News and views about the Retail sector in India

The ICRIER report has been well received by the organized retailers. On the other hand, trade groups opposing big retail chains say the report does not give the true picture. According to the report, retail sector has the potential to become a $590-billion industry by 2011-12.

-Chillibreeze Business Research Team

General Plans and Information

After multiplexes, retail giants face IPL heat

The ongoing IPL Twenty20 cricket tournament has taken the nation by storm and retailers complain that they are among its unintended casualties, just like the movie halls which have been drained of cine-goers.

Matches are played and screened at prime time, overlapping with the hours when retailers conduct nearly half of their business, between 6 pm and 9 pm.

“The drop in walk-in customers is 20-30% since the IPL season started,” says Chakor Jain, business head for Lee at Arvind Brands. Businessmen estimate a conversion rate (from walk-in to sales) of 40% daily. This amounts to a fall in sales of 5-15%.

No one has been spared by the IPL phenomenon — the decline can be seen across all stores, mass or premium. Big Bazaar, the Future Group’s department store chain, too, has recorded lower business volumes during the last two months.

“IPL has become a game of bats and eyeballs, turning a nation of cricket lovers into couch potatoes,” observes brand consultant Harish Bijoor. IPL is different in that it has also managed to interest women while traditionally men are seen as cricket lovers, he says.

This has led to entire families being glued to their television screens with a decline in shopping as an outdoor activity. But retailers say they will adapt to the IPL reality from next year.

“The IPL, like Diwali or the March exams, is just another factor that we will have to keep in mind when we plan our budget for a month or season. For IPL, we will just have to keep it at 4-5% lower,” says Sanjeev Mohanty of United Colours of Benetton. “It is a temporary phenomenon and its impact has been negative because of its novelty.”

Furthermore, most feel that IPL is not necessarily an impediment to business in the retail sector; it could have a positive impact if plans are made and the opportunity exploited.

“Reebok has probably done better during this season because of its association with the game. IPL can be used to leverage on merchandise, and that is what we are looking at for the next season,” Mr Mohanty says. Some preparation is all that retailers need to make the most of the IPL season,” agrees Mr Bijoor.

“Malls and high-end shops could get cricket-friendly, with bigger screens, schemes, tieups with brands and so on,” he says. Retailers have apparently decided to live by the axiom ‘If you can’t beat ‘em, join ‘em’

May 27, 2008
Source: Economic Times

Local traders refuse to buy Icrier logic

Organised retail chains have welcomed the Indian Council for Research on International Economic Relations (Icrier) report for supporting their stand that their operations have little impact on mom-and-pop stores. Trade groups opposing big retail chains, however, say the report does not give the true picture.

"The country has a large retail market and is growing at a healthy rate. We believe everybody can co-exist and do not see much impact of organised retail chains on neighbourhood stores," said Mohit Khattar, president, Subhiksha, a food and grocery retail chain.

Khattar says farmers are one of the biggest beneficiaries as retail chains go to them directly and make upfront payment, which is not the case with wholesalers. "Since we buy directly and eliminate middlemen, we can price our products lower," Khattar added.

Venugopal Dhoot, president of industry body Assocham, said big retail could benefit youths as it offered better jobs and salaries. "Ultimately, somebody has to take a hit in the larger interest of the nation," said Dhoot, whose Videocon group plans to set up cash-and-carry stores across the country in the next couple of months.

Local trade bodies and industry associations say kiranawalas have been hit by big retail chains. "You forget about the long run. Small traders will be finished within the next few years if big chains are allowed to expand. In Western countries, retailers can depend on external capital and government support.

But in our country, they have to depend on their own capital and family members," said Mohan Gurnani, president of the Federation of Associations of Maharashtra.

For Sharadkumar D Maru, president of the Grain, Rice and Oil Seeds Merchants' Association, big retail chains kill fair competition. "We are not afraid of competition. But it should be fair. Look at mall rentals, power charges, salaries. How can they sell at cheaper rates? It is all false," Maru said.

May 27, 2008
Source: Business Standard

Revenue gains can refurbish small stores

As the share of organised players in overall retail trade grows, the government is likely to gain in terms of tax revenues as "it would be much easier to collect sales taxes from organised retailers than from traditional retailers", says the Icrier (Indian Council for Research on International Economic Relations) study on the impact of big retail on small traders. These revenues can be used to upgrade traditional retailers, it says.

The study also points out that organised retail in India is moving at a rapid pace to smaller cities, unlike in many countries where it took decades to extend its reach. The expansion would lower prices at assured quality and offer wider variety and a better shopping experience, said the report.

"These benefits should soon percolate to the mass of Indian consumers, assuming that organised retailers have free access to global and pan-India sourcing directly through producers, processors and specialised agents," the report adds.

In addition, as the share of organised retail in India rises, the sector is likely to experience major consolidation, with large retailers and processors taking over smaller players or joining hands with other large retailers to exploit economies of scale.

In 2007, Reliance took over Adani Retail in Gujarat while Trinethra stores were bought by the retail segment of the AV Birla group under the banner "More". Also, Mumbai-based Spinach retail stores took over Delhi's Sabka Bazaar and Home Store.

May 27, 2008
Source: Business Standard

Retail giants haven't hurt small stores

Despite the hype, organised retailers such as Reliance Industries and Bharti Enterprises have failed to dent the earnings of mom and pop stores in India, a study by the Indian Council for Research on International Economic Relations (Icrier) has found. That's not all, such small stores also managed to hold on to their workforce, the study said.

According to the Delhi-based think-tank, unorganised retailers experienced a decline in their business volume and profits in the initial years when large organised retailers set up shop in their vicinity. But over time, the adverse impact weakened.

"The initial 8-10% negative impact wears off because of small retailers' competitive response to their big and organised rivals," said Icrier's director Rajiv Kumar. Small retailers used door-to-door delivery, better display, credit provision, computerisation and personal interaction with customers to fight competition.

Interestingly, the entry of organised retailers did not cause a decline in the overall employment in the unorganised sector. "There is no large closure or loss of employment due to big retailers coming in," said Kumar. The rate of closure of small retailers due to competition from big stores was found to be as low as 1.7% per annum. India's retail industry is likely to grow at 13% annually to $590 billion in 2011-12 from $322 billion in 2006-07. The study estimated that organised retail would grow at 45-50% per annum and quadruple its share in total retail trade to 16% by 2011-12.

On its part, the unorganised sector is likely to clock an annual growth of 10% to $496 billion in 2011-12 from $309 billion in 2006-07.

"Given the relatively weak financial state of unorganised retailers, and space constraints their expansion faces, this sector alone will not be able to meet the growing demand for retail," the study said.

According to the Icrier report, simplification of government procedures for large retailers could help boost this sector. Kumar said that there are 20-22 clearances and approvals needed now to open a big retail outlet. "These vary from one state to another. The licence and permit process needs to be simplified to bring necessary investments into this industry," he added.

For the unorganised sector's growth too, the study had some recommendations. It said the government needs to improve infrastructure, increase cooperation between them and offer them credit through scheduled commercial banks. The three are the biggest issues hindering the unorganised retail sector's progress, Kumar said.

The study observed that the entry of big retailers has been beneficial for both consumers and farmers. "While all income groups saved on costs through organised retail purchases, the survey revealed that lower income consumers saved more," it said.

Selling to big retailers directly got farmers profits that were 60% higher compared to those obtained in government-regulated wholesale markets, the study revealed.

Under license from www.3dsyndication.com

May 27, 2008
Source: Sify

‘Organised retail not a threat to small stores’

In what may be significant for the shaping of Government policy on retail business in the future, the Indian Council for Research in International Economic Relations (ICRIER) has said that there would be no long term impact due to the entry of organised retail chains on the neighbourhood kirana shops in the country.

However, from empirical evidence, the ICRIER has found that though initially small stores located in the vicinity of big malls have seen a drop in sales and profit, the effect could be expected to level-out in the long run.

The ICRIER study on impact of organised retailing on the unorganised sector was submitted to the Department of Industrial Policy and Promotion (DIPP) here on Monday.

Supporting the entry of big retail chains, the report says that it would be beneficial to the farmers in terms of better price realisation and the consumers too would benefit because of competitive pricing.

The ICRIER was asked to prepare the report focussing on the probable impact of organised retail chains on small retailers and vendors in the unorganised sector, effect on employment, impact on consumers, farmers and manufacturers and prices and overall economic growth.

There has been “no evidence of a decline in overall employment in the unorganised sector as a result of the entry of organised retailers,” the report said.

Beneficial to farmers

It further said that farmers would be the major beneficiaries because they would get higher prices for their produce by selling directly to the big retail chains while the consumers, particularly the lower income groups, would save money.

“Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than amount received from selling in the mandi,” it said. “While all income groups saved through the entry of the organised retail purchases, lower income consumers saved more,” the ICRIER said.

On the policy front, the report suggested introduction of a nationwide uniform licensing policy for setting up multi-location retail chains. The retail sector has the potential to become a $590-billion industry by 2011-12, the report points out.

Talking to presspersons, Director of ICRIER, Dr Rajiv Kumar, said that the study covered 10 major cities. “This study has nothing to do with the impact of foreign direct investment on retail,” Mr Kumar said.

Advantages remain

The advantages of neighbourhood kirana stores such as proximity, leverage on credit sales, bargaining choice for customers, home delivery and convenient shop timings would remain even after the entry of big retail chains, the report noted.

In order to help the small retailers improve their efficiencies, the report said that they should be entitled to a better deal in terms of institutional credit.

On the farmers’ side, the study recommended formation of farmers’ cooperatives to sell directly to big super markets. Simultaneously, unorganised retailers should also form cooperatives and associations for direct procurement from suppliers and farmers, eliminating middlemen.

The report recommended that wholesale markets be modernised through public private partnership and the Competition Commission be strengthened to check collusion and predatory pricing by big players.

The DIPP, which had commissioned ICRIER to undertake the study last year, has now asked it to gather further inputs from all stakeholders and invite comments from the public.

May 27, 2008
Source: Hindu Business Line

Big retailers' share in India to quadruple: Report

The share of big retailers in India's retail industry is expected to quadruple to 16 percent by 2011/12 from 4 percent as they lure consumers through competitive pricing, a government think-tank said on Monday.

"Low-income consumers save more than others through shopping at organized retail outlets. This is a result of targeted discount shopping," the Indian Council for Research on International Economic Relations (ICRIER) said in a report.

"It is also seen that farmers gain considerably from direct sales to organized retailers, with significant price and profit advantages as compared with selling either to intermediaries or to government regulated markets," it said.

India's retail industry is dominated by "mom-and-pop" stores, and modern retail faces political obstacles because of concerns million of jobs may be lost in the fragmented but fast-growing industry.

ICRIER said there was no evidence of a decline in employment because of big retail chains.

"The retail sector, left entirely in the unorganized and informal segment of the economy, could well emerge as a major bottleneck to raising productivity in both agriculture and industry," it said.

Indian laws ban foreign multibrand retailers from entering its fast-growing grocery market. Germany's Metro AG and Shoprite Holdings have wholesale centres which operate on a "cash and carry" model.

Indian retail industry should grow by 13 percent annually to $590 billion by 2011/12 from the present $322 billion, ICRIER said in the study that surveyed family-run retailers, consumers, farmers, large and small manufacturers and intermediaries.

Sales of "mom-and-pop" shops are expected to grow by 10 percent every year to $496 billion in three years from $309 billion, it said.

May 26, 2008
Source: Economic Times

Big players - plans and investments

Carrefour may opt Parsvnath for India foray

Carrefour, the world's second largest retailer, is considering the franchise model to initially expand its presence in the country and may announce a local partner in four weeks, people involved in the development said.

The French retailer, which has held talks with as many as 50 domestic business houses including Mumbai-based Wadia group and Mukesh Ambani-led Reliance Industries and real estate companies, such as DLF, in the past five years, may choose Parsvnath, a New Delhi-based real estate company, as its partner.

"Parsvnath has emerged as the strongest option for the franchise partner," a source said. A person familiar with the development at Carrefour gave the same timeline for the announcements. Parsvnath has almost five million sq ft of retail space under its belt and plans to increase it to six times in the next five years.

The retail giant's negotiation with other domestic houses and companies failed as they wanted greater control over the business.

Carrefour is exploring the wholesale cash-and-carry format and front-end retailing options in the country. It has already formed Carrefour WC & C India and Carrefour India Master Franchise Company for the respective business formats.

"We are likely to announce our retail partner in three to four weeks," Pradeep Jain, Parsvnath's chairman said.
Under current government guidelines, foreign direct investment is allowed in the wholesale cash and carry model but it is not allowed in the multibrand retail stores. In single brand retail stores, it is limited up to 51 per cent.

However, multi-brand international retailers can operate through the franchise route where an Indian partner would own the operations.

Carrefour SA Chief Executive Officer Jose Luis Duran had said last month that it was worth investing in India before the limits on overseas companies' ownership of local stores were lifted. The company was talking to potential Indian partners to start a wholesale business and may announce the winner in the coming "weeks or months''.

"We still haven't zeroed in on a partner as it is all in the early stage," said Somesh Dayal, marketing head for Carrefour India.

It is Carrefour India Master Franchise Company that would give its Indian partner the licence to do front-end retailing with using the French retailer's brand name. Carrefour would also manage the whole-supply chain and provide the logistic support to the retail firm.

"Franchise is the best option," said Jain. "Today franchise can operate the company and tomorrow when FDI is allowed the international retailer can increase its stake," he said explaining the business model under discussion.

Carrefour built its core management team early this year with the help of executive search firm Transearch India.

May 27, 2008
Source: Business Standard

Westside eyes Rs 30-crore turnover from franchisee stores

The Tata Group's retail chain, Westside, is eyeing a turnover of around Rs 30 crore from its franchisee stores across 37 Tier-II and III cities over the next five-year period, a top company official said on Friday.

"The stores would be spread across 8,000-12,000 sq ft and set up at an initial investment of Rs 1.5-2 crore," Trent Ltd's Head, Marketing, Neeti Chopra, said.

Westside, operated by Trent, currently has 30 stores and by 2009-10, there would be 60 stores of which around 10 would be franchisees, she said.

Over the five years, it would have around 80-90 stores of which around 25-30 would be franchisees, she added.

Westside has identified cities on the basis of investment potential of the business community, consumption trends and spending potential of the consumers.

Among the short-listed cities are Allahabad, Patna, Guwahati, Dehra Dun, Madurai, Kolhapur, Jammu, Bareilly, Aligarh, Cochin, Pondicherry, Trivandrum and Salem.

Westside has invited proposals from interested parties for these destinations, Chopra said. "Due to high real estate prices and also because we would be entering new markets, we thought the franchisee route was more viable."

Describing inflation "as a cause of concern for all retailers", Chopra said rising prices, a high rate of interest for credit and a declining stockmarket were beginning to affect the retail industry.

On margins, she said "last year was a tough year and revenue growth was in single-digit for the company. Since too many players came in and a lot of discounts were offered, margins of retailers got further reduced."

May 23, 2008
Source: Economic Times

Rel Retail in talks with food MNCs

In a bid to bite into the potential market for premium food, Reliance Retail is in advanced talks for alliances with at least four foreign food companies. The MNCs include fresh fruit and vegetable suppliers Dole and Chiquita—both based in the US, and meat retailers Sadia of Brazil and Doux of France.

“We won’t comment on speculation,” said the Reliance Retail spokesperson when asked to confirm the development. The flurry of likely deals indicates that Reliance Retail is still focused on its fruit and vegetable business, despite political controversies stalling its spread in certain states. However, there seems to be a concerted attempt at capturing the premium end of the market. So far, Reliance Fresh and Reliance Super—the company’s small and large format supermarkets—had been sourcing vegetables and fruit mostly through mandis and middlemen.

And there is very little product differentiation. Reliance Retail operates across several formats and an attempt at offering differentiated products through tie-ups with premium food companies may help it draw new segments of customers.

It’s not clear yet if the partnerships will get into production in India. If they do, it will mean a new venture for Reliance Retail, which has so far limited itself to retailing. These likely alliances echo the sentiments expressed by chairman Mukesh Ambani at the latest Reliance Industries AGM. Mr Ambani had cited ‘strategic alliances’ as key to growing the group’s retail business.

Lately, the retailer has started offering non-vegetarian food under the brand name ‘Delight’. This is one of the first attempts at organised meat retailing by a major retailer in the country. Besides getting access to premium quality fruit, vegetables, juice and flowers, Reliance Retail’s tie-up with the MNCs will also give it access to much-needed processes and technology.

India’s rapid economic growth and multiplying income of its middle class has encouraged a number of premium brands, ranging from apparel to watch makers, to set up shop in the country. Now, it’s the turn of premium food companies to cash in on India’s potential. The fast-growing upper middle class has been more than willing to pay a premium for quality fresh or processed food. This can partly be attributed to the growing consciousness about health and nutrition.

US-based $6.9-billion Dole Food Company is one of the biggest producers and marketers of high-quality fresh fruit, vegetables, flowers and juice. NYSE-listed $4.7-billion Chiquita, known mostly for its bananas and salad, is also likely to join hands with Reliance in India, where branded vegetables are still to catch the fancy of consumers. Reliance Retail will strengthen its non-veg menu by adding offerings from Brazil-based Sadia and French food firm Doux.

Sadia, which reported revenues of $1.2 billion in 2006, is one of the biggest meat exporters in the world and currently services India through its Japan office. Doux sells its products in more than 130 countries. The company boasts of 50 years of expertise in offering fresh and frozen foods in all segments of the poultry market. It controls the entire production and distribution chain.

May 22, 2008
Source: Economic Times

Reliance Retail to bring in Neiman Marcus

Reliance Retail (RRL) is understood to be in talks for a strategic alliance with the US-based Neiman Marcus, an upscale, speciality retail departmental store operated by the Neiman Marcus Group.

The alliance, which may include equity partnership, may be sealed through Reliance Brands, an RRL subsidiary which focuses on tieups with global brands in the area of premium denim, contemporary brands, women-oriented labels and women’s lingerie.

The Neiman Marcus Group operates the exclusive Bergdorf Goodman speciality retail department stores on Fifth Avenue in New York and a direct marketing division, Neiman Marcus Direct, which operates catalogue and online operations under the Horchow, Neiman Marcus and Bergdorf Goodman names. Meanwhile, Reliance Retail spokesperson declined comment.

Reliance Retail has been ramping up its non-grocery business in recent times to help improve business margins through tieups with lifestyle global retail heavyweights.

In the last two months, it announced tieups with M&S and Office Depot. Sources said the company has sought FIPB approval for the JV along with similar tieups with GAP, which also owns Banana Republic. While Gap and Banana Republic are mid-premium brands, the Neiman Marcus tieup will focus on luxury market, offering an upscale assortment of men and women apparel, accessories, jewellery, beauty and decorative home products to the affluent consumer. The company is headquartered in Dallas, Texas, and competes with Bloomingdale’s, Nordstrom and Saks Fifth Avenue

Reliance Brands inked the first JV with the Italian fashion house Miss Sixty Group, which will hold the majority stake in the venture. The company is exploring inorganic growth opportunities. It is also in talks with the US-based Gap Inc for a franchise arrangement for Reliance Retail’s apparel business. Gap Inc operates four of the most recognised apparel brands in the world — Gap, Banana Republic, Old Navy and Piperlime.

Following a recent decentralisation move within Reliance retail, various strategic business units (SBUs) have decided to expedite the rollout of formats faster than what’s happening now on the ground. SBUs have also been given enough independence to enable them to achieve targets faster.

To hurry up the process, real estate procurements for RRL, which were earlier undertaken though a central pool system, have now been decentralised. Within the system the sore point was that there was far more focus on Reliance Fresh as a result of which the other verticals did not get as much importance.

May 21, 2008
Source: Economic Times

International

VF mulls new retail structure

Lifestyle apparel giant VF Corp is exploring options for direct foray into India’s retail market, including the possibility of foreign direct investment (FDI) in single brand retailing with maximum permissible 51% stake allowed under current regulations.

The $7-billion VF has an existing wholesale distribution joint venture with Arvind Mills Ltd, in which it controls 60% stake, but operates mono brand outlets through multiple franchisees, including Arvind. VF with brands like Lee, Nautica and Wrangler is keen to increase its direct-to-consumer business globally, as it moves away from being a distribution-led player, and would talk to several potential partners to show up with a separate retail structure in India.

“We have complete control of our retail plans since we are a majority partner in our fundamental business (brand ownership). We are looking at all options, including retail FDI, for improving our direct-to-consumer business. This is in no way a conflict with Arvind,” VF Asia Pacific president Aiden O’Meara told ET while adding there is no current discussion to buy out Arvind’s 40% stake in the wholesale JV — VF Arvind Brands — as there exist “no big issues between the two partners”.

VF brands together have a network of about 150 single brand stores across India with the denim coalition of Lee and Wrangler accounting for almost 130 of them.

Nautica, a premium sportswear brand, runs 10 stores while the rest is split between Jansport and Kipling. Incidentally, Arvind’s share of the current franchisee store network is less than 50%.

VF is also working on the introduction of two more blockbuster brands — North Face and Vans — as part of its plans to tap the outdoor clothing segment.

“Globally, we are targeting direct-to-consumer business to account for 20% of our revenue in the next five years. We believe it is imperative for growth as well as brand value creation. We see a huge opportunity for direct-to-consumer play in Asia Pacific where China and India are two strong markets for us,” Mr O’Meara said.

The direct-to-consumer business driven through exclusive stores already accounts for 45% of the VF sales in India, but the company sees potential to scale up further.

VF, which is targeting $11-billion revenue by 2011, plans to bring in one or two of its global brands into the country every year. But the denim coalition led by Lee and Wrangler that accounts for about 80% of the domestic revenue will continue to lead the show for the company in the near future.

May 22, 2008
Source: Economic Times

Apparel & Accessories

Lee Cooper plans to open 24 stores in 2008-09

Lifestyle denim brand Lee Cooper today announced to open 24 new outlets involving an outlay of Rs 20-30 crore in 2008-09.

Lee Cooper, a joint venture between Future Group and Lee Cooper International, also aims Rs 180-200 crore turnover from Indian operations in the next two years.

"As part of our efforts to have pan-India presence, we will be opening 24 more stores in this year," Lee Cooper (India) CEO Ameet Panchal told reporters here today.

Under this expansion programme, the company has targeted to cover northern region including Punjab, Himachal Pradesh and Haryana in order to deepen its market.

"We have plans to open our stores, having a size of 1,200 to 2,000 square feet in Ludhiana, Patiala, Jalandhar, Amritsar, Gurgaon, Ghaziabad and Shimla," he informed.

At present, the company has 31 stores across the country. On being asked about the growth rate the company is expecting, Panchal said, "We are looking to grow between 80 to 100 per cent during next two years." Last year, the company touched a turnover of close to Rs 100 crore, he said.

The company today opened its first store in Chandigarh here. "Chandigarh has emerged as promising market for us as the aspiration and affluence level have grown substantially," he said.

Lee Cooper (India) markets entire range of casual wear range apparels for men and women categories.

May 23, 2008
Source: Economic Times

Luxury & Lifestyle

Luxury malls to drive Louis Vuitton’s expansion

Luxury malls will drive global luxury brand Louis Vuitton’s expansion plans in the country.

Speaking to news reporters here after the launch of its third store in India, the first one in Bangalore, Mr Yves Carcelle, Chairman and CEO of the company, said, “We know that a certain number of projects (of luxury malls) are going on in other cities and are following them carefully.”

Louis Vuitton, which opened its first store in India in 2003 in New Delhi, followed by Mumbai and now Bangalore, will soon launch its second store in Delhi, and is considering a presence in Chennai, Kolkata and Hyderabad.The luxury brand’s starting price point would be €100 (Rs 6,000), Mr Carcelle said. Though Louis Vuitton introduces all its products at the same time across the world, luxury ready-to-wear will not be launched immediately in India. “Because the sari is still a preferred garment here,” he said.

Commenting on Louis Vuitton’s plans to pick up a minority stake in the Puducherry -based leather goods maker Hidesign, he said that it was an investment that the group makes, betting on the future of India. “It has nothing to do with Louis Vuitton strategy in India. India is a dynamic economy and the group will make some other investments as a minority shareholder.” Louis Vuitton’s investment firm is constantly looking at other lines for investments and this could be in sectors such as real estate and wine spirits, he added.

India would not be a sourcing hub, he clarified explaining that all Louis Vuitton’s products are currently sourced from France, Italy or Switzerland.

Mr Carcelle was optimistic that the company would escape the recession and said that it had witnessed double digit growth in the first quarter of this year. “When people are uncertain, we are of eternal value,” he said.

May 23, 2008
Source: Hindu Business Line

Ferragamo ties up with DLF

Salvatore Ferragamo, luxury Italian fashion group, has announced a new joint venture agreement with the DLF Group. The Italian company plans to open 10 new stores in the next five years throughout India. In 2008 alone, the company will open stores in major cities such as New Delhi, Bangalore and Mumbai. Salvatore Ferragamo has been present in India since 2005. Ferragamo, which only has one store in India, would hold 51 per cent of the joint venture, while DLF Group will hold 49 per cent.

May 21, 2008
Source: Hindu Business Line

Rural marketing

ITC to go slow on Choupal stores

ITC has pushed the pause button on expansion of its rural and urban food and grocery retail formats — Choupal Sagar and Choupal Fresh. Slower pace of agriculture reforms has impacted the momentum of ITC’s agri retail rollout, as the company’s front-end retail plans are deeply integrated to the back-end, going up to the farm level.

ITC international business division head S Sivakumar, who also drives the e-choupal initiative, says: “We are going slow on our Choupal Sagar (rural) and Choupal Fresh (urban) formats. There is no expansion planned in any new location for Choupal Fresh.”

At present, there are 24 Choupal Sagars or large-format rural bazaars that complement the e-choupal initiative and stock everything that a farmer may require. It has 27 Choupal Fresh stores, targeting wholesale and retail buyers of fresh produce, only in Hyderabad, Pune and Chandigarh, with no current plans of spreading out.

Unlike other food and grocery retailers, ITC’s revenue from fresh products are planned to account for a lion’s share and that necessitates its investments and engagement in the backend.

For instance, its investments in e-choupal, the rural digital infrastructure, include fruit and vegetable demo plots and nurseries, apart from capacity building. It has links at the plot and farmer level and its frontend retail plans are an extension of the company’s pre-existing trade division, which procures and exports commodities.

Although nearly 16 states have amended the Agriculture Produce Marketing Act, some controls still remain. Most retailers in India source from the mandi level while many have expressed serious intent in deep diving at the farm level.

ITC is looking at driving down spends on cold chain infrastructure through better “calendaring of crops” or managing information in such a way that each farm is mapped to a store. Its farm-to-store link concept has been positioned in its brand — Today’s Harvest.

May 26, 2008
Source: Economic Times

Hatsun plans rural retail foray

Hatsun Agro Product Ltd, a leading private-sector dairy company, has decided to set up a retail chain in rural areas.

According to Mr R.G. Chandramogan, Chairman and Managing Director, Hatsun Agro Product Ltd, the company will set up retail outlets at the 5,000 milk collection centres it has established across South India. There is spare space — cumulatively about 4 lakh sq ft — and manpower in these milk collection centres that would be used to stock and sell a range of commonly-used products such as readymade garments, textiles and household utensils.

The retail outlets would be ‘no-frills’ outlets in the heart of every village where the company has its milk collection centres. The company can operate these with minimum overheads to provide household goods at low margins to the farmers, he said.

Over 1.2lakh dairy farmers visit the milk collection centres daily in the mornings and evenings, when for two hours the company staff work to collect the milk delivered by the farmers.

Each rented centre has about 80 sq ft of spare space, the company’s trucks move daily between the processing centres and milk collection centres moving milk.

Hatsun can exploit the space, logistics infrastructure and human resources optimally for retail business.

According to Mr Chandramogan, for the average retailer these three resources account for about 20 per cent of the business expense but for Hatsun, which has them with spare capacities, the business would be “zero-expense retail.” The company has tried the retailing business in 100 centres in Tamil Nadu and found it “overwhelmingly attractive,” he said.

The Rs 850-crore company procures over 16 lakh litres of milk daily and markets liquid milk under the brand names Arokya and Komatha. It also sells a range of branded dairy products and manufactures and markets ice creams under the flagship brand Arun Ice Creams.

May 22, 2008
Source: Hindu Business Line

e-Commerce

Online shopping is the next big thing

It’s late afternoon on a Sunday and you are in the middle of IPL's final match between Rajasthan Royals and King's Punjab XI, and the wife reminds you that you have to go shopping. However bored you are, you know that it's month end and you are left with no choice but to go shopping. You switch on your laptop, visit at least three retail outlets’ online shopping portals, shop for the best prices, and all this without missing even a single Shane Warne delivery to Yuvraj Singh.

Online retailing or e-tailing has been a distant concept in India , except in the travel and ticketing sector. The Future Group has been an early mover while others such as Reliance Retail, RPG Cellcom, and Tata Woolworths are gearing up to launch their own online shopping portals.

Importantly , smaller players such as Vishal Retail, Subhiksha and Spinach too are seriously looking at e-tailing as a future revenue generator. Says R Subramanian, MD, Subhiksha, "We are investing Rs 12 crore into this venture and expect 3-4 % of total business coming from online. We'll deliver across 400 towns we are present in."

Other than shopping the website will be designed to provide buyers with information such as new store opening, offers and promotions and so on. Vishal Retail is also looking at internet shopping, confirms its MD Ramesh Chandra Agarwal, "We plan to launch our online shopping portal in the next 4-5 months, and have already appointed a person to head the new venture."

He says prices on the portal will be 5-15 % lower than what a consumer pays in their stores. Figures released by the Internet and Mobile Association of India (IAMAI) state that the ecommerce market is expected to reach the Rs 9,210 crore mark by the end of 2007-08 , a growth of 30% over the current year.

Online is the largest contributor to the B2C e-commerce industry at Rs 5,500 crore for the year 2006-07 and is expected to rise to Rs 7,000 crore by the end of 2007-08 . Etailing stands at Rs 850 crore in the year 2006-07 and contributes maximum to the on-line nontravel industry. It is expected to be Rs 1,105 crore by end 2007-08.

Reliance Retail is on the verge of rolling out its integrated e-tailing website that will include Reliance Fresh, Digital, Trendz and other verticals. The company will set up its own call centre and a separate team for it, says Ajay Baijal, president, Reliance Digital: "Cities like Bangalore, Hyderabad and Pune are going Wi-Fi and we see a massive opportunity here for online shopping."

Speciality mobile retail store chain RPG Cellcom too is making its on-line foray soon. Its marketing head Bishwajeet Pandey says, "The prices on-line will be no different from our store price, and we plan to charge a little extra for home delivery."

The challenges in replicating the success of physical stores online are very different, and retailers are eyeing a different set of value adds and experience to hook customers. Some are planning to introduce virtual shopping , where the customer can get a feel of moving around in a mall, and can click on the items he/she wants to buy.

Mumbai-based Spinach is among those looking at virtual shopping. Says its CEO Pushpamitra Das, "There's big business in on-line retailing and it's still untapped in India. We're planning a virtual shopping experience which will be launched very soon."

Retailers have begun viewing IT as one of the areas, which could strengthen their market position, and market share thereby. Most of the spending would be in supply chain management , point of sale systems, strategic merchandising and facilitating customer relationships.

It is estimated that India, China and Russia would be spending over $1.57 billion in 2010 on software, says a research report by AMR. The report mentions that retailers would hike their IT budget by 25% by 2010. Says Rob Garf, vice president and general manager of retail strategies at AMR Research, "To support growth initiatives, retailers in India, China and Russia are focusing on building a technology architecture."

Says Ajit Joshi, CEO, Tata Woolworths , "We'll either partner with TCS or IBM or a combination of both for our e-commerce venture. We are conducting a detailed study since an online business should be supported by excellent delivery systems."

Online retail is also expected to benefit the credit cards business. According to credit card companies, retail has been instrumental in boosting average consumer spending per card at stores. According to an AT Kearney report credit card transaction value in organised retail has been is growing at 35% in India.

So card issuers have been tying up with retail chains with an eye on larger prospects when online shopping opens up in a big way by 2010.

"Retail features among top five destinations where our customers wish to spend. With retail booming and malls opening in small cities and towns we expect a surge in buying by our existing customers," says Sachin Khandelwal, head, card products , ICICI Bank. Of the total 25 million credit card holders in India, ICICI Bank leads with 8.5 million customers followed by SBI and Citibank.

Says Kishore Biyani, CEO, Future Group, which was one of the first retailers in India to go online, "The use of credit cards (in retail) has increased substantially, and most spends through credit cards are by employed professionals . Credit cards are swiped mostly to buy fashion accessories."

Globally online shopping has become crucial to the organised retail business. For instance, UK-based Tesco earns $1.2 billion from its online business. Whether Indian retailers can make a similar success in the virtual world is anybody's guess. Vishal Retail's Agarwal admits this will be a very different ball game compared to physical store operations: "Success in this medium will depend on the facilities and value that one can provide to customers, and the consistency of service delivery."

Mouse trap

Prices on the Vishal Retail portal to be 5-15 % lower than what consumers pay at stores Subhiksha will invest Rs 12 crore and expects 3-4 % of total business coming from online.

AT Kearney reports credit card transaction value in organised retail has been growing at 35% in India

May 26, 2008
Source: Economic Times