TRICHY Retail chain Nilgiri's sees big growth opportunities in small towns of southern India

JALANDHAR Cosmetic counters like this one at the Ebony store have proved a big hit with women shoppers

Small" seems to be the operative word for retailers in the eight towns visited by Business Today writers to put this story package together. When asked to describe the retail stores in the towns, their answers were uniform: "The Wills Lifestyle store in Belgaum is small", or "the Ebony in Jalandhar is smaller than the one in Delhi" or "Rajkot is dominated by small shops".

Small. And that's exactly what's keeping some very big retailers at bay. While there is a huge retail rush into the class one towns, it has a size and flavour of its own. On the subject of flavour, have you heard of Moustache or Turtle Shirts or WaghBakri, maybe Sapat? Well, you would have if you lived in a town in West Bengal or Maharashtra. They happen to be fairly established apparel and tea brands. And if you lived in Jalandhar you would be visiting Yankee Tunns for your sundowner or if you lived in Rajkot you would be indulging in a fair bit of retail therapy at 'Options' (make that 'One Stop Shop' or 'Overtake' for Jalandhar), a retail store that stocks all major brands across product categories. The home market has clearly seen some early movers-all local. "Regional brands do very well since they penetrate a particular geography with much lesser spend than large brands, they don't have very large overheads and they give better margins to retailers," explains Jagdeep Kapoor of marketing consultancy, Samsika.

No wonder the likes of Lifestyle, Shoppers' Stop and Globus are taking their time to chalk out a strategy for the 'class one town' (population between 5 lakh and 10 lakh) market. For one, their current formats simply don't lend themselves to a town that small. Says Kumar S., Managing Director, Lifestyle International: "Our format typically lends itself to towns with over 3 million population. Our stores won't be viable in a class one town". Sentiments that are echoed by B.S. Nagesh, MD & CEO, Shoppers' Stop, who says that the store has no plans of entering towns smaller than Lucknow, Kanpur, Ludhiana or Surat right now. "Shoppers' Stop follows the same model in all its stores and doesn't adopt different strategies for different cities," notes Nagesh. In course of time, however, these stores may have to make an entry into these towns, and when they do, chances are you will see a shrunk version of the Lifestyle or Shoppers' Stop that comes up in, say, Navsari or Trichy.

BELGAUM A Compaq showroom offers the town's geeks a chance to partake in the digital revolution

VIJAYAWADA The Music World outlet keeps the city's cool crowd up to date on the newest chart-busters

While mega stores agonise over strategy, small home-grown retail ventures like Chennai's Odyssey-a 'leisure store' selling mainly books, toys and music-is quietly branching out into Salem, Vishakapatnam and Vijayawada in addition to its existing outlets in Trichy and Chennai. "It's important to be the first mover. Small towns have only so much buyer capacity. The initial size of an Odyssey store will be 2,500 square feet in a small town, and not upwards of 6,000 square feet like in the metros, since this is the capacity that a small town can take," says T.S. Ashwin, MD, Odyssey.

Another successful retail chain that is largely regional and successful has been the Nilgiri's supermarket, which operates in the southern states. The grocery category, however, is an interesting one where the existing metro formats are actually being grafted on the townscape as well. Kishore Biyani-promoted hypermarket Big Bazaar, for instance, has already gone into Nagpur, Bhubaneshwar and Nashik with its entire offering, and has Durgapur, Varanasi and Amritsar on the radar. "We believe that these towns are ready for us; there has been practically no retail activity in these towns. When we study the towns we look at where people are going for leisure activities, like a mela or a temple, because finally a mall is a place of entertainment," says Biyani. While others like FoodWorld are more wary about rapid expansion, a no-frills retailer such as the Chennai-based Subhiksha has a relatively inexpensive model that can be taken to smaller towns.

RAJKOT Shoppers looking for fancy footwear in Rajkot have the option of stopping by the local Metro store

MORADABAD Reliance Infocomm, Archies Gallery, ICICI Bank and Western Union all co-exist with small shops

It's All About Entertainment

But what about the capacity of the towns, will he face severe competition when the next hypermarket comes in? "I will set up the next one where there is capacity in a town before anyone else gets there," says Biyani, with the aggression of a first mover wanting to protect his turf. Biyani's 'entertainment hub' model is getting popular with property developers in the towns. Take the case of Srirang Sarda in Nashik who has developed a complex where Mumbai-based Cineline Cinemas has opened a multiplex and Big Bazaar is the other big anchor. Sarda has plans to start a gymnasium and a health club as well. "We figured that the main gap in the smaller towns was entertainment and that's the gap we sought to fill. Moreover, I am looking at people from neighbouring towns coming in as well, so the catchment area goes beyond just Nashik," says Sarda.

The model is mushrooming across the country. Take the case of the West Bengal government agency, the Asansol-Durgapur Development Authority, which has floated a JV with Shristi Infrastructure Development, a private infrastructure developer, to provide need-based infrastructure to the towns of Durgapur and Asansol. While Durgapur will see an urban utility plaza complete with a Big Bazaar outlet, a three-screen multiplex and an international hotel chain, Asansol is witnessing the rise of an 'integrated township' with residential and commercial complexes, school, hospital and of course shops. Not very different from the townships mushrooming around metros like Delhi and Mumbai.

DEHRADUN The town's own fashion street Rajpur Road sports outlets of all the top foreign brands

MANGALORE Malls like the Saibeen, with a number of pubs and restaurants, offer Mangaloreans an active nightlife

Sarajit Deb, CEO of Bengal Shristi, the joint venture company, says the strategy has gone a step further with the model for Ranigunj, a town near Asansol and known for its coal fields, which will soon have a spanking new infrastructure hub comprising a truck terminal, warehouses, motels, petrol stations, shops and dhabas. And again the 'catchment area' for these projects would be a good part of the Burdwan district of which both Asansol and Durgapur are part, says Deb.

Coming to the core issue of purchasing power and capacity though, which is what large multiplexes and multinational brands worry about finally, some multiplex operators like Fame Cinemas of Mumbai have zeroed in on relevant pricing strategies-the operator prices his tickets at Rs 55 at its Nashik venture. Multiplex tickets are typically priced in the region of Rs 130 in the large metros. "It would be stupid to imagine that Mumbai prices can work in these places. We would obviously take some parts of the offering and stick them in and invest only what we can recover," states Shravan Shroff, who heads Fame Cinemas. He adds that the foray into smaller towns is a great derisking strategy, since these towns are fast-expanding cities but not large enough sometimes to absorb two players.

Coffee chain Barista has followed a similar policy. The company has launched a range of coffees at Rs 20 per cup in Chandigarh while its prices for the metros (for a full cup of coffee) are in the Rs-40 range. "While there is a huge aspiration in these towns, they need something that suits the pocket as well. We can't possibly have metro prices there," says Barista's Head of Marketing & Strategy Brotin Banerjee.

Finally, while talk of entertainment hubs and hypermarkets is headline-grabbing material, the retail topography in these towns will in no way be limited to these glitzy newcomers. What will, in reality, exist is a complete mix of local players, brands, kirana stores, general stores, organised pharma outlets, pan-biri shops, auto outlets, hardware stores and what have you.

But there is one crucial statistic that indicates how the new kid on the block-organised retail-will fare. According to Samsika's Kapoor, it is expected to account for 20 per cent of the total sales of a class one town in the next five years, up from the current 1 per cent or so.

-additional reporting by Nitya Varadarajan in Chennai, Priyanka Sangani in Mumbai and
Sudarshana Banerjee in New Delhi