Are hypermarkets only for the rich class?

The concept of hypermarket has always been low cost, wide range and depth in the western countries. But in countries like India, where property prices have been skyrocketing and with every retailer worth its value, entering the market, would it be the same?

I guess not. It would be difficult to position a hypermarket for the masses.A back of the mind calculation shows that to build a hypermarket you would need a space requirement of anywhere between 50,000 sft to 1,50,000 sft .Lets assume you want to build a 100,000 sft sized hypermarket, for that you would need 1,66,000 sft plot area equivalent to 65 grounds, assuming 60% ground coverage with an FSI = 1.
Assuming a ground costs on an average 3 crores in Tier � 1 cities, you would spend almost 195 crores in just acquiring the land. An additional 20 crores (assuming building costs at the rate of 2000/sft) would be spent on construction. Taking the total to 215 crores. (Scenario � 1)

In Scenario � 2, for the same 1,00,000 sft if we get an FSI equivalent to 2.5, we would end up paying 78 crores for acquiring land and another 20 Crore for building one. Taking the total to 98 Crore.















Assuming a hypermarket has most of the main categories viz a viz Food, Consumer durables, FMCG, apparel, Books, Music, Furniture, Home, Footwear. The weighted average revenues /sft generated would be around 14,000 sft/month. So the yearly turnover expected will be 140 crores(14000 * 1,00,000), out of which if we keep 25% as the margin with vendors, the margins expected will be 35 crores. Assuming 6% profit on sales (which is an optimistic figure after deducting COGS, staff, electricity, marketing, and miscellaneous expenses but excluding rent @ 4% of sales), the EBDITA will be 2. 1 Cr. Another major revenue for a hypermarket will come from selling space either through endcaps or through in store visual signage�s.

Assuming a hypermarket has 15 endcaps, they would generate approximately another 1 Crore (15 endcaps * Rs 50,000/endcap/month * 12 months). Another one crore would be generated through miscellaneous space selling. This leaves an EBDITA of 4. 1 crore / year for the retailer.A simple 9 - 12 % (depending on demand supply of money) bank interest in (Scenario � 1) alone will yield 20-25 crores a year.I cannot comprehend how hypermarkets will sustain at this rate but this is a secondary question for the moment, but given the stark scenario it would be wise for hypermarket developers to go in for a wide range of SKU�s but at the same time not too low on price.

The customer is already pampered with choice, variety, convenience, and therefore there is no reason why he should be getting rock bottom prices. By increasing the walk-ins and more importantly the average bill value one can cover the bottom-line.

Like I have mentioned in my earlier article disposable income is on the rise, consumers don�t mind paying a bit premium.

Do vegetarians pay more in a restaurant viz a viz a non-vegetarian

It looks to be true if you compare some of the rates at restaurant. For example if you took a sample of restaurants and compared the vegetarian and non-vegetarian item rates, overall the non-vegetarian rates will be 20% more than the vegetarian's rates.

But if you look at the costs of chicken which comes to be around 60 Rs/kg, Lamb Rs 200/kg, Fish 80-200 Rs/kg, the average comes to Rs 130/kg, whichever way you see, the rates are way costlier by almost 200% than you would need to make a decent vegetarian meal.

I guess restaurants wouldn't want to show that much of price differential for vegetarians and non-vegetarians. So if you are a vegetarian you are shelling out more every time you eat out.

Are Kirana stores losing their relavance?

A big yes, gone were the days when families used to wait for the start of the month to place their monthly purchases.

With spending power/consumption expenditure (disposable income � savings) on the rise, middle class India have the option to buy anytime of the month.

The advantages that that the kirana stores enjoyed viz. personalized service, door delivery, and personal touch have have all been lost with the advent of organized retailing. Organized retailing provides a number of advantages i.e. they provide variety, quality in terms of freshness, good prices, convenienence; these factors combined with the rise of disposable incomes have made a big hit with the burgeuing middle class population.

Note: �Kirana stores� is equivalent to a �Mom and Pop Business� The term "mom and pop business" is a common colloquial expression for a single-family operated business with few (or no) employees other than the owners.