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The Indian defence services could teach the\ncountry\u2019s top private retailers a thing or two about making money.\n
\nA chain of 3,900 stores of the Indian defence ministry\u2019s canteen stores\ndepartment (CSD) earned Rs236 crore ($35 million) in profit in\nfinancial year 2014-15, according to a report in the Economic Times on\nAug.17, based on a reply to a right to information query.
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\nFor the same period, the Kishore Biyani-owned Future Retail, which runs\nsupermarket chains such as Big Bazaar and eZone, reported a profit of\nRs153 crore; the corresponding figure for Reliance Retail was Rs159\ncrore.
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\nThe CSD stores typically work on operating margins as low as 1%\u2014this\nfigure can vary anywhere between 8% and 18% for a private retailer.\nThese canteens function on a not-for-profit basis, but their volumes\nare huge. In 2014-15, their turnover stood at Rs13,709 crore, according\nto the report, trailing that of Reliance Retail at Rs17,640 crore but\nahead of Future Retail\u2019s Rs11,149.87 crore.
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\nA big reason to the CSD stores\u2019 better profitability is lower overhead\ncosts.
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\n\u201cCSD does not\nhave to bear two expenses that are major operational costs for\nretailers\u2014real estate and advertising,\u201d explains Devangshu Dutta, CEO\nof Third Eyesight, a New-Delhi based consulting firm. That\u2019s because\nthey are located within easy reach of defence staff, typically inside\ncantonments and not in commercial locations such as markets or malls.<\/span>
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\n\u201cStaffing and\ntraining costs are lower than private retailers since the management\nworkforce is partially shared with the standing armed forces. CSD also\nhas a focused, sometimes captive, audience which it doesn\u2019t really have\nto fight for,\u201d Dutta said.<\/span>
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\nThese stores account for a bulk of the turnover of large consumer good\ncompanies. In fact, business from these canteens contributes between 5%\nand 7% of total sales for some of them, according to estimates by the\nEconomic Times.<\/p>\n
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The country\u2019s largest consumer goods firm\nHindustan Unilever, for example, counts CSD as its biggest customer in\nsouth Asia. The same holds true for liquor major United Spirits.