Amit Bagaria's Blog

India’s Next PM Likes Chicken

This is THE FOURTH PART OF ‘YESTERDAY ONCE MORE’ – A series of stories initiated by Images Retail about successful local OR REGIONAL retailers spread across urban India, who continue to expand and grow despite tough competition from national and international retailers.

RAHUL MEETS RAHUL

India’s crown prince (or should I say the country’s next prime minister?) Rahul Gandhi recently enjoyed chicken 65, chicken kathi rolls and crunchy chicken at the legendary Aryan restaurant opposite the Uttar Pradesh Governor House on Lucknow’s M. G. Marg, in the state capital’s well known Hazratganj area.  When Aryan’s owner Rahul Khanna tried to convince his namesake that the lunch was on the house, the young Gandhi insisted on paying in full.  Gandhi even chatted with some young ladies attending a birthday party at Aryan and posed for photographs with them. “He (Gandhi) is a very decent man,” comments Khanna.

Rahul Gandhi is not the only celeb to have dined at Aryan.  The list includes film writer-director Shyam Benegal, ghazal singer Jagjit Singh, actor Vivek Oberoi and recipe book author Tarla Dalal.

Coming from a family in the institutional catering business, Rahul (Khanna, not Gandhi) started his first restaurant when he was only 29, back in 2001.  The catering business continues to thrive and parent company Yash Foods even caters to the Chief Minister of Uttar Pradesh.  I’m wondering if Rahul Gandhi would have still dined at Aryan if he knew Mayawati eats the same food.

Today, there are nine Aryan restaurants, eight in Lucknow and one in Allahabad.  The tenth – a restobar under a new brand name “ZINNG” – will open early next year, coinciding with the chain’s tenth anniversary.

The second and third Aryan restaurants both opened in 2004, the fourth in 2005, fifth in 2006, sixth in 2007, seventh in 2009 and the last two (a pure vegetarian restaurant and the one at Allahabad) this year.  Put together, the nine restaurants have a seating capacity of 720, plus additional banqueting space for 600 people. Zinng will have 120 seats.  The original restaurant on M. G. Marg still remains the group’s flagship, with 150 seating and banqueting capacity (under the name of “Essence”) for up to 500 people. While all eight restaurants at Lucknow are company operated, the newest one at Allahabad is franchisee run and is located in a mall.

Aryan does home delivery throughout Lucknow city. That should not be difficult, considering it has eight locations to cater from. Annual turnover this year will cross `18 crores, excluding the franchised restaurant at Allahabad, which will do almost `3 crores of business. The ABVs in Aryan’s QSR formats is `90, while it touches `200 in the casual dining formats.

Apart from the restobar, 2011 will also see the opening of franchised restaurants at Varanasi and Gorakhpur.  Next on the agenda is Agra, followed by ……  hold your breath …… London. Yes, Khanna is seriously working with London’s official FDI agency “Think London” to open a restaurant in the city’s well-known upscale West End area, which includes Mayfair, Park Lane, Oxford Street, Regent Street and Bond Street, the most expensive properties in the board game Monopoly. At Lucknow, a Chinese restaurant will also open very soon.

The multi-cuisine Aryan restaurants already serve Chinese food, apart from North Indian and South Indian.  Someone on the website TripAdvisor complains about the restaurant not serving Lucknowi food. Lucknow resident Sonal Gidugu says, “This is the best restaurant in the city. Whenever I have to go out for dinner with relatives, Aryans is the most preferred. You get a very pleasing ambience with good music.”  Loyal customer Asha Adlakha adds, “I cannot remember the number of times I had lunch or dinner at Aryans. It’s a perfect place for birthday parties and also for family get togethers.” Kapil Bansal, who was raised at Lucknow and nor lives in Bangalore calls Aryan “a fusion between a Nirula’s and Shanti Sagar, with pretty decent food and consistent quality.”

Even though Rahul Khanna was born in Kanpur, this neighbouring city is not on his radar, because “it has people of much lower income levels.”  Hmm…I wonder when the Gandhi scion is scheduled to dine next at Kanpur?

In the next five years, Khanna expects to have 20-25 restaurants, mostly spread throughout Uttar Pradesh. Delhi is not on his radar, “as it is overcrowded”. He is also considering larger banqueting facilities, starting a packed food business and even a foray into 4-star hotels.  Younger brother Ruchir also helps him run the business.

Even 12 restaurants for a local restaurant chain is certainly impressive. While international F&B chains such as McDonald’s (160+), KFC (100+), Domino’s Pizza (300+), Pizza Hut (140+) and Subway (180+) have all opened more than 100 outlets each in India, no Indian chain has managed to reach even 75.  Blue Foods has less than 70 outlets, Nirula’s has <60 (excluding ice cream kiosks and pastry shops), BJN <40, Mainland China <30 and Haldiram’s <25.  McDonald’s, KFC, Pizza Hut, Domino’s Pizza, Café Coffee Day and Barista are all present in Lucknow.  Costa Coffee, Nirula’s and Blue Foods opened outlets but had to shut them down due to low performance.

Khanna is not impressed with the international chains. “McDonald’s, Pizza Hut and KFC are assembly lines – they do not manufacture food like we do, as Indian food is always made-to-order,” he says.  He claims that while his M. G. Marg outlet does annual business of more than `3.5 crores, the neighbouring Pizza Hut is struggling at less than `1.5 crores.  His inspiration originally came from Nirula’s and now he is learning from Haldiram’s.

I’m looking forward to dining at Aryan whenever I visit Lucknow next – who knows, I may even bump into Sonia Gandhi there.

KANPUR IS NOT A BAD MARKET

Even if Rahul Khanna of Aryan thinks that his birthplace Kanpur does not have good market potential, Kanpur-based Raj Ratan is experiencing a monthly ATD of almost `3500 psf in one of its stores. This is more than four times the ATD of Westside or Pantaloons.

Apparel retailer Raj Ratan has four stores at Kanpur and one at Lucknow.  The first (and at 10,000 square feet, the largest) opened at Nayaganj in 1999.  The family was already in the womenswear wholesale business, which was started by Ratan Chand Khatri back in 1964.  Other businesses of the group include real estate, BPO, castings, healthcare and a club.

The second store opened five years later in the city’s posh Swaroop Nagar area.  A third opened in 2006 at P. Road, followed by a fourth in Lucknow (on the Kanpur highway) in 2008 and a fifth in Kanpur’s Lal bangle area in 2009.  The chain expects to close this year with a topline of `100 crores from 37,000 square feet of total retail trading area, giving them a monthly ATD of `2250 psf.

Expansion plans include several more company operated stores in Lucknow, as well as new places such as Varanasi, Allahabad, Gorakhpur and Rae Bareli.  Raj Ratan expects to be a 20-25 store chain in 5-6 years.  They are not interested in franchising and do not believe in malls. “We like to be apart (away) from the market,” says CEO Preet Singh. When I informed them that Tamil Nadu based retailer RMKV does more than `10 crores of monthly business from its 55,000 square feet anchor store at Brookefields Plaza mall in Coimbatore, Singh and his boss Raj Kumar Khatri (Director of Raj Ratan), did not seem to be too impressed.

In fact, neither Khatri nor Singh were aware of the fact that local/regional retailers in the South have single stores as large as 125,000 square feet.  “Ours is the largest store in Kanpur,” was Khatri’s response. Singh expressed surprise and commented that he would visit the South with his team to see these stores and study the South Indian market.

In this context, the Images initiative of organizing Regional Retailers Conclaves at the IRF and the Images Regional Summits needs to be applauded, as it will give much needed exposure to local retailers based at cities such as Kanpur and Guwahati, who seem to be disconnected with what is happening around India. Asipac is happy to be associated with these conclaves.

While Raj Ratan started and grew primarily as a womenswear store, men’s apparel now comprises 30% of the business. “Men used to come with women to buy sarees, so we thought we should convert ourselves to a family shop,” says Singh.

Sarees comprises 42% of the total business, while salwar-suits and lehengas make up the balance 28%.  Their saree offerings include cottons, silks, crepe-de-chines, chiffons, Benarsis and Kanjeevarams.  Frequent customer Beena Batra says, “They have the best variety in sarees at Kanpur. I generally shop there for myself and my daughter and have also recommended others for purchasing sarees and suits for various occasions.”

Khatri is proud of the fact that Raj Ratan treats all customers equally and that his shops are “fixed price shops” whereas other Kanpur retailers have huge and never ending negotiations.  Well, that is the first step towards becoming an organized retailer.

LORD SHIVA ON MONDAYS, HANUMAN ON TUESDAYS AND SATURDAYS

Standing on the western bank of India’s holiest river Ganges, Varanasi is the oldest surviving city of the world and the cultural capital of India. Deen Dayal Jalan started wholesale apparel trading business there in 1974. In 25 years, the business was flourishing, with 4000 regular customers and almost 6000 ad-hoc customers.

That prompted his son Krishna Kumar Jalan to start a 4000 square feet retail store in 1999, under the name Jalans at Gyanvapi, close to the famous Kashi Vishwanath Mandir (Shiva temple). This 4000 square feet store does annual business of `30 crores, with a monthly ATD of a whopping `6250 psf. Sales here are highest on Mondays, the day most devotees/pilgrims visit the Vishwanath temple.

Six years later, in 2005, the second store – a much larger one at 25,000 square feet – opened opposite the Sri Satyanarayan Tulsi Manas Mandir, at Durgakund.   This store does annual business of `60 crores, with a 30% y-o-y growth. Here, sales are highest on Tuesdays and Saturdays, due to its proximity to the Sankat Mochan Mandir (Hanuman temple).  This flagship store also has an economically priced Indian fast food restaurant.

Another four years later, in 2009, a small 2200 square feet store was set up half a kilometre from the first store at Gyanvapi.  This year, the fourth store opened at Kuccheri.  This 18,000 square feet store will also soon have a restaurant.

The three locations (Gyanvapi has two stores) of Jalans form a triangle in Varanasi.  The four stores together do an annual business of `150 crores, with a monthly ATD of a whopping `2550 psf.  Next year, Jalans will open their fifth store at Allahabad.  In the next five years, they expect to have 8-10 stores, with a turnover of more than `300 crores.

Three years ago, Krishna Kumar Jalan had sent his son Bhagirath Jalan for training at Future Group (he knows Kishore Biyani very well).  Young Bhagirath worked under Future Group Director Damodar Mall for one year, and returned in November 2008 to join the family business.

“This experience gave me confidence to expand the business and to add categories,” says Bhagirath.  He quickly converted the Durgakund flagship store from a 100% apparel store to a department store format, adding categories such as footwear, cosmetics, mobile phones, cameras, watches and fashion jewellery. The Kuccheri store was started as a department store.  Jalans sells over 450 pairs of footwear per day across its stores.

Jalans customer Anju Taneja says, “Shopping at Jalans is surely value for money and this is one of the very few stores where you get products of all ranges. I generally shop there for clothes. This is the best department store in Varanasi.”

Apparel still constitutes 85% of Jalans business, with sarees accounting for 40% of that 85%. The range starts from a saree with blouse piece for only `65/- to a lehenga for as much as `30,000/-.  The price range is displayed through shelf talkers, so that customers do not get embarrassed in asking for products within a price range. Winter wear is amongst the fastest growth categories.

Compared with the people at Raj Ratan in Kanpur, Bhagirath Jalan is much more aware of similar retailers around the country.  He visits Chennai every year to see the T Nagar market there. “It’s a very good place to learn retailing,” he says, “the retail stores there get customers from across the region and customers are very loyal to the retailers in South India.”

Today, Bhagirath runs the retail business, while his father and uncle run the wholesale business. The training under Damodar Mall seems to have had another effect on young Jalan – he wants to add supermarkets adjacent to his two large stores. He is also working on professionalizing the organization. “We need to change mindsets,” says Bhagirath, “1-2 stores can be run by family members, a chain has to be run professionally.”

Did Kishore Biyani help create a formidable future competitor? Let us wait and watch.  Au revoir till next month.

ABOUT THE AUTHOR

Amit Bagaria is Chairman of shopping centre development consultants and managers Asipac Group and retail chain Men and boyS.

This is PART OF a series of stories initiated by Images Retail about successful local / REGIONAL retailers spread across urban India, who continue to expand and grow, despite tough competition from national (and in some cases, even international) retailers.

Big boys don’t party in Aurangabad

As I write this story, the grandson rises in Maharashtra.  Yes, the third generation of Thackerays, Aditya, photographer and poet, son of Uddhav, grandson of the legendary Bal Thackeray, is now in politics.  So why is this relevant to this article?  Just like the regional Shiv Sena has given national political parties a run for their money in the western Indian state of Maharshtra, so has Sapana Supermarkets beaten back the national retailers out of Aurangabad. 

V.B. Gupta, erstwhile schoolteacher and younger brother of Dr. D.B. Gupta (of pharma giant Lupin fame) started Sapana Polyweaves in 1984, with a factory in Aurangabad to manufacture polypropelene mats (plastic carpets). Today, Sapana mats are sold in 25 countries, including USA and most of Europe.  Sapana has been the top Indian exporter of mats in 2003-04, 2007-08 and 2008-09.

Inspired by Amway and another company in the Philippines, in 1993, Gupta started the business of multi-level marketing (MLM) in Mumbai, under the name of Sapana Asha Kiran Network Marketing.  His son Nishith Gupta, then aged 24 and fresh with an engineering degree from Pune, was given charge of this business in 1999. Around the same time, both father and son read the book “Made in America” by Sam Walton, founder of Wal-Mart, the world’s largest retailer.  This was a game changer.

Obviously inspired by Sam Walton’s success, and not very happy with the value proposition of the MLM business, the Guptas decided to shut down the MLM business and use their experience in dealing with FMCG products and consumers to start a food and grocery (F&G) retail business.  They chose Aurangabad because the mat manufacturing plant was already there and real estate costs were a fraction of Mumbai.  Young Nishith was put in charge of the project.

The first Sapana Supermarket opened in 2000 at Samarth Nagar in Aurangabad.  The next year (2001) saw the opening of four more stores, at Bajrang Nagar, Ulkanagri, CIDCO’s N3 Sector and Dashmesh Nagar.  This was followed by one new store every year for the next five years.  The sixth store opened at TV Centre in 2002, followed by Shahganj in 2003, Waluj in 2004, Beed Bypass in 2005 and Aurangpura in 2006. The 10 stores (four owned four on rent) together occupy about 22,000 square feet of retail space.  At an average of 2200 square feet per store, the format is more of a convenience store, even though it carries the name Sapana Supermarket.

Since then, there was a four year long hibernation. Nishith explains this was because several national chains opened their convenience stores in Aurangabad – Sapana saw high staff attrition across levels, rentals in the city went up, there was a drop of up to 20% in some store sales, as customers wanted to try the novelty experience offered by these national chains. “We served as a training ground for many retailers in and around Aurangabad,” says Nishith.

The mahabharat battle lasted less than three years.  All seven stores of Subhiksha shut down. The 16,000 square feet Vishal Megamart closed in February 2010 after operating for 3½ years. Spencers has closed all five Spencers Daily neighbourhood stores and is concentrating on its hypermarket format – there is one Spencers Hyper at Aurangabad.  Reliance Retail has shut two of the five F&G stores it had opened.  Aditya Birla Retail only set up three MORE stores and one More Megastore in Aurangabad.

In the last two years, the honeymoon is over and customers have started returning to Sapana. “The national chains did not survive because they were paying as much as 10% of revenues as rentals – in the F&G business, gross margins are just 14-16% and one cannot afford to pay more than 3% as rent,” commented Nishith Gupta.  The smile is back on his face and he is now actively looking at expanding Sapana once again, although in a cautious manner, so as to not make the same mistakes the national chains did.  Although Sapana had also planned to open a 40,000 square foot hypermarket, it has shelved those plans as of now.  Since the 10 existing stores are located within 1½ km of any point in Aurangabad, the home base is pretty well covered and future growth is likely to come from neighbouring cities such as Nashik and other smaller towns across Maharashtra. “We had no pressure to grow,” he says, “we only opened a store if and when we got the right place at the right price.”  Perhaps, the MBAs and CAs at the national chains need to learn from this young engineer.  According to Nishith, many prime retail properties in the city are vacant as they are asking for too high rentals.

Sapana has a topline of `19 crores, with an ATD of `720/sft/month, about 20% lower than the national average. Not all 10 stores are performing to capacity – while the N3 store does business of `29 lakhs a month, Shahganj is still struggling at `5-6 lakhs a month.  Nishith says that even the N3 store was doing just `5-6 lakhs a month just four years ago. He sees Sapana as a 30-35 store regional chain by 2015. He is exploring several possibilities to raise funds for expansion.

In early 2008, Sapana was in talks with external investors and larger retail players for a tie-up or stake sale.  Although Sapana did get some offers, the valuations were very low, as a result of the financial market meltdown in 2008. One player with whom talks had progressed was Spinach.  It was a godsend for Sapana as, earlier this year, Wadhawan Retail shut down all 45 of its Spinach stores.

Nishith believes that Sapana has most of the systems of a large company.  Don’t forget he learnt the tricks of the trade from Sam Walton himself – so what, if it he didn’t follow it “by the book”.  Nishith is particularly proud of his 9600 square feet DC (distribution centre).  “It’s a true DC and not a warehouse, as nothing stays there more than 48 hours,” he says, “purchases and logisitics is the backbone of retail business.” Shrinkage is less than 1%, much better than industry standards. In fact, the level of shrinkage plays a big role in staff appraisals, especially of store managers.  Sapana also puts a lot of emphasis on the assortment and range of products, as well as pricing.  Nishith feels this is another area in which the national players are going wrong. Although Nishith believes that his stores have a great layout, some of Spana’s regular customers feel that the stores are overcrowded.

“Retail has been thriving across India without the organized sector for decades,” says Nishith Gupta, “organized retail will find it very difficult to survive in India.”  Was I wrong in comparing this young Maharashtra warrior with Shiv Sena?

Jai Maharashtra or Jai Hind?

We move on from the 1.5 million people strong Aurangabad to its three times larger regional big brother, Pune – India’s seventh largest city.

If you live in Pune, you cannot ignore Jaihind, especially if you are a man.  Every man that I spoke with in Pune knew about this retailer – such is its popularity.  Even men such as Kabir Lumba, Govind Shrikhande, Vishnu Prasad, Gaurav Mahajan and Arun Sirdeshmukh should not ignore Jaihind.

In 1980, Jivraj Jain started a 1000 square foot retail store for men’s clothing by the name of Jaihind Collections (Collections has now been dropped from the trade name, which is now just Jaihind) in Pune’s Laxmi Road, in the retail hub of Sadashivpet.  In 1988, the store quadrupled in size.  After another nine years, in 1997, the store grew to 9000 square feet.  Fast forward to seven years later, and you had a sprawling 28,000 square feet four-level department store, selling men’s readymade apparel, fabrics, ethnicwear, sunglasses, perfumes, ties and belts, and even offering customized tailoring.

By this time (2004), Jain’s nephew and current MD, Dinesh Gupta, was running the business, assisted by his two younger brothers, Pravin Jain and Vinod Jain.  In the same year, Bollywood icon Salman Khan launched Jaihind’s Mewar section (department) dedicated to selling ethnic and bridegroom apparel.  By 2007, Dinesh’s son Preshit also joined the business. Addition of young blood led to improvements in systems and processes.  It also led to the opening of the second store – of 15,000 square feet – at Karve Road in Kothrud.

While many national retailers were busy in shutting down or downsizing their operations in 2009, Jaihind opened its third store of 20,000 square feet at Aundh.  Footwear was now added as a category.  The fourth store of 22,000 square feet opened in early 2010 at Pimpri. Gupta adds that Jaihind’s business has not been affected with the advent of the national retail chains, or large department stores.

Recently, the family has also diversified into real estate development and Vinod Jain looks after this business.

Jaihind is planning to open two more COCO (company owned company operated) stores in Pune within 12-15 months.  One of these may be at a mall. It is also planning 4-5 new FOFO (franchisee owned franchisee operated) stores (with an average size of 15,000 square feet) in 27-30 months, at places such as Nagpur, Aurangabad, Kolhapur and Nashik.  “Our brand is very well known over a 200km radius and we want to capitalize on this,” says Gupta, “Jaihind serves 1.4 million customers per year, including more than 100,000 NRIs.”

A little more than half the business comes from readymade apparel, with a majority contributed by formalwear.  Jaihind has a department named JC Studio especially for clubwear, eveningwear and partywear and this business is also growing.  Brands like Colour Plus, Van Heusen, Louis Philippe, Zodiac, US Polo, Allen Solly, Pepe, Levis, Mufti and Spykar are the most popular.

About 21% of business comes from fabrics – Jaihind is Raymond’s second largest retailer in the country, in the MBO category.  5-6% of the business is made up of ties, belts, footwear, sunglasses and fragrances.  The average age range of the customer is 20-40.  Almost 40% of the men shop alone – that is, without an accompanying female companion.

Each of the stores either has a floor or an area dedicated to the Mewar ethnicwear department. These departments have catwalk ramps with focus lighting, to help soon-to-be-married bridegrooms to see how they will look on their big day.  Hmmm, I wonder how many Pune brides walk the ramp before their big day.  According to Gupta, there are now weddings during eight months out of 12.  Ethnicwear contributes to about 22% of Jaihind’s topline.  The retailer is also contemplating the possibility of opening Mewar EBOs on a standalone basis.  It has recently tied up with the famous Bollywood ethnic fashion designer Shahid Amir to launch a signature collection.

Gupta sees the scope for a national retail chain dedicated to men.  He is ready to tie up with a national player to open 100+ stores.  Other players in this category who come into immediate recall are Ahmedabad based Jade Blue (which has seven stores in five cities of Gujarat, as well as Indore in Madhya Pradesh) and Prestige The Man Store (which has two stores in Bangalore).  So are men finally getting their rightful 50% share?

`30 crores turnover from retailing 25 paise paperclips

Six years before Jaihind Collections was set up, a couple of blocks away, Kishan Chand Arya set up a small 225 square feet stationery products shop named Venus Traders at Pune’s AB Chowk (not named after the author, nor after Amitabh Bachchan), where many books and stationery shops already existed.  Arya’s family already owned an established stationery manufacturing business by the name of Sudarshan Stationery.

Nine years later, in 1983, the store size more than doubled to 500 square feet.  In 2002, the Pune Stationery and Cutlery Association gave the Best Shop Award to Venus Traders.  In the early 2000s, Arya’s nephew, Surendra Karamchandani took charge of the business and in 2004, he opened a 6000 square feet shop on Pune’s famous Fergusson College Road.  Surendra says he was inspired by William Penn’s first shop in Bangalore.  This new store, aptly named Venus Traders Stationery Superstore, stocked more than 25,000 SKUs.

While Venus sold IT items such as laptop computers and digital cameras from this superstore, after a couple of years, it decided to stop selling IT products, as most people preferred to buy these from specialized shops.  “Staples carries 50 types of laptops, whereas we only had four,” said Surendra Karamchandani, “so we decided to concentrate on our core business of stationery – we have a much wider range of school, college and office stationery than Staples.”  He claims that no other shop in India has the depth of merchandise that Venus has in stationery products.  The range of merchandise includes a 25 paise paperclip to a high-end pen costing `15,000.  The range includes almost 200 art related books, which bookstores don’t carry.  Venus decided to sell these books for the benefit of many of its artist customers, who frequent their stores to buy art materials.  Venus does not retail any other types of books.

In 2006, the Pune Municipal Corporation gave an Ideal Dealer Award to Venus Traders.  In the same year, the original store at AB Chowk expanded to 3000 square feet and a third store of 1800 square feet opened in Nucleus Mall in the Camp area.  Two years later, the fourth store in the chain, measuring 1600 square feet, opened in Kothrud.  Except the FC Road store which is owned, all other shops are in rented properties. A fifth store has been booked at Eon Matrix Mall coming up in Kharadi – one of the 300-odd malls coming up in Pune.

Surendra believes in the mantra that margins are secondary and the best choices must be offered to customers.  His younger brother Pramod and son Vinod are now part of the business.  The manufacturing business (Sudarshan Stationery) is now with another faction of the family, but Venus retails their products also.  Venus is proud to be a member of the Council for Fair Business Practices (CFBP), whose membership is only granted after strict reference checks.

Venus does business of `30 crores from total retail space of 12,400 square feet, yielding an ATD of a healthy `2106/sft/month.  About 25% of the business comes from supplying to offices and colleges.  The ABV (average bill value) is `325.  Venus uses Retailware software and is happy with the product. Unlike most other retail categories, average sales on weekdays are higher than on weekends.  Surendra attributes this to the fact that offices are closed on weekends.

On expansion plans, Surendra says that they get many franchisee enquiries from cities like Nashik and Kolhapur, but they are not very clear about whether they want to adopt the franchising route for further growth.  A couple of years ago, the `530 crores stationery manufacturer and publisher Navneet Publications approached Venus to set up a JV to open more than 100 retail stores across India, but this proposal did not fructify due to differences in business projections.  Recently, Navneet has set up retail outlets named FundoO (currently in Ahmedabad and Surat) to market a range of innovative learning products catering to the segment of kids aged between 3 to 10 years.   Is Coke interested in buying a stationery business? Just kidding.  Au revoir till next month.

Amit Bagaria is Chairman of shopping centre development consultants and managers Asipac Group and retail chain Men and boyS. If you know about such a retailer in any Indian town (including Tier-II and Tier-III towns), please send the name of the retailer and the city (with contact details, if available) to ab@asipac.com.

This is the SECOND in a new series of stories initiated by Images Retail about successful local / REGIONAL retailers spread across urban India, who continue to expand and grow, despite tough competition from national (and in some cases, even international) retailers.

The grandson rises in the East. This statement would not be very unrealistic in the context of two out of the three retailers from Eastern India in this story.

Little Shop is growing up

Founded in 1967, for 36 years, there was just one Little Shop in Kolkata, selling children’s garments in the iconic New Market – India’s oldest enclosed mall.  The retail business was not given too much importance, as the family concentrated on their main business of exporting children’s garments.

Then, in 2003, Shiv Daswani, the 26 year old grandson of the founder, armed with a MBA from the UK, opened the second store – an 850 square feet “little” shop at The Forum Mall on Kolkata’s Elgin Road.  The shop was very different – it had a modern, self-help format, compared with the traditional counter service format of the New Market store. “Our export business exposed us to international environments and best practices,” said Daswani.

Following another five year hibernation period, in 2008, the now 31 year old and more experienced Daswani opened a 2700 square foot flagship store on the Ground Floor of South City Mall. Based on extensive in-house research, the (much) larger store had an expanded merchandise mix, including books, toys, basics for newborns and infants, nursery furniture, footwear and a wide range of accessories for children. “I made a list of everything required for a child, from a parents’ perspective,” Daswani says proudly, “If you came with a list of eight things and couldn’t find four of them, you would never come back to Little Shop.”  The gamble paid off and there’s no looking back ever since.

Regular customer Payal Himatsingka says “It is very good for newborns up to the age of three. It stocks toys and accessories, apart from clothes. It is like a one stop shop for children.”

The not-so-little flagship store at South City Mall today clocks estimated annual sales of `12-15 crores (Daswani declined to disclose the numbers).  The store has witnessed 7500 footfalls on a single day. Another 2100 square foot store opened the same year at Mani Square Mall, followed by an 1800 square foot store in 2009 at Ambuja Realty’s City Centre New Town (Rajarhat). The sixth store opened in August on the Ground Floor of Forum Courtyard, the brand new annexe of Forum Mall.

“(Mall developer) Rahul Saraf had the choice of giving the shop to Next, The Body Shop or some other international retailer, but I persuaded him to give it to us, based on my being able to convince him that we had done very well with our first store at Forum Mall,” says Daswani, beaming with pride. While this new format store at Forum Courtyard – branded as Baby Little Shop – caters to 0-2 year olds, the older and smaller store in the adjacent Forum Mall caters to the 3-14 age group.

“Little Shop is very well known since the last generation. My mother tells me that she used to buy clothes for me as a child from Little Shop. They have been one of our best tenants, especially the manner in which they maintain the store. They have great visual merchandising and are the only retailer who keeps their show window lights on until the last movie goer leaves the multiplex,” comments the promoter and developer of Forum Mall and Forum Courtyard.

Little Shop is amongst very few local retailers in India that have strategically chosen to grow only through the mall route, as opposed to the more popular choice of high streets. “At New Market itself, we had realized that malls were better and more convenient for families, especially in extreme weather conditions,” says a confident Daswani, having tasted success in malls.

Daswani is emphatic (and very emotional) about his conviction that he will not sell the business to a Reliance Retail or a Mahindra Retail, even if they offered him a high valuation, but he is open to a minority stake sale, if this brings in the capital and the bandwidth required to experiment a national model. He believes that there is no real direct competitor to his multi-category format today, although he is watching out for Lilliput World, as and when it opens at Kolkata.

By 2015, Daswani hopes to have 10-15 stores in Eastern India.  He has no plans to go national, as he feels that he neither understands other regions as well as local retailers in those regions, nor would mall developers in other regions give him the right locations, as they don’t know him or his business. Although he has more than 20 franchising offers from people who are continuously chasing him, he is in no hurry to grow. Micky Jagtiani also started with the Baby Shop, didn’t he?

Sreeleathers is NOT FOR SALE

Manoj Modi does not seem to have too many acquisition opportunities, at least in Kolkata. Just like his fellow “city”zen Shiv Daswani, Kolkata based Sushanto Dey of Sreeleathers also won’t sell his `140 crore footwear retail business, even if someone offered `75 crores to buy him out.

Daswani and Dey share the same initials (SD) and are both grandsons of the founders of their respective businesses.  That’s where the similarity ends.  Malls do not feature in Dey’s dictionary, he is already franchising (Dey calls them dealers) and Sreeleathers has gone national.

Sreeleathers’ first store opened in 1952 opposite New Market. Today, the chain has 31 stores, of which 26 are franchisee owned and operated. Apart from eight stores in Greater Kolkata, there are stores in Delhi’s Connaught Place, Varanasi, Raipur, Bhubaneshwar, Cuttack, Jamshedpur, Ranchi, Dhanbad, Bokaro, Patna, Muzzafarpur, Gaya, Bhagalpur, Guwahati, Asansol, Behrampur, Purulia, Naihati and Malda. While researching Sreeleathers, I refreshed my high school geography with my son’s help. A new 8000 square foot store is opening in Jaipur this year and a 10,000 square foot one in Chennai next year.  All stores are on properties owned by the family or by individual franchisees. “We don’t believe in paying rentals,” Dey says, “so we cannot be in malls.”

He sees everyone from a Bata and a Reliance Footprint to a footpath vendor as competitors. “We take Reliance Footprint very seriously,” comments Dey. Last time I looked, there were no footpath shoe vendors in Bangalore at least, thank goodness.

Regular Sreeleaethers customer Cheryl Ann says “They have shoes, chappals, belts, bags and leather accessories which are durable and suitable for rough handling.  Shoes are priced `200 to `800 while chappals are available even below `200. The most expensive shoes at Sreeleathers cost less than the cheapest shoes of its rival shops.”  Nishant Kumar Pandey adds “Sreeleathers is known for durability and economic cost, if they could work out on varieties and style, they will be the No.1 in India.”

This 58 year old pure retail business (Sreeleathers does not manufacture any products) sells all products only under in-house brands.  Four family members are involved full-time in the business.  One of Sushanto’s uncles has diversified into the hospitality industry.

Sushanto Dey believes that The Loft – a retail chain promoted in the early 2000s by the well-known real estate developers Hiranandanis – failed because they only had premium offerings.  “Bally is the Porsche of the footwear retail sector, Metro is like Audi and we are the Maruti,” Dey says, “see who is the biggest amongst them in India.” I’m still trying to figure out where Bata and Reliance Footprint figure in this analogy.

Sreeleathers has been instrumental in the establishment of many footwear retail hubs across the country. After they opened a 2500 square foot store in the basement of a building at Patna, four other footwear retailers opened shop in the same or adjacent building. A similar mushrooming effect has been witnessed across other markets too, but Dey is quite humble about the phenomenon and does not want any credit for it.

G. Sankar, Chief Executive of Reliance Footprint, says “They are a good value retail player. They do well in the eastern parts of the country, especially in Kolkata. In footwear circles, we talk about their crowd pulling ability during the pujas in Kolkata which is almost surreal – thousands of people wait in long queues outside their shops. This is very impressive – how many other businessmen can boast about customers standing in a queue to buy their product?”

Shoppers Stop of the North East

Variety is the spice of life, the popular 18^th century English poet William Cowper wrote. Manohar Lal Jalan of Assam’s retail chain Sohum Shoppe – winner of the Images Retail Award for the Most Admired Regional Independent Fashion Retailer 2009 (East Region) – is not the grandson of the founder. He is the founder.  He does not speak in English as well as Shiv Daswani or Sushanto Dey.  In fact, he does not speak as much as them either.  And he is ready to sell his business, if he gets a good price, of course. Is Kishore Biyani reading this?

Guwahati (Assam) based Jalan, 54, came from a family in the business of sarees, operating under the regionally popular brand of the 1980s Assam Silks.  In the early 1990s, Jalan recalls that, following the success of Kishore Biyani’s John Miller shirts – then retailed at `110 – he also started a readymade shirt brand named after a West Indian cricketer (he couldn’t recall the name) and priced it at `90 per piece.  This business did not do as well as anticipated.

In 1996, he was visiting his cousin in Mumbai.  He wanted to buy some socks and handkerchiefs for himself, as these were not easily available in his home town – Guwahati.  But he was too embarrassed to tell his cousin this – instead, Jalan asked his cousin where he could buy readymade shirts and trousers. His cousin directed Jalan to the only Shoppers Stop outlet at Andheri – India’s first modern department store.

He reached Shoppers Stop at 4pm and left at 9pm, but did not buy any socks or handkerchiefs in the five hours he spent there – not because they didn’t have any, but because he was so mesmerized with the shop, he completely forgot what he had come there for. He went back the next morning and spent the entire day there, followed by the same routine the next day. By the third day, he was convinced that “I can also open this type of shop back in Guwahati.”

Jalan spent almost 25 extra days in Mumbai, during which he went to Shoppers Stop each day. Fascinating, isn’t it? Well, it was for me, when I heard the story from the man himself.

Back home, this 40-year old entrepreneur starting assembling the blueprint of his own Shoppers Stop. The only high street area of Guwahati in those days was Fancy Bazaar.  A “shop” of 10,000 square feet was available for `3.00 crores. Jalan calculated that the interiors would cost him another `50.00 lakhs and he would have to stock at least `1.50 crores of merchandise.  So, the total investment required was a little over `5.00 crores. He figured that, with such a high investment, it would take 5-6 years to break even – so the business was not viable.  Instead, he bought a 12,000 square feet “shop” on the fourth floor of the building for just `72 lakhs, saving himself more than `2.20 crores.

It was a decision he regrets today, in retrospect.  The first Sohum Shoppe at Fancy Bazaar (named by his guru Sri Sri Ravi Shankar of The Art of Living Foundation) opened in 2000. It had sales of only `15,000 to `20,000 per day in the first five months.  By the third year, the business was still bleeding. He then went back to Shoppers Stop at Mumbai and immediately realized that most people were actually buying well known brands.  He decided to start stocking genuine brands. He got Mont Blanc pens, Swarovski crystals and Lladro porcelain figurines, amongst other well known brands in several categories. And I always thought the places to buy these brands were New York, Paris or Dubai. Anyways, it was then that the business really took off.

When Jalan selected the site for his second store – today the flagship – he did not compromise on the location.  The 28,000 square foot store on G.S. Road opened in 2005. By then, his older son Sandeep (then 24) had joined the business. Sohum Shoppe had arrived.  Three years later, the third outlet opened at Pan Bazaar of Guwahati.  By now, his younger son Siddharth had also joined the business.

In 2009, a 15,000 square foot Sohum Shoppe opened at Dibrugarh.  In just a few months from now, a 22,000 square foot store – the fifth in the chain – will open at Jorhat. For the time being, the Jalans have abandoned plans for a shop at Shillong in Meghalaya state, because of insurgency in that state.  They are looking at Nagaon and Silchar towns in Assam, and are also eyeing Ranchi and Jamshedpur – both cities in Jharkand state – for future expansion. “Business is good, but not in the Northeast,” says senior Jalan, “insurgency is a big problem.”  He considers Pantaloon and local retailer Goenka’s as his main competitors. “Agar maidan bada ho to koi bhi khel sakta hai,” he adds.

Bijan Deka of Guwahati says “One of its kind, Sohum Shoppe is the buzz of town. Its wide range of products and trendy collection of cosmetics, apparel and accessories defines its escalating popularity.”  College student Rakesh Sharma adds “It is the big thing in the world of style and comfort for people of Assam, an exclusive shopping extravaganza at nominal prices. It has a glamorous feel and ecstatic aura to boot. A recommendable treat called Sohum Shoppe.”

Young Sandeep Jalan feels that the future is very bright. Sandeep has brought in many changes in the business. By installing a modern specialized retail software package, he is able to control his inventory better. He has also initiated several activation programs almost on a daily basis to increase footfalls at the Sohum Shoppes.  Let us see what the grandson does 25 years from now, if I’m still writing then.

Amit Bagaria is founder Chairman and CEO of Asipac Projects. If you know about such a retailer in any Indian town (including Tier-II and Tier-III towns), please send the name of the retailer and the city (with contact details, if available) to ab@asipac.com.