Latest News and Events from the Indian Retail Sector

Weekly Retail News from India

• General Plans and Information
• Big players - plans and investments
• International
• Support Industries
• Government Policy
• Sector specific

General Plans and Information

1. India remains the top retail investment destination
The Indian retail market held its top position as the most attractive emerging retail market in the world for the third straight year in a row, according to AT Kearney’s annual report. The top markets according the their attractiveness for retail investment were India, followed by Russia and China in the first three spots, while Brazil, which was ranked highly in the BRIC report stood at the 20th position in this report.

The study noted that modern retail is growing at 25-30% in India, as compared to 13% in China and Russia. According to Hemant Kalbag, AT Kearney India’s Consumer Industries and Retail Practice Principal, "We anticipate seeing another year of major investments and new retail concepts changing the rapidly evolving organised retail landscape in India, not just in the metros but also deeper penetration in the tier two and three cities."
Thursday, June 21, 2007
Source: The Times of India

2. Mall growth to ease up
Retailer’s growth plans and projections are all in disarray due to delays in completion of malls. Retail companies such as Pantaloon, Pyramid, Reliance, Hypercity and Globus are all facing this problem, which is leading to friction between retailers and real estate developers. It is estimated that these delays will cost retailers a lot of money, who have already tied up for merchandise and vendors in advance.
Thursday, June 21, 2007
Source: The Economic Times

3. Smaller cities increasingly attractive for retailers
With many of the larger cities reaching saturation point, retailers are now focusing on smaller cities, mostly II and III tier cities where they can open up stores. Consumers in most of these cities are already aware of the systems of organized retailing due to the widespread use of these formats in popular movies, television and the internet, and are eager to try them out for themselves.

The 6th annual Global Retail Development Index (GRDI) conducted by AT Kearney which studies retail market attractiveness for investment shows India at the top spot for the third year in a row. The Indian and Russian retail markets have held the top spots for the past two years, with China shooting past Vietnam and Ukraine to the third spot in this years index.
Friday, June 22, 2007
Source: The Hindu Business Line

4. Majority of malls in India not successful
While the retail boom is increasing the number of malls almost on a daily basis, only a very small number of these are actually successful. According to real estate and retail analyst, Susil Dungarwal, only 10-12% of an estimated 120 malls in India are successful. Malls might be opening on every corner, but most of them don’t get enough footfalls and those who do are not able to convert them into sales.

One reason for their lack of success is their design and tenant mix, which is often not given enough importance. The lack of retail design specialists has added to the situation, as once malls are built there is no one to manage them correctly.
Friday, June 22, 2007
Source: The Hindu Business Line

Big players - plans and investments

1. Piramal looking to partner with international retailers
The Ashok Piramal Group is keen on expanding its flagship brands, Piramyd Retail and TruMart and also tying up with international retailers. The company has been restructuring its operations for the past year and is now keen to move the company forward to the next level. According to reports, the company is keen on becoming a licensee for international brands coming to India, especially in the case of specialty retailers.
Tuesday, June 19, 2007
Source: DNA India

International

1. Office Depot finds India an “attractive” market
US office supply chain, Office Depot’s President Chuck Rubin feels that India might just be the place to take the company’s international expansion. At the Reuters Consumer and Retail Summit in New York, he said, "We haven't done anything in India yet. I think India is too large, too attractive for us to think that we won't be," Rubin told Reuters. "We're trying to globalize how we go to market." Office Depot is world’s second largest office supply retailer in the world, the largest being Staples, and has 300 stores in international locations.
Tuesday, June 19, 2007
Source: Reuters

2. Starbucks by winter most likely!
US coffee chain Starbucks’ hopes to be opening its first store by October and will most likely to be in Gurgaon, with a second outlet planned for Saket in Delhi. The company has set up a team for research and development, operations and marketing, and is currently based in the Future Group’s office in Gurgaon.

Starbucks India venture will be headed by Anoop Sequiera, the former CEO of Global Franchise Architects, with the licensee being New Horizons, a 51:49 JV between Starbucks’ Indonesian franchisee V.P. Sharma and Kishore Biyani, COE of Future Group. New Horizons will set up the company here, operate and manage their stores in India.
Thursday, June 21, 2007
Source: CNN-IBN

3. Tesco criticizes retail “frenzy” towards entering Indian market
At the Reuters Consumer and Retail Summit, Tesco criticized the way international retailers were causing retail frenzy about entering India. The company added that it would only enter the country once the rules of ownership had been changed for entering the Indian market. Tesco had been holding talks with Bharti last year, which did not go through.

While European retailers are still very excited about growth prospects in the Indian market, the legal and operational hassles are making many feel the cost as too high. Tesco itself is still interested in the market but only once the laws change in regard to foreign ownership of retail stores.
Thursday, June 21, 2007
Source: Reuters

Support Industries

According to a Rail Bhawan official, “Big retail companies are in talks with us for taking various real estate spaces across the country, and these cinema halls are one of them. The real estate, including halls and clubs would be leased out to them on competitive basis, provided they cease to be of use to us any more.”

With the cinema halls located in cities such as Delhi, Chandigarh, Bhopal and Indore, which are usually located between 1-3 kms. from the railway stations and are a perfect option for warehouses for large retailers and cash & carry ventures.
Saturday, June 23, 2007
Source: The Economic Times

2. JWT gets Bharti Retail ad account
The highly valued Bharti Retail advertising account worth Rs. 500 million has been won by JWT. Ever since the company announced its plans to entering retail in a big way, advertising companies such as Lowe, O&M, Leo Burnett and McCann-Erickson have been vying for its account. Besides the advertising, JWT will also be responsible for building the Bharti brand as well as store design.
Wednesday, June 20, 2007
Source: The Economic Times

Government Policy

1. Is the government planning to introduce licensing in retail sector?
According to some news reports, the government might be planning to introduce a license system in the retail sector in an effort to protect the small retailer. If this plan goes through, local municipal corporations will have the power to decide where large retail stores come up in the city.

The reason why the government might put this plan into effect is due to the opposition of large international and domestic retail by the CPI (M) as well as other political parties. The plan is likely to benefit only the municipal corporation officials, who will wield power over retailers, but other than that all other parties involved will be at the losing end.

Small retailers have for years been selling products over the listed MRP, but consumers didn’t have any other choice but to pay that price. Now that there are lots of choices available to them, they will themselves select the option that is most beneficial to them financially and otherwise as well.
Tuesday, June 19, 2007
Source: The Economic Times

2. Government to redo FDI norms for franchise agreements
Luxury brands are likely to find it tougher in the Indian market as the government is planning to change its foreign direct investment (FDI) norms of franchise agreements that take place between Indian companies and overseas partners. If this change goes through, then franchise agreements in sectors that do not allow automatic foreign direct investment will be affected. Brands such a Chanel, Ferragamo, Valentino and Tiffany operate in India via this franchising route and Gucci, FCUK and Starbucks are planning on entering the market via a franchising agreement.
Friday, June 22, 2007
Source: The Economic Times

3. Government likely to liberalize certain sectors for FDI
The Indian government is planning to ease restrictions for FDI and exempt certain sectors from mandatory requirements under Press Note 1 (PN1). Sectors such as advertising, hospitality, franchise operations and other services are now likely to be excluded from Press Note 1. This move is likely to remove major obstacles in the fields of advertising, hotels, agro processing and franchising.
Friday, June 22, 2007
Source: The Economic Times

Sector specific

1. Croma Zip opens store at Mumbai airport
Tata Group’s retail division Infiniti Retail announced that it had opened a store at the Mumbai Airport at the domestic terminal. The store is called Croma Zip and will sell laptops, cell phones, PDAs, CDs, DVD Players, cameras and other gadgets such as travel related products.

According to Ajit Joshi, CEO Infiniti Retail, “In the next three months, we expect a 25 per cent conversion rate from the large number of passengers who pass through this terminal. We are looking for opportunities to set up more such stores at airports in India.”
Saturday, June 23, 2007
Source: The Hindu Business Line, Hindustan Times

Food & Grocery

1. Subhiksha focuses on the masses
Subhiksha, the largest grocery store from Chennai in south India has been expanding to new territories and continues to focus on its target market, the masses of India. The company is not looking to win over any of the higher end customers and doesn’t plan to change the way it operates. In an interview with The Economic Times, R Subramanian speaks about how he got started with creating the company, starting with 10 stores in Chennai and giving customers a 7-8% discount on all items.

The company took two years to break even, but the company continued to expand and open more stores. ICICI Venture joined as an investor and the company carried on its expansion into Tamil Nadu, till it decided to expand on a national basis in 2004.
Wednesday, June 20, 2007
Source: The Economic Times