Which is cheaper for monthly grocery shopping – organized retail or the local kirana?

Organized retail is in for some interesting times, although not all of it will be fun. For instance, the local kirana is often cheaper, as the report by Mint indicates. Malls too have to ensure they are customer centric to survive the consolidation coming up ahead. This week also has reports on some interesting JVs in the retail space – Reliance with Marks & Spencer and DLF with Armani.

Chillibreeze Business Research Team

General Plans and Information

50% of malls may shut down by '10, hype to go: Experts

Consolidation in the retail industry would result in nearly 50 per cent of the malls shutting down by March 2010 and the hoopla surrounding the sector would considerably subside by then, a brand expert has said.

"By March 2010, around 50 per cent of malls would close down while retailers focusing on consumers would thrive. Those who focus on investors, however, will not survive," Samsika Marketing Consultants Chairman and Managing Director Jagdeep Kapoor told reporesr here.

Retailers think that consumer demand had increased but they do not realise that consumers had also become more demanding, he said. "Those who will understand both will survive."

Retailers were concentrating more on expansion which was not enough for surviving in a market that was becoming intensely competitive, he said. "They need to look at depth by improving their services and focusing on how to retain the consumer."

By the end of the calendar year, margins of organised retailers were likely to decline, Hypercity CEO Andrew Levermore said. "Retailers, especially in the food and groceries business, would be the worst affected." "We will see some consolidation and mergers and acquisitions happening in the sector," Levermore said.

However, two categories of retailers would survive in this scenario - the ones with deep pockets who could sustain losses for a long period and the others who had accumulated experience in the sector, he noted.

February 24, 2008
Source: Economic Times

Retail franchising expects to grow two-fold in 5 years

The concept of franchising has picked up substantially in the retail industry, which is expected to witness two-fold growth annually over the next five years, a top brand expert said.

"In the last three years, franchising has been clocking a 60 per cent year-on-year growth which is likely to accelerate to 100 per cent over the next five-year period," Samsika Marketing Consultants Chairman Jagdeep Kapoor told media here. "The main driver of this growth would be retailers' aspirations to expand fast." To keep pace with increasing consumer expectations on quality, ambiance and brand experience, an increasing number of companies are now adopting the franchise route, he said.

"We will have 10,000 Reliance Money outlets by December 2008, of which 9,000 outlets will be franchised," Reliance Money Director and CEO Sudip Bandyopadhyay said. "We have around 10 per cent of our own outlets while the remaining 90 per cent are franchised." At present, Reliance Money has around 5,000 outlets, of which, 4,000 outlets are franchised, he said, adding that this number has been achieved within ten months. "It was possible for us to achieve the huge expansion and a customer base of 6,50,000 within such a short span only because we had adopted the franchise route," Bandopadhyay said.

Besides, it was not practically possible to know all the local languages whereas for forays into Tier II and III towns and rural areas, it was very important to know the local language. The best way to enter these markets is through the franchise route, Bandopadhyay said.

"Franchise is a big opportunity for both brand owners and the store owner. It's a win-win situation for both," Future Group, Home Solutions, Retail India Ltd's Chief Executive Officer Hemchandra Javeri said. Real estate and rental corrections in retail will happen in the next two years and in that scenario, the franchise model would work well, he added.

February 24, 2008
Source: Economic Times

Small stores show the way on bill savings

Shyamala Balasubramanian, 48, travels about 5km from her house in Mayur Vihar Phase III in the Capital to the Big Bazaar hypermarket in Noida, a New Delhi suburb, once or twice every month — to save some money. “A visit here in the first week is a must every month,” says Balasubramanian, as she stands in queue to pay for a trolley-full of groceries for her family of four. “I can save Rs400-500 on a bill of around 4,000 (rupees) and also I get gifts.”

When Mint presented a copy of Balasubramanian’s bill to a local grocery store, or kirana, and asked it to repeat the order, the result was surprising. Shopping at the local grocery store would have saved Balasubramanian a bit more. Balasubramanian was picked randomly, as was the kirana that was asked to repeat the order. To be sure, not all the items the housewife picked at Big Bazaar were available at the kirana.

As organized retail begins to take root in India, the tussle between it and small stores has taken on a new pitch: Companies operating modern retail stores claim they offer wider choice and cheaper prices. This has forced smaller shops to innovate and get competitive with pricing to keep their traditional customers.

In December, Mint carried the findings of this study that showed that small retailers in areas where organized retailers had opened stores had seen a fall in revenues and profits and that consumers were happy with the advent of organized retail because it meant convenience and lower prices for them.

Big Bazaar is part of Pantaloon Retail (India) Ltd, India’s largest listed retailer. Balasubramanian isn’t complaining about the air-conditioned, well-stacked aisles at her supermarket. She usually does her grocery shopping at Big Bazaar on the first Sunday of the month, after her banker husband draws his pay. On this particular weekend, she bought items ranging from toothpaste to tea and her total bill that day was for Rs 3,410. Mint tried to compare rates for the items Balasubramanian purchased at Big Bazaar from a small grocery store located a few hundred metres from the hypermarket. For a start, only 30 items were available at Grover Store at Atta Market in Noida against the 48 items on the Big Bazaar bill that Balasubramanian showed Mint.

Mint then attempted to find out the total bill of only the comparable items at both the mom-and-pop store and the hypermarket. The total bill for the 30 like-to-like items, including staples from sugar to sunflower oil, at Big Bazaar was Rs 1,812 compared with Grover Store’s Rs 1,723—a saving of Rs89 at the neighbourhood grocery store.

One expert said the result didn’t surprise him. “I think where modern retail scores over traditional stores is not necessarily on price, but on the overall value proposition, which includes the 4Cs — convenience, comfort, choice and cost,” said Jayant Kochar, managing director of retail consultancy firm Go Fish Retail Solutions.

“From time to time, modern retailers claim to be cheaper or even cheapest—but that is easy to manipulate by including a couple of loss leaders in the basket of products being considered. Overall, it is unlikely that any particular modern retailer will be significantly cheaper for any extended period of time,” he added.

To complete the exercise, Mint also picked, at random, a shopper who bought groceries at a kirana and compared his bill with what it would have been had he shopped at a supermarket. To see if shopping at the local store disadvantages him in any way, Mint picked up his bill, and using the same methodology of picking only comparables, asked Big Bazaar to fill the order. Choudhry bought things ranging from sugar to shampoo and shopping at Shanti Bazar for those items cost him Rs 159 less than it would have at Big Bazaar.

Rajan Malhotra, chief executive at Big Bazaar, said that while kiranas operate on low cost and can offer a good price, an accurate comparison between them and modern retail stores would only be possible when the number of stock keeping units at each is taken into account. “On select stock keeping units they can always be cheaper to the consumer, but on the larger basket, obviously, we are cheaper,” Malhotra added.

February 19, 2008
Source: Livemint

Big players - plans and investments

Reliance eyes retail JV with Marks & Spencer

Reliance Industries chairman Mukesh Ambani’s deal-making spree to get the best domain expertise in the retail sector is poised for the big one now. His retail arm, Reliance Retail (RRL), is locked in ‘substantial’ discussions to float an equal joint venture with iconic UK fashion retailer Marks & Spencer (M&S) for apparel, gourmet food and cafes, multiple sources familiar with the situation said.

The deal, slated to be clinched in the next three weeks, would see the UK retailer bringing in new formats like food and cafes into India. M&S’ core business — apparel and lingerie — is already operational in the country.

According to a source close to the deal, the gourmet food format is likely to be integrated with Reliance Fresh “wherever possible,” (upmarket localities) as a shop-in-shop format. This would help M&S get immediate scale in food business. There are 491 Reliance Fresh stores that sell food, FMCG and fruits and vegetables and this figure is likely to touch 1,400 by the end of next fiscal.

The $16-billion M&S, operating in the country through a franchisee arrangement with Planet Retail since 2001, is in the midst of charting a new India strategy aimed at accelerating expansion in the domestic market. It recently slashed prices by 20% to attract more footfalls in the stores and taking prime space in malls to open more stores.
Planet Retail was earlier a 51:49 JV between Indonesian NRI VP Sharma and Pantaloon Retail. The JV has now been called off and the brands that it was managing has been divided into fashion (Sharma) and sports (Pantaloon).

Sources said M&S would settle for a 50:50 JV with Reliance, in a marked departure from its earlier stance that it would like to keep the maximum permissible 51% stake under FDI regulations in single-brand retailing. Troubled by stagnant growth in matured markets, M&S is looking to rapidly scale up operations in expanding economies like India and China.

February 25, 2008
Source: Economic Times

Reliance Retail eyes franchisee route to ramp up business

In a bid to rapidly build up scale, Reliance Retail now plans to take the franchisee route. Faced with skyrocketing real estate costs and delays in retail space acquisition, the company has now decided to co-opt existing small retailers in its expansion plan in all formats other than Reliance Fresh and Reliance Hypermarket.

“We will have franchisees in every format, except hypermarket and Reliance Fresh,” Reliance Retail Lifestyle CEO Bijou Kurien told ET, adding that franchisees would comprise a significant portion of the total number of stores Reliance Retail plans to have. The franchisee stores could be close to half the total numbers.

Reliance Retail today operates in several verticals, including hypermarket, food and grocery, apparel, footwear, health and wellness, jewellery and electronics. “We would capitalise on the traditional retailers’ capabilities,” Mr Kurien said.

By roping in existing retailers, Reliance Retail would get access to large chunks of high-street properties, which every retailer admits is the toughest job in putting together a retail operation. “The difficulty in locating land, negotiating a good deal and then the time taken to conclude a deal are the most significant challenges for our business,” he added.

Besides the usual advantages of franchisee model, Reliance is also seeing it as a move to co-opt traditional retailers and assuage fears about organised retailers driving small storekeepers out of business.

February 22, 2008
Source: Economic Times

BIG Shopping Centres to build 60 malls; invest $2.4 bn

BIG Shopping Centres on Thursday announced its entry into India's retail market with plans to develop 60 stores across the country in the next 10 years at an investment of about Rs 9,600 crore.

BIG India Malls Pvt Ltd, a joint venture company between Israel-based BIG Shopping Centres and US-based Lehman Brothers' wholly-owned special purpose vehicle BIG Mauritius Holdings, would develop the shopping malls over about 24 million sq ft of retail space.

"The initial plan is to roll out 60 shopping centres in the country, which will be based on our 'open mall' concept. For this venture, we have earmarked an investment of 2.4 billion dollars," BIG India Malls Pvt Ltd Director Eitan Bar Zeev told reporters here.

To begin with, the company would roll out the first mall at Thane, Mumbai, in November this year, which would be spread over 8.5 acres with a retail space of 5.5 acres, he said, adding that "for the ground floor, we have assigned retail chain 'Hypercity' as the anchor tenant, while the upper floor will have shops of different retailers". After Thane, the company plans to launch such malls in Bangalore, Vadodara, Nagpur, Bhopal and Pune.

"Open mall is a new concept here, where parking is free and the structures will be up to maximum 'ground plus one' level with large free area. There will be no entertainment or 'hang around' zones as these are meant for hardcore shopping," he added.

The Bangalore mall will be completed by 2009. Besides metros, the main focus will be Tier II and Tier III cities, he said.

February 21, 2008
Source: Economic Times

Home Solutions Retail aims $1 bn revenue by 2010-11

Future Group company Home Solutions Retail is targeting to become a $1 billion company by 2010-11 as it looks at rapid expansion across various verticals by 2011.

The company, which retails home furnishing products and electronics through various format stores, expects to break-even in the current fiscal. "We are targeting to become a one billion dollar company by 2010-11 and intend to achieve an operational break-even by the end of current fiscal," Home Solution Retail Chief Executive Officer Hemchandra Jhaveri told reporters on the sidelines of Technopak Retail Summit.

The company is planning to set up 50 new E-Zone stores across the country over the next three years while it would open seven new large format Home Town stores over the next two years.

Home Solutions' other two formats, Furniture Bazaar and Electronic Bazaar, operate through a shop-in-shop model at Future Group's hyper market Big Bazaar. The number of these two store formats would go up to 200 over the next three years along with Big Bazaar's planned expansion.

February 21, 2008
Source: Economic Times

D’Mart to set up facility in Gwalior

Luxury lifestyle brand D’Mart Exclusif, along with Italian design house Linea Argenti, is in the process setting up of a manufacturing unit in the country to make high-end decorative art pieces in silver.

The facility, to come up in Gwalior, will see an investment of Rs 10 crore in the first phase.

The company, which has an exclusive manufacturing arrangement with Linea Argenti, said so far the Italian company was doing contract manufacturing for them. However, the two companies have formed a joint venture to establish a facility in India. D’Mart will hold a 75 per cent share in the joint venture and the Italian partner will have the rest.

D’Mart, which has seven exclusive outlets in India and 14 franchises, said that it is also firming up plans to set up an outlet in London. It also has presence in Amsterdam, New Jersey and San Francisco.

Feb 19, 2008
Source: Hindu Business Line

MyDollarStore considering multi-pricing

MyDollarStore, a format which sells a range of products priced at Rs 99, is now considering a multi-pricing strategy besides expanding its presence by opening around 50 outlets in the next fiscal.

After Future Capital picked up 28 per cent stake in Sankalp Retail Value Stores for Rs 20 crore, the master franchisee of the US-based MyDollarStore International, shop-in-shop discount format are likely to come up soon at the retail outlets of the Future Group including Big Bazaar, Food Bazaar and others.

The standalone format of the store will continue to offer products at the Rs 99 price point but in case of the shop-in-shop formats, price variation will be there.

When contacted, MyDollarStore Chief Executive Officer Soumitra Ghatak told PTI, "as a retailer, we will continue to expand presence and explore possibilities of setting up different formats." He said the company currently has 48 stores in 25 cities across India and plans are afoot to open around 50 new stores in the coming fiscal.

February 19, 2008
Source: Economic Times

Shopper's Stop on the block?

India's retail extravaganza may be in for a shakeout. The country's pioneer retail chain Shopper's Stop, promoted by the Mumbai-based K Raheja Group, is on the block.

According to industry sources, the group is looking for a buyer for Shopper's Stop as also its other retail formats, including Home Stop, Crossword, Stop & Go (airport retail) and Brio. Sources said that Reliance Industries (RIL) and the A V Birla Group are taking a serious look at the buyout proposition.

When contacted, Shopper's Stop managing director B S Nagesh said, "These are just baseless market rumours. There is no credibility whatsoever. Shopper's Stop is not for sale."

Sources at Reliance Industries said that on its part, the company's retail arm Reliance Retail has looked seriously at the business and is inclined to buy it, if the price is right.

February 19, 2008
Source: The Times of India

Regional

Shops closed in demand for law to curb retail chains

Commercial activities came to a virtual halt in Kerala on Saturday as shop-owners downed shutters as part of their half-day protest demanding a legislation to restrict the entry of big retail chains into the state.

Reports from across the state said thousands of retailers responded to the protest called by the traders' union, 'Kerala Vyapari Vyavasayi Ekopana Samithi.'

Traders also organised marches and took "anti-monopoly" pledge in different centres across the state. The Samiti leaders said this was just a token protest, and, if the government ignored the demand, a prolonged struggle would be launched.

February 23, 2008
Source: Economic Times

International

Giorgio Armani-DLF JV to make retail foray in India

Iconic Italian fashion brand Giorgio Armani is rolling out retail stores in India soon. After evaluating several options, Armani has entered into a 51:49 joint venture with India’s biggest real estate developer DLF. After protracted negotiations, DLF has agreed to give 51% stake––the maximum permissible under single-brand retail norms for foreign investment––to the Italian partner.

According to the details submitted with the Foreign Investment Promotion Board (FIPB), the Netherlands-based Giorgio Armani Holding BV, a wholly-owned subsidiary of the parent Italian firm Giorgio Armani S.p.A., will bring in Rs 1 crore for the joint venture. The JV will also act as a wholesaling firm supplying Armani branded products to other independent retailers.

The joint venture will undertake the sale and distribution of several Armani brands, namely Giorgio Armani, Emporio Armani, Armani Jeans, Armani Junior and Armani Collezioni across India. Delhi, DLF’s stronghold, would see Armani’s first stores. The Italian brand would be retailed at two stores in the Emporio Mall, being developed by DLF.

The roll out would subsequently spread to other luxury locations across the country. The Armani-DLF JV also plans to set up shop-in-shops to exclusively sell some of the Armani branded products such as Armani Jeans, Armani Junior, Armani Collezioni and Emporuio Armani Underwear. These shops will be located in departmental stores and duty free shops at airports but will have an independent invoicing system.

February 19, 2008
Source: Economic Times

Luxury & Lifestyle

Brandhouse Retails plans to bring home 4 international labels

Brandhouse Retails, a part of the S Kumar's group, said it will introduce four global labels into the country along with two others from the parent company by April, as part of its long-term Rs 400-crore expansion plan.

"Currently talks are in final stages to bring four new international brands in fashion and accessories segment by April in India," Brandhouse Retails Managing Director Tarun Joshi said here on the sidelines of Technopak Retail Summit here.

Of the four brands, two would be in the luxury segment and two in the super premium segment, he said without divulging further details. "By March 2009, we will have eight luxury stores for the two luxury brands," he said.

It plans to open 1,200 mono-brand stores by 2010-11 entailing an investment of Rs 400 crore. "By April we will have 400 stores. Currently, 271 stores are running with another 136 stores under development," Joshi added.

February 21, 2008
Source: Economic Times

Rado plans more exclusive outlets

Rado, the Swiss watchmaker, has lined up plans to take its point of sales to 175 from the present 150. It also plans to increase the number of exclusive showrooms to 14, from the present six, this year.

“We will open exclusive outlets in New Delhi, Ahmedabad, Bangalore, Chennai and Kolkata, besides increasing our presence in Mumbai,” Mr Christian Leiggener, Regional Sales Manager, told Business Line. Stating that the market for premium watches in India had gone up after it was opened up in 1997, he said the company had registered a growth of 35 per cent in sales in 2006-07.

“We are expecting a similar growth rate this year as well,” he said. Mr Leiggener, along with Rado’s brand ambassador and film actor Ms Lisa Ray, was here in connection with the inauguration of an exclusive outlet at Banjara Hills. The company recently introduced its Ceramic Chronograph range of watches, the price of which starts at Rs 67,000.

February 20, 2008
Source: Hindu Business Line

Apparel & Accessories

FabIndia to open 250 stores by 2010

Ethnic retail chain FabIndia is embarking on a pan India expansion to take its total number of stores to 250 by 2010, which could entail an investment of around Rs 200 crore.

"Our current number of stores is 78, which we plan to increase to 250 by 2010," FabIndia Managing Director William Bissel told reporters here on the sidelines of Technopak Retail Summit here.

By next year the company plans to open 80 new stores at an estimated investment of Rs 70 crore

February 21, 2008
Source: Economic Times

Tommy Hilfiger expanding to tier-II, -III cities

Fashion retailer Tommy Hilfiger India is charting its second phase of expansion with a slew of new stores even as it is extending its footprint to tier-II and tier-III cities in the country. Backed by a healthy appetite for luxury brands in the country, the company is poised to clock a turnover of Rs 100 crore this fiscal.

“There is immense appetite for luxury brands in India. The market is exploding. We are currently in the second phase of expansion and will be having 23 points of sale by the end of this fiscal,” Mr Shailesh Chaturvedi, CEO, Tommy Hilfiger India, told Business Line.

The company said it hopes to become a pan-India luxury brand by 2010. The new stores from its stable will come up in the tier-II cities such as Ahmedabad, Pune and Ludhiana.

The apparel and accessories brand said the new stores will be a combination of both mono-brand and concessionaire (shop-in-shop type arrangement) outlets. While apparel contributes to the chunk of revenue, accessories such as watches and bags too are much in demand, he said adding the company is also looking to scale up its product line.

On the challenges, Mr Chaturvedi said lack of availability of quality retail space and high duty on imported apparels and goods are bottlenecks in the growth of the sector.

February 20, 2008
Source: Hindu Business Line

Health & Wellness

Manipal Cure and Care health and wellness outlet

Manipal Cure and Care has launched its first retail health and wellness outlet in Bangalore.

Dr Ranjan Pai, CEO of the promoter group, Manipal Education and Medical Group, said, “We plan to open 50 of our own centres by 2011, and will look at further expansion in Indian and global markets through a franchise model under sub-brands Mask, Smile, Xpresscare and Foot Solutions and our own private labels.”

Started in January 2007, with an initial investment of Rs 50 crore, MCC opened its first centre in Ahmedabad in August. It plans to have a total of ten centres in Delhi NCR, Mumbai, Hyderabad, Pune and Vadodora.

The 10,500-sq. ft outlet opened at the upmarket Koramangala along with the launch of skincare brand Dermalogica in the presence of Mr Gibson G. Vedamani, CEO, Retailers’ Association of India. A second centre is due to start at Total Mall later in the year.

The seven-day MCC centres have consultant doctors in general medicine, dermatology, dentistry, paediatrics, gynaecology, ophthalmology, endocrinology and lab medicine among others, a release said.

February 23, 2008
Source: Hindu Business Line

Government

Retailers want less red tape, industry status

Retailers want service tax on rents withdrawn, lesser number of licences and clearances to set up stores, and industry status for the sector from the union budget.

"The service tax on rent is a major problem. We want that to go," J K Jain, Vice President Finance of Provogue (India) Ltd, which makes and retails men's clothing. Separate guidelines were needed for retail infrastructure, which is now clubbed with real estate, forcing retailers to get more permits than required, Jain added.

"There needs to be a single window licence for retailers," said Pushpamitra Das, chief executive officer, Wadhawan Food Retail Pvt Ltd, which owns the Spinach retail chain and is a group firm of Dewan Housing Finance Corp Ltd. Each retail outlet, even if part of a chain, now needs to obtain multiple licences and permits, such as trading licences and product licences, adding to time and costs, Federation of Indian Chambers of Commerce and Industry (FICCI), said.

"Granting industry status may facilitate the provision of fiscal incentives to this high potential sector," FICCI said in its prebudget memorandum.

The retail sector is likely to grow to $427 billion by 2010, with organised retail accounting for about a fifth, and over $30 billion in investment is being planned by domestic and foreign players in retail over 5-7 years, FICCI said.

February 25, 2008
Source: Economic Times