Shop-in-shop model for Modern Trade

Or­ga­nized re­tail­ers can make hand­some gains by rid­ing the “Nano Wave” of health-cum-or­ganic stores.

Progressive Grocer (India) - - Contents - By Su­nil Ku­mar The writer is GM, Ke­jri­wal Bee Care Pvt. Ltd. Views are per­sonal.

How or­ga­nized re­tail­ers can ride the “Nano Wave” of health-cum-or­ganic stores.

Health is the new mantra nowa­days and this is man­i­fest in the way su­per­mar­ket shelves are crowded with so many ayurveda, or­ganic, nat­u­ral prod­ucts and neu­traceu­ti­cals th­ese days. As health con­cerns be­come per­va­sive, the mar­ket for such prod­ucts is boom­ing.

As per var­i­ous re­ports by As­socham, Mckin­sey and other con­sult­ing or­ga­ni­za­tions, the mar­ket for neu­traceu­ti­cals in In­dia is ex­pected to touch USD 2 bil­lion, about USD 1.5 bil­lion for or­ganic, and about USD 2 bil­lion plus for ayurveda – by 2020. Com­pa­nies like Patan­jali, Hi­malaya, Dabur, Sri Sri Prod­ucts, and oth­ers have cap­tured big slices of the or­ganic and health and well­ness mar­ket in In­dia and have big plans for the fu­ture.

The com­bi­na­tion of Nat­u­ral, Ayurveda, Neu­traceu­ti­cals and Or­ganic can be said to con­sti­tute the NANO seg­ment in the FMCG cat­e­gory. An­a­lysts pre­dict that it is a seg­ment on the cusp of an ex­plo­sive boom and where modern re­tail will see at least 100% rise in sales in the next three years.

To get more per­spec­tive on the growth po­ten­tial of this seg­ment, one only needs to look about two decades ago, when the health and well­ness move­ment in this coun­try showed the first signs of surg­ing ahead. At that time, no­body re­al­ized that the seg­ment would wit­ness rocket-fu­elled growth in the years to come. Since then or­ganic re­tail chains in cities like Ban­ga­lore, Chen­nai, Hy­der­abad and else­where have mush­roomed. To­day there are hun­dreds and hun­dreds of or­ganic stores across the coun­try with south In­dia tak­ing the lead.

But or­ganic stores can’t drive prof­itabil­ity by them­selves. There has to be a com­bi­na­tion of Health and Or­ganic for a store to ring in the prof­its. That is why I am sug­gest­ing that present day Modern Re­tail must cap­ture the NANO wave and cap­i­tal­ize on the mar­ket po­ten­tial of the seg­ment.

What is the in­vest­ment in­volved for a shop-in­shop NANO store? An or­ganic-cum-health store will, on av­er­age, re­quire about 400-500 square foot of re­tail space, one billing soft­ware and carts. There can be four sec­tions, each show­cas­ing one NANO cat­e­gory. There can be 400-500 SKUS, which will be the core of a NANO store. In all, there can be a max­i­mum of about 1,000 SKUS. The av­er­age in­vest­ment re­quired for a 400-500 square feet NANO store would be about Rs. 6 lakh and would be in­clu­sive of the in­vest­ment on rakes, etc. The ex­pected ROI will be in range of 18-20% p.a. net, af­ter meet­ing all ex­penses from the day of in­spec­tion. The break-even can be eas­ily achieved in two years time. If one can com­bine online and off­line in a NANO store, then ex­pect the re­turns to be even faster.

I cite one ex­am­ple of a NANO store that has done very well: The Roots Or­gan­ics Life­style Store in Ad­chini, Delhi. The store, on av­er­age, has a turnover of Rs. 80 lakh plus per an­num and its monthly ex­pen­di­ture is about Rs. 25,000-30,000. Its av­er­age mar­gin is about 20% on sales. So the store makes about Rs. 12-24 lakh profit per an­num.

There are many more ex­am­ples of NANO stores do­ing good and prof­itable busi­ness. That’s all the more rea­son why modern trade must ex­plore the NANO op­tion for a shop-in-shop con­cept.

The com­bi­na­tion of Nat­u­ral, Ayurveda, Neu­traceu­ti­cals and Or­ganic can be said to con­sti­tute the NANO seg­ment in the FMCG cat­e­gory. An­a­lysts pre­dict that it is a seg­ment on the cusp of an ex­plo­sive boom and where modern re­tail­ing will see at least 100% rise in sales as well dis­play space in the next three years.

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