LEARNINGS FROM LARGE FORMAT FOOD

1
LEARNINGS FROM LARGE FORMAT FOOD GROCERY
RETAILERS

• TIE SUMMIT 16TH DECEMBER 2008

2
GEOGRAPHY/PACE OF EXPANSION

• Barring future group pace of expansion slow.
• Long term intent - National footprint
• Metro/Tier -1/ Tier - 2 cities.
• Future group Specs on infrastructure more
  flexible. Hence pace of expansion fast.
• - 1 Floor/ 5 Floor
• - 15000 100000 Sft
• Reliance Mart specs diluted to get scale.
• Shoppers Stop/ Aditya Birla/Spar/Metro Specs
  more rigid hence Outlet Numbers small.

3
FORMAT SIZING/INFRASTRUCTURE

• Hyper Markets - 50000- 100000 Sft
• Super Markets (SPAR) 20000 30000 Sft
• Sizes getting more compressed - sweat space more.
• Future more opportunistic- not so rigid on
  customer connectivity/parking infrastructure.-
  though getting better.
• Others trying to provide trolley connectivity to
  parked vehicles more car parks.

4
STORE LOCATIONS- TRENDS

• MALLS PREFERRED LOCATION
• Generally in NON CBD locations
• Mall developers increasingly providing for Hyper
  Market space
• Good infrastructure
• - Ceiling Heights
• - Column Grids
• - Connectivity
• - Car Parks
• - Services
• STAND ALONES SECOND CHOICE
• Inferior infrastructure
• Office /commercial building converted for retail

5
HYPER MARKET PRODUCT MIX TRENDS

• FOOD
• - Key footfall driver
• - Low Margin 15/18
• - 15- 40 of space
• - Productivity good / Very good
• - Working capital high
• ELECTRONICS
• - Footfall driver
• - Very low margin - 8-12
• - 5 10 of space
• - Productivity good / very good
• - Working capital high

6

• GENERAL MERCHANDISE
• - Margin Driver 20-30
• - 20 30 of space
• - Productivity average/ low
• - Working capital low
• APPAREL
• - Margin driver 25 30
• - 20 30 of space
• - Productivity average/ good
• - Working capital average/high

7
KEY SUCCESS FACTORS - CATEGORIES

• FOOD
• - Cost effective fresh supply chain
• - Aggressive private label program
• - Creativity in new concepts
• - Improving returns on FMCG ranges.
• GENERAL MERCHANDISE
• Sourcing Imports
• ELECTRONICS
• - Driving MPFs
• APPAREL
• - Sourcing basic ranges
• - Sharp pricing

8
FINANCIALS CHALLENGES/TRENDS

• Scale through developing hubs
• Outletwise profitability
• Revenue sharing in lieu of rent.
• Cost Effectiveness Capex/Opex/Corporate/Working
  capital
• Out Sourcing/Sub Leasing/SOH

9
SOME THOUGHTS ON WAY FORWARD

• The business model must be robust withstand
  test of time dont cut corners.
• Build the business on achievable assumptions and
  not on WISHES.
• Look at viability in a reasonable timeframe
• Food/grocery will always remain a low margin
  business-drive productivity keep a close watch
  on cost structures.
• If funding is in place excellent time to make a
  beginning.