February 2017 | Priyanka Hosangadi
We deliver freshness
Star Bazaar has created a value proposition by focusing on providing fresh, high-quality produce at competitive prices
It is a busy morning at the Star Bazaar hyper store in Thane, Maharashtra. As customers browse the wares on shelves while stocking up on groceries and other essentials, shop assistants stand by attentively.
|Neatly laid out assortment of fresh vegetables and fruits displayed at a Star Bazaar aisle|
The star attraction at Star Bazaar, however, that grabs customers’ attention is the fresh food section. The neatly laid out assortment of brightly coloured fresh vegetables, handpicked fruits, and rows of glistening fish and juicy cuts of meat is what keeps them coming back to the store. That appeal is a critical component of Star Bazaar’s strategy. “Our primary focus is on fresh food. We feel that fresh food, leading to healthier and better living, is something our customers would desire and aspire for,” says Jamshed Daboo, managing director of Trent Hypermarket, a joint venture between Tata and UK-based retailer Tesco. Trent Hypermarket runs its retail business under the brand Star.
The intensified focus on ‘fresh’ is a recent change, part of an overall transformation that the retail chain is undergoing. Star stores have been undergoing a refitting exercise, in conjunction with its partner. “The Tesco team brings best practices from all over the world, and we make sure that they are adapted to the Indian context. There are colours, for example, that are more suited to Indian tastes than the others. Together, we have come up with a product which is modern, because that is what we are all about, yet suited to the needs of the Indian consumer,” says Mr Daboo.
Another track that the brand has taken that is contrary to competing retail brands in India is that it has focused its attention on the states of Maharashtra and Karnataka, with a footprint that spans 37 stores (as of December 2016). There are reasons for this focused approach to expansion. Multibrand retail companies with foreign investments have permission to operate in certain states only. Maharashtra and Karnataka score favourably due to a higher presence of modern trade, particularly in cosmopolitan centres such as Mumbai, Pune and Bengaluru.
The strategy has paid off, according to Mr Daboo. “The supply chain, marketing and operations are concentrated in these cities. As a result our efforts, too, are focused in a smaller geographical area, giving us operating cost benefits which we pass on to our customers.”
The supply chain becomes all-important, given Star Bazaar’s obsession with freshness. In an untypical business model, Star Bazaar directly sources above 70 percent of its produce from over 100 farmers in Maharashtra and Karnataka. Mr Daboo explains: “We get fresh produce straight from the farm, which is sorted to our requirement, and we move it within a day. What the farmer picks today is available on the shelf tomorrow and, therefore, on your plate tomorrow.” Timing and logistics is the key to maintaining quality and freshness of foods. “We normally transport at night when temperatures drop, but moving forward, we are going to experiment with cool chains for some vegetables and fruits which need it,” says Mr Daboo.
All this doesn’t necessarily translate into an expensive proposition for customers, since one of Star Bazaar’s customer value propositions is to make healthy eating affordable for more shoppers. “We ensure that slightly higher value fruits are priced fairly. We have also introduced a healthy eating range which is offered at popular prices,” he says. In addition, Star Bazaar runs a weekly promotion called Fresh Wednesday, where a range of specially sourced fruits and vegetables — such as avocados from Kodaikanal, cherry tomatoes from hydroponic farms in Hyderabad, dragon fruit flown in from Vietnam — are offered at what Mr Daboo calls “unbeatable prices”.
These changes have clearly resonated with customers: ‘Eat Fresh’, the chain’s packed fresh produce brand, has shown significant growth. Another popular offering is its range of private label products such as Kitchen Culture, its premium line of staples, which has been doing very well. Mr Daboo says he is confident of its continuing success: “Every time we introduce a new product, it has done well. The reason is that the product is of the same quality but priced around 25-30 percent lower than that of the leading brand in that category. That is something we insist on doing, which is why it has been successful.”
|Jamshed Daboo, MD, Trent Hypermarket, talks about Star Bazaar, the 'famous for fresh' convenience store|
The quality and freshness proposition is just one of the change initiatives at Star Bazaar. The retail chain intends to expand its footprint, but cautiously. According to Mr Daboo, growth will be derived from existing markets, at least in the immediate future. “Demand in each of our cities is huge, so there is no point in unnecessarily chasing growth by stretching ourselves across the country,” he says.
The brand’s business model is showing signs of success, despite the tough competition from online as well as brick-and-mortar retail stores such as Reliance Fresh, More stores, BigBasket.com, and so on. In FY2015-16, Star’s like-for-like sales grew by 9.2 percent as against 1.1 percent witnessed in the preceding year. Total revenues increased to Rs8.4 billion from Rs7.9 billion the previous year. Star Bazaar currently operates in three formats — Star Hyper, the hypermarket format; Star Market, the mid-sized supermarket format; and Star Daily, the convenience store format.
Star Bazaar’s success is also due to the relationships it builds with its stakeholders: be it consumers, its staff who ensure good customer service, the farmers it directly sources produce from or even the communities it works with.
Clubcard, its loyalty membership programme borrowed from Tesco, is another successful initiative. Close to 90 percent of sales come from Clubcard members — an indicator of how the programme has been a key driver in engaging and retaining customers. Clubcard differs from other loyalty membership programmes because customers don’t have to shop for a certain amount to become eligible for it. The programme benefits both Star Bazaar and its clientele: through the membership database, the retail chain can reach out to customers with offers and promotions, while consumers accumulate points for their purchases.
Food as pivot
“We are quite proud of the programme. It is a very powerful engagement tool and the customer also sees a lot of benefit in it,” says Mr Daboo. Actively engaging with the community is the other side of the business coin. Given its focus on ‘fresh’, it is not surprising that food is also the pivot of many of Star Bazaar’s community initiatives including Kimaye, Gift-a-Meal and Eat Right. Store employees are also encouraged to volunteer for or carry out local community activities. The business touches over 1,000 lives through its community engagement initiatives.
Looking forward, Star Bazaar has a lot of action lined up. New stores are on the drawing board, with one scheduled to open in Hyderabad. Close attention will also be paid to consistently improving the quality of the product range, both in terms of importing it as well as working closely with local farmers to develop unique products. “We are working on a crunchy capsicum which you can directly eat. You don’t need to cut it and put it in a salad,” says Mr Daboo.
Another focus area is to increase the number of private label products. “The Westside team has shown how successful you can be in own labels, especially through Studio West, their cosmetics private label. We see ourselves making a big play through our labels.”
With its new and intense focus on freshness and quality of food and produce, it is clear that Star Bazaar has chosen to carve out a clear positioning for itself in the overcrowded retail market. Fresh is the new star appeal.
This article was first published in the January - March 2017 issue of Tata Review. Read the ebook here