The HyperCity Story: What Went Wrong

HyperCity, which had appointed Ramesh Menon as CEO last year has been for some time now, struggling to maintain its own in front of its bigger and more popular competition, Big Bazaar.
However, there was once a time when the retail chain was well on the path of growth, slated for success. HyperCity operates in nearly 20 large format stores in cities such as Mumbai, Hyderabad, Bengaluru, Bhopal, Ludhiana, Amritsar, Jaipur, Pune, Ahmedabad, Delhi and Noida in Delhi- NCR.
The company recently redesigned all 19 stores and the total space in HyperCity was reduced from the previous 1.5 million square feet to 1.3 million square feet.
A 51 per cent subsidiary of Shoppers Stop and dealing primarily in foods and apparel, claiming to offer consumers world-class shopping experience, HyperCity – today a loss-making chain – was once The Raheja Group’s golden child. The Raheja Group has invested Rs 800 crore in this chain over the past 11 years in India.
Around 65 per cent of the business from HyperCity came in the from the food portfolio with garments accounting for 16-17 per cent. The rest comes in from other products.
In July 2017, it seemed that HyperCITY Retail was going places. It had unveiled the ‘Hyper Food Island’ an exclusive section that hosts an assortment of niche international and national brands. Announced at HyperCITY’s flagship store – Malad, the Food Island, was supposed to bring together some of the finest brands under one roof across categories. The idea behind it was to provide ‘Something Fresh Everyday’ – a range of carefully handpicked products to suit the needs of the contemporary customers.
Brands like Doyen, Smoor, Tea Culture of the World, Cool Story, Wingreen’s Farm, RRO- International Cheese, Emporio, Muralidhar Shrikhand, Punjab & Sind and Brownie Cottage were all part of the Island model.
When The Tides Turned
Soon after however, HyperCity began altering its strategy to focus on smaller stores due to space constraints.
Earlier, it had opened stores occupying 70,000-80,000 sq. ft. The new stores, which the company said it would open, would be half the size at 40,000-45,000 sq. ft.
Another area that HyperCity seemed to not be able to control was technology. The retailer had said that it was developing its Omnichannel capability not for just flexing its technology superiority but to serve its catchment, its customers and its loyalty base with greater dedication and service.
However, when Indiaretailing Bureau spoke to Ramesh Menon on the sidelines of India Retail Forum 2017, he categorically refused to comment, saying that he would only talk once they had unveiled an Omnichannel strategy. When asked when that would be, he said “tentatively post Diwali”.
Kishore Biyani’s Buying HyperCity
Future Retail is buying HyperCity, a premium chain of 19 hypermarkets from Shoppers Stop for Rs 655 crore. Once the HyperCity deal is sealed, it will add about 1.4 million square feet of retail space to Future Retail, taking the total store count to more than 900 outlets.
Future Retail now operates around 13.8 million square feet of retail space in 221 cities, with annual sales of Rs 17,075 crore. Consolidation in the grocery space will help it push its private label consumer products, which earn higher margins than other items. According to Euromonitor data, Big Bazaar, is already India’s market leader, with a 22.4 per cent share of the organised store-based retail market in 2016.
The transaction will be similar to the Heritage transaction. Shareholders of Hypercity will get shares of Future Retail. Part of the company’s debt is also likely to get transferred.