Tesco opened an 800 sq ft pharmacy at its Harlow store in Essex – about a third smaller than its traditional pharmacies – in its last financial year and has earmarked a further 30 locations for roll-out this year.

Ashley Hicks, category director for healthcare at Tesco, said: “We wanted to get our pharmacies into more locations, so trialled it in one of our smaller superstores in Harlow and it’s worked really well.”

He added: “The smaller format has had its design squeezed and a slightly smaller range, but it still has a private consultation room.”

Hicks said Tesco recorded its “biggest ever year” for pharmacy in its full-year results, announced last week. He said the category now attracts 500,000 customers a week, prescriptions are up 10 per cent year on year and it is 9 per cent ahead in volume.

“We are very pleased with how we are progressing and customers like the convenience and services we provide,” said Hicks. “Customers can pick up their prescriptions while they are doing their food shopping, which is a clear benefit.”

At present Tesco has 270 pharmacies in the UK and Northern Ireland. Hicks also said pharmacies could be rolled out internationally in the long term. “Terry [Leahy, chief executive] asked me about international but it’s not in our short-term plan,” Hicks said. “The regulation is very different – but we will keep it on the long-term plan and not rule anything out.”

He added: “We believe our offer is as good as that of a traditional player like Boots. They offer a number of other private services but in terms of core NHS services, we also offer the same.”

Hicks said that Tesco will add new services to its pharmacy offer later this year. It launched its Health Check in January and has cut the cost of the service from £20 to £10 and will roll-out flu vaccinations to more stores this winter.

The new format will feature a wide range of clothing, shoes and products under one roof, with collections of good, better and best products merchandised by lifestyle. With a 12,000-sq.-ft. footprint, the stores will carry product assortments in a range of very broad sizes starting at XL in tops and a 42-inch waist in pants for the bigger customer and a 38 inch waist for the taller customer.

The Casual Male superstore concept was created following a six-month consumer research study conducted by L.E.K. Consulting that found that big and tall men are looking for more options in a “one-stop-shop” environment and are willing to travel longer distances for a place that caters to their specific needs.

“DXL is a new and innovative retail concept that is attuned to our customers’ needs,” says David Levin, president and CEO of CMRG. “Our target customer wants choices, value for their dollar and the convenience and unique shopping experience DXL offers. We are confident that our new lifestyle superstore concept will offer the unique shopping experience that many big and tall men have been seeking.”

The DXL superstore concept also will be supported by an all-inclusive e-commerce site, launching in 2011, which will offer the same breadth of apparel and products.

Currently, Casual Male Retail Group operates 454 Casual Male XL retail and outlet stores, as well as 19 Rochester Clothing stores.

According to a study by The Nielsen Company, modern retail dropped prices by more, or increased them by less, for more product categories than traditional retailers, or kiranas, between the last quarter of 2009 (Oct-Dec) and the first quarter of 2010 (Jan-Mar).

“The power of modern retail lies in the scale and efficiencies which we have built over the years,” says Kishore Biyani, CEO of Future Group that operates retail formats such as Food Bazaar, Big Bazaar, Pantaloon and KB’s Fairprice stores.

The Nielsen Shop Census study compared prices of 47 commonly used items including toothpastes, washing powder and confectionery. Modern retail dropped prices by more, or increased them by less, than traditional retailers for 29 product categories while traditional retailers did better in 18 categories.

It collected data from 16,000 stores (11,000 urban and 5,000 rural, in both modern and traditional retail) in 462 towns and 1,427 villages.

During this period, the rate of inflation, as measured by the Wholesale Price index, was hovering around 10% and food inflation was more than 12%.
In the past two years, modern retail has been able to significantly cut operational costs related to real estate rentals, energy costs and increase persquare-feet productivity of employees leading to savings in people costs.
They also launched private labels to get a better grip on selling prices and profit margins, and some savings were passed onto customers.

Higher collaboration with small and medium suppliers as well as distributors of large FMCG companies helped them cut costs in transportation and logistics.

Efficiencies of scale helps one source the goods closer to the manufacturer says Mr Biyani. In 2009, Big Bazaar sourced 26,000 tonnes of rice, 4 crore pieces of clothing, 20 lakh suitcases, 36 lakh mixer-grinders, 45,000 manufactured beds, 20 lakh bedsheets and 19,000 LCD TVs. Each of these figures will be higher by a minimum of 30% for the year 2010, he says. “Such large sourcing allows us to get better prices directly from manufacturers and producers.”

Big Bazaar is the largest player in the segment contributing over 33% of modern retail sales. Other top retail formats competing with traditional kirana for essential purchases include Reliance Retail, Aditya Birla Retail’s More and Spencer’s Retail.

Kumar Rajagopalan, CEO, Retail Association of India, says strong sourcing power helps modern formats offer better prices. “They have done away with the extra level of intermediaries,” he says.

Meanwhile, grocers too are working on protecting their turf by leveraging on their strengths such as customer relationships, home delivery, credit facilities and expanding their product portfolio.

Top FMCG companies such as Hindustan Unilever, Procter & Gamble Marico and Godrej have begun adopting kiranas, teaching them category management and effective merchandising to counter big retailers and their private labels.

Bharatiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom-and-pop stores, has formed city-centric associations that negotiate directly with manufacturers such as Unilever and P&G and do away with any middlemen.

This helped kiranas offer 5-20% discounts on MRP of branded products like detergents, shampoos soaps, oil and atta.

“When prices rose due to inflation some kirana stores offered customers the option of paying in instalments apart from extending them credit for a month,” says Vijay Prakash Jain, secretary general of BUVM that comprises 17,000 state and district-level associations across 27 states.

Interestingly, kiranas managed the prices of items such as detergent bars toilet soaps, shampoo, packaged tea and iodised salt better than modern retail, according to the Nielsen study.

Currently, traditional retail, both grocers & chemists, constitute over 95% of total sales in the country.

Modern trade at just 3-5% of the total national industry sales, had grown aggressively at over 35-40% contributing to over 15-25% sales for most consumer goods companies last year.

IT’S a nagging, almost decade-old doubt that has kept foreign direct investment (FDI) in retail at bay: will the entry of Big Retail hurt the six million kirana stores? As the nation grapples with the question, a series of interesting pilot projects are demonstrating how the giants and the dwarfs can co-exist, and even fuel each other’s growth, thanks to a little help from microfinance institutions (MFIs).

Biggies like Wal-Mart, Metro Cash & Carry and the Future Group have forged partnerships with microfinance and financial institutions to sell merchandise on credit to rural kiranas. The MFIs not only provide credit, but also double up as valuable intermediaries that collect orders from the kiranas, source the merchandise from big retailers and deliver it at the kirana’s doorstep. What’s more, the MFIs do not charge any interest on the credit extended to the kiranas. Instead, they receive a commission from the retailers, for whom this is a small price to pay in order to win new markets and grow faster.

While Metro has been running a pilot with SKS Microfinance in Hyderabad for a few months now, the Future Group has just inked a similar deal with SKS. Bharti Wal-Mart, an equal joint venture, has a partnership with Kotak Mahindra Bank for cards that offer ready credit to the kiranas. RPG-controlled Spencer’s Retail too is keen to explore such opportunities.
If these experiments click, it could enable large retailers to pry open vast rural markets, help kiranas become more efficient in their sourcing, give consumers the benefit of lower prices, and build a thriving retail ecosystem where the lambs can indeed sleep with the lions.

It might also soften the resistance to FDI in retail. If kiranas are empowered to source more effectively, they may be able to co-exist meaningfully with organised retail if and when FDI is opened up. Though foreign retailers are allowed to set up cash-and-carry formats, FDI is not allowed in supermarkets, etc.

“This will open up a completely new rural distribution model and help us in understanding rural consumers,” says Future Group CEO Kishore Biyani. “This is probably the first time the Indian retail sector is targeting the rural market in such a big and strategic way.”

Future Group has started to sell staples, dry groceries and FMCG products through SKS’s network to some kiranas in the North, including a few in the National Capital Region. It also plans to supply its bouquet of private label products through this network. ‘Partnership a win-win one’
IT’S a win-win partnership as we can use our sourcing strength and SKS’s huge network of kirana clients to supply products to them at competitive rates. Eventually, we can include other products as well,” says Biyani.

SKS provides interest-free working capital loan to its kirana clients. The kiranas use this to purchase their inventory from Metro and Future Group at wholesale prices. The loan amounts range from Rs 5,000 to Rs 25,000. SKS, in return, receives a fixed commission from Metro and Future Group for the total purchases a kirana makes.

“Kiranas access superior quality products at very reasonable prices, delivered right at their store, thereby increasing their productivity,” says SKS Microfinance COO MR Rao. SKS has 2.72 lakh kirana store owners as its customers (4% of its total of 68 lakh members). Industry estimates suggest that only 35% of the 6 million-odd kiranas in India are properly serviced by consumer goods companies and distributors. The remaining 65% is serviced by a multi-layered distribution network that is often inefficient, but still adds a substantial amount to the product cost.

German wholesaler Metro Cash and Carry India plans to scale up its Hyderabad pilot nationally soon. The company is also helping rural kiranas with tips on effective use of working capital and strategies to serve their catchments better. “We could have launched this as part of our CSR programme, but we chose to make it a part of our core business plan as the potential is huge,” says Metro Cash & Carry India director (customer management) Ajay Sheodaan.

Kotak Mahindra and Bharti Wal-Mart have rolled out a “business card” which offers credit to kiranas starting from Rs 8,000. The credit is free of interest for 14 days after the purchase and an interest rate of 1.5% per month is charged after that. Kiranas are now making transactions ranging from Rs 15,000 to Rs 1 lakh on this card.

Kotak Mahindra Bank executive VP and head (credit cards) Subrat Pani says the customer acceptance for this lowticket working capital funding is growing on a daily basis. “We have around 700 members from Amritsar and Chandigarh. Within six to seven months, we have been able to drive almost 9-10% of the total sales at Bharti Wal-Mart. This could potentially go up to 12% in the next three months,” he says.

Enthused by these initiatives, RPG Group vice-chairman Sanjiv Goenka says Spencer’s Retail will also study such possibilities. “Any new model which expands penetration is good for the industry,” he says.

However, Retailers Association of India CEO Kumar Rajagopalan responds cautiously. “The real potential for modern retail lies in the top 100 cities. Some companies may be experimenting on newer models, but we need to see how much business it can generate,” he says.

Boston Pizza International’s new smaller-scale store design, at about 4,100 square feet, is expected to make it “more affordable than ever to own a Boston Pizza franchise,” the company said in a statement Thursday.

The new store template is an opportunity “perfect for markets that were previously challenging due to market size or real estate availability,” said Ken Otto, the Toronto-based chain’s chief operating officer.

“One of our core pillars is a focus on franchisee profitability. This new prototype delivers against this by offering a reduced size model that is perfect for smaller communities.”

In terms of occupancy, the new space would allow for 140 seats with a 50-seat patio and would include both the “welcoming family restaurant and… lively sports bar” now seen in the chain’s larger outlets.

By comparison, the typical Boston Pizza building currently takes up 6,000-6,500 square feet, with capacity for 180-225 seats plus patio seating for 50-75.

“We believe a multi-channel approach to real estate and development is the best way to expand the Boston Pizza brand and extend our dominance in the casual dining category,” Otto said Thursday.

The company in recent months also made moves to expand its presence beyond the suburban landscape where it’s most often now seen, by developing stores in “prime urban locations” across the country and in “non-traditional” sites such as hotels, sports venues and strip malls.

“We are looking at building on the success of our urban prototype in Toronto in other major markets as well as growing through the opening of new stores in smaller, more rural communities that we haven’t entered yet,” Otto said.

Born out of an Edmonton restaurant, Boston Pizza and Spaghetti House, in 1964, the company — which then included 44 stores — was bought in 1983 by then-franchisee Jim Treliving and partner George Melville, who oversaw its expansions into Ontario, Quebec and Atlantic Canada.

The chain, which booked gross sales of $853 million in 2010, also began southward expansion in 2000 under the name Boston’s The Gourmet Pizza, now including about 50 U.S. outlets and three in Mexico.

No SUV-driving American shopper would be surprised to find 20 lb. sacks of dog chow at a Wal-Mart supercenter. But at an urban minimart that is trying to attract bag-toting pedestrians? Not so much.

Wal-Mart is struggling to expand with small stores as it seeks to penetrate big cities and jumpstart its U.S. growth. It has rolled out only a handful of Wal-Mart Express locations, and their merchandise shows a lack of adaptation from the Supercenter formula, as Shelly Banjo explains on Lunch Break.

Unless that minimart is operated by Wal-Mart Stores Inc. The Bentonville, Ark., retailer is betting that small urban stores called Walmart Express could eventually help jump-start its growth in the U.S. and fight off competition from rapidly expanding dollar-store chains.

The heavy bags of Ol’ Roy dog food suggest Wal-Mart is struggling to think outside the supercenters that remain its focus, analysts say. The world’s largest retailer has rolled out fewer than a dozen Wal-Mart Express locations since it launched the first 15,000 square-foot store a year ago, and experts say its effort to offer supercenter pricing and assortment in small, high-cost spaces is putting pressure on the minimarts’ profitability.

Wal-Mart declined to comment ahead of its quarterly earnings report on Thursday. But in a March analysts’ conference, finance chief Charles Holley said the company didn’t have enough results to open thousands of small-format stores. The venture, he emphasized, was still “a pilot.”

He described the company as moving slowly on purpose, citing a similar, 13-year effort to make its Neighborhood Markets profitable; the company has opened 199 of the grocery stores since 1998 and plans to open 80 this year. Analysts polled by Thomson Reuters project a fiscal first-quarter profit of $1.04 a share on revenue of $110.5 billion; a year earlier, Wal-Mart reported earnings of 97 cents and $104 billion of revenue. The company’s stores open at least a year are expected to report a third-consecutive quarter of modest growth.

Double-digit sales gains overseas have been a big driver of results in recent years. Investors are eager to see Wal-Mart develop a strategy for accelerating its U.S. growth.

The company wants to do the same in the U.S. At Wal-Mart’s annual meeting last June, U.S. stores chief Bill Simon said he would like the Express Stores “to deliver the same experience that a supercenter can deliver, only in 15,000 square feet.”

Problem is Wal-Mart has taken that statement quite literally, said Leon Nicholas of the consulting firm Kantar Retail.

“Wal-Mart can’t pull itself away from a supercenter mind-set,” he said. “Just look at the shelves. It is just absurd to see a dozen kinds of jelly or peanut butter when a shopper just wants to get in and out of the store quickly.”

Prices of items such as Skippy peanut butter and Kellogg’s cornflakes at a Wal-Mart Express store near Fayetteville, Ark. were identical to those at a nearby Wal-Mart supercenter, according to a recent Kantar study. The same buyers select goods for the Express stores as the supercenters.

Some customers like it. Rhonda Wright, 43, filled a plastic basket with items including cocoa butter skin lotion at a Wal-Mart Express in Chicago last week. A bank teller who lives about 15 minutes from the store, Ms. Wright said found it quicker “and a little easier to find things” than at a supercenter.

Some analysts question why Wal-Mart isn’t moving faster and why it has added or remodeled more than 120 supercenters last fiscal year, while other big-box retailers, including Best Buy Co., Staples Inc. and Barnes & Noble Inc. shutter dozens of stores.

“Wal-Mart is the only retailer out there continuing to open up big box stores, which leads me to think they’re not paying enough attention to what the consumer needs,” said Charles Grom, an analyst at Deutsche Bank who has a sell rating on Wal-Mart. “Eleven Express stores is a drop in the bucket.”

—Owen Fletcher contributed to this article.

Write to Shelly Banjo at shelly.banjo@wsj.com

A version of this article appeared May 17, 2012, on page B2 in the U.S. edition of The Wall Street Journal, with the headline: Can Wal-Mart Think Small?.

By crafting a retail bounceback program, both parties win by improving sales and/or combining advertising dollars. Provided that you are expanding each other’s reach, this is a no-brainer for a multi-unit chain operator as well as the single-store operator. Many retailers are specialists in their product offerings and always benefit from strong relationships with nearby non-competing retail outlets.

The concept is straightforward: you partner with a noncompeting retailer and they hand out your marketing materials to their customers. These marketing flyers are called “bouncebacks”—they usually contain a coupon that “bounces” the customer back to your store. Then, you do the same for the noncompeting retailer, handing out bouncebacks for their stores.  For the cost of the flyers, this is a remarkably easy way to generate customer traffic—customers that are already in the vicinity of your location.  You can even share the cost of printing a joint bounceback with your noncompeting partner, helping reduce your cost even more, as well as solidifying your partner relationship in the eyes of your customers.

Choose Wisely: Picking the correct retail partner is essential in order to hit your desired objectives. An ideal partner would have a loose tie to your industry that will be complementary to your concept. Though you may share crossover customers, the linkage between concepts allows customers to act while in the same “mindset.”

Tap The Potential: Creating a cross-promotion bounceback with a non-competing retailer is an excellent way to tap into another retailer’s customer base.  Within your three-mile trade area, identify one noncompeting retailer to cross-promote with for each quarter.  Create independently or collaborate on a dual bounceback that will be distributed to each store’s customer base for a set period of time. Rotating your retail partners throughout the year will keep your offer fresh.

Execute Flawlessly: As customers purchase your products, attach a bounceback for the other noncompeting retailer so that your customers will frequent that establishment.  Likewise, your noncompeting retail partner will do the same with their customers, sending their customers into your store. Of course, it is prudent to know your partner’s offer to answer any quick questions a customer may have.

Make It Compelling: Depending upon your weekly customer traffic, ideally partner with a noncompeting retailer that averages the same traffic count. Since the partner is within your three-mile trade area, expect to receive upwards of 2% customer traffic from the non-competing retailer’s customer base. Capitalize on the one-stop shop mentality that may expand to the shopping center as opposed to just your store.

Track Results: If you are using a coupon on your bounceback to drive customer traffic, code the coupons so that you can track the redemptions of the coupons. For every new customer who comes in with a coded coupon, ensure that you capture their customer contact data in order to actively market to them in the future.  Remember, each new customer may only represent the first time sales–your results could be significantly higher if you cultivate repeat customer visits.

All too often, marketers tend to overcomplicate their messaging to potential customers or overspend in reaching them. Sometimes the best marketing strategies are simply capturing customers when they are in walking distance to your store. Though this may seem like a nuts-and-bolts approach to marketing your store, keeping it effortless for your customer to react and head over to your store sometimes is the most profitable way of driving sales.

By John Matthews, founder and president of Gray Cat Enterprises Inc.