Slump-hit retailers look to small towns for relief

Slowdown-hit retailers in Uttar Pradesh are now targeting customers in tier-II and tier-III towns to make up for the loss in footfalls in the overreached metropolitan cities. Retailers such as Future Axiom and Vmart have decided to consolidate their business by reaching out to unexplored markets outside major cities, believing them to have been relatively unaffected by the downturn.

Future Axiom's mobile bazaar CEO, Ashy Sehgal, told Business Standard that tier-II cities in India are reporting significant growth and it has become crucial for every retailer to build a strong presence in these cities.

"We have evolved a two-pronged strategy to capture the untapped market in smaller towns. One, we are working on a franchisee basis to enter these markets and, secondly, we are also working on standalone models based on our strengths and feasibility," he said.

Future Axiom will be opening another 1,000 stores by December 2009 and quite a few of these stores will be opened in the smaller cities. "Quite a few tier-III cities seem to have the potential to provide decent returns. The growing middle class in tier-II and tire-III cities have decent disposable income," Sehgal said.

"We believe that the employment opportunities in these cities will grow further resulting in better purchasing power and amplified opportunities for us. The telecom and hosiery retailers are not experiencing significant slowdown as of now," he added.

When asked about the prospects of ongoing recession slowing down returns, he said that the group was all set to expand and widen its reach with 1,000 new stores being planned. "The Indian mobile retail industry is still very exciting and is not experiencing significant slowdown as of now," he explained. 

He further said that residents in smaller towns were mostly earning their livelihood from government jobs or farming-based activities, which have not been hit by the slowdown as severely as the larger cities. "Instead of spending heavily on attracting more customers in overreached metropolitan markets, we can target the unheeded customer waiting for us in smaller cities," he argued.

Agra-based construction firm Baba Constructions has recently built a shopping mall in Etawah, a town with a population of less than 4 lakh (400,000), and has similar offers to construct malls in smaller markets like Mainpuri, Farrukhabad, Muzzafarnagar and Sitapur.

Vivek Agnihotri, joint director of the firm, told Business Standard that most of its retail ventures were based on the franchisee model and even international brands such as Reebok opened their stores here.

Another retail giant Vishal Mega Mart has also opened its store in smaller cities like Etawah. Some 18 shopping malls are expected to be shifted from big city centres to smaller towns or the low-cost suburban areas adjoining the main cities.