Ashirwad Retail

This is a blog post I had written on 12th June 2007 and for some reason not published! Was cleaning up my drafts today and found this, and thought it would be good to publish just to show how I thought 7 years back! 

This evening I accompanied my mother to this store called Ashirwad Departmental Stores in Basavanagudi (near South End Circle). If you would ask me to describe the store I might probably call it a family-owned supermarket. And in my opinion, that store is easily the best department store I’ve seen in terms of customer service. And I believe this particular model might end up being the big success story in Indian retail.

Being a stand-alone store, Ashirwad may not have the supply chain efficiencies that chains such as Big Bazaar claim to have. It may not offer the discounts that say a Subhiksha offers. It may not be airconditioned and have the perfect lighting like yet another of the larger retailers. However, I believe it makes up for all this, and more

What Ashirwad so nicely achieves is in combining the good points of both organized and unorganized retail while trying to eliminate the drawbacks of both. To elaborate, one usually associates family run ‘kirana’ stores with inconvenient formats (you need to ask the shopkeeper for everything you need), lack of facility for bill payment for credit cards (i hear this is changing now), old or non-moving stock, the lack of a “shopping experience” and so forth.

Organized retail usually loses out on factors such as incompetent staff and store managers, ignorance of staff about store layout, bureaucracy, rules and most importantly the “impersonal” feeling. There are also quality issues that people (such as my mother) raise about the store-branded goods (mostly groceries) that are available at the supermarkets.

A family run supermarket tackles them all. The thing with Ashirwad is that the guy at the billing counter (there is just one, and there are no huge queues) is one of the owners of the store, and the store P&L has a direct impact on his life. He reports to no one, and hence has to offer no explanations. This solves a large number of problems – starting from billing time to allowing people to selling without a bill. Also, I noticed one thing that two people do the billing simultaneously (one looks at the items and packs them, while the other keys in the codes) speeds up the billing process by a huge amount.

Then, there is the format itself. It is a supermarket “help yourself” format, but there are staff all around (and they really know the store) in order to help you out if you can’t locate something. The level of intrusion, in my opinion, is just right. In fact, there are enough staff in the store so if you can’t, or don’t want to, go around the store to fetch things for yourself, the staff will do it for you, converting the store into a regular kirana. And you can browse all day if you want, and the staff won’t bother you, and it becomes a supermarket!

The most important thing that sets Ashirwad apart from the other supermarkets is that “personal” feeling. It being a family-run store, the staff are also fairly permanent (this perhaps explains their knowledge of the store layout – something sorely lacking in current “organized retail”) and if you visit the store a couple of times you become a “regular customer” and get the associated benefits. The same staff being there always also helps in case you want to return defective goods (another major hassle at supermarkets) or go to claim some unclaimed discount. Oh, and by the way, Ashirwad delivers.

The most important thing that sets Ashirwad apart from the other family run stores is it’s size and format. The shopping experience is sorely missing in the kiranas, and the fact that you need a shopkeeper to serve you also increases service time. They accept both credit card and meal pass coupons without a fuss, and most of the stock looks fresh. The in-store brands (in groceries) are also supposed to be of good quality.

However, what really struck me about Ashirwad, and I see that as a clear sign of financial strength, is the range of inventory. One way stores like Subhiksha save on expenses is by stocking only the really fast moving of FMCGs, thus saving on inventory carrying costs. Which means that every visit to a Subhiksha has to be followed by a visit to some other store to get what you didn’t get at Subhiksha (which is a lot). The range of goods (talkign about biscuits and tea and cosmetics here) I saw at Subhiksha seemed much larger than that I’ve seen at Food World, or maybe even Big Bazaar. I’m really impressed.

Now that I’ve praised the Ashirwad model so much, the question is regarding its scalability. Is it possible for me to open a thousand Ashirwads, and hope to give the Big Bazaars and Reliance Retails a run for their money? The answer, I think, is no and yes.

One of the key things that make Ashirwad what it is is that it is a standalone store, and it is a family that runs it. As I talked earlier, a large number of benefits of kirana stores are also seen in Ashirwad purely because the guy at the cash counter owns a share of the P & L, and that he has full control of the store. I opening a thousand such stores would imply employing store managers, and staff, and doing everything top down. Doesn’t fit into the concept at all.

So is there some hope in this? What if I can link up with a thousand such kiranas and make money out of that? I need not open a thousand Ashirwads myself. What I need to do is to convert a thousand existing kiranas into Ashirwads. And get a share of their profits (or maybe a fixed fee) while they function like a thousand independent Ashirwads – with all the associated benefits, and owning their own P&Ls.

Now if this format is such a clear winner, why is it not being replicated? Why are there not already a thousand Ashirwads out there? Looking at the various players, the people best placed to convert to this format are the kirana owners. Why are they not doing it, when it is such a winner? I believe the main, and maybe only, reason is that they don’t NEED TO. They don’t see any benefits in remodeling their store, and offering things they are not offering right now, and are hence not spending in this direction. They believe they are making enough money in the present format and there is no need ot change.

In the introduction to this piece, I actually mentioned a couple of drawbacks that Ashirwad suffers vis-a-vis organized retail. I mentioned reduction in supply chain costs. And I also mentioned discounts. Is there a way in which we could work with say fifty Ashirwad-like stores in a large city such as Bangalore and help them save costs? Is there something we can do that can save costs for all these guys (and significnatly so that a part of it can be passed on to the customer) and also make a profit for ourselves?

What kind of model can we use for this? How can we save the costs for the stores? What revenue sharing model do we use, and how do we make money? Who invests in teh store remodeling, us or them? Why will the stores partner us? Will their revenues increase so much by joining with us that they can pay us a part of that? All these questions still need to be answered. And once I do that, I need to approach someone with loads of money in order ot implement it.

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