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Feb, 03 2011

Tiny treasure troves

They may be tiny but huge businesses ride on them. Be it a coffee counter in a mall or a jewellery kiosk in a shopping complex, these few square feet count for big bucks in business. Kiosks, carts and vending machines are turning out to be the new turning

AFTER the hype created by 'big-box' retailers in the last decade, it's now the turn of small retail formats to garner genuine attention. As the market is evolving, small retail formats are burgeoning at the same pace to feed the altering consumption patterns. The idea of small formats is deeply motivated by global markets, wherein the growth is massive and prospects brilliant. Such formats urge impulse buying, which is highly favourable for entrepreneurs. That is why small formats are being readily embraced by young entrepreneurs.

Business potential

In India, small retail formats have great potential, as they offer multitude of opportunities to entrepreneurs within low investment zone. Sectors such as food and beverage, stationery and gifts items, movie rental, artificial jewellery and florists encourage small formats in specialty retail. Pointing out the market's share, Vrinda Rambhia, Director of Business Development, Leonidas Belgian Chocolates, Premium Pralines Pvt Ltd, believes, “There is a valuable market share in the kiosks/carts industry though it is not an organised or a structured area. Most kiosks/carts are owned and operated by individuals selling mostly artifacts, artificial jewellery or quick food options. There is a positive growth in this area, as shoppers are now accepting this model for their shopping needs.”'

Bigshoebazaar started a couple of kiosks in tier II towns as an experiment. Now, after an encouraging response, it plans to open around 100 kiosks in the next six months in tier I, II and III towns. For opening a bigshoebazaar kiosk, a franchisee has to invest Rs 10 lakh and own 200-300 sq.ft of space.

Leonidas has over 1,300 stores worldwide with three formats in place, Leonidas Chocolates standalone store, Leonidas Chocolates cafes and kiosks. Rambhia says, “For scaling up the business, we look for upmarket customer-friendly locations with easy access. We have Delhi, Bengaluru, Hyderabad and Ahmedabad in line for our expansion. However, we are not limited to these cities.” For opening a Leonidas kiosk, the investment is Rs 5 lakh with a minimum area of 65 sq.ft.

To strengthen brand presence, Ferns N Petals is targeting cities like Dehradun, Jaipur, Amritsar, Jalandhar, Mysore, Vijaywada, Indore, Bhopal, Rajkot and Durgapur, Cochin. For a Coffee Day Xpress (CDX) franchise, the franchisee is required to have an area of 80 to 200 sq.ft within the investment range of Rs 2 lakh to 5 lakh. At present, CDX has 900+ outlets.

Growth areas

Franchising has triggered extension of small formats in India. As compared to medium and large retail formats, small formats are more eye-catching. Rambhia feels, “For smaller formats, franchising is ideal since they can gain on the already successful model and it is easy to replicate the guidelines and experiences by knowledge transfer. We offer thorough training to franchisees to run the business.” Agreeing to it, Puja Mahajan, Director, YUM YUM Dimsoms says, “Yes, small formats have huge growth potential. Franchising in kiosk format is very successful because small formats allow first-time entrepreneurs to become franchisees, as it requires low investment and has low risk.”

Whether you're looking to operate small formats in a mall or a high street, one has to follow numerous legal formalities. “Most formalities are similar, only few of them depend on local regulations. Having said so, it is not difficult to obtain permissions or licences to start a business in India. The government has turned very business-friendly in the last decade,” quips Rambhia. According to Manmohan Agarwal, CEO, Bigshoebazaar India (p) Limited, “Tax registration is required. Other formalities differ from state to state.”

Anil Sharma, General Manager, Retail, Ferns N Petals, says, “Kiosks can be used as branding tools to drive the customer to the parent outlet. Any kiosk model in our line of business needs to be supported by a dedicated shop. We have a standard training programme for our franchisees, which enables them to understand the intricacies of running a flower business.”

Upside

The benefits of small formats include small capital investment and space, low risk factor, high footfall, easy accessibility, high portability and flexibility, good visibility and maximum returns. It has the potential to create a win-win situation for the franchisee. From high streets to malls to commercial buildings and institutions, carts, vending machines and kiosks can be placed anywhere. The food and beverage sector offers huge potential in small retail formats, as franchisee can get immediate returns within a limited timeframe. Lately, schools, colleges, hospitals, banks, airports, railway stations, bus stands, stadiums, fitness centres and corporate buildings have turned out to be major retail destinations for small formats.

Downside

Small retail formats are, by and large, in a topsy-turvy form, facing huge competition from local street vendors. Other challenges are scouting an ideal space that assures visibility, easy accessibility and feasible real estate prices. As per Mahajan, “Weaknesses are primarily non-permanency of locations like atriums, galleries where the mall authority can ask a kiosk vendor to vacate his location any time. Then lack of organised/developed kiosk space in high street markets and dearth of variety on a kiosk could also hamper business.”

According to Puttaraj A. G, President, Coffee Day Xpress, “Competition from a local vendor is the biggest worry since they are normally out of tax reach, enjoy the cost benefit, which ends in more competitive offering. Price wars could be one major threat for a short term. But this does not work in the long-term, as customer would always prefer a branded kiosk. Consumer today is giving lot of prominence to the hygiene and quality aspect while taking purchase decisions.”

Agarwal states, “Display of complete range of footwear is a challenge. The focus has to be only on the fastest moving articles/categories. Moreover, we display all our merchandise online for consumers to select. Selected merchandise can be shipped to the kiosk location in 24-48 hours. Thus, the yield is quite attractive, considering the realisation per square foot.”

Conclusion

Be it vending machines, carts or kiosks, specialty retail across various sectors has finally caught the consumer attention. Entrepreneurs can make a quick start with small formats, as they are reckoned to be the safest for first-time franchise buyers. They are the best formats for small investment and long-term gains.

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