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Co-retailing shaping the retail landscape; Developers innovating with the format

One recent concept that is emerging in the Indian context is that of co-retailing, where two or more than two brands share a retail space, thus adding to the lucrativeness of the proposition being offered.

Co-retailing shaping the retail landscape; Developers innovating with the format
Industry experts say the key to the success of the co-retailing model is identification of the brands that complement and support the existing brand.

Spurred by strengthened market sentiments, malls across the country continue to witness increased footfalls and sales. The high traction indicates the retail sector’s growth is inching towards pre-Covid levels. According to industry body RAI (Retailers Association of India), the retail business sales across India witnessed a 23 percent rise in April this year as compared to the same month in 2019. 

Amidst this, there is a growing buzz among retailers to occupy premium spaces across several high-potential retail properties. With new and innovative business models gaining prominence, the retail sector is on a high growth trajectory. Enabled with flexibility and low risk, the co-retailing model is fast catching up amongst businesses, investors, and retailers. 

Co-retailing is an emerging concept providing businesses with operational and economic efficiency by reducing costs or generating additional revenue.

According to industry experts, the retail segment is charting its way back from the Covid-19 shock, with Brick & Mortar retail format gaining back footfalls of pre-Covid levels and occupancies in malls returning to the pre-Covid levels.

Ashutosh Kashyap, Director, Advisory Services, North India, Colliers, says, “With incidence of challenges of diverse nature, businesses tend to cope up with certain mutations and change in mode of operations. One recent concept that is emerging in the Indian context is that of co-retailing, where two or more than two brands share a retail space, thus adding to the lucrativeness of the proposition being offered. On one hand, the concept allows small retailers avenues to start their business at lower costs, while on the other hand, it offers brands with extra space to monetize some floor space, by adding a complementary brand within the same roof. The key to the model is Flexibility, Cost Optimization and Complementarity.”

Recently, for instance, Omaxe Chowk has launched first-of-its-kind co-retail spaces in its multi-level parking-cum-commercial project in Chandni Chowk, Delhi.

Omaxe Chowk offers two co-retailing models, namely sharing common commercial space and short-term leasing contracts. Shared space between two mutually associated product categories (shoes & bags, apparel & perfume, etc.) and 1-6 months’ lease agreements have been drawing the huge interest of retailers across geographies. The project will have approx. 8000-10,000 sq. ft. area dedicated for co-retailing.

Talking about this concept, Jatin Goel, Director, Omaxe Ltd, says, “Co-retailing is an emerging concept in the retail arena. For businesses, such flexible lease models will enable them to test new markets or sell a specific product in new geography. This is also good news for businesses that were previously only available online and are now looking to adopt the omnichannel retailing strategy and go into brick-and-mortar space as well.”

The business potential of operating a co-retailing space in Omaxe Chowk can be ascertained from the fact that it is one of the largest organized commercial developments with a multilevel parking facility in Delhi’s oldest market Chandni Chowk. According to the developer, businesses from Surat, Varanasi, Jaipur, Kolkata, etc., and reputed brands have evinced keen interest in co-retail spaces in Omaxe Chowk as a way to expand their business, generate new customers, or be amidst the huge business and trading circuit.

Goel says, “In the post-pandemic world, where market dynamics continue to evolve owing to the buyers’ behavioral changes, altered business models, and changing market strategies, the co-retailing concept can do wonders for retailers.” 

Commenting on this, Anuj Kejriwal, CEO & MD, ANAROCK Retail, says, “Omaxe Chowk is in middle of Chandni Chowk. Being one of the costliest real estate areas of the city and only organised development, the concept of co-retailing in Omaxe Chowk will be very interesting. The famous home-grown retailers of Delhi/NCR will be interested in taking space for 3rd party infrastructure and offering their goods in an organised manner.”

In addition to the above, co-retailing already exists in India in the complementary category space – for example, Fashion and F&B, Home and F&B, Fashion and Home, etc.

The White Crow (TWC), which is a management by objectives (MBO) of luxury brands from House of Reliance brands, has arrangement with Starbucks wherein Starbucks operates out of TWC Stores.

Crosswords stores across India have tie-ups with Blue Tokai, a prominent coffee brand.

Department stores and electronics anchors are also co-retailing examples in India, wherein various brands come under one roof to retail their goods and use the infrastructure of these stores.

“Co-retailing will work if the space provider is a retailer itself because consumer behaviour, adjacencies of categories and the psychology of consumers inside the stores will play a major role to increase the trading densities and hence success of the format,” says Kejriwal.

The renewed market confidence, in fact, is supporting the growth momentum of the retail sector.

Abhishek Trehan, Executive Director, Trehan Iris, says, “In the post-pandemic world, new trends and approaches are redefining the retail landscape. Businesses have realized that innovation is the need of the hour. In the retail segment, there is a pent-up demand for small spaces as various small brands and retailers are eyeing the cost-efficient model. Co-retailing, as the name suggests, brings the advantage of flexibility and cost-efficiency as per its space-sharing model. The concept is quite promising owing to the benefits associated with it. However, at present, it is at a nascent stage and has a long way to go.”

Pankaj Pal, Group Executive Director, AIPL, explains, “The Indian retail industry has witnessed significant growth in the last few years. Brands and mall operators are adopting various innovative concepts and one such is co-retailing. Given that high-street malls or retail outlets in business districts command high rentals, in such a situation the concept of co-retailing helps businesses and brands to come together to operate from a shared retail space and save significant expenses.”

AIPL claims to be among the first few developers to adopt and offer this concept. “At our mixed-used development — AIPL Joy Street, Gurugram — we have a section called Senora market, where co-retailing spaces are available for grab. Under this concept, air-conditioned Kiosks are available starting from monthly rent of Rs 20,000, with no maintenance charges. We have witnessed a significant demand and response for the same in the last few quarters,” he says.

Industry experts, however, say the key to the success of the co-retailing model is identification of the brands that complement and support the existing brand. Each brand coming under the roof should evaluate the impact on their brand values and positioning, and be warry of possibility of insubordination to the other brand.

“Co-retailing should not result in loss of customers to another brand. Each brand should clearly demarcate area within, with distinctive branding so that their brand identity is not compromised with. Once these basic aspects are worked out, the model would only add value to the combines set up with increased visibility, increased ability to draw customers and above all shared costs,” informs Kashyap.

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