Ultimately, though, Subhiksha's USP is its price - cheaper than the kiranas, and cheaper than the hypermarkets. If it is to keep dishing out discounts, the chain needs to keep its costs down to the minimum.

Hence its tearing hurry to build scale quickly: so that procurement costs fall and overheads can be absorbed over a larger base. Stratospheric real estate prices notwithstanding, Subhiksha has opened close to 42 stores every month in the past year and a half, across 20 cities.

It aims to hit the 1,000-store mark by Diwali (next month), and double that by March 2009, occupying 3 million sq ft in all. "We do manage to get space, though it’s not always cheap," Subramanian points out.

The momentum seems justified when you consider how close the competition is. The Future Group entered the small-store arena a month ago; Mall says in the next couple of years, the group will roll out 1,000 KB Fair Price shops.

Reliance Fresh, too, although not catering to the same clientele, is expanding from its current 300 stores to 1,000. But where the Future Group, Reliance Retail and Bharti Retail will have both large and small formats, Subhiksha intends to stay with the small store model.

That could make it harder for the chain to scale up. Observes Raman Mangalorkar, head, retail practice, AT Kearney, "Although the small-store format is not in any way logically flawed, the ability to scale up with only a small store format is less than it is for a chain that has both large and small formats."

Interestingly, the TruMart chain - which has stores occupying anywhere between 2,500 sq ft and 8,000 sq ft of space - is opting out of the smaller model.

"Customers want everything under one roof and 2,500 sq ft is simply not enough," explains Upamanyu Bhattacharya, CEO, TruMart. He adds, however, that the market is segmented with enough of a catchment for all formats.

For its part, Subhiksha's convinced that small is the way to go. "We intend to dominate the small store segment. We are already ahead of the pack and while others may be rolling out both large and small stores, our costs are lower," asserts Subramanian.

As for notching up scale, Indian shoppers prefer to buy vegetables and groceries closer home, but are willing to go a little further to pick up apparel or other items.

"People don't want to spend too much time buying essentials. And only high-end shoppers will buy food and groceries in hypermarkets and they are not our customers," he adds.

Ernst & Young Partner Pinakiranjan Mishra thinks a slightly better corner store makes strategic sense. "The small-store format is obviously a viable model, otherwise the kiranas wouldn't exist. The trick is to leverage purchase efficiencies, since costs for an organised chain are higher than those for a kirana," he advises.