UP retailers eye smaller towns

Retailers in Uttar Pradesh are now targeting customers in tier-II and tier-III cities to make up for the economic slowdown in over-invested metropolitan ones.

Future Axiom and Vmart are among the retail groups that believe markets outside the major cities are relatively unaffected by the downturn.

Ashy Sehgal, CEO of Future Axiom’s mobile distribution business, told Business Standard that tier-II cities in India were still reporting significant growth and it had become crucial for every retailer to build a strong presence here.

“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, second, we are also working on standalone models based on our strengths and feasibility,” said Sehgal.

Future Axiom will open another 1,000 stores by December 2009 and a number of these will be 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 III cities have decent disposable income,” added Sehgal.

He said residents in smaller towns mostly earn their livelihood from government jobs or farming-based activity, which have not been hit as severely. “Instead of spending heavily on attracting more customers in over-reached metropolitan markets, we can target the unheeded customer waiting for us in smaller cities,” he added.

Agra-based Baba Constructions recently built a shopping mall in Etawah, a town with a population of less than four lakh. It has similar offers to construct malls in smaller markets like Mainpuri, Farrukhabad, Muzzafarnagar and Sitapur.

Vivek Agnihotri, its joint director, told Business Standard that most of the retail ventures the firm worked for were based on the franchisee model and even brands like Titan, Raymond and Reebok had opened their stores there.

Another retail giant, Vishal Mega Mart, has also opened stores in places like Etawah. Many more shopping malls are expected to be sited in these smaller towns and in suburban ones.