Priyanka Tiwari
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With the rise of e-commerce and quick-commerce, most consumers buy products online than visit shopping centers, leading retailers to downsize their store space. A number of domestic and foreign retailers have also noted that they are shifting to a more focused, smaller format which features premium customer service and products.
This is also seen in the US where retailers like Target, Ikea and Macy's have smaller format stores to capture relevant markets. Shoppers Stop, Decathlon, Spencer Retail and Ikea are some of the retail chains venturing towards this marketing strategy in India.
“We will support our premiumisation strategy by opening smaller, select product HomeStop stores,” said Kavindra Mishra the Managing Director of Shoppers Stop, a leading and the oldest department store chain in the country. Those stores offer a variety of products such as clothes, home decorations, electronics, footwear, cosmetics, books, etc.
Earlier Mishra claimed that the retail chain had closed down 31 stores over nine years due to them severely underperforming. He also mentioned how some markets do not have enough footfall for stand-alone stores these days which is a noticeable change in certain consumer trends.
"Department stores used to be the destination. But with e-commerce and quick-commerce these are no longer relevant. People actually want things much faster while traveling lesser. Hence, businesses need to be present in many more places, resulting in the need for smaller formats that are closer to the consumer," said Anand Ramanathan, Partner and Consumer Products and Retail Sector Leader, Deloitte.
Spencer Retail, which is a part of the Goenka group, is utilizing smaller stores as local growth hubs. The company claims there is a “huge opportunity” in small store sales because of fresh product focus, a revamped supply chain, and loyalty/subscription programs.
These small-format stores can also act as physical hubs for online orders, thus blurring the lines between physical and online store marketing through focused penetration of certain neighborhoods. These initiatives fall within the framework of Spencer's plans to increase same-store sales growth and consolidate the company’s presence in strategic areas. Last month, the retailer from Kolkata launched its ordering app JIFFY and entered the market of quick commerce.
Ramanathan highlighted proximity, rental costs, and market expansion as the main drivers towards those strategies alongside efficient supply chains.
"The smaller box stores, defined as those less than 15,000 square feet, are growing at double digit rates while larger outlets (over 15,000 square feet) are in decline, grocery stores for instance. The shift in demand from consumers is causing a considerable change in the composition of real estate that retailers are using for new stores," Bharat Mimani, Managing Director and Partner at BCG said.
Earlier this month, Swedish furniture retailer Ikea and French sports goods retailer Decathlon unveiled their plans to increase their presence in India through smaller stores. As per the media reports, he stressed that Decathlon which has a yearly revenue of Rs 4000 crores will be spending Rs 1000 crores over a period of five years. In the Financial Express, Decathlon plans to open smaller stores with footprints between 200 and 500 square metres. Furthermore, there are plans to open mini stores of about 100-120 square metres which will have a limited stock. Customers can walk into these stores and make quick purchases.
Ramanathan posed, "For example, looking at Decathlon, their stores used to be located on the outskirts of the city. But in cities like Bengaluru, traffic makes it extremely challenging to move around. How do you get closer to the consumer while having your store service e-commerce? Delivery expectations are getting shorter, so can you get close to the consumer?" As of 2024, Decathlon India has 122 stores spread across 19 states.
According to media sources, Ikea plans to set up shops with 30,000 to 70,000 square feet of retail space as part of their expansion plans. In India, IKEA is known to have these standard large format stores that usually range from 460,000 to 530,000 square feet.
However, smaller formats will continue to dominate especially in the metros and tier 1 cities because of expensive real estate and evolving consumer sentiments. But in tier 2 cities, larger formats may also be available when trying to strengthen your brand where you haven’t established a presence yet. So, it's possible you'll encounter bigger primary-level formats in tier two and further, but in metros, size will always matter," mentioned Ramanathan.
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