Higher returns in niche formats.
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Wherever mixed land use is permitted, companies opt for neighbourhood stores.
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Bindu D. Menon
New Delhi, Dec. 15 Faced with the unexpectedly sharp slowdown in economic
activity, retailers have begun to opt for smaller and niche formats rather than
the large and hyper formats. This means shop sizes now will be between 800 and
5,000 sq feet, rather than huge flagship and experiential stores.
Companies say that the return on investments (RoI) is high in smaller formats
as against a bigger retail area. Retailers such as Reliance Retail, Future
Group's Big Bazaar and Bharti's Easy Day are moving ahead with smaller formats,
especially in the fashion and furnishing segments apart from the food and
grocery segments.
Industry analysts note that the return on investment in a large format is
around Rs 11,000 to Rs 14,000 a year/sq.ft as against a smaller format where
the RoI is about Rs 14,000-18,000 a year/sq.ft. "Large formats are highly
mall-dependant. With smaller outlets, companies can gain scale faster besides
getting premises in residential areas at a much lower cost," they note.
Mixed land use
But much depends on whether mixed land use is allowed or not. According to Mr
Rajneesh Mahajan, Director (Retail Services), Cushman and Wakefield, "Risk is
much lower in a smaller format as compared to a big one. Wherever mixed land
use is permitted, companies are going to areas where consumer concentration is
high. In certain categories such as furnishing, food and grocery, fashion and
apparel, retailers are abandoning flagship stores for neighbourhood stores."
"The smaller formats can be anywhere from 800 sq feet to 5,000 sq feet. We will
tap the niche customer segment," Mr Manu Kapur, Chief Executive, Reliance
Living Furnishing, said. The company recently opened another specialty store in
the furnishing category. This is the fifteenth specialty store that Reliance
has ventured into.
Similarly, Big Bazaar's Best Deal store is the smaller format and a prototype
that the company has been testing for a while now. "We are targeting about
100-odd stores, each covering an area of 2,000 sq feet, in the next two years.
These stores will follow the convenio format and be present in neighbourhoods
where mixed land use is permitted. It will primarily stock food and grocery," a
Future Group official said.
http://www.thehindubusinessline.com/2008/12/16/stories/2008121652210100.htm
Government cannot make man richer, but it can make him poorer
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