As incomes rise, aspirations change and brand awareness increases among non-metro consumers, an increasing number of international and Indian brands have started foraying into these largely untapped markets.
The markets in metros are maturing rapidly, and brands hoping to expand are seriously eyeing these hitherto unexplored territories to capitalise on the growing demand. However, as the supply of quality malls is low in these markets, such brands have to either open their stores in the established high-streets (generally located in city centres) or explore built-to-suit (BTS) options.
In fact, the lack of entertainment options and organised retail in these markets has paved a way for a distinct high-street retail culture, and a rising demand for such offerings. This explains how non-metros like Ahmedabad, Jaipur, Ludhiana, Indore, Chandigarh, Bhopal, Surat, Amritsar, Nagpur and Lucknow have been able to accommodate growth in retail over the last four-five years despite the significant lack of organised retail options.
These cities have very favourable demographics and a high propensity to consume, and this naturally attracts national and international brands. Consumers in some of the Tier-II cities around New Delhi travel to the malls here to shop for luxury and high-end brands, but mid and mass-segment brands are much better equipped to leverage the demand in non-metros, and many are trying to gain first-mover advantage.
Customisation is key
Inclination towards cultural events and traditions continues to remain strong in Tier-II and Tier-III cities. Customising to local culture is very important in each city, and standardised store formats do not necessarily work. The formats, sizes and pricing all need to change as per the spending power and target audience in each city.
Many of the food and beverage (F&B) players customise their menus to include local flavours and suit the indigenous taste palates. Department stores and hypermarkets incorporate F&B brands or cafes to attract more footfalls and extend the time consumers spend in them. Likewise, fashion brands also customise their merchandise according to demand and demographic parameters.
Store sizes
Sales per square feet and productivity of space utilised are an important parameter for success of a brand and most brands are focussing on right-sizing their stores according to the location, format and demand from consumers. Due to the onslaught of discounts from ecommerce players, smaller formats are also coming up apart from the standard formats.
Flagship stores which showcase a brand’s largest variety of merchandise are generally bigger, and are found in prominent locations across these cities. While store sizes may be comparable in the metros and non-metros, brands generally have a larger footprint in the metros by operating several smaller stores in different malls and high-street locations. In non-metros, they may have only single stores.
Crystal gazing into the future
As bigger cities quickly reach saturation point in terms of retail potential, the next phase of retail real estate growth will be in the non-metros. In these smaller but important markets, rentals may increase in quality mall supply and prominent high-street locations depending on the economic conditions and consumer demand in the long run. However, the upward movement will be in line with growth in consumption.
