Research Feb, 09 2011

Suburbs as New Franchise Destination

Having realised the potential offered by suburbs, small towns and cities, the biggies in franchise industry in all segments are heading towards these new emerging destinations. Read on to know more.....

By Abha Garyali
Sub Editor
Suburbs as New Franchise Destination

Franchised outlets from big names like Amul, Guardian Pharmacy, Archies Gallery, Next Retail, The Loot Store, Samsonite, and Dosa Plaza have so far adorned the high streets and shopping malls in metros and big cities only. However, observing the growing interest and encouraging demand for such brands in suburbs, smaller cities and towns, organised brands are now ready to explore these markets. Retailers and franchisors, who earlier equated only big cities with big-budget spending, have started thinking to expand to tap the growth prospects of these upcoming locations. It has been noticed that franchisees with local stores in the smaller markets are performing better than those in big malls and high streets.

In this context Shubhranshu Pani, Managing Director, Jones Lang LaSalle India says, “A large number of malls have opened in all metro cities which are full of branded outlets. However the next stage has come where franchisors and retailers would also seek expansion in suburbs of these metro cities.”

The Indian suburbs with a population equivalent to five lakh or more offer attractive opportunity for opening branded outlets. Customers from upper strata, throng these outlets to buy branded and latest products. Observing this trend, builders and developers have now started venturing into Tier-II and III cities.

Developing Suburb Areas

Developers and builders are seeking ways to meet the increasing demand for branded products and services in suburbs. Ashiana Housing Ltd, a Delhi based real-estate company has come up with a unique way to develop small cities and towns. Recently, the company has built a two-storey retail mall known as Ashiana Village Center in Bhiwadi (a town bordering Haryana and Rajasthan). The mall, first of its kind in Bhiwadi, has become a popular shopping place fetching huge benefits to franchise players. In words of Ankur Gupta, Joint Managing Director, Ashiana Housing Ltd, “Branded players, especially franchisees have rented outlets in our mall in Bhiwadi and are getting good sales everyday. Customers are thronging the outlets as they are the first of its kind in such a small place.” He added, “Looking at the success of our mall in Bhiwadi, we are coming up with another mall in Jamshedpur to cater to the residents there.”

Benefits for Franchise Brands

No doubt, setting up an outlet in a suburb is risky but can produce larger profits if it generates interest in public  Besides, opening an outlet in a mall built by reputed builders, is a better deal anyway.

Regarding this Gupta informs, “In the initial stage of starting the mall there was a lot of convincing needed to bring brands to a small place like Bhiwadi. However, after setting up their outlets all brands are making good profits and are happy with the results.” He further added, ‘Moreover due to fewer players in the mall, the present players hold a monopoly in the market which is an added benefit to them.” Local partners teaming up with franchise brands in these small places get the advantage of working with the established brand. Local people also visit the newly opened outlets to experience of shopping in a mall. Happy with their previous experience and the prices people started buying everyday things from these as well. In addition to these, big brand attracts more brands. Seeing the success of an existing brand, other brands also get influenced to take up an outlet in the small suburbs.

Players in Suburbs

There are only few brands that have monopoly in small cities and towns. Some of the brands that have opened up their franchised outlets in the Bhiwadi mall by Ashiana Housing Ltd are Amul, Guardian Pharmacy, Archies Gallery, Next Retail, The Loot Store, Samsonite, Dosa Plaza etc.

The Other Side of the Coin

As mentioned earlier opening an outlet in a small city or a suburb of a metro city can be quite rewarding and on the other hand it can be risky as well. These areas also have some limitations. Pani informs, “There are limited players who can do well in suburb areas and towns. Consumer, electronic and every day brands may prosper in these areas. Premium brands like Nike, Levi’s etc may not do so well here.” Gupta also says, “Franchised brands can do well in smaller towns till the time there are fewer players. Opening too many malls and brands in suburb areas may not work here.”

To conclude it can be said that there is a lot of hidden potential for big brands in suburb areas but it may not a good idea to over stuff them with hundreds of brands

Related: India: successful platter for foreign franchisors

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