News and views about the Retail sector in India

This week, we focus is on the Indian consumer who is willing to spend with open arms, but will the lack of infrastructure cause the retail boom to falter and fail. What measures need to be taken to ensure this does not happen? Will we be able to overcome regional and political opposition to function smoothly? Get all the answers you want in this edition of the retail news.

Chillibreeze Business Research Team

General Plans and Information

TRS to intensify protest against Reliance Fresh

The Telengana Rashtriya Samity (TRS) will be increasing its protest against Reliance Fresh outlets in the Telengana region. According to K Chandrashekar Rao, the party will continue its fight against the company as it hurts the business of small traders and farmers. The TRS is the first of the political parties to vocalize its protests against the retail giant.

Date: Friday, November 02, 2007
Source: The Economic Times

Indian consumers will spend $5.08 per day by 2025

According to a new study by the McKinsey Global Institute, the average Indian consumer will be spending an average of Rs. 200 or $5.08 per day by the year 2025. The main factors for this increase will be a ten-fold increase of the middle class population of the country from 50 million to 583 million, along with a three-fold rise of household incomes, leading to an aggregate consumer spending to reach Rs. 70 trillion in 2025 from Rs. 17 trillion in 2005.

The study also stated that by the year 2025, the middle class of the country would account for 40% of the population, from the current 5%, and will spearhead an increase in consumer spending. Middle class families are classified as those with a disposable income of between Rs. 1-2 lakh per year.

Date: Monday, November 05, 2007
Source: Livemint.com

Is our lack of infrastructure holding back the retail sector?

While the retail sector is growing by leaps and bounds, the lack of infrastructure in the country is causing international companies to re-think their plan for investing in India. The Indian consumer is just waiting for opportunities to spend money and with incomes rising and consumer spending at an all time high, it could be that the retail industry is what will lead to the poor standard of infrastructure being improved in the country.

India’s horticulture sector is the second largest in the world, but due to lack of a proper cold chain, about Rs. 60,000 crore worth of fruits and vegetables are disposed of due to lack of proper refrigeration facilities. One can only imagine the kind of potential the sector has if all the proper processes were in place.

Public-private partnerships are one of the ways to address this problem, another could be to offer tax holidays for 5-10 years, to bring this sector up to par with other sectors, as well as give a boost to the agriculture sector. The key factor is that the infrastructure and logistics issues need to be addressed with urgency; else international companies will have no alternative but to bypass the Indian retail market.

Date: Tuesday, November 06, 2007
Source: The Financial Express

Big players - plans and investments

Reliance Retail to increase staff to 1 million in four years

Regardless of the fact that Reliance Fresh has faced protests in several parts of the country, the company is going all out to increase it total headcount to reach the one million mark in the next four years. According to Susan Bloch, Chief Culture Officer of Reliance Retail, "We will be having a million people working for us within the next four years. What took Wal-Mart to achieve in 30 years, Mukesh Ambani plans to do that in four years.”

Reliance Retail launched its first retail store in Hyderabad in November 2006 and has continued to expand in a fast and furious manner. So far, the company has opened 300 stores in 30 cities and continues to roll out stores at a fast pace.

Date: Thursday, November 01, 2007
Source: The Economic Times

Vimal to re-launch, expand its stores

Reliance Industries Ltd (RIL) announced that its Vimal brand will be undergoing a renovation and will be getting new showrooms. According to Anand Parekh, RIL President, Textile Business, the first of these newly designed stores was launched in Ahmedabad since it was the birthplace of the product.

New showrooms are to be opened in Mumbai, Bangalore, Chennai and Kochi, with a total of 24 new showrooms to be opened. The company will also be announcing several brand ambassadors for the Vimal brand. Founder of RIL, Dhirubhai Ambani started the Vimal brand in 1966 with just four machines and 40 men, a brand that grew to be one of the most well known brands at one time.

Date: Friday, November 02, 2007
Source: The Economic Times

Aditya Birla Retail to open 15 stores in Andhra Pradesh

The Aditya Birla Group will be opening 15 new supermarkets in the city of Vishakapatnam and another 300 in the state of Andhra Pradesh by the end of the financial year. The company had taken over the Trinethra brand of supermarkets at the beginning of the year, and 15 of these would be “refurbished and…re-launched” in Vishakapatnam, which will also see another 35 new stores opening by the end of the year.

According to Shiv Murti, CEO of Aditya Birla Retail, “In all, we are planning to set up 150 stores or so in the coastal regions and parts of Rayalaseema and 150 more in the rest of the State by the end of the financial year.” The company will be putting aside Rs. 40-90 lakh as investment per store, depending on its size and location.

The new stores have been designed by international design firm Fitch and will offer the complete variety of items from fruits and vegetables, to staples such as lentils and rice, personal care items, general merchandise and dairy products.

Date: Friday, November 02, 2007
Source: The Hindu Business Line

RPG to invest Rs. 1000 crore to expand its mobile and laptop retail chain

The RPG Group announced that it will be investing Rs. 1,000 crore over the next year to expand its PRG Cellucom India brand, which is a collaboration between RPG and the Dubai based Cellucom brand, for which it is the master franchisee. At present, RPG Cellucom India operates more then 100 stores in the country and will be expanding by another 400 stores by December 2008.

An estimated 150 stores will be operational by the end of the year, according to Sunil Bhagat, CEO of RPG Cellucom. The agreement between the two companies states that RPG will take care of the investment for infrastructure and Cellucom will take care of the procurement of the products as well as provide back end support. Cellucom is one of the leading retail firms of the Middle East, with a turnover of more than $350 million per year.

Date: Friday, November 02, 2007
Source: The Economic Times

Spencer’s Retail focusing on high tech ventures

RPG Group’s Spencer’s Retail will be growing more than just its food and grocery retail chain that it is most famous for. The company will be launching its new formats for consumer electronics, cellular phones, books, music and stationary products. According to Ramesh Menon, Vice President of operations for Spencer’s Retail, the company will be launching 5 new electronic outlets, with the first one being opened in Hyderabad.

The company has also launched its books; music and stationary products format under the Spencer’s Books and Beyond brand, the first of which is to open near Delhi. The company is also fast expanding its core business of food and grocery, with 40-50 new Spencer’s Daily stores opening each month. With 320 stores at present, the number is likely to cross 600, by the end of this financial year.

Date: Friday, November 02, 2007
Source: The Economic Times

Spencer’s to hire another 8,000 employees

RPG Enterprises’ food and grocery retail chain Spencer’s announced that it will be doubling its employee strength by the end of November 2008. At present, the company has 8,000 employees at its 250 stores, which are in 45 locations in the country. Approximately, 80% of the new employees will be for front-end operations of the company.

The company had announced earlier in the year that it would be increasing its total retail space from 1 million sq ft to 5 million sq ft and this increase in employees is in keeping with this expansion. A large part of the new employees are to be in stores located in Kolkata, Ranchi, Jharkand and Orissa.

Date: Monday, November 05, 2007
Source: Business Standard

Pantaloon to increase private label brands in Big Bazaar

The Future Group’s most valuable brand Big Bazaar will be increasing its private label products. According to Rohit Malhotra, Head of operations for South Zone, the company already has a large range of private label products in the apparel, food and electronics segments, all segments which contribute 12-14% of sales which the company hopes to increase to 25% of sales.

At present the Big Bazaar retail chain has 70 stores in major cities across India, with 22 stores in South India. According to reports, a large portion of the private labels will be taken from outsourcing. The rise of private labels has been phenomenal in the past few years, leading to a greater number of retailers opting for such as setup.

Date: Monday, November 05, 2007
Source: The Hindu Business Line

Reliance Retail could be split into 34 companies

In an effort to streamline its businesses, Reliance Retail could undergo some rigorous restructuring and be split into 34 companies that would be independent profit and loss centers for the company. While no changes will be taking place immediately, the entire process is likely to be completed in a phased manner.

In the initial phase, some of the verticals that will be separated will be the hypermarket division Reliance Mart, the health and wellness chain Reliance Wellness, the consumer durables division, Reliance Digital, the lifestyle chain Reliance Trends and its proposed footwear division Reliance Footwear. It’s most prominent business Reliance Fresh has already been hived off into a separate company Ranger Farm.

Once separated, all companies will have their own infrastructure for supply chain management, logistics, and marketing. The move is largely anticipated to stave off the anti-Reliance Fresh feeling that has been growing in some regions of the country, by making it an altogether separate entity. These separate entities will also find it easier to create collaborations with international companies and could become growth drivers in for the company in the future.

Date: Wednesday, October 31, 2007
Source: The Economic Times

International

Lowe’s close to signing deal with Reliance Retail

The second largest home improvement store in the US, Lowe’s is reportedly close to signing a deal with Reliance Retail. If the company completes the deal, it will be it’s first foray outside the US and Canada. In its home market, Lowe’s is giving its number one rival Home Depot stiff competition.

According to reports, the two companies are reportedly in talks to form a cash-and-carry retail venture, with Reliance have majority stake in the front end venture and Lowe’s managing the back end and sourcing, something along the lines of the Wal-Mart-Bharti venture.

As a multi-brand retailer, Lowe’s is not permitted to enter into the Indian market on it’s own and has to form an agreement with a domestic company as its franchisee or go in for a cash-and-carry business, as wholesale businesses are permitted under FDI regulations.

Date: Monday, November 05, 2007
Source: The Economic Times

Regional Trends

UB and Prestige Group announce luxury retail destination

UB City-The Collection is the new initiative between the United Brewery Group and the Prestige Group that will offer luxury retail space in the city of Bangalore. The UB City initiative will require an investment of Rs. 300 crore and will cater to some of the most famous and prestigious international and domestic brands.

According to Shashikanth, the CEO of the UB City project, The Collection has already signed up with several leading brands such as Louis Vuitton, Gucci, Mont Blanc and Dunhill to open branches of their stores there. A total of 38 stores and 23 brands will be in The Collection, which is expected to open in the first quarter of 2008.

The UB City project will itself be a grand project and will be spread over 1.5 million sq ft of space, offering the most luxurious of environments for discerning shoppers. So far the project is only for the city of Bangalore, but it could be replicated to other cities as well.

Date: Tuesday, November 06, 2007
Source: The Economic Times

Support Industries

Adani plans to invest Rs. 1000 crore to create supply chain

Adani Agrifresh announced that it would be investing Rs. 1,000 crore to set up a supply chain, bringing fruits and vegetables from farmers to retailers. According to Ravindra Jain, the company will be investing heavily to set up a cold chain, pack houses, distributions centers and expanding is present facilities.

Adani Agrifresh is the subsidiary of Adani Enterprises, which had earlier invested Rs. 200 crore to set up cold stores, grading and packing houses in Himachal Pradesh. The rise in the amount of fruit that passes though its centers has risen dramatically already, with apples increasing from 5,000 tonnes to 18,000 tonnes in just a year.

According to Jain, "Volume is the most critical factor in this business where investment is high and margin is low." The company will be working to create a distribution network spread across the country supplying fresh fruits and vegetables throughout the year. The company has also tied up with several wholesalers in 20 cities and also supplies to Reliance Fresh among other retailers, such as Mother Dairy, Food Bazaar, Big Apple Choupal Fresh, Trinethra and Namdhari.

Date: Monday, November 05, 2007
Source: The Economic Times

HR News

Healthcare retail could face shortage of trained staff

While there are lots of companies rushing into the healthcare system, the sector could be heading towards a shortage of trained staff, which could severely impede its growth. The difference in how healthcare is managed in India and in the US is vast. While in the US, the McMedicine brand has attracted several retail chains such as Wal-Mart, Osco Drug, Target and CVS Corp, and offers healthcare facilities run by nurses and pharmacists, in India, the plan is to have doctors take care of these facilities.

The focus of retail healthcare is to make basic healthcare more accessible by taking it out of a hospital setting. In India, there are plans to provide consulting, diagnostic services, treating minor emergencies, clinical care and medicinal dispensing, at the clinics that are to be set up.

Reliance has already launched its first health and wellness brand, with a store in Hyderabad and plans to open a total of 1,000 stores. Other companies who are also in the field are Manipal Health Systems, Fortis, Apollo, Dabur, Gold Shield, Future Group, AVB, Bharti and the Max Group.

Date: Monday, November 05, 2007
Source: Business Standard

Apparel & Footwear

Woodland to invest Rs. 200 crore to expand business

Footwear retail company Woodland has announced that it will be investing Rs. 200 crore within the next year to increase its stores, adding another 75 stores in India as well as increasing its manufacturing capacity in an effort to take advantage of the ongoing retail and spending boom.

According to Harkirat Singh, the Managing Director of Woodland Shoes, the company hopes to have approximately 70-75 stores in the metro cities, which would take its total number of stores to 240 in the country. The stores will each receive Rs. 2-3 crore for investment, to ensure that they showcase their products in the best possible manner.

On the production side, the company plans to increase its production capacity from the current 6,000 pairs per day to 10,000 to 12,000 pairs per day, almost doubling its present capacity. In this regard, the company has already set up five production facilities in Uttrakhand and Himachal Pradesh to meet greater demand from their increasing number of stores.

Besides footwear, Woodlands also has a line of apparel wear which at present accounts for 30% of the company’s topline. Woodlands expects its apparel segment to grow at a faster pace than its footwear segment and will be likely to contribute around 50% of the total turnover in the next two years.

Date: Monday, November 05, 2007
Source: Business Standard

Samsonite plans to create line of travel clothing

World-renowned luggage manufacturer Samsonite’s Indian subsidiary, Samsonite South Asia Pvt. Ltd. announced that the company would be creating a line of travel clothing to go along with its luggage and travel accessories. The company had earlier announced its plans of creating lines of fashion accessories such as watches, eyewear and shoes.

According to Subrata Dutta, CEO of Samsonite South Asia Pvt. Ltd., this new travel-clothing segment will offer solutions to people traveling to different parts of the country and the world. At present, Samsonite has 150 stores in the country and will be increasing these to 175 by the end of next year. The company will also be launching its Black Level luggage brand in Ahmedabad by spring next year.

Date: Monday, November 05, 2007
Source: Business Standard

Planet Sports to separate its sports and fashion business

Planet Sports announced that it would be launching separate entities for its sports and fashion businesses, to keep a more focused approach to both segments. The company is a joint venture between Pantaloon Retail and Planet Retail Holdings. Planet Sports will also be launching new categories such as cricket equipment and apparel by late 2008 and will increase its stores to 5000 by 2010, a move for which the company is committing Rs. 250 crore.

According to Ravdeep Singh, CEO of Planet Sports, "We have two different lines of business, one fashion and another sports, so the aim is to create separate entities to manage them. A proposal will be put forward to the boards of both Pantaloon Retail and Planet Retail for approval at their annual general meetings to make the two businesses." The partnership between both companies will be continuing for its new entities as well.

Date: Tuesday, November 06, 2007
Source: The Economic Times

Zodiac plans entry to US market

Zodiac Clothing announced that it would be taking its branded garments to the US market as it had already tapped the Western Europe and West Asian markets. Zodiac Clothing is one of the leading manufacturers of premium men’s wear branded apparel. According to Anees Noorani, Vice Chairman and Managing Director of Zodiac Clothing, the company is just waiting for an opportunity to enter the US market, but since the Zodiac name is already registered as a women’s footwear brand, the company cannot operate in the market under the same name.

The company plans to offer the same garments that it sells at its Indian stores to US customers. Zodiac Clothing is also looking for a partner to set up its business in the UK, after having ending its relationship with its erstwhile partner Ciro Citterio from before.

Date: Tuesday, November 06, 2007
Source: The Hindu Business Line

Titan Eye+ to open 250 stores

Titan Industries eyewear segment Eye+, which was launched earlier this year, will be opening 250 stores spread across the country next year. Of these new stores, approximately 15 of them will be company owned stores, while the balance will be franchisee stores.

According to S. Ravi Kant, CEO of Eyewear business of Titan Industries, all showrooms will stock merchandise from famous international brands such as Christian Dior, Tommy Hilfiger, Elle etc. All showrooms will also have optometry clinics that will offer customers free “zero-error” eye testing services.

Date: Wednesday, October 31, 2007
Source: The Hindu Business Line