Realty check at the check-out counters

No where is the maxim of retailing in India — location, location and location — better illustrated than the cash tills of modern formats. As retailers grapple with shortage of good retail space outside, the limited space near the check out counters is setting their cash tills on fire. It’s simple, limited supply, enormous demand for the space. The result — premium pricing charged by the retailers. “It’s after all real estate for the retailers and like any good location, it is getting the premium tag,” says Sameer Satpathy, head – marketing, Marico. Brands enter into either long term understanding with retailers where using space near the cash counters forms part of the deal. However, Ashutosh Chakradeo, business head – food & grocery, Hypercity says independent deals are also struck with brands for using only the cash till space. Typically the rates depend on the size of the format, whether it is hypermarket, supermarket or discount stores. Also the kind of SKUs/categories to be placed comes into consideration while negotiating the rate. “On an average, the premium earned near the POS could be 70-100 % more than the rate per sq feet on the shelves. It is also dependent on the catchment area of the store and the footfalls it accrues,” says Salil Sahu, MD, Home Stores India. While retailers are reluctant to reveal the price tag for POS, industry sources indicate that given the demand for the space, it is not uncommon of rates touching Rs 6000/cubic feet in major metros like Mumbai and Delhi. “The terms of trade also include providing for 0.5-1.5% extra margin, over and above the product line margin offered to retailers,” explains Himanshu Arora, VP- client management, In-Store consulting.
And if one thinks that long term deals involve brands locking in for months together with retailers, one is way off the mark. “No retailer will want to hand over the proverbial golden goose to brands on a platter,” remarks a senior marketing official from a FMCG company. So POS deals comprise of weekend special deals, festival days or special discount day deals, he reveals. “So if some special days have done well, then we are looking at another round of negotiations to decide on POS deals for the next special days,” he states.