Retailers go to small towns for big growth

Retailers go to small towns for big growth

In the September quarter, Kishore Biyaniled Future Retail opened its hypermarket Big Bazaar at Hajipur in Bihar, Puri in Odisha, and Raigarh in Chhattisgarh, taking the presence of its flagship stores to 130 cities across 26 states.Big Bazaar has also signed up properties for new stores in the remaining three states —Meghalaya, Mizoram and Nagaland.

A clear sign organised retailers are not only reaching tierII and tierIII towns but beyond is that Biyani has announced plans to have 10,000 smallformat neighbourhood stores across the nation in the next five years, up from 700 now. In FY18 itself, he plans to take the number of small format Easyday stores to 1,100.

“We will open stores within 2 km of every consuming Indian,” Biyani said, unleashing his Retail 3.0 plans that aims to make the Future Group Asia´s largest integrated consumer business, with Rs 1 trillion in revenues, by 2047.The retail giant also has a consumer and logistics business, which not only supports its retail empire, but also caters to outside businesses.

Biyani isn´t the only one who is penetrating deeper into India.According to real estate consultant JLL India, Mukesh Ambaniled Reliance Digital has established its presence in more than 100 cities and plans to expand further.

Swedish fashion retailer H&Mis planning to expand its presence in cities, including Coimbatore, Indore and Amritsar.Tata group owned Trent´s value fashion brand Zudio has launched stores in tierII and -III cities.Walmart is planning a fulfilment centre (cash and carry with focus on fast moving consumer goods and staples) in Lucknow.

Online eye wear retailer Lenskart raised capital to enhance its supply and expand the reach of its products across tierII and -III cities.And, Amazon India has opened fulfilment centres cities, including Coimbatore and “Retailers are looking actively beyond these metro cities to explore the offered byalarge consumer hungry for experiential retail,” said in its report with CII on emerging destinations.

“What adds to the of these smaller cities, which future centres of retail growth country, is availability of land at cheaper prices, lower rentals, new high street and a younger generation of now willing to experiment with leasing formats,” said the report.

The expansion into smaller towns coming atatime when the online space has not only seen consolidation but is actually looking to collaborate physical stores.

Amazon India has with the KRaheja Group owned Shoppers Stop, and Flipkart, is exploring such an opportunity.Future Retail´s expansion plans also dependent on leveraging technology with Google and Facebook, besides online retailing plans.

“As the dust for ecommerce physical retailers are getting aggressive on their expansion plan to convert unorganised into organised in tierII and -III cities,” said Nitin Gupta, transactions partner at EY. “For these towns, large format stores are not that is why there is rapid expansion for mid and small format stores.These stores are also coming up in tierI towns as retailers optimise formats for each cluster considering high rentals,” he said.

The Business Standard, New Delhi, 2nd December 2017