Liquidity crunch has not stopped brand expansion. Instead, retailers are tweaking strategies to make way for franchisee model, which will let them expand with minimum investment. Falling footfalls in malls and plateauing of demand in tier-I cities have diverted retailers’ attentions to smaller towns, where the demand has remained steady.
While bigger retailers like Reliance Retail and Trent (Westside) decided to adopt the franchisee model early in the year due to real estate pressures, others like Vishal Retail, Raymond and Brand House Retail are now looking at it to expand in tier-II and tier-III cities. Stand-alone brands like Bata India, ITC’s Wills Lifestyle and GHCL’s Rosebys are also on the lookout for franchisees to add to their top lines.
“The market meltdown and recession-like conditions have provided an impetus to the franchisee business from both the retailers’ and the entrepreneurs’ end,†says Franchise India Group president Gaurav Marya.
According to Mr Marya, the franchisee-led retail is about 30% of the organised retail market in India, but will increase to 50% in the next few years. “The loss of revenue to a franchisee is more than compensated with top-line growth for the company, especially if it is backward integrated into manufacturing,†says a retailer.