QZ&A
A Thai company plans to take on cash-and-carry giants in the Indian market
In expansion mode.
Image: Lots Wholesale Solutions.
Sangeeta Tanwar
Cash & carry, or wholesale retail, is a highly competitive yet lucrative business in India.
With 12 million small traders and a growing hotel-restaurant-cafe sector to tap into, it has lured global giants like Germany's Metro Cash & Carry and Walmart to India.
LOTS Wholesale Solutions, the wholly-owned arm of Thailand-based Siam Makro PCL, wasn't going to miss this bus. The company opened its first store in Delhi in July 2018. Since then, it has added two more—one in Delhi and another in neighbouring Noida. It now plans to open 12 wholesale distribution centres across northern India over the next three years and invest over Rs1,000 crore ($150 million) over five years.
"Having consolidated our operations in Delhi-NCR last year, we are focused on expanding our footprint in the rest of north India. We are looking at Uttar Pradesh, Haryana, Punjab, and Rajasthan," said Tanit Chearavanont, managing director of LOTS Wholesale Solutions.
Yet, it is a challenging market. Metro Cash & Carry, the first mover, took 15 years to turn a profit after entering India in 2003. Rival Walmart, which entered the country in 2007 through a tieup with Bharti Enterprises, is yet to turn profitable.
LOTS Wholesale, which sells fresh produce, packaged food, electronics, stationery, and apparel, must also grapple with India's current consumption slump.
In an interview with Quartz, Chearavanont talked about the company's strategy and the need to use digital as a tool to drive efficiencies in the business.
Edited excerpts:
As LOTS prepares to expand, what's going to be your key focus area?
Location, or proximity to customers, plays an important role in retail. We prefer being geographically close to our customers. Hence, we are experimenting with various store formats based on demand and demography. We want to populate targeted areas with multiple stores so that we can cater to our customers—mainly kirana store (corner store) owners, corporate offices, and restaurants—effectively. This approach also helps us target customers in micro-catchments (nearby markets).
You are also encouraging your customers to buy online?
Following seven to eight months of beta testing, we have now opened our e-commerce portal to 100,000 customers. We aim to have an effective omnichannel business.
How successful have you been in on-boarding kirana stores?
Keeping kirana store owners in mind, we have strategically opened stores closer to our customers. The idea is to provide convenience and speedy delivery to our walk-in customers. We have been collaborating closely with small businesses and kirana store owners. The company is helping them modernise their stores through digitisation. We are encouraging kirana owners to order online, and check their inventory and make payments electronically. We are currently catering to more than 140,000 registered customers in Delhi, offering them 5,000-plus stock-keeping units (SKUs).
The fast-moving consumer goods segment (FMCG) is struggling with sales. How about you?
The FMCG sector witnessed relatively slow growth in 2019. As households continue to limit spending, and rural demand loses steam, kirana owners have been impacted. Despite a challenging market, we are focused on encouraging more customers to join us and take advantage of our competitive offerings. We have been offering right assortments in various pack sizes and a wide range of available products to get more footfalls at our stores. The team monitors and measures customer buying patterns and accordingly customises offerings for them.
What is the one key pain point of kirana store owners that you are working to solve?
We are looking to reduce their sourcing time. This would help reduce supply-chain inefficiencies and maximise profits for us and the partners.
To reduce sourcing time, we have set up a collection centre in Haryana to collect supplies directly from farmers. We have also built a state-of-the-art cold chain system to increase the shelf life of fresh produce and meat. This further helps avoid transportation in open trucks that can damage produce and reduce shelf life. Our sourcing team keeps a close eye on the stocking of products and helps add assortments as and when required.
How is the company using digital as a tool to connect to customers?
We have been deploying technology across various stages of the business. Our focus has been to digitise back-end solutions and tech.
Tanit Chearavanont.
Image: Lots Wholesale Limited.
Product management, for example, is crucial for us. Our marketing analytics tools are simplifying processes. Our business development application (BDA) app enables our salesforce to take orders on a tab synced with our backend inventory management system, enabling real-time shipments. We are also enabling smoother last-mile deliveries with our transport management systems.
How do you compete on prices with bigger players like Metro Cash & Carry and Walmart?
Customers in India are price-sensitive, which makes it critical for us to bring in operational efficiencies to succeed.
At LOTS Wholesale, we have a specialised team that helps us with price benchmarking, therefore, allowing us to offer products at competitive prices. Also, we work closely with kirana owners to stay up-to-date with the exact requirement of products at their end. This predictability of price and timely availability of SKUs helps us and our partners plan better and avoid wastage.