Retail brands head to non-metro for expansion

The maturing markets of metros have induced the brands expand their presence and reach out to non-metros. However, owing to the market dynamics and consumers commuting to metros for luxury products, primarily mid and mass-segment brands are tapping into T
Retail Brands head to non-Metro for Expansion

As incomes rise, aspirations change and brand awareness increases among the non-metro consumers, an increasing number of international and Indian brands have started foraying into these largely untapped markets.

With maturing markets of metros, brands have started expanding their footprint in non-metros to capitalise on the growing demand. However, as supply of quality malls is less, many brands have to either open their stores in the already-established high-streets, generally located in the heart of a city, or explore built-to-suit (BTS) options.

The lack of entertainment options and organised retail, when compared to the metros, has paved a way for high-street retail culture and rising demand for such offerings. Despite a lack of supply and options in terms of organised retail, non-metros like Ahmedabad, Jaipur, Ludhiana, Indore, Chandigarh, Bhopal, Surat, Amritsar, Nagpur and Lucknow have witnessed considerable growth in retail development in the last four-five years.

With these cities having favourable demographics and a high propensity to consume, many national and international brands are creating their presence here. Consumers in some of the Tier-II cities around New Delhi travel to the malls here to shop for luxury and high-end brands. Interestingly, it is the mid and mass-segment brands that are expanding the most in non-metros owing to the market dynamics and demand potential. 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. Therefore, customising to the local culture becomes very important in each city as 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 taste palate. Department stores and hypermarkets incorporate F&B brands or cafes in their stores to attract more footfalls and extend the time spent by consumers in the store. Likewise, fashion brands also customise their merchandise according to demand and demographic parameters.

Store Sizes

Sales per sq ft and productivity of space utilised have become an important parameter for success of a brand. A majority of the 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.

A comparison between the average store sizes in malls located within metros vis-à-vis non-metros reveals that there is hardly any difference between them. Also, no direct correlation between the store sizes and their locations exists, i.e. the average store size in one of Delhi’s leading mall could be the same size as the size of a store in Bhopal, Ahmedabad or Baroda.

 

City

Mall Name

Average Store Size (sq ft)

Delhi

Select Citywalk

500-600

Gurgaon

Ambience Mall

1000-1500

Delhi

DLF Promenade

500-600

Jaipur

World Trade Park

400-600

Ludhiana

MBD

300-400

Amritsar

Trillium

400-600

Bhopal

DB Mall

500-600

Goa

Mall De Goa

700-1000

Nasik

Nasik City Centre

700-1000

Coimbatore

Brookefield Mall

800-1000

Madurai

Millennium Mall

800-1000

Ahmedabad

CG Square

400-500

Baroda

Inorbit

500-700

Nagpur

Empress Mall

800-1000

 

The flagship stores, which showcase a brand’s variety of merchandise, are generally bigger in size, and are generally found in prominent locations across these cities. So while store sizes may be comparable in the metros and non-metros, brands generally have a larger footprint in the metros by having several smaller stores in different malls and high-street locations vis-à-vis a single store in a non-metro.

It could also be due to brands wanting the non-metro consumers to have the same experience as their metro counterparts. The same holds true if we compare the store sizes at high-street retail locations in metros and non-metros.

 

City

High Street/Market

Average Store Size (sq ft)

Delhi

Connaught Place

1000-4000

Delhi

Khan Market

450-1000

Delhi

South Extension

500-1000

Jaipur

MI Road

400-600

Guwahati

GS Road

400-1000

Amritsar

Model Town

800-1000

Goa

June 18th Road

500-1000

Nasik

College Road

700-1000

Coimbatore

DB Road

1000-1500

Trichy

Thillai nagar main Road

1000-1500

Madurai

Theni bypass Road

1000-1500

Ahmedabad

CG Road

800-1500

Baroda

Alkapuri

500-1000

Nagpur

Dharampet

600-800

 

Gazing Into The Future

A look at the average rentals across some of the established high-streets in metros like Delhi and Mumbai shows how non-metros like Chandigarh have a similar range of rentals as the former while Goa has higher rentals than Bangalore.

 

City

Average Rentals (INR/sq ft/month)

Delhi

350-1200

Mumbai

300-1000

Bangalore

150-300

Hyderabad

100-200

Chandigarh

700-1000

Goa

200-350

Ahmedabad

140-150

Nagpur

120-140

 

As bigger cities would reach saturation point soon, the next phase of retail real estate growth is expected to come from non-metros. The rentals in non-metros may increase in quality mall supply and prominent high-street locations depending on the economic conditions and consumer demand in the long run. The upward movement, though, will be in line with growth in consumption.

 

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