Retailers bet on low-cost models to get footfalls
Conscious of the escalating costs of high rentals and less than expected shopping spends at bigger stores, retailers are upping the ante on smaller formats.india Updated: Sep 21, 2008 20:15 IST
Conscious of the escalating costs of high rentals and less than expected shopping spends at bigger stores, retailers are upping the ante on smaller formats.
Future Group, which has stores across all retail formats such as Central, Big Bazaar, Home Town and eZone, has decided to speed up its expansion plans for its 127 KB’s Fiar Price stores that operate on the deep discount format.
Future Group had a plan to open 1,500 KB’s Fair Price Stores over the next three years. “I think we have found success in the formula. This is a low-cost model that requires very little capital involvement,” Kishore Biyani, chairman of Future Group told Hindustan Times.
“We will have 1,500 stores in the next 24 to 30 months. The expansion will be much faster compared to the first year,” said Damodar Mall, group customer director, Future Group.
KB’s Fair Price Stores, have only 300 SKUs (stock keeping units) to manage and typically range between 800 sq feet to 1600 sq feet. The set-up costs are as low as Rs 387 per square foot with no frills, no air-condition, no home delivery or shopping bags. Biyani added that for every Re 1 invested in such a store, there is a return of Rs 10.
Mall added that the stores do a business of Rs 40 per square foot per day.
“The model is very relevant for some parts of India. I am aware of at least two other organised retailers thinking of introducing such deep discount stores,” Arvind Singhal, chairman of Technopak Advisors.
Such low-capital, high return formats have caught the attention of big retailers who have struggled with other costly formats, where investments and returns don’t have a very viable ratio and inflation keeps customers away from big-ticket shopping. But, the format may not find takers shoppers who are not looking for steal deals.