Retail News October 2006

GENERAL PLANS AND INDUSTRY INFORMATION

Organized retail majors record over 50% growth in Q2

The top five retailers in the organized retail sector have had a phenomenal performance this past quarter, with a combined net sales growth of more than 50% for the quarter than ended September 2006. The top five retailers, Pantaloon Retail, Shoppers' Stop, Trent, Titan Industries and Provogue, have combined net sales growth of 52% and net profit growth of 22%.

Pantaloon Retail had the highest net sales growth at 65%, its value segment increasing by 78% and lifestyle segment increasing by 50%. Value retail accounts for close to 72% of the company's turnover.

Source: The Economic Times

Malls attracting more than just customers

Its not only customers that are flocking to malls in India, marketers are all making a beeline to malls as they are the perfect connecting place to their target audiences. Banks, credit card companies, cars, and airline companies are all focusing on co-branding activities with retailers who are selling every little inch of space for signs; carry bags, end caps, trolleys or in-store TV promos.

The rush is so much that Shoppers' Stop even has a separate department to handle in-store marketing activities. Govind Shrikhande, CEO of Shoppers' Stop says that, "It's an agent, not a driver of business for us. But even as we have grown 300% in the last five years, this business has grown around 600% in the same time frame."

Pantaloon has a team of 18-20 people, with Sanjeev Agarwal, Head of marketing at the head of the team, to deal with liaisons with advertisers, marketers and brands. Barista Coffee CEO, Partha Duttagupta, adds, "With 1.2 million walk-ins a month and a target audience largely in the 19-30 years category, there are many brands that are looking to form long-term and short-term promotion-led associations with us."

Source: The Economic Times

	Buy our Omnibus edition featuring 4 reports covering the fast growing retail scene in India. Updated March 2008. The reports begin with an overview of Retail in India. Your purchase includes 3 additional reports on: 1. Grocery and Food Retail 2. Growth of Malls in India 3. Growth of Single Brand Stores in India

Some quick facts on the Indian retail industry

India's retail sector is estimated to be worth $350 billion, of which organized retail accounts for only $8 billion. This organized part of the retail industry is growing at 30% annually.

Market Data:

• New entrants: Reliance Retail and Bharti Enterprises
  
• Established retailers: Pantaloon Retail, Shoppers' Stop, Spencers, HyperCITY, Lifestyle, Trent.
• An estimated $412 billion is likely to be investing in the retail sector over the next five years.
• Food, beverages and tobacco make up 40% of the retail sector.
• The organized food retail sector is estimated to be worth $666 million and likely to reach $33.3 billion by 2015.
• Branded apparel segment is estimated to be worth $422 million and is growing strongly at 20% annually.
• Major metro's such as Mumbai, Delhi, Chennai, Kolkata, Bangalore and Hyderabad is where 68% of organized retail is located.
• There will be an estimated 220 malls by 2007, a significant rise from 30 in 2003. Current lease rates in major cites vary from Rs. 88 - 120 per sq ft per month.
• India's retail industry is the 2nd largest employer, after the agriculture sector, employing 21 million people, roughly 6% of the country's total workforce and contributes 13% of the GDP.

Foreign Investment:

• Foreign companies are permitted to hold only 51% of equity in a single brand format only, whose products are sold under the same brand internationally.

Indian retail market will attract investments worth $412 billion

PricewaterhouseCoopers (PwC) has estimated that $412 billion in investments will come into India by 2011. Hypermarkets and supermarkets will receive the maximum investment, with more than half of it going to food related retail. The figure is substantially higher than the estimated amount of $320 billion that was suggested by Prime Minister Manmohan Singh.
Source: Deccan Herald
Read more on the action in Food Retail in our report

Big Players

The Big News..Reliance Fresh opened at Hyderabad amidst media glare and public scrutiny. Customers delighted in a great shopping experience.those that could handle the stampede and rush! We tracked the chain of events from the unveiling of the store for the press to the actual opening of the store to the public.

- Chillibreeze Business Research Team

Reliance Fresh to open on November 03, 2006

At the unveiling of the store for the press on Sunday, October 29, 2006, Mukesh Ambani CMD RIL said that, "This is the first small step in our attempt to build and forge strong and enduring bonds with the millions of farmers and transform our relationship with the consumers to a new level. We are starting on a pilot journey of listening to customers and learning from them. We still strive to continuously delight them." The Hyderabad store is one of 11 pilot stores that will "listen and learn from consumers" according to Mukesh Ambani.

Other cities that Reliance Fresh stores will be opening in are Vijaywada, Vishakapatnam, Chitoor, Tirupathi, Adilabad and Karimnagar. In other states, the stores will open in Ahemdabad, Mumbai and Delhi. The company plans to open stores in 1,500 cities to generate around $2 billion by the year 2010. Reliance will follow three price points, based on the quality of the product: premium, middle and lower. The company's in-house brand Reliance Select for grocery items was also launched.

Reliance hopes to change one of the major problems of retail in India, having a smooth supply chain in place. By linking farms and stores with a high-tech cold storage and transport system, both farmers and consumers will gain. A senior Reliance official said that the company hopes to "reach out to more than 60% of the population in four years time".

Reliance Retail's Fresh start

The launch of Reliance Fresh in Hyderabad marks the beginning of the company's in house brand Reliance Select, under which the company will sell staples such as pulses and rice. The stores, product selection and the prices have been designed keeping the average Indian housewife in mind and appropriately, the store will be inaugurated by them too.

Nita Ambani, wife of RIL's CEO Mukesh Ambani, has been deeply involved in store design, branding, customer experience and staff selection for the company. Reliance plans to have close to 1,000 stores in 10 states operational by March 2007. Most stores will be in the 2,000-5,000 sq ft range.

The company wants Reliance Fresh to be the neighborhood store, with a store for every 3,000 families or approximately a store for every 2 km.

Reliance Retail aims to link farm to fork

As the first Reliance Fresh opened in Hyderabad, the company is keen to use its resources to create a profitable link from farm to fork. Raghu Pillai, President and CEO (operations and strategy), emphasized that the company will be opening stores in the 70 top cities in several formats, including hypermarkets, music and entertainment, pharmacy, specialty stores and lifestyle products.

Reliance hopes to utilize its investment in its supply chain and will be starting Ranger Farms, a wholesale format store to cater to fresh fruits and vegetables to small vendors and stores. Ranger Farms will open earlier in the mornings and will have different prices than the Reliance Fresh stores. Reliance is also utilizing its supply chain to source fruits and vegetables from specific crop belts in the country. For example, the apples come from Himachal Pradesh, onions come from Karnataka and green leaves come from close by districts of Andhra Pradesh.

Birlas ready a Rs. 150 billion retail rollout

The Aditya Birla Group has planned its retail rollout at an estimated cost of Rs. 150 billion, making it the second largest investment in the retail industry after Reliance Retail's investment of Rs. 250 billion earlier this year. The Birlas plan to start operation by mid 2007, opening 6,000 stores in three years eventually and will be focusing on the food and grocery segment for half of its revenue. Lifestyle segments will account for approximately 22% and the balance will be from all other segments.

The Birla Group plans to set up retail stores in a similar manner to how Reliance is doing, by not entering into any tie-up with a foreign partner, following a carpet-bombing approach to opening stores in a variety of formats such as neighborhood convenience stores, supermarkets and hypermarkets and also on its focus on food and grocery.
Source: Financial Express

Innovations / Collaborations

At Chillibreeze, we believe that future growth in the retail (as in most other sectors) will increasingly depend on healthy partnerships and win-win situations. Here is a sample of the kind of collaborations we will see in greater numbers soon.

- Chillibreeze Business Research Team

Cadbury's ties up with Café Coffee Day

Cadbury will be supplying chocolates in regular bar forms and Café Coffee Day will innovate with it, combining coffee and other ingredients. The company will be charging Cadbury a branding fee for promoting its brand and will pay Cadbury a bulk rate based on per unit of chocolate purchased.

Pantaloon expects revenue of Rs. 50 billion from joint ventures

The Future Group's subsidiary, Pantaloon Retail India Ltd (PRIL) is targeting revenues of Rs. 50 billion from its joint ventures by 2010. The company will be investing Rs. 5 billion in these joint ventures and hopes for a ten fold return. Joint ventures are being looked at in seven key segments such as footwear, lifestyle, kidswear, food, entertainment and health.

It has already formed some of these agreements such as a 51% stake JV with Liberty India for footwear under the name Shoe Factory, a tie up with kidswear brand Gini & Jony, for the food segment it has tied up with Pan India Food Solutions and Galaxy Entertainment for the entertainment segment.

The company has tied up with Talwalkars for fitness and Indus Clothing for yoga clothing and fitness wear. For the lifestyle segment, the company has tied up with Planet Retail India Ltd, with the Etam brand for lingerie and inner wear and Goldiam International Ltd for its jewelry brand Ola.

Future Group and IOC sign agreement

The Indian Oil Corporation (IOC) and Future Group's Food Bazaar have signed an agreement to set up petrol pumps at the retailer's shopping center's and setting up Food Bazaar's at IOC run petrol outlets. With this agreement, The Future Group will have access to new and untapped markets in semi-urban and highway locations.

IOC will set up their petrol pumps at select Future Group malls, hypermarkets and supermarkets. The larger Food Bazaar outlets will run by the Future Group itself, smaller outlets will be run by IOC dealers, who would source the merchandise from Food Bazaar.

Timex in talks with Reliance Retail

Timex India is conducting talks with Reliance Retail to acquire shelf space or have a shop-in-shop fir its own brands. Timex has been ramping up operations and has invested Rs. 80 million in relocating its manufacturing facility in Himachal Pradesh to take advantage of the tax breaks the state government is offering. According to Kapil Kapoor, MD of Timex India, "We are rolling out a slew of initiatives, which will improve our market share. We are exploring options to bring in more brands to plug the gaps in our portfolio and are in talks with our strategic partner for this."

Unique Formats

While strictly not in unique formats, retailers and malls are working to develop unique entertainment that attracts customers and retains them. The boom in retail has also engendered innovative initiatives that result in social good in addition to profit.

- Chillibreeze Business Research Team

Shoppers' Stop plans on making 'fun centers' for families

Sunday, October 29, 2006

Shoppers' Stop is picking up 45% stake in Time Zone Entertainment Pvt. Ltd.'s India operations to connect with families and young adults via entertainment. BS Nagesh, CEO of Shoppers' Stop, told DNA Money that, "The board has just approved of the company's decision to synergize our existing business with entertainment facility. To this effect, we will be acquiring 45% stake in this family entertainment centre (FEC) company operating under the brand 'Timezone'."

At present Time Zone Entertainment operates three family entertainment centers (FECs) in India, Inorbit Mall in Mumbai, Gallops Mall in Ahmedabad and Salt Lake City Centre in Kolkata. According to industry sources, the company is planning to increase their operations to have 100 such outlets.

NIFT launches its own rural based fashion label

The National Institute of Fashion Technology has tied up with the Ministry of Rural Development's Swarnjayanti Gram Swarozgar Yogna (SGSY) to launch a fashion label, "i.m.". Asha Baxi, senior professor and dean of academics at NIFT, said, "The attempt is to get our budding fashion designers to understand and involve Indian craft and fabric, generate a perpetual employment mode for traditional craftspeople and, finally, of course, establish a sales point that will market the end-product."

NIFT will retail i.m. products at the Rajiv Gandhi Hasta Kala Bhawan in New Delhi. In this regard, 10,000 craftspeople have been already been identified in 5 states of Madhya Pradesh, Karnataka, Gujarat, Kerala and West Bengal, which will be handled by NIFT students in Delhi, Bangalore, Gandhinagar, Chennai and Kolkata.

Students will take artisans on educational trips to places such as Fab India, Anokhi, Dilli Haat, where they can see the various interpretations of their craft. This venture will see an investment of Rs. 30 million, on training, sourcing material, skill upgradation, marketing and product development and is likely to change the lives of the over 2,000 craftspeople.
Source: Business Standard

Retailers using EMI schemes

Taking advantage of younger customer's willingness to spend, retailers in Chandigarh and Punjab are using EMI and kitty schemes to increase customer spending. The first store to use this method was Genesis Colors, which has brand such as Satya Paul and Samsara. Only a select number of invitees were allowed who can put in a maximum of Rs. 2,000.

The success of the concept has led the company to launch the scheme in Pune, Amritsar, Ludhiana and possibly Delhi. Genesis Colors CEO Nalini Gupta, explained the reason for its success, "We have seen how women, instead of saving for household things, are now keen to spend of designer wear. Also, the desire of youngsters is driving parents to come here and purchase."
Source: The Economic Times

Intertnational

The opening of the Reliance store has triggered a fresh round of talks at the government level to allow global biggies like Wal-Mart and K-Mart entry to the "priority 1" market!

- Chillibreeze Business Research Team

Raj Jain is currently in Shanghai undergoing training and when contacted by ET, only said that he was the president and CEO of Wal-Mart's emerging markets, refusing to comment on any position related to the company's India operations.
Source: The Economic Times

Wal-Mart stepping up efforts to start operations in India

US retail giant is reportedly stepping up efforts to gain entry to the Indian retail market. Raj Jain president (emerging markets, excluding China and Japan) is currently in India to hire senior managers for its India operations. The company is also looking for a legal head and operations head for its India operations.

Arvind Singhal of Technopak said that although Wal-Mart is keen to enter the market soon, the process would take at least 15 months since its business policy was not clear. Wal-Mart is reportedly looking for an Indian partner to set up its business here, and its wholesale model of operations; Sam's Club is one of the likely access routes to enter the market.

Source: Daily News & Analysis

Starbucks tie up with Biyani likely

Although the majority of people in the country drink tea, coffee drinking has become a trend in urban areas and current coffee chains such as Costa Coffee, Café Coffee Day and Barista target consumers between the ages of 15 and 35. The Coffee Board of India estimates that Indians consume 80,000 tons of green coffee beans and export 206,400 tons.

Source: Forbes, The Economic Times

Bookstores

Action in a generally subdued category.several big players announced expansion plans, even as the virtual publishing industry thrives. At Chillibreeze, we booklovers rejoice, "More power to the written word!"

- Chillibreeze Business Research Team

Crossword aims to enter new markets

The company plans to focus on the South with new stores coming up in Bangalore, Coimbatore, Kochi and Hyderabad. In the north, Chandigarh and Nagpur will have new stores opening soon. Rather than just selling books, Crossword aims to become a part of the community, organizing cultural and social events for authors and book lovers.
Source: The Hindu Business Line

Future Group bets on publishing

The Future Group is betting big on publishing and is negotiating to acquire copyrights of best sellers from several foreign and Indian publishers. So far, the company has acquired Indian publishing rights for 18-20 foreign titles. These are in children's and health book segments and will be sold under the company's Depot brand, the Future Group's private label for books.

Future Group CEO stated to The Economic Times that "The group is in an advanced stage of negotiations with foreign publishers, including those from countries like the UK and Canada." Preeti Vyas, business head for Depot, added, "Since we will have exclusive copyrights for selling these titles in the Indian market, the price will be customized." Depot also plans to bring in Indian authors to produce independent titles.

Source: The Economic Times