No frills, all thrills
T.V. Mahalingam September 4, 2008It is said that Mumbai fulfils aspirations of most people who come to the city. Jobs, a lifestyle, an entry into Bollywood… you dream it, work hard enough, and Mumbai can give you the lucky break. But one thing that people in Mumbai really prize and yearn for but find the toughest to get is a home of their own, which remains a dream for many.
That aspiration may soon become more reachable. By early 2009, 300-500 sq. ft flats will be up for grabs on the outskirts of Mumbai (like Karjat) at an unbelievable price of Rs 3.5-5 lakh. The going rate currently for such homes in these regions is at least Rs 8-10 lakh (as most decent flats are a minimum of 600 sq. ft).
Affordable houses are set to spring up across the country, not just in metropolises like Mumbai or Bangalore but also smaller cities like Ahmedabad. “There is a huge deficit in urban housing—of about 24.7 million units, most of it amongst the poorer segments of society,” says Ashish Karamchandani, CEO, Monitor Group, India, a Massachusetts-headquartered consultancy, which is working closely with developers on this concept.
It’s not only in housing that companies are seeing a big market nearer the bottom of the pyramid (although not at the very bottom, not yet). Across service categories like organised retail, entertainment, fitness and banking, marketers have begun training their sights on consumers for whom the buzzword is affordability. And the target audience in this high-volumes play is not necessarily just rural folk, but also that set of the urban working class whose monthly take-home may not run into five figures.
Cut to Kishore Biyani’s Future Group, which runs the Big Bazaar chain of hypermarkets, amongst other formats. If you thought Big Bazaar is the place to go for mouthwatering discounts, you obviously haven’t been to Biyani’s no-frills KB Fair Price Outlets. Customers are expected to get their own carry bags. These outlets are not airconditioned.
Local brands are stocked and there are no complicated schemes. Only 300 items are stocked in a store. And there’s no home delivery. These outlets are typically located in high-volume residential areas. “It started from an insight that a large number of people instinctively reject mall offerings because they fear there is a catch somewhere,” says Damodar Mall, CEO, Innovation, Future Group. The cost per sq. ft of the KB Fair Price Outlet is Rs 387 compared to a neighbourhood supermarket that has costs in the region of Rs 2,000 per sq. ft, adds Mall. Capital employed is a fifth and operational costs are half of those of neighbouring supermarkets.
Result? Prices are 10-15 per cent lower. Currently, there are about 125 such outlets in Delhi, Mumbai, Hyderabad and Bangalore. Mall sees 1,500 more such outlets coming up in these cities over the next 18 months.
If so much action is concentrated around low-cost housing in the bigger cities, it isn’t without reason. “Over 80 per cent of India’s households make less than Rs 10,000-12,000 a month. As a result, most of the housing options available today are beyond their reach,” says Karamchandani of Monitor Group, which has conducted an extensive self-initiated study into the low-cost housing opportunity in India and is helping builders interested in such projects in an advisory role. Yet, the quest to woo the not-sowell-heeled with inexpensive services is not restricted to the big cities.
Inevitably, the small towners, who are increasingly aspiring in a way not too different from their cityslicker counterparts, are coming onto the radar of service providers. Entertainment is one such aspiration, and the nofrills mantra is on display here, too. Subhash Chandra’s Essel Group, which operates the premium multiplex chain Fun Cinemas mainly in the metros, has a two-pronged plan to tap the booming small-town segment. Essel has seeded two chains, Talkie Town and E-City Bioscope Entertainment, both targeted at non-urban India.
The business rationale is rather simple: There are over 10,000-odd screens in the country and 2,000-odd touring theatres. Of these, 80-85 per cent are in non-metros. Half of these screens are in towns that do not even have municipalities. “The theatres in these towns have primitive infrastructure, even though there is a huge audience for movies,” says Vishal Kapur, COO, Fun Cinemas, who is also overseeing Talkie Town.
Typically, the cost of setting up infrastructure for a multiplex in a small town (like Indore) is Rs 4-5 crore. “That drives ticket prices up to Rs 130 in a town that’s used to paying Rs 50 for a movie. Therefore, the success of multiplexes in these towns has been limited,” says Kapur.
To be sure, the no-frills concept isn’t just an Indian phenomenon, which is best illustrated by the number of players in the global low-cost aviation sector. Recently, Snap Fitness, a US developer of no-frills fitness chains, announced plans to start operations in Mumbai and Bangalore. Snap’s membership fees will be priced at $30-40 (Rs 1,290-1,720) per month, compared to $50-75 (Rs 2,150-3,225) charged by its larger (and more feature-rich) peers. “The Indian market can support 500-1,000 units,” says Snap Fitness CEO Peter Taunton. More and more Indians will be eager to work out. Just as more and more will be eager to go out shopping (so what if they have to carry their own shopping bags), visit a multiplex, and of course own their own home. The bottom line: just bring it all within reach.
Additional reporting by Rahul Sachitanand