Even as India is slated to become a major e-commerce market, the country is, ironically, a testimony to the fact that brick-and-mortar is here to stay.
Amounting to be only 7 percent of the overall market size right now, organised retail is expected to become over 10 percent by 2020, growing at a CAGR of 2-25 percent annually (Source: Anarock Retail Report).
The rapid growth of organised retail in the Indian market, armed with liberalised FDI and GST policies, has not only made the country a lucrative destination for several international brands to anchor on its shore, but has also expanded Indian customers’ view of in store experiences.
Today, the world’s biggest fast fashion brands are penetrating smaller Indian cities, homegrown brands are turning their private labels into single brand retail identities and several unorganised retail brands are hobnobbing at an urban mall with larger store footprints. At present, over 14 million retail outlets operate in the country and there is a surprising slew of reasonable strategies that is making these stores profitable. Starting from developing a store design ID, to regularly improvising them to stay abreast of customer expectations, to keep the capex commensurate with the opex to managing much fast-paced rollout scenario, the list is impressive.
So, what has really come out of the growth story is the undying spirit of brickand- mortar retail?
Design & Demographics
If we look at organised retail in India, brands with over 100 stores usually have various design derivatives depending on the market they cater to. Mostly, debut stores and urban catchments are selected as flagship stores or premium store design IDs, while every brand has a concise version of design ID for smaller markets.
However, this trend is changing as more Tier I &II markets are coming into the limelight, becoming as good as metro markets. Cities like Pune, Coimbatore, Chandigarh, Guwahati etc. are increasingly hosting flagship / first-cut design IDs of many brands. These brands also argue that space is not a major constraint in smaller cities as compared to their metro counterparts. Therefore, it’s easier to justify capex and thereby the sale-per-sq. ft.
However, when it comes to crafting store design ID, a stronger focus is what customers demand and what brands need to deliver. Interestingly, many debut brands and stores take a lot of initial years to fine-tune their IDs before they finally find the right design.
Vishal Kapoor, Group Chief Design Officer, Future Group, explains: “As a retailer, one must understand the essence of the brand and what you want to communicate to your customer as a brand story. These two must be aligned. There are many cases where the brands are able to do justice, but the customers can still not connect to the brand. Parallelly, we must look at the socio-cultural space that we live in. If for an elite customer, I create a clean, touch-me-not space, even if it’s for the 5-10 percent of the economic power of the urban population, the lack of excitement may mar the design objective.”
Kapoor’s idea is reflected in most store designs that international brands are creating in India. Although many of them are global latest design IDs, these are tweaked due to space constraints in the country (globally, the store sizes are much more expansive while in India, this is at least 30-40 percent less). Also, India’s retail space generally offers 50 percent lower ceiling height calling for different facade design and window space disbursements.
Value Engineering and Costs & Control
According to an Anarock report released late 2018 named “Rebirth of Retail Malls: New, Improved & Revitalized”, India generated 91 percent of retail sales through brick-and-mortar stores, ahead of China and the USA.
But will more stores mean more business for retail brands operating in India? Clearly, no. In fact, retailers are taking cautious steps towards not only avoiding loss-making store ventures but also keeping the capex cost low.
In this fast-paced store rollout era, the rollout period of each store becomes a key factor in store profitability. Over last 5 years, rollout time has been reduced by about 50 percent by all brands depending upon store sizes. Store sizes ranging from 500 sq. ft. to 80,000 sq. ft., take about 30 to 90 days between the completion of civil work to complete execution.
Mridumesh Kumar Rai, Group President, Sara Group – which operates two international brands, Love Moschino and Florsheim, and one in-house footwear brand Ruosh – shared, “As we refine design IDs and go ahead with store rollouts, our execution cost has come down after a few initial stores. For Ruosh, we are working on the third version of retail design. The retail designer’s fee has certainly gone up compared to the earlier design execution. However, since the brand base is not too large and is about adding 4-5 stores a year, the capex certainly comes down.”
Sudhir Saundalgekar, Director – Projects, Raymond says, “Four years ago, the traditional execution time used to range between 90 to 150 days but today, across all our brands, no store takes more than 2 weeks to 30 days to get operational. Moreover, we have been able to keep the capex cost constant, in some cases, even lowered it. The answer lies in value engineering in all aspects of design. We have largely moved to modular fixtures, lighting system etc. We have also moved maximum of off site work into onsite, resulting into saving on our time frame hugely.”
Saundalgekar manages store rollout for all 9 brands of Raymond.
Amongst three lifestyle brands by the Landmark Group operating in India,in the order of store capex value, the lowest is Max, followed by Home Centre and finally Lifestyle. While the group is gearing up to revamp Home Centre’s store design ID in India first, over the last 10 years it has reported a 10 percent increase in the overall capex value. Why?
Sasikumar Ramaswami, President/Group Head – Store Design & Projects, Landmark Group, explains this saying, “Overall, the market inflation is about 4-5 percent, but we are aggressively integrating technology at the store level across all brands causing our capex to go up.”
Interestingly, a large part of design components has moved into plug-and-play systems. Specially display fixtures and lighting systems are more modular today, adapting to all sorts of properties and retail spaces. In many cases, these plug-and-play systems are self-instalable, saving even in the manpower and logistics investments.
Post the LED boom about a decade ago, lighting fixtures are much more adaptable offering lowered opex cost through technologies like tunable LED, automations, Bluetoothenabled, Li-Fi etc.
There have been many advances in both display fixtures and lighting, and today there is a series of integrated display systems up for grabs for retailers, which are smart not only for display purposes but also come with the promise of reducing opex costs.
Although there’s a mixed opinion on which design element incurs maximum budget after the cost of civil interiors, retailers have agreed on the reducing cost of lighting fixtures along with their optimised effi ciency.
However, Tyrone Li, India Head of Japanese lifestyle brand Miniso, which registers an exponential growth rate of 80-100 stores each year worldwide including their relatively new market India, has a different opinion to share. “Each and every element is an important and integral part of the store design and format. A budget is created and divided in accordance with specific needs of the business. However, lighting and fixtures form a major chunk where budgets are allocated. Further, depending upon the requirements and different needs the budget is disposed appropriately to other sections,” he says.
Raising the Visual Merchandising Bar
Out of 14 million retail outlets that operate in India, only 4 percent of them are more than 500 sq. ft. Recently, one of world’s largest fast fashion retailers, H&M was in news for their plans to reduce store size in India. Globally, India’s organised and to some extent, unorganised retail too are waking up to the value of an efficient store than sheer largeness of store space. This is when Visual Merchandising often drives store efficiency.
More and more retailers are waking up to the fact that Visual Merchandising is no longer refrained to windows and seasonal displays but has a large role to play in order to drive brand proposition, footfalls and sales conversion. Many notable large format retailers agree that merchandise on mannequins sell at least 50 percent faster than stacked merchandise. And that’s not all. Visual merchandisers today are optimising the roles of fixtures, lighting as well as focal areas of stores.
More interestingly, Visual Merchandising is fast becoming a priority for non-apparel category too. Rai agrees, saying, “Visual Merchandising has been underplayed in the footwear category for many years. For Ruosh, we have lately added a series of product-led Visual Merchandising schemes and they have done wonders for our new products launches in terms of customer education as well as sales conversion. Apart from these, we have sincerely started adding Visual Merchandising space in our stores like Craftsmanship walls etc., which have contributed to narrate brand legacy.”
For a category like furniture, which is highly populated by unorganised players, it was pertinent for India’s Omnichannel furniture behemoth, Urban Ladder.
Ashish Goel, Co-Founder, Urban Ladder, says the brand’s learning as far as Visual Merchandising goes. “In terms of Visual Merchandising, the earlier format that we used to follow was a vertical layout of our products. After observing how this layout was working in the store, we decided thereby increasing our return per sq. ft. We also altered how we displayed our window merchandising. We incorporated a living room setting in a narrow space.”
Managing the Rollout Spree: Key Takeaways
Home to the shopping practice where 90 percent retail sales take place in physical stores, India’s length and breadth is sure to be explored by more malls, more brands and thereby more stores. While the scale of rollout is inevitable and store numbers are going to beef up in period shorter than expected, the success of brick-and-mortar will largely rely on the profitability of each square feet of the store. Therefore, every retailer is drafting strategies to keep the store design relevant to customers, innovate on modularity of store design and are looking for more opex-friendly design options.
What that is expected to parallelly bring is the opportunities for rollout vendors in fixtures, lighting, signage, design consultants etc. We can see that the vendors are working sincerely on developing easy-to-install logistics friendly products, often with international benchmark along with bringing the price down drastically.
Almost every retailer today agrees that opening more stores is bringing their capex down. All they are applying is better vendor management, focus on value engineering and developing design strategies which is extremely customer specific.