real estate is where we faced some challenge because finding real estate for our store size is at times a challenge in the centre of a city. While we also look at this as an opportunity because we are flexible with our store sizes. We are also experimenting with the format, it could be single level, multi-level and we are open to setting up in any part of the city. On the other front, I think technology is the biggest positive because in India you can get a lot of support through technology. Typically cash and carry is a traditional business, offline primarily; where you have a store and full distribution network. We are looking at bringing in technology to support us and India is a hotbed to get technology enabled support that can resolve infrastructure/real estate related issues.
Cash and Carry is a B2B model. So whom you are going to associate with?
For a cash and carry or B2B model, we can only approach business customers. We will be working with the kiranas to make them our members, we will be working with hotels, restaurants, caterers who are running businesses. We try to get best deals, quality ingredients and value products for them. For example, if you are a HORECA player, you need the best vegetable quality; you need the best of meat, best of ingredients so this is what we will provide.
A kirana store owner typically might not be able to leverage the volume base plus he doesn’t have space to keep his stock.This is where we come in to assist them. We provide them with storage space and good deals on the products. Also, he/she doesn’t need to stock everything in their shop. They can come back to our store and buy as and when they want to refill their inventory. We also have a transparent billing cycle to help win our member’s trust and provide them with a hassle-free shopping experience.
So far how many kirana members you have associated with?
We are currently enrolling members from across Delhi. So typically for a store, we should have at least about 100 thousand people who should be our members. That’s where we are right now trying to build the customer base, meeting them, telling them what we are doing and informing them of benefits that we are bringing in terms of quality, value pricing, and convenience, about being in theirneighbourhood, so that they can associate with us and become a member.
How are you approaching them? First of all, you need to identify who all will be interested in your B2B model. How do you do that?
When we do a site selection, we look at what is the catchment all about. We look at setting up our stores at locations that are a 30 – 40 minute drive away from the catchment area. The drive time and the store vicinity decide the convenience factor. In a particular area, we look for the population, number of kiranas, households, hotels, hospitals and schools. We have some GPS enabled companies that we work with who have data that helps identify your target segment. We meet them, and we get a list of what they want. So, our product assortment will vary from one region to another basis the local demand.
Do you think after 5 years or some years you will be looking at e-commerce model as well?
We will be going ahead with that very soon. I think within maybe couple of months of our first store launch. We want to give our customers the option of both walking into our store and shopping online through our ecommerce portal. It’s like another channel of sales for us. We also offer the option of delivery the products at their doorstep.
The best part of coming to our store will be that you will get to see the range, the variety, the ongoing promos and get to buy the best deal of the day.If you cannot visit our stores, we will try to meet you at your store. Omni-channel is the future of this industry.We are currently working on an e-commerce platform and app for our customers. We are tech-enabling our sales force, so for each store we have dedicated number of employees, which will go out to the market and collect orders.
Do you have a separate kind of investment/ infrastructure for the e-commerce channel?
Basically, our IT system will be able to manage all channels of sale and conversion of sales and it is part of our overall investment plans.
How much demand do you think is there from kiranas and HORECA for a wholesale e-commerce channel?
It is all about convenience. It is easy for them to see that this is the best deal for them. I think there is a huge demand this business model. If someone can build the supply-chain first and then build the whole business model for them there is a huge potential in the market. We have spoken to so many people and their feedback has always been that you cannot order products in large quantity from the existing platforms. We are very positive about the ever-growing demand from the customers.
Do you think this will keep you ahead of the other players in India?
Today everybody is on the app or is used to some kind of e-commerce interface, so it is something which we are working on. So, whether you want to visit a store or come to a website, you will both the options from us. Certain customers still appreciate the in-store experience. Having an omni-channel approach from the beginning will allow us to be successful in India.
You were saying next 5 years you will be investing 1000-1200 cr in building infrastructure and other facilities.
Yes, we have already started making those investments.Most of the investment would go into real estate for the stores, our corporate office, building up the team and the supply chain. We are getting the right people, training them and skilling them to meet the requirements of our business. We are looking at entry level jobs as well. Customer service is of utmost priority in our business, so soft service, understanding what kind of product we are selling, what exactly is our motto, would be our core focus areas. We are working with lot of government agencies to conduct these hiring camps and training sessions to get the right talent.
Can you give me a tentative number of jobs you will be able to create?
Over next five years we look at creating 5000 direct and indirect jobs through our business. These would primarily include, corporate employees, staff at the stores and back-end support.
How would you source your products?
For us, sourcing will be 100% from India. So, we are working with various cottage industries, local suppliers, manufacturers of various products be it food or non-food. For food, farmers are our main and direct source. So, we are working with Ministry of Food Processing who have set up a couple of camps for us in Bhatinda recently where we interacted with farmers and told them about harvesting, best way to package the product, how to handle a product, how to cover, how to place it so that it gives them an extra shelf life. It gives perishable products 24-48 hours of shelf life which is what we bring to the table. Also, we are working with them to get the right product and quality for our customers. We will also be setting up multiple collection centres across the country for sourcing these fresh produce directly from the farmers.
What are the other initiatives are you planning apart from your e-commerce platform?
For now, we are focused on expanding our operations. Our plan is to launch 3 stores in Delhi NCR within 2018.
For these 5 years, will you be focusing on north India only or you will be expanding to other regions as well?
As of now we are focusing on north. As I mentioned earlier, we have a cluster approach towards building and expanding our operations. It is also about finding the right real estate and catchment area to setup our stores. Once we have established our presence in the northern region, we will look at expanding to other regions of the country.