Why did we back "The New Shop"?
Tech-enabled retail chain of 24x7 convenience stores with omni-channel footprint
Founded Year: 2019
Website:
https://thenewshop.in/
Founders: Aastha Almast, Charak Almast, Mani Dev Gyawali
Raised: $795K
Backers: Huddle, Anthill Ventures, Kevin Harrington, Hustle Partners
About “The New Shop”
The New Shop is a data-backed chain of mini convenience stores at high-traffic and high-density locations like railway & bus stations, highways, residential neighborhoods, etc that double up as dark stores for selling need and intent-focused brands targeted to that location.
TNS is making modern retail more accessible to the masses by taking retail to where people live, work, travel, study, etc. The New Shop's focused segment is transit retail (railway stations, bus stations, highways) (USD 22B market size) & residential areas (USD 500B market size).
Modern retail penetration stands at a dismal 9% in India as compared to a 90% in USA and China, even though being the third largest consumer and retail market in the world preceded only by the formerly mentioned countries. As the retail sector is unorganized and segmented, they want to bring consolidation and standardization in convenience retail.
TNS is building a business model that mitigates the challenges of brick and mortar and incorporates a data-driven approach, with the convenience of e-commerce.
No fixed rentals (TNS works strictly on revenue share only)
Low Capex (INR 1 Lakh to INR 7 Lakh + modular plug-and-play stores)
Retail automation (hence, low OPEX)
Higher gross margins and operating margins
Alternate locations with high traffic and high density and targeted products
Omni-channel presence and proximity to the customer
Twenty-four hours operational
Direct sourcing from manufacturers/brands
Nature of the Target Market
Retail is a USD 1.3 Trillion markets in India, with India being the third largest consumer market with an estimated size of consumer demand to reach USD 6 Trillion by 2030. Our focus segments are Transit retail – USD 22 Billion and Residential grocery/staples – USD 500 Billion.
The major macro indicators are the upwardly mobile class of people, 70% of the population in the working age, new aspirations, a new wave of infrastructural development, and privatization of transit points in India – highways, railways, bus stations. In addition, people’s retail needs are more spread out today - there are call-center workers on night shifts, late-night flights, people living in hostels, and single living. All these boost the need for convenience stores.
COVID has augmented the need and penetration for micro-retailing such that the need to have standardized modern convenience stores with targeted and intent-focused products accessible in neighborhoods through both brick-and-mortar setup as well as online deliveries is a necessity.
The problem at hand
Brick and Mortar Retailing as a business model has not been innovated in many years and now retailers are facing tough challenges which are restricting penetration, and growth and are resulting in stagnation and demise. Some of the challenges are mentioned below:
High fixed rentals
High staffing costs
Very high location hunting costs
Unpredictable and unknown footfalls
High Capex & Opex
Lack of technology adoption
Traditional retailers have not innovated on business models and most big players are debt-ridden and shrinking in size. Hence, this is the perfect opportunity to capture the market with our variable cost model in retail.
Currently, FDI in MBO is fixed at 49% which makes it difficult for large international chains to enter India independently. With our current real estate partnerships, we have a ready opportunity to scale in absence of any real competitive threat. The government is also pushing for Indian retailers selling Make in India products under the Self Reliant India or AtmaNirbharBharat Schemes, positioning us better suited against some of the larger modern retail outlets.
Why Huddle Invested in “The New Shop”
While we all had our concerns around retail, given the COVID impact on physical businesses, The New Shop (TNS) model is built to combat the challenges of traditional and modern retail. Summarizing a few key points that showcase the potential of The New Shop:
Low Fixed Cost - unlike traditional/modern retail which is rental-heavy, the TNS model is built on a revenue share model, which allows them to manage capital spending more efficiently for growth.
Data-Driven Approach to Product/Category Selection - TNS only sells contextual and intent-focused products for a specific TG. Given TNS stores are present in alternative retail locations, they take a data-driven approach to understand what sells for their TG and captive audience. Moving forward, this provides access to large data sets for TNS on which product categories to promote and list across their locations.d
Omni-channel Approach to Distribution - one of the largest risks for traditional retail lies in a pure offline strategy; TNS approach is built on offline and online-focused distribution. In addition to TNS locations, the business is also listed on hyper-local apps such as Dunzo and Zomato to increase penetration. In fact, the team is also introducing a 'dark store' concept wherein the physical locations will act as mini-warehouses and dispatch centers across the city, for online orders.
Alternative Retail Locations including Transit Retail - TNS is present across alternative retail locations, wherein there is a captive audience but no other retail option like co-living spaces, co-working spaces, university hostels, gyms, etc. In addition, a large opportunity for TNS is transit retail - they have launched their first store in Anand Vihar Railway Station in Delhi, and the scope to increase penetration pan India with a favorable tender towards TNS.
Team Dynamics - The team understands retail and works brilliantly together. This is their second venture together and the founders bring complementary skill sets to the company. Having worked closely with them, we've witnessed strong execution capability with the grit to get things done.
Large Market Opportunity - In a retail market size of USD 1.3 trillion, this kind of new retail concept is making waves across countries like the US and China, with ventures like Stockwell.AI and Bingobox, raising rounds of upwards of $40 million and $100 million, respectively.
(Read more about The New Shop)
That's all for today! A call out if you are a founder building in this space, you can reach us at connect@huddle.work and we look forward to brainstorming with you. If you are an enabler and investor and would like a further look into our ecosystem, then we are happy to dive deep into these sectors alongside you.
