Aadhaar Retailing aims to break even in a year

Aadhar Retailing, the rural retail joint venture between Future group & the $3.3 billion Godrej group, is embarking on a restructuring exercise for the loss making chain that aims for a break even level of operations in a year, Financial Chronicle reported, citing senior officials at Future Group. Meanwhile, the company is looking to expand its retail network via franchise model.

“We will take around nine months to break even. While 35 per cent of our existing stores are profitable, we are expecting 35 per cent to break even in two-three months,” said a senior company official in the know of the development. On an overall basis the chain plans to achieve break even within a year.

For the financial year 2010-11, Aadhaar Retailing had sales of Rs 68 crore and a loss of Rs 20 crore. As of end of March 2011, the group had invested Rs 86.18 crore in this venture, which retails products such as apparel, seeds, fertilisers and FMCG products.

The group is trying to lure rural customers to stores with personalised communication via mobile messages, loyalty programmes instead of banking on print or television media. There is new technology in place to link up to the stores through the internet.

Kishore Biyani is trying to rationalise costs and rentals by relocating staff, hiring less qualified employees at the front-end and shutting down unviable stores. “We are trying to increase the sales throughput to be more profitable,” said a senior company official.

The group that currently has 40 stores of its rural retail chain plans to add 40 more over the next three months across clusters around districts in Punjab, Haryana and Gujarat, added the senior official. The first round of expansion would be around Gujarat and the second phase in Punjab. As part of its restructuring process, the group is trying to launch a wholesale format that would stock food and grocery. Each of the wholesale stores would have around 1,600 stock keeping units (SKUs) against typically 10,000 SKUs in a Big Bazaar, said another senior company official. The size of the retail store would be scaled down to 500-1,000 square feet from average 5,000 square feet.

The new model being piloted at Kalol in Gujarat, will see Aadhaar become a cross between a cash-and-carry store and a front-end retailer. Under the proposed pilot, the company will operate a hub and spoke model where its existing outlets will serve as supply hubs while the franchisee outlets will be spokes.

In a typical cash-and-carry format, the store serves as a front-end outlet to wholesale goods and services for commercial/industrial consumers and small store owners.

But the model Biyani is proposing involves Aadhaar also ensuring last mile delivery and working with small kirana outlet owners to run stores.