In an exclusive interview, Sameer Gandotra, the founder of Frendy, shares his remarkable journey from Calcutta to Kazakhstan and his insights into creating a unique retail experience that caters to the often-overlooked consumers in rural India. With a strategic focus on ‘value luxury,’ Gandotra emphasizes the importance of consumer trust and delivering a superior shopping experience. Here’s an in-depth look at his entrepreneurial journey and the future plans for Frendy.

Q: Can you tell us about your background and how you came to start Frendy?

A: I grew up in Calcutta and worked in my father’s tea business before pursuing an MBA at Wharton. After a stint in banking, I moved to Kazakhstan, where I had a 10-year career in the oil and gas industry. I started in M&A, then worked for an oil producer, an engineering and construction company, and finally co-founded a services business. We grew the businesses significantly and eventually sold one to a large Russian oil major. This experience in entrepreneurship and scaling businesses laid the foundation for my journey with Frendy.

Q: What inspired you to start Frendy, and how did you identify the opportunity in the market?

A: My partner and I started an affordable housing company in India in 2016, focusing on consumers outside urban metros, especially in industrial SEZs. We noticed that despite limited budgets, these consumers were becoming aspirational due to increased digital access. This led us to the concept of ‘value luxury,’ which we applied to other categories like food and clothing. We realized that this consumer segment, often overlooked by urban-focused companies, had significant needs, especially in non-discretionary categories like groceries. This insight inspired us to found Frendy, aiming to provide these consumers access to a variety of branded products through smaller format stores, fulfilling their aspirations within their household budget.

Q: What unique challenges did you face while setting up Frendy in small towns and rural areas compared to urban markets?

A: Operating in rural towns presented fewer challenges compared to urban areas due to less competition and higher consumer trust. Rural India offers a blue ocean of opportunity, especially in towns with populations ranging from 20,000 to 100,000. Small-format stores in these areas cater to basic needs with around 1,000 SKUs, simplifying operations compared to urban settings with thousands of products. Consumers in rural areas prioritize reasonable quality products over a wide assortment, making it simpler for businesses like Frendy. They appreciate transparent pricing and self-service, which empowers them. Maintaining trust is crucial in these communities, as word of mouth spreads quickly. Frendy focuses on offering a 50% to 60% better experience than typical stores to build consumer loyalty and avoid losing trust.

Q: How do you ensure a balance between national brands and local brands at Frendy?

A: Frendy primarily sells three categories: food, home and personal care, and general merchandise. They offer a range of national brands such as Unilever, Procter & Gamble, ITC, and Britannia, as well as local brands, particularly in states like Gujarat. Additionally, Frendy has its own private label, which focuses on low-involvement categories such as shampoo, food grains, tissue paper, cups, and cleaning products, comprising over 300 SKUs. They aim to cater to regional preferences, such as offering different snack food brands in different towns based on local preferences. Their strategy includes sampling products and providing small sachets to promote their private label, which accounts for almost 20% of sales at the store level.

Q: What initiatives has Frendy taken to promote sustainable practices in its operations?

A: Frendy has implemented several initiatives to promote sustainable practices, including using cardboard shrink-wrapping for many products and experimenting with biodegradable plastic for packaging staples. They also offer products in bins, allowing them to pack items in paper thongas, reducing plastic waste. However, we highlight the need for the industry to transition to more sustainable packaging materials to further reduce environmental impact.

Q: Can you share Frendy’s turnover to date and how you project its financial growth in the coming years?

A: In about three years, Frendy has achieved close to about ₹ 200 crores in revenue. We have served nearly 100,000 households and aim to reach profitability within two years. Our strategy focuses on store profitability and scaling when the time is right, with each store being profitable individually and collectively driving increased revenue, gross margins, and net margins.

Q: What are Frendy’s growth strategies for the next five years?

A: Over the next two years, Frendy plans to focus on Gujarat, where we see a significant market opportunity. After evaluating our success in Gujarat, we will consider expanding into other regions that have similar characteristics in terms of density, entrepreneurship, and per capita GDP. We aim to either expand geographically into areas close to Gujarat or enter completely new areas where we can absorb a new cost centre. Frendy’s approach is to stay compact, focusing on a clustered approach to expansion, and ensuring that each new area we enter is profitable before moving on to the next.

Q: How does Frendy ensure the quality and freshness of products offered at Friendly Markets, especially in rural areas where logistics can be challenging?

A: In rural areas, Frendy primarily deals with dry groceries, which are less affected by freshness issues. We have experimented with offering fruits and vegetables but have found the supply chain for these products to be more complex. However, we ensure the quality of our products by monitoring stores through computer vision and regular audits to ensure cleanliness and prevent pest infestations. Additionally, we empower consumers to self-select and check the quality of products themselves, ensuring a last-mile quality check.

Q: How many jobs has Frendy created so far, and what are your future employment targets?

A: Frendy focuses on enhancing livelihoods rather than just creating jobs, especially with micro stores where most operators were already in existence. We have successfully piloted initiatives to get women to run stores from their homes and plan to work more on this model. At the store level, retail can create many jobs, with an estimated three jobs per mart. However, Frendy’s goal is to create entrepreneurs and work with franchisees who have a stake in the business, ensuring their interests are aligned with the company’s success. We aim to create a career path for franchisees, with successful ones going on to own multiple stores and backing other entrepreneurs into the model, thereby creating a sustainable ecosystem of livelihoods.

Q: What is the amount of investment required to get a Frendy franchise, and what are the different investment models available?

A: Typically, a Frendy store setup costs about 15 lakhs. Currently, these costs are either fully invested by the franchisee or by an investor who then operates the store. In the future, we plan to explore co-ownership models where we invest the majority of the capital, enabling people with less capital to start and run a mart. We prefer to work with franchisees who are willing to put their effort into making the business successful, as their interests are aligned with the success of the store.

Q: What advice would you give to other entrepreneurs looking to start a business in rural markets, especially in the retail sector?

A: If you want to succeed in rural markets, you must be extremely frugal and attentive to customer needs. The consumer in these markets can quickly switch between seeking value and aspiring for more, so it’s crucial to understand their pulse points. Listen to your customers, adapt your offerings to their preferences, and focus on providing them with a better experience than they currently have access to. Building trust and loyalty in these communities is key to long-term success.

Sameer Gandotra’s strategic approach to entrepreneurship, coupled with his commitment to enhancing consumer experiences and fostering entrepreneurship in rural India, underscores Frendy’s unique market positioning. As Frendy continues to grow and expand, Gandotra’s insights and leadership will undoubtedly shape the future of retail in non-urban areas, bringing value luxury to the heart of rural India.