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Sep, 01 2008

East India: Next biz destination

Though, East India is a developing region it is slowly turning into the fastest growing retail destination in India. As compared to other cities in this region, Kolkata is amongst the first ones to reach the top of the list of metropolitan cities. It is c

East India is a region of India, which comprises states and cities of West Bengal, Jharkhand, Bihar, Orissa, Kolkata, Sikkim, Darjeeling, Mizoram, Arunachal Pradesh and Tripura. In terms of business, East India has a huge potential but, major players have got in late in expanding into this part of the country, as they were confined to only lucrative markets. At present, the franchising industry in India is growing at the rate of 35-40 per cent annually. Most of the players in the East are looking at the franchising model for further expansion. Generally, the retailers and the franchisors open stores at high footfall areas so as to generate maximum profits. But, small areas also contribute to the growth and success of their businesses. The reason is obvious as most parts of Eastern India are still facing poverty, lack in education, unemployment, low purchasing power due to which these major players do not see it as a productive market for further expansion. As compared to the growth of organised retail in other developed regions of India, the East is still developing as a new market hub for franchising business. The East is definitely leading the retail revolution in India today, and Kolkata, even though it is far behind Mumbai, Delhi and Bangalore where the purchasing power of people is taken into consideration, is attracting a lot of attention as a vibrant market. Food and beverages, apparel, footwear, fashion accessories, consumer electronics are some of the areas where franchising is doing extremely well.

Talking about franchising in the East, Om Prakash Hassanandani, Business Head, Shaadi.com centre says, “Franchising as a business model is clearly in its nascent stages in India and is in the process of gaining momentum for most organised business models that would roll out in the country. Therefore East as an individual market is bound to invite many players as it has a strong base of entrepreneurs waiting for such alliances.” To set up business operations in any region, one should study the market, the tastes and preferences of consumers, business potential and competition in the area.

Market potential

As compared to other regions the survival of businesses in the East was the least successful as major retailers and franchisors were reluctant to expand in this region. The concept of franchising in Eastern India has, by and large, been extremely fragmented but today with growing development in other regions, East India has started catching up as a prospective market. It shows a tremendous potential for the players that are emerging in this region as well as for the ones who are looking forward to entering the region. East India is emerging as the next potential market for franchisors around the country. Players like Nik- Nish, Khadim`s, The Blue Potato, Aptech Limited, Koutons, Shaadi point, BIGFlix, Ferns `n` Petals, The Floriana Group, OSIM, VI-Ga, US Dollar Store, Allen Solly, Veta, EducationOne Promise, Mobile Magic, Subway, Career Launcher, Kewal Kiran, Westside, S P Apparels, Toonz Academy, Raymond Apparels, Welhome, Canon, KFC, Pizza Hut, Linc Pens, Club City, Shaadi.com, Kwality Walls, Tanishq, VLCC, The Body Shop, Swarovski, Cartridge World, New Zealand Natural, Horizon Aviation Academy, Senco Gold, Tag Heuer, Nace Solutions, Reliance Fresh, Vimal, Vishal Retail and Moustache are already present in this region through franchising model.

Some of the retail companies include Odyssey, Mcdonald`s and Personalised Funda, Fab India, Touristor Bharat Shoes Group, Pantaloon, Spencer`s Retail, Shopper`s Stop and ITC Limited and Trinethra Supermarkets. Well-known hotel chains like Hyatt, Taj and Oberoi, Forum Mall and The Park Hotels are also present in the region. On the other side, Mehrasons Jewellers, Office1 Super Store, REBI, Nirula`s, Whites of London are looking for prospects to make their presence through franchise model in East India soon. Gautam Sahni, Director, Nanson Overseas Pvt Ltd says, “East India is a highly potential zone for our kind of product range. As of now we have about 5 stores in East India. For a Dollar Store business model, we believe all towns with adequate footfalls are viable for us. Today we have stores in III tier cities as well.”

East India is now emerging as a profitable market for franchisors as well as franchisees and provides a huge opportunity for the entrepreneurs. Looking at the growth potential in this market, major players are now looking forward to expanding in tier II and tier III cities as well.

Extensive research

Any company which is looking ahead to expanding its operations in any region, should conduct extensive market research about the demographics, market potential, consumer tastes and preferences, purchasing power, entrepreneurial culture, employment opportunities and competition in the market. Looking at the developing franchise market in the East, big players are now geared up to extend their business operations. Speaking about the prerequisites for entering in any region, Major K V Rajan, Executive Director, Veta says, “Market research has been done by our professional consultants who looked into the commercial viability, consumer needs and futuristic trends. In addition they also looked into the number of educational institutions and the aspiration of our target group i.e. people in the age group of 18 - 25 years, towards improving their communicative skills.” On the other side, R. Krishnan, Executive Director, Aptech Limited says, “Each of our brands does a detailed research before establishing centre in a particular location. Factors like population, primary and secondary education, number of people in the target group, income, job climate and trends are all taken into account. Our education dissemination is uniform across India and we have done no customization as such to our offerings. However, we have a fee variation between metros, mini metros and non metros to take care of the disparity in the paying capacity of the people.” Sahni says, “We always conduct a survey for calculating footfalls yielding sales before proceeding for any location. The survey that we conducted for East India is no different from other parts of the country. Initially we faced hurdles as far as logistics were concerned but now we say we are perfectionists.”

Understanding consumer`s preferences

The consumer tastes and preferences in East India are different as compared to other regions. People in North, West and South India are more brand conscious and are not hesitant to spend money on high-end aspirational brands. In comparison, East India is a price-paranoid market and is not yet ready for global brand explosion. Balwinder Singh Ahluwalia, President, Koutons Retail India Ltd says, “We faced two challenges- one was that people in the East had low disposable incomes and the second was that they were very price conscious.” Speaking about consumer preferences in East India, Sahni says, “Consumers in East India know about imported brands and enjoy using imported products. There are no cultural changes adopted by the company for East India specifically.”

Franchising ahead

Franchising is a profitable business and it can do wonders if you chalk out the right business plan, market research, right tactics for brand promotion, marketing and advertising strategies to popularize the brand and the company. Most of the companies running in East India are running via franchised businesses. Commenting on the market potential, Sahni, says, “East India is a high potential zone. A company should always gear up before entering the East Indian market. We have entered even remote areas in East India with the help of our profitable franchise business model. There is certainly great scope of work in East India but a company should have strong back end support to be successful in East India.”

Talking about the franchise plans in the Eastern region, Krishnan, says, “Franchising is one of the better ways of expanding. We have used our robust franchising model successfully to expand across all geographies. We have a sound model which is adapted well across the globe. We have been able to tap local entrepreneurs to ensure our education and training services reach far and wide. The future of franchising in the Eastern market continues to be bright.” Commenting further on the expansion plans, he says, “The Eastern market is as important to us as any other Zone in India. All our retail brands have a presence in the Eastern Region - we have nearly 70 centres between Aptech Computer Education, Arena Animation, N Power and Avalon across the major metros and mini metros in the Eastern Zone of the country, with Aptech and Arena having a larger presence.”

The franchising system provides a lot of opportunities for entrepreneurs. According to industry experts, the lucrative cities for both franchisors and franchisees in East India are Kolkata, Assam, Siliguri, Guwahti, Ranchi, Patna and Bhubaneswar. Hassanandani says, “East is an extremely important market for us considering that it houses almost 20 per cent of the Indian population therefore making it a hot bed for consumer services. Our Shaadi.com centre has made a strong foothold with its presence in 6 cities at 12 locations namely Guwahati (Assam), Ranchi (Jharkhand), Cuttack (Orissa), Bhubaneswar (Orissa), Kolkata (West Bengal) and Siliguri (West Bengal).” When it comes to the Eastern region, the players are very reluctant to do business. But, the scenario is changing as many companies foresee it as a money-spinning market. Kamal Gianchandani, CEO, BIGFlix, says, “East India is as important to us as any other part of the country, especially so because people here are generally connoisseurs of good movies. At present, BIGFlix has 8 stores in Kolkata, and we plan to have a total of 15 stores in Kolkata by March 09. We are looking forward to enter Bhubhaneswar, Ranchi, Jamshedpur and Guwahati soon. We plan to adopt the franchise model for the Eastern region in a very significant way soon.” The key growth drivers for establishing businesses in East India are growing urbanization, increase in English speaking middle class, better employment opportunities, changing lifestyles and high disposable incomes. Global players are also willing to expand in this region very soon. Srivastava says, “At present, we have 10 stores; and we have plans to open 200 stores by 2011. We are targeting the East by this October and should hopefully be able to open Office 1 Super Store through a regional franchisee. All stores in East India will be franchised stores. As of now, we have 600 stores worldwide and all are franchised.” Talking about the future plans, Ahluwalia says, “In East India, we have 280 stores and it is very important as far as overall business is concerned. Mainly the 90 per cent of the stores will be franchisee outlets. It will be better to have franchisees than to be company owned. We have plans to cover West Bengal, Assam and Orissa.” He further adds, “Apart from the East, we are also targeting the Southern and Western region. At present, we have 1350 stores. We are planning to open 1800 stores by the year-end.”

Emerging players

Vimal, the flagship textile brand of Reliance Industries Limited opened its first Premium Franchise retail store at N.N. Dutta Road, Tollygunj, Kolkata. The new store is built on an area spanning 2600sq.ft. At present, it has over 77 stores in the East, which are witnessing a major growth in footfalls as well as revenue year after year. Commenting on Vimal`s expansion plan, Parekh Anand Parekh, President, Reliance Textile, says, "We see a huge potential for growth in the Eastern markets. These new openings will further strengthen our commitment in the Eastern market and promote our wholesale and retail business."

Real Estate Bank India (REBI) is planning to set up 3,000 franchisees across the country, with about 48 outlets in West Bengal in the next few years. Across the Eastern region, REBI would open 200 stores.

Apollo Hospitals announced its plans to open its 100th clinic in Kolkata. The Group also proposed to open another 100 Apollo clinics in the country in another two years.

The Blue Potato, a Kolkata-based restaurant brand is also looking to expand its presence in Indian metros with 8 to 12 restaurants by 2011. The group plans to expand under the franchise management model for future developments. It is considering franchise opportunities in Kolkata, Mumbai and Delhi, while other potential locations include Hyderabad, Pune and Bangalore.

Kolkata –based lifestyle chain Nik Nish announced its plans to increase the number of stores to 65 in the next 18 months time. At present, the company has 15 outlets.

Footwear retailer Khadim`s plans to set up 151 exclusive stores out of which 45 would be owned footwear retail Stores and 106 would be exclusive dealers. The company has already opened 11 own stores in 2007-08. It plans to set up 22 own stores in 2008-09 and 12 during 2009-10.

Reliance Retail tied up with the British toy retailer Hamleys Group to set up a nationwide network of exclusive toy stores. The company would set up 20 stores in seven years. With an area of 25,000 sq ft, it would set up two flagship stores in Mumbai and Delhi. The first store will be in place by 2009. The regional stores will come up in Bangalore, Hyderabad, Pune, Chennai and Kolkata. The company has aggressive plans lined up to grow in the City of Joy by Dec 2008. Adopting the cluster approach of expansion in Eastern region, the company intends to expand in tier II and III cities like Durgapur, Siliguri, Asansol and Darjeeling in the future.

Growth prospects

The growth prospects in East India are very bright as it is emerging as a prospective market for both retailers and franchisors. Ujjal, General Manager, The Forum Group, says, “We believe that there is a lot of untapped potential in East India. All our upcoming projects are in the East- Jamshedpur, Adityapur, Bhubaneshwar, Rourkela, Behrampur and Belur with a couple of projects in Kolkata.” Amongst other states and cities in east, Kolkata provides a lucrative opportunity not only to the franchisors but to the potential franchisees as well. Speaking about McDonald`s growth prospects in the East, Vikram Bakshi, Managing Director and JV Partner McDonald`s India (North and East Region) says, “Our investments for Eastern India are on track, and we will continue to expand in Kolkata and other major cities around Kolkata. We see the Eastern part of India driving our future growth." Most of the home-grown companies running in the East operate through franchising model. The players in East India are not only confined to their own states and cities but are also looking at a pan India presence via franchised businesses, a sign indicative of growth in the Eastern market.

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