IndianOil to enter non-fuel retail
New Delhi   10-Nov-2008
IndianOil has decided to take the plunge into the non-fuel retail segment in partnership with some established player in the business such as the Aditya Birla group or Pantaloon. IndianOil chairman Sarthak Behuria said the new retail business would start operations within six months. It will first shortlist the leading players in the organised retail sector and then decides on the most suitable partner to forge a joint venture. Senior company officials said IndianOil would provide the use of its petrol pump sites for the retail stores while the partner company will have to take care of sourcing the products. The decision to rope in a partner for the business has been taken in line with recommendations made in a study carried out by retail consultancy company Technopak, for IndianOil, recently. The study has recommended that it is better for IndianOil to enter the organised retail business in partnership with an experienced player instead of going it alone. Senior IndianOil officials said the company has a major advantage in that it owns prime sites on which its petrol pumps are located in various cities. "These sites along with the IndianOil brand name will be leveraged to forge a deal with an ideal partner for the retail venture," a senior official said. At one point the IndianOil management wanted to leverage its strong brand to enter big retail, which would have involved taking up entire malls that sell everything under one roof. However, the IndianOil management is also aware that while it has a nationwide retail network of fuel outlets it does not have the experience to run big retail stores. The company has, therefore, decided to go in for the Technopak model of forming a joint venture. While IndianOil has some "convenio" stores at select filling stations, these are being run by the dealers who decide on what goods need to be stocked and the prices that have to be charged. The new retail plan is bigger and more organised, an official said. Currently, IndianOil has around 50 to 60 convenio stores at its bigger petrol pump sites located near posh residential areas. The volume of business is around Rs 5-6 crore and these are seen mainly as add ons for the customers rather than a pure profit-making venture. Bharat Petroleum Corporation Ltd (BPCL), which had taken the lead in new marketing initiatives among public sector companies, has already set up 400 convenio stores. A senior BPCL official said, "We have reached our limit and will be opening only an odd store here and there." He said, "The convenio stores have been put up for the convenience of our customers. We do not make big profits on the sale of non-fuel retail goods as the margins are a mere four to five per cent."