When shoppers really stop, at the margin

When shoppers really stop, at the margin
Sunil Jain

New Delhi, Feb 20: Which is India's largest retail chain of grocery stores or shopping malls? Shopper's Stop, at Rs 153 crore, is your likely answer if you live in cosmopolitan areas like Delhi or Mumbai. Or perhaps the Foodworld chain at around Rs 360 crore -- Rs 220 crore from groceries and around a third more from sales of the music and health sections? Actually, the answer's none of the above, it's a rank outsider.

It's a co-operative society that runs stores run by the name Margin Free Market Pvt Limited in Kerala. It's turnover today, from a mind-boggling 160 stores (the Foodworld group has just 84) is a whopping Rs 450-plus crore! And almost no one at the KSA Retail Summit 2001, being held in the capital over the past 3 days, even knew of the Margin chain till one of its directors, T.K. Salim, told them of their success.

The chain, begun 7 years ago, really took off in the last 18 months or so, and now plans to have 250 stores by the end of next month. Today, Salim told The Indian Express, in a designer matter-of-fact tone, `we've opened 7 more, I just got a message.'

And since success begets imitation, the whole of Kerala is dotted with Margin Free Supermarkets, Margin Less Markets, and other variants of the original co-operative's name.

Margin's mantra for success, actually, is simple, and naturally is the one that all retail chains in India are aiming at -- volumes, volumes and volumes. In 3 months time, according to Salim, Margin will be the single-largest purchaser of grocery items in the whole of Kerala, and will control roughly a fourth of the total market. Naturally, then, it can afford to dictate terms to suppliers.

When one leading tea producer refused to offer it special `margins' (!), Margin simply stopped stocking its produce, and offered rival brands. Given its tremendous clout, the firm appointed Margin as an institutional distributor, giving it huge margins to be passed on to its customers. Similarly, Margin's now turning the screws on other FMCG major to get a good deal for its customers, by threatening to boycott their products. The chain is an institutional distributor for several brands and gets special offers from several top brands including beverage ones.

How does Margin work? It has a customer base of 6 lakhs, and sells them Consumer Cards at Rs 40 per year -- this gives them greater discounts, and also freebies like 2 kg of subsidised sugar per month. In addition, any one who wishes to set up a Margin store has to buy at least Rs 1 lakh worth of shares of the main Margin holding company -- this is a small price to pay for getting virtually assured customers and large discounts on merchandise. Thus, Margin Free Market Pvt Limited, has virtually an unlimited cash-trove to fund its expansion.

In addition, there's the factor of credit that large purchasers get. Margin gets an average of 20-22 days credit from suppliers, and sells all of this on an average of 10 days -- so it generally earns interest even on its sales!

Margin's story began when 39 friends registered a co-operative society in 1993, and decided, by 1994 to enter the supermarket arena. For a couple of years, they set up a few stores in Thiruvananthapuram, worked in them in a voluntary capacity. Taken by surprise with the tremendous success of the stores, they then decided to speed up operations a couple of years ago -- 7 months ago, they began working on constructing a 1 lakh square feet central godown to feed all the stores.

Success, it would appear, comes at the Margins.