New Shop, a category creator of convenience retail in India, is driving entrepreneurship and empowering business owners with its franchise business model.
Established by three entrepreneurs in 2019, New Shop comprises 300 franchise stores in 18 Indian states but is targeting 10,000 stores by 2030.
Launched by siblings Aastha and Charak Almast and their best friend Mani Dev Gyawali, New Shop was initially conceived with company-owned stores.
Aastha picks up the tale.
“Before New Shop, there wasn’t really any kind of standardisation around how stores operate 24 hours.
We needed to learn ourselves before we empowered franchise owners to build a brand for us,” she says.
The trio have pooled their respective experience and expertise to create a unique franchise business model.
Aastha has a background in banking, finance and retail; while Charak and Mani are computer science engineers, who had previously founded a number of tech start ups.
They teamed up in the US, after traveling and studying in various countries.
It was there that they realised they had become dependent on convenience retail stores for their day-to-day shopping needs, as young people who were constantly on the move, unable to cook and living by themselves.
Back in India in 2016, they experienced a completely unorganised and traditional retail eco-system, Aastha recalls.
“Eighty eight percent of Indian retail is traditional and unorganised.
With that comes a lack of standardisation, hygiene practices or any kind of offerings that can be dependable,” she says.
That pain point was exacerbated if they were travelling to Mumbai, for example, and trying to buy coffee and snacks from traditional stores, which were neither standardised nor hygienic.
“That was the only option that we had.
However, India is 75% youth – people like us, under the age of 35, who are working and constantly on the move but lack the availability of a convenience store that is open 24 hours,” Aastha says.
It set the three of them thinking why the top chains like 7-Eleven and Circle K were not eying India as a key market and then propelled them to build a convenience chain themselves rather than wait for an international operator to enter.
“The aim was to bring standardisation into India with 24-hour operations so that the minute somebody sees a New Shop store, they would know what to expect,” Aastha explains.
Franchise route
Representing India’s entrepreneurial youth, the New Shop founders elected to go down the franchising route.
“Everybody is just looking to be a business owner and to start something that gives them the opportunity to live life on their own terms and grow that business because the more effort you put into your own business is directly proportionate to the return you make,” Aastha says.
“As young entrepreneurs we felt that India is raring towards entrepreneurship and franchising is the easiest way to own a successful business with very limited downside and risks.”
New Shop raised money from seed investors, who were both passionate about franchising and believed India’s retail market was ripe for disruption, and the model was launched.
“Everything New Shop is today comes from running company-owned stores,” Aastha reports.
That includes the average store size – 800sq ft and 24-7 opening hours.
The business was unsure if there was a need for round the clock opening in India but, from day one, 66% of sales are post 10pm and before 3am, Aastha reports.
The blueprint for New Shop included both the store design, the right products to offer for a just-in-time audience and what tech to create.
Uniquely, New Shop has built its own tech stack, which sits on the cloud so is both scalable and efficient.
Other retailers in India typically source different software for different parts of their business, which makes integration both difficult and expensive.
Since New Shop’s tech has been built in-house it has one database for PoS, inventory management, software apps etc so is affordable and scalable for the franchise-led business.
It even includes a B2B e-commerce app, where franchise owners are able to procure their inventory through New Shop’s own system.
Another benefit of operating company-owned stores at the outset means New Shop has developed a complete playbook for franchisees.
“Every single thing is now put in our training module and notebook, which is something that we impart to all our franchise owners.
And I guess this is their recipe for success,” Aastha says.
New Shop is breaking another mould with its ‘store in a box’ concept, a modular, foldable store, which fits in a 40ft container and can be built out at a location in fewer than three weeks.
That’s critical in cutting construction time and improving the ROI for franchise owners.
The model means stores can be ready to serve customers within 35-40 days and is helping to ensure franchise owners are profitable by 18-24 months, a standard already achieved across 150 stores.
The concept also means New Shop has never had to close a store.
If it’s in the wrong location, it simply moves the store and the franchise owner never loses money.
In-store experience and offer
New Shop’s offer is finely honed and based on Aastha’s own research.
“When I started working on the convenience retail model, the one thing that I Googled the most was a convenience store is a place that sells products and services that are consumed within the first hour of purchase.
And that definition just stuck with us.
We have also created an entire range of product and services that are curated to a particular location as well,” she explains.
That translates as 60% of sales from snacks and beverages, of which 25% come from fresh food and beverages on-the-go sold through an in-store cafe.
Frozen products like ice cream are also key along with ready to cook food and tobacco.
Grocery products, including pet care and home care, account for a further 5-10% of sales; while gifting is a key category in transit locations such as airports and railway stations.
Services are important too.
New Shop offers instant cash withdrawal through ATMs, electric vehicle charging, gifting for religious and spiritual rituals, astrology and palm reading services plus printing.
During the pandemic, it even provided Covid vaccines.
In terms of foodservice, New Shop’s mirrors the big international chains and is based around a frozen supply chain with products heated and served in-store as fresh.
Popular products include samosas and momos but the retailer has injected some international fusion but with an Indian twist.
Sandwiches, for example, have fillings like cottage cheese.
“We have adapted that and we’re constantly learning.
We have a constant feedback mechanism that comes to us from our consumers as well as from our business partners.
And we are constantly launching new food products that would appeal to our Gen Z and millennial customers,” Aastha says.
While the retailer adopts an omnichannel approach – there is an app and people can buy online, as well as from a further 14 delivery platforms – 90% of orders come from customers who prefer to come and shop at the store.
“They like the idea of going to a place that’s a great place to hang out and chill,” she says.
The PoS is very fast and checkout does not take more than two minutes, Aastha adds.
A positive disruptor
While New Shop is shaking up the market in India with its modern convenience retail approach, it’s providing the next generations with a fresh opportunity.
“Yes, we are creating a disruption but we are giving the children of traditional shop owners access to a new age business with five to 10 times the earning potential.
We are not displacing but upgrading them,” Aastha says.
New Shop is lobbying and helping India’s government understand the franchising concept and 24-hour retailing too.
“Interestingly, the concept of franchising in India is new, as is running retail 24 hours,” reports Aastha.
“I’ve had to actively educate the government.
India is projected to be a 150 billion dollar franchising market in the next 10 years so the government needs to create more guidelines and a framework for regulating the franchising industry,” she says.
Similarly, perceptions that India is not safe due to a lack of law and order and infrastructural development, don’t carry weight any more.
“We have been operating our stores for six years 24-7 and, if anyone can tell you India is a safe country, it’s me.
We’re in 45 cities and operating stores 24 hours.
I see an equal number of young men and women visiting my stores post midnight.
And there’s never been any situation where anybody would have remotely felt confusion about their safety,” Aastha says.
“The government was open to understanding what it will take for a store to run 24 hours but also ensure that there is no anti social activity.
Running our company-operated stores in the beginning helped us to create that framework on how can we ensure that there’s safety,” she adds.
As a result, New Shop is working alongside government to create a playbook for granting 24-hour licences and enabling the night time economy to thrive in India.
That’s involved meeting the right law makers but also contesting decisions in court where local authorities have challenged the business on 24-hour operation.
“We have actually fought these battles in the court and come out with a winning verdict, which has always got us one step closer to being the flag bearers of facilitating the night economy in India,” Aastha says.
24-7 opening creates more safety since the streets are better lit and more people are out on the roads, she maintains.
The dialogue with government is well rooted since New Shop’s first store was opened in a railway station, operated by the government.
“They trusted us and allowed us to open our first store, which was profitable in one month.
They are open to youth contributing to India’s growth story,” Aastha says.
New Shop and Aastha are passing on their entrepreneurial know-how too through a government programme to educate women and young people about becoming successful retail entrepreneurs.
“I’ve up upskilled many women and many young people in India and taught them how the retail business works and actually awarded free franchisees as well.
Empowering entrepreneurism is very important to me.
I feel strongly because I am young and a woman and I know that, given the right hand holding, there’s an opportunity to be self sufficient,” she says.
Future ambitions
New Shop’s future looks bright.
India has 70 million traditional business owners who could all potentially be upgraded through the New Shop opportunity.
However, its goal is to standardise 5%, which represents a 40 billion dollar opportunity, Aastha says.
“So that’s what we are working towards.
Our easiest way is to reach out to the next generation of these traditional brands.
And we already have a long backlog of franchise owners waiting to get their new shop franchisees.
So for us, finding a potential franchisee is not a problem.
We are controlling and restricting our growth because we want to grow in the right way.”
That strategy is working.
The business became profitable within the first four years and 95% of franchise owners are profitable and they’re breaking even in the first three months, Aastha reports.
“What’s an amazing fact is, on average, our franchise owner is making $45,000 per annum as profit.
India’s per capita GDP is $2,300.
So that’s the impact we’re really making in the economy – we’re giving the opportunity for anyone to earn 20 times the per capita GDP of the country.
We’re on a massive expansion drive and from this year onwards we are looking at doubling or tripling our store count every six months,” she says.
The business would also welcome international competition in what is a 40-50 billion dollar convenience retail market with an opportunity for 150,000 stores.
“I don’t think New Shop would open all those,” Aastha says.
“And it’s good to have healthy competition because that just creates the entire ecosystem to grow together and thrive.”
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