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Mar, 07 2012

AIRPORT RETAILING TAKES OFF IN INDIA

What do Dubai, London and Singapore airports have in common? They are famous for their exuberant and profitable retail zones. Not to lag behind, Indian airports too are enticing the retailers and customers alike. After majority of the Indian airports got

A NURADHA Gupta, an IT professional and a frequent traveller, can't stop gushing at the recent revamp that majority of the airports have undergone.“I have got addicted to shopping at the airports. I wish I could shop there whenever I wanted to and not just while travelling,” she prays.

It's not just her who is happy with the airport retailing taking off in a big way in the country but every new age traveller is, who is pampered in every possible way. Work stations, food outlets, duty-free shops, book shops, etc, have changed the perception of airports. The smart traveller today wants nothing but the best. And that is what the retail stores are offering at the airports in India. Huge size, best brands and unsurpassed experience is what majority of the newly developed airports in India offers. Best malls now pale in comparison to the retail mix at the airports, especially at the Delhi domestic-cum-international terminal (T3). It has a retail area of around 2 lakh sq.ft and had sales of Rs 1,200 crore in 2011.

Airport retailing concept that took off around two years ago is now making its way into the Indian retail market. After receiving an incredible response, the retailers have now begin to understand the right brand and merchandise mix.

Arrival, departure and shopping in between

We are aware that airport gets its revenue from two sources, aviation income (passenger charges, cargo, etc) and non-aeronautical revenue like retail zones, shopping malls, hotels, etc. Non-aeronautical revenue is of great significance as around 50 per cent travellers spend at terminals. With Delhi's new T3 terminal, which boasts of about 20,000 sq.ft. of retail space as well as Mumbai's new terminal, with an over 20,000 sq.ft., of dedicated food court and retail area, this sector is expected to get a further fillip. And, this isn't just due to travellers moving to and from international locations; a huge chunk of airport retailing is doing well due to the burgeoning domestic travel industry as well. No wonder then, the aggressive bidding seen in recent years amongst private players to invest in this emerging sector.

As per Manpreet Gulri, Country Head, Subway India: “Sales are substantially higher at airport locations as they are concentrated areas for targeting our audiences/customers. Also, there are limited options for customers, so there are more Subway customers at these locations.” Renowned franchise brands like Hidesign, The Body Shop, Kimaya, Subway, Mango and Kaati Zone are doing great business at the airports. Due to infrastructure enhancement, the rest of the premium brands are also set to check in at the airport's retail space. To grab the attention of thousands of high-net worth passengers, franchisors and retailers are offering some exclusive products. A few franchisors are at a loss to explain why franchise stores at the airports are doing much better than their franchisee-run stores at a high traffic mall. QSR brand Kaati Zone is present at two airports so far. As per Kiran Nidkarni, CEO, Kaati Zone: “We have one outlet at Bengaluru airport and another at Hyderabad airport and both of them are running tremendously well. The outlet at Hyderabad airport is franchisee-run.”

As per Dilip Kapur, President, Hidesign: “For a brand like Hidesign where customers are constantly travelling, it is a great opportunity to be present at airports, as this is a segment that grows really fast. Retail is not a core business of airports, but there is so much to tap into. They realise that this is a good source of revenue. They are learning from European airports that they need to hire more professionals.”

Lucrative business terminal

Franchisors across all sectors vie to have a franchise outlet at the newly transformed airports. Subway has been at airports for last seven to eight years. Presently, the brand caters to their consumers at airports in Delhi, Bangalore, Ahmedabad and Kolkata. When asked about their expansion plans, Gulri said: “Yes, going by our experience at airports, we wish to be present at all major airports across India.”

Accessories is another sector that has an incredible demand. Looking at the response of their stores at the airport, Dilip adds: “Hidesign is present at several airports in India and internationally. Specifically in India, Hidesign has five exclusive stores at Delhi Domestic Airport, Mumbai Domestic, Hyderabad International and Domestic and Cochin International Airport. Hidesign also has three shop-in-shop (SIS) at Bombay International airport, Bengaluru Domestic and Hyderabad Domestic. Internationally, Hidesign is present in several stores like Heathrow, Copenhagen.” Hidesign runs company-owned outlets at airports so far but the brand would be equally happy to have a franchisee-run store. It is waiting for a suitable opportunity to come its way. A renowned jewellery brand, Forever Precious Jewellery and Diamond, part of the Su-Raj Diamonds Group, is also planning to adorn two new stores in Delhi and Hyderabad airports.

Associate to fly high

Being a prime location, a perfect match for any franchisor at the airport is of utmost importance. Subway is seeking franchisees who have some prior experience with Subway System, i.e., an existing franchisee who has good standing with his brand and operates his existing outlets satisfactorily. Commenting on the same, Gulri says: “As the airport locations are very high profile, our area development managers are very careful to sign up the franchisees for these locations. The Subway store at these locations is like any other location across the country. The investment varies between Rs 25 and 45 lakh.”

For Kaati Zone, the brand makes sure that the location for opening the outlet is not finalised without the brand's consent. The rest of the agreement is between the Airport authority and franchisee. Most of the brands believe that presence at the airport assures a steady footfall that they it specifically aims at.

Growing air travel in India will drive airport retailing so much that by 2015, over 50 per cent of revenues of the Airport Authority of India (AAI) are expected to come from non-aeronautical activities, with airport retailing contributing a mammoth 27 per cent, says a study.

Ten best performing retail zones

= Delhi International Airport

= Bengaluru International Airport

= Hyderabad International Airport

= The Rajiv Gandhi International Airport

(RGIA)

= Mumbai International Airport

= Chennai International Airport

= Kolkata International Airport

= Cochin International Airport

= Ahmedabad International Airport

= Goa International Airport

= Trivandrum International Airport (TIA)

Delhi's biggest mall, the T3

The battle for a part of the well heeled's wallet has got more intense with Delhi's biggest and most expensive mall, the T3, which has a retail area larger than most malls. With an annual passenger handling capacity of 3.5 crore, the expected footfalls are, no doubt, huge. What's more important is that it's a captive place for conspicuous consumption as well.

The terminal boasts of India's biggest airport retail area spread over 30,000 sq mt, with 247 outlets under the shopping area.

Flight for Profits

Amidst the top retail destinations are the international airports in New Delhi, Mumbai, Chennai and Bengaluru. Initially, majority of the franchisors booked retail spaces at airports to enhance their brand's presence but record-breaking sales have made them expand at these destinations too.

n pros and cons is an integral part of growth strategy, as it not only assures higher customer footfalls but also generates revenues too. On highlighting the parameters that the franchisors must follow, Ankur Shiv Bhandari, MD, Kantar Retail, says: “First understand the consumers and shoppers you are going to target before making investments. The requirement in tier II and III town could be quite different from urban cities.” On setting up brand's outlet in smaller cities, Balakrishnan states, “Decide which media is to be selected to communicate to the city population, the merchandise mix and customisation to suit the reading habits of that particular city.”

By giving thumbs up to brand customisation, Rachna Aggarwal, CEO, Indus League Clothing Ltd is quite optimistic about attracting customer footfall and building a stronger grip in the market. She adds, “We do not dilute the core essence of the brand's offering rather we try to localise with minimal changes and yet try to fulfill their requirements. Brand awareness, pricing and product offerings is a challenge. To deal with it, we do local marketing activities to bring awareness of the brand and run promotions to match the price/product offerings.”

Target location

Through their growing consumption, smaller cities are stimulating India's economic expansion and evolving out as key markets for franchisors, who are seeking to tap their purchasing power. Heading towards the smaller cities is also being practiced as a key growth stratagem that has been adopted by many brands that are upbeat about generating a fair share in the market. As the market in small cities is less explored, it allows a better opportunity for franchisors to open medium-sized as well as large-sized stores because getting a right place is not a big deal. Since there is a dearth of malls in smaller cities, franchisors prefer to open their brand's stores in the commercial hubs of the marketplace. For instance, Crossword Bookstore prefers to open their store inmalls or extremely good high street locations with parking facility in a B or C class city. Talking about the location it targets, Jhunjhunwalla says: “We as a brand try to take up locations which drive high footfalls of the right consumers.” On enlightening about the growth rate at which the tier II and III cities are burgeoning as a next promising retail destination for expansion, Sandeep Kulhalli, Vice President Retail & Marketing, Tanishq, says: “Due to lack of availability of business equipped infrastructure and exorbitant property prices in the existing metros, the IT, ITES and the BPO companies are vying for the smaller cities where they are promised better infrastructure, state-of-the-art office spaces and skilled manpower. Also, the potential that exist in the smaller cities are huge as disposal incomes have risen and the media exposure has also contributed in making the Indian consumer more accessible to varied products.” Considering the demand generation is such locations, Tanishq is currently planning to open 25 new stores in tier II and III cities in the year 2012-13.

Potential cities and their priorities

As of today, Turtle Limited has presence in small cities like Allahabad, Bhubaneswar, Cuttack, Silchar, Tezpur, Gangtok, Indore, Jamshedpur, Hisar, Raipur, Ranchi, Nagpur and Patna, amongst others. Going further, Jhunjhunwalla of Turtle Limited expects to increase its brand's reach in cities like Patna, Agra, Varanasi, Rourkela, Sambhalpur, Hubli, Belgaum, Mysore, Vijaywada, etc. Crossword Bookstore plans to increase its network by opening stores in Chandigarh, Goa, Raipur, Bareilly, Cochin, Madurai, Trivandrum, Calicut, Mysore, Mangalore, Coimbatore, Jalandhar and Guwahati. Classic Polo will be targeting mainly southern region by opening stores in Coimbatore, Pollachi, Namakkal, Kumbakonam, Trichy, Pondy, Shimoga, Bellary, Davengare, Belgaum, Kannore, and Kovalam.

How franchising fares

As a business model, franchising has not restricted the brands to eye expansion in metros only, rather it has contributed in a big way for brands to make way into markets by launching their outlets in tier II and III cities. Every brand, be it big or small, has a reason to smile as franchising is proving a successful business model for expanding faster. Through a highly replicable concept, many franchisors have been scaling up their retail network by venturing into potentially lucrative cities. As of today, there has been a rise in demand from smaller cities, where many franchisors have witnessed a lot of traction and thereafter, are thinking in terms of exploring feasible business options for expansion. In the last few years, tier II and III cities have caught the attention of many top-guns such as such as Pizza Hut, Domino's, KFC, Subway, Gitanjali Jewels, Tanishq, Reebok, Adidas, Raymond Ltd, Turtle Limited, Allen Solly, Classic Polo, Crossword Bookstore, EuroKids, Amul, Cartridge World, Motilal Oswal Securities Ltd, Starwood Hotels and Carlson Hotels, who are buoyant about increasing their network.

Seeing that, the real estate rentals in metros have also touched the unsustainable stage so, penetrating aggressively into the unexplored markets is the way for brands in the coming times.

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