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Indiabulls Wholesale Services Ltd will start the roll
out of 30 hypermarkets in tier II cities like Ahmedabad,
Jodhpur, Indore, Kanpur, Patiala and Ludhiana starting
early January 2008. It has already begun construction
work of malls in 21 of these 30 cities. Apart from hypermarkets,
these malls will also house a multiplex, and other smaller
stores.
"Tier-II cities are better suited for a discount
model. Bulk-purchasing cannot take off in big cities
as there's no space to store," said Gagan Banga,
Director, Indiabulls, while explaining the rationale
for choosing tier II cities.
These large format hypermarkets will be set up in the
next 15 to 18 months, with an investment of Rs 1,500
crore ($380 million). Indiabulls has chosen Costco Wholesale
of the U.S. as its model for setting up these stores.
Each of these hypermarkets will occupy 100,000 to 150,000
sq. ft. of space.
Costco is the world's largest membership warehouse
club chain with sales of $64.2 billion in 2007. It operates
523 stores worldwide, 388 of which are located in the
U.S. and Puerto Rico. Their model operates on limited
number of brands and private labels and it does not
carry multiple brands or varieties. This results in
high volume of sales from single vendor, allowing further
reduction in price, and reducing marketing costs.
It also saves money by not stocking extra bags or packing
materials. Customers must bring their own bags or buy
the merchandise shipping boxes from the company's outside
vendors.
Unlike Metro C&C and Wal-Mart's Sams Club, which
are B2B retail businesses, Indiabulls will operate as
a B2C retailer. Banking on large discounts as its value
proposition, it will encourage household consumers to
buy in bulk. Compared to discounts of up to 10% on MRP
being offered on FMCG by other retailers, Indiabulls
is likely to offer discounts of up to 18%.
Source: www.indiaretailbiz.com
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