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Feb, 03 2011

Small wonders

SMALL RETAIL FORMATS ARE PROVING TO BE A BIG THING IN INDIA. EXCEPT FOR THE NAME, NOTHING IS SMALL IN THIS RETAIL MODEL. IT HAS BIG BRANDS LATCHING UP, BIG REVENUES AND EVEN BIGGER SCOPE FOR GROWTH.

THE popularity of small format retail stores (less than 500 sq.ft) is not limited to mature and affluent markets of metros. Tier II and III cities are also among the preferred destinations, as this format has immense scope and potential to aid expansion across the length and breadth of the country.

Business potential

A format, which is less than 500 sq.ft, is what majority of the franchisors and franchisees look at these days. Pawan Gadia, CEO, Ferns N Petals, opines, “Small formats have lesser rentals, less management costs and you can do things much faster as compared to big store formats. Thus, it would be absolutely right to state that there is a huge business potential in this format because any kind of specialty retail business you deal in, you ideally need around 200-300 sq.ft of space.”

Supporting Gadia, Sandeep Arora, CEO, Trenz Jewellery, says, “Less than 500 sq.ft formats have more potential because of the unavailability of large space at reasonable rates in high streets or malls. Besides this, the payouts increase with every per sq.ft space of the store.”

Upside

According to Smriti Dalvi, CEO, Florista India Pvt. Ltd, “A store with an area up to 500 sq.ft is fit enough to get started with any kind of business, be it apparel, footwear, internet café, flower or gift shop.” So, regardless of the kind of business you are in, there are three basic factors that make small format stores beneficial for both the franchisor and the franchisee. These are:

Unattractive massive retail stores: The bigger retail establishments seem pretty unattractive to the hurried consumers, as it takes long to negotiate never-ending aisles. Besides the time consuming exercise, it is the broad assortment of products that drives home how little they can afford.

Value proposition due to improving economy and technology: With the advancement of technology and booming economy, tech savvy retailers are capable of achieving effectiveness in procuring the merchandise and distributing goods efficiently through supply chain logistics.

No personalised touch: Larger the store, lesser is the scope for personalised services whereas small format stores offer the franchisor and franchisee a more intimate relationship with the customers and the employees.

Besides, small size format is focused more on low income and larger families. An aspirant needs to have good knowledge of the local market and popular market trends. Area requirement may differ from company to company. For instance, for Trenz Jewellery, area requirement is 100 to 250 sq.ft, it's 400 sq.ft for Ferns N Petals and 300 sq.ft for Florista India.

Once the franchisee takes up the franchise business, he enjoys all the leverages that come along with the franchise scheme. As Arora says, “We help our franchisees in finding the apt location for the franchise outlet. We support our franchisees in terms of establishing the business and offer training to the sales teams.” Gadia says, “We assist them in doing the interiors of the outlet, supplying the merchandise, providing trained manpower along with the standby manpower in case of emergency.”

Downside

Every business faces certain challenges. In this format, the key ones are real estate and huge rentals, dearth of specialised manpower, logistics, taxation and unorganised retail. It is the biggest challenge in the retail industry to find the kind of space you want at a reasonable price. As Gadia says, “Finding real estate is the biggest problem. A shop at the right place or location is quite challenging.” High rentals automatically affect the profitability of a business and pose biggest challenge to the retail industry. Besides, being a part of the specialised industry, skilled manpower is an utmost necessity. “Trained manpower is another challenge, which is required to run the special project successfully,” says Gadia. Tax is another key challenge in retail businesses. Lastly, in spite of the rising brand consciousness, there are lot of unorganised players in the retail industry. As per Arora, “The market is still dominated by unorganised retail players, especially in our kind of business (retailing of artificial jewellery). Around 90 to 95 per cent of the artificial jewellery retail is unorganised.”

Conclusion

There has been a tremendous change in the retail industry over the years, especially in the specialty retail segment. Small store formats are now re-defining the characteristics of the business, providing huge potential and growth to the franchisors and franchisees alike

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