News and views about the Retail sector in India

This week, we focus on the concept of temporary employment in retail, which saw a significant boost this holiday season. Will temporary workers change the way the retail industry is staffed, will temporary workers become more well trained in the future and most importantly, will they change the way retailers look for talent? Get all the news about this and much more in this edition of the weekly retail news.

Chillibreeze Business Research Team

General Plans and Information

Indian farmers & traders to take on Wal-Mart

Farmers and traders in India who have been opposing the entry of global retail giants such as Wal-Mart are planning to create a chain of superstores where they will sell their products directly so as to not let the few large players set the market prices. This new venture will be backed by the Maharashtra government, which will reduce the infrastructure costs.

According to Sunil Pawar, general manager of the state’s agricultural marketing board, "It's a viable idea to counter private players, and if everything goes to plan the first of the superstores can come up in a few months." He added that the board was also in consultation with farmers’ cooperatives and traders associations and that the government had been very positive about the project.

Farmers and traders across the country have been struggling to overcome the new competition from retail giants such as Reliance Retail and are worried that they will not be able to survive for long. If all goes well, the first of the superstores will be launched in the next few months.

Date: Thursday, January 03, 2008
Source: The Economic Times

Organized health and beauty segment to get boost

The health and beauty segment of the retail industry is seeing lots of changes lately. Where at one time it was possible to buy these products only at department stores or one of few branded stores, now many major players such as Dabur and Reliance Retail have plans for the segment. Dabur announced its format called new-u and Reliance Retail launched Reliance Wellness last year. The Future Group is also planning to launch its own health and beauty format soon.

There are several international brands such as Body Shop and M.A.C. available in the Indian market now as well as some smaller local players such as Bare Body Essentials and Beaute Boutique, which opened up shop last year. The first major player in the segment was Dairy Farm International, which opened the Health & Glow chain of stores and has 57 stores in the country and plans to open another 40 stores this year.

All of these stores combined will add up to 600 stores by 2010. While most brands are concentrated in the major cities, some are making a foray into tier II cities as well. Women are not the only target for these stores any more: Dabur expects 20% of its customers at its stores to be men.

Date: Thursday, January 03, 2008
Source: The Economic Times

College students use the Christmas break to earn some money in retail

The Christmas break was the perfect opportunity for many college students to earn some money working at retail stores. The concept of temporary recruitment has been increasing, especially in sectors that are facing a shortage of staff, like the retail sector. Temporary jobs can earn students anything from Rs. 1,500-7,000 for 7-10 days worth of work.

According to Narendra Kala, CEO of Matrix HR Solutions, "While increased sales is key to additional staff needs, catering to maximum customers by providing high aesthetics as per the occasion is also a reason." Bulk of the demand in retail during the holiday period is for front-end jobs. Having good communication skills, computer knowledge and a pleasant personality are required to be placed for these retail jobs.

Date: Thursday, January 03, 2008
Source: Financial Express

Big players - plans and investments

Reliance Retail to launch home solutions format store

There is a buzz in the marketplace about Reliance Retail planning to unveil its brand of home format stores in Kolkata on a trial basis. The company has reportedly acquired prime lots of real estate where it will launch the first of its home format stores, which will stock everything for the home, ranging from furnishings, décor, curios, lifestyle products and kitchenware.

If the pilot project in Kolkata is deemed as successful, the company will be opening around 1,200 such stores across the country. Reliance Retail director Raghu Pillai is said to be heading this new division, and there are also reports that the company has tied up with US home store giant Lowe’s for this venture.

Some are suggesting that the land being used for these stores was originally acquired for Reliance Fresh stores, which were ultimately put on hold for the entire state of West Bengal and are now being used for other formats of Reliance Retail.

Date: Saturday, January 05, 2008
Source: The Economic Times

Indiabulls Wholesale acquires 43.92% of Piramyd Retail

Piramyd Retail Ltd. announced that Indiabulls Wholesale Services had acquired 8,783,000 shares of the company and now holds 43.92% of the company. Indiabulls Wholesale is the retail division of Indiabulls Real Estate. Piramyd Retail is owned by the Ashok Piramal Group and runs several formats of stores including Piramyd Megastore, and Trumart stores.

Date: Thursday, January 03, 2008
Source: The Economic Times

International

International retailers stressing on India’s retail as a growth sector

The Indian retail sector is being noticed the world over and is becoming the target for a wide variety of companies who are looking to be a part of this booming segment of the economy. Companies such as Dunkin’ Donuts and Reebok International are placing emphasis on their Indian expansion as part of the global strategy.

Dunkin’ Donuts has been in talks with Indian retailers to set up a partnership and will start operations in 2008. The company has 7,000 outlets in total, of which 1,700 are located in overseas locations such as Philippines, Indonesia, South Korea and Thailand. According to Srinavas Kumar, vice-president of international business for Dunkin’ Donuts, stores in India will be customized towards local tastes.

India’s large population and undeveloped market is they key attraction to most foreign retailers. It’s growing population topped 1.1 billion and with the government slowly relaxing FDI rules; the market is looking more attractive than ever before. The government permitted single-brand format stores to hold 51% of stake to be held by foreign retailers last year, leading to the increase in interest in the market.

With the retail market in India estimated to grow from $350 billion to $427 billion by 2010, as per a study conducted by India Brand Equity Foundation (IBEF), which is a partnership between the government’s economic development office and the Confederation of Indian Industry (CII).

Date: Monday, January 07, 2008
Source: Saukvalley.com

Global fast food chains to open 400 outlets in 2008

International fast food companies such as McDonalds, Yum Brands, Domino’s and local company Café Coffee Day plan to spend approximately Rs. 400 crore to expand in the Indian market this year. There are more than 900 fast food restaurants and cafés in the country at present.

Yum Brands that operate KFC and Pizza Hut plan to add 30-40 stores this year. Currently there are 134 Pizza Hut restaurants, which will be increased to 175 by 2010. The company has 30 KFC restaurants and plans to add 15-20 more this year itself.

The organized food and beverage segment in India is worth around Rs. 11 billion and is growing at 25-30% annually, making it an extremely attractive sector for global companies. The pizza delivery and dine-in business alone accounts for 40% of the overall market and is worth Rs. 470 crore and is growing at 35% per year.

Domino’s Pizza India will be investing Rs. 220-230 crore over the next three years to expand both its fast food chain and its manufacturing capabilities. The company plans to add 50-60 new stores this year, to its existing 148 stores in the country.

McDonalds has 123 fast food outlets in the country and will be adding 50-60 additional outlets this year, making an investment of Rs. 500 crore in the next 2-3 years. Each of its outlets requires an investment of Rs. 3 crore, not counting the cost of real estate, which is one of the largest parts of the total cost.

Café Coffee Day currently has 440 outlets and will increase them to 700 outlets, with an average investment of Rs. 250,000-300,000 per store. The company also has 40 outlets on IT campuses of companies such as Infosys, Wipro and Accenture and will be opening 80 outlets in office premises and highway stores.

Date: Sunday, January 06, 2008
Source: Business Standard

Carrefour could form partnership with Reliance

Carrefour has been in talks with numerous Indian retailers and other major corporations in the hope of tying up, but now it seems that the company could be forming an agreement with Reliance Retail. Although the specifics of a potential tie-up are not clear as yet, but sources say that Reliance could act as its partner for its cash-and-carry business similar to the Bharti-Wal-Mart deal.

The French retailer has been holding talks with many major companies such as DLF, Parsavnath, the Wadia group and many more for the past two years. Carrefour is essentially looking for three main strengths in its Indian partner: large amounts of prime real estate, strong clout with the government and long-term interest in the retail sector. Reliance Retail is strong on all three fronts, giving it a front-runner position in talks with Carrefour.

Date: Friday, January 04, 2008
Source: The Economic Times

Consumer Durables

White goods sales increasing due to easy availability of finance

Consumers are enjoying the benefits of getting finance easily and are increasingly buying consumer durables such as LCDs, top end refrigerators, washing machines and assorted IT products. The rising cost of real estate is also leading to consumers to spending the money on white goods instead of investing it in a real estate purchase. The consumer durable segment in India is worth Rs. 25,000 crore and this holiday season it beat its own expectations.

According to Sukhpreet Singh, general manager of brand marketing for Whirlpool India, “The durables industry is seeing a gradual trend towards financing purchases, particularly at the entry-level and high-end products. Almost 20 per cent of home appliances sales come through financing options, but the number could be larger if we take into account unorganized financing too.”

Samsung saw a 30% increase in sales during the holiday period, of which finance schemes accounted for 30% of the sales of premium products, with average prices of Rs. 35,000. Last year, finance schemes accounted for 20% of sales during this same period. The increasing use and acceptance of credit cards among retailers and consumers alike is also a major reason for this increase in consumer durable spending.

Date: Wednesday, January 02, 2008
Source: Business Standard

Food & Grocery

Kotak buys stake in Heritage Foods

A Kotak venture fund will be investing $10 million in Heritage Foods, which is promoted by Chandrababu Naidu, chief minister of Andhra Pradesh. The funds raised from this will be used for expansion of the @Fresh chain of stores. There are 50 such stores in India at present, all of which are located in south Indian cities such as Chennai, Bangalore and Hyderabad, and the company hopes to raise the number to 100 stores.

Date: Wednesday, January 02, 2008
Source: The Economic Times

FMCG

FMCG products shine at large-format stores

Large format stores are one of the major reasons for the rising turnover of fast moving consumer goods (FMCG) and the pace of growth is only set to intensify further. Several companies have launched special initiatives to increase point-of-purchase (POP) sales, have dedicated sales personnel and many other tactics that have led to the increase of FMCG sales at these stores as compared to kirana stores.

According to VS Sitaram, executive director of marketing (consumer care division) for Dabur India, “The servicing needs of modern trade are vastly different from the traditional stores and it requires a ‘sell through’ approach. The exciting new formats also open up immense opportunities for “brand activation” at the point of purchase. The selling skills are vastly different and are of a higher order.”

While FMCG sales are rapidly increasing at large-format stores, the bulk of sales still take place at kirana stores, with 95% of sales coming from these small mom-and-pop stores. Certain segments such as premium hair and skin care see a larger share coming from organized retail stores, with approximately 50% of sales taking place at large format stores.

Date: Sunday, January 06, 2008
Source: Business Standard