Hypercity slows down on retail expansion

Thursday, 24 May 2012

Hypercity, the hypermarket arm of Shoppers Stop, is scaling down its store rollouts and tweaking the product mix to include high-margin goods in an effort to achieve break even faster. “We would like to have a medium-sized business but it has to be a profitable business. Our idea is not to build huge scale,” Mark Ashman, chief executive of Hypercity says.

Hypercity contributes 30 per cent to the overall consolidated revenues of Shoppers Stop. Most organised food and grocery retailers in India are yet to turn profitable as they operate with little overheads and compete on razor-thin margins. They compete with the neighbourhood mom-and-pop stores, where most Indians buy groceries because they are convenient and give credit.

Hypercity plans to open two hypermarkets in the current fiscal year that began in April from three last year and will invest Rs 80-85 million per store. It also plans to roll out new stores in the geographies it is currently present in to reduce promotional and logistics costs. Hypercity currently has 12 hypermarkets in India. It expects to be nearing store level profitability soon and hopes to achieve overall profitability by 2014/15.

Shoppers Stop is also looking at tie-ups with Asian retailers for its Hypercity format once the government reaches consensus on FDi in multi-brand retail. The company is also looking at consignment-based sourcing deals where the retailer pays for the goods only after completion of sales and unsold items are returned to the supplier.

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