News and views about the Retail sector in India

Nothing attracts us shoppers quite like discounts – and when they are offered on top brands, all the year round, its simply time to party. The Economic Survey has indicated that its time to open up the retail sector to FDI. Meanwhile, India’s retail boom is attracting several Israeli mall giants.

Chillibreeze Business Research Team

General Plans and Information

As organized retailing takes off in India, so do discount chains

Mayank C., a 27-year-old engineer, loves shopping and confesses to indulging in retail “therapy” every fortnight. Nothing unusual really, except that Mayank never steps into the upmarket outlets near his home. Instead, he travels the 10km it takes to get to a discount mall. Turns out, Mayank is not alone among India’s young shoppers looking for famous brands at reduced prices.

With half of the country’s population under 25 and two-thirds under 35, the knowledge and aspiration for international brands is on the rise as is the quest for bargains. Even as branded retail itself is starting to take off, there is already a surge in branded discount outlets in India.

A year ago, there were some three prominent discount retailers in the country, but in the last few months, there have been four new entrants and, they are all on an expansion spree. Pantaloon Retail (India) Ltd’s Brand Factory, Arvind Mills Ltd’s Megamart, Vishal Megamart, the discount store chain of Vishal Retail Ltd, and Provogue (India) Ltd’s Promart have been the most prominent players in the field.

A number of relatively newer players, such as The Loot (India) Pvt. Ltd, which operates The LOOT outlets, Krishna Group’s The Grab Store and Prateek Apparels Pvt. Ltd’s Coupon have started in the last few months.

Some 45% of branded products are estimated to be sold at discounted rates. Brand discount retailers typically offer 25-80% discount on products through the year and insist they do not sell counterfeits or factory seconds, or products typically rejected by stores.

They claim they are able to buy at reduced prices as they purchase odd sizes, end-of-season surplus items and, often, make payments in cash to the manufacturer or distributor. The products generally include formal and semi formal as well as casual clothing, footwear and accessories.

The most visible Indian and international fashion brands at discount outlets include Reebok, Nike, Adidas, Van Heusen, Arrow, Levis, Lee, Pepe Jeans, Allen Solly, Reid and Taylor, Wrangler, Puma and Louis Phillip.

Pantaloon Retail, which currently has six Brand Factory stores, plans to have 40-45 stores in the two years. Megamart, which has 91 stores, plans to have 200-250 stores in four-five years, by investing Rs400-500 crore. It also plans to have 30-35 large format stores with a size of about 50,000 sq. ft. The Grab Store currently has one store and plans to have 50 stores by March next year. The company’s marketing head Snigdha Kar says each store would have an investment of Rs90 lakh.

The LOOT plans to invest Rs100 crore by March 2009 to expand its footprint across the country. It currently has 30 stores and plans to raise the number to 100 within a year. Prateek Apparels, which has two stores, plans to set up 50 more discount malls by 2010 at a cost of Rs400-500 crore, according to Sudeep Menon, director, Prateek Lifestyle.

Retailers say although the profit margins of a discount retail format are much less than a full priced retail store, the higher sales volumes in a discounted format compensate the cash flow. The profit margin in a discount retail chain is 6-10% says Ganesh Raman, marketing head, Megamart. He refused to divulge the profit margin of full priced retail stores.

But discount retailers are already facing stiff competition from exclusive factory outlets, seconds’ stores and seasonal sales at regular stores.

“When it comes to positioning, discount retailers do not pose a threat to us. People who are fashion-conscious and want to buy products when they are in vogue will anyway come to us. But yes, they are a threat when it comes to value share and wallet share. If a customer gets the same product at lesser price, it is obvious that they will go for cheaper options,” says Govind Shrikhande, chief executive officer of Shopper’s Stop, a multi-brand retailer.

Shoppers find the lack of a full range—especially of sizes—a problem. As a result, discount stores won’t necessarily eat into market share of other retailers, says Purnendu Kumar, associate vice-president, KSA Technopak, a management consulting firm. Kumar predicts discount retailing will grow at the 25-30% and would become more specialized in future.

March 4, 2008
Source: LiveMint

Time to open up retail

The Economic Survey has said what the experts have been saying all along about opening up of retail trade: Allow a share of foreign equity in all retail trade but open it up fully in the case of foreign branded, specialised retail chains (luxury brands and consumer durables).

As of now, 51 per cent FDI is allowed in “single brand” retailing but this phraseology rules out participation by any and every well known foreign retailer in the front end of retail.

Which is why the world’s largest retailer, Wal-Mart, had to rope in an Indian partner for setting foot here, and even then it cannot have a direct consumer interface. All Wal-Mart gets to do under the present arrangement is open wholesale cash & carry stores - in which 100 per cent FDI is allowed through the automatic route - and sell its wares to other retailers.

Given the lack of enthusiasm about foreign retailers, Carrefour and Tesco, the second and third largest global retail brands, are also still evaluating options for coming into India.

Even the homegrown giants such as Reliance Industries and AV Birla Group, which have begun retailing fresh fruits and vegetables (besides other things) have been facing a volley of opposition from small retailers so unless the government policy becomes clear, growth of retail sector in India could be full of hiccups.

February 29, 2008
Source: Sify Business

Big players - plans and investments

Future Group eyes majority stake in proposed venture with Godrej Agrovet

The Future Group is all set to make a foray into rural retailing by riding on the Aadhaar outlets belonging to Godrej Agrovet. The group intends to pick up a majority stake in a separate joint venture company to be floated by itself and Godrej Agrovet, to enter into yet another retailing format.

A Future Group official told Business Line, “There would be a SPV (special purpose vehicle) floated to enter into a joint venture with Godrej Agrovet. The stake holding of the Future Group would be split among a couple of its companies including its newly listed entity Future Ventures.” The multiple Future Group companies that are expected to pick up stake would form the majority stakeholders in the new joint venture.

While Aadhaar would give the Future Group the necessary footprint into rural retailing, it would also help the group in gaining from the combined sourcing strengths of agricultural commodities and thereby reducing its gross margins in the business. “With the help of this joint venture company we would be able to add and expand our core retailing operations. Several synergies would get exploited as a result of this venture and this would include strengthening of our sourcing capabilities as well as building the private label business in this format,” the official added.

Currently, there are 65 Godrej Aadhaar stores operating in States such as Punjab, Haryana and Maharashtra offering multiple categories ranging from agri products, consumer durables, apparel and FMCG products. The stores have also forged alliances with companies such as ICICI Prudential, Apollo and Fortis as well as BPCL and HPCL petrol pumps to give an impetus to its retailing operations.

Meanwhile, Godrej Agrovet is also said to be scouting for partners for its gourmet retailing stores under Nature’s Basket. Sources close to the company indicated that there have been talks with a couple high-end gourmet retailers, both Indian and international, who could help in expanding the niche and high-end retailing business further.

February 27, 2008
Source: Hindu Business Line

ITC mulls more lifestyle stores, ties up with design cos

ITC Ltd’s lifestyle retailing business division is planning to expand its retail footprint further by setting up more Wills Lifestyle, John Players and Miss Players stores across the country. It has also embarked on an active exercise to create a stronger brand and retail identity for Wills Lifestyle, which it wants to position as a more international and aspirational brand.

Towards this end, ITC has piloted a new store concept with FRCH Design of the US, a specialist in store and mall design. Three concept stores have already been launched, two in Mumbai and one in Delhi. It is also working with the UK’s Elemental Design and The Friedman Group from the US in areas like product presentation, visual merchandising and retail training.

As per Mr Chand, plans are on to increase the number of Wills Lifestyle stores from 250 to 400 by the end of 2008-09. “These stores will come up on the lines of the concept store, which has been designed taking the cultural context, customer profile, etc, in mind,” he said.

February 27, 2008
Source: Economic Times

Tatas plan home furniture retail with Steinhoff

The Tata Group is reportedly exploring joint venture plans for home furniture and lifestyle products retailing with Steinhoff International, one of the top five integrated lifestyle furniture suppliers in Europe and Australasia, and the largest in Africa, sources said.

The JV is likely to be called Tata Home and is expected to be set up through an SPV of Tata Sons or Tata Africa Holdings, sources said. It is learnt that discussions have reached the business planning stage. Officials of both groups are discussing plans to set up 50,000-60,000 sq ft formats across leading metros and tier I markets, sources said.

When contacted, a Tata Group spokesperson said: “The information is baseless.”

Founded in 1964 by Bruno Steinhoff in Westerstede, Germany, the Steinhoff Group converted in 1989 from a marketing/distribution company to a manufacturer and distributor of household goods. The Group owns over 70 factories spanning the UK, the Netherlands, Germany, Poland, Hungary, Ukraine, South Africa, India, Australia and New Zealand.

According to rough estimates, home furniture accounts for nearly Rs 14,000 crore of the Indian furniture market, and the organised players control only 10-12% of this. Consumers are getting more brand conscious and the market is growing at over 20%, industry players say.

KSA Technopak estimates say durables purchases peak in the 20-34 years age group and the growing number of double-income couples setting up households are driving growth in the country.

February 27, 2008
Source: Economic Times

Regional

Retail giant to open shop

(Ranchi) Big Bazaar would open shortly at the Kadru diversion here. Under Pantaloon Retail (India) Ltd, which operates in food and grocery retailing, this six-storeyed hypermarket will give shoppers periodic discounts and interesting offers.

Built in an area of 80,000sqft, the interiors of the market are almost complete and would be open to the public in a month. A parking facility for over a hundred cars has also been constructed.

In the first phase, four floors of the store would be open. The remaining floors will be developed as a “home bazaar” where one could shop for domestic products, furniture and could also avail of plumbing information, among others. Besides, for those who would like to take home freshly baked items, a bakery counter would be in service.
“The hypermarket is already doing well in Calcutta and Mumbai and is attracting up to 15,000 people each day. We expect more customers from our city. Many have already visited our stores in Calcutta and here, too, we promise to give them a complete shopping experience,” the official added.

March 4, 2008
Source: Telegraph

International

India's retail realty beckons Israeli giants

Israeli mall giants, which own many prime retail-linked realty assets across the world, are buying into India’s big buck retail story. Tel Aviv-based mall giant Gazit Globe has tied up with one of the HDFC funds to pump in $150 million into developing assets, including supermarket anchored retail play.

Another Israeli major, Big Shopping Group, has teamed up with Lehman Brothers Real Estate Private equity to set up ‘open malls’ in tier I and tier II cities.

While Gazit Globe’s retail play in the Indian market is still not clear - it is also looking at getting into business parks and special economic zones (SEZs) - Big Shopping Group along with Lehman has drawn up plans to show up with 60 centres over the next 10 years. This will entail over $2 billion in investments, with over $100 million pumped in as initial corpus through Big Holdings Mauritius, a wholly-owned subsidiary of Lehman Brothers real estate private equity.

“Our malls will be essential purchase malls, and not driven by entertainment shopping and impulse purchase. Big Malls will cater to planned shoppers. We are looking at 15-20 acre plots to develop 4 lakh sq ft of retail space in ground plus one level format. In Big’s experience, we feel that shopping rarely goes up more than one floor (level),” says Big India Malls Pvt Ltd CEO Sanjiv Trehon.

Big Malls will be located on a major highway leaving a city, which invariably locates them at the outskirts targeted at destination shoppers. The open mall concept also brings down the cost of development as there is no central atrium and air-conditioning.

Industry sources say there are about 12-14 Israel-based retail chains that are exploring an Indian foray through the two mall operators. Having played the real estate game globally, the Israeli giants are quite content with dabbling in the retail play across tier II cities in India given the exorbitant realty costs in the leading metros.

For instance, after the initial forays into Mumbai and Bangalore, Big Malls will tap into markets like Pune, Indore and Nagpur. Big Malls have roped in Hypercity as one of its anchor tenants at its Mumbai and Bangalore properties. As a part of its mall management strategy, it only leases out space and does not opt for outright sale.

February 28, 2008
Source: Economic Times

Luxury & Lifestyle

Sally Hansen shaping up plans for shop-in-shop nail care bars

Riding on the retail boom, nail expert brand, Sally Hansen, is set to enter the services sector by launching nail care bars across the country. The brand is expected to tie up with retailers such as Reliance Retail, Dabur and Pantaloon Retail to have its shop-in-shop nail bars at the stores.

Sally Hensen has been brought in by Delhi-based distribution company Brushman(India) Ltd which has in the past introduced to the Indian market international brands such as Tony & Guy, Keune and Brushman.

Speaking to Business Line Mr Kapil Kumar, Managing Director, Brushman (India) Ltd, said: “We are planning to set up nail bars within the premises of retailers such as Reliance Retail’s Wellness stores. We would be providing quick and easy nail care services, going beyond the usual pedicures and manicures.”

“We might name the nail expert services as ‘Express’ nail bars as the service is going to be quick and fast and reasonably priced,” says Mr Kumar. Pegging the average rate of a manicure at the nail bar at Rs 200, Sally Hansen expects to scale down its pricing for the sensitive Indian market.

Currently the Sally Hansen brand has a global portfolio with over 50 nail care products such as strengtheners and hardeners, nail growth boosters, cuticle care, base and top coats and anti-fungal products, providing solutions to almost all nail dilemmas.

March 4, 2008
Source: Hindu Business Line