It’s all about the format


March 2, 2010

Diwakar Kumar, March 2, 2010

It is an every day challenge for a retailer to satisfy the diversified demands of discerning customers. The further challenges are to reel in more customers, assure their loyalty, drive in more footfalls and the ensure the conversion rate. In order to gain more profits, retailers try to lure the customers with in-store signages, advertisements and customer-loyalty programmes. No matter how unique these strategies may be, they do not guarantee a success rate.

Thus, to ensure a minimum return on investment, the retailers need to ascertain that the format, product assortment and the location of their store assures profits. Exclusive brand outlet (EBO) does ensure that the store is never out of stock, thanks to the predominant one-brand presence. However, veterans argue that it is the multi-brand outlets (MBOs), which drives more footfalls. In the MBOs, the retailers offer wider range of merchandise but EBOs are in command with better visual merchandising, more control over the brand, customer experience etc.

In the response to the open poll question on IndiaRetailing — Exclusive brand stores may allow for greater depth and branding of merchandise, but multi-brand outlets and shop-in-shops are really the revenue drivers for a brand — 91.67 per cent of the respondents support the statement while the remaining 8.33 per cent of them negated it.

Devangshu Dutta, chief executive, Third Eyesight observes, “MBOs and shops-in-shop (SIS) can certainly help a brand build its footprint more rapidly and with lower capital than it could with only exclusive brand outlets. However, EBOs provide more control to the brand on the overall customer experience, merchandise assortment, pricing and margins."

Gopalkrishnan Sankar, chief executive, Reliance Footprint says, “MBOs and shop-in-shops give the size and scalability opportunities. Customers also look for variety of products, choice of price points all in one place. This is best captured by MBOs, particularly the ones who are positioned as destination stores.”

Sunil Sanklecha, managing partner, Nuts ‘n’ Spices maintains, “From any business perspective, the model that leads us to bottom line is the right strategy which depends on different aspects, such as, is the individual brand strong enough to survive with exclusive store format? How do we want to position our brand? Are we looking at the long-term or short-term strategy and strength of the finance on the marketing part.”

He strongly believes that EBOs have better future than MBOs or SIS format. He says, “Everyone wants the larger pie. We see the that the big stores want bigger margins and they start building their own brand. The manufacturers want their presence everywhere in the store but without sharing a larger pie.”

“A well-put together and well-located MBO is usually a destination for most of the categories that sit within it. Also by virtue of the range and brands that it encompasses, the customer engagement is strong. This ensures good footfalls and hence individual brands in MBO’s stand a far better chance of maximising revenues vis-a-vis exclusive stores,” says Viney Singh, MD, Max Hypermarket India Pvt Ltd.

T S Ashwin, managing director of Odyssey India Ltd, which has recently opened an SIS at Easyday Market comments, "This depends on what kind of brand it is. If the brand is niche and has a clear TG, then it needs more exclusive stores to showcase the width and depth of the range. Also it may really not have the market size for selling through multi-brand outlets. If the brand is not niche, then the exclusive stores help in building the brand and the multi-brand stores and shop-in-shops will help in increasing the visibility and reach of the brand as sales channels for the fast moving SKU’s in the brand."

Thomas Varghese, CEO, Aditya Birla Retail Limited says, “Exclusive brand stores have a place in the marketing strategy for a brand as they enhance visibility within the catchment, a consistent story to the consumer and a depth and breadth of merchandise. However, positioning a brand in multi-brand outlets enables the brand to enhance reach across a cross-section of customers thereby driving revenue.”

In the further analyses on the store formats in India, Dutta says, “In a market like India, brands need to follow a blended approach since in many locations MBOs or department stores suitable to the brand may not be available and the only option may be to open EBOs directly or through franchisees.”

“There is no ideal balance between EBOs, MBOs and shops-in-shop. The mix would differ from brand to brand and also change over the lifecycle of any single brand,” concludes Dutta.