Retail News March 2007

Big players – Plans and Investments

Wal-Mart to use new formats for Indian operations

Tuesday, February 13, 2007

Wal-Mart is known for its large format stores all around the world, but for its operations in India, the company is considering going for smaller, neighborhood stores in keeping with consumer preferences, high real estate prices and a severe shortage of available properties. According to Love Goel, Chairman and CEO of Growth Ventures Group, and a former Wal-Mart advisor, "We expect Wal-Mart and Bharti to explore the neighborhood market concept because groceries are one of the largest retail categories with the least organized retail competition in India."

Source: Silicon India

Future Group likely to split business to raise funds

Monday, February 19, 2007

The Future Group is planning to split it business and hive off one of its most popular formats, Big Bazaar, to raise funds separately for each type of format. According to sources, the procedures for the split are in the last stage. The Future Group is focusing on the metros and is aiming to dominate the markets of the top eight metros of the country. By the end of 2007, the company hopes to have 11 Big Bazaar stores in Bangalore, eight in Mumbai and seven in Kolkata. New Big Bazaar stores will have private label products. Currently, there are 41 Big Bazaar outlets, with nine stores having opened in the past two months.

Source: DNA India

Bharti to invest up to $2.5 billion by 2010 for retail venture

Monday, February 19, 2007

The Bharti Group announced its plans for its retail venture for which it has tied up with Wal-Mart. The company will be investing up to $2.5 billion by 2015 to open stores across all major cities in India. According to Bharti Enterprises JMD Rajan Bharti Mittal, "After revolutionising the Indian telecom sector, retail will be the next big focus area for Bharti... the investment would be $2-2.5 billion.” He added that the company would be opening multi-format stores in cities with populations of around 1 million.
The company will be covering an estimated 10 million sq ft of retail space, and would employ 60,000 people in the next few years. Its first store will be opened in the first quarter of 2008. The company was yet to decide a brand name for its stores, which would be decided based on consumer research.

Source: CNN-IBN, Financial Express, The Economic Times

Bharti aiming for launch in August

Saturday, February 24, 2007

In a letter last week, Bharti informed the Ministry of Commerce and Industry that it would be starting operations in August-September. The company hopes to finalize its plans with Wal-Mart and have all operations in place. Wal-Mart’s CEO Michael T Duke who was in India the past few days, met Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, Sharad Pawar, the Union Minister for food, agriculture and consumer affairs, and Kamal Nath, the Commerce and Industry Minister. It is expected that a joint venture agreement will be signed in the next few weeks.

Source: Business Standard

Wal-Mart CEO checks out the local competition, faces protests

Friday, February 23, 2007

Wal-Mart’s CEO Michael Duke, who is visiting India, went to several local stores and malls in Mumbai with a team of executives. The team visited Inorbit Mall, Big Bazaar, Spencers, Crossword and HyperCity, in an effort to understand how the Indian market functions in its varied complexities and nuances. He told reporters that he had come to India “to see how the market works” and added that the Indian market was a very exciting spaces, thanks to the consumers. While there were no protests in Mumbai, in the capital city demonstrators protested against the company and its intentions to open stores in India.

Source: The Economic Times

Reliance Retail to increase number of stores in Andhra Pradesh

Friday, March 02, 2007

Reliance Retail started its Reliance Fresh retail venture in Hyderabad in December and announced that it will expanding its business in Andhra Pradesh, increasing its stores with four new stores making the total number of stores in the city 25. The company opened stores in several tier II cities such as Vijaywada, Vishakapatnam and Guntur last month.
With these new stores, Reliance Retail will have a total of 63 outlets in the country, with 35 stores in Andhra Pradesh, 9 in the NCR area, 7 in Jaipur and 12 in Chennai. The company has also been busy creating backward supply chains and had tied up with farmers in various parts of the country for supply of produce.

Source: The Economic Times

Bharti-Wal-Mart might use different brands

Wednesday, March 07, 2007

Bharti Enterprises’ highly anticipated retail launch with Wal-Mart is likely to use three different brand names for operations in India. The cash-and-carry venture will carry the Bharti and Wal-Mart name while the Bharti operated supermarkets and franchise stores will have two different identities and brand names. The company is likely to open its first stores in early 2008, as opposed to its earlier time frame of September 2007.

Source: The Economic Times

Reliance Retail plans to focus on large format stores

Friday, March 02, 2007

Reliance Retail is looking for land in the Chennai area to set up its large format stores. The company is also looking for suitable locations in other locations such as Madurai and Coimbatore where it will be opening Reliance Fresh stores. There are more than a dozen stores in the Chennai area, which receive over 12,000 visitors every day.
Reliance has set up 10 collection centers for grading and processing fruits and vegetables. M. Balachandran, Chief Mentor for Reliance Retail, dismissed claims that the company would put local fruit and vegetable vendors out of the market, stating that their stores have a turnover of Rs. 120,000 per day, while the total retail market for fruits and vegetables for Chennai was for Rs. 180 million a day. He added that the Reliance Fresh stores are only a test project to understand the market and the main focus of the company will be large format stores.

Source: The Hindu Business Line

General Trends & Information

Big retail likely to undermine known brands

Thursday, February 15, 2007

Industry analyst and president of IMRB International, Thomas Puliyel writes about how the entry of large retail companies will change the way Indian consumer make purchasing decisions. Currently, consumers are opening their wallets like never before, mostly putting purchases on credit cards, but over time it is likely that consumers will become more conscious of the power they have to decide between these stores and medium sized newer entrants.

Source: The Economic Times

Private labels key to profitability

Friday, February 16, 2007

Retail chains are increasingly relying on private labels to catch the gaps in their product mix and targeting specific needs of consumers. Pantaloons, Westside, Ebony and Shoppers’ Stop are all increasing their range of private labels to improve their profit margins as well as increase average bill size. According to Govind Shrikhande, CEO of Shoppers’ Stop, “Today, the offering of private labels is not about price. The private label brands are filling the missing gap in terms of both range and quality. Private labels are more about targeting specific merchandise for youth and mature customers.”
Categories such as women’s luggage, accessories, corporate clothing, gym and yoga wear etc are some of the segments that retailers are targeting. While retailers are still pricing their private labels are a lower level, the emphasis is no longer on saving costs but on developing a specialized portfolio.

Source: The Economic Times

Mandis lose out but farmers are the winners

Wednesday, February 21, 2007

With organized retailers such as Reliance and ITC bulk produce in bulk directly from farmers, the old-fashioned fruit and vegetable markets or mandis are the losers. Unfortunately, the result of lower supplies at the mandis has resulted in a sharp increase in prices there. Organized retail is also squeezing out the middleman so that they can offer lower prices and increase their efficiency by having fewer intermediaries.

Asia’s largest fruit and vegetable mandi, Azadpur mandi in Delhi has already seen a drop of 37% during the period of January 1 and February 18, 2007. Himachal Pradesh sold roughly 40% of its 273,000 tones of apples to organized retailers and in Nashik, onion farmers are selling 5,000 tonnes directly to Global Agrisystems, a trading company. In Ratnagiri and Sindudurg areas of Maharashtra, Reliance Retail and ITC will be buying large amounts of mangoes.

The sudden rush for food and grocery retail has brought about this change in the way fruits and vegetables reach the consumer, who is paying lower prices now than before. The last two years has seen 8 new food and grocery chains start, such as HyperCity, Spinach, Nature’s Basket and Reliance Fresh being the prominent ones.

Source: The Economic Times

Malls will not harm mom-and-pop stores

Monday, February 26, 2007

Shopping malls seem to be opening on every corner, but contrary to most people’s assumptions, these retail formats are not likely to harm local mom-and-pop stores, as they too are upgrading their stores. Most kirana (mom-and-pop) stores have already begun upgrading their stores to be more professional and organized.
Last week, Reliance Retail announced its intentions of giving out franchises of its Reliance Fresh stores to certain kirana stores or taking over their stores to convert them into small supermarkets. Most retailers feel that there is enough opportunity for all formats to survive, just as long as they offer some additional or localized service that other stores do not.

Source: The Economic Times

International

France’s Auchan keen on opening in India

Monday, February 12, 2007

France’s Auchan, a $50 billion food, grocery and consumer goods retailer, is keen on opening stores in India. The company has reportedly been holding talks with Bombay Dyeing to form a joint venture for its India operations. Bombay Dyeing has reportedly also been holding talks with Carrefour, although no formal plans have come of it as yet. Due to the stringent laws on retail FDI and political instability, most foreign retailers are looking to partner with reputable business houses that have political clout. Wal-Mart reportedly selected Bharti Group over Reliance Retail for this reason and also why Carrefour’s talks with Dubai based Landmark Group did not materialize.

Source: The Economic Times

HAS keen on tying up with Reliance for retail venture in Yemen

Thursday, February 15, 2007

The Hayel Saeed Anam Group (HSA) a Yemen based company is keen on tying up with Reliance to set up a retail business. The company already has ties with Reliance in its refinery segment and is keen to extend it to retail. The HSA Group is present in sectors such as manufacturing, real estate, telecom, food products and petrochemicals, accounting for over 60% of the economy in the country.

Source: The Economic Times

Tata and Woolworths might partner for retail

Friday, February 16, 2007

The Tata Group said that they are looking ahead to when FDI rules change in the future. The company has tied up with Woolworths to set up Croma, consumer durable stores. The company is keen to tie up with Woolworths for retail, once the laws change. According to RK Krishna Kumar, Director Tata Sons, "Our relationship with Woolworths is a happy one. They have strong presence in Australia and New Zealand and if we were to consider getting into any such format, we will go with them."

Source: NDTV Profit

Wal-Mart not to use its name for retail stores?

Sunday, February 18, 2007

In an interesting development, it seems that Wal-Mart stores in India might not carry the famous ‘Wal-Mart’ name since Bharti Enterprises will be taking care of the front end retail operations and Wal-Mart focusing on back-end operations such as logistics and supply chain. A spokesperson for Wal-Mart said that branding of the front-end stores was up to Bharti to decide.

Bharti has been conducting consumer research and weighing its options on finalizing a brand name. According to sources, the US retail giant was open to the idea that its name would not feature on the stores, especially in regards to fueling further political opposition to foreign owned companies setting up shop in India.

Source: CNN-IBN

International retailers to account for 40% or retail investors

Sunday, February 25, 2007

The ICICI Property Services-Technopak Advisors white paper has some interesting figures for the retail industry. International retailers such as Wal-Mart, Tesco, Metro and Carrefour will account for 40% of the $30 billion estimated investment in the next 4-5 years in organized retail. The balance of the investment is shared by leading Indian retailers and upcoming retail companies. An estimated 94% of the $30 billion investment will be taking place in urban markets, with over 60% going to the top 25 cities of India.

As expected, food and grocery will get the maximum investment in hypermarket, cash-and-carry and supermarket formats. Besides malls, it will be high street locations that will play a major role in the apparel category. Furniture and consumer durable categories are likely to lead to specific real estate developments such as specialty stores.

Source: The Economic Times

Home Retail to expand to India and Ireland

Monday, February 26, 2007

UK’s Home Retail Group announced that it will has signed an agreement to develop the Argos brand in India via a franchising arrangement. In a separate deal, the company will be buying stake in Home Store + More, a retailer in Ireland. For its India expansion, the company has tied up with Shoppers’ Stop and HyperCITY Retail India Pvt., to set up a brand called HyperCITY-Argos, for home and housewares. The first store will be opened in Mumbai by the end of the year. Argos is one of the leading Internet retailers in the UK.

Source: The Economic Times

Carrefour talks with HDFC for retail tie-up

Tuesday, March 06, 2007

French retailer Carrefour is reportedly in talks with the HDFC Group to tie up for its retail venture, which is likely to happen with one of the private equity arms of the company. While both companies refused to divulge any details, industry analysts say that the tie-up would have to include a third party as RBI regulations do not permit HDFC or HDFC Bank to enter into retailing as the FDI restrictions do not permit Carrefour to operate stores on its own in the country.
It is possible that HDFC might float a holding company such as a PE fund that would tie up with a third party to allow it to work with Carrefour in India. The French retailer will be handling all the back-end wholesale operations and has been interested in HDFC due to real estate considerations.

Source: The Economic Times

Unique Formats

Dollar store boom in India

Monday, February 12, 2007

Dollar stores are booming in India, with consumers flocking to stores to buy items such as branded food, healthcare products and glassware. Despite their names, these stores sell products for Rs. 99 ($2) but the names have stuck. Most products are bought at wholesale prices abroad and sold at a fixed Rs. 99 in India. Several US based companies such as Dollar General, Dollar King, 99 Cents and Family Dollar are making plans to come to India. According to Shuchranshu Pani, president, retail services or TrammellCrow Meghraj, “India is a price-sensitive market. Customers will be delighted to buy international products for Rs. 99. Hence, master franchisees for retailers abroad are bound to register high sales.”

Source: Financial Express

DCM to increase its agri shops

Saturday, February 17, 2007

DCM Shriram Consolidated (DSCL) announced that it was planning a massive expansion of its agriculture retailing stores, Hariyali Kisaan Bazaars, adding 250 stores by the end of the year with an investment of Rs. 5 billion. The company currently has 54 outlets in the states of Uttar Pradesh, Uttranchal, Punjab, Haryana and Rajasthan. DCM will now be opening stores in Madhya Pradesh and Andhra Pradesh in the next six months and in Karnataka, Tamil Nadu and Maharashtra after that.

Source: Business Standard

Reliance to offer car servicing

Sunday, February 25, 2007

Reliance is planning to start offering servicing for automobiles at its hypermarkets and supermarkets. The company has been in advance stages of talks with Corghi SpA, although a Reliance spokesperson did not comment on the plan. Corghi is a leading manufacturer of tyre changers, wheel balancers, wheel aligners, lifting and testing equipment.

Source: The Economic Times

DSCL plans to tie up with retailers

Monday, February 26, 2007

DCM Shriram Consolidated Ltd is planning tying up with several retailers to source fruits and vegetables. The company has already sourcing produce to Food Bazaar, Subhiksha and Spencer, and is interested in tying up with additional retailers. According to Ajay S Shriram, chairman of DSCL, “We are working at strengthening the supply chain so as to achieve scale in this segment.” The company has set up a warehouse in Kota, Rajasthan.
The company sees sourcing and supplying produce to retailing stores as an extension of its work in its rural retail initiative, Hariyali Kisaan Bazaar, where the company provides a meeting and learning ground for farmers and a place for them to purchase agricultural goods and services.

Source: The Economic Times

Strategy

Retailers add finances to their store services

Wednesday, February 14, 2007

Several retailers are adding financial services to their stores in an effort to reach newer customers. The Future Group will be launching Money Bazaar in the next two months with 400-500 stores initially and have set a target of Rs. 40,000-50,000 for the next five years. Sameer Sain, CEO of Future Capital said it would be “…a Big Bazaar of financial products, with the outlets selling consumer credit including mortgage, insurance and mutual funds.”

The company has not yet decided what format Money Bazaar will take, from either standalone or kiosk form. The company will also be launching an online portal, moneybazaar.com in a year. Besides mainstream lending, the company is also exploring micro financing to reach out to the poorer sections of society.

Mukesh Ambani’s Reliance Retail is also planning to offer automobile and consumer loans to customers, in an effort to be a one-stop shop. Bharti Enterprises is also considering the micro finance segment as a method to support its supply chain for its retail stores. Smaller retailers such as Subhiksha and Spinach are also planning to sell financial products such as housing loans and credit cards.

Source: The Economic Times

Kirana stores keen on brands too

Wednesday, February 21, 2007

The Indian Institute of Packaging is making a cluster branding strategy that would help kirana storeowners compete effectively with large format organized retailers like Big Bazaar and Reliance Retail. The chairman of IIP, BS Kampani said that the institute was “…evaluating an alternative model for kirana shops” that would benefit both customers as well as shop owners.
By clubbing neighborhood kirana stores under a single brand, they could sell packaged rice, pulses and other items under a brand name. Packaging for such an initiative could be taken care of at a minimal cost. Customers would get some sense of quality assurance by purchasing a “branded” product. So far, the institute has already contacted 800 such stores in Mumbai and more than 250 in Ahmedabad.

Source: Business Standard

Reliance hoping to convert local kirana stores into its own stores

Friday, February 23, 2007

Reliance Retail is planning to take local kirana stores and make them their own in a new initiative that combines kirana with organized retail. While the concept is not new, with Hindustan Lever Ltd having already launched the ‘Super Value’ stores, by helping the stores in redoing the stores, it has not made a very strong impact as yet.
Reliance Retail is now inviting small retailers and individuals to become franchises for their store. According to a senior Reliance executive, “Reliance will revamp these outlets. But, they will be run by the small retailers on a revenue sharing model.” The company will be encouraging people who have strategically located land and would like to become a franchisee for the company.

Source: The Economic Times

Apparel & Footwear

Max Retail readies for major expansion to tier III cities

Monday, February 19, 2007

The Landmark Group’s Indian division, Lifestyle International announced that it will be making major expansion moves for its value retail chain, Max and will be targeting tier III cities. The Landmark Group runs the Lifestyle retail chain, an exclusive department store format chain; Max, a hypermarket value retail chain; and also has several international brands such as Bossini and Kappa.
New stores will be opening using the franchisee model in cities such as Kozhikode, Mysore, Hubli, Manipal, Rajkot, Nasik, Vashi, Thane and many others. Stores will be around 22,000 sq ft in size with each store receiving a Rs. 50 million investment. Max’s company owned stores will be located in tier I and tier II cities. At present there are 6 Max stores, with 65% of its revenues coming from apparels and the remaining 35% from footwear and accessories.

Source: Business Standard

Nike targeting sales of $1 billion for next five years

Tuesday, February 20, 2007

Nike announced it was targeting sales of $1 billion in the country in the next five years. At an investor meet, Nike executives said that although sales had grown by 40% in 2006 in India, the brand was still trailing behind Reebok and Adidas in the country. The bulk of the growth was related to cricket initiatives and branding. The company looks to India as becoming one of the new billion dollar markets along with Russia and Brazil.
Nike will be focusing on building its brand around premier customer experiences, product innovation and increasing its retail presence to newer areas. The company has also been focusing on making its marketing and promotional strategy local to India, by winning a 5-year BCCI sponsorship for the Indian cricket team.

Source: Business Standard

Puma launches denim line

Wednesday, February 28, 2007

German sports brand Puma and its Indian division Puma Sports India, launched a line of jeanswear in India. The Puma-Evisu line is in collaboration with the Evisu designer denim brand and will offer a denim wear for both men and women. Besides being a sports brand, Puma has been expanding its product offerings to include several lifestyle and apparel items such as trousers, cargos and t-shirts. The company is one of the newer entrants to the Indian market, having started in 2006, but aims to become a desirable sports-lifestyle brand in the Indian market. There are 8 exclusive Puma stores at present, in Chennai, Bangalore, Delhi and Mumbai, and will be setting up stores in Kolkata and other cities in the North-east by the end of 2007.

Source: Business Standard

Support Industries

Retail boom pushing up prices of warehouses

Tuesday, February 27, 2007

The retail boom in India is not just pushing up prices of malls and high street retail spaces, but also for warehouses, which are seen as a rising business opportunity, since all international retail firms that are planning to come to India are interested in doing both retail as well as wholesale trade. Several realty firms such as DLF, Unitech, Ansals, TDI, Omaxe etc have already started talking to retail chains for this purpose.

As the industry gets more organized and systemized, it is estimated that warehouses and cold storages of close to 5 million sq ft will be needed by the year 2010. According to Kamal Taneja, MD of TDI, “Warehousing and logistics are clearly the backbone for the growth of organised retail in the country and will throw up huge business opportunities, particularly in tier II and III cities. Owing to very limited space in larger cities, retailers will be able to keep the lowest possible stock on shelf.”

Industry sources report that prior to even the signing of the Bharti-Wal-Mart deal, representatives of the companies have been scouting for warehouse locations. While Tesco and Carrefour have not made definite plans for their front end retail, they are both planning to enter the Indian market via the cash-and-carry route, since it is the only way to bring equity when they enter the market. When the FDI restrictions are eased, these retailers will be in a position to easily switch to regular retail formats such as hypermarkets and supermarkets, having already taken care of supply chains and logistical issues.

Source: The Economic Times

Retail sector to set off boom in realty

Wednesday, March 07, 2007

Organized retail will be the trigger behind the rising demand for real estate, according to a study by ICICI Property Service and Technopak. The survey estimates that India’s retail sector will grow from its current value of US $330 billion to US $500 billion by the year 2011, which will create the need for an additional 500 million sq ft of retail space.

There are only 137 malls in the country at present, which the study estimates that it can actually support 1,000 malls and shopping centers in more than 500 towns and cities. There is likely to be investment of over US $30 billion in the next 4-5 years from major companies such as Reliance, Aditya Birla Group, Metro, Carrefour, Auchan, Wal-Mart and Tesco.

Most of the investment will take place in the top 25 cities. Hypermarkets and supermarkets will be the format of choice, especially those that are food focused. An estimated 4.5 million jobs will be created in direct employment in the organized retail industry in the next five years.

Source: DNA Money

HR News

Countrywide’s CEO joins Reliance Retail

Tuesday, February 20, 2007

Vasu Ramaswami, CEO of Countrywide Financial Corporation (CFC) has left to join Reliance Retail, where he will head operations and customer service areas for the finance division. He has been with CFC in February 2005 and led the company to grow from 450 to 1000 employees n India.

Source: The Economic Times

HR chief at Aditya Birla Retail might be leaving

Thursday, February 22, 2007

Vijay Kashyap, the HR head of Aditya Birla’s Retail division is said to be leaving before even the first store is opened and barely completing 6 months into his job. Before joining Aditya Birla Retail he was VP or HR at Shoppers’ Stop. While the official statement from the company is that he has not left his job at the company, and has only accompanied his wife to Australia who has moved there. He will also be moving there eventually, although when exactly is not known.

Source: The Economic Times

Wal-Mart faces HR upheaval at the top level

Friday, February 23, 2007

Wal-Mart is facing difficulty after difficulty in setting up stores in India, this time concerning the HR division. Senior executive Randy Guttery has left due to differences in opinion with Wal-Mart CEO designate for India, Raj Jain. Also leaving the company is Lance Retig, who has reportedly returned to America after completing his assignment with the company. Industry sources report that Randy Guttery might be joining Metro, the German cash-and-carry company, whose CEO Harsh Bahadur left to join Reliance Retail’s hypermarket division.

Source: The Economic Times

Top retail executives leaving wholesale

Monday, February 26, 2007

There’s another major upheaval going on at several retail firms as executives leave before or get poached, before even their retail operations have got off the ground. Some of the executives who have left companies include COO of Pantaloon Ved Prakash Arya, HR Head of AVB Retail Vijay Kashyap, who is relocating to Australia, a senior VP at Subhiksha Abhijit Sanyal and V Nagaprasad, both of whom will be joining Reliance Retail.
At Wal-Mart, Randy Guttery, cash-and-carry operations head and Lance Retig, senior executive left the company last week. Other high profile resignations include Rajeev Karwal who left Reliance Retail several months ago and G Shankar, CEO of Lifestyle International left late last year.

Source: The Economic Times

Food Bazaar merchandising head resigns to join AV Birla Group’

Tuesday, March 06, 2007

Shiv Murthy, the head of merchandising of Food Bazaar, part of the Pantaloon Group, has put in his papers to join the Aditya Birla Group’s retail initiative as COO of its supermarket venture. The AVB Group had hired Russell Berman to head its hypermarket venture from Carrefour and now has heads for both its supermarket and hypermarket divisions in place.

This is the second high profile resignation at Pantaloon in recent weeks, with Ved Prakash Arya, COO of Pantaloon Retail who left recently. Interestingly, Mr. Murthy was likely to become the next Food Bazaar President, while the current Food Bazaar President Damodar Mall was expected to become COO of Pantaloon Retail.

Other high profile resignations and appointments include Vijay Kashyap, HR head of Aditya Birla Retail who has put in his papers and Martin Dlouhy who has been appointed as Metro Cash & Carry’s new MD, after the departure of former MD Harsh Bahadur to Reliance Retail.

Source: The Economic Times