Indian retail juggernaut, which began rolling towards smaller cities and towns a few years ago, has gathered momentum as retailers are now going whole hog to make a killing. Changing demographics, higher disposable income and improved agri-produce realisation have made smaller cities and rural areas the future hotbeds of growth. And Indian retailers are in no mood to miss out on this big, untapped growth opportunity.

So, from customising collections and keeping a wider entry-level merchandise mix to leveraging local franchisee know-how and opening more outlets, retailers such as Future Group, Shoppers Stop, ITC Wills Lifestyle and Spice Hotspot are trying every possible permutation and combination in their effort to rake in moolah.

"Disposable income in smaller towns has risen significantly in the recent past as they were largely unaffected by the slowdown," said Kumar Rajagopalan, CEO, Retailers Association of India (RAI). The rush towards smaller towns is triggered mainly by the low availability of property at right prices in the big cities, feels Mr Rajagopalan.

Retail chain Shoppers Stop will open over 12 stores in smaller cities by year-end. The K Raheja-promoted company, which has positioned itself as a "bridge-to-luxury" brand, will open department stores in cities such as Ahmedabad, Aurangabad, Jalandhar, Ludhania, Mysore and Vijayawada with an investment of Rs 120 crore.

 “Before we enter smaller cities like Amritsar, Bhopal and Aurangabad, we already have loyalty customers there, courtesy people from those locations who have shopped in nearby metros,” said Shoppers Stop vice-president (marketing & loyalty) Vinay Bhatia.

Shoppers Stop stocks a smaller assortment of bridge-to-luxury products in such smaller markets, at about 5-10% of the total merchandise as compared to big cities where it's about 15-20%. “Our experience also tells us these cities have a lower working women population and less occasions to wear formalwear. So we have more casualwear and a bigger ethnic mix in these stores,” adds Mr Bhatia.

Future Group is planning to enter 10-12 towns every year. About 15-20% of the product mix in smaller stores of India's largest retailer is customised to the regional requirements of the market. “This mostly happens in food, ethnic apparel, general merchandise and home products,” said Rakesh Biyani, CEO, retail, Future Group. ”It allows us to build a connect in smaller cities. Sales per sq ft may be lower than the cities, but then the costs are lower too. As we adopt a cluster approach for expansion, these cities will become more lucrative,” said Mr Biyani.