At a time when the risk-taking urge of organised Indian retail has dropped to unprecedented levels, thanks to poor sentiments, efforts to boost sales by offering heavy discounts are also failing to attract ‘potential’ buyers. However, this has ultimately resulted in Indian consumers demanding the moon from retailers. A recent KPMG report on Indian retail did suggest the possibility of retailers moving into tier II cities, but a common belief of the slowdown not having touched these cities cannot be the only reason to take this route. There may be many others. IndiaRetailing presents ground zero analysis of the Manchester of India — Kanpur — and why retailers are considering it important to mark their presence in the city.
While aggressive expansions of retail stores show a magnified version of the clamour for instant success, similar haste for easy success is visible in smaller ecosystems too.
The hypermarket format of Kishore Biyani-led Future Group — Big Bazaar — operates one store in this commercial capital of Uttar Pradesh. However, the company plans to open two more stores here.
One proposed Big Bazaar store will be opened in a stand-alone property as anchor with food court and a multiplex. Meanwhile the high profile department store Pantaloons is also present in the city.
“Kanpur is a large town with a good consumption and has enough potential. Our earlier store was in Lucknow and Kanpur is an extension. Kanpur is one of the cities where Pantaloons opened before Big Bazaar and is now one of the better performing stores,” says Rajan Malhotra, president, retail strategy, Future Group.
“We are opening our second store in Kanpur in the third week of May. Kanpur as a city can take another store and eventually we will have three stores there,” he added.
Discussing the reasons to expand in Kanpur, Malhotra discloses, “There is no reason for one to complain about Kanpur. Our existing store is already matching our expectations in terms of performance. That’s the reason why we are opening a second store in the city. We would love to open a third store in the city also. I believe the city has the capacity to take 3-4 stores comfortably.”
Another pan-Indian retailer having presence in the city is M&B Footwear. Elaborating the potential of the city, Krishnendu Kundu, VP, M&B Footwear says, “In any retail business, we term an individual store as a unit. In metros, the rentals per square feet are much higher than in tier I and II cities. So if you do that comparison, we are getting returns out of the stores in Kanpur. I can’t compare the business with a store that is doing business of Rs 15 lakh per month. We can’t expect that kind of returns from such stores in these cities from our product range. But, at the same time, if you compare the rentals vis-à-vis any metro, then in any case they are lower in such cities. So the economics are good in terms of bottomline support.”
When asked about the brand consciousness of the customers, Kundu says that while that is very high at the moment, it is improving steadily.
Discussing the strengths of the city, he says, “Buying pattern of the city is improving and it is good for organised brands. Earlier, this was a totally unorganised market. The buying pattern is shifting from unorganised to organised. Kanpur has been in the throes of a transition — on one side is strength and the other side are the weaknesses. And the main weakness is that the city still has lots of unorganised brands.”
“Having said that, we find the market prospective enough for our retail brand to grow. I can never expect that a Kanpur store will generate the turnover of a store in a metro, but at the same time we need to have presence across all major cities, and not only metros, because there are lots of tier I and II cities that contribute to the business. From that point of view Kanpur is a crucial city for us,” he adds.
About the growth of the store, he informs that the outlet is not yet 24 months old and so it will be difficult to provide specific fugures. But store sales are growing by about 15-20 per cent, he confirms. “We will launch our second store in the city in the near future,” he adds.
One of the other retailers who will be exploring the city with the launch of Z Square Mall is the department store chain Westside.
Smeeta Neogi, head – marketing, Westside, says, “Kanpur has a lot to offer for retail development and after initial research we found it a good market to foray into. It has a huge young customer belt because a number of educational institutes are there. The industrial sector is also growing. “
When asked about expectations from the market, she adds: “We don’t set targets before opening stores. But after initial research, we found a very good prospect in the market.”
Brands that are present in the city include John Players, Puma, Nike, Peter England, Raymond, Kappa, Moustache, United Colors of Benetton, Indian Terrain, Levi’s, Reebok, ColorPlus, Koutons, Adidas, Allen Solly, Ritu Kumar, Kappa, Cantabil, Pepe Jeans, Biba, Liliput, Van Heusen and Titan.
Being a metropolitan city sprawling over an area of 260 square kilometres, Kanpur is the biggest city of the State of Uttar Pradesh and is the main centre of commercial and industrial and educational activities.
Famous for housing the Indian Institute of Technology, this commercial hub of Uttar Pradesh is a one-stop destination for millions of students preparing for engineering and chartered accountants exams. Reason: Faculties who are associated with IIT. In fact, when the city is claimed to be driving the largest student traffic after Kota, Rajasthan, the mushrooming of coaching institutes provide proof to the belief. Presence of the country’s premier educational institutions including Harcourt Butler Technological Institute, Agricultural College, Indian Institute of Technology, GSVM Medical College, National Sugar Institute, and Government Textile Institute, also add to the reasons for increasing traffic. Hence, the city, inevitably, enjoys the presence of young and aspiring students with disposable money to spend.
When Rajan Malhotra says that the city has the highest numbers of self employed people and therein lies Kanpur’s uniqueness, he has reason to say that. The city is home to SMEs engaged in leather, cotton and wool production, flour and refined oil mills, sugar refineries and chemical industries. According to estimates, more than 40 percent of the people in Kanpur are self employed.
However, entrepreneurial spirit also has a flip side — official figures show that Kanpur is one of the most polluted cities in the country due to the existence of various types of industries in and around the city.
JK Group brought the first steel company to Kanpur. LML has also been manufacturing two wheelers in the city. At present, Kanpur has mostly industries relating to leather footwear and cotton textiles. Other factories include silk, woollen and jute textiles, food products, fire-bricks, fertilizers, railway wagons, textile machinery, television sets, metal ware, leather goods, soap, tents, durries, fountain pens, hosiery, cutlery, television picture tubes, etc.
In Kanpur, banking services are availed of by 61 per cent of the households (Census 2001). About 8 per cent of the households did not possess basic assets such as vehicles (bicycle, scooter, moped, car, jeep, etc.), televisions and radios.
According to the census 2001, Kanpur has a population of 25.51 lakhs. The average annual growth of population was 3.5 percent during the period 1991-2001, up from the average annual growth rate of 2.6 percent in the previous decade (1981-91).
Analysts say that one of the factors for high population growth is higher number of in-migration to Kanpur city from other areas. As per the simple graph method, projected population is 48 lakhs in 2031, which means that another Kanpur will be added in next 25 years. The average population density in Kanpur is 97.56 persons per hectare. The density in core area is six times higher than the outer area.
Despite the fact that this Manchester of India is deprived of air connectivity, it enjoys the privilege of being connected by road with all the major cities of the country. Located just 79 km from Lucknow, 193 km from Allahabad and 269 km from Agra, the commercial capital of UP is situated on NH2 on the Delhi-Agra-Allahabad-Kolkata route and NH25 on the Lucknow-Jhansi-Shivpuri route.
One of the major shortcomings of the city is the power supply shortfall. Power outages lasting 10-12 hours per day on an average are not uncommon. “Connectivity is not an issue; the roads function extremely well. But electricity is definitely an issue; in fact, getting sufficient supply of electricity in UP is always an issue,” feels Malhotra.
Meanwhile, according to media reports, Kanpur Development Authority is planning to develop an additional 33,700 hectares of area for the city. In the master plan 2021, provision for inner and outer ring road, new terminals, vegetable and grain markets and development of new colonies in close proximity to commercial hub has been proposed.
An SEZ is also being established in the hinterlands of the city to boost trade and industry.
The contribution of SMEs have largely contributed to the growth of real estate in the city. Accordinf to analysts, the boom in the real estate market in the city is forecasted because of growth in the retail sector in the days to come. The recent development in the real estate market is the decision of Indian Railways to use their 800 hectares land that has been lying unused in city. The Railways have decided to develop these lands commercially under Public-Private- Partnership (PPP) scheme.
The shopping destination of the city include The Rave in Sarvodaya Nagar, The Rave 3 at Parvati Bagla Road, The Mega Mall at Noronha Crossings, A2Z shopping Mall at Sisamau, Salasar Mega Store at Civil Lines, Somdutt Plaza Parade and Citi Fashion Mall at Fazal Ganj.
Meanwhile Z Square Mall is also complete and according to unconfirmed sources the property will be opened to the public by September 2009. However, the company’s website claims the anchor locations of the mall will be in the hands of Westside and Lifestyle. “Z Square mall is one of the largest malls in the city and Westside will be an anchor there. Getting into Kanpur is significant for us,” says Neogi.
Further, according to industry estimates, the real estate prices have appreciated by 15-20 per cent in the commercial areas like the malls, Chunniganj and GT Road.
—Shailesh Shah & Sarimul Islam Choudhury