Wal-Mart learning about Indian market from P&G

Some interesting twists in India’s retail trip - Vishal Retail plans a franchisee model leveraging the strength of the kirana stores to take on other organized retailers. Mahindra and Mahindra denies talks with Tesco on the latter's Indian foray. Another must-read this week is the rural marketing article on Hariyali Kisan Bazaar.

-Chillibreeze Business Research Team

General Plans and Information

Big brands seeking designer labels

With design and designers everywhere these days, the big numbers are stacking up. And the big cahunas are breaking in. At current estimates, fashion in India (including street brands, cosmetics, beauty, accessories, etc) is already at the $1-bn mark (see chart) and growing. And clearly, no marketer or designer can afford to ignore it.

Everyone wants an engagement — either directly with designers or with a fashion week, whose title sponsorship reportedly fetches Rs 15 crore. Think Nokia, HP, Samsonite, Gitanjali, Grasim, Raymond’s, DHL, Chivaz, Allen Solly, Samsonite, Wills Lifestyle, everyone is riding the fashion platform.

Locally too, at street level, designer fashion is stirring, and stirring things up. At the Select CityWalk shopping mall in the Capital’s Saket area, Rajesh Pratap’s and Puja Nayar’s labels jostle cheek-by-jowl against global fashion brands, while next door at the MGF Metropolitan, Ashish Soni, Mandira Wirk, Vikram Phadnis, Varun Bahl, preen for the same customer as Shopper’s Stop.

In the capital’s upscale Khan Market, Ranna Gill, Deepika Govind, Kavita Bhartia sit amidst fruit and vegetable-sellers, book stores and cake shops and popular cheap chic brands such as Fabindia and Anokhi.

Much of this is, however, supply pushed. While earlier the difference was only between tailored versus ready-to-wear (RTW), now several segments are emerging within both. Now even in the branded and retail segment, brands and retailers are trying to differentiate themselves and fashion is being used as a key parameter.” Case in point is Wills Lifestyle, which in just two years has seen 15% of its turnover come from branded designer fashion in its stores.

Yet, a couple of years ago, when Westside, Pantaloons, Shopper’s Stop, Ebony experimented with designer RTW, it met with patchy results at best. Says Simran Singh, retail consultant to many of the big names: “For a number of retailers those days, I think it spoke to a different audience than their regular customer. There was lack of clarity of target audience. The whole emphasis was to give cheap fashion. However, it was too expensive for the regular customer and not trendy enough for the fashionable customer.”

April 6, 2008
Source: Economic Times

Big players - plans and investments

Wal-Mart takes retail tips from P&G India

Wal-Mart, the $340-billion retail giant, is looking to its long-time partner Procter & Gamble to learn the tricks of the Indian market, as it tries to get a foothold here.

Globally, the relationship between the two goes well beyond a vendor-retailer relationship and P&G has offered to share its understanding of the Indian market to help Wal-Mart in building efficiencies in supply chain and merchandising for its cash-and-carry business.

Senior officials at P&G told ET that its India unit has shipped its first consignment of personal-care products to Bharti-Wal Mart, a joint venture for the cash-and-carry and logistics initiatives.

While the joint venture will focus on B2B business, the Bharti group plans to launch small-format retail stores shortly. The officials said P&G India is helping Wal-Mart understand the nuances of doing business in India. Wal-Mart’s India exposure has been so far restricted to sourcing from the country for its global operations.
The Wal-Mart official said the first cash-and-carry store is expected to open by 2009.

April 8, 2008
Source: Economic Times

Vishal Retail to rope in kiranas to take on biggies

So far India’s retail story has largely been of rivalry between traditional kirana stores and the emerging big retail. But this year could see a new partnership emerge between the two. In perhaps the first major attempt by a big retailer at co-opting kiranas in the country, Vishal Retail is rolling out a mega plan to turn existing kirana stores into their franchisees.

“This partnership will help kiranas survive the onslaught of organised retail as it will enhance their competitiveness. Kirana stores can avail of the benefits on account of the economies of scale, a key advantage for big retailers,” says Vishal Retail CMD RC Agarwal, adding that his attempt will also tone down the debate of traditional kirana versus organised modern retail.

As per the plan, Vishal Retail will completely take over the supply chain of kirana stores and provide them with technology, new practices, visual merchandising skill and special promotional schemes on offer in the company’s hypermarket — Vishal Megamart. Vishal will also offer a minimum guarantee to all kirana stores, which will ensure that the latter doesn’t lose out on revenue after having joined hands with Vishal. Kirana stores, which choose to take the franchise route, will also sport ‘Vishal’ brand.

The partnership will also help Vishal. “We can expand very fast under the franchisee model,“ says Mr Agarwal. Relatively-small Vishal Retail plans to leverage this army of kirana stores to take on the might of the likes of Reliance, Future, Wal-Mart and Subhiksha.

April 8, 2008
Source: Economic Times

Dabur's H&B heads South: launches 2 outlets at Hyderabad airport

H&B Stores, Dabur India's retail arm has ventures into South India by launching two beauty, health and wellness retail stores under its brand name 'newu', at the Rajiv Gandhi International Airport, Shamshabad.

The two 'newu' outlets will give air travellers a variety of international and national beauty and health brands, across categories like personal care, baby care, fashion accessories and male grooming.

According to Baker, newu will continue to aggressively expand its presence in the organised retail market, though an increased presence in high streets as well as quality malls. In months to come, new 'newu' stores would be launched in Delhi and the national capital region (NCR), where it had launched its first store, besides entering new markets such as Bangalore, Chandigarh and Ludhiana. By the end of 2008-09 fiscal, 'newu' would have around 20 stores.

April 8, 2008
Source: Economic Times

A rich harvest from Kisaan Bazaars

Organised retail might be faltering in urban India, but is booming in rural India, going by the experience of DCM Shriram Consolidated Ltd’s Hariyali Kisaan Bazaar (HKB). Aimed exclusively at rural India, the company has seen sales from its 160 stores more than double in the last couple of years.

Average sales at an HKB store have gone up to Rs 5 lakh a day during the harvest seasons, while it is around a tenth of that during the lean season. That means the turnover of a single HBK store is over Rs 6 crore, annually, while the investment cost varies between Rs 2 crore and Rs 3 crore.

The growing popularity of HKB stores has also prompted banks and insurance Companies to look at possible tie-ups to tap the rural customer. ICICI Lombard and HDFC Bank have already tied up with HKB for their products. Though he furnished few details, Ajay S Shriram, chairman & senior managing director, DCM Shriram Consolidated, said, “Banks and insurance Companies get a ready customer base on a platter.”

Shriram said HKB’s retail model was developed exclusively for rural customers. “We have no intentions to bring it to urban areas; it has been designed for rural customers,” he said, adding that retail in rural India is commercially viable.

HKB not only sells products relating to agriculture like fertilisers and seeds, but also household items as 40% of rural India comprises those that are not engaged in farming, Shriram pointed out. The success of HKB has also encouraged the company to launch pulses and masalas under its own Hariyali brand.

April 6, 2008
Source: Financial Express

Mahindra says not in talks with UK's Tesco

Diversified conglomerate Mahindra and Mahindra on Friday said it is not in talks with British retail giant Tesco regarding any partnership for the latter's foray into India.

A British media report, quoting unnamed sources, had on Thursday said that Tesco has identified a "preferred partner" for entering the Indian retail market and the partner was likely to be among a group that includes M&M, Bombay Dyeing and National Dairy Development Board.

Reacting to the report, an M&M spokesperson today said in a statement that "Mahindras is not in talks with Tesco for any partnership or agreement".

April 4, 2008
Source: Economic Times

Birla plans retail expansion

Aditya Birla Retail is looking at increasing the number of supermarkets and hypermarkets to ramp up its expansion across India, Sumant Sinha, chief executive officer, said today.

“Our rollout strategy is dependent on our ability to execute. We are planning to launch more stores,” Sinha said on the sidelines of the company’s press meet.

Currently, the company operates two formats—supermarkets and hypermarkets—under the `More’ brand. Aditya Birla Retail has 500 supermarkets and 2 hypermarkets at present.

April 3, 2008
Source: Economic Times

Aditya Birla Retail to open ten hypermarkets

Aditya Birla Retail Ltd. (ABRL) on Thursday unfolded its expansion plan to add this year around ten hypermarkets to its existing chain of supermarkets and hypermarkets across India. The expansion plan will involve an investment of Rs. 250 crore. Besides, there is a move to roll out a large number of superstores under the ‘More’ brand name.

“I believe we can roll out an equal number of supermarkets, which we have opened last year,” ABRL CEO Sumant Sinha told reporters, while announcing the tie-up with Oracle for implementing IT solutions in its retail operations.

He said the company had plans to open ten hypermarkets this year. Mr. Sinha said the company had selected Oracle Retail merchandising, planning and supply chain applications to drive its growth plan in India.

With a centre in Bangalore to supports its retail clients both domestic and international, Oracle, which started providing solutions for the retail industry 18 months back in India, is also very bullish about the Indian market.

April 3, 2008
Source: Hindu Business Line

Regional News

Brand ‘newu’: Dabur Retail’s stores at RGIA

Dabur India Ltd’s retail subsidiary, H&B Stores Ltd, has announced the launch of two of it ‘newu’ brand stores at the Rajiv Gandhi International Airport, Shamshabad.

The beauty, health and wellness retail stores will sell international and domestic beauty and health products. While one ‘newu’ outlet will operate out of a kiosk in the check-in departure area, the second is located in the Village Shopping Area in the passenger arrivals greeting area, a company press release said.

April 8, 2008
Source: Hindu Business Line

Raheja group’s Inorbit plans ‘Village’ mall

Bringing into India the internationally popular concept of value retail, Inorbit Malls, a Raheja group initiative, is introducing a ‘Village’ mall near here.

Located 12 km away from Uppal, the first ‘Village’ value retail showroom at Pocharam would be positioned as a family destination, offering shopping experience, entertainment area and eateries. “The four-lakh sq ft facility will be a prototype for us. After studying this model, we will replicate this in other Indian cities,” Mr Rajiv Bhatia, Chief Executive Officer, told Business Line.

Globally, stores like Dubai Outlet City (Dubai), Bicester Village (London) and Wertheim Village (Frankfurt) have become popular with shoppers.

The Pocharam mall would be operational in August 2008.

Inorbit, which currently operates one mall in Malad (Mumbai) is planning to build 10 malls, including two each in Baroda, Pune and Hyderabad; and one each in Bangalore and Chennai.

April 4, 2008
Source: Hindu Business Line

International

UK companies are search for overseas opportunities

According to recent newspaper reports, Hamleys is set to capitalise on its reputation as a world famous tourist attraction by entering the Indian retail market. The 250-year old toy store was last week said to be about to announce a joint venture with Reliance Retail, one of India's largest industrial conglomerates.

It joins a clutch of other retailers which, over the past year or two, have either announced their intention to open in India through partnership arrangements, or been reported to be carrying out research, with a view to making an entry into the market at some point in the future.

They include Marks & Spencer, which is also in talks with Reliance; Wal-Mart which is set to open its first cash-and-carry with India-based Bharti by December 2008; and Giorgio Armani, which has entered into a joint venture with real estate developer DLF to open stores which will sell and distribute various Armani brands. It's not a huge surprise that retailers are eyeing the Indian market as it is reported to be worth an estimated $330 billion.

A few retailers have managed to become forerunners into India, mainly through franchising agreements. Mothercare was one of the first to explore this, teaming up with Shoppers Stop to open 11 franchise outlets in 2006. And its approach seems to be paying dividends. Earlier this year, Mothercare chief executive Ben Gordon said: “In India there is an 80 percent awareness of Mothercare among the middle classes. We have an absolute gem of a business here for international expansion.” At the time, Gordon suggested that Mothercare's expansion programme could double its opening programme in India and Russia.

April 5, 2008
Source: Retail Bulletin

Apparel & textiles

Orient Craft to form Rs 350 crore JV with European clothing line

Gurgaon-based textile and clothing export house, Orient Craft, is formalising plans to set up a 50:50 joint venture with sOliver, a $2.5-billion European clothing brand. The association will build a retail chain of fashion and lifestyle products across the country, Sudhir Dhingra, company chairman and managing director, Orient Craft, said.

Orient Craft already has an exclusive licensing agreement with sOliver under which it has been retailing the latter’s products in India for the last three months.

The joint venture will have an investment of Rs 350 crore, that would be raised through a mix of equity and venture capital funding. The exclusive retail-stores chain will offer the entire range of sOliver’s apparel and accessories for children, men and women under the sOliver brand. The JV is expected to be signed in three months from now.

“We have already opened an sOliver store each in Mumbai and Delhi. Our idea is to have around 77 exclusive, company-owned sOliver stores in the next four years,” Dhingra said.

April 6, 2008
Source: Business Standard

Prateek looks at beefing up retail presence

Apparel manufacturer Prateek Group is looking to beef up retail presence of KANZ (a children’s wear brand) stores and ‘Coupon’ malls across the country.

Prateek forayed into retail last year through a subsidiary, Prateek Lifestyle, to set up ‘Coupon’ malls, which retail apparel brands at discounted prices, in Bangalore and Raipur. Plans are on to add 12 malls this fiscal year in cities and towns such as Hyderabad, Kozhikode , Gaziabad, Faridabad and Kolkata.

The company is also in the process of launching a slew of private labels at Coupon mall. Coupon already sells private labels from Prateek in the men’s and women’s wear categories. Other categories will be launched in time, says Mr Pradeep Agarwal, Managing Director, Prateek Group.

Prateek also has a presence in kidswear with a joint venture with KANZ of Germany. Currently, there are 13 KANZ exclusive brand outlets (EBOs) in the country in cities such as Bangalore, Delhi, Mumbai, Kolkata and Ludhiana, apart from being present in multi-brand departmental stores such as Central, Lifestyle and Shoppers’ Stop.

“We hope to add 28 EBOs in the current financial year (2008-09). We will also increase KANZ presence in multi-brand stores,” says Mr Agarwal.

April 4, 2008
Source: Hindu Business Line

McDonald’s outlet in Chennai

Global fast-food major McDonald’s launched its first Chennai outlet at Ascendas IT Park, off the city’s IT corridor. McDonald’s has come to Chennai, almost 11 years after it opened its first outlet in Delhi. This is in line with the company’s expansion plans in southern India. By the end of the year, it plans to open one more in Chennai. A total of 20 restaurants are planned in the region over two to three years.

Announcing the launch, Mr Amit Jatia, Managing Director and joint venture partner, McDonald’s India (West & South), said eating out has become extremely popular in Chennai and “we see a lot of potential here”.

April 2, 2008
Source: Hindu Business Line

Support Services

Retail rentals stabilising after two years

After witnessing an unbridled run for the last two years, retail rentals seem to be holding their breath now.

Rentals for retail stores and showrooms have stabilised across Delhi NCR, Bangalore, Hyderabad and Kolkata, with most markets in these cities witnessing little or no growth in the past six months. The rentals in Mumbai, however, are still roaring with some pockets witnessing an increase of as much as 174% in the past six months.

“Retail rentals had been increasing much faster than the revenue generated from the stores. At such pace, it reached a stage, where revenues stopped supporting the rentals, leading to little or marginal hike for rents,” says Cushman & Wakefield India director (retail services) Rajneesh Mahajan.

Skyrocketing rentals have been a sore point for retailers who have had to restrict their expansion plans and even down shutters at some places due to this. Several retailers have complained that rising rentals was putting pressure on their margins.

In Mumbai, however, the rentals are increasing unabated. The rentals have increased by 111% to Rs 1,350/sq ft in Linking Road and by 174% to Rs 960/sq ft in Colaba Causeway. This is linked to the fact that there is no fresh supply of retail space in Mumbai’s prime locations and some of the new projects are already leased out.

Unlike in Mumbai, Delhi had fresh supply of retail space with the opening of Amby Mall and Select City Walk mall in Saket which helped distribute the demand. Additional retail space also came up in suburbs of Gurgaon and Noida, easing off pressure on existing high streets. In Delhi, Connaught Place and Basant Lok have seen no rise in rentals while GK-I M block market (15%), Khan Market (9%) and South Extension (9%) have seen moderate increase in rentals over the last six months. While rentals in Noida remained stable, it increased by 16% in Gurgaon. The rentals in Gurgaon are Rs 250 per sq ft while in Noida it’s Rs 325 per sq ft.

Similarly, Bangalore, which witnessed over 50% annual growth in rentals over the past two years, seems to be cooling off with no increase in rentals since September ’07. Hyderabad and Kolkata too saw stable rentals during FY ’08. Rentals, however, are rising in Chennai and Ahmedabad with both cities reporting over 10% rise in most pockets in the last six months.

April 3, 2008
Source: Economic Times