Shwapno targets massive expansion

Shwapno, Bangladesh’s largest retail chain, plans to raise its store count from 300 to 3,000 in the next three to five years to address the growing demand for quick shopping among urbanites and to enhance sales volume for profitability.

The supermarket chain also hopes to attract more investors to its franchise model, where investors receive 40% of the gross profit from store operations, covering expenses such as rents and utilities.

Investors can expect a 30-40% return on investment after subtracting expenditures, making it an appealing business option.

According to Sabbir Hasan Nasir, the executive director of ACI Logistics Ltd, the operator of Shwapno, the plan is to develop a hub-and-spoke model, where existing stores will act as hubs with smaller stores acting as spokes around them.

This ambitious target is based on the success of the current business model and the ability to offer customers convenience and value through bulk purchases and exclusive deals.

As the company grows, the goal is to build closer relationships with clients, which will lead to more appealing offers and more income.

Shwapno posted an operating profit for the first time in the last financial year of 2021-22, with revenue growing by 1% year-on-year to Tk 1,388 crore.

The company anticipates reaching break-even in three to four years.

Despite losses of Tk 135 crore at the end of the financial year, Shwapno has improved from its previous year’s loss of Tk 142 crore.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the company are now 1.5-2.5%, which has been positive for the last four years. Its goal is to boost EBITDA to 6-7% by increasing sales volume.

ACI Logistics Ltd’s executive director, Sabbir Hasan Nasir, is optimistic about the company’s prospects, given the growing interest among urbanites in modern retail for convenience and ease in purchasing items, as opposed to visiting traditional wet markets.

The retail market in Bangladesh is valued $18 billion and increasing at a 7.5% annual rate, while the supermarket sector, including branded segments, is worth $400 million and rising at a rate of more than 12% yearly, displacing traditional retail.

According to Nasir, there is a niche market that caters to the upper-income groups, while another group of shoppers purchases products for their daily needs.

He mentions that this second market is quite large, and local grocery stores are adopting the supermarket model to attract customers. Nasir observes that supermarkets have had an impact on this market.

Given the bright growth prospects, Shwapno aims to capitalize on this market. The retail experience is not only about transactions, but also about providing a satisfying shopping experience.

Shwapno is presently one of the top 10 brands in Bangladesh across all categories and is the leading superstore brand, as per the think-tank Bangladesh Brand Forum.

Since its inception in 2008, the retail chain has served more than 60,000 households each day by offering daily essentials, groceries, apparel, home décor, and electronics through its outlets in 58 districts. It commands over 50% of the market share in the supermarket segment.

Nasir, who has been leading the retail chain for a decade, mentioned that they have dedicated a significant amount of time to establish and cultivate the Shwapno brand.

He stated that the initial years were challenging, and the retail chain had to work hard to gain customer acceptance.

To make the shopping experience comfortable and easy for customers, Shwapno had to create new designs for its stores.

Additionally, the retail chain has established direct contacts with growers for contract farming to source farm produce, particularly vegetables. For the past four years, Shwapno has been part of the global Good Agriculture Practice.

Nasir feels that modern retail would have grown at a faster pace had there been no discriminatory policy by the National Board of Revenue.

Presently, customers have to pay a 5% value-added tax when shopping from supermarkets, while they don’t have to pay the same when buying items from unorganized groceries.

Despite this, customers still choose to shop at supermarkets for other benefits, both tangible and intangible.

Nasir emphasized that consumers ultimately get more value by shopping at Shwapno, where the shops are hygienic and provide a better overall shopping experience. However, there are still challenges to providing top-notch services to customers.

Retail is a service-oriented industry, and all individuals involved in the trade need to be trained efficiently.

Nasir believes that it would be beneficial to have an academy to create skilled human resources for the retail sector.