MUMBAI: When in a town such as Sangli, a family of 46 people goes shopping to the nearby supermarket, it means a really long queue, an even bigger shopping ticket and party time for the retailer.
Big Bazaar, one of the biggest retail chains in the country, gets the largest turnover per square foot and the largest bill sizes from small towns and not some metro.
That leaves Kishore Biyani a happy man because he bought a 120,000-square foot property in far off Kharagpur. The place is successfully selling merchandise today.
The point is simple: big mall developers and retailers have begun to eye Tier III towns even before metros have saturated.
Even though the population is less than a million in these towns, the first-mover advantage along with a receptive customer base makes it an opportunity too big to miss.
Take Chhattisgarh-based Avinash Developers, for example. In six months, the company will open a million square feet-plus mall with a multiplex and a hotel in the small city of Raipur. There are more of such huge mixed-use destinations lined up such as Bilaspur
Anand Singhania, managing director, Avinash Developers Pvt Ltd said, “There is not much competition here, whereas the consumers are waiting for a modern retail experience. Bigger size development means lower maintenance cost on the whole and an inclusion of commercial property in the development ensures faster recovery of investments.”
To pull in the crowds, Singhania has planned 40 shops of 150-200 square feet each within the mall to bring about a local market flavour.
Roopa Purushothaman, chief economist, Future Capital Holdings (FCH) said, “Consumers in these niche cities such as Jalandhar, Faridabad and Chandigarh are spending almost as much as megacities. They have the highest asset (cars, airconditioners, refrigerators and so on) penetration and aspirants in smaller towns are more likely to own a car than those living in a metro where the tendency to save is higher.”
Purushothaman was giving a presentation on the latest report ‘The Next Urban Frontier: Twenty Cities to Watch’ which was based on a study carried out by National Council of Applied Economic Research and FCH.
There are others who have already latched on to these findings. Phoenix Mills Ltd in association with Entertainment World Developers Pvt Ltd and Big Apple Real Estate has planned mixed use development with malls being the highlight in several small cities such as Amravati, Nanded, Ujjain, Bhilai and so on. Fifty malls in the next 5-7 years and a Rs 10,000 crore investment is their plan, said company officials.
When asked if the developers felt there was a market big enough in these smaller towns, most said they were confident of their business plan and success was achievable with the right tenant mix.
Manish Kalani, managing director, EWDPL India said, “We aren’t expecting recovery in less than 7-8 years. But shopping business is more like hospitality rather than real estate and a proper understanding is required to deal with the challenges.”
Interestingly, FCH’s survey showed that the highest credit card penetration is in Surat and Jaipur and not any of the metros. The spending propensity in terms of percentage of income is the highest in Bhopal (80%) while its about 20% in Mumbai and Delhi.
But not everyone seems as optimistic about the market potential in Tier III. One of the big chain retailers said that developers would need all the luck for such ventures because with just a little bit of competition, everything can go wrong since the market is not so big.
Profitable or not, only time will tell. For now it seems like before the people of Mumbai get a fun destination centre within the city, the Bilaspurs and Raipurs are going to have at least a couple of them.