Bharti Retail to double pvt label sales

Bharti Retail, the wholly owned subsidiary of Bharti Enterprises, has been expanding rather slowly compared with some of its rivals even after chalking out an ambitious expansion plan two years ago. In 2007, the company had announced an 8-year, $2.5 billion capital expenditure which was to take the headcount to 60,000. Vinod Sawhny, president and chief operating officer, Bharti Retail, tells DNA about the changes since. Excerpts:

What are your expansion plans for this fiscal?
In 2009, we will set up more supermarkets in north India. Besides the 27 Easy Day stores that we have in Punjab and Haryana, we will expand to Uttarakhand, Delhi and Himachal Pradesh this year. This expansion is part of the $2.5 billion capex announced when we started operations a year and a half ago.

Bharti Retail was reportedly in talks to acquire Foodland stores, which Sodexo finally bought. Are you still looking for acquisitions?
We are continuously looking for acquisitions. Opportunities are coming to us and we are evaluating them. They will be funded from the capex we announced.     

What is your unique selling proposition?
We are value retailers, which means we offer value for money. We are targeting a population of 400-500 million falling in the middle layer in terms of purchasing power. We offer prices that are lower than those of competition.

‘Low price’ is the push being used by all organised retail players in India. How do you think you can sustain that in the long run?
I believe we can. We are leveraging Bharti-Wal-Mart joint venture’s way of buying, in which products are sourced globally at lower prices. We are able to maintain a high in-stock position without bearing the cost of sluggish movement of goods from shelves, if at all. This is taken care of by the arrangement Wal-Mart has with its suppliers. So we get the benefit of longer shelf life such as 7 days, 15 days or 21 days on various types of products.

One of the biggest challenges for retail is selecting the right catchment area for outlets. How have you fared there?
Yes, catchment area selection is crucial. About 90% of our locations are absolutely in sync with our sales expectations. We have huge footfall in those stores. We are looking to relocate stores that are not doing well to other areas in the vicinity. So about 3-4 Easy Day stores will be relocated in the next 3 months.

Private labels is another area retailers are talking about. What are your plans there?
Private label sales contribute about 15% to our revenues at the moment. We expect them to bring 30% of revenues in 3 years. At present, we sell grocery, apparels, household chemicals under our label. We will add some more goods to the private label basket after observing consumer preferences. We are also upbeat on the fresh food and dairy business, which contributes about 15% to revenues.

There were reports that some Easy Day stores would be closed. Is that true? How has the slowdown affected your business?
We have not closed down any Easy Day stores. All 27 are operational. As I said we will merely relocate some of them to areas where they will do well. In the relocation process we ensure that 65% of the cost remains intact. The slowdown has surely impacted which is why we have turned cautious on capex towards expansion in the last one year.

Are you in cost-cutting mode?
We have taken a number of steps to cut down on cost of operation. For example, we are focusing on value engineering — having modular shelves to store optimum quantities of a product. Another area we are focusing on is elimination of wastage, in terms of electricity usage, etc. We are trying to develop an anti-wastage culture among our in-store employees. These efforts have helped save 30% on expenditure in the last one year. 

How have movements in rentals affected you?
Some of our stores are on high rent. The rents went up by 100% while the sector was growing 30%. Rents have fallen recently but are still high by 80%. I feel the rent will fall about 40% more.  

Are you also looking at the electronics segment like your rivals?
We do sell electronics goods such as TVs, DVDs, etc. But we won’t open exclusive electronics stores.