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Feb, 03 2011

Business Balancers

The mid-size format acts as a middle ground for franchisors through which brands can balance out their business and economies. If caught between small and large stores, mid-size stores are the best bet. Better brand visibility and high profit quotient mak

TRANSFORMATION in retail formats, especially in less than 2,000 sq.ft segment, has been quite noticeable. There has been an upswing in the mid-size retail formats and specialty retailers offering the richness of a shopping experience and products that meet the needs of the target consumers are adding to the flavour of the Indian retail experience. Adding to this, franchising has surfaced as an opportunity, promising profit and rising prospects.

Business potential

The thriving popularity and success of specialty retail segment, especially in less than 2,000 sq.ft format, is not only garnering growth but also has been a success in raking moolah. Talking of the opportunity in this format, Manish Gupta, Country Head, Gordonmax, states, “We have two stores which measure approximately 1,000 sq.ft. We find this extremely profitable and we are able to convert 30 per cent of the walk-ins. Besides, we want to make all our stores profitable and feel that stores in the jewellery sector are suitable for revenue generation.” Srikant Gokhale, CEO, The Mobile Store, says that 60 per cent of the stores are operational under the 600 sq.ft format while 25 per cent are under 1,000 sq.ft and just 15 per cent in less than 1,500 sq.ft formats.“

Chandru Kalro, Executive VP, TTK Prestige Ltd, opines that modern formats, which include institutions and canteen stores department, are the fastest growing channels for the company.

Growth areas

Specialty retail stores under this format are expanding aggressively. Gupta avers, “We are currently in the process of expanding our operations across India and by the end of the year, we expect to have additional two company-owned stores in India as well as sub-franchises across tier I cities, taking advantage of the burgeoning demand for high-quality, reasonably-priced fashion jewellery in major cities.”

Kalro affirms, “TTK Prestige plans rapid expansion across the country, more specifically in the southern markets. It aims to set up 75 stores in the next 12 months. We are planning to add some more innovative gadgets to the existing range of kitchen appliances.“ Highlighting the extension details, Gokhale informs, “The Mobile Store has gained expertise to manage the retail business in the mobile space. We have developed a significant relationship with customers and leverage on the growth with handset and operator brands. We have learnt how to maximise profits and use retail operations for efficient customer service. We are planning to come up with 50 mobile applications (Apps) stores across key metros in India. The company also plans to add 1,000 stores in the next three years via franchise and 500 CoCo stores. Majority of the expansion will be in tier II towns.”

He feels franchising is the most successful medium to expand operations in minimum time and at multiply touch points. “At The Mobile Store, we believe that our learnings, which have now transformed into some of the best practices in the industry, shall help us and the franchisee to make it a win-win model,” he adds.

Upside

With the Indian retailing becoming consumer-centric, focus is on increasing profit quotient of specialty retail stores. According to industry experts, less than 2,000 sq.ft format store brings in optimum visibility in any location, thereby, slashing the chances of store failure and poor footfall. Franchisees of specialty retail brands often vouch for this format, as it converts footfalls into sales factor. Besides, a store in less than 2,000 sq.ft module often reduces the daunting task of hunting for locations, as stores in this format are deemed to be readily obtainable in metros and tier I cities. Even when variety of formats dish out plethora of opportunities in the specialty retail segment, brands in this mid-size format have emerged to be the profit grossers. Guidance by specialty retail brands to the franchisees usually range from distinctive academies to unique modules of training. States Kalro, “ The store largely rides on the strength of the brand. The company provides marketing support to do activities around a 5 km radius of the store-sales camps, exhibitions, cookery shows and free service camps.”

In a motion to generate profits both for the company as well as the franchisee, The Mobile Store has designed an entirely new business model. Gokhale informs, “This business model provides partners with the best-in-industry margin structure and rewards high performers handsomely to make it viable. The company does not charge any royalty fee, instead it provides additional payout for conforming to the brand guidelines. The company leverages its influence with brands to make the model work and hence promises long-term relationship.”

As per Gupta, managing and starting a big format store often demands a lot of hand-holding of the franchisee. Hence, he says, “When opening a boutique, we continue to provide our franchisees with the support uptill one month. We place our sales team to ensure that franchisees and their local sales team are well-trained and well-managed.” Besides, special training is also provided regarding stimulant and gem stone industry.

Downside

As per several franchisors, zeroing in on a less than 2,000 sq.ft store means burdening the franchisee with heavy rentals. Kalro says poor shopping experience can also disappoint the customer. “TTK prestige products were earlier sold through only multi-branded outlets, where the products were not properly visible to the consumers and moreover, the brand has to share space with the competitors,” he shares.

Conclusion

Be it kitchenware or just a mobile handset, specialty retail has definitely caught up the attention of the Indian consumer. With the less than 2,000 sq.ft segment garnering growth as well as riches for both the franchisor and franchisee, this format is making headway as the most preferred segment.

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