In a model that will fundamentally differ from its partner Wal-Mart's, Bharti Retail has finalised a three-tier retail format that will provide customers access to a store 1.5 to 7 km from their homes.

Bharti Retail, a subsidiary of the Delhi-based Mittal group, has tied up with Wal-Mart for back-end and logistics support. Foreign direct investment in retail is currently prohibited in all but single-brand retail stores.

Based on customer research, Bharti Retail is planning a small-format convenience store within 1.5 km of the customer home, a mid-level store 2-3 km distant and a hypermarket within a 5-7 km drive.

This is in sharp contrast with the Wal-Mart retail model in the US which is dominated by large-format stores on city outskirts. The world's largest retailer has a few small convenience stores in countries like Mexico to cater to neighbourhood demand.

Bharti's model, on the other hand, will have more convenience stores and fewer hypermarkets.

"In India, our studies have shown we require a multi-format store structure, and for large store formats we have to consider the challenges posed by our poor infrastructure. The distance has to be convenient for customers to go to the store," explains Bharti Retail President and Chief Operating Officer Vinod Sawhney.

The small stores will range from 2,000 sq ft to 5,000 sq ft in size and will mainly stock food, grocery and household items that have a high purchase frequency of seven to eight a month.

The company plans to build a majority of the stores within this format under a model that will franchise existing mom-and-pop stores.

The hypermarkets will range from 75,000 sq ft to 1.5 lakh sq ft in size and a mid-level store will be 25,000-50,000 sq ft in size.

The new retail entrant, which hopes to have over 10 million square feet of retail space by 2015, is also considering shop-in-shop formats (under which it would rent space to a jewellery or pharmacy chain), and a private label for food, grocery and even consumer electronics.

It is also studying the possibility of introducing free home delivery services and an online format, should customer demand exists.