Leveraging Steel Market

Essar Hypermart, a pioneering initiative of Essar Steel aims to make steel available to the end users close to the user point, thereby, revolutionising steel marketing in the country. The firm, at present, boasts of over 400 retail outlets spread across the country while planning to further expand its distribution network through Expressmarts and Expresspoints whose distribution is backed by world class service centre facilities and supply chain management of Essar Steel – making available customised products to customers at their door step.

Vrinda Oberai, Franchise India Media had a conversation with Mr Girish Rao, CEO, Essar Hypermart to better understand more about this out-of--box initiative….

Vrinda Oberai (VO): How did this Hypermart idea strike in the first place? How would you justify that there was such great demand in this regard that exclusive retail outlets were introduced?

Girish Rao (GR): SME segment is one of the large contributors to Indian GDP with contributions of over 30 per cent. While they consumed steel, they did not have direct access to steel directly from the mill since their requirement was small. It was a challenge to steel mills to cater to the requirement of small requirement in large numbers. This is the genesis of Essar Hypermart. This business model has now become an industry benchmark. Today, we have over 500 distribution points and generate over 30 per cent of our total revenue from this segment. The idea behind the Hypermart is to enable transparent high quality steel purchase in small and manageable packs supplied at his doorstep, thus eliminating the need to purchase in bulk.

Essar Steel, one of the nation’s largest and most trusted names in the steel industry is known to constantly reinvent the way it does business keeping its customers in mind.

VO: What remains to be your USP and who is your target audience?

GR: As said earlier, our target market is SME segment. Our USP is – “Sahi quality, sahi price and sahi delivery.” With its pan-India presence, Essar Hypermart is a one- stop shop for a wide range of steel products.

VO: It is since when that you introduced these retail outlets and what has been the response?

GR: In 2006, Essar envisioned and set up the first steel retail store in the nation – an ‘Essar Hypermart’, at Gandhidham in Gujarat. Soon enough, Hypermarts were set up across the nation to the delight of every small and medium enterprise (SME).

Currently, we have 100 Hypermarts and 419 Expressmarts operating in the country. The response has been very encouraging. The repeat purchases by the customers are ample testimony of the success of Essar Hypermart. Today Essar Hypermart has over 10,000 customers.

VO: Have the footfalls increased over the period of time? Has the demand increased? How much has been the revenue generation from this particular vertical?

GR: There has been a steady rise in the footfalls over a period of time which has encouraged us to expand our network on pan India basis.

India is experiencing a consistent growth in steel demand in tandem with the economic growth.

The demand is currently growing at over 11-12% p a. The revenue generated from this retail network accounts to 30% of Essar Steels revenue.

VO: What do you think, is the future of this out of the box retail structure? Is it expected that more number of players will join the bandwagon in the coming years?

GR: Retail chains are now commonplace in the global economy, but no one would have ever thought that steel – as a commodity, would one day be available at a store to anyone wishing to procure it.

With this pioneering effort, Essar Steel has set the ball rolling. While other players might join the bandwagon, Essar will always have the first mover advantage.

However, the fact that sets Essar apart is the kind of service that is associated with the brand name.

VO: What have been your learning/stumbling blocks since the time of inception of the Essar Hypermart? Any special way of managing the logistics?

GR: The major challenges were logistics and supply of requisite steel product in a particular region. We have successfully overcome these challenges. The logistic arm fo Essar group takes care of reaching material on time to all Essar Hypermart outlets. These outlets are connected through an IT network to the plant. This helps us in analyzing the requirement of products in various regions and we replenish our stocks accordingly. Being port based steel plant, Essar is able to use multi modal transport to cater to the requirement of customers.

VO: What has been your marketing strategy when it comes to targeting your set of audience and what are your expansion plans for the coming 2 years?

GR: Essar Hypermart is a path breaking initiative by Essar Steel that has revolutionised steel marketing in India. Moving away from the traditional way of marketing and distributing Essar Hypermart vouches to make steel available to end users close to the user point.

With more than 519 retail outlets across the country, Essar Hypermart aims at maximizing the direct availability of our products even in the interiors of the country. With this retail model, Essar Hypermart has been successful in creating a win-win situation for the customer and the company. Since we are located to steel consuming points below the line marketing proves effective for our products. However Essar Hypermart uses 360 degree approach for marketing including outdoor, print media and radio to reach out to the customers

Essar plans to increase the number to 126 Hypermarts and 650 Expressmarts by March 2011. It also plans to strengthen its retail presence in East India by over 300 percent by setting up 100 retail outlets in East India by 2011.