The Organic World founder and director Gaurav Manchanda shares details about the company’s growth strategy, the reasons for staying away from quick commerce, and its upcoming outlets, and more.
The Organic World, a start-up based out of Bengaluru, is looking at a massive expansion for its next phase of growth. With 17 stores spread across Bengaluru, the retail chain is now betting on a franchisee model to foray into other South Indian markets such as Hyderabad, Chennai, Mysore, and Coimbatore.
In an exclusive conversation with Outlook Business, The Organic World founder and director Gaurav Manchanda shares details about the company’s growth strategy, the reasons for staying away from quick commerce, and its upcoming outlets, among other things.
What is the strategy for your next phase of expansion?
We are at 17 stores currently, and a bunch of them are still franchises. We aim to expand to 100 stores by the end of FY2025. While we also have company-operated stores, franchises are our growth engine. So, we are looking at setting up more of those in the future.
Currently, our focus is largely on South India, primarily because consumption and shopping habits are similar here. We are looking at setting up stores soon in Hyderabad and Chennai through the franchise route. I'd say Hyderabad is somewhat like the Bengaluru market in terms of the mix of people and workforce there. So, Hyderabad seems to be a natural fit for expansion.
The Chennai market is logistically well connected to our supply chain, and we can service its needs regularly. So, these are the two immediate logical fits for expansion.
Moving from 17 to 100 in such a short time is an aggressive goal. Do you have a short-term target?
We are on track to open four stores next month. These new stores will open in Bengaluru and Hyderabad.
How are you building up the sourcing for this kind of expansion?
For things like non-F&B (food and beverage) items, we have suppliers for everything, be it staples or consumables in the daily shopping basket. A lot of that can be supplied by suppliers to the stores directly.
Primarily, the challenge we face is identifying local F&B suppliers. We are locking in these suppliers. In fact, they're on standby. We should be able to quickly plug in and play as soon as the stores get off the ground.
Additionally, franchises now have the option of setting up a store without F&B (food and beverage) as well. With this, they can focus on categories that are mostly groceries and other consumables, such as home care and personal care products.
There's a bit of a trade-off without F&B. The assumption is that walk-ins might get affected if there is no F&B category. But, on the other hand, the overall margins of the store improve considerably because F&B margins are on the lower side.
A lot of D2C brands are jumping onto the quick commerce bandwagon as a channel of distribution. Do you feel you are late to the party?
In the F&B and organic fruits and vegetables segment, we have supplied to certain players in the past. But, eventually, they figure out their own dark stores and supply chain. It finally comes down to ensuring there is a key differentiator, it is innovative enough, and the margins are making sense.
Certain players in e-commerce and quick commerce still need to figure out their unit economics and get them right. So, if we end up giving away higher margins, then unit economics doesn't make sense for me. That is why we had to delay our entry into those channels.
How much business is currently coming from online channels?
Our split is roughly 85:15, with 85 per cent still coming from offline channels and the rest 15 percent from online. I must add that we are working towards ramping up online. At some stage, it is my goal to achieve a 60/40 split.
But offline still has cheaper customer acquisition costs. So, to allocate resources, it is more sensible for us to spend offline.
We saw a burst in consumer awareness towards organic food. Has that tapered off in recent times?
Awareness is critical for consumers, and we are seeing that it is continuing to increase. There are a lot of influencers and people in the market who continue to talk about eating healthy food. So, that movement is growing slowly but surely.
As long as good content is put out and people can consume that content to understand exactly what food can help and what can hurt them, we're on the right track. Even in the schooling system, there's a lot of focus on eating healthy foods and making sure that you control your sugar consumption.