India’s small towns have become the new go-to destinations for the retail sector, given the increasing propensity of customers who are getting richer and more willing to shop in the modern retail formats. Indeed, the next growth story is expected to come from the small towns, where modern retail is expected to grow at a whopping 50-60 per cent per annum over the next few years, compared to only 35 per cent in Tier-1 cities. Foreseeing this emerging market of the future, Raymond has embarked upon a store expansion plan to cover small cities with its Mini TRS concept.
Mini TRS: The new growth formula
With urbanisation, there has been an emergence of over 1,200 new urban towns, having a population above 50,000 which show immense potential to support The Raymond Shop (TRS). Having its presence in over 400 of these towns, Raymond felt a need to evolve and develop new retail business model with right consumer proposition for the remaining 800 potential towns.
Based on its 60 years of experience in retail and in-depth research done through a small study of over 100 outlets in Tier-4 and Tier-5 markets, in September 2016, Raymond sensed a big opportunity and piloted its new business model – Mini TRS (The Raymond Shop) – which was then perfected over 6 months and commercially launched on 25th March 2017 in Bihta (Bihar). Since then, over 303 Mini TRSs have been rolled out in the past 24 months making The Raymond Shop the leading brand in mens’ fashion lifestyle with roaring presence across 590+ towns with 990+ stores. Mini TRS stores have been performing 1.5 times more than their expected budgeted growth.
The new asset-lite model requires an investment less than one-third of a regular TRS which provides necessary fuel to make the business highly profitable in these upcoming markets. The agile design and modular interiors ensure that the stores are set up within 15 days instead of regular 45 days. Taking into the account the challenge of availability of retail inventory in these towns, the store size has been optimised to 600-1,200 sq.ft. vis-à-vis the average 2,500 sq.ft.
Behind the success of this format, Mohit avers, “The success formula has been twofold. First, the new agile and asset-lite business model paved the way for the brand to enter into these emerging towns of India, which hitherto were inaccessible. Second, the new business model was then brought alive by associating with like-minded franchisees in these potential towns by leveraging their market knowledge, hands-on operations and adherence to the business framework.”
These stores continue to add incremental revenue and income to the company since they have been launched in completely new markets and towns. He further claims, “Over 90 per cent of the stores that have opened have exceeded our expectations in terms of revenue generation. Mini TRS business model proves to be the most promising one for emerging markets that are driven by external factors like growing aspirations, democratisation of information, media exposure, young demographics, rise in spending power and improvement in lifestyle standards. We identify white spaces in existing cities by mapping all potential markets with defined catchment that can sustain our retail model. We then shortlist our franchise partner and location that is ideal for the concept.”
Mini TRS comes with the feature of an integrated digital omnichannel capability through which the customers can access a curated range of products from the company’s online web store – Raymond Next. All the stores are connected through an interactive kiosk located in the store. In case a customer wants a product that is not available at the store, he/she can access the web store and select the product from the assorted range. He/she may then choose to get the product delivered either at the store or at his/her desired address.
Decoding the distribution model
Raymond already has an extensive distribution network through direct and indirect channels such as agents, distributor and wholesaler networks that service over 15,000 outlets across the country. These direct and indirect channels of distribution provide the platform to reach the emerging towns with right product mix and faster turnaround time. The only way that any organisation can reach out to such markets in a relevant and engaging manner is also through franchising. At Raymond, the essence of creating partnerships with entrepreneurs in such markets was understood very early and this has helped the brand create very strong channel partners.
More than transactional relationship, the company strongly believes in an ethic-based relationship with its franchisees. It abides by its five cultural pillars.
The first pillar is Transparency in dealing and interacting with people internally and externally. The brand has a transparent policy framework with standard and unbiased terms of trade for each channel type.
The second pillar is Collaboration which is epitomised through ‘I am with you in this’. The franchise model is build in such a manner that the brand partakes in the set-up investment. This ensures that both the franchisee and the franchiser have common interests in making the business relationship work.
The third pillar is Meritocracy wherein it rewards and recognises the franchisees on the basis of performance across five levels such as total value contribution, driving the growth agenda, customer satisfaction levels at the store, engagement through its Raymond reward program (CRM) and initiatives taken in bringing alive the brand in its catchment markets through the LSM platform.
The fourth pillar is Personal Accountability – each employee is empowered to take decisions which are in the interest of customers and organisation. Commitments made are honoured and if there is a delay in action, the team will keep the stakeholders informed of such delays.
And, the fifth pillar is Bias for Action. If something is not right, quick action is taken on it or it is reported to the right team so that they may set it right. Opportunities are grasped and gaps are addressed.
With respect to the criteria through which Raymond selects the right franchisee, Mohit says: “In addition to the above, the franchisee should have a suitable retail space ranging from 600 sq.ft. to 1,200 sq.ft. with a minimum frontage of 15 ft. and an investment up to Rs. 50 lakh (for interiors: Rs. 20 to Rs. 25 lakh and for inventory: Rs. 20 to Rs. 25 lakh).
As per Mohit, the essence of the partnership is an entrepreneurial mindset and passion towards retail business. His team works along with his franchise partners on detailed profitability model with store P&Ls /business targets which are monitored on a continuous basis by the area managers. The catchment plans are then worked out to drive footfalls through sustained calendar activations for the stores. The team trains the franchisee and store team on retailing principles, emerging trends, product training and visual merchandising keeping it relevant for franchisees and customers.
Partners in growth
An optimistic Mohit confirms, “We work with like-minded entrepreneurs, who have the right attitude for customer service and have a growth mindset to partner for retail expansion.The key to its success lies in the conduct of engagement and training programmes that we provide on various subjects pertinent to modern retail like product training, customer relationship management, staff development, visual merchandising and operations, apart from evolving product portfolio that ensures the product offering is in line with the changing consumer preferences and requirements.
We actively engage with our franchise partners where their knowledge of markets is leveraged through science and technology provided by Raymond to activate the brand in the local catchment and delivery superior last mile service delivery.”
Innovation in place
Mini TRS will continue to provide the immersive Raymond retail experience to its discerning customers across all emerging markets and towns. The focal point is ‘single view of customer’ irrespective of which channel, city and store they shop in. ‘Think global, act local’ theme is brought alive by Raymond empowering its store managers, franchisees and area managers.
Every franchisee is supported by an area manager who builds local calendarised activation and marketing plans for each outlet depending on the local festivals as well as key talking points. Through a cooperative marketing pool, the activation calendar is implemented via the local franchisees and stores, so that they may leverage their local knowledge to maximise the efficiency of all such activities.
While there are broadbrand guardrails available, each city/market develops and drives activations and promotions that are best suited for its market and customers.
“In retail, we have our mantra for growth that we internally refer to as 5Gs of growth. These are Competitive Growth (faster than the competition); Profitable Growth (+ve EBIT); Sustainable Growth (continuous year on year); Inclusive Growth (company and franchise partners) and Experiential Growth (enhancing customer experience),” explains Mohit. This 5G growth leads to exponential progress for Raymond. Mohit then concludes, “Our ambition is to bring alive the Raymond brand immersive experience across all towns of India through our rallying cry #HarSheharMeinRaymond.”