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A Low Price for Success
By Naresh Kumar

Munisami walked into one of the most well known stores in Chennai, with his wife and two children – one boy and one girl. He bought a 2 metre shirt piece for himself, a saree for his wife, shirt and half pant set for his 4 year old son and a frock for his 3 year old daughter. Tired but happy, they then made their way up to the 5th floor of the building. There Munisami bought idlis and vadas for all of them, coffee for himself and his wife, and icecream lollies for his children.

Munisami had entered the store with a little more than Rs. 200 in his pocket. He walked out with enough money to get them all home by bus.

Surprised? Here’s the clincher - this scenario is not set in the 1960’s. It is set in year 2001 A.D.

The saga of Saravana Stores begins in 1970. The three brothers who started this – Yogaratnam, Selvaratnam and Rajaratnam- were born in a village near Tuticorin in Tamil Nadu, called Panickar Kudiarrappu. They had an agricultural and rice mill business there, which was doing very well

Then, in the late 1960s, discontent – that divine catalyst of greatness- began to gnaw at them. There was an increasingly strident voice inside them, which told them that there was great fame and wealth waiting for them, and that this was not going to come about in the agricultural business in Panickar Kudiarrappu. Heeding that voice, they went to Chennai, and in 1970 started off their journey to stupendous success in a small shop that sold vessels. The next six years were spent in consolidating and growing this business. It was in 1977 that the Saravana Stores of today first took shape.

Off the main street in T. Nagar, there is a small lane. A casual stroller along the main road might actually miss it, which probably explains a signboard on a lamppost on the main road opposite the lane, pointing towards the lane with the legend “Saravana Stores” on it. The lane itself is small and crowded, reminiscent of a thousand such bazaars in any city. Hawkers peddle small ticket items on the sides of the street, and there is a loud buzz of cheerful, busy voices.

Halfway down the lane, you see the side of a five-storey building that hasn’t seen paint in years. It is only when you come to the front of that building and look up above the entrance that you realise that this is Saravana Stores. It takes a few seconds more to find out that the building next to it, and the building opposite it, are also Saravana Stores! The first of these is a store selling all conceivable household items, the one next to it is – hold your breath – a jewellery store(!), and the one opposite it is a garments and textiles store.

If you walk into any one of these stores, the immediate impression is that of a railway station. There are hordes and hordes of people- so much so that there are actually traffic controllers on each floor- whistles, uniforms, et al-who noisily direct people to the left or right flight of stairs, depending upon whether they want to go up or down to different floors.
In the household items building, there are 4 floors besides the ground floor. The ground floor is breathtaking at first sight – rows and rows of vessels are to be seen, hung from the ceiling, scattered all around the floor, in fact everywhere. In the other four floors, you find household items of every conceivable kind – crockery, cookers, household decoration items, thermoware, sofas, beds, dressing tables. One floor even sells TVs, washing machines and other electronic appliances.
The garments building also has 5 floors, covering a range and depth of textiles and garments that simply has to be seen to be believed. The top floor is a small eatery, where one can get idlis, dosas and other popular snacks, as well as beverages like coffee, tea and cold drinks.
The jewellery store has just two floors, but even here the range and depth if merchandise is incredible. Rows and rows of gold, silver and diamond jewellery are exhibited along the walls and in showcases.

The common thread underlying all of these is that they are all discount stores. Prices are on an average at least 20- 30% lower than elsewhere. In the jewellery section, the percentage difference is somewhat less- around 10% or so- but for an item costing around 8-10,000, that works out to a saving of almost Rs. 1000- a considerable amount. In the household section, there is similar saving for the high-ticket items, such as TVs and fridges.

OK, so there is a discount store, selling all kinds of items. What is it doing in an “Unsung heroes of Indian retailing” column?

The magnitude of Saravana Stores’ achievement sinks in upon comparison with Shoppers’ Stop, considered one of the greatest retailing successes in modern times. Shoppers’ Stop has outlets in 6 cities, a total space of over 2,25,000 sq.ft. The outlets are air-conditioned, well maintained, and have beautiful store displays. Their advertising campaign is considered to be pathbreaking, and the staff is well dressed and articulate. They have a good loyalty card system in place, and their service is reasonably quick and efficient. They have spacious, pleasant cafes, with a variety of different snacks.

Saravana Stores has only one outlet in Chennai, consisting of three divisions, has a lower middle class clientele and a total space of not more than 25,000 sq.ft. The exterior of the outlet, as mentioned before, has not seen paint for many years. To a person accustomed to store interiors like that of Shoppers’ Stop, a first exposure to the interiors of Saravana Stores is tantamount to a mild shock. There is a huge crowd at all times. Goods are piled on top of one another (sofas, plastic chairs), or displayed all along the wall (garments, textiles). The staff is dressed in uniforms that are generally mildly grubby, and is not likely to win any popularity contests when it comes to courtesy towards customers. Billing and delivery can take almost 20-25 minutes. The signboard across the street is about as much advertising as they have ever done. The eatery at the top of the garments store has no tables and chairs- customers sit on the floor on their haunches. They sell a total of about 8 items-coffee, tea and cold drinks included.
Shoppers’ Stop has a total turnover of 160 crores. Saravana Stores has a turnover in excess of 600 crores – earned through 20,000 customers per day!!

At first glance, it is an intriguing case. Here is a store that ostensibly flouts all the norms, the so-called “best practices”, and continues to do so whenever it gets time from laughing all the way to the bank. Its customer orientation is nothing to speak of when it comes to the normal parameters of courtesy and efficiency. Its efforts at store display are non existent. The bulk of its products are unbranded. It takes care of its employees, but its efforts in that direction are by no means remarkable, like, for example, its namesake, Saravana Bhavan. It has no facilities to speak of in terms of entertainment or convenience. What, then, could account for its incredible success? Is price all that matters? Can it be that when it comes to price, all retail management theories break down, like Newton’s laws at the subatomic level?

Published in Business Standard