SIZE MATTERS

Across the world, big retailers are now experimenting with a new expansion strategy that says, ‘small is the new big’. The theory is that small format stores can help retailers set up large, centralised sourcing and distribution systems, taking a cue from the traditional traders to recast their business models. As Pushkaraj Shenai, CEO, Lakme Lever, puts it, “At this point of time, the retail industry is just taking off. So, one would see lots of new ideas and innovations with formats in terms of multispecialty, single specialty, retail space, etc. You will find retail stores that are 5,000 sq. feet and also stores that are just about 200 sq. feet in size.”

According to Abheek Singhi, Senior Partner and Director, Boston Consulting Group, changing lifestyles as well as increasing transportation and urban costs are compelling modern retailers to aggressively consider small-format stores as opposed to large-format ones. Also, considering the skyrocketing rental and location costs, the idea definitely makes more sense.

To consider an example, Future Group will be opening 4,000 stores in various formats – KB’s Fair Price, Nilgiris, Easy Day, etc. by 2021. Earlier, Kishore Biyani of Future Group had identified small-format stores as the first of the five pillars of his group’s long-term retail strategy. British brand Mothercare is already operating many small-format stores set up though various partners – franchisees, dealers and distributors. Furthermore, clothing and accessories brands like Gap and Aeropostale have also cut down the size of their stores to improve their revenue per square feet.

According to trade reports, Aeropostale has moved out of a 3,000 sq. feet shop and shifted to an 800 sq. feet retail space. Similarly, Gap has relocated to a smaller shop from its 7,000 sq. feet floor space. Lakme Salon too has opted for a small-format store with Lakme Fast N Fab, which is a unisex salon in the retail space of 500- 600 sq. feet and requires less money for operational setup.

Titan Company Ltd. has also launched multiple small format stores to strengthen its presence in the eyewear segment in small towns. Shalini Gupta, Head – Marketing, Design and Visual Merchandising, Titan Eyeplus, asserts, “Titan Eyeplus has launched multiple small-format stores in tier-II and tier-III cities. Understanding that these markets are highly underpenetrated, we have aimed at providing them with a presence of a branded player to cater to their optical needs. Small format stores also act as pilot stores to gauge interest in tier-II and tier-III markets, if we launch there for the first time.”

Change of Scale

Says Shenai, “A small-format store helps you saturate the market, optimize your cost and also optimize your portfolio by which you reduce complexities of operations and therefore give consumers limited but relevant choices. Furthermore, it helps in making access to your chain easy for consumers and definitely increases footfall.” While the big-box retailers focus on scale and footfall, the small stores are more community-focused and look at cost-effective strategies for frequent replenishment and targeted stocking of goods.

Pratik Pota, CEO, Jubilant FoodWorks, says that to drive profitable growth and build a sustainable model for ‘Dunkin’ the company will start looking at small-format stores. While other business models, including experiential outlets, large-stores, etc. still have their place, majority of the retailers or brands are now considering resizing their stores to smaller sizes for better return on their investments. As experts point out, that’s the only way to beat the inflation in real estate prices.

Comment