A Very Happy Diwali to all !
Carrying the Nilgiris story forward today –
Nilgiris is probably the second oldest modern retail chain in India. It started off as a single store in Ooty, and gradually expanded to cover TN and Karnataka (it still has token presence in the other two states).
Lots of stuff is available in public domain about the company’s takeover by PE group Actis in partnership with a Singapore based investor. See this and this.
Niligiris is a shining example of great brand equity. Over the last 100 odd years, it has been able to continuously reinforce the perception of being a quality self service outlet that stocks great product range (imported as well as Indian), superb dairy products (especially the cakes at Christmas time) and reliable food stuff (pulses, sugar, rice et cetera). In some places, it sells liquor as well 🙂
Nilgiris is based on the franchisee model – that is – if I am an independent kirana shop owner, I can ask Nilgiris to make me their franchisee, at an obvious monetary consideration.
The store will then be laid out as per their guidelines, and I will get the benefits of better margins and discounts from suppliers by virtue of being a Nilgiris store (since all national suppliers have terms of trade with the organisation).
This model obviously has great upsides and a few downsides, the obvious upsides being –
1) Faster store addition – you have to visit Bangkok and see the 7/11 stores to understand the power of franchisee led expansion !
2) Lower operating costs – since stores are usually supplied on an individual basis, the brand typically has lesser investment in warehouse, manpower and working capital – hence it is easier (relatively) – to be profitable, and that is any day a huge challenge.
3) A win – win scenario for both store owner and the brand – owing to the previously mentioned facts.
However, the operating reality is not so rosy as it seems –
1) Ensuring consistency across stores in terms of layout, merchandising and providing branding space is very very difficult to achieve – this is because the brand has no role in deciding the store layout – as it has had to adapt to a pre-existing physical entity.
2) Managing various franchisees is itself a challenging task, since each person is a separate business man, with his / her own set of expectations about the financial and other benefits from the business.
3) There could be a risk of older franchisees turning rogue and parting ways with the brand – since location is a critical success factor in retail – and the store is technically owned by an individual – it may so happen that the store owner has a falling out due to a mismatch in expectations, and may want to start his own stand alone store. Preventing this requires strong operational discipline, as well great relationship management between the brand and the franchisee.
4) Supporting loss making stores may not be a very feasible option for the brand.
Landmark stores –
Chennai – Near Ega Theatre – PH Road, R. K Salai, Adyar, T Nagar, Velachery, Ashok Nagar, Besant Nagar
Bangalore – Brigade Road, HAL Airport Road (Golden Enclave), Koramangala (left from Sony Centre), Opp IIM.
Nilgiris enjoys a good reputation owing to its focus on quality – and it is hoped that it can expand its footprint across India so that the rest of us can also savour the benefits!
Carrying the Nilgiris story forward today –
Nilgiris is probably the second oldest modern retail chain in India. It started off as a single store in Ooty, and gradually expanded to cover TN and Karnataka (it still has token presence in the other two states).
Lots of stuff is available in public domain about the company’s takeover by PE group Actis in partnership with a Singapore based investor. See this and this.
Niligiris is a shining example of great brand equity. Over the last 100 odd years, it has been able to continuously reinforce the perception of being a quality self service outlet that stocks great product range (imported as well as Indian), superb dairy products (especially the cakes at Christmas time) and reliable food stuff (pulses, sugar, rice et cetera). In some places, it sells liquor as well 🙂
Nilgiris is based on the franchisee model – that is – if I am an independent kirana shop owner, I can ask Nilgiris to make me their franchisee, at an obvious monetary consideration.
The store will then be laid out as per their guidelines, and I will get the benefits of better margins and discounts from suppliers by virtue of being a Nilgiris store (since all national suppliers have terms of trade with the organisation).
This model obviously has great upsides and a few downsides, the obvious upsides being –
1) Faster store addition – you have to visit Bangkok and see the 7/11 stores to understand the power of franchisee led expansion !
2) Lower operating costs – since stores are usually supplied on an individual basis, the brand typically has lesser investment in warehouse, manpower and working capital – hence it is easier (relatively) – to be profitable, and that is any day a huge challenge.
3) A win – win scenario for both store owner and the brand – owing to the previously mentioned facts.
However, the operating reality is not so rosy as it seems –
1) Ensuring consistency across stores in terms of layout, merchandising and providing branding space is very very difficult to achieve – this is because the brand has no role in deciding the store layout – as it has had to adapt to a pre-existing physical entity.
2) Managing various franchisees is itself a challenging task, since each person is a separate business man, with his / her own set of expectations about the financial and other benefits from the business.
3) There could be a risk of older franchisees turning rogue and parting ways with the brand – since location is a critical success factor in retail – and the store is technically owned by an individual – it may so happen that the store owner has a falling out due to a mismatch in expectations, and may want to start his own stand alone store. Preventing this requires strong operational discipline, as well great relationship management between the brand and the franchisee.
4) Supporting loss making stores may not be a very feasible option for the brand.
Landmark stores –
Chennai – Near Ega Theatre – PH Road, R. K Salai, Adyar, T Nagar, Velachery, Ashok Nagar, Besant Nagar
Bangalore – Brigade Road, HAL Airport Road (Golden Enclave), Koramangala (left from Sony Centre), Opp IIM.
Nilgiris enjoys a good reputation owing to its focus on quality – and it is hoped that it can expand its footprint across India so that the rest of us can also savour the benefits!