With the emergence of eCommerce and quick commerce, the retail industry is changing as we speak.
You might be thinking, “Aren’t physical retail stores under the axe because of eCommerce?”.
It’s a fair question but, the in-store experience one gets will always have its place in the consumer’s mind. The fact that the retail market is set to reach $2.2 trillion with 90% of it being offline is quite evident.
To enter into this highly competitive market and succeed, you need to have a fair understanding of consumer behavior and major retail store types. This will help you narrow down your choices to determine which retail business is best for you.
So, whether you’re here to educate yourself or trying to open a retail store, this guide is for you.
Major Retail Store Formats: With Examples & Characteristics
To explain the types of retail store formats in a simple manner, we can segregate the major store retailer types into 3 categories:
- Owner Based Retail
- Merchandise Based Retail
- D2C
Ownership Based Retail Store Format
Independent Stores
These are independent stores, for example, Kirana stores, owned by an individual or families. These types of stores have been around for ages in India. These are the go-to options when you run out of things.
These stores can be anything from,
- Grocery shops,
- Sweet shop,
- Local boutiques & more.
Apart from these common stores, independent mobile service centers & mobile accessories stores are gaining traction with the increase in mobile usage.
The biggest advantage that this type of retail store format has is that these stores are mostly opened by the same community where you’re brought up.
So, if you do understand the basic demand for such products, you can easily set up a store. The cost, however, depends drastically from one area to another, and what you are selling.
But if you’re in any of the Tier-I cities the story of where you open your retail is entirely different. The cost could shoot up higher based on the residential area you’re targeting. The cost could be anywhere around 5-10 lakhs.
Consider this retail store format if:
- You want to build close relationships with your local community.
- You value operational flexibility and low overhead costs.
- You’re looking to cater to specific local needs and preferences.
Chain Stores
Chain stores, as in the name itself, are many stores in different locations that are owned by a single owner or a company. These types of chain stores can be mostly found in the sectors like,
- Restaurants,
- Multi-specialty stores,
- Electronics stores,
- Supermarkets and Hypermarkets
- Fashion, etc.
In Tier – III and IV cities this type of retail store format has been primarily dominated by prominent brand names within the city.
But Tier-I cities are dominated by big corporations like, Max, Croma, DMart, Raymond, Titan, etc.
It’s easy to get chain stores confused with franchisees but remember that these stores are owned by these individuals and corporations alone.
Consider this type of retail store format if:
- You aim for widespread brand recognition.
- You can invest in multiple locations and large-scale operations.
Franchise Stores
Franchise stores are operated under the brand and business model of a parent company, but, are owned and managed by an individual.
There are various franchisees in different sectors from fashion to fast food and more. Some of the popular franchises in India include,
The franchise business model generally provides all the “secret sauce” of their business to help you succeed in the market.
There are a lot of low-investment franchises that you can look into if you’re eyeing to enter this market.
But, where many retail investors lack the most is,
- Which franchise to choose?
- Where to open the store?
Here is where our solution comes in handy for you. By utilizing our location AI platform you can identify what franchise to choose and where you should open your store based on analyzing consumer demographics, footfall, and demand in a particular location.
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Consider this type of retail format if:
- You prefer operating under an established brand with a proven business model.
- You want support with marketing, training, and operational guidelines.
Also, If franchise is the option for you, do note that you should be willing to invest in franchise fees and adhere to specific standards.
Merchandise-based Retail Store Formats
These are retail stores where the shop is categorized mainly based on the type of product they offer. Let’s discuss such types of retail stores a bit deeper.
Departmental Stores
Departmental stores are large retail establishments that offer many products across different categories under one roof.
These stores are organized into different departments, each focusing on a specific product category, making it easy for customers to find what they need in one location. This could be the “one-stop shop” for many.
These types of stores are mostly owned and managed by prominent names in a specified location.
Consider this type of retail store format If:
- You aim to attract customers looking for a one-stop shopping experience.
- You can manage large-scale operations.
Specialty Stores
Specialty stores focus and specialize on a single niche of products. These stores are known for their specialized knowledge and expertise. They might not be known for a diverse range of products but they’re the best in segment when it comes to industry expertise.
The type of specialty store varies from a drug store, an ethnic wear shop, an electronic shop, and more. Their expertise in a specific category of products lets them curate the best shopping experience for customers.
Some of the big names in specialty stores include,
Consider this type of retail format if:
- You want to cater to a specific market segment with targeted offerings.
- You have expertise in a particular product category.
Supermarkets and Hypermarkets
Supermarkets as you may know primarily focus on providing grocery and other household items. This type of retail store format typically aims to offer its products at a low price and provide loyalty programs to cover a larger audience.
Big names in this sector include:
Hypermarket on the other hand expands its product offering a bit more to include other categories such as clothing and electronics. They often have food courts inside to provide a delightful shopping experience.
This kind of retail store model is dominated by
- D-Mart
- Hypercity
- Big Bazaar (also operates as a hypermarket in some locations)
Consider these two types of retail formats If:
- You have the capacity to manage extensive inventory and large-scale operations.
Discount Stores
Discount stores as in the name itself, offer products at a discounted price. Unlike other types of retail store formats where discounts are only offered at seasonal peaks, these stores aim to offer them all the time.
These stores are popular among budget-conscious consumers looking for deals on everyday items. Discount stores can vary in size, from small shops which we find at every nook and corner to large chains.
This kind of retail store format may or may not carry a wide range of products, including groceries, clothing, electronics, and household goods.
Major retailers like DMart are known for running discounts all the time.
Direct-to-Consumer (D2C) Retail
D2C is a type of retail business model where a company builds, markets, and sells the product directly to the consumer without any intermediaries online.
This retail business model nowadays is gaining traction as these brands create a brand name for themselves.
Some of the famous D2C brands include,
One of the major trends in retail marketing is that these D2C brands expanding their business with retail stores. Lenskart and Snitch have already started appearing in major tier-I cities.
Lenksart in particular went beyond and started penetrating the Tier-II cities as well.
You can read how we helped Lenskart with site selection by utilizing our solution.
Which Type of Retail Store Format is Best for Your Business?
As much as we hate to say, it actually depends on your risk appetite, budget, exposure to the market, etc.
For someone who is completely new to the market, a Franchise could be the best option since you would already have the brand name, their loyal customers, and their retail marketing strategies.
But if you’re someone who isn’t willing to pay a franchise fee and have exposure in the retail market, opening a store of your own could be the best option. Again, watch your risk appetite and market knowledge before jumping into the business.
In the end, whatever the type of retail store format you choose, you should choose the best location where high footfall and ideal target group would be present.
How GeoIQ Can Help You?
GeoIQ’s location AI platform can help you pinpoint the best location for your business by leveraging various data such as footfall trends (hourly, daily, weekly, and monthly), demand prediction, characteristics of your target audience, their presence, etc.
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Conclusion
Retail business is a dynamic field where you have to keep yourself updated on consumer behavior and trends.
What we’ve discussed are the major retail store types that are also bound to store closure, suffering low revenue and other risks.
While most of the problems could be solved by choosing the ideal location and the right retail business model, do assess your risk appetite and whether you can sustain the market with all the changes that will be happening in the future.