NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News  » Business » Retailers see future in shop-in-shops

Retailers see future in shop-in-shops

June 23, 2009 10:43 IST

Future, Shoppers Stop, Landmark go slow on standalone speciality outlets. Standalone outlets are out, shop-in-shops are in.

That seems to be one of the dominant themes of the organised retail sector, which is now trying to get its act together after the super growth between 2006 and 2008.

Consider this: Kishore Biyani's Future Group, which owns the country's largest retailer Pantaloon, is converting the standalone stores of book and music chain Depot into shop-in-shops within Big Bazaar.

While the number of Depot shop-in-shops has risen to 123, that of standalone stores has come down to nine.

Same with UK-based footwear brand Lee Cooper. The Future Group is in the process of converting the 30-odd independent stores of Lee Cooper into shop-in-shops. The group has also converted its home-ware brand Mela as furniture store Collection i and Fashion Station stores as Fashion within the Big Bazaar outlets.

Biyani isn't alone. Others such as department store chain Shoppers Stop are also doing the same.

The Raheja group-owned retailer had earlier planned to open standalone outlets for its children and women's wear brand Mothercare. That plan has been changed to shop-in-shop formats only.

"We open new stores without much information, but when we close them, we have complete knowledge about the operations," B S Nagesh, managing director of Shoppers Stop, told Business Standard earlier.

Shoppers Stop recently pulled out of a catalogue retailing venture with UK's Home Retail group under the Hypercity-Argos brand.

The company exited the foods business after announcing that its Café Brio outlets would be replaced with Café Coffee Day outlets.

Another brand, Fresh Basket, has become a private label of group firm Hypercity Retail.

Dubai-based Landmark Group is also going for more shop-in-shops for its brands Kappa and Bossini, though a group official says they are also looking at exclusive stores for these brands.

Does it mean standalone stores have lost their USP? No one is quite sure, but Purnendu Kumar of business consultancy Technopak Advisors says having shop-in-shops in larger formats helps retailers in getting better sales than standalone speciality stores.

"Big format stores are able to capture both monthly purchase and impulse purchase of shoppers. But it's still difficult to generate enough footfalls in speciality formats,'' Kumar says.

Even retailers admit the problems in running speciality formats, particularly during a downturn.

"Speciality formats have no takers in a market where people are cautious about spending on lifestyle products," said a top Future Group official on condition of anonymity.

The other reason, and the more crucial one, for the shift  is the cost factor. For instance, retailers have to shell out more rent per sq ft in speciality formats than hypermarkets where they book large space and get cheaper average rates.

"Besides, by doing shop-in-shops they can save a lot on power, staff, security and other utility bills,'' says Kumar.

Others agree. Anand Raghuraman, partner and director at Boston Consulting Group, says in the last 6-12 months, retailers have realised what went wrong or right. They have done many pilots in terms of formats, merchandise, offerings and have a much better idea now in terms of what works and what doesn't.

Retailers say the high rentals are just not cost-effective for standalone outlets. "None of the business models were bad, but rentals were killing. We couldn't get out earlier because of a two-year lock-in that most malls impose. Now that the lock-ins are over, we are pulling out of the standalone outlets," says a leading retailer.

Raghavendra Kamath in Mumbai