Less is ‘More’ for Aditya Birla Retail – Downsizing yet again!
Aditya Birla Retail, which runs More supermarkets and hypermarkets, has closed 39 stores, including two-thirds of its outlets in Gujarat, company CEO Thomas Varghese said. The retail venture of the $29-billion Aditya Birla Group has closed these stores over the last nine months as part of a strategy to discontinue unprofitable stores.
“Any store that is not making money by next fiscal will be shut down,” Mr Varghese said. That could mean a gradual end to its Gujarat operations. “The firm is reviewing its remaining six stores in the state where high rentals and a culture of heavy discounting have made profitability unlikely”, Mr Varghese said.
“The Gujarati consumer is extremely discerning. This has resulted in a culture of heavy discounting and it has reached a level where it didn’t make sense for us anymore. Also, landlords in the state were unwilling to renegotiate rent even after real estate rates dropped across the country”, he said.
The cement-to-cell phone conglomerate,which ventured into retail in early 2007 by acquiring Trinethra Super Retail with more than 170 stores across four South Indian states, today operates more than 600 “More” supermarkets and a handful of “More Megastore” hypermarkets.
When it entered the business, the company had set a target of opening 1,000 stores in three years. But an economic slowdown in 2008 hit the organized retail business forced the company to go slow on expansion, just like other big-ticket retailers such as Mukesh Ambani’s Reliance Retail and Kishore Biyani’s Future Group.
Expansion is back in the agenda. But the new buzzword is profitability. Aditya Birla Retail has decided that every store in the network has to be profitable, no matter how profitable the chain is. “We want every store in the network to be profitable,” said Mr Varghese. “So, after we open a store, we will give it some time and a lot of support. But, despite our best efforts, if it is not showing promise, we will not hesitate to take a hard decision.” He said the company will achieve profitability by 2012.
For expansion, the retail chain is now focusing on hypermarkets, or mega stores, which are much bigger than supermarkets. “We plan to open 10-12 hypermarkets every year,” Mr Varghese said. He said the company has been ignoring the hypermarket format compared with its supermarket business and now it will undertake a course correction.
It opened a hypermarket in Mumbai’s Thane suburb this month and will open one in Delhi’s Rohini suburb in May.
Most retailers in India are caught in an expansion dilemma. If a company is too slow to expand its network, rivals will take positions in key areas in important cities and towns. If it expands too soon, it could affect the company’s financial stability if sales slow. ‘More’ clearly wants less risk.
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