News and views about the Retail sector in India

This week, we focus on the cash & carry segment of the Indian retail industry. This fast-growing format is taking the center stage thanks to international brands choosing to enter the country via this route, which has led to several domestic retailers to announce plans of launching their own versions of cash and carry formats.

Chillibreeze Business Research Team

General Plans and Information

Retail fraud adds up to a Rs. 9,000 crore loss annually

The organized retail industry is growing by leaps and bounds, but the number of thefts is also increasing very rapidly and accounts for an estimated Rs. 9,000 crore each year. Shrinkage for Indian retailers varies between 3-4%, which is almost double than what it is in the west. Retailers are fighting back and investing in mechanisms to control shrinkage, such as RFID’s, IT solutions and training employees to fully understand and counter shrinkage.

According to Himanshu Chakrawarti, COO of Landmark, “The Indian version of a 'slip & fall’ scenario is typically a situation when a consumer claims he’s missing some valuable from the bag he had kept with the security. The matter invariably goes to the courts once the consumer sues and the retailer lines up a legal defence. Though such cases are still rare, it’s happening.”

Some of the popular methods being used are return fraud, slip and fall, which for the Indian scenario translates to customers claiming that valuables from bags kept at security are missing, and the rapidly gaining method of sweet heartening, where an employee teams up with a friend to bill an expensive item with a lower-priced product.

Date: Tuesday, January 22, 2008
Source: The Economic Times

Retailers hold the power

With the incredible growth of retailing on a global scale, one notable change has been the shift in power from the suppliers to the retailers. Where at one time brand marketers such as Unilever or Nestle held the power in distribution channels, retailers were fragmented and mostly single storeowners, now more and more retailers have consolidated and become more powerful than the suppliers. Due to their rapid growth, retailers have gained a tremendous amount of clout and are making the most of their upper hand.

Date: Friday, January 18, 2008
Source: The Economic Times

Brands on a high

International brands such as Puma, Esprit and Tommy Hilfiger are doing very well as consumers look to own a greater number of ‘branded merchandise’. Brands have been doing well, thanks to high margins and strong marketing and branding which have created a definite persona in the minds of customers.

Brands with high ‘aspirational value’ are faring the best, as consumers are willing to pay higher amounts for this merchandise. According to Sailesh Chaturvedi, CEO of Tommy Hilfiger India, “This is clearly the case of customer upgradation. It happened in many other sectors like people buying bigger TVs, cars with bigger engines and now it is happening with apparel.”

Global brands such as Tommy Hilfiger are growing at over 100% and will reach Rs. 100 crore by the end of the financial year; Esprit is growing at over 200% and will reach a turnover of Rs. 75 crore. The original aspirational brands such as Louis Philippe, Van Heusen, ColorPlus and Levis are also doing well.

Date: Thursday, January 17, 2008
Source: The Economic Times

Big players - plans and investments

Reliance Super opens in Gurgaon

Reliance Retail launched the second of its Minimart format stores called Reliance Super at the Mega Mall in Gurgaon. The company has successfully launched several formats such as Reliance Fresh, Reliance Trendz, Reliance Mart, Reliance Footprint, Reliance Digital, Reliance Wellness, Reliance Timeout and Reliance Jewels.

The store covers an area of 13,500 sq ft and carries a range of 10,000 products, in food and grocery, home care, apparel, accessories, FMCG, consumer durables, auto accessories, lifestyle, footwear and health and fitness products. The stores will also carry a range of Reliance’s own private labels and will offer services such as an alteration and a food and beverage counter.

At the launch of the Mini mart in Gurgaon, President and CEO (Operations and Strategy) of Reliance Retail, Raghu Pillai stated that, “The launch of Reliance Super is yet another step by Reliance Retail towards providing an international shopping experience to all our customers at unmatched affordability, guaranteed quality and choice of products and services. Reliance Super marks the achievement of another milestone in our effort to unleash a retail revolution in India.”

Date: Saturday, January 19, 2008
Source: DMA NewsDesk

Future Group to set up mall clinics

The Future Group will be forming a joint venture with Global Hospitals, a Hyderabad based chain, to establish a chain of health clinics across the country. The clinics will be located in malls as well as Big Bazaar outlets in the country. According to Kishore Biyani, CEO of the Future Group, “We are building a prototype for quick-service healthcare clinics with Global Hospitals which will treat common ailments. These clinics will come up in shopping malls and Big Bazaar outlets. The healthcare retail venture will be kicked-off shortly.”

Last year, Indivision India Partners, a private equity fund run by Future Group had acquired 26% of stake in Global Hospitals, and are already partners. The clinics will specialize in offering medical consultation, take care of small procedures, have diagnostic facilities, a skin therapy center as well as a pharmacy. Most clinics will range from 1,000-1,500 sq ft in size.

A brand name for the clinics is not yet known. The first of the clinics will be opening in Hyderabad. The Future Group had earlier proposed a joint venture with Manipal group, but it did not materialize and the Manipal Group has created its own Cure and Care health outlets.

Date: Saturday, January 19, 2008
Source: The Economic Times

Concor to handle logistcs for Bharti-Wal-Mart

The Container Corporation of India (Concor) will be taking care of logistics for the Bharti-Wal-Mart joint venture. The company will reportedly be procuring and supplying fresh fruit to Bharti-Wal-Mart, and is also wanted to offer its services to other major retailers such as Subhiksha, Mother Dairy and Big Bazaar.

According to Suresh Kumar, Concor’s director for finance, “There is a huge consumer demand for fruit in the country, much of which is imported. So, there was a great business opportunity. When we evaluated the entire cost of starting this business, including setting up cold chains, it was found that returns could be pretty attractive.”

The company has already set up a central store near Sonepat, in Rai Harayana, with an investment of Rs. 92 crore. The store has a controlled atmosphere and is a modern version of a cold storage and enhances the life of fruits.

Date: Saturday, January 19, 2008
Source: The Economic Times

Videocon to make its foray in cash and carry retail

One of the country’s largest consumer durable retailers, Videocon Industries will be making its debut in the lifestyle and grocery retailing arena with its cash and carry format of outlets. Videocon has reportedly already hired many senior level expats who have retail experience with global companies. The venture is to be headed by Marco Padella, an Italian who has worked with companies such a Carrefour and Metro AG.

Videocon will reportedly be tying up with a global major, but which company it will be is not yet known. Videocon’s subsidiaries such as Next Retail, Planet M and its cash and carry business will be formed under Videocon Retail in mid 2008, instead of Videocon Industries as it is currently positioned.

According to Venugopal Dhoot, CMD of Videocon Industries, “The growth in consumer demand and the growing share of the organised players in retail is compelling. We see the retail business, which is currently doubling for us each year, as a great value proposition.” The company has brought in KSA Technopak, Ernst & Young and Price WaterhouseCoopers to advise the team on its retail initiative, while in the mean time, the company has been busy acquiring land in Calcutta, Bangalore, Ahmedabad, Ahmednagar and Aurangabad.

The company hopes to open 40 large stores, ranging from 75,000-1 million sq ft by the year 2012. Stores will carry a variety of items such as food, grocery, apparel, consumer electronics, home furnishings, general merchandise and other items.

Date: Wednesday, January 16, 2008
Source: The Economic Times

International

Vijay Murjani to create cash & carry outlet chain

Brand Marketing Limited, owned by Vijay Murjani will be converting itself into a holding company to invest in a cash and carry wholesale business in India. The proposal has already received clearance from the Foreign Investment Promotion Board. Vijay Murjani is famous for bringing in international brands such as Tommy Hilfiger, Build-A-Bear, Gucci, Jimmy Choo, Calvin Klein, La Perla and FCUK into the country.

Date: Friday, January 18, 2008
Source: The Economic Times

Giordano to expand base in India

One of the world’s leading apparel and accessories retailers, Giordano International will be expanding its base in the country using the 51% FDI in single-brand retail. The company is presently in the country through Giordano Fashions India, which is its distributor in India and is owned by Emirates Trading Agency (ETA) Group, a Dubai based agency.

The first Giordano opened in India in 2006 and the company now has five stores in Chennai, Delhi, Ahmedabad, and Mumbai. Under the new plan, Giordano International will be buying a 51% stake in Giordano Fashions (India) Pvt. Ltd. once approved by the Foreign Investment Promotion Board (FIPB).

Giordano is one of the best-known apparel brands in the Asia Pacific region. Founded in the year 1981, the company employs more than 11,000 people and has 1,700 stores in China, Japan, Korea, Australia, Southeast Asia, Middle East and India. Giordano made its debut in the North American market in 2007.

Date: Thursday, January 17, 2008
Source: The Economic Times

SPAR might launch chain of large kirana stores

Dutch retailer SPAR International who recently tied up with Landmark Group for a hypermarket format store chain, might also be creating a chain of kirana stores that might be launched as early as 2009. With its master licensee, Max Hypermarkets, SPAR is planning to have sub-licensee agreements with bigger kirana stores so that it can be a part of the neighborhood supermarket format.

The company operates as a neighborhood store or as a local supermarket in most countries and will be following similar principles for its functioning in India. According to Gordon R Campbell, MD of SPAR International, “As modern retail progresses in India, people who run the small stores will expand into large neighbourhood stores. We will work with these people who run their own local supermarkets. These independent retailers can be part of the Spar umbrella in India.”

Under the new arrangement, SPAR will assist kirana stores with layout of stores, retail technology, merchandising and other aspects of the business. SPAR currently operates three types of formats; a hypermarket format, a large supermarket format and SPAR Express, a small size format.

Date: Wednesday, January 16, 2008
Source: The Economic Times

HR News

RAI to offer management course in retail

The Retailers Association of India (RAI) will be offering a postgraduate retail management course and has tied up with 15 business schools across the country for this course. According to Gibson Vedamani, CEO of RAI, the business schools have been selected based on their infrastructure, faculty and library facilities, and include institutions such as the Asian School of Business Management, IILM Institute of Retail Studies, Bangalore Management Academy and Chennai Business School.

The objective of the course is to increase retail knowledge and improve understanding of retail aspects to students, who will be placed in RAI member-organizations upon completion of the course. The admission test to this courts will be conducted through a Common Admission Retail Test (CART), which will be conducted in 25 cities on January 27, 2008.

Date: Saturday, January 19, 2008
Source: The Hindu Business Line

Hunt for talent goes to colleges

The retail industry, which has been facing a shortage of staff, is now looking to attract talent from colleges and is increasingly taking part in college carnivals and other campus events to market themselves as employers of choice to students. Business school events, tech-festivals and inter-collegiate events are the most attractive options for retailers to find new recruits for their companies. While at one time it was only consultancy and IT companies that attended such events to look for fresh talent, now it is the turn of retailers to build their brand and attract talent.

Date: Wednesday, January 16, 2008
Source: The Economic Times

Apparel & Footwear

Koutons Retail to acquire 51% of Upper Class

Men’s apparel manufacturer, Koutons Retail announced that it will be acquiring 51% stake in Upper Class, a Delhi based ladies wear brand. Upper Class already has a strong base in women’s wear and will be the perfect compliment to Koutons Retail, expanding portfolio. The company was listed in 2007 and has a Rs. 3,000 crore market capitalization currently.

Upper Class is owned by Rajesh and Amita Sachdeva and specializes in casual wear bottoms for women. The company is worth Rs. 25 crore and exports its products to all the leading European brands and is also available at Splash and Lulu stores in the Middle East.

Its products are sold at multi-brand outlets such as Globus, Shoppers’ Stop, Piramyd and Pantaloons and are also available at exclusive stores in Delhi, Ludhiana, Vadodara and Jaipur. According to Rajesh Sachdeva, the company would like to grow with this new arrangement and will help Koutons make its entry into the overseas market.

Date: Wednesday, January 16, 2008
Source: The Economic Times

Luxury and Lifestyle

Luxury Brands offer more than just a brand

Luxury brands that offer something more than just the product itself stand out in the minds of customers. Some of the worlds best known luxury brands such as Zegna, Ferragamo, Lladro, Pal Zileri, Hugo Boss and many more are investing in relationship managers and offering personalized services to customers to ensure that customers are completely satisfied.

Luxury brands offer extra services such as in-house tailors for personalized fittings, fashion consultants to assist in shopping, previewing limited edition collections before they are unveiled to the public and other such services. These specialized services are paying off very well for the retailers, especially with Hugo Boss where 15% of sales come from its personal shopping service.

Lladro offers a cleaning and maintenance service for its customers who can call for the service any time. According to senior brand manager at Lladro India, Sachin Sharma, “We have received a tremendous response after implementing these services and as a result the team is booked throughout the year. Moreover, it has also helped us in generating more sales. Customers who used to pick-up their pieces from abroad are getting more convinced to make their purchases here.”

Date: Sunday, January 20, 2008
Source: The Economic Times