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Retail News October 2008 |
Reliance may merge retail arms to beat slowdown
Faced with a difficult retail environment and on the lookout for a winning formula, Reliance Industries is mulling the merger of its different formats to make its retail arm more efficient.
The company is considering merging the management of hypermarkets (Reliance Hypermart), supermarkets (Reliance Super) and convenience formats (Reliance Fresh) just a year after these formats started as separate profit centres , according to people familiar with the development. The idea of the merger is still at a conceptual stage and the company hasn’t taken a final decision.
A Reliance spokesperson denied that the company was proposing any move to merge its three formats. Reliance Retail, which operates around 650 stores under different formats, has already taken several measures to cut operational cost, ranging from rationalising manpower to cutting office expenses. It has also reduced by almost one-third the size of its hypermarket in Ahmedabad.
The merger of three formats will potentially kick in economies of scale and help the company rationalise its human resources, thereby bringing down overall recurring expenditure. Sources said the company is close to taking the first step in this regard by merging the respective IT and HR functions of Reliance Super and Reliance Hyper.
Unlike other retailers, which have been more cost-conscious, Reliance is said to have been more extravagant and possibly because of that, sources say, it may be forced to take stricter measures. The company has had more employees than required on its payrolls, augmenting its costs. However, Reliance is also more capable of withstanding difficulties.
October 6, 2008
Source: Economic Times
Big Bazaar footprint explodes all around
Kishore Biyani does not subscribe to the view of a global meltdown. His Future Group's strategy is paying off in numbers and his outlets seem to have more and more goods on offer. In effect, he is increasing the real estate that has been leased out to his company for more and more retail outlets.
One wonders whether people are buying more things if they enter a pretty looking showroom or a mall such as Pantaloons or Big Bazaar. To put it in John Donne's language , "Wasn't the customer weaned till then?" For one, the Future Group's retail chain Big Bazaar is itself is planning to have 300 hypermarkets in the country by 2010-11.
The company may also increase its annual turnover to Rs 13,000 crore by 2010-11 , up from Rs 3,600 crore last fiscal on the back of its expansion. They had reported begun with their first store in October 2001 and till date have crossed the 100-store mark. This was capped with three stores that opened recently in Pune, Cuttack and Delhi. The company's top brass plans to increase the number of stores to 300 by end of the 2010-11 fiscal.
The company would be looking at both the metros and Tier I cities, besides Tier II and smaller cities. The strategy seems to be perfectly on track as the Big Bazaar hypermarkets had a footfall of 11 crore last fiscal and the company is aiming for an increase in the numbers up to 14 crore this year. The average size of a Big Bazaar hypermarket is 30,000 sq ft to one lakh sq ft.
October 5, 2008
Source: Economic Times
Future Group shelves plan to spin off Big Bazaar
Kishore Biyani has dropped plans to hive off its hypermarket division Big Bazaar into a separate company. The company had said earlier they would be hiving off Big Bazaar after it emerged as the largest business unit of Pantaloon Retail, the flagship of Future Group.
Mr Biyani was quoted in the past as saying it would be easier to grow Big Bazaar after being spun off into a separate company and that they might opt for an IPO to raise funds for expanding the division subsequently.
However, according to Big Bazaar CEO Rajan Malhotra, they now feel they can derive better synergies by continuing to be part of Pantaloon Retail. “By hiving it off into a separate company, we would have to set up a lot of new functions for Big Bazaar like separate HR, marketing and supply chain divisions. At this time we feel it is better to have overlapping functions at the back end,” he said.
The development comes in the wake of economic slowdown with retailers across the board cutting costs to survive weakening consumer sentiments.
Although Mr Malhotra does not see lesser demand due to weaker consumer sentiments in the months to come, according to him money will get tighter and companies will have to bring about more efficiencies and ensure that capital is deployed only where necessary.
At present, Big Bazaar operates three structures with the smaller 15,000-20,000 sq ft Big Bazaar Express outlets positioned as neighborhood stores, the 50,000 sq ft Big Bazaar hypermarkets and the bigger Big Bazaar Supercentres. The Supercentres resemble malls complete with foodcourts, salons and the group’s home products format Home Town Bazaar.
October 3, 2008
Source: Economic Times
Big Bazaar plans 300 stores by 2010-11
Kishore Biyani-promoted Future Group's retail chain Big Bazaar is planning to have 300 hypermarkets in the country by 2010-11. The company is also mulling to increase its annual turnover to Rs 13,000 crore by 2010-11, up from Rs 3,600 crore last fiscal on the back of its expansion.
"We started with our first store in October 2001 and have now crossed the hundred mark with three stores opened today in Pune, Cuttack and Delhi. Our plan is to increase the number of our stores to 300 by end of the 2010-11 fiscal," Big Bazaar Chief Executive Officer Rajan Malhotra said. He said the company would have another 35 odd stores by end of its fiscal in June 2009 to take the total number to 135.
"We are targeting a turnover of Rs 5,000 crore this year and have plans for reaching a figure of Rs 13,000 crore by 2010-11 fiscal," Malhotra said. He added that the company would be looking at both the metros and Tier I cities, besides Tier II and smaller cities, for the expansion.
The Big Bazaar hypermarkets had a footfall of 11 crore last fiscal and the company is aiming for an increase in the numbers up to 14 crore this year. The size of its hypermarkets on average is 30,000 sq ft to one lakh sq ft.
September 30, 2008
Source: Economic Times
Metro AG plans to double its presence in India
Germany's Metro AG aims to double the number of its cash-and-carry centres in India, a senior official said on Thursday, as global rivals draw up their plans to tap the fast-growing economy.
Metro, Germany's biggest retailer, plans to invest $120 million in at least four new wholesale cash-and-carry centres in the eastern state of West Bengal, Henry Birr, the firm's vice president of international affairs, said at a news conference. It has four other centres in India, which only allows foreign multiple-brand retailers to operate via wholesale or franchise and licence arrangements.
"We see the same growth potential in India as in China," Birr said. In West Bengal, the company was waiting for the state to issue licences so it can deal in agricultural produce that it can source directly from farmers, Birr said. Metro, one of the earliest entrants in the sector in India, has been measured in its approach.
September 25, 2008
Source: Economic Times
Arvind's retail chain in pact with US firm
Arvind Ltd's retail chain Megamart has entered into a licensing pact with U.S.-based Cherokee Inc, under which the Indian firm will market Cherokee's family lifestyle brand across the country, officials said.
"Arvind has been a specialist in men's brand in India, through this agreement we are planning to tap the women and children's apparel market in a big way," Megamart's chief operating officer K.E. Venkatachalapathy said at a press meet.
Megamart, which sells multiple brands at discount prices, will sell the products at a variety of prices points across Tier 1, 2 and 3 cities, he added. Megamart is expected to contribute about 3 billion rupees in sales, or roughly 15 percent of Arvind's total turnover, in 2008/09, Venkatachalapathy said.
Cherokee will occupy 20-25 percent area of a typical small-format Megamart store, which has an average area of around 3,000 square feet. For its large-format stores which occupies between 40,000 to 60,000 square feet in area, Cherokee will take up about 5 percent of space, Venkatachalapathy said.
Megamart currently has 110 stores across India, which the company plans to raise to around 250 by March 2010, he said. "We hope to hit 500 stores in the next 4 years," he added. Arvind is investing an additional 3 bn rupees on store expansion over the next three years, Suresh J, Chief Executive Officer of Arvind's Brands and Retail Division said.
It has already spent 1 bn on its retail expansion. The entire amount would be raised through internal accruals. Arvind had seen a softening in property rentals in the past three months and was expecting a further drop in prices, he said.
"Being a value for money model we do not go to any developer who sells beyond 35 rupees a square feet because if the rentals are higher than that we may not be able to give full value to the consumers," Suresh said.
September 25, 2008
Source: Economic Times
Marks & Spencer Reliance to open its first store next January
Marks & Spencer Reliance would be rolling out its first store in Mumbai in January 2009, a top company official said. "We are opening our first Marks & Spencer Reliance store in Mumbai by January next year. The store, spread over an area of 18,000 sq ft, would be set up at an investment of half-a-million sterling," Marks & Spencer CEO (India), Mark Ashman, said on Thursday.
Marks & Spencer Reliance is the joint venture between the Mukesh Ambani-promoted Reliance Retail and the British department store chain, Marks & Spencer group. The second and the third store would be opened by September 2009 and April 2010, respectively, in metros, he said.
The first store would have around 40 employees and would offer men's, women's and children's garments besides various household items, Ashman said. The company has plans to open 50 new large format stores across the country in the next five years. These stores would be spread over an area of 15,000 - 20,000 sq ft.
Currently, the company has identified 20 locations in various parts of the country. "We have zeroed in on 20 odd locations which includes Delhi, Mumbai, Bangalore, Ludhiana, Chandigarh, Pune, Chennai, Hyderabad, Kolkata and Jaipur," he said.
"We will open around five stores in Mumbai, five in Delhi, three in Bangalore, one or two stores in Chennai, Hyderabad, Kolkata, Jaipur, Pune, Chandigarh and Ludhiana," Ashman said. All the stores would be on a stand-alone basis, he said.
Asked about the prevailing high property rates, Ashman said that higher rentals were not an issue for the company, adding, "we don't see high rentals to be a challenge for us as today the rentals have become much more sensible than before."
September 18, 2008
Source: Economic Times
Landmark planning Rs 550 cr spread
Undeterred by soaring rentals and inflation gnawing at profit margins, retailers are entering the expansion gambit with an élan.
Dubai-based retail major Landmark group for one is planning to invest Rs 550 crore into its twin ventures - Max Retail and Max Hypermarkets. Landmark group is eyeing a bigger slice of the retail pie by 2010-11. The move will take up the retail major’s total store count to 100 outlets.
Max Retail, the group’s lifestyle arm with a presence in eight cities, will be branching out to tier-I and tier-II cities with 12 stores by March 2009. The company plans to pump in Rs 350 crore for expansion.
Vasanth Kumar, executive director - Max Retail, said the company would locate its store in malls instead of high streets to cut costs. “Each store will be spread over an area of 15,000 sq ft and most of the stores will come up in malls as high streets are not viable in terms of costs,” Kumar said. The outlets will house apparel, footwear and home furnishings.
The company currently has 15 stores covering 2.25 lakh sq ft of retail space across Bangalore, Delhi, Hyderabad, Mumbai, Ahmedabad, Indore and Lucknow. It will add another 11.05 lakh sq ft after its expansion comes through.
“We aim to have 10-12 stores in each metro,” Kumar said. The company is also planning to open new stores in Chennai by the year-end and in Kolkata by October 2009.
The company will invest Rs 200 crore by 2009 to expand its Max Hypermarkets format. It plans to set up five stores, including hypermarkets and supermarkets. The stores will come up in Hyderabad, Chennai and Bangalore. The company has rolled out two hypermarkets in Bangalore in the last 10 months.
Viney Singh, managing director - Max Hypermarkets, said the company would cover Tamil Nadu, Andhra Pradesh and Karnataka next year.
September 9, 2008
Source: DNA
Subhiksha to go the FII way to raise $50-$100 million
Close on the heels of Wipro chairman Azim Premji buying a 10% stake in it for Rs 230 crore, Subhiskha Trading Services is now gearing up to dilute stake in the company to raise money to the tune of $50 to $100 million.
According to highly placed sources, the company has already finalised on the FIIs who would be investing in it. The money raised from the investments of the UK and US-based FIIs would be used to fund the low-cost retailer’s consumer durables foray.
The sources told ET Online that the proposed investment which would be announced in the next 10 to 15 days would be 60% more than what Premji had paid to take a 10 per cent stake in the company. The investments, the sources said will take the valuation of the company to Rs 3800 crores, much higher than the speculated Rs 2000 crore.
With plans to list itself, the company believes that Azim Premji acquiring stake in it would lead to more investors showing interest in the retailer, “Now that Premji has bought a stake in us, many other investors would take confidence in us and would not hesitate to buy our shares once we list ourselves in next two months in the name of Subhiksha India limited,” said Subhiksha promoter R Subramanian.
Subramanian infact, also said that they would not mind acquiring other companies who are put in block in the next two years or so.
September 9, 2008
Source: Economic Times
Subhiksha to foray into durables; denies reports of stake sale
Supermarket chain Subhiksha Retail is foraying into consumer durables retail segment, with plans to invest Rs 600 crore for opening 150 stores by June 2009. The company, however, denied reports of any plan by its promoters to exit the business or go for dilution of stake. "We are planning to diversify our business and enter the consumer durables retail market. Our plan is to set up 150 specialised consumer durables stores across the country with an investment of Rs 600 crore by June 2009," Subhiksha Trading Services Managing Director R Subramanian told PTI.
He said the consumer durables stores would have a total space of 20 lakh square feet and would be located across 65 cities, including metros and Tier I and II cities. "These stores would also come up under the existing brand name of Subhiksha," he added. The company has presently 1,580 supermarket stores under the Subhiksha Retail brand, in more than 100 cities. "We are also increasing the number of our general supermarkets to 2,200 by end of the current fiscal. The company would be investing around Rs 400 crore on the additional 620 odd supermarkets," Subramanian said.
He said the new consumer durables stores would source products from top global brands in various segments including televisions, air-conditioners, computers, fridges and so on. He, however, refused to disclose the targeted turnover from the consumer durables segment.
September 8, 2008
Source: Economic Times
Big Bazaar to have 112 stores by November
Big Bazaar, the flagship retail chain of the Kishore Biyani Pantaloon Group, is looking to beef up national presence to around 112 stores by November 2008.
Some of the cities where the store count is set to go up are Mysore, Pune, Cuttack, Kolkata, Chandigarh, Agra, Faridabad, Surat, Nashik, Mumbai, Delhi and Solapur. Investment in the expansion of the chain of Big Bazaar stores is reported to be around the Rs1,600 crore mark. Presently, Big Bazaar has around 97 outlets.
The addition of 15 stores to its chain is part of Big Bazaar's larger plans to beef up its store count to around 145 stores by June 2009. The chain's 100th store will open later this year in Cuttack.
September 6, 2008
Source: domain-b
Future to push up fashion portfolio
To shore up margins in the hypermarkets business, Kishore Biyani’s Future Group will push up the fashion portfolio in the Big Bazaar chain.
The group has recently created a sub-brand for apparel called ‘Fashion@Big Bazaar’ and plans to reposition Big Bazaar as a value lifestyle store. Long-term plans also include rollout of standalone Fashion@Big Bazaar stores across India.
The apparel business contributes around 30% to Big Bazaar’s revenue with plans to increase this to 40% in two years. “The margin contribution from apparel is much more than food and grocery. The decision to focus on fashion will help us increase our margins by 4-5%,” Fashion@Big Bazaar chief Amit Kumar said.
September 3, 2008
Source: Economic Times
Bharti happy to go slow in great Indian retail story
Bharti Retail, which has rolled out only seven stores so far, quite small compared to rivals’ pace and general expectations, says it’s not chasing numbers and will continue to move slow unless it has understood the dynamics of retail. The company, which formed a joint venture with Wal-Mart (Bhart-Wal-Mart) amid much fanfare to be able to provide a strong backend to its retail stores, now says its growth is not dependent on Bhart-Wal-Mart’s cash and carry venture.
Compared to Reliance’s one-store-a-day approach, Bharti’s pace has been almost one-store-a-month. It has opened seven stores in six months, as against around 700 stores of Reliance in two years.
“We plan to have pan India presence, but are in no hurry to roll out stores everywhere. Our aim is to understand the dynamics of retail and evolve the right model. We are not here to prove anything in a year or two, but looking at 5-10-year period,” says Bharti Retail president and COO Vinod Sawhny. He didn’t give any specific number of stores the company planned to open in a year, but said “we are being conservative”.
“It’s easiest to tie-up with logistics and warehouse firms and roll out a number of stores, but that is not what we are looking at. We are trying to evolve a model that will serve masses,” Mr Sawhny said. He didn’t clarify how long it might take Bharti to evolve a “massification” model.
Bharti stores today source around 40% of supplies from a distribution centre set up by Bharti-Wal-Mart. Bharti stores—2,500 sqft to 4,000 sqft in size—sport Easy Day’ brand name and sell food and grocery in neighbourhood store format.
It has also introduced a private label ‘Great Value’ for its grocery items. The company would continue to focus on neighbourhood stores, but plans to launch medium (30,000-40,000 sqft) and hyper (70,000-80,000 sqft) formats later. Bharti is also looking at inorganic route to expand. “We are open to acquisition, but nothing significant has materialised,” Mr Sawhny said.
September 3, 2008
Source: Economic Times
'Organised, unorganised retailers can co-exist in India'
India's organised and unorganised retail sectors can co-exist and thrive, says a top government official, who foresees bright prospects for the retail industry in the country. "It is quite possible for both the organised and unorganised sector retailers to co-exist and flourish," said Rakesh Kacker, additional secretary, Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution.
"India has a huge potential for growth in retailing sector. It is picking up at a reasonable pace. The organised and unorganised retail sectors will go from strength to strength together," Kacker told on the sidelines of an international retail summit here.
An Associated Chamber of Commerce and Industry of India(Assocham)-KPMG study has pegged India's total retail market at $353 bn in 2008, which it says is projected to grow at eight per cent annually to touch $416 bn by 2010.
"The organised retail, which currently accounts for seven percent of the retail market, is projected to grow at a much faster pace of 40 per cent per annum to touch $51 bn by 2010," said the study of Assocham, an industry lobby. The unorganised retail sector in India has been the traditional employer to a large number of people across the country. A retail outlet in an unorganised sector feeds a household of six to seven members.
Agreed Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT), a city-headquartered body of India's nearly 5,000 trader associations. "A retail outlet in the unorganised sector takes care of minimum 10 persons. It is the lifeline of scores of people in semi-urban and urban India, while doing yeoman's service in rural areas," Khandelwal told IANS.
CAIT has decided to begin at least 500 retail schools to train retailers in the unorganised sector to meet challenges emanating from the entry of big players into the retail sector. According to Khandelwal, India has nearly 50 mn traditional or unorganised retailers, who need to be adequately trained to face the onslaught from the major retail players.
"Whatever problems the unorganised sector retailers are facing today need to be articulated and should be addressed. The government will be more than happy to work with trade bodies to ensure that dynamism in the unorganised sector remains intact," said Kacker.
The Indian retail industry has seen phenomenal growth since 2001 and has currently several key players like Future Group, Trent Ltd, RPG Enterprise, Vishal Retail Ltd, Shoppers Stop Ltd, Bata India Ltd, Provogue India Ltd, Aditya Birla Group, and Reliance Industries.
"Traditional retailers are faced with a major challenge with the entry of corporate houses into the organised retail sector. Our retail schools will equip them with adequate skills and know-how to continue to grow," added Khandelwal.
The latest edition of India Retail Report, brought out by private research firm Images F and R along with the Confederation of Indian Industry (CII) and other organisations, says the domestic retail market will touch Rs 18.1 trillion (Rs 1,810,000 crore or $402 bn) by 2010.
October 6, 2008
Source: Economic Times
Panwala, the 5th P of marketing
FMCG companies leverage the spread and consumer-connect of panwalas to sell a growing array of products.
Ghanshyam can be seen all over the town in search of blood for his son who is in hospital. Just when doctors are all set to lose hope, Chhajju panwala enters and gives his blood. The boy recovers and Ghanshyam is eternally indebted to the panwala. So much so, he gives up his favourite brand of mint for whatever Chhajju recommends.
Perfetti Van Melle’s new Chlormint ad ends with a message against irrational Ghanshyam-like behaviour — it’s the consumer who needs to choose the brand he wants to experience and not the panwala. Unless, of course, he has saved your son’s life and you know of no other way to repay his debt.
What the ad recognises is how the panwala is capable of influencing consumer choice and improve sale of one brand over its rivals. The panwala, in a growing category of products, has become the 5th P of marketing after product, price, place and promotion.
Prianka Sihota, brand leader, McCann Ericsson India, the creative agency behind the ad, says the panwala community has always been at the centre of of the Perfetti business plan in the country. “The current campaign for Chlormint draws its essence from the insight that consumers often do not exercise their right to choice of purchase and under a retailer’s influence take whatever is given to them,” she says.
Fast-moving consumer goods companies ( FMCG) seem to have recognised the advantages the panwalas offer. Post the sachet revolution in India, the panwala has diversified his product range from pan and cigarettes to bottled water to shampoo sachets, potato wafers and other snack food items, aerated beverages, candies and at times even pens and condoms.
The biggest advantage they offer to any marketing-led company is their spread across the country. Pan has been a national addiction for long and panwalas can be found in pucca as well as ramshackle structures in every nook and cranny of the country.
Industry estimates suggest there are 14 million panwalas currently in business. Little surprise then, ITC leveraged its network of panwalas to good effect when it diversified into candies and snack food.
FMCG companies say the USP of panwalas is their location. A panwala is not very difficult to spot, which makes him a convenient point of purchase for impulse-purchases right from candy and biscuits to beverages. “There is no denying that a panwala has a significant role to play in the sale of confectionery,” says Perfetti Van Melle India CEO Sameer Suneja.
“Indians spend a lot of time on roads, parking lots or public transport transits. Panwalas are usually located near these spots. Hence, they make for great sampling points where one can pick up smaller convenient snack packs or even buy water,” says Mudra Max President CD Mitra.
Brand specialist Harish Bijoor has another interesting take on the growing importance of the panwala in the marketing plans of FMCG companies. “A panwala sits atop a perch dispensing products. That itself indicates that he is in a position to hand down some knowledge to his customers and because of the one-on-one interaction he has with a host of people, they listen to him. That’s his advantage over any modern retailer.”
There’s more. A growing number of FMCG companies now use the panwala network to test-market their products. There are some serious advantages that a panwala offers over modern retail stores. As a pan shop is small in size, products normally get a good display and better service since only small amounts are stored at these units.
The verdict is clear: Even as modern retail stores mushroom all over the country, the traditional panwala’s importance has not diminished in any way and he continues to re-invent himself.
“Marketing people need to work with what I call the ‘panwala paradigm’. Look at the spectrum of products he stocks right from grocery items to now even recharge coupons for your phone. Tomorrow, he could double as a bill collector or even an insurance agent,” says Bijoor. Ignore the panwala at your own peril.
October 6, 2008
Source: Business Standard
Retail sets store by cooling realty prices
Even as the real-estate industry is evolving strategies to grapple with the slowdown in the economy, dropping inflows from non-resident Indians and the resultant cooling off, it is the retail sector that waits to make hay while the sun shines.
The retail sector, which began expanding in the last three-four years, suddenly came up against a roadblock — skyrocketing real-estate prices. The steep rise in realty prices in the major metros has made retail companies work overtime to negotiate and renegotiate with property developers to get space at a ‘competitive’ price.
“The cool-off effect has begun to show results. Developers are now showing willingness to renegotiate. As we have decided to expand through both organic and inorganic (franchisee) model, this will help us,” says Mr Ashok Mayya, Chief Executive Officer of Cornerstone. Cornerstone, a cloth retail brand from ZeroStock Private Ltd backed by the promoters of MedPlus pharmacy group, believes in not keeping huge piles of stocks at the shops. Instead, it just keeps samples of the cloth range, offering a wide variety of options in the smallest possible space as opposed to the spacious formats of other brands.
Asked whether the benefits (of cooling real-estate prices) have begun trickling down, he says, “Absolutely. It makes acquisition of a store property much easier. This, in turn, will reflect in profits. We have certainly seen the change. After all, the (real-estate) prices need to get rationalised,” he says.
A study by Ernst and Young estimates the organised retail industry in the South at 4.9 per cent of the total market in the region, higher than the national average of 4.1 per cent ($11.8 billion in 2006) of the $300-billion retail industry in the country. It puts the total supply of retail space in the South at 14.1 million sq.ft by the end of 2007, representing an increase of 5 million sq.ft in the preceding three years.
Mr Shivram Murti, Chief Operating Officer of More (the retail arm of Aditya Birla Retail), feels that the benefit will be more for larger formats such as hypermarts. “With regard to the smaller formats such as supermarkets, the industry may not get any benefit. As these stores are located on high-streets or busy areas, the prices continue to be competitive. As a variety of players, such as banks and other retailers, compete for small chunks of space, the prices continue to be higher,” he explains.
The cost of rentals has become a major burden on the retailers, particularly in the organised sector, impacting their bottom lines. The retail industry for long has been arguing for a correction in the prices of commercial spaces, keeping in view the wafer-thin margins in the stiff competition. However, Mr Anjaneyulu Kakkera, Chairman of Vah Magna Retail, who founded Trinethra retail malls ( subsequently acquired by Aditya Birla Retail), feels that the sector is yet to see the impact. Anyway, the falling real-estate prices means nothing to major players, with almost 75 per cent of all their expansion already implemented. “Almost all the major players have set up their malls in all metros. They must have already entered into certain agreements with the developers. So, the present fall might not be of any help to them,” he reasons.
The retail sector, which seeks to benefit out of the cooling-off effect in real-estate prices, is itself feeling the heat of the slowdown in the economy. Mr Anand Reddy, Executive Director of PBEL property developers, says the high costs of rentals will put severe pressure on return on investments. Pointing out that the return on investments in retail globally is in the region of 8-10 per cent, he says it could be much lesser in India because of the huge rentals. Several retailers have slowed down their expansion plans, while others have significantly cut down on their advertisement spending. That, however, is a different story.
October 5, 2008
Source: Economic Times
Retailers bullish on festive sales, to open more stores
Retailers across the country are upbeat about sales prospects with the advent of the month long traditional festive season which sees millions of shoppers go on a spending spree
Companies like Kishore Biyani's Future group, Vishal Retail and Reliance Retail among others expect more Indians to spend money on a variety of consumer goods of middle-class shopping habits, including clothing, mobile phones, televisions and refrigerators among others.
A cross section of retailers that Business Standard spoke with were gung-ho on sales prospects, even as concern over slowing credit availability, higher interest rates and high prices is expected to hurt consumer demand. A key reason for the upbeat assessment is the fact that the recent pay hike and arrears for an estimated 4.6 million central government employees leaves more disposable income in their hands.
Several states are also likely to give pay hikes to their employees, even as the private sector executives are hoping to pick up their annual bonuses. Central government employees including those in the Indian Railways will receive arrears of nearly Rs 11,750 crore, in addition to their enhanced pay this month.
Unlike overseas, retail consumer spending in India is not quantified as extensively, but the nine-day Hindu festival of Navratra, along with Eid which Muslims are celebrating this Thursday, sees people buying household necessities and goods with gusto. Buying continues right through up to Diwali, which falls at the end of October. A key reason for the upbeat assessment is also the fact that this year all the key festivals fall in October, unlike last year when Navratri was in October and Diwali the month after.
Kishore Biyani's Future group has already started opening the first few of at least 12 new stores planned this month, including some dedicated to retailing electronic goods, at various locations across the country. Other retailers also have similar plans.
"We expect sales growth at 10 to 15 per cent or even higher in some categories like clothing,'' says Rakesh Biyani, chief executive, Future Retail. The group expects sales of Rs 175 crore in consumer durables this October, over double of what it did in the same period last year.
Essar Group's mobile handset retail chain is opening 100 stores during October. "I think the festive season should be fine and we have already seen 25 per cent improvement in sales after the Shraadh period got over,'' says Rajiv Agarwal, chief executive, The Mobile Store. "We expect 45 per cent growth in sales during this month,'' he adds. The Mobile Store has 1200 stores and planning to take its total tally of stores to 2,000 by 2009.
Delhi-based Vishal Retail is also increasing its presence, mainly in north India, to cash in on the festival boom. It plans a mix of company-owned and franchisee-run stores this month. The company is opening three stores at Lucknow, four at Delhi, one each in Varanasi and Rae Bareli and giving out franchisees in Ludhiana, Bakshi Nagar, Mirzapur, Fatehabad, Bharatpur and Jaipur. "We are all set to launch our new stores and increase our presence in India. Diwali is the right time,'' says Ambeek Khemka, president, Vishal Retail.
A Reliance Retail executive said the company was geared up for Diwali in a big way across its stores with special products and offers. “This is the best time of the year for sales. We are opening new stores in lifestyle and other formats during the festive season”, he added.
However, there are some who have a more conservative outlook. "With overall economic sentiment negative, it would be challenging to achieve higher sales. I expect festive season sales will be down 20 to 25 per cent this time and if retailers do not offer discounts and promotions, sales can fall 40 per cent,'' says Susil Dungarwal, a Mumbai-based retail analyst.
Adds Purnendu Kumar of business consultancy Technopak Advisors: "Given the current conditions, even if retailers do the same business as they have done last year, it would be good enough. We expect lesser corporate gifting this time and a sharp drop in sales of lifestyle goods such as laptops, jewellery etc”.
Retailers are already launching promotional schemes to woo customers. For instance, Trent, the retail arm of Tata group, is offering higher discounts on particular categories at its Star Bazar stores. Starting this Thursday, the store will offer discounts on food, extending it later to the kids category, to gifts and finally to apparel towards the end of the month.
The country’s retail sector is projected to grow to $700 billion, while organised business is expected to be 20 per cent of the total market by 2010, according to consultancy Northbridge Capital. The retail market, which is currently worth $400 billion, is growing at annual rate of 30 per cent.
October 1, 2008
Source: Business Standard
Organised retail to grow from 5 pc to 14-18% by 2015
Organised retail in India is expected to expand from the current 5 per cent of the total market to 14-18 per cent of total retail and reach the $450-billion mark in size by 2015, a report released here said.
To evolve a profitable model, however, retailers would require an approach that is distinctive from the rest of the world, the report entitled `The Great Indian Bazaar: Organised Retail Comes of Age in India' by the retail practice of McKinsey & Company, said.
While the Indian market was a high-growth one, it was characterised by small transactions, rapidly-evolving customers with unique shopping habits and whose spending across categories was different from shoppers elsewhere.
To succeed here, the report referred to five ways in which retailers could create a profitable operating model. They should integrate real estate into the business model, create an effective and scalable supply-chain and increase basket-size by shaping consumption, the report said. Retailers should, further, develop and retain talent and influence regulation to ensure healthy development of the sector and to de-risk margins, it added.
"Driving consumption across categories is essential. We need to grow the basket-size per customer," McKinsey & Company's Partner and co-leader of the retail practice, Peter Haden, said.
Retailing in India would not succeed with the `cut and paste' global formats, the report said.
September 28, 2008
Source: Economic Times
Organised retail players rethinking their strategy
Just over two-years ago, India’s largest private sector company , Reliance Industries (RIL), announced its grand entry into what remains one of the biggest, and largely unexplored markets anywhere in the world — the $350 billion Indian retail market.
RIL chairman Mukesh Ambani outlined the company’s ambitious plans to carve out a slice of this market — a Rs 25,000 crore investment by 2010 — with big and small Reliance shops across 1,500 cities, employing over a million people and an enviable logistics chain sewing up millions, from farm to fork.
Like with everything else, when Reliance pins its faith on any new idea, the world took notice and followed suit — from global retailing majors (Wal-Mart to Carrefour) and India's other big corporations — Bharti Group, Aditya Birla Group, Mahindra & Mahindra and the Tatas.
Cut to the Sept 2008. At a time when organised retailers should have been busy ramping up their operations and pouring cash to actualise that $350 billion promise, most are doing everything but that.
South India-based retail major Subhiksha is busy denying media reports of its selloff plans even as rumours of smaller retail chains looking for buyers flying thick and fast. India Inc’s heavyweights in the organised retail — Reliance , Birla, Tata — are back to drawing boards taking a relook at their strategies.
Most seem to be trudging cautiously on their multi-faceted plans in the face of the continuous northbound march of property prices, soaring rates of interest and supply chain challenges that have exposed them to unbearable pressures.
It’s time for reality check for the Indian retail sector. Reliance Retail, with a target of 1,000 stores by the end of 2007, has managed only 735 outlets till July this year.
The company has booked a net loss of Rs 10.99 crore last year on reported revenues that hover around 1% of its total sales (Rs1.39 trillion). Similarly, Aditya Vikram Birla Group too fell short of its expansion target by two dozen outlets of ‘More’, its retail chain brand.
Bharti Retail is also going slow. Grocery stores from retail biggies are reportedly registering losses, forcing them to rationalise their numbers. Adding to their woes are vendors and FMCG players refusing to supply, citing payment delays.
Let’s put things in perspective. Three years back, organised retail in India was expected to grow as fast as 38% annually. Then, the global management consultancy, AT Kearney had announced India’s arrival as the hottest retail destination.
Yet, Indian organised retail is still far from the target of becoming a $60 billion industry by 2011. It is growing at only about 30% per annum (contrary to the grandiose predictions) and stands at 4% of the $350 billion Indian retail industry.
Even Wal-Mart — the world’s biggest retailer — hopes to open its first cash-and-carry store only by 2009, a full three years after announcing its collaboration with Bharti retail. It is realising that it would take more than its legendary supply-chain management and margin-shaving acumen to bring a change in the country’s retail landscape.
Ditto for Tesco, UK’s biggest retailer that is yet to help out Tata Trent’s operations through a cash and carry initiative. In other words, despite attracting the world’s mightiest retailers, the India retail story doesn’t sound as attractive as it was supposed to be. Arvind Singhal, chairman, Technopak Advisors sees no reason to panic. “The current turbulence is not entirely unexpected,” he says.
“The sector is experiencing a steep learning curve and the situation should improve during 2009-2013 period when most of the players would have expanded, consolidated, merged or acquired.” Share of organized retail, he adds, would go up to 16% during that period providing direct employment to 2 million people.
While Technopak projections sound pleasing enough, the current scenario offers no reason to cheer. “The present retail environment is very challenging,” says Lalitha Banerjee, principle consultant, retail and consumer industry group, PricewaterhouseCoopers (PwC) pointing to the mounting costs and supply chain problems. Adds retail analysts Piyush Sinha, who is a part of marketing faculty at IIM-Ahmedabad : “Just adding numbers or bringing in foreign players doesn’t ensure success unless you have operational efficiency and that will come only with time.”
Little wonder then, most retailers are busy formulating fresh strategies. Take the case of Reliance Retail. It has downsized its hypermarket in Ahmedabad and is tweaking its strategy in response to changing consumer demand. It is said to be leasing out an entire floor to other retail players in some cases. In response to an email, query, this is all that the company’s official spokesperson had to say: “In retail, processes are continuously evolving in accordance to the customer's tastes and choice.”
Perhaps, it is these conditions that have forced the country’s largest retailer (by volume), Kishore Biyani — promoter of the Rs 8,600 crore Future Group that owns Big Bazaar — to turn from ‘an eternal optimist to a realist’.
So cost cutting is the mantra. Big Bazaar has now begun integrating the management, marketing , human resources and IT departments of its units into one, which it says, will help save around Rs165 crore a year. Big Bazaar is also planning to prune its advertising budget, reduce electricity bills and cut packaging costs. “We are closing some stores to integrate operations that helps us save costs,” says Rajan Malhotra , CEO, Big Bazaar.
Spencer’ Hyper, Super, Daily, Express and Fresh have been merged into just two brands — Spencer's Hyper and Spencers. The group also plans to consolidate its supply chain for both the formats under one business unit. Samar Singh Sheikhawat, VP marketing, Spencers Retail, says the chain is now relocating stores while focusing on large format.
Apart from high costs, insufficient investment in strengthening back-end operations, high rate of attrition and retaining a talented workforce have been a big challenge.
So what is the way out? Perhaps RC Agrawal, MD, Vishal Retail, spells it out most unequivocally . “It is good to amputate body parts that are not functioning,” he says metaphorically.
September 27, 2008
Source: Economic Times
Mom and pop stores will continue to remain relevant in India: McKinsey
As organised retail evolves, mom and pop stores will continue to remain relevant across both large and small towns in India, said a new report.
The report by the management consulting firm, McKinsey & Company projected that India is likely to be a $ 450 billion retail market by 2015. Further, organised retail is expected to grow from the current 5 per cent of the total market to 14-18 per cent of total retail in 2015, it added.
The report suggests that retail in India can be profitable but not with ‘cut and paste’ global formats. Profitable retailers will need to keep four mantras in mind as they explore this high potential market, it said.
First, develop innovative formats for material differentiation for which three decisions will be critical – where to participate in the retail value chain, which geographies to play in and what price points to offer.
Second, craft a customer-insight driven merchandise strategy to stimulate consumption and lock in core customers.
Third, create an efficient retail operating platform consisting of a self sufficient system of suppliers, logistics providers and even loyal shoppers.
Finally, build an evolving organisation with an empowered front-end selling team that “owns” local catchments.
September 25, 2008
Source: Business Standard
Franchising In India: Opportunities Galore
In India, not much is commonly known about franchising as a concept. In fact, it's an industry that is estimated to be as large as Rs 10,000 crore in size. It is estimated that there are around 600 franchisers spread across education, retailing, hospitality and healthcare in India. That translates to over 40,000 franchisees. The business has grown impressively in terms of size and stature. Investments made by the franchisees has been well in excess of Rs 5,000 crore and the industry employs more than 3 lakh people who are employed directly by the franchised businesses.
The potential in the business has been a huge trigger which explains the levels of optimism prevailing. The numbers tell a story - franchising accounts for a third of all retail sales in the UK while the corresponding figure is 40-50% in the US. By contrast, franchising in India accounts for just 2% of total retail sales. It is interesting to note that it is 3% for China and a much healthier 12% for South Africa.
So, what drives the industry in India? Factors like the growing aspiration and prosperity of the middle class, changing lifestyles and an entrepreneurial culture are some that come to mind. It was with the intention to discuss these aspects, opportunities and challenges pertaining to the industry that the Franchising Association of India (FAI), led by its President, CY Pal, under the umbrella of the ET Think Turf Series, brought together a panel.
Setting the tone for the discussion, Mr Pal said the franchising industry was growing at the rate of 40% every year. Agreed Aptech's Mr Dighe, "The demand from the middle class is bringing in many franchisees." The growth of the retail sector is what is making people in the business hugely optimistic. "With the emergence of organised retail, franchising in India can only grow. I am very optimistic about franchising business in India," said Educomp's Mr Khetan.
In the modern day context, the high cost of real estate has been viewed as a huge deterrent. Mr Malik offered a point of view on the issue. "Franchising in real estate should be for the long-term and contract-based. The success of the India Inc story depends on globalisation and the ability to bring in more investments from abroad. Today, international brands have struck a cord with the heart of India even in the rural areas," he said.
For the franchising model to work, a lot of work has to be put in by those in the industry. Gorgeous Skin Spa's Mr Chatterjee said, "Selection of a franchisee is extremely important." He said that the voice of franchising in the country should be strengthened. "A lot of value has to be created by the franchisers for the franchisees. The biggest challenge is to maintain and deliver quality," he pointed out.
Aptech's Mr Dighe substantiated this point by saying that it was critical for franchisers in India to understand the local circumstances. For all this to happen, there is a great deal of dependence on the franchisee as well. "A lot of responsibility and work goes into building the confidence in a product and a franchisee can make or mar it," said Ms Popat.
Baggit's Mr Ahuja, while emphasising on the point that India was a mature market for the retail sector as well as franchising, said, "Having the right spirit is very essential for growth." Baggit is looking to open 12 stores every year.
It was evident that the panel was optimistic about the future of franchising in India. "It is a tested business in India and the risk involved is understood clearly. The way I see it, retail and franchise model will coexist like husband and wife," thought REBI's Lakshmi Narayanan. In his opinion, the growth of franchising would come from India's huge population and a growing number of entrepreneurs. India's franchising growth story is not something that can be ignored. It is an industry for the long-term.
September 25, 2008
Source: Economic Times
315 hypermarkets likely in Tier I & II cities by 2011: ASSOCHAM
Just concluded study jointly undertaken by ASSOCHAM and KPMG has made a forecast that 315 hypermarkets will come up in most of tier I and tier II cities by 2011 and sell off all articles from automobiles to needles under one roof.
The Study named `Reinventing India’s Retail Sector’ in its analysis of Feasibility of Hypermarkets in Tier I & Tier II towns between 2008-11 points out that that even in year 2008, 212 towns have sufficient market potential for hypermarkets for break even existence. That is a different matter that this potential has yet to be realized.
Releasing the study, the ASSOCHAM President, Sajjan Jindal said that given the expected growth in number of households as well as in income and consumption per household in urban India, particularly in its leading 25 towns, 5 or more hypermarkets per city are feasible even in 2008.
Going forward, in 2011, this number is anticipated to grow to 52 as a few tier III towns also gain the market potential to support 5 or more hypermarkets. Tier IV towns that constitute the bottom of the pyramid, considered for this analysis emerge as unviable for modern retail formats not only in 2008 but also in 2011.
The ASSOCHAM President, however, pointed out that after 2011, the organized retail would grow by 15% as enough competition will have emerged by then and the Chamber expects that in most of 400 good towns in India, the number of hypermarkets would have risen to 475.
Based on the study of the ASSOCHAM and KPMG, it is pointed out that tier III, IV and V towns should be on the radar of retail majors today, since even if they decide to set up stores in these towns 3 years from now, planning for the same should begin at this stage. Further, in case of a large number of towns beyond tier I & II, one hypermarket maybe sufficient to cater to consumption of that town due to which a first mover advantage will be crucial. This fact necessitates the need of evaluating potential of these towns beyond tier I & II as early as possible.
September 23, 2008
Source: India Infoline News Service
Mall Manias: Big brands plan pullout
Faulty mall management coupled with inappropriate tenant mix has resulted in poor mall traffic and closure of individual stores in several malls. Already, a number of big retail names have changed their strategies and pulled out of the malls.
ETAM, the French lingerie brand, recently pulled out of Palm Beach Galleria mall in Navi Mumbai, together with six other retailers such as grocery chain Foodland Fresh and Manoranjan sarees. ETAM has so far closed four stores, all in malls, in cities such as Mumbai, Delhi, Surat and Ahmedabad.
Reebok has closed two of its five stores in the Great India Place in Gurgaon. Levi Strauss India, had also said earlier that it will be pulling out of a substantial number of malls in 2008. “Once the store are leased out, the developers are not worried about the promotion any more. Though a few mall organise some in-house promotional activities but that alone doesn’t gurantee a good footfall. Customers will get to know about the in-house promotions only when they come to the mall,” says a retailer that has multi-brand store in
A lot of brands have recently walked out of mall owing to decreasing footfalls. Experts feel that the developers have not paid enough attention to the mall management aspect of retail.
“Thinking about the efficiency of mall now is like thinking about the fuel efficiency of the car after its launched. Majority of the developers have done nothing about the branding, marketing, budgeting, financing part of running a mall. This is hurting the efficiency resulting in set back in the main business,” says Rajneesh Mahajan national head-retail services Cushman and Wakefield.
India’s retail industry thrived due to the rise in shopping malls across the country in the past five-six years even as their management has emerged as a big challenge.
“Once the novelty of a shopping mall wears out, there is an urgent need of engaging the customers in promotional activities. But they should not be sporadic rather should be well spread out and customised keeping the clientele in mind. The retailers are treated as cash cows instead of being considered an integral part of mall. We decide the locations keeping all this in mind and this has limited our expansion plans,” says Amit Rai business head of Oliver, an apparel brand.
There is a lot to be desired from the mall developers in India, says Wong Kok Wing, a mall management veteran in Singapore and south east Asian countries. “The developers have started spending money but it is not being spent in the right direction. Malls were constructed keeping the demand in mind but what the customers want was not considered, leading to this problem. India will have to learn from the other Asian countries,” he adds.
September 21, 2008
Source: Economic Times
Heads, it’s a mall, tails, it’s a high street. India’s retail consumer spending, which is likely to touch Rs 16 lakh crore in the current year, has retailers in a spin. In a country where consumers are turning to retail therapy like people did to painkillers a few decades ago, retailers have no choice, but to be available ‘here and now.’
And so, with not much choice between locating themselves in malls or high streets, Indian companies are grabbing all the space that comes their way. But there should be an economic sense to this retail mania. What drives companies to choose a mall presence versus a high street store or vice-versa? Does one format give better sales realisations than the other?
“Malls have a shorter history in India, so we will have to wait and watch,” says Ajoy Chawla, Vice-President and Global Business Head (Titan & Retail), Titan Industries Ltd. The process of deciding on a store location is quite comprehensive at Titan, with the company first considering town assessment criteria. “There are some towns that have extremely successful malls and some with average performers.” In Bangalore, Chennai and Mumbai for instance, Titan stores in malls such as Forum, Spencer Plaza and InOrbit have yielded extraordinary sales revenues (about Rs 56,000-66,000 per sq. ft. per annum), while some malls in Delhi have been ‘indifferent,’ says Chawla. Titan is currently present in 32 malls and 253 high street stores across the country. “About 65 per cent of the mall stores are successful, they met what they had projected, but the hit rate on high streets is about 95-98 per cent, though the revenues per sq. ft. are comparable in both formats,” says Chawla.
Sales conversion rates have been better on high streets, recording about 85 per cent while those in malls have been a few notches lower at 65 per cent. But the number of walk-ins is higher in malls and the chance to induce trial is also higher. Consequently, therefore, higher are the chances of impulse buying.
For Arvind Brands’ Wrangler, the conversion rates story is quite the reverse. They are usually higher in mall stores as compared to those on high streets. “All other parameters remaining constant, we have seen around 20 per cent difference in the conversion rates in these two formats,” says Janani Subramaniam, Business Head, Wrangler. The brand has seen mall stores getting relatively higher footfalls, specifically the ones in malls which have multiplexes or food courts. She agrees the probability of consumers making an impulse purchase is much higher in these stores and the brand has seen good sales of low ticket items too.
Like Titan, for Levi’s too, high street stores have yielded higher conversions, especially mature high streets. They operate with conversions as high as 35 per cent and mall conversions range between 12 per cent and 16 per cent as a lot of the walk-ins there tend to be browsers. “However, revenue per sq. ft. and footfalls per sq. ft. are higher in malls,” says Bhaskar Kelkar, Director (Retail & SBU Head), Southern Region, Levi Strauss India Pvt Ltd.
He says Levi Strauss’ strategy for distribution of stores in high streets and/or in malls depends on the company’s decision on how much space and how many stores it should have in a city, the catchment area and the decision to be present on a particular high street or in a mall is based on the merits of the location and catchment. “High streets have a clearer catchment area,” agrees Chawla.
Though Titan’s actual presence in malls is far lower than its high street presence, sales revenue from malls and high streets for Titan in 2007-08 were comparable: Rs 20,000 per sq. ft. from malls and Rs 28,700 per sq. ft. from high streets, per annum.
Investment in malls seems higher because the loading factor is higher, though the quoted cost is lesser, says Chawla. “In malls, we can utilise the space in a particular manner and the average realisations are much better, because the ticket size is much better. The total revenues in high streets are higher because we take larger spaces there.”
Kelkar explains that the reason for the marginal increase in store set-up costs on high street stores is the retailer having to invest in air-conditioning units and diesel gensets, whereas in malls this is a given. Chawla argues that though the neighbourhood stores rentals may be lower, this is only a dynamic situation.
Commenting on whether there is a brand-retail format suitability factor involved, Chawla says malls are inherently more risky because of their short history in the country. “But for a newer brand, a presence in malls is important because the merit of the brand has to be established. For them, participation in the malling scene is as important as being on high street.” Chawla gives instances of malls that have done well, such as Forum and Spencer Plaza, and therefore have given Titan a very good response.
On high streets, the brand’s pull determines the performance of the brand. As malls attract walk-ins in adequate numbers, it helps. Therefore, a brand’s performance in a mall is linked to the mall’s performance itself. “Of course, this is determined by the tenant mix, the anchor stores, the kind of food courts and multiplexes that malls have.”
Therefore, for Indian retailers, starved of space and scurrying for every inch of real estate available, the response has been a mixed bag. Participation in the malling of India is important and remaining firm with the traditional high streets, equally so.
September 18, 2008
Source: Hindu Business Line
Retail industry to touch Rs 18.1 lakh cr by '10: Report
Spiralling income and rising economic growth will see the Indian retail industry touch Rs 18,10,000 crore by 2010 with organised retail expected to constitute about 13 per cent of the total market to reach Rs 2,30,000 crore, said the India Retail Report 2009.
The India Retail Report 2009 compiled by research group Images F&R Research said, despite the hue and cry over the perceived impact of organised large retail on mom and pop stores, modernising the retail sector would engage around 15 million people in various activities by 2010.
At present, the 13,30,000 crore Indian retail market is growing at 10.8 per cent of which the organised retail sector's contribution is 5.9 per cent at Rs 78,300 crore, the report said.
"This modern retail segment grew at the rate of 42.4 per cent in 2007, and is expected to maintain a faster growth rate over the next three years, especially in view of the fact that major global players and Indian corporate houses are seen entering the fray in a big way," it said. Organised retail is expected to touch Rs 2,30,000 crore (at constant prices) by 2010, constituting roughly 13 per cent of the total retail market.
On the employment front, the study said, "Modernising retail will see some 15 million people engaged in retail and retail support activities by 2010 - including front end retail operations, supply chain management, logistics, process and infrastructure development and supplies."
Food and grocery dominated the retail segment with 59.5 per cent share valued at Rs 7,92,000 crore, followed by clothing and accessories with a 9.9 per cent share at Rs 1,31,300 crore.
September 17, 2008
Source; Economic Times
Store rentals suffer 20% fall in 4 months
Store rentals have come down by 10 to 20 per cent in tier-II and tier-III cities in the last three to four months, said retailers at the India Retail Forum here. The rentals have dropped following the country’s property market cooling down after three years of high growth.
Many retailers, such as Aditya Birla Retail, could not expand their hypermarkets and large-format retail stores as they had planned due to high rentals and unavailability of space. “With the downturn in the property market, the correction process has already started. With this, we hope rollouts will be pretty faster,” said Thomas Varghese, the chief executive of Aditya Birla Retail, which has over 600 stores in the country, including two hypermarkets.
“We have seen rentals cooling off by 10 to 20 per cent in the last three to four months,’’ said Ashok Bhasin, managing director, Wadhawan Food Retail, which runs the Spinach brand of convenience stores.
According to property consultants, Kishore Biyani’s Future Group has been unable to strike deals for nearly 6 to 7 lakh sq ft of ready retail space in the last three to four months due to high rentals.
“We have looked at many locations and said no to many. But now, developers are demanding much more sensible rentals than before. We are closing three deals very soon,” said Mark Ashman, the chief executive of Marks and Spencer India.
Marks and Spencer, which has a joint venture with Reliance Industries, plans to open 50 stores in the country in the next five years.
Apart from the correction in rentals, analysts tracking the sector said 60 per cent of retailers were opting for revenue-sharing agreements with mall developers, wherein retailers pay a share of their sales to developers.
“Now retailers are demanding zero rentals and a full revenue-sharing agreement. Until and unless developers realise the need for reasonable rentals, many deals may break off,” said Bappaditya Basu of property consultancy Jones Lang LaSalle Meghraj.
Analysts also attribute the decline in rentals to oversupply of retail space in the next couple of years. According to property consultancy CB Richard Ellis, nearly 100 million sq ft of retail property development is in the pipeline.
“Some developers were building malls at Rs 4,000 a sq ft. I wonder who will occupy those malls at such rates,’’ said Future Group Chief Executive Kishore Biyani.
“Developers were building malls not for retailers, but for investors. They did not figure out what would drive retailers to malls. But now, investors are backing out and funds are drying up for developers, which is leading to rationalisation of rentals,’’ said Sanjay Dutt, deputy managing director, Cushman & Wakefield.
September 17, 2008
Source: Business Standard
Retail firms thinking lean and mean to stay fit
Close on the heels of Reliance Retail, other retail companies are also going the lean-and-mean way. Aditya Birla Retail, Future Group, Provogue, Spencer’s, Koutons and Vishal Retail are some of the other retail majors that seem to be exercising prudence when it comes to spending.
Gone are the days when one could enjoy luxurious trips at company’s expense. That means no travelling in sedan cars or staying in lavish hotels. Telephone expenses are being looked at closely and couriers are being monitored to make sure it is not used for personal purposes. Today, it is becoming necessary to fill out formal requisitions for stationery.
All this has resulted in a bad summer where routine increments are themselves running behind schedule. Employees have been advised to cut their discretionary spending which would earlier pass off under the company account.
With a growing inflation figure eating into profits coupled with a ballooning expense account, corporates have realised that curbing expenses is a rational approach. Unsurprisingly, companies are reluctant to acknowledge that something like this is going on.
An employee with a large retailer which has business interests in other areas like metals and telecom said that they have been instructed to use company guest houses only and not opt for hotel accommodation. “We have rejigged operating expenses to cut our fixed overheads,” says Provogue V-P (HR) Ajay Nair.
Even travelling budgets have been prepared and ceilings have been set for travel reimbursements based on the designations, he added. The motto at Future Group seems to be Garv se kaho ki hum kanjoos hain. The objective here is unmistakable-cost efficiency is the name of the game.
The top management here seems to have already taken cognisance of the slowdown and has gone in for an internal restructuring exercise for each of its businesses. Here’s how they have gone about it. Smaller businesses have been amalgamated under one large umbrella brand to avoid duplication in key areas like human resources, IT or that of supply chain, says Big Bazaar CEO Rajan Malhotra.
That’s not all. Employees have been asked to share rooms while travelling on work and to fly economy class. “We have connected all our regions through the video-conferencing route and this helps our regional managers to avoid unnecessary travel,” says Spencer’s V-P (marketing) Samar Sheikhawat. He adds that there has been a saving in travel costs.
Koutons says that that it has always been a lean organisation since inception. This is a function of its business model. “Efficient utilisation of our logistics facility, opting for upfront cash payments and motivating employees to deliver at least 25% more than usual output are some of the things we have done. This has helped us in offering a discount of 25-40% to our customers round the year,” says Koutons chairman DPS Kohli.
“Our chairman travels economy class and is open to staying at a palce that is comfortable. That is not necessarily a five-star hotel,” says Vishal Retail CEO (corporate affairs) Manmohan Agarwal. The company is evaluating the possibility of using railways for their inland logistics since it could be more cost-efficient than road transport.
September 11, 2008
Source: Economic Times
Subhiksha to foray into east, to open store in Kolkata
Food and grocery retail chain, Subhiksha, plans to expand its wings in the east soon, a top company official said.
"The company is already present in the north, south and western regions. To make its presence felt in the east, we will soon foray into the east," Subhiksha's Senior President, Sunil Kataria, told reporters.
The company plans to set up a store in Kolkata by December, he said.
Currently, the company has around 1,580 supermarkets under its Subhiksha Retail brand in more than 100 cities. It plans to enhance this network to around 2,200 stores by the end of the current fiscal.
The company intends to achieve a turnover of Rs 4,500-crore this fiscal as compared to Rs 2,305-crore posted in the previous financial year.
October 5, 2008
Source: Economic Times
Even as a Tata pullout from Singur looms large, West Bengal CM Buddhadeb Bhattacharjee is making a last-ditch bid to prevent Germany’s Metro Cash & Carry from checking out of the state.
After a meeting with Metro AG’s global management team on Wednesday, CM is learnt to have given assurances that his government would consider issuing a fresh APMC licence to Metro Cash & Carry for its wholesale venture in West Bengal.
Metro team, comprising Metro Cash & Carry India MD Martin Dlouhy and Metro Group V-P Henry Birr, met CM at Writers’ Buildings.
A government official told ET that CM had informed the Metro team that the Sunday meeting between CPM and Forward Bloc would discuss the possibilities
September 25, 2008
Source: Economic Times
Mukesh Ambani rejigs retail plan for Bengal
Amid the resistance from Left Front (LF) partners to the entry of big retail players in the farm-to-table segment, Mukesh Ambani’s Reliance Retail has rejigged its plan to roll out new formats in West Bengal.
According to sources, Reliance Delight stores, scheduled to be launched after the pujas in October, will sell fresh fish, frozen chicken and meat. The non-vegetarian items will have a shelf life of three days. It will also sell frozen, ready-to-cook foods of other companies.
“They (Reliance Retail representatives) have held a preliminary talk with us for the Delight stores,” said a supplier to Reliance Retail.
After entering the city in August with Keventers Fresh, sources say the company is aggressively looking to open more Reliance Fresh stores in Kolkata. So far, Reliance Fresh has opened at least four stores, each at Swabhumi, Rajarhat, Budge Budge and Bangur.
According to industry sources, while Reliance Fresh caters to the vegetarian segment, Reliance Delight will cater only to the non-vegetarian category. While Reliance has not commented on the issue, sources in the company said, “The Delight stores are likely to be opened after the pujas in October.”
In 2007, Reliance Retail shelved its plan to create 1,62,000 sq ft of retail space in the city and adjacent areas in the face of violent protests from LF partners. So far, it has come up with the single format, Reliance Fresh. It is one of the 12 formats the retail major has in India.
September 23, 2008
Source: Financial Express
Metro Cash & Carry fate in Kolkata hangs on Forward Bloc
German wholesale giant Metro Cash & Carry has hit a political roadblock in the opening of its first outlet in Kolkata with Left Front constituent Forward Bloc resisting renewal of its APMC licence.
METRO Cash & Carry sources said the company was ready with infrastructure but the APMC (Agricultural Produce Marketing Committee) licence, which was unilaterally withdrawn in June 2007, has not been renewed.
The state government had issued the APMC licence in 2005 and renewed it twice in 2006 and 2007. The APMC licence is issued by the Agri Market Board which is controlled by Forward Bloc. Food products comprise a critical part of the company's wholesale trade.
Forward Bloc state general secretary Ashok Ghosh told PTI, "This is not an administrative issue now. It has become a political matter and a decision must be reached on a political level. We have written to Left Front chairman Biman Bose seeking a bilateral meeting with him."
He said his party was opposed to opening large stores by big business houses at the cost of small trader and farmers. Agriculture minister Naren De said, "I will look into the matter once the concerned officer resumes office on Monday."
Metro Cash & Carry has so far invested Rs 140 crore and employs 350 persons at the Kolkata store.
September 19, 2008
Source: Economic Times
It's festive mood in West Bengal
A wide section of Kolkata’s retail segment is going berserk just now with pre-Puja offers. Step into a Pantaloons, a Big Bazaar, a Westside or any of the numerous wayside shops that trade in typical puja merchandise, and you will find offers vying with each other to go one better.
From “Take one, get one free” or “Buy two and get two free” to discounts ranging from 5-70%”, Kolkata is ablaze with offers. It is the festive season mood.
The best however, isn’t this. “Cash assistance to landlosers and bargadars so that they are able to buy agricultural land of their choice, 300 days wages at NREGA rate to affected agricultural labourers and unrecorded bargadars, 10% of the award money to those who have not received compensation......”—this pre-puja offer by Bengal to Singur's residents takes the cake.
September 18, 2008
Source: Economic Times
Reliance to open more supermarkets in Kerala
Reliance Industries Ltd, which operates 25 Reliance Fresh supermarkets in Kerala, is planning to open several more stores in the state, said a senior official.
The official, who did not wish to be named, said that the company would soon open specialty stores and Reliance Super stores. The first specialty store would be opened in Kochi later this month, he added.
"We are planning to open specialty stores in apparels, footwear, books, music and toys and Reliance Super stores," the official said. The Reliance Fresh shops sell vegetables and fast-moving consumer goods, while Reliance Super stores will have almost every item.
The opening of the first Reliance Super store at Palai near Kottayam, scheduled for last week, did not take place due to opposition by Left parties. The official said Reliance would move court this week seeking legal protection to open the Palai store. "There have been problems, but we are confident that we will go ahead, and we have big plans," he added.
September 14, 2008
Source: Economic Times
Big Bazaar plans three more outlets in Ahmedabad
After being forced to shut down two of the five Big Bazaar stores in Ahmedabad, Kishore Biyani spearheaded Pantaloon Retail India Ltd, the company that runs the retail chain stores across the country, is planning to open three more stores in different areas of the city.
According to Anand Adukia, Zonal Manager, Big Bazaar, the company is exploring Vasna, Sabarmati and Motera areas of the city for opening its new stores.
“Moreover, we have decided to merge the Bapunagar unit with the Kankaria outlet, which will result in the expansion of the latter from 60,000 sq feet to 1.10 lakh sq feet,” said Adukia. He said the Bapunagar store was shut down not because of any customer behaviour, but because the three year lease period of the property was over. In addition, the company is considering opening one more outlet in Surat, he said.
Meanwhile, Pantaloon Retail is planning to open 15 more outlets across the country by the end of November, thus taking the total number of Big Bazaar stores to 112, including the one to be opened at Surat.
The other outlets will be opened at Mysore, Pune, Cuttack, Kolkata, Chandigarh, Agra, Faridabad, Nashik, Mumbai , Delhi and Solapur.
September 7, 2008
Source:Indian Express
Growth of luxury products market
Ashish Chordia loved luxury cars and brands since childhood. He had a passion for cars. Today he is the CEO of Shreyans, which represents world-renowned brands such as Porsche, Audi, Ducati, NetJets, Van Cleef & Arpels, Fendi, and Dolce & Gabbana, among others in India. When he came back from the US after working with consultancy firm Deloitte, he found only a few luxury brands in India. “I saw a business opportunity there and a chance to develop my passion into a business plan,” chuckles Chordia. He’s been at it for four years now. And is literally making a killing with his luxe.
The glitter of the world’s top labels lure entrepreneurs like Chordia. While passion seems to be the biggest motivation, the business opportunities that these labels offer in a booming economy like India, cannot be discounted. Indeed, that’s the premium.
The luxury products market in India was estimated at over $500 million and is expected grow at a CAGR of 28% to touch $1.2 billion by 2010, according to a FICCI-Yes Bank study released recently. The market is further expected to double and reach $2.5 billion by 2015, the study says.
Sharad Kachalia, managing director, Navnit Motors has been in the business of selling automobiles for a very long time. What his portfolio lacked was a premium luxury brand and that is what some of their high-profile customers were eyeing. In 1994, Kachalia added BMW to his firm’s stable of products alongside Maruti and a few other commercial vehicle brands. Since then he has added brands such as Land Rover and the iconic Rolls Royce in 2006 (also from the owners of the BMW). Kachalia has sold over 35 Rolls Royce in India, and is now bringing in the Rs 3.1 crore Phantom Coupe, which will hit Indian roads in November. “A big luxury brand in the portfolio reflects the organisation’s strength as well as reputation,” he says.
Pradeep Hirani started Kimaya Fashion House in 2003 and brought on board almost all of the Indian designers as well as some from Pakistan, Malaysia, Europe and France. With the explosion in the number of high networth individuals and the affluent over the last few years, Hirani was quick to spot a gap in the luxury fashion retailing in India. In 2007 he was selected the exclusive franchisee for hot designer labels such as Versace, Pinko, Galliano as well as private label designer silhouettes of famous celebrities such as Victoria Beckham and Paris Hilton. “We filled the vacuum in luxury fashion retailing in India,” says Hirani.
For luxury watch retailer Haresh Chainani, being born into a family associated with luxury timekeeping devices in India and abroad fuelled his passion. “Watching the workers assembling watches by hand at my father’s watch assembly factory in Switzerland, I learned a lot. So for me to step into the business of representing famous international watch brands in the country was not only obvious, it was a cakewalk because the biggest watchmakers knew and trusted us,” he admits. Twelve years ago, the family shifted base to India, where Chainani Sr started Swiss Promotions, a franchise distributor for some of the world’s best known watch brands. And in 2005, two entities were formed under this company, which were handled respectively by Haresh and his brother Nitin Chainani. Haresh today heads Ganga watches, and is an exclusive distributor of brands such as Police, TechnoMarine and Ulysse Nardi.
Twenty-four year old Atul Bhonsle started out similarly. A marketing MBA, he worked briefly in media before turning to something he always wanted to do: sell yachts. But it wasn’t a decision based on rash impulse. Bhonsle’s father had a ship repair business and as Atul admits, “In that small fraternity, everyone knows everyone else.” Today, he is director of New Wave, which is the exclusive distributor of the elite Azimut yacht brand in the country. Besides selling finely-crafted water nymphs, Bhonsle and his team provide end-to-end yacht management services, ensuring that the customer is never left high and dry. Initially, when Bhonsle approached Azimut, he says that both of them were taking a risk. “I convinced them that I knew what Azimut stands for internationally. My professional contacts also helped. But they were taking a chance with me as well,” he explains.
Harish Bijoor, brand expert and CEO, Harish Bijoor Consults feels that the first thing that a luxury brand looks for in a potential distributor is the right mindset, because that’s what luxury is: a mindset. “And the most obvious indicator of mindset is pedigree. If the individual was born into a known business family or has successfully promoted similar brands before, the company can easily entrust him/her with the task of pushing that brand in that market.” Of course family background does help but only to a certain extent. “My family was into real estate and gems exports and I had good multinational experience along with a good network,” says Chordia. The latter is what, he feels, helped him clinch his first deal. “Of course, an ability to invest consistently to grow the brand is also very important,” he adds.
“Luxury brand market entrants seeking partnerships in India are increasingly cautious given the market challenges across high investment requirements in appropriate brand retail expansion and given cost of image reflective market communications and human resource,” says Devyani Raman, CEO, Leading Brands of the World and Luxury Marketing Council of India.
The franchisee has to understand the requirements of these customers. “These customers are very special and have to be treated specially too. The effort has to be different. Confidentiality is prime here. This is what a brand explores in a franchisee,” says Kachalia of the customers he taps for his iconic auto brands.
Luxury brands require understated selling. Says Bijoor, “When every brand is trying to shout down its competition, the brand that whispers softest gets noticed the most.” Last year Shreyans did a Porsche roadshow where they got 200 of their clients to drive different Porsche cars and do 180-degree turns with specially trained drivers, on an airstrip. Chordia now plans to conduct a driving experience for Ducati’s soon. The Italian two-wheeler maker Ducati Motor Holding had recently announced its foray into the Indian automobile market with the launch of five motorcycles, priced in the range of Rs 15 lakh to Rs 50 lakh.
Kachalia’s marketing approach for Rolls Royce and other auto brands is very personalised. “It is an individualistic approach, one-to-one, kind of a whisper programme,” he says. “It is very important to understand that we ARE the brand for our Indian buyers,” Chainani of Ganga Watches says, adding, “There are some basic restrictions that flow from the manufacturer, which relate to logos, photo shoots, etc., but ultimately, we understand the Indian market best and know what works.” And in the luxury timekeeping device sales business, the watchword is “subtlety”. “We never flash the brand. At any given point, I never have more than fifteen watches on display and never alongside any other brand,” Chainani explains. He adds that with the Indian market evolving the way it is, a luxury watch doesn’t have to be announced. “Our buyers often know more about these brands than us. That makes selling these devices that much easier,” he states.
In the world of luxury brand selling, the initial investment has to be large. Raman puts it in perspective. “Initially we struggled to get the right location and when we got that it was issues with permissions. Here my family helped with a few recommendations,” says Chordia. Now Porsche is looking going into new locations.
These franchisees are entrusted with maintaining the brands’ consistency as well. “The marketing has to communicate exactly the same brand image as it is in other markets,” says Chordia. Brands do no offer any liberty to the franchisees to tweak the brand image to suit the Indian market and its sensibilities. “We patch this cultural gaps with some interesting events off and on,” he explains. Azimut luckily has been flexible with Bhonsle and has always trusted his judgement, given that this was a new market for them. “Of course I was always committed to the brand and what it stands for internationally,” he adds.
September 14, 2008
Source: Economic Times
For many Punekars, Diwali means paying a visit to the local sweets and savouries shops for giving faral to their near and dear. And catering to their taste, Chitale Bandhu Mithaiwale is all set to expand its reach by going online. www.puneshop.com would facilitate the online shopping.
Amarake Services, promoter of the Web site puneshop.com, has been appointed as the first online distributor for Chitale. Like the other shopping sites, when the order and the payment has been done, it would be home-delivered. On the Web site, corporate gift boxes, with the traditional Diwali Faral items such as laddu, chakali, chivda and shankarpali from Chitale Bandhu, priced at Rs 111, discount coupons from Jaihind Collections, Prasanna Holidays and Wonder Funkey will also be offered.
It will also have a discount voucher from Chitale Bandhu Mithaiwale, which can be redeemed during the next online order. The minimum quantity to order the gift box online is 10 boxes and in multiples of 10. All the online orders will be delivered to the customers between October 18 and 27. Two per cent of the gift box sales would be donated to the Lokmanya Public Charitable Trust, Dapoli, for its solar lighting project.
October 3, 2008
Source: Hindu Business Line
Pay your kirana bills through e-wallet
Electronic payment enabler companies like Oxigen, Obopay, Atom, Indipay, Easy Bill and Suvidha have introduced novel concepts to enable kirana stores transform into e-retailers.
They have tied up with these mom-and-pop stores to facilitate cashless payments (electronic wallet) for a host of services. The electronic wallet allows transactions for recharging of prepaid mobiles, telephone bills, electricity and water bills, DTH recharges, travel services and other utility/insurance bill payments through mobile phones.
The concept saves consumers the trouble of rushing around to make payments.
Pinakiranjan Mishra, partner and leader, retail and consumer products practice, Ernst & Young, points out that kirana stores provide convenient and personalised service that organised retail cannot match.
People are more likely to make frequent purchases rather than weekly/monthly purchases. Kirana stores will provide this market to consumers, he notes.
Pramod Saxena, Chairman and MD, Oxigen Services India – which currently has 50,000 touch points through kiranas across the country — is planning to expand its retail network to 250,000 stores by 2010. It is adding 1,500-2,000 touch points every month.
The bulk of the kirana usage comes from the consumers with saving accounts, but no credit cards. The wallet allows them to do cashless shopping and make payments at a lower charge (Banks charge 2.25 per cent of transaction value, while these payment enablers charge only Rs 2-3 per payment and on some verticals a maximum of Rs 8-10).
The kiranas are able to aggregate and lower inventory. Shop owners don’t have to gather cash every day and rush to the bank and able to save on demand draft and are able to save on cheque and demand draft payments.
They will also get instant cash and won’t have to give things on credit. Shop owners also earn a commission of up to 3 per cent.The potential of the service is high, if delivered effectively. Dewang Neralla, director, Atom Technologies, says: “We plan to bring 8,000-10,000 touch points in rural areas by next year.”
Vijay Balakrishnan, Chief marketing officer, Obopay, says: “Once the RBI guidelines are out, we will start these services from Mumbai or Chennai initially and then spread to Tier-II cities. The ubiquity of mobile phones makes the idea viable.”
September 25, 2008
Source: Business Standard
Art brushes against big bucks at online auction
When art has a brush with the Internet, it could mean big bucks for the artists. In its latest round of online art auction last week, Mumbai-based Saffronart, which pioneered the concept in India, sold over 100 pieces of contemporary art for Rs 29 crore ($7.2 million). More than 500 bidders from 30 countries sat before their computers for two days, as canvases produced by some of the big names in Indian contemporary art were auctioned.
The top four lots of the auction were Mr Subodh Gupta’s Idol Thief, which was sold for Rs 4.28 crore, followed by the same artist’s Saat Samundra Par (Rs 3.4 crore), Mr T.V. Santhosh’s When Your Target Cries for Mercy (Rs 2.8 crore) and Mr Anju Dodiya’s The Site (Rs 1.06 crore).
But this was not the biggest collection for Saffronart, which introduced online art auction in India in 2000. “In December 2006, we auctioned 140 pieces for a total of Rs 50 crore during a two-day online auction,” says Mr Dinesh Vazirani, the Director of the company.
Indeed, online art auction has added a splash of colour to the domestic auction market, with some five or six companies, led by Saffronart, engaged in this business.
“When we started the venture in 2000, the online art auction market in India was only $150,000. But today, the market has grown to about $70 million, with Saffronart’s share being about $45 million,” Mr Vazirani told Business Line.
He points out that online auction makes it possible for bidders across the world to participate, with higher levels of transparency and information about the art pieces. The business model of Saffronart, which charges about 15-20 per cent transaction commission, has prompted Harvard Business School to write and teach a case study on the company.
Now, Saffronart plans to broaden its business canvas by organising the first online auction of jewellery and accessories on October 7. It is mainly intended to showcase jewellery designs more than the brands — included in the catalogue would be a rare, fancy yellow 42-carat diamond. After art and jewellery, what will be next on Saffronart’s catalogue? “Right now our hands are full, but at a later stage we may look at rare books or antique furniture,” says Mr Vazirani.
September 9, 2008
Source: Hindu Business Line
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