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May, 01 2019

THE BIG VALUE IN SMALL ORGANIC RETAIL

Authentic products and affordability are the keys to successful organic retail franchise.

From merely selling 50-60 prod­ucts everyday online to serving customers in over 15,000 pin codes and having over 13,000 products, the Organic Shop has come a long way. Today, months after its first store launch in Mumbai-Thane region, the brand is looking for faster expansion through franchising, especially in southern markets, where it receives more than 6-8 franchise en­quires per day.

“There are various reasons for the growing demand and increasing popularity of organic products. But it’s mostly internet penetration in smaller regions that is creating awareness and better accessibility to buy organic products. Organic food is no longer consumed only by the urban crowds,” says Manuj Terapanthi, CEO, The Organic Shop.

OFFLINE MARKET THRIVES

With products ranging from organic toothpaste to even rather unordinary clothing like organic denims, the demand for everything organic is at an unexplainable high as of now. As a result, any store that sells organic products will be able to generate Rs 1.5-2 lakhs in sales every month. The average billing per customer at an organic store ranges from Rs 500-Rs 2,000 with 25-40 customers making a purchase. While the store walk-ins are high during weekends and seasonal sales, locations in high streets and malls are most sought after.

SMALLER FORMATS

Brands like Organic Harvest are considering small formats like kiosks to ensure that big rentals and lower footfalls don’t burden the stores. According to Sumesh Sood, Co-Founder, Organic Harvest, the brand considered to launch even less than 100 sq. ft outlets at malls. This model, especially, was designed to compensate for the high rentals in Metros. As per the brand, a balanced business model is the key to sustain in the long run.

THE BUSINESS MODEL

To open a 500 sq. feet organic store, the investment would range between Rs 5-10 lakhs, depending on the location. Of the total investment, Rs 3-4 lakhs goes into stocks. The interiors, lightings and fixtures will cost another Rs 3 lakhs. Further, the brand will allow the franchisee to choose the location and decide in which area they would like to open the store. The investment will also include a one-time franchisee fee and software license fee. Typically, two staff members would be required to run the store and the salary bracket of the staffers will be around Rs 15,000-25,000. A store can generate up to Rs 1.5 lakhs in monthly sales and the profit margins are 20-40%, which can vary from product to product.

FRANCHISING FOR FASTER EXPANSION

After successfully running seven stores, Sood, says that the brand is now looking at franchising for faster expansion. Although they have not franchised any store so far and are working on the business model to franchise, Sood maintains that the brand receives maximum enquires from southern regions, especially from Bengaluru, Chennai and Hyderabad.

“Price points no longer concern the customers much who wish to consume organic products. Interestingly, on the other hand, an increasing number of people now want to invest in outlets selling organic products. While we do not have any criteria for franchise selection, we would like the investor to understand that there are no immediate returns in franchising an organic products’ store. Depending on the location, the break-even period will vary, but will take a minimum of 6-12 months,” he says. Sood says that the brand is developing a financial model that will be a win-win for both the brand and the franchisee. “When we have the right model ready, we will venture into franchising,” he adds.

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