India set to be a major sourcing hub for global retail

Amongst all the stakeholders, consumers and farmers are the most likely to benefit by organized retail. Reports indicate that several small farmers have started leasing land to augment their earnings with small vegetable patches, the produce of which they sell to big retailers for a better price than they received from a middleman.

- Chillibreeze Business Research Team

General trends and information

Margins soar at retail companies as shoppers loosen purse strings

Retailers in India reported increased margins this quarter despite concerns that rising rentals, salaries and the cost of adding stores would dent margins for the three months ended in September, as customers opened their wallets and splurged on more expensive goods and private labels.

“People had been upgrading their cars, houses or airlines but the range of brands for clothes had remained limited for more than a decade,” said Govind Shrikhande, chief operating officer of Shoppers’ Stop Ltd. “Over the last year, as we have seen premium brands such as Calvin Klein FCUK, Esprit and Tommy Hilfiger become available, we are seeing a shift.”

At Vishal Retail Ltd, a newly listed discount store chain, margins rose too. Operating margins for the six months ended September were 11.5%, compared with 11.1% for the year ended March. Profits rose as the company launched new private label products for water, flour, spices, appliances among other products. “Typically private labels get us 3-5% higher margins,” said Ram Aggarwal, managing director of Vishal Retail.

Retailers also said they are controlling costs better, which is helping keep up profitability. While salaries in the sector have been going up by 50-60% a year over the last few years as large, new players such as the Aditya Birla Group, Reliance Industries Ltd and Wal-Mart Stores Inc. enter the sector, retailers are also working to curtail employee costs and keeping employees from leaving.

At Pantaloon, while employee costs rose 41% for the quarter ended in September, compared with the same quarter last year, they had more than doubled for the year ended June, compared with the year before. The company is working to increase staff productivity, Kishore Biyani, Pantaloon’s managing director had said in a post-result phone interview with Mint.

At Shoppers’ Stop, employee costs were up 56% for the quarter ended September, compared with the same quarter last year. The cost of renting premises also went up 57.16% for the quarter, compared with the same quarter last year.

October 31, 2007
Source: livemint.com

Farmers reap benefits from organized retail

Murukesh, a worker in the Kannan Devan Hill Produce Co.’s tea estate at Munnar, Kerala, grows carrots, cabbage and cauliflower on a little piece of 3,500 sq. ft land. For years, this has been an additional source of income for Murukesh, who uses only one name. He used to sell his produce to local vegetable vendors or agents (where the latter were involved, he would pay a commission of 15-30% of the value of the transaction). He claims that the weighing machines used by the agents were not always perfectly calibrated and that the money due to him would come in instalments.

Since June, things have changed for Murukesh. Once a week, staff from Reliance Retail come to his field to take delivery of his vegetables. The price offered is at least Re1 more (per kg) than what Murukesh used to get; he pays no commission because no agent is involved; the produce is weighed electronically; and the payment is made immediately.

Even as opposition to organized or formal retailing grows across the country, farmers such as Murukesh are benefiting from the entry of firms such as Reliance Retail Ltd into the business. At Munnar alone, there are more than 200 farmers who either take their produce to a Reliance Retail collection centre or, like Murukesh, have the staff come over to their fields and pick up their produce.

Reliance Retail, which began its collection operations in Kerala in June, runs four collection centres at Kurupanthara near Kottayam, Muvattupuzha in Ernakulam, Kozhinjampara in Palakkad and Sultan Bathery in Wayanad.

From tapioca and yam to cowpea and cucumber, Reliance Retail sources fruit and vegetables from around 2,000 farmers in Kerala. These are sold through the 12 Reliance stores within the state and 318 stores across India. In the past four months, the firm has sourced around 1,000 tonnes of vegetables from the state.

A.V. Jayaraj, who once ran a farmers’ cooperative venture called Sangha Maitri and now plays a pivotal role in coordinating vegetable and fruit collections at Wayanad for Reliance Retail, says the firm is also looking at bulk purchases of pepper, the harvest of which is expected to begin in a few months.

Farmers have even started taking land on lease to cultivate vegetables. With paddy cultivation becoming unviable on account of high costs and lack of labourers for harvest, several fields are being converted into vegetable farms.

The promise of an assured market for the produce may encourage more people to take up vegetable cultivation. People familiar with the development who did not wish to be identified say that Reliance Retail is considering encouraging people to start vegetable gardens on terraces.

October 29, 2007
Source: livemint.com

India to emerge as sourcing hub for global retailers: Report

The Indian textile and apparel industry is poised to emerge as a sourcing hub for global retailers, given the abundant supply of fibre, well established production base and cost competitiveness, a CII-E&Y study has said.

The sourcing market is projected to grow to $35-37 billion by 2011 from the current $22-25 billion, the CII - Ernst and Young Textile and Apparel Report said.

Identifying sourcing as a huge opportunity for India, the report said phasing out of the Multi-Fibre Agreement triggered growth in the quantum of sourcing of top global retailers for the country.

"India has several advantages in terms of abundant supply of cotton and man-made fiber, well-established production base, cheap and skilled labour and good design capabilities," the report said.

Besides, government incentives to exporters and entry of foreign retailers into the domestic market would also boost retail sourcing from India.

The report further predicts that the Indian textile and apparel market would grow annually at 6.5 per cent, driven by a favourable domestic environment of rising household incomes, increasing consumerism and rapid growth in organised retail.

Exports would also grow annually by 12 per cent with international retailers looking at India as a viable alternative to China for sourcing of apparel.

October 26, 2007
Source: Economic Times

Big Players – plans and investments

Reliance Retail may be split into 34 companies

As part of a big restructuring process, Reliance Retail is likely to be split into 34 separate companies which will be independent profit and loss centres for the group. The plan, said a source, will be executed by the company in a phased manner over a period of time.

Some of the important verticals that the company is looking at hiving off into separate profit and loss centres in the initial phase include the hypermarket Reliance Mart, health and wellness chain Reliance Wellness, consumer durable format Reliance Digital, lifestyle chain Reliance Trends and the proposed footwear chain Reliance Footwear. The company’s food & grocery chain Reliance Fresh has already been hived off into a separate company, Ranger Farm.

All these companies will have their own infrastructure for procurement, supply chain, logistics and marketing. At present, Reliance Retail has a centralised pool of resources which caters to all formats.

Though the move is primarily part of a major restructuring exercise at Reliance, a source also indicated that it could be aimed to check political controversies surrounding the retail business.

Also, the operating margins vary significantly in various retail formats and with independent profit and loss centres, it would be in a position to make a better financial leverage.

In addition to accountability and focus, the formation of new companies will make it easier for the various Reliance offshoots to enter into joint ventures and alliances with global and domestic companies.

October 31, 2007
Source: Economic Times

Reliance plans makeover for shuttered stores in UP

Reliance Retail Ltd is considering reviving its mothballed grocery stores in suburbs, here, by converting the Reliance Fresh to speciality outlets other than grocery, so that it can keep the space without violating a Uttar Pradesh directive on closure.

Reliance Retail can no longer sell groceries in some 20 stores because of a state government ban on grocery stores run by organized deep-pocketed retailers.

In August, UP chief minister Mayawati asked Reliance to shut stores because their presence was, according to her, creating social tension in the state—a reference to protests by small traders opposing the entry of large corporations in India’s booming yet sensitive modern retailing. Since the ban Reliance has suspended its ambitious Rs4,000 crore retail roll-out for the state and has fired about 1,000 employees. In addition, the company is breaking rental leases for almost 100 commercial properties it signed up in seven cities in UP.

31 October, 2007
Source: livemint.com

Reliance Retail to launch 'Reliance Jewelry'

Reliance Retail, part of Reliance Industries, will make its jewellery foray with the launch of Reliance Jewelry this Diwali

Reliance will be the second corporate after the Tatas to enter the Rs 70,000 crore Indian jewellery industry, which is dominated by almost 3 lakh traditional family jewellers.

The company will launch its first store at Bangalore and will subsequently roll out 400 outlets in the next three years. Apart from gold and diamond jewellery, the stores would offer customised services for high-end jewellery. Sources close to the development indicated that Reliance is exploring possible branding options for the jewellery collections.

Reliance Jewelry may also sell gold below market rates. The move assumes significance in light of the recent surge in gold prices, which have breached the psychological barrier of Rs 10,000 per 10 gramme.

The company has reportedly entered into a sourcing agreement with Rosy Blue, one of the largest jewellery manufacturers, for operations. The jewellery foray is part of the company’s lifestyle retail, which includes books and music, cosmetics, lifestyle accessories and home solutions.

Reliance is set to compete with Tanishq, the jewellery brand from the Tatas. Consultancy firm Technopak Advisors estimates the Indian jewellery market to grow by 15 per cent annually, while branded jewellery is expected to grow by 30 per cent.

31 October, 2007
Source: Business Standard

Titan to launch first Tanishq store in US next year

Titan Industries Ltd will roll out its first Tanishq retail jewellery outlet in the US in the first half of 2008, a move aimed at expanding its retail business overseas and establishing a presence in the world’s largest jewellery market.

The US outlet, which is likely to rope in a local partner, will showcase products both for the non-resident Indian as well as for mainstream Americans.

V Govind Raj, vice-president (retail and marketing), Titan Industries, told Hindustan Times that no branded jewellery retailer could ignore the $60 billion US market, although it was far removed from Tanishq’s target customers in India. Titan was working out the modalities of opening the store, Raj said, adding that all manufacturing work would be done in Tanishq’s manufacturing plants at Hosur and Dehra Dun.

With a standalone Tanishq store in the offing, Titan has decided to abandon its earlier strategy of having a shop-in-shop presence in major markets in West Asia and the Far East

October 28, 2007
Source: Hindustan Times

Metro to set up cash-and-carry shop in Mumbai

The fight between Big Retail and the strident traders’ lobby is all set to get messier. Come December, Metro, Germany’s largest retailer, is all set to launch its first store in Maharashtra in Bhandup, a relatively nondescript locality in Mumbai’s eastern suburbs.

Metro’s entry into Mumbai is timed with the Maharashtra government’s long-pending decision to amend the Agriculture Produce Marketing Committee Act, which prohibited both farmers from selling their produce directly in the open market as well retailers from buying at the APMC market yards. While the move is expected to prompt more organised retailers to source directly from farmers in the state, traders believe that they run the risk of losing their livelihood.

Spread over 1 lakh sq ft, plus 30,000 sq ft of parking space, Metro will use the same cash-and-carry model it debuted with in Bangalore back in 2003. By cutting out middlemen, Metro reckons it can offer huge savings on a majority of the 18,000 items on sale.

Since foreign retailers are not allowed to sell directly to individual buyers under the cash-and-carry format, ironically, Metro will target wholesalers and other traders who buy in bulk, the very same constituency that is now protesting against its entry.

The battlelines have already been drawn. Two weeks ago, nearly 10,000 traders and wholesalers converged in Mumbai’s Azad Maidan to protest against the entry of Big Retail. The traders had threatened to launch a nation-wide agitation and disrupt the organised retail business across the country from January next year.

The traders had three specific demands: that the model APMC Act of 2001 be scrapped, no foreign direct investment in the retail sector by multinational corporations and a complete withdrawal of all cash-and-carry licences. The protesters had specifically decided to resort to violence against the existing organised retail chains, including Metro.

But the rising tide of protests doesn’t seem to have the state government unduly worried. A top official told ET that the state government’s talks with the German superstore were in the “concluding stages.” Justifying their decision to push ahead with the Metro project, another government official said, “It’s not another mall. The Metro follows the HORECA model, that serves hotels, restaurants, caterers along with other small retailers. These customers buy at the Metro’s wholesale centers, pay in cash and transport the goods themselves.”

Of course, dealing with irate traders isn’t a new challenge for Metro. In October 2003, just before its launch, the German retailer faced protests from wholesalers and distributors in Bangalore, who claimed that the cash-and-carry wholesale business was merely a backdoor entry into retail.

At present, Metro runs three stores in Bangalore and Hyderabad. Set up in Germany in 1964 Metro Cash and Carry today has 584 wholesale centers in 29 countries and is among the 50 largest companies world-wide listed by Fortune magazine. It commenced its Indian operations in 2003 with two modern wholesale centers in Bangalore and one later at Hyderabad. After Mumbai it has plans for Kolkata and Punjab, company insiders say.

October 25, 2007
Source: Economic Times

Unique Formats

Catalogue retail pilot at Shoppers' Stop

Shoppers' Stop Ltd's brand new offering the HyperCity Argos catalogue is all set to be launched in a few weeks
"It will be a pilot for the suburban Mumbai market. It requires minimum two catalogue seasons which take us one year to establish the model and then begin the rollout," said B S Nagesh, customer care associate, MD and CEO, Shoppers' Stop.

The HyperCity Argos catalogue is expected to match the prices of its existing brick-and-mortar retail format Hypercity, which currently has a single store in Mumbai.

The pilot is expected to be launched in Thane before rolling it out in other suburbs of Mulund, Vashi and Airoli and then entering Pune. In India, HyperCity Argos is expected to have display centres, online and call and collect counters that would cater to customers of a particular region. The company envisages a national rollout of HyperCity Argos in a few years.

Earlier this year, UK-based catalogue retailer Home Retail Group Plc signed an MoU with Shoppers Stop and HyperCity Retail to develop the company's catalogue retailing format in India.

October 25, 2007
Source: sify.com

Apparel & Footwear

Donear defers retail launch to December

Textile company Donear Industries Ltd, which was to launch its retail outlets in October, will now do it in December, said Mr Rajendra Agarwal, Managing Director, at the launch of their new Black and Blues collection of fabrics.

The retail outlets will be of 600-1,000 sq ft format in the franchisee mode, he said. "Our plans have not been scrapped. It's just that we want to announce one thing at a time," he said.

Mr Ajay Agarwal, Executive Director, added that they will target the age group of 16-35 years through these outlets. The company plans to invest Rs 350 crore, of which Rs 250 crore is for its greenfield facility at Surat and the rest in its retail expansion.

The new collection launched by its brand ambassador, cricketer Yuvraj Singh, will have Fabric Integrated Technology which prevents the colour black from fading. "With this new collection, we want to own the colour positioning of black and blue," said Mr Agarwal.

October 25, 2007
Source: Hindu Businessline

Food & Grocery

Dabur's Amit Burman forays into food retailing

To tap the rapidly growing Rs 23,000-crore food and beverages retailing space, Dabur India Vice-Chairman Amit Burman, along with two other promoters, has set up a new venture - Lite Bite Concepts.

The promoters plan to invest Rs 200 crore in the next two-three years for setting up a chain of quick service restaurants and food courts. Targeting a Rs 1,000 crore turnover in next two years, the new venture will open around 200 outlets spread across the country - in malls, office complexes, high way locations, Metros and other high footfall locations.

"Food and beverages retailing is a very attractive segment and with Lite Bite Concepts we are targeting Rs 1,000 crore sales in a couple of years with around 200 outlets," said, Burman.

He said the company has tied up with Dubai-based Hot Brands International, which operates in multi-cuisines like Shamiana, Magic Wok, Santinos, Sala Thai and others, while it is also scouting for several new tie-ups with leading local and international brands.

He said the company's own brand will be 'Rapps' which is a wrap-based sandwich roll concept to be available across formats, ranging from quick service restaurants, Casual Dining (CDR), express outlets and food courts.
With a focus on NCR, tier II and select tier III cities, the company is expecting to launch its first outlet next month

October 28, 2007
Source: Economic Times

Consumer Durables & Electronics

Tata's Infiniti Retail to have 30 Croma Stores by March

Infiniti Retail, a wholly-owned subsidiary of Tata Sons, plans to have 31 'Croma', multi-brand consumer durable and electronic mega stores by March 2008.

The 10th Croma store was inaugurated here today in Navi Mumbai's Vashi area by Tata Sons Director and Infiniti Retail Chairman RK Krishna Kumar and Tata Sons Director Arun Gandhi.

"We will have 31 Croma stores by March 2008," Infiniti Retail CEO and Managing Director Ajit Joshi told reporters after the inauguration of Navi Mumbai's second Croma store. The first store is in Belapur area.

"Next week on Friday another Croma store will be unveiled at Surat in Gujarat, and first store in South India will be unveiled on November 15 at Bangalore which will be followed by Croma stores in Chennai and Hyderabad. The store in Delhi will come up by December," Joshi said.

October 27, 2007
Source: Economic Times

Regional News

French Connection’s outlet in Pune

After having made its mark at the Lakme India Fashion week, French Connection UK (FCUK), Britain’s hi-fashion brand, is opening its outlet at the Central Mall here. This is the fifth outlet in the country . FCUK already has three outlets in Mumbai and one in New DelhiThe FCUK, which is situated at the newly constructed Central mall would have the Autumn Winter ’07 collection for women and men.

October 30, 2007
Source: Hindu Businessline

Tanishq unveils 100th store at Patna

Tanishq, the largest jewellery retailer in the country, reached the century mark, with the unveiling of its 100th store in Patna.

The Bangalore-headquartered Tanishq Jewellery, ventured into jewellery retailing in 1996 through exclusive stores, both company owned and franchisee outlets. A Tata Group company Tanishq has presence in 70 cities across the country and has registered a turnover of Rs 1,250 crore last fiscal.

Following more than 40 per cent growth in operations last year, Tanishq will invest extensively during 2008 in marketing and retail initiatives to further develop the market. It will build new logistics centres and upgrade existing ones.

October 26, 2007
Source: Economic Times

Just in Vogue to add more outlets

Luxury retail chain Just in Vogue is planning to open more outlets in the coming months, apart from bringing in more international brands into the country.

Currently, Just in Vogue, which retails premium and luxury products in categories such as watches, jewellery, perfumes and writing instruments, has 14 exclusive outlets and four shops-in-shops (in Central malls) in eight cities such as Bangalore, Hyderabad, Pune, Mumbai and Ahmedabad.

It plans to add eight outlets and two shops-in-shops by March 2008 in cities such as Delhi, Nagpur and Chandigarh – “wherever the youth population is high,” said Mr Manoj Subramanian, Head – Marketing, Just Lifestyle Pvt Ltd. Just in Vogue looks to bring in international brands in the crystal and leather goods categories.

The luxury brands market in India is estimated to be Rs 3,000 crore, dominated by the grey market.

October 25, 2007
Source: Hindu Businessline

Lifestyle & Luxury Retailing

Hero Group forays into home decor biz; to open 40 retail units

Amid growing demand for household design, two-wheeler maker Hero Group has ventured into home decor market and plans to initially invest Rs 40 crore to launch 40 lifestyle stores across the country in the next two years.

The company has launched two stores, one each in Gurgaon and Delhi, and would open the third one in the city by November. It plans to open 18 stores by March 2008. It is also looking to make overseas foray by rolling out a retail home decor outlet in Dubai.

The group would open its chain of lifestyle and home decor stores - OMA - in 22 cities, including Tier II ones, he said, adding "smaller cities have a huge potential as they don't have much choice and variations."

It has planned to open five stores in the national capital region and two in Mumbai.

The company has tied up with furniture store - Proform for its Gurgaon outlet. Out of 40 stores it has planned to open, 35 would be on standalone basis and the remaining would be with Proform.

October 24, 2007
Source: Economic Times

e-Commerce

Diwali e-shopping rising

E-shopping sales for Diwali this year has already registered a growth of 40 per cent, and is expected to register a growth of 130 per cent during the festive season.

Consumer goods industry sold products worth Rs 250 crore this time last year through e-shopping, in which nearly 18-20 lakh consumers used the Internet as medium for executing their sales orders in large cities including metros, an Assocham release said here. "As per estimates, this year's Diwali is likely to witness over 30 lakh consumers taking advantage of the Internet for e-shopping as it offers convenience and easier accessibility," it added.

October 29, 2007
Source: Hindu Businessline

eBay expects e-commerce users in Gujarat to double

Recognising the rapid growth of e-commerce entrepreneurship in Gujarat’s tier II and tier III cities, eBay India has decided to focus on the state as a global sourcing hub for diamonds, apparel, furnishings and handicraft.

As per company estimates, the Indian e-commerce market is likely to be worth Rs 1105 crore in 2007-08, when the company aims to have a 34 per cent market share.

The top cities from Gujarat involved in e-commerce through eBay are Ahmedabad, Surat, Sibhor, Rajkot, Vadodara and Bhavnagar.

The products are believed to be popular among traders and customers in the US, UK, Germany, France, Italy, Canada and Australia.

Gujarat currently makes up 5 per cent of the total two million users in India. eBay expects the numbers to double by year end.

October 26, 2007
Source: Business Standard

Bus ticket bookings take real-time route

Online surface transport Web site, Ticketvala.com, was formally launched on Tuesday. The site will enable travelers to book bus tickets from the comfort of their home in real-time and at no extra cost.

“The effort is aimed at revolutionising road travel which, compared to rail and air transport, is the most fragmented sector,” says the President and CEO of Ticketvala.com, Mr Haranath Lokanadham. Mr Lokanadham has signed up with 30 bus operators across the country to offer this facility.

Ticketvala, he pointed out, is not restricted to the Web interface as a good number of people are yet to gain Net connectivity. “We operate a call centre to facilitate the reach,” he said.

According to him, the basic issue in bus services is access to information. “There is no information guide, but with roads getting better by the day, the passenger road traffic is bound to rise. The point-to-point road connectivity is amazing,” he said.

Ticketvala is located in Mumbai, but plans to spread its wings across every region soon.

October 25, 2007
Source: Hindu Businessline