By: Satish Patra

2.  Nanz was originally set up by the three
partners with the objective of retailing and
also to engage in the food business.
 A joint venture of Goetze (India) Ltd, NANZ
(Germany) & Marsh (USA), the store was
being run on international lines.

3.  Nanz was also engaged in outsourcing, packaging
and promoting its own brand of food products.
 Nanz faced several problems during its eight-year
stint, including skyrocketing real estate prices and
its inability to build an efficient supply chain.
 Besides, in the eight years of its existence, Nanz also
saw close to six different CEOs in charge of the
supermarket chain.

4.  When Nanz hit the market in 1993, it was
considered a bold step into what was then a
sunrise industry.
 In 1997, the chain had projected a turnover
Rs100 crore by 1999.
 But by the appointed date, turnover was less
than a fifth of that level, and profits were
nowhere visible on the horizon.

5.  “The reason Nanz failed was because the
stores were built on the lines of the
promoters’ ego and not with consumer
needs in mind,” says a former senior
executive of Nanz Foods Products.

6.  Thus at Nanz, rent accounted for as much as
4 to 5 per cent of gross margins.
 Apart from real estate “Three per cent of
gross margins was used up in paying power
bills.”
 Manpower costs were also high. “If you
take around 4 per cent of margins for paying
manpower, that leaves very little,”

7.  “Real estate was the main killer,” admits BR
Kapoor, executive director, Goetze (India)
Ltd. - the Nanda group company that backs
Nanz Food Products Ltd.
 In contrast, RPG group’s Food world opened
in Bangalore, Hyderabad, Chennai and Pune,
where real estate prices are almost a quarter
of those in Delhi.

8.  Lack of a market.
 Direct competition with the kirana shops,
which have three distinctive advantages -
proximity, service and high margins due to low
infrastructure costs.
 It failed to attract middle class and lower
middle class consumers who would help
generate volumes to partially neutralise the high
overheads.

9.  Tried to rectify by setting up ‘LoBill’ stores -
no-frills stores of 1,000 to 2,000 square feet
to increase its consumer base.
 Opened in middle class “catchment areas”
like Noida and Shahdara (1994).
 Such measures only brought temporary
relief.

10.  Nanz didn’t concentrate much to strengthen
customer relationships in a durable manner.
 Nanz stores didn’t offer sufficient price
differentials from the neighbourhood shops.

11.  A basic lack of
vigilance added to the
management’s woes
with a high degree of
pilferage - as much as
6 % of total turnover.
 No CCTV’s in the
stores.

12.  Part of the reason why Nanz went out of
business is that it no longer fitted in with the
promoters’ overall plans. Nanz of Germany
was exiting the retail chain business.
 The Nanda’s were going through tough
times, So they sold their 24 cent stake in
Two-Wheeler company Escorts Yamaha
Motor Ltd to the Japanese partner in a Rs 230
crore deal.

13.  In the end, however, Nanz failed on the most
basic issues.
 “The problem was not that it was ahead of
its times. It simply did not have a proper plan
and business model.”

14.  What are the factors to be considered while
setting up a Supermarket/Department retail
chain Operation ?

15.  Understanding the needs of the consumers.
 Developing good assortment of merchandise.
 Displaying the merchandise in an effective
manner so that consumers find it easy and
attractive to buy.

16.  Stringent cost controls per square foot of
management space.
 Cost efficiencies in supply management and
bulk sourcing.

17. 1) Real Estate Constraints.
2) Do Your Homework.
3) Supermarkets Are A Mass Concept.
4) Partnerships Count.
5) Basic Supervision Is Crucial.

18.  Nanz chose to open stores in the high priced
retail zone of India - the north.
 In 1993, it paid Rs 5 lakh a month in rent for
its Greater Kailash outlet.
 Hefty stamp duties for property transfer, rigid
zonal laws, urban land ceiling acts etc.

19.  Two of Nanz’s outlets had to face
the wrath of Delhi Municipal
Corporation because the outlets
violated building bylaws.
 Nanz officials say they took the
leases from the original owners in
good faith.

20.  Nanz’s upscale ambience kept middle and
lower class consumers at bay.
 The original target audience, SEC A
consumers with high purchasing power,
constitute only 10-15 per cent of Delhi’s
population.

21.  Nanz did not pay sufficient attention to
building up partnerships with manufacturers
and growers.
 The chain was dependent on distributors
instead of sourcing directly from
manufacturers, and so could not offer
meaningful discounts to consumers.

22.  The chain was also hit by a high degree of
pilferage - around 6 per cent of total turnover.
This considerably reduced the already tight
margins.

23.  What is the growth strategy to be adopted
by a supermarket chain in a country like
India?

24.  To build its share by expanding its sales
faster than the overall Market Growth Rate.
 Develop a superior Product Technology.
 Differentiating through Rapid Product
Innovations.
 Line Extensions/Customer Service.
 Offering Lower Prices.
 Increasing Product Usage among present
users.

25.  What Organization Structure do you
recommend?

27.  Nanz was said to be an idea before its time-
how could Nanz have used the 1st mover
advantage to its benefit?

28.  Providing assortment.
 Holding inventory.
 Providing after sales services.
 Providing information.
 Open to all classes.

29.  Economic environment
 Legal environment
 Technological environment
 Competitive environment

30. Threat of New
Entrants
Bargaining Power of Rivalry among Existing Bargaining Power of
Suppliers Competitors Buyers
Threat of Substitute
Products