The Hindu Business Line : Setting store by formats

Ever walked into, or left a store because of the way it was laid out, its merchandise and service? A store’s design, layout, mix and range of merchandise and pricing, spell its success. These parameters are a function of the store format adopted by the retailer.

While formats can be classified on different bases, they are not subject to a strict definition and can be modified or even combined with others to most effectively serve customer needs. Some of the most common formats on the Indian retail scene are outlined here.

Supermarkets

Everyone knows the supermarket — those self-service stores located in your neighbourhood which offer fast moving consumer goods, groceries and everyday household items.

These stores stock on low value, low margin items and rely on large volumes to generate sizeable sales. The space occupied is large, ranging from 4,000 to 25,000 sq ft. Popular Indian supermarkets include Food Bazaar and Subhiksha.

Department stores

Apparel, footwear, furniture and the like are bought in department stores. These stores stock multiple brands across products and customers can freely access, compare and evaluate merchandise. They are larger in size compared to supermarkets and can cover areas up to 50,000 square feet. These stores are typically located on high streets or as anchor tenants in malls.

Hypermarkets

Combine a supermarket and a department store, and the result is a hypermarket. Shoppers here, therefore, have access to an enormous number of products across categories ranging from groceries and daily household goods to appliances and apparel. Hypermarkets are designed to be a one-stop shop for a family’s needs.

These stores cover vast areas reaching 200,000 square feet. Products are priced low and bulk buying entails substantial discounts. Low prices and margins are compensated through large volumes. Big Bazaar is a prime example of a hypermarket.

Specialty stores

A jewellery store, an electronics store, a sports store, and so on, are examples of specialty stores, which devote themselves to a particular product category and have a clearly defined target market. Specialisation allows them to identify and serve customer needs more effectively.

They provide a high level of service and product information. Customers also get greater choice and can compare brands. International specialty stores include furniture store Ikea and The Gap while sports goods retailer, Proline, figures among Indian specialty retailers.

Another method of classifying formats is the ownership model.

Mom-n-Pop stores

Internationally known as mom-n-pop stores, in India, these kirana stores are the biggest contributors to the retail industry and form the unorganised market.

These are the small, friendly corner stores that offer most groceries, vegetables and other small household goods. Owners of these stores are independent and usually do not own more than one store.

Corporate retail chains

A string of stores in different locations owned by the same institution forms a retail chain. These stores are similar in terms of products, styling and promotions. Examples are Westside or Globus.

Franchising

A retailer (franchiser) can enter into an agreement with another (franchisee) to sell his products or services. A franchiser is typically the owner of a brand and the franchisee is given the licence to use it as per the franchiser’s business format and model. Franchisees pay a fee or compensation to the franchiser.

Franchising is now the favourite method of Indian retailers to expand and build up brand name and sales as it requires minimal capital investment and a control can be kept on costs and inventory. Examples of franchisers are Pizza Hut and Subway.

Shop-in-shops

A section of a department store can be leased or rented to another party. This is termed as a shop-in-shop and is a good method for manufacturers to expand retail footprint while keeping a tab on costs.

An up-and-coming format is e-tailing which uses the internet to sell products, famous among these being Amazon.com.

This format is gaining popularity on account of its convenience as shopping does not involve travel, can be done at any time of the day and comparisons are easy.

E-tailers additionally benefit as they have the flexibility to wait for customer orders before sourcing from suppliers. Besides these, there are other formats such as off-price retailers who offer manufacturer’s seconds, or marginally defective products at a deep discount, a prime example being factory outlets.

Another format is cash-and-carry, a wholesale format where customers pick out products, pay in cash and carry them away.

It is primarily meant for businessmen and small retailers to stock on limited amount of a variety of goods. Metro cash-and-carry is the Indian player in this format.

A distinction also can be made between value and lifestyle retail. The former offers quality products at affordable prices while the latter plays on image and ‘shopping experience’ offering branded products with high customer service.

Vishal Retail is an example of a value retailer while Wills Lifestyle or Reebok is a lifestyle player.

Retail formats are aplenty and only some of them are explained here. Customer behaviour being unique according to region, a universally applicable format cannot be enforced.

The organised retail industry in India is just evolving and retailers are experimenting with formats to design viable stores.

The flexibility of store formats allows a retailer to decide on those which are a fit between his objectives and customer needs.

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