Shop-in-shop model for Modern Trade
Organized retailers can make handsome gains by riding the “Nano Wave” of health-cum-organic stores.
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.