the story of_mk_retail_and_its_success

20 • PROGRESSIVE GROCER • OCtObER 2012 AHEAD OF WHAt’S NEXt www.imagesfood.com

In the past 10 years, Indian retail has grown significantly.As per industry reports, organised retail has grown from 3 percent in 2010 to the current 10 percent. there is a boom in organised retailing as more and more grocers are beginning to upgrade their stores, expand their product offerings, and improve their customer service and staff training. We too have gone through several changes; from a kirana store we have grown to become a supermarket, in fact, we are bigger than a regular supermarket. the need for supermarkets is also growing as consumers

Niyas KN, Chief Information Officer, MK Retail, charts the progress of his family business over 85 years

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Niyas KN

are flocking to such stores where they can buy all that they want under one roof and in a comfortable environment.

Unlike a traditional grocer, we offer our customers more than just the basic requirements.We have a total of 60,000 skus which include stationery items, footwear, garments, cosmetics, frozen food, dairy products, staples... all of which may not be full-fledged offerings but they meet the basic needs of any customer.

By Roshna Chandran

Past, Present The Future&

www.imagesfood.com AHEAD OF WHAt’S NEXt OCtObER 2012 • PROGRESSIVE GROCER • 21

acquiring manpower is very difficult nowadays. We only get freshers. there is also a lot of uncertainty whether they will stay on or not. Attrition on the whole is very high as people only look for higher salaries; so there is no loyalty to any company. If they get a hike of even a few hundreds they will just move on.

We have lots of promotional schemes and offers - at least 100-150 skus are currently on schemes. this keeps changing month on month. Each category has an offer, like Ariel detergents on which we are offering 40 percent discount.We take up each category and put an off price on one of the fast selling skus within that

which is about 25 percent, and another 25 percent is from consumer durables. We have imported products in all categories so we have not allocated a separate area for international brands. It is not a separate section, it is all mixed.

We have a strong base of loyal customers who have been shopping at MK Retail stores since they started. We plan to have more promotions and develop customer loyalty programmes. We are also working towards giving home delivery to our customers. No doubt, the sales staff is the primary connect customers have with our brand, so having good staff is crucial. but

There is a boom in organised retailing as more and more grocers are beginning to upgrade their stores, expand their product offerings, and improve their customer service and staff training

Total number of stores: 7Store Size: 4000-25000 sqftDaily footfalls: approx 5,000 across all storesNo. of staff: 550 across all storesSales growth over the past 5 years: 25% per annum.Monthly overheads: 3-4 % of salesSales as per product categories:Staples: 35 % of sales in food categoryFMCG - food and non food: 65%Space allocated to PLs: 40%Average billing size: Rs 750 to Rs 1500

MK Retail

Our fast moving products are staples, which is our private labels (PLs). All the food grains that we sell are mostly PLs. We have been seeing growth in almost every vertical ... every category is growing. Processed food is growing very fast which in turn affects sales of staples. Our sales from FMCG food is about 50 percent of our overall sales, followed by non-food


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category. We are not much into advertising now as the brand is pretty strong already. We are a regional player, and wherever we are present, we have a good customer base, and we are banking on our loyal customers to strengthen our brand value.

Infrastructure is a big challenge and that affects the supply chain. bigger formats have to set up their own warehouse. If there was government support

MK Ahmed (Niyas’ grandfather, started a food and grocery store in 1927 and

named it after his own name. It was a typical grocery store situated at bangalore’s Mysore Road and catered to consumers in the neighbourhood.

When Ahmed died in 1947, his sons managed and grew the business. Son Abdul Rahman, current Chairman of MK Retail (Niyas’ father), set up a kirana store in Malleswaram in 1963. In 1983, when the business split between his five sons, Abdul Rahman inherited the kirana shop on bangalore’s CMH Road. Soon, the store expanded its product assortment to include products such as packaged foods, and even deployed technology to modernise its store operations, launched promos and loyalty programmes as part of its marketing plans.

In the early 2000s, Rahman’s five sons joined the business in quick succession, and began expanding. The 17,000 sqft flagship store opened further up on the same road in 2002. It stocked stationery, appliances, crockery and furniture.

to the 2nd generation of the family, the company owes its expansion initiative. but it was the 3rd generation that started the modernising and branding process to make the store a part of modern retail, and which

Secret of Success

Many of our skus don’t make money, but we stock them nevertheless because our customers want them

in terms of warehousing, things would be a lot easier. It depends on the capacity of a retailer - whether he can set up a good warehouse or not. Generally, the trend abroad is to have warehousing spaces. Distribution centres are rented out. India does not have anything like that. We have to set up our own warehouse in some industrial area. Infrastructure and supply chain is something we have to seriously improve. Although we have a distribution centre, we need a better location to maintain freshness and ensure timely supply. If products are damaged during transit vendors will not take them back.

When it comes to technology, there is nothing good in India apart from a good ERP and some business intelligence.RFID is still not very affordable, but this advanced technology is more specific to supermarkets. We use Microsoft ERP which I think is the best for our segment. and the most affordable too. this takes care of our back-

renamed the store MK Retail. the brothers meet once a month to discuss strategy and take important decisions. there are no external board members or advisors. Having only family members in the business is what differentiates them from national corporate store chains. “We have a common vision, mission and goals,” says Niyas.

Each one of their stores is individually profitable and sustainable on a stand-alone basis. Their focus is more on profitability than the number of stores. What is unique about them is their personal touch with customers, their quick acceptance and adaptation to customer needs and market trends.

besides its fresh produce, good quality and seasonal fruits, vegetables and flowers, wide range of Indian mithaais, gourmet foods, high-quality bakery products and desserts, a

good range of crockery and other household products and variety of gifts for all budgets, MK Retail has built up a reputation of catering to the needs of the local catchment area for instance, it offers Kerala delicacies to meet the needs of residents from Kerala in the catchment area.

Quick and friendly service, the right product mix and affordable pricing enables a good retail experience that keep customers coming back. “A truly progressive grocer is one who is capable of meeting the requirements of his customers, and how localised his product assortments are,” says Niyas.

Quality and not price is important to the family. In their experience, premium brands are far more sustainable in the long run than economy brands. Even in their private labels, they have had better success with premium priced (and high quality) products than low budget offers.

Now there are 7 MK Retail stores - all in bangalore. And the grocer continues to be one of the most well known, trusted and successful local retailers in the city. What is the secret behind MK Retail’s consistant success and popularity? “First is our fill rate, which is 75 percent; second is our wide product assortment, and third is our customer service,” says Niyas.


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end management and other operations such as warehousing, stock inventory, ensuring fill rates, supply and distribution to all our stores. We have a business intelligence tool for forecasting and placing orders.

For India’s F&G retail business the future looks very bright — there could be a boom in this industry.With growing disposable income people are willing to spend more. the trend will be more towards modernising F&G retail as grocers upgrade to new technologies, store layout and design, and expand their product assortment to cater to every need.

However, at present, the infrastructure is not all that great. It is not easy to expand beyond one’s own city. If I want to open an outlet in Mysore, I will not be able to manage it with the kind of infrastructure we have. Logistics would pose a problem as would warehousing facilities, supply and distribution. this industry is labour intensive, but unfortunately, India’s retail labour productivity is the lowest in the world, and really less as compared to that of USA. High attrition rate and lack of training are issues that are hindering growth of Indian retail. At MK’s, our top management have been with us since ages, but at ground level, we have only new faces and they keep changing constantly.

Our merchandisers have been with us for 15-20 years, and understand the consumer pulse. We source products based on what

customers demand, rather than based on margins or profitability. Many of our skus don’t make money, but we stock them nevertheless because our customers want them.

Our growth will be organic — slow but steady.We have three store formats ranging from 4,000 to 25,000 sqft. the one at CMH Road is 20,000 sqft, the Sarjapur store is 10,000 sqft; and CV Ramagar store is 4,000 sqft.

We study the catchment area and the class of customers there, and based on the customer profile we bifurcate them into what we call B+ or A. We basically look at the population in a given area as we are into niche residential layouts. Wherever we find an opportunity we will definitely expand. Presently, we are planning to go South - Kerala and Chennai in particular. We plan to achieve this by the next 5 years.

Our seventh store of 4,000 sqft is the smallest in the chain. We have experimented with this size because we believe that this size could be more viable in the future. We believe that it is easier to set up smaller sized stores across several more locations, either as company-owned or as franchises, and easier to run them too, as compared to large format stores of 15,000 to 20,000 sqft. We also prefer high streets rather than malls which charge very high rentals. We cannot afford to operate on a business model that allows breaking even after two or three years. Each store has to make money from day one.

FDI could be a good thingWith the coming of big retailers the whole perception of Indian retailing would change. It may provide more employment and moreover we will be able to adapt new technologies, which will become more affordable. Where Indian retailers need to improve is on their store design and ambience. Although we keep working on the look and feel of our stores, somehow, stores outside India are completely different and so much better. n

Quick and friendly service, the right product mix and affordable pricing enables a good retail experience that keep customers coming back.

MK’s sales from FMCG food is about 50% of the overall sales, non-food which is about 25%, and consumer durables is 25 %