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Woo Consumers in Tier-II + III Cities – Strategy for 2009

January 11, 2009


Retailers Planning Strategy for 2009Taking a leaf out of Telecom success story, Indian retailers are moving on similar lines as they shift their focus on retailing in 2009 from Metros and Cosmopolitan cities to Tier-II and Tier-III cities. However, when it comes to Luxury Brands, retailers will stick to Metro cities only. Even the upper end lifestyle retailers have no plans to go beyond Metros currently.

We have already covered in the past on how unrealistic realty prices led to stagnation of Retailers plans. Re-negotiated lease, revenue sharing model [first of its kind] didn’t help either. However, most of them have realized that it is the Tier-II and Tier-III cities that offer the potential for organizing the retail industry.

Future Group’s Hypermarket format Big Bazaar wants to have its presence established in every city which has population of 300,000 or more. Kishore Biyani, Future Group founder and Pioneer of Indian Retail said,

So far there were no deals happening. Now suddenly there is activity being seen. We are also looking at striking new deals at a few places. Seeing the condition of real estate market, even developers are willing to negotiate now. We plan to expand our presence to at least 100 cities and the focus is now tier II and III cities.

Ajit Joshi, CEO of Tata’s Infiniti Croma Electronics retail sounds happy at the miserable situation of Realty players,

Developers have accepted that they cannot dictate terms any more. Both retailers and developers are now arriving at an understanding that is beneficial for both the parties involved.

Echoing similar views, Tarun Joshi, MD of Brand House Retail said,

With the situation changing, developers have realized that its no point charging the tenant what he can’t pay. Property prices coming down have ensured that our plans are on track.

Despite the difficult economic situation, lifestyle retail has not slowed down as expected earlier. S.Kumars nationwide owners of brands such as Reid & Taylor don’t expect any downturn yet. Tanishq may see a fall in QoQ growth rate, but the company is still expecting to grow and the management has similar plans as we outlined in our post last week – How to Win Consumers in Difficult Times.

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