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Jan, 01 2008

Franchising ideal for small retailers

India is being seen as a potential goldmine for retail investors from over the world and the latest research has rated India as the top destination for retailers for an attractive emerging retail market.

India is being seen as a potential goldmine for retail investors from over the world and the latest research has rated India as the top destination for retailers for an attractive emerging retail market.

India`s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. The organised retail sector is expected to grow stronger than the GDP growth in the next five years, driven by changing lifestyles, burgeoning income and favorable demographic outline.

Retailing in India is witnessing huge revamping. As per KPMG, annual growth of departmental stores is estimated at a 24 per cent. The Indian retail industry is gradually inching its way towards becoming the next boom industry and stands second in global retail development index of 30 developing countries drawn by AT Kearney.

With massive expansions in progress, the franchisee model has a lot of opportunity in India to feel the inorganic growth. Even at the present stage it comprises nearly 50 per cent of India`s economy and provides employment to thousands of people, besides providing various opportunities to growing entrepreneurs.

Franchising in retail

Franchisee model is a good idea; however we must examine its pitfalls and build safeguards on them. In the last four to five years franchising as a business model has been growing at a rate of 30 to 35 per cent in our country and is gradually becoming the backbone of retailing.

However, studies show that this model has been both successful and not so good because the common factor for a constant relation between a franchisor and a franchisee was `trust` in the brand. Trust is the most important factor in this business as it binds the two parties for a long-term benefit while exchanging and safeguarding the business environment for franchising, both with regard to franchisors and franchisees. There is huge entrepreneur talent available in India which is also a strong factor.

All small retailers will eventually join organised retail. They will survive the arrival of organised retail in India, although in a different form and role to his current position. The small retail will innovate, improvise, adapt and learn to co-exist with the medium and large retail formats. This will happen either through being a franchisee of an established player or they will cater to the supply chain for them. The role of the supply chain in the organised retail sector in India should be a shelf-centric partnership between the retailer and the manufacture, as this will create supply chains that are loss-free and also give rise to top and bottom line growth.

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