Highway retailing : The new retail driver

Retailing on highways existed in India ever since roads came into existence. However, it was quite unorganised till some time back. Today, highway retailing is picking up in an organised manner and emerging as an altogether unique entity. Pallavi Majha explores this concept in the present context in India     

 

Many of us may recall the times when it took days of planning and preparations if we had to travel by road, specially in our own vehicle. From the tyres to maintenance of the car to refuelling the tank and food basket, everything needed to be checked well in advance. The reason was quite simple: scarcity of petrol pumps on the highways, payments by cash, and absence of good, clean eating joints.

Today, with the entire services sector having gone through a changeover, you no longer need to worry about cash or the fuel tank. You can now bank on the large number of petrol pumps and ATM services on the highways.

And no more getting up early morning to prepare food for the journey ahead. The highway retail format caters to travellers looking for quality and variety in refreshments and a convenient break in their journey.

This is not where it ends. You name it and you have the service alongside the road in the form of a flourishing and complete highway retail outlet.

So, next time you have to take a trip, be prepared for a highway experience that you will write home about.

 

Indian retail industry

The Indian retail industry has witnessed a drastic change during the past one decade with a lot of retail activity happening as a result of the emergence of the mall culture and entry of foreign brands. FDI is also set to bring in its share of developments in the retail scene of India.

Elaborating on the evolving retail indiutry in India, Tejbir Singh Sawhney, Deputy General Manager, HPCL, says, “The retail scenario has been witnessing a paradigm shift in the last few years. The Indian retail sector earlier comprised only small family-owned stores located in residential areas with a shop floor of less than 500 sq.ft. But this image of a retail store in the urban market has evolved, and continues to do so. With the advent of departmental stores and various other formats of retail across all metros and major cities of the country, the current projection of organised retail in India is a growth of 20 to 25 per cent on YOY basis.”

Highlighting the current retail scenario in India, Prof. Ravi Sohi, Marketing College of Business Administration, University of Nebraska, Lincoln, comments, “The Indian retail industry is evolving but is highly fragmented. While in-roads have been made with the establishment of shopping malls and other retail formats, there is a lot of potential for growth and improvement.”

Rajat Luthra, Vice President, Operations, Barista Coffee Company Ltd, opines, “Action in retail is just beginning in India. With organised retail contributing to just over 3 per cent of the total retail market, we can expect a lot more to happen in the form of more retail formats, ultimately benefiting the consumers. Improvement in infrastructure and roads, coupled with preference to travel by personal transport, will bring in organised highway retailing at a fast pace. Eateries and convenience stores will be seen on highways, as they are in the cities.”  

Expressing confidence that the retail business in India would be the second largest after agriculture, Abdul Bari, Vice President, Marketing, Melange mall, however, states, “The unfortunate part is that the retail sector is unorganised. A retail revolution has now started, and almost 5 per cent of it is organised. Therefore, a vast field of 95 per cent organised retail is waiting to be reaped. Consumer tendencies in all the metros are changing rapidly and they are inclining more towards the organised retail industry.”

Presenting statistics, Rajat Kakar, Managing Director, Silver City, says, “Organised retail in India has advanced to a different level in the value chain. Knight and Frank has ranked India fifth in the list of 30 emerging retail markets and predicts an impressive 20 per cent growth rate for the organised retail segment by 2010. Currently, the expected demand for quality retail space is estimated to be 40 million sq.ft. Changing lifestyles, changing consumer preferences, enhanced income levels, propensity to spend, and identity conflict among various brands have been factors in revolutionising the retail industry in India.”

Sanjay Coutinho, General Manager, Operations, Baskin Robbins, informs, “The current retail scenario is concentrated around malls, market places (traditional) and standalones. With a lot of malls coming up and FDIs flowing in, many international brands are foraying into the country. The Indian economy is booming, and the market is becoming a happy hunting ground for retailers and multinational brands.”

Within this flourishing retail industry in India, is emerging the altogether new segment, highway retailing.

 

Retailing on Highways

India is in the process of modernising its national highway system, and has developed almost all major stretches across the country. As a result, there will be more, smoother and faster vehicular movement on the highways. More people travelling means increasing demand for better privileges and services along the highways. Many outlets and stores have come up to cash in on this opportunity. Commonly seen are food outlets, some with the take-away option for food. These eating and refreshment points are a welcome break for the weary traveller. What else would a traveller wish for when there is branded food, and a refreshment zone in a luxurious air-conditioned set-up, to freshen up after hours of driving on highways.

 

 According to an official spokesperson of McDonald's India (North), “Highway retail is set to get a big fillip with major companies launching a blitzkrieg to open more and more highway outlets that will change the face of retailing. Highway retailing is surely the in thing. Today more Indians are travelling (transport and personal vehicles) on the highways than ever before as a result of improved infrastructure. McDonald's wishes to tap the highway traveller who is looking for quality branded meals from restaurants.”

The Indian highway market has a potential of approximately Rs 60,000 crore following the development of the Golden Quadrilateral Project.  The market is in its take off stage and could emulate the US model which started with petrol retail, and later expanded into non-petro offerings in a big way.

With this the consumer product brands, including automobile companies, could now use the emerging highway retail market as an effective platform to display and spread awareness of their products.

With vehicles readily available off the shelf and under easy finances, India is witnessing a tremendous growth in road travel. Out-of-town outlets, malls and highway shopping are expected to rise along major highways, and in close proximity to major towns, combining discount outlets offering food and entertainment.

However, Coutinho points out, “Highway retailing will take its time in this country as Indians tend to shop more within towns and cities.” Sohi differs, “Highway retailing has always existed in India in its very basic form with roadside eateries and small shops catering to the needs of the travellers. The recent growth and change in the form of highway retailing has been spurred by the increasing affluence of the middle-class. Over the years a change has occurred in the number and quality of people traveling by road.

Says Sawhney, “The concept of the Indian highway customer was earlier confined to the commercial vehicle owner or transport operator only. Due to lack of good roads and unavailability of customer facilities en route, the highways were rarely used for vacation or business purposes. However, with the increased preference for road travel by individuals and families, the availability of shopping centres and food chains became the need, and this has led to the birth of highway retailing.”

From the preceding discussion, we observe that the shift in highway retailing in India has made the highways an emerging hub for retailers.

 

Inspiration behind opting for highway retail

The need for highway retailing has grown considerably of late. Commenting on the reason behind their highway mall, Bari says, “Our mall is situated on the Delhi-Dehradoon highway and is surrounded by a residential population of approximately 3 lakh. As Meerut city is rich in the jewellery business, sports goods exporters, sugarcane agriculturists, loom businessmen, a survey conducted states that the city has a high potential for retail business, and people are waiting for a big mall to open in the city.”

Here we discuss some of the factors contributing to highway retail in India:

Tremendous improvement in the infrastructure of the country

Broadening of the National Highways and the coming up of new ones in all parts of the country

 Evolution of road travel from being an unsafe mode of commuting to a pleasant medium of heading for a getaway, with all amenities available through the journey.

Fuel stations, specifically, have played a crucial role in organising highway retail for customers.

Space constraints, parking facilities and, above all, the steep land prices within cities are forcing developers to focus their activities on the highways.

Kakar opines, “The commencement of the much-awaited four lane of the Chandigarh-Ambala highway, the initiation of the monorail project, and the announcement of the upgradation of the existing Chandigarh Airport to an international one, were the prime factors to inspire us to opt for a highway location for our mall.”

Highlighting the encouraging factors for malls on highways, Bari says, “The concept of highway malls will suit highway customers and city people, alike. A highway mall, as the name says, should be on a highway which has heavy traffic movement. It should not be far from the city, and the catchments within an area of five kilometers should be of very high potential.”

 

Sectors coming up on the highways

Opinions of those closely related to highway retailing clearly point out that highways are emerging as new retail destinations. Now, which are the sectors that are doing well in this area?

Not surprisingly, the petrol retail sector stands as number one, with the retailing network of public sector giants like HPCL, IOC, and BPCL, and private petro retailers like Reliance and Shell, expected to add more lustre to the highway retailing story.

Other projects currently on the highways are shopping malls, multiplexes and entertainment zones. Then there are factory outlets offering branded products at discounts. Also, a lot of national and international brands have tied up with the petro companies and mall owners to provide a luxurious shopping experience to people while travelling.    

 

Petro retailing

Highway retail is set to receive a big fillip with major oil companies launching a blitz to open more and more highway outlets that will change the face of petro retailing. With the entry of private Indian and foreign players following the deregulation of the petroleum sector, the highway retail battle is all set to be fought among the retail majors to its  the customers’ advantage.

“We have also introduced different variants of loyalty programmes, credit and pre-paid, which provide a complete fleet management solution to the customers in addition to the reward points. We strive to make the customers' visit to our pump not only an incident but an experience, ” says  Sawhney.

Indian Oil Corporation has its flagship retail outlets on highways at 123 points across the country under the banner 'Swagat'. The retail outlets, to sport all facilities, would be a boon to travellers on the highway by serving the purpose of being a refreshment point.

The facilities in the Swagat outlets are designed for best Q and Q standards in the industry.

Brands like Baskin Robbins have tied up with IOC for a retail venture.

Commenting on the tie-up Coutinho, remarks, “We have signed up with them as the first priority in case we plan to open stores at key petrol stations. These should, however, suit our dynamics and format. If otherwise, then we have the right to move to the others.”

Bharat Pertol Corporation Ltd (BPCL), the country's second-largest oil marketing company, is rapidly turning its 9-acre petrol station on the bustling Delhi-Mathura highway into a thrilling retail plaza.

Thus, we can see how petro retailing is emerging as an altogether new entity on Indian highways.

 

Malls

The mall boom, after cashing in at all metros, has now turned sights on tier two cities and highways. Mall builders across the country are planning hundreds of sophisticated shopping marts in metros and smaller cities. The concept of the highway mall was perhaps inevitable. The Rs 125 crore Majestics Properties is first, with the launch of the Melange Mall, to be located on the Delhi-Dehradun highway, 6 km from Meerut. Apart from the high traffic on the Delhi-Dehradun Highway, the mall will cater to the residents of Meerut, where the buying capacity is high.

Shopping malls are to come up soon at two popular stops on the busy Kalka-Shimla national highway, and later on at other places along the highways running through Himachal Pradesh.

According to Bari, the main features of the project are a shopping mall and a 3-screen multiplex with 1,040 seats, along with a 24 hours eating joint, and ATM kiosk, besides other features, in a covered area of 2 lakh sq.ft.

Highlighting the features of his highway mall Kakar says, “The nearest catchment areas for Cosmo's Highway mall is Pallav Puram, Cantonment area, Defence Colony, Saket, and old city. We are expecting approximately 10,000 visitors per day to our mall.”

Besides this there are a variety of malls coming up on highways across the country. The factors responsible for the development of these malls is of course to serve the highway travellers. But at the same time, these malls are developed keeping in mind the catchment area so that they can cater to the people living in the outskirts of the cities.

 

Factory outlets

At factory outlets, one can procure branded goods at an affordable price, anywhere between 30-70 per cent less than the retail price. Factory outlets are affordable because the products are generally factory surplus excess stocks overruns, quality control rejects, or seconds that may or may not have some negligible defect. As a result,  they are offered at low prices. It is a win-win proposition for both the company and the consumer.

The brand craving consumers of the middle and the upper middle segments prefer these outlets where they get products with brand tags at an affordable price range. Factory outlets are equally important for the companies to get rid of their excess stock. There are innumerable factory outlets from where consumers can purchase quality merchandise at affordable prices. The long stretches like Mehrauli - Gurgaon (MG) Road, and Mahipalpur (near NH-8) in Delhi, Trimulgherry in Hyderabad, Marthahalli in Bangalore, have emerged as the hubs of factory outlets in the country. Almost all major brands have their factory outlets. Most of the factory outlets operate on franchise norms while others are company owned. The company-owned outlets are always exclusive.

These factory outlets are mostly present on the highways and the outer circles of each city where a huge number of people cross the border from either side every day.

There is a fear that these factory outlets are eating into the fresh stock market. The case is especially true for brands that overdo the seconds stuffs and end up being discount stores.

India has to go a long way before its factory outlets come closer to matching those of the west.

Tie-ups add value to the property and keep the profits coming.

International and national brands, including, automobile companies, have planned to use the emerging highway market as an effective ‘display and awareness’ platform. According to Prof Sohi, “When making a purchase decision, consumers are always going to gravitate towards a well-known brand because they know what they are getting.  Therefore, a tie-up with a well-known brand is going to be beneficial to drive the business.”

Coutinho, “Baskin Robbins as a brand is now concentrated in metros and mini metros. Simultaneously, we as a company intend opening drive-throughs, takeaway stores, and kiosks. We may even look at tying up with food plazas on highways. Since we have signed up with Trammell Crow Meghraj to identify real estate, getting into malls on highways is not a problem for us. We are one of the most aspirational brands any mall wants to have on board.”

Food and beverage brands, including, Nirula's, Café Coffee Day and Barista, have already logged onto the highway bandwagon. And waiting in the wings are products like apparels occupying the low-end of the lifestyle spectrum. Arvind's megamart chain, an everyday discount store for brands like Arrow, Lee, Wrangler and Flying Machine, hopes to target the stopover traffic with impulse buys.

According to industry sources, since the sector is booming and is expected to grow even further, it is the best opportunity for companies to venture in. With strategic tie-ups, companies are bound to get more exposure, which ultimately results to increasing the profits. 

Says Coutinho, “This is bound to happen as there is a shift from brand loyalty to a total shopping experience. Retailers and brands have to only piggyback on malls. Instead of the retailers and brands, it is the malls that are the traffic drivers. But it’s also true that malls need to ensure signing up anchor tenants, as the total shopping experience will be strengthened only under an umbrella of good brands and retailers. This adds value to the property and other brands, and retailers make a beeline to be part of such prestigious malls. Such malls survive and even though at times the rents are high. Retailers and brands make profits as the revenues are higher than if they were to be standalone ventures.”

Barista Coffee Company has already joined hands with Indian Oil Corporation (IOC) to open outlets at IOC's major petrol pumps on highways. Barista, which is a wholly-owned subsidiary of the Chennai-based Sterling Infotech group, will invest over Rs 20 crore for the purpose. The alliance involves the investment of Rs 16 to 20 lakh per outlet from both the companies. At full stream of around 200 outlets, Barista is looking at earnings of 10 to 15 per cent of its overall revenues. Under the agreement, the speciality coffee leader will also look at IOC sites in metros and mini-metros for opening its outlets.

The outlet will take shape on the Delhi-Agra and Delhi-Chandigarh highway.

Luthra, explains, “We are looking at cities and tier II towns as part of our expansion plans. We are certainly not going to lose out on the highway stores as they are going to connect to our guest wherever they go. We have identified highways and expect to open a couple of stores soon.”

Hughes, a leading global provider of broadband satellite services, networks and products for businesses governments and consumers today, has signed a definitive agreement to connect 1,000 retail outlets of Reliance industries across the country. The deal, valued at Rs 8 crore, involves Hughes installing a technology backbone for all of Reliance Petroleum outlets in a phased manner, connecting 3,000 outlets by 2006.

Hughes works with BPCL, HPCL and Essar oil in the Indian market worldwide. It has connected over 50,000 retail outlets via satellite, allowing them to offer techno differentiators to their customers. These include clients like Exxon mobile, BP Amoco, Chevron, Shell and SK Gas.  

Giving reasons for the concept of brands in retail alliances, Mr Sawhney says, “Earlier, road travel was confined to fragmented routes, and long distance travel was taken by only a few individuals. With the growth in the country's infrastructure and building of highways across the length and breadth of the country, travellers today are taking longer journeys using highways.”

Commenting on the tie-up, Mr Luthra says, “IOC today has the largest number of petrol stations in the country and are well represented in all geographic areas across the country. Being a brand that commands trust, it was a logical decision to partner with them to offer the consumer a relaxing coffee break on the highways.”

Apparel major Arvind brands is taking its factory outlets chain, Megamart, to the highways. Already on the road is grocery chain Food World.

And there are more to follow, according to a study on the retail industry by experts. A host of stopover entertainment businesses are in the pipeline as long-haul highway travel picks up. In terms of geographical opportunities, the study forecasts that organised retail will grow in mini-metros, offering a strong customer base with surplus income. According to an official spokesperson, McDonald India north, “At present McDonald's has six drive-through highway outlets. McDonald's is in its final stages of discussion with real estate developers, oil companies and the National Highway Authority of India”

  McDonald's India is planning outlets on highways and railway stations. These are expected to be a combination of highway restaurants, outlets at railway stations, at shopping malls and cineplexes, besides residential areas with significant footfalls. The chain has its highway restaurants on the Delhi-Agra highway, on the Delhi-Ludhiana highway and one on the Mumbai-Pune highway. For McDonald's (with its first highway outlet at BPCL’s retail establishment), ice-cream major Baskin-Robbins, and Swiss gifting company Diviniti, which came aboard six months back, the petrol station on the Delhi-Mathura highway is already an excellent  business proposition.

BPCL is negotiating with PVR cinemas for setting up a theatre, and with the Tatas and Ashok Leyland for an automobile service centre.

Apart from corporate tie-ups, BPCL will, subsequently, offer intermediary services like Cyber Cafes, a couple of rest rooms, and even emergency services through a tie-up with the Red Cross. BPCL has been approached by the Red Cross to permanently place an ambulance at the station.

The idea behind these tie-ups is to provide customers value-added services. The primary motive for such initiatives, in the current scenario, is not to generate profits but to generate maximum experience recall of fuel station visits in the minds of the customers.

 

Consumer's interest

A lot of planning goes into developing a project on the highway. The consumers' interest is the top most priority of the companies, as, ultimately, it is the consumer's satisfaction that will lead to profit generation of the company.  

Sawhney says, “The customers now expect uniformity in the offerings at our fuel stations, across India. Having identified this need, HPCL has tied up with brands like Café Coffee Day, Coffee Day Express, US Pizza, Baskin Robbins, Marrybrown, Ferns and Petals, etc. Newer initiatives include alliances with ancillary service providers like Hertz Car Rentals and authorised service stations.”

Highway retailing is an extension of the growing retail scene in India. This can be of advantage to the customers in terms of enriched value in travel, and to the company in terms of generating additional footfalls.

According to an official spokesperson of McDonald’s India north, “The highway traveller looks for quality branded meals and they are quite beneficial for our customers. Our consumers are much valued and our endeavour has always been to provide them with best class service. Our restaurants are very popular family destinations for nearby cities as well on the respective highways. We have a huge number of people patronising our restaurants from the adjoining towns. Our restaurants are rated as the top wayside facility on the highways. Our QSCV principle plays a dominating role in attracting the floating crowd to our restaurants vis a vis IEO'S (informal eating out options). Enhanced security, clean toilets, a well managed parking area just tempt the consumer to dine in at McDonald's on the highways.”

The increase in highway traffic presents an immense opportunity to reach out to customers. Elaborating, Sawhney says, “By providing diversified offerings and amenities at our fuel stations, we aim to provide our customers a multiple-value proposition, which helps them economise on time and effort. For example, on a short distance route of 160 km between Mumbai to Pune, every traveller stops at least once either at our company-run stations at Sajgaon or at Taje not only to re-fuel their vehicle but also for a refreshing halt.” And adds Luthra, “With Barista outlets on highways the consumer can expect a quality and hygienic coffee break.”

Says Prof Sohi, “There will be opportunities to provide more goods and services to the consumers. For example, in the US, highway retailing started in its basic form with petrol pumps selling convenience items. This was followed by a growth in the motel industry. Now there are factory outlet malls on many highways with manufacturing companies setting up their own stores to sell directly to the consumers. Similar opportunities exist in India too.”

 

Future of highway retailing in India

With Indian consumers relishing international delicacies like pizzas, burgers, ice creams and coffee on the highways,  we see the scenario of retailing on Indian highways. Beginning with petrol outlets and moving on to food and beverage, as it happened in the case of motel clusters in the US, the highway market in the country is steadily attracting more entrants. Observing the number of commuters it is estimated that roads are the most popular element for travel for tourists and locals in India.

In this regard, the future of highway retailing seems quite bright, as Prof Sohi comments, “As long as people continue to travel in their own vehicles, there is tremendous growth potential in highway retailing.” Adds Sawhney, “Highway infrastructure is only getting better with each passing day.”

“In the future we are sure to see a substantial presence of organised retailers on the highways. Consumers will definitely prefer a better hygienic outlet in the case of eateries and convenience stores to meet their needs while travelling. And, backend support and logistics are going to be the key drivers to the growth of highway retailing,” says Luthra.

Expressing optimism about the future of malls on highways, Bari says that a great time awaits highway mall retailing, subject to a few conditions:

The city should not be very far off

It should have a population of more than 5 lakh

Students population including universities/colleges should be more than 40,000

The highway on which the mall is supposed to come should have heavy traffic

The city should be approximately 75 to 100 km away from Delhi

“Though highway retailing in India is still at a nascent stage, it is all set to bring about a paradigm shift in the industry by redefining shopping, recreation and leisure experiences with the launch of various highway shopping malls and multiplexes,” remarks Kakar.

A chief factor contributing to the growth of road traffic on highways is the arrival of organised transport operations. Sales of commercial vehicles grew by a whopping 28 per cent in 2004, and even continued to be upwards of 10 per cent in 2005. Out of this, LCVs grew by more than 17 per cent.

Sawhney believes, “With commercial vehicles' owners and operators introducing supply chain management and ERP solutions in their businesses, the challenges for oil marketing companies to align their systems with the needs of their clients and provide end-to-end fuel solutions are arduous. But we, at HPCL, are fully geared up to meet these challenges and trying to provide complete solutions for our customers .”

 

An Overview

From the above discussion, we conclude that highway retailing is the in thing these days with a lot of malls, petrol retail ventures and branded outlets making their foray into this segment. The flourishing of highway retailing is beneficial to both the consumer and the retailer in the sense that it will facilitate the consumer with a whole lot of services available 24X7, on one hand, and a lot of retail opportunity to the big time as well as small time retailers.