Shift in Growth Strategy for Hyper City Retail
Hyper City Retail, a subsidiary of Mumbai-based K Raheja Corp, has decided to abandon its plans to launch convenience formats, ExpressCity, announced last year. Instead, the retailer will focus on expanding its big box format and exploring multi-channel retailing opportunities.
Low Profit Margins Cited as Reason
According to officials, the decision to halt convenience format plans was driven by the realization that larger formats yield better profit margins. The current crop of convenience formats in India, including Subhiksha, Reliance Fresh, and Spencers, are struggling to cope with the challenges of operating a low-margin grocery business, exacerbated by:
- Spiraling Real Estate Costs
- High Supply-Chain Costs
- Intense Competition from Traditional Formats
Hyper City CEO Weighs In
“The experiment with the convenience format has been put on the back burner for now. It is clear that the Hyper City format delivers greater returns than the small formats in the retail space, so we have decided to expand Hyper City. We may revisit the small convenience format experiment at some point in the future,” said Andrew Levermore, CEO of Hyper City.
Industry Challenges
Retailers are grappling with the issues of:
- Delayed Property Developments
- Challenges in Securing Prime Locations at the Right Price
- Weak Back-End and Supply-Chain Infrastructure
Expansion Plans Unaffected
Despite the shift in strategy, Hyper City Retail is proceeding with plans to launch seven additional big format stores this year. The company has also recently introduced a multi-channel retailing format, Hyper City Argos, and is celebrating the second anniversary of its maiden Hyper City store at Malad in Mumbai.
ExpressCity: A Market Tester
Hyper City Retail had initially set up its first convenience format, ExpressCity, in Jaipur as a market tester. The original plan, announced in mid-2007, was to roll out 300 smaller grocery stores across India over four years, with each store spanning 3,500-5,000 square feet.