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Store Expansion

Issues on hand

This brand in accessories had put up a network of 10 exclusive shops and was finding it loss making at a consolidated chain level, costing 8% more than the budgeted cost of sale. Individually few shops were profitable but a few others were making such losses that the sum total was negative.

The brand management was committed to making exclusive retail channel a success as part of the strategy to build the brand nationally, to mitigate risk across sales channels and have an opportunity to learn about its consumers first hand.


An extensive comparative analysis was carried out to compare all stores on parameters of costs, expenses and revenues.

Below are some of the parameters on which this comparison was made between stores:

bullets Store location
bullets Store size
bullets City type
bullets Market type
bullets Competition density around
bullets Presence of anchor stores: their type, size
bullets Category sales ratios
bullets Visual merchandising differences
bullets Catchment analysis
bullets Customer demographic analysis
bullets Spends per square-foot on various heads including rent

The analysis showed a way to estimate sales more accurately and point to the license fees (rent) the brand could afford to pay for a certain size.


In effect, this study helped identify a store feasibility blue-print & its variants or ready reckoners that would serve as pointers while evaluating a new store property.

The study also highlighted glaring exceptions on certain expense heads from one store to the other and brought them to management notice.

There was renewed confidence in the organization in signing up new properties and within a year with addition of 6 new stores, the exclusive brand outlet network had broken even.

Case Study 2
Issues on hand

This Textiles retailer had a network of 70 exclusive showrooms across India in grade ‘B’ towns largely and wanted to plan where the next 100 can be put up. The inquiries for franchising would come from all corners of India and the Company wanted to build a process to prune & evaluate the inquiries for further processing.


States of India where the trade channel sales was strong for the brand was taken a pointer to better performing territories and to mitigate risk. Mapping footprint of established competitors was another proxy to towns that held potential. Further, diving into better performing territories to identify potential towns to put up next stores was based on study of existing network of 70 stores.


Statewise revenues in the trade channel were studied to identify strong markets for the brand. This gave more confidence to setting up a new exclusive store in comparison to a territory where other channel sales were low. Next, ratio of retail sales to trade sales in the State was plotted to establish how high it could go where the exclusive stores presence was sizeable. This exposed gaps in States where the penetration by retail business was smaller in comparison.

Within the well populated State as well, analysis was carried out to see how big was the universe of districts in the State and identify the gaps where stores were not located. Mapping of business revenues to town potential was made to correlate town MPV (market potential value) to revenues from the exclusive store. This ratio for the smallest potential town in the State where exclusive store was present was extrapolated to other district headquarters to calculate potential revenues. Applying average annual purchase of exclusive stores in the State, number of additional stores was derived.

The list was pruned further by applying competition analysis which was further qualified by stronger and weaker States by the brand.

Plotting operational expenses of existing stores and relating it to the town MPV (market potential value) and MII (Market intensity index), a small Excel based query was designed that threw up stores’ performance in towns of similar potential values in same State and in different states, on choosing any one of 784 towns in India.


Result was clarity in prioritizing States in which to focus the store expansion and projection of sales revenues so as to control format size of the new store under consideration. The exercise also drew up the whole list of towns where next - more than 100- stores could be put up for the brand. More importantly, which towns would be refused for consideration if a franchisee inquiry came up.