Mobiles are going where no store has gone before. According to CBRE India Consumer Survey 2015, online shopping trends in India are expected to continue to grow, fuelled by deep penetration of mobile devices, combined with limited footprints of brick-and-mortar retail formats.
The rapid growth of the online consumer base is due to increase in adoption of devices like smartphones, tablets, and laptops, and access to the internet through broadband and 3G. “India’s Internet user base is expected to reach 550 million by 2020, with a penetration of nearly 40%, from the current estimated base of 243 million and penetration of 19%,” said a report by retail consultancy firm Technopak in India Retail Report 2015.
The report notes that while the organised brick-and-mortar retail, has been in India for two decades now, its contribution to total retail is still low, at only 8% in 2014. “Organised B&M retail is concentrated in the top 25-30 cities and most B&M retailers and brands are unable to meet the rising aspiration in smaller cities. This skew in retail presence has also fuelled the demand for online channels due to their wider reach and delivery to even such smaller cities and towns where B&M retail stores are either not viable or will take years to reach.”
But this scenario isn’t as black and white as many would believe. Most modern retail chains – especially those in fashion and lifestyle categories — have committed to optimising the potential in small-town India. Earlier this year, sportswear chain Puma, which operates 340 stores in 115 Indian cities, announced a balanced expansion strategy by opening new stores in tier II and III cities, even as it continues adding to existing metro markets.
“We will expand into tier II and III places as well as focus also on the existing developed metro cities,” Puma India Managing Director Abhishek Ganguly told PTI in May.
Notably, he pointed out that “dependence on the metros is reducing as the other cities are growing”.
Value fashion retailer V-Mart, whose core markets are in tier II and III territories, is convinced about the opportunities lying dormant for physical retailers. The chain operates through a cluster-based model, which means not expanding beyond 100 kms from an existing store’s location. The chain is so far limited to northern and western regions of the country, but Lalit Agarwal, CMD, has clear pan-India ambitions.
With a vision to establish the concept of organised value retailing in untapped regions of India, Agarwal launched first lifestyle store of Ahmedabad in the western state of Gujarat. At the time of its opening, this store was recognised as the first organised lifestyle retail store in entire Western India, targetted specifically at middle- and lower-income consumers.
“The small-town shopper is the toughest customer,’ Agarwal notes. “When it comes to fashion, they have strong aspirations of dressing as their big-city counterparts, but are limited by wallet size.”
“For a value fashion retailer like us, this means a long-term fashion consciousness in our ranges, while also ensuring higher quality — because a small-town customer is likely to wear a certain garment many times over and for longer than a richer customer in a big city. Therefore, the product has to endure for longer, while being just as fashionable.”
V-Mart is aiming to expand its store network up to 200 in non-metro cities in next four years, starting with the addition of 25 new outlets in the current fiscal
But if you thought tier II and beyond markets are fertile grounds for mere budget offerings, think again.
With 225 stores across 176 towns in the country, fashion MBO Planet Fashion — part of Madura Fashion & Lifestyle – is aiming to cross the Rs 430 crore-mark this fiscal and plans to open 300 new stores by 2018 by expanding its reach to tier III and IV markets of India.
Speaking to Indiaretailing, Rahul Jhamb, Brand Head, Planet Fashion says, “We plan to double our consumer value turnover, which means the net MRP value, to Rs 700 crore from the current Rs 300 crore primarily by doubling our reach and penetration in mini-cities of India. We will continue to work deep on improving like-to-like performance of each store through brand building and merchandise planning.”
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