Startups
Bet on Small Town Boom
A
clutch of entrepreneurs create business models targeting increasingly affluent
non-metro consumers
In places largely bypassed by the big-name brands, enterprising businessmen are building malls, multiplexes and retail businesses to take the latest in shopping and consumer trends to small-town India
Ventures such as Promart, Stargaze Entertainment, eDabba and Miraaya are catering to an increasingly affluent set of consumers living in cities and towns like Ajmer, Kurukshetra and Tinsukia who are demanding the same products and services that metrodwellers have easy access to. And, as these entrepreneurs are finding out, small-town consumers are also willing to spend, if not more then at least as much as metro-consumers.
A Nielsen study late last year mentions that Middle India, a region made up of approximately 400 towns, each with a population of 1-10 lakh, is home to 100 million Indians and accounts for a fifth of the overall consumption of fast moving consumer goods.
“The Indian economy is going to be fuelled increasingly by the 400 million people who live in small towns and entrepreneurs who recognise this have an advantage.” says Justin Sargent, MD-Consumer, Nielsen India. “These entrepreneurs are following a smart model of meeting small town aspirations.”
LOW COST
It is the prohibitive rental costs in metros, along with the crowded retail scene, which made Punit Agarwal, chief executive officer of discount-based brick-and-mortar fashion chain Promart Retail, target non-metro locations such as Vadodara, Rajkot, Vapi, Anand and Aurangabad. “All our margins will get eaten up by just the rents in metro cities. What is the point of having a presence in metros; we need to make money as well,” says Agarwal, who, along with co-founder Ashish Garg, bought out Promart from Provogue India in late-2011.
The company, which also supplies uniforms to schools and corporates, is planning to launch stores in smaller towns such as Bilaspur, Silvassa and Bhilai. The company is also tying up with local franchisees in still smaller towns like Latur and Beed. Agarwal says the company, which also has retails a private label brand, has seen a growth of 10-12% month-on-month from its store sales and is targeting revenue of 250 crore from stores.
SPENDING POWER
Sumant Bhargava, founder of Stargaze Entertainment, which runs multiplex chain Glitz Cinema, says consumers in these locations are willing to spend for good quality products and services. Bhargava set up Stargaze in 2008 and in fact started operations in Delhi. But he soon shifted his focus to nonmetro centres.
“All cinema chains focus on the top few cities, where consumers have access to many forms of entertainment,” says Bhargava, who expects to double revenues from 35 crore this year to 65 crore in the next fiscal. “In smaller cities and towns, movies are the only form of entertainment available and now people are willing to pay 150 for a cinema ticket if they get a multiplex experience.” Stargaze operates mall-based multi-screen cinemas in Ajmer, Raipur, Ranchi, Kurukshetra, Dehradun, Bilaspur and Jodhpur. The company is now setting up multiplexes in Muzaffarnagar in Uttar Pradesh and Yamuna Nagar in Haryana.
While Promart has a 100 square metre shopin-shop in Mumbai and Bhargava still operates the Delhi multiplex, the entrepreneurs say they will continue to focus only on smaller centres. “Our Mumbai store is performing satisfactorily, but it is our stores in smaller towns that are giving us margins of over 10%, so our focus will be on these towns,” says Promart’s Agarwal.
LACK OF CHOICE
Rajesh Jain, co-founder of affordable fashion chain Miraaya, says small-town buyers have never had the choices that a metro-buyer has come to expect as natural. Jain, who was earlier Head - Buying & Merchandising at Lifestyle’s Max brand, set up Miraaya in 2010 to provide Indo-Western apparel to women in smaller towns and cities. The company has over 60 self-owned and franchisee stores, including in centres such as Guwahati, Tinsukia, Vishakapatnam and Gorakhpur. “We have tailored our design for small-town sensibilities, but in the past two years we have realised that women in these towns want the same fashions as found in large cities,” says Jain. The company, which plans to double its turnover to 8 crore this financial year, has an ecommerce platform as well and has also tied up with a handful on online retailers to expand their reach.
NEW MODELS
Ankur Bisen, Associate Vice President-Retail at Technopak, says cracking last-mile delivery will be critical for such entrepreneurs as the lack of infrastructure is a problem. It is to solve this issue that Manoj Kumar, former chief executive officer of Future Group’s electronics retailer Ezone, along with Saurabh B Chaddha, set up a hybrid retail venture, eDabba, in 2011. Apart from an ecommerce platform, the company, which is targeting 50-crore turnover this year, has tied up with small retail stores in tier-II and III cities and towns.
“We have set up computer kiosks where the shopkeeper can guide the consumer to buy products online. We handle the deliveries,” says Kumar, who offers a selection of electronics, books and jewellery among other categories through his venture. Over 80% of all orders for the company come from these kiosks, known as Trust Points, which are present in towns such as Bhilwara, Ajmer, Chhatarpur, Zirakpur and Barnala. “In many of these centres, new products reach only after many months through traditional retail models. When Galaxy S3 was launched, we were able to offer it immediately,” says Kumar, who says eDabba is registering growth of 35% month-on-month.
CHALLENGES
While these entrepreneurs are busy chalking out their expansion plans, they admit that the lack of trained manpower, especially at the managerial level, is their biggest worry. “No one wants to come from big cities to work in small centres,” says Stargaze’s Bhargava, who is now training inexperienced employees to take on managerial roles. “We show them that they can grow with us and hopefully they will stay on,” adds Bhargava.
Logistics and infrastructure issues also dog these entrepreneurs. Companies such as Promart and Miraaya are joining hands with franchisees who have the local knowledge to deal with structural problems in small towns. However, the hiccups of operating in small towns pale in comparison with the opportunities, say the entrepreneurs. “We are aiming to become a $70-million brand by 2017 and that will be powered by smaller centres,” says Miraaya’s Jain.
Radhika. Nair ET120831
In places largely bypassed by the big-name brands, enterprising businessmen are building malls, multiplexes and retail businesses to take the latest in shopping and consumer trends to small-town India
Ventures such as Promart, Stargaze Entertainment, eDabba and Miraaya are catering to an increasingly affluent set of consumers living in cities and towns like Ajmer, Kurukshetra and Tinsukia who are demanding the same products and services that metrodwellers have easy access to. And, as these entrepreneurs are finding out, small-town consumers are also willing to spend, if not more then at least as much as metro-consumers.
A Nielsen study late last year mentions that Middle India, a region made up of approximately 400 towns, each with a population of 1-10 lakh, is home to 100 million Indians and accounts for a fifth of the overall consumption of fast moving consumer goods.
“The Indian economy is going to be fuelled increasingly by the 400 million people who live in small towns and entrepreneurs who recognise this have an advantage.” says Justin Sargent, MD-Consumer, Nielsen India. “These entrepreneurs are following a smart model of meeting small town aspirations.”
LOW COST
It is the prohibitive rental costs in metros, along with the crowded retail scene, which made Punit Agarwal, chief executive officer of discount-based brick-and-mortar fashion chain Promart Retail, target non-metro locations such as Vadodara, Rajkot, Vapi, Anand and Aurangabad. “All our margins will get eaten up by just the rents in metro cities. What is the point of having a presence in metros; we need to make money as well,” says Agarwal, who, along with co-founder Ashish Garg, bought out Promart from Provogue India in late-2011.
The company, which also supplies uniforms to schools and corporates, is planning to launch stores in smaller towns such as Bilaspur, Silvassa and Bhilai. The company is also tying up with local franchisees in still smaller towns like Latur and Beed. Agarwal says the company, which also has retails a private label brand, has seen a growth of 10-12% month-on-month from its store sales and is targeting revenue of 250 crore from stores.
SPENDING POWER
Sumant Bhargava, founder of Stargaze Entertainment, which runs multiplex chain Glitz Cinema, says consumers in these locations are willing to spend for good quality products and services. Bhargava set up Stargaze in 2008 and in fact started operations in Delhi. But he soon shifted his focus to nonmetro centres.
“All cinema chains focus on the top few cities, where consumers have access to many forms of entertainment,” says Bhargava, who expects to double revenues from 35 crore this year to 65 crore in the next fiscal. “In smaller cities and towns, movies are the only form of entertainment available and now people are willing to pay 150 for a cinema ticket if they get a multiplex experience.” Stargaze operates mall-based multi-screen cinemas in Ajmer, Raipur, Ranchi, Kurukshetra, Dehradun, Bilaspur and Jodhpur. The company is now setting up multiplexes in Muzaffarnagar in Uttar Pradesh and Yamuna Nagar in Haryana.
While Promart has a 100 square metre shopin-shop in Mumbai and Bhargava still operates the Delhi multiplex, the entrepreneurs say they will continue to focus only on smaller centres. “Our Mumbai store is performing satisfactorily, but it is our stores in smaller towns that are giving us margins of over 10%, so our focus will be on these towns,” says Promart’s Agarwal.
LACK OF CHOICE
Rajesh Jain, co-founder of affordable fashion chain Miraaya, says small-town buyers have never had the choices that a metro-buyer has come to expect as natural. Jain, who was earlier Head - Buying & Merchandising at Lifestyle’s Max brand, set up Miraaya in 2010 to provide Indo-Western apparel to women in smaller towns and cities. The company has over 60 self-owned and franchisee stores, including in centres such as Guwahati, Tinsukia, Vishakapatnam and Gorakhpur. “We have tailored our design for small-town sensibilities, but in the past two years we have realised that women in these towns want the same fashions as found in large cities,” says Jain. The company, which plans to double its turnover to 8 crore this financial year, has an ecommerce platform as well and has also tied up with a handful on online retailers to expand their reach.
NEW MODELS
Ankur Bisen, Associate Vice President-Retail at Technopak, says cracking last-mile delivery will be critical for such entrepreneurs as the lack of infrastructure is a problem. It is to solve this issue that Manoj Kumar, former chief executive officer of Future Group’s electronics retailer Ezone, along with Saurabh B Chaddha, set up a hybrid retail venture, eDabba, in 2011. Apart from an ecommerce platform, the company, which is targeting 50-crore turnover this year, has tied up with small retail stores in tier-II and III cities and towns.
“We have set up computer kiosks where the shopkeeper can guide the consumer to buy products online. We handle the deliveries,” says Kumar, who offers a selection of electronics, books and jewellery among other categories through his venture. Over 80% of all orders for the company come from these kiosks, known as Trust Points, which are present in towns such as Bhilwara, Ajmer, Chhatarpur, Zirakpur and Barnala. “In many of these centres, new products reach only after many months through traditional retail models. When Galaxy S3 was launched, we were able to offer it immediately,” says Kumar, who says eDabba is registering growth of 35% month-on-month.
CHALLENGES
While these entrepreneurs are busy chalking out their expansion plans, they admit that the lack of trained manpower, especially at the managerial level, is their biggest worry. “No one wants to come from big cities to work in small centres,” says Stargaze’s Bhargava, who is now training inexperienced employees to take on managerial roles. “We show them that they can grow with us and hopefully they will stay on,” adds Bhargava.
Logistics and infrastructure issues also dog these entrepreneurs. Companies such as Promart and Miraaya are joining hands with franchisees who have the local knowledge to deal with structural problems in small towns. However, the hiccups of operating in small towns pale in comparison with the opportunities, say the entrepreneurs. “We are aiming to become a $70-million brand by 2017 and that will be powered by smaller centres,” says Miraaya’s Jain.
Radhika. Nair ET120831
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