News and views about the Retail sector in India

This week, we focus on how the Indian consumer decides on a purchase. Is price still the primary factor, or have other factors such as convenience, uniqueness and physical proximity taken on a more important role. Find out about this and all the other retail news, in this edition of the weekly retail news.

Chillibreeze Business Research Team

General Plans and Information

Retailing to grow faster in India that in the US

In an interview with Rediff, Rodney Fitch, Founder and Chairman of Fitch, one of the world’s largest design consultancies in the world, emphasized India’s role in the global retail market and stated that retailing in India would grow faster than in the Unites States. Fitch has designed stores for Wal-Mart, Best Buy, Marks & Spencer, Tesco, Target and several others of the world’s leading retailers.

Describing India’s retail sector as “wonderful, exciting and challenging”, he said that the country lacked design resources currently and with the country’s strong visual culture, the market has attracted design firms such as Portland, Landor, Fitch and Brand Union. The company is part of the WPP communication group and has offices in Mumbai and Delhi at present and will soon be opening an office in Bangalore and other cities as well.

Date: Monday, January 14, 2008
Source: Rediff Money

Punjab Cooperative to launch retail chain

Cooperative societies are teaming up to take on competition from modern retail chains. An estimated 3,500 cooperative societies with 4,700,000 members will be joining hands to set up a retail chain. The new retail chain will generate employment and improve the financial viability of cooperative societies.

The new name of the chain is to be Cooperative Retail Chain and it will be getting finances from the Punjab State Cooperative Bank. The coop hopes to get bulk discounts from manufacturers and pass them on to consumers who were members of the society.

Date: Monday, January 14, 2008
Source: The Economic Times

Younger generation driving retail growth in India

The retail sector in India is one of the most exciting and dynamic sectors and has seen a significant growth in the past few years with the entry of several new chains. Factors such as increasing disposable incomes in the middle class, higher number of consumers in the urban areas, easy availability of credit, rising nuclear families, larger number of working women and a rural consumer who is awakening to the convenience of modern retail stores are some of the factors fueling the growth in the sector.

As a greater number of younger people start to work, their amount that is spent on products such as lifestyle products, eating out, services etc increases. Consumers no longer feel guilty about spending money and like to indulge themselves rather than save their money.

According to an analysis by Ernst & Young, the number of households in the upper middle class and high-income group has increased by 270%, from 30 million to 81 million. With over 50% of the population under the age of 25, the youth is driving the growth in the retail sector and will continue to do so for some time ahead as well.

The three main aspects that most youth look at before making purchasing decisions are uniqueness of a product, how contemporary it is and its value for money. Having a unique product is rapidly becoming the most important part of the decision making process and retailers are playing into this need.

Date: Wednesday January 09, 2008
Source: The Economic Times

Value for money is deciding factor for Indian grocery shoppers

A new survey conducted by Nielsen Company found that Indian consumers look for value for money in products they purchase. In an online survey conducted by the company, around 91% of respondents voted for ‘Good Value for Money’ as an important factor when selecting which grocery store to shop at.

Factors such as prices, promotions and perceptions about the store are also important factors in making that decision. According to Rajshree Dave, Director of Client Solutions for The Nielsen Company, “For Indians getting valued brands for a lesser price enhances their shopping experience and is a motivating factor for them to be more loyal to the stores.”

Other factors such as high quality of brands, location and availability of parking space are also important in selecting a grocery store. Interestingly, around 64% of consumers like to research and compare store prices and 58% of consumers selected stores based on word of mouth.

Date: Wednesday, January 09, 2008
Source: Yahoo News

Big players - plans and investments

Godrej could tie up with Future Group for rural sector

Godrej and the Future Group’s Pantaloon Retail could form an agreement over a rural retail initiative for its Godrej Aadhaar and Nature’s Basket stores. With this alliance, Pantaloon Retail will get the assistance it needs for its rural retail plans, and Godrej will get the investments required to improve its specialized retail model and turn it into one that generates revenues.

If all goes well, Pantaloon Retail is expected to buy a significant stake in both Godrej Aadhaar and Nature’s Basket. Godrej had earlier held talks with Subhiksha in this regard. Godrej Aadhaar and Nature’s Basket are both handled by Godrej Agrovet, which is a key player in the agricultural sector and has a large presence in the poultry and cattle feed segment.

Date: Monday, January 14, 2008
Source: The Economic Times

Future Group to invest Rs. 300 crore in Future Ventures

The Future Group will be investing Rs. 300 crore in Future Ventures India Ltd, so that the company can handle acquisitions. According to Pankaj Thapar, Future Capital Holdings Ltd (FCHL) Head of Investments and Acquisions, "Future Ventures would act mainly as an investment company for group's acquisitions. The group has decided to pump in Rs. 300 crore within 2008." All investments by the group and funds managed by FHCL will not be clubbed together.

Date: Sunday, January 13, 2008
Source: The Economic Times

Future Group looks for fresh acquisitions

The Future Group is keen to grow its business through fresh acquisitions and is reportedly in advanced stage of talks to acquire stake in companies in both fashion and food retail segments. According to Kishore Biyani, CEO of Future Group, “We are negotiating to pick up stakes in several retail firms that are mainly in the apparel and food segment. Some of these deals are in fairly advanced stages of negotiation. We will not pick up more than 50% in any of the chains. We are eyeing both national and regional retail chains.”

The company recently bought a minority stake in Sankalp Retail Value Stores, which is the master franchisee of MyDollarStore, a US based retail chain, which have pioneered the concept of dollar stores in India and offer international products at fixed prices of Rs. 99 only.

Date: Saturday, January 12, 2008
Source: The Economic Times

Pantaloon to invest in JV with NTC

Pantaloon Retail India Ltd has announced that it will be investing Rs. 3 billion in a joint venture with the National Textile Corporation, a state run enterprise. The company’s stake in the joint venture will be at 49%. According to Kishore Biyani, CEO of Future Group, parent company of Pantaloon Retail, “This will be for our 49 percent stake and for revamping the two mills.”

Date: Saturday, January 12, 2008
Source: Reuters

Future Group considering hiving off Big Bazaar

India’s most successful retail company Future Group announced that it was considering hiving off its Big Bazaar format into its own company. Big Bazaar is the company’s largest and most popular format and is currently part of Pantaloon Retail India Ltd.

Date: Saturday, January 11, 2008
Source: The Economic Times

International

EMKE Group to open outlets in Egypt, Saudi Arabia and India

UAE based EMKE Group is keen on expanding its market to regions like the Saudi Arabia, India and Egypt and is drawing up ambition plans to chalk out this growth. The EMKE Group operates 66 shopping outlets under its Lulu brand, opened three stores this week; one in Abu Dhabi, one in Barka in Oman and one in Karama in Dubai.

According to Yusuffali MA, managing director of EMKE Group, "After firmly establishing our presence in the region we are now focusing on increasing our retail network both in the existing as well as new markets. With the opening of these three hypermarkets our total store count will reach 69 and we intend to hit the 75 mark by the end of the year."

Date: Sunday, January 13, 2008
Source: Khaleej Times

Reebok to expand lifestyle segment

Sportswear company Reebok will be expanding its lifestyle segment in an effort to maintain its leadership position in India. The branded sportswear segment in India is worth Rs. 1,700 crore and is one of the most competitive segments of the Indian retail sector. Reebok will be adding to its women’s wear portfolio and expanding its kids wear segment as well.

The company will also be launching premier sports apparel as well as footwear in the Indian market and expand its range in sports such as soccer. According to Subhinder Singh Prem, managing director of Reebok India, “India is an evolving market and what is true now may not be true in the future. We did not address the kids market two years ago. However, it is a huge opportunity now and threshold prices have risen. Moreover, parents want to be known by what their kids wear.”

Reebok is likely to launch its kids wear sports merchandise in department stores initially and open stand alone stores at a later stage. The company will be investing in soccer to improve Reebok’s brand awareness with children. Reebok will be increasing its stores from 580 to 750 by the end of 2008.

Date: Sunday, January 13, 2008
Source: Business Standard

Spar to expand in India using partnerships

Dutch food and grocery retailer Spar will be expanding on a nationwide scale using licensing agreements with retailers across the country. The company is specifically targeting business houses or retail chains, which will be able to operate franchises for entire states or cities, and run under the Spar brand name.

The company opened its first hypermarket called Max Hypermarket in Bangalore, which is operated under a licensing agreement with the Landmark Group, a Dubai based retail company. The arrangement calls for a total of seven supermarkets and hypermarkets to be set up in India.

According to Technopak Advisors, the country’s retail market is estimated to be worth $350 billion of which organized or modern retail only accounts for 4% of total trade. With growth rates estimated to be rising at 10-15% per year, the retail sector in India will be attracting several other companies as well.

Spar International’s managing director Gordon R Campbell, says that the company will initially only be selecting sites in larger cities and once established there will move to smaller tier II and III cities. He added that the company would also be interested in opening smaller formats in some locations.

Date: Saturday, January 11, 2008
Source: Business Standard

Jewelry & Watches

Indian jewelry stores look to overseas markets

Indian jewelry stores are going places. Shrenuj & Company is holding talks with European design firms to bring out a line of premier handbags under its Arisia jewelry brand. According to Pranava Bhargava, group general manager (marketing), “We are in talks with leading European design houses for developing watches and handbags. The company might take the joint venture mode or co-branding initiatives after evaluating the value propositions.”

Shrenuj bought a 50% stake in Diamond Trading Corporation’s Arisia Jewelry, and will be focusing on developing the luxury market, with its launch of diamond-studded watches, handbags and mobile phones. The company will also be making its debut in China with a tie up with Joliesse, a jewelry firm base in Hong Kong.

Another jewelry brand Gitanjali Gems will also be expanding its newly acquired Nakshatra jewelry brand to cover lifestyle products, a segment that has international labels such as LVMH and Gucci already operating in India. According to Anuj Rakyan, vice-president of Gitanjali Gems (jewelry division), “Nakashtra will be extended into other categories such as handbags, watches and cosmetics. We intend to position Nakashtra to the brands such as Gucci and LVMH.”

The company is estimating its sales revenues from the Nakshatra brand to be around Rs. 1,000 crore in the next five years. Gitanjali Gems is also keen to open outlets in UK, Singapore, West Asia and South Africa. The jewelry and watch market in India is worth around $13.7 billion (Rs. 53,841 crore) and is expected to grow at 12% by 2012, reaching $23.6 billion (Rs. 92,741 crore).

Date: Saturday, January 11, 2008
Source: Business Standard