Retailers look for fortune at bottom of pyramid

NEW DELHI: Major retailers around the country, who had adopted a ‘wait and watch’ policy till sometime back in the hope of real estate prices coming down, are now back in action. While on one hand, retail majors are pressing developers to go in for revenue sharing model along with providing other freebies, most of them that SundayET spoke to say that action will now shift to tier II & III cities.

Says Sanjay Dutt, CEO (business) Jones Lang LaSalle Meghraj; “In 2009, retailer brands will look at tier II and III cities. Luxury brands, however, will stick to metros. Pan India mall developers will look at more practical rentals in 2009. High streets may see consolidation with a high possibility of a revenue-sharing model in terms of the overall cost-to-retailer on many high streets. We have seen a decisive scaling up in transactions in the hypermarket category.

The demand is clearly higher for stand-alone high street locations rather than mall-based locations. This year is expected to be a year of consolidation for Indian retail sector. As a result of adoption of best practices and restructuring of business models by the retailers, organized retail is expected to realign itself to the market conditions and create new areas of growth in 2009.”

Future Group, the largest retail company in India, that has a presence of about 11 million sq ft plans to expand to about 30 million sq ft by 2011. But the retail space, the company says, was already finalised sometime back.

Says Kishore Biyani, CEO of Future Group; “So far there were no deals happening. Now suddenly there is activity being seen. We are also looking at striking new deals at a few places. Seeing the condition of real estate market, even developers are willing to negotiate now. We plan to expand our presence to at least 100 cities and the focus is now tier II and III cities.”

He feels it will be a win-win situation for both the retailers and developers. Future Group’s Big Bazaar aspires to be present in all the cities with a population of more than three lakh. They have stores in cities like Chandigarh and have recently opened a store in Nashik.

According to industry sources, the retailers are not only in negotiations on the fresh deals but the existing deals are also being discussed again. Brand House Retail (BHRL), a subsidiary of Mumbai based S Kumar’s Nationwide, has so far 700 stores across India and plans to open at least 400 more this year.

“With the situation changing, developers have realized that its no point charging the tenant what he can’t pay. Property prices coming down have ensured that our plans are on track,” says Tarun Joshi, MD, BHRL.

Developers, who till sometime back were not ready to even negotiate prices, are now offering freebies to attract tenants. According to industry sources, majority of the developers across the country have lowered the common area maintenance charges that include facilities like air-conditioning, toilets and general space upkeep. In fact this itself constitutes almost half of the rentals paid.

Says Ambeek Khemka, president, business development of Vishal Retail: “The situation has reversed now. There is more space in market than the demand. The developers don’t want vacant space in their malls as no one wants to be in a mall with low footfalls.”

Ajit Joshi of Infiniti, which runs the Croma electronics retail chain says, “Developers have accepted that they cannot dictate terms any more. Both retailers and developers are now arriving at an understanding that is beneficial for both the parties involved.”

According to a recent Cushman & Wakefield report, in certain micro-markets many retail spaces saw conversion into office space for quick revenue returns due to continued and increasing demand for office space. This trend is expected to continue in the coming few quarters too.

Sources :- Economic Times

‘Consumer-based economy to sail India out of crisis’

Ahmedabad (PTI): The expanding consumer-based economy is what the experts and entreprenurs, attending Jain International Trade Organisation Global Summit, believe would help India come out of the global economic crisis.

Speaking at a session titled ‘India Today and Tomorrow’ here on Sunday, chairperson of marketing in the Goizueta Business School at Emory University, U.S., Jadish Seth said that because of the rising number of middle-class, India’s economy is driven by consumption of goods and services which will help India sail through the economic crisis.

“India has under gone three major changes. First was the independence, second the libralisation policies introduced in the early 90s’ and the latest being the move towards the comsumer-based economy,” Seth, said while addressing the Global Summit organised by JITO here.

“More Indians are now outsourcing their household chores. The Indian household which used to be like a production unit a decade ago is now fast becoming a consumer unit,” Seth said. This ever-expanding demand for service will boost the economy and help India sail through the economic crisis, he added.

“Our country being an emerging economy like China and Brazil, will recover faster from the global crises, unlike the U.S. which will take more time to get back on track,” the author of over 200 books and research papers said.

Seth said that a large public sector economy and less exposure to foreign investments have shielded India from the impact of global crisis. Future Group chief Kishore Biyani said that consumption will lead to the development in the country.

“There are big opportunities for service and retail sector on account of the increasing consumers in the expanding middle-class population in the country,” Biyani, head of one of the leading seller of consumer goods in India said.

“We believe more consumption will lead to larger development. Also the opportunity in India is best for entrepreneurs,” he added. Talking about importance of women and youth in the growing consumer and retail business, Biyani said power of women and youth have remained untapped.

“Woman is symbol of power in society and also in retail business. Retail business is about details, and women give more importance to details. Hence I believe that women could become big retailers,” Biyani said. However, he regretted the fact that there were less number of women in the retail bussiness.

Sources :- The Hindu

Reliance Retail plans private label sale to kirana stores

Mukesh Ambani’s Reliance Retail is understood to be exploring ways to supply its private labels in food and groceries to kirana stores and small retailers in the country. A separate entity, most likely to be named Reliance Foods, will carry out the private label business.

The move is expected to give high retail exposure to its products in innumerable kirana stores in the country, without having to spend much on advertising and marketing expenses apart from generating business volumes. When contacted, Reliance Retail spokesperson said: “As a policy, we do not comment on speculation.”

In a recent reshuffle at the company, Reliance Fresh head Gunender Kapur was made head of private labels business in the company, sources close to the development said. “We have plans in this direction. Once, we entirely cater to the demands of our stores, we can certainly look at supplying them to other retailers since we have required infrastructure, process and systems in place. But before that, we should completely cater to our own stores,” said a source in the company.

Sources said that after launching private labels in food and groceries, Reliance Retail is also expected to launch soaps, detergents, cosmetics and non-FMCG products under its private labels segment with a new brand name. The company’s flagship chain Reliance Fresh sells staples and food items under Reliance Select and Reliance Value brands, dairy products under ‘Dairy Pure’ brand.

Kishore Biyani’s Future Group, too, also have plans to sell its private labels to stores outside the group and it has already carried out pilot studies for this venture and is expected to start the business soon. Future Logistics, the logistics arm of the group, also has plans to foray into wholesale distribution of products such as food, apparel, grocery to organised retail chains in the country, which is expected to start from this month.

Nearly 30 months ago, Reliance Industries announced an ambitious plans to invest Rs 25,000 crore to expand its stores in the country to take the advantage of organised retail in the country. Initially, the company was planning to open 2,000 stores by 2008, and 5,000 stores by 2010, but due to a delay in delivery of properties, economic downturn and demand slump the company had to scale back its expansion plans.

Reliance Retail runs over 850 stores, which include stores for food and grocery, consumer durables, beauty and wellness, jewellery, footwear, among others. Its formats such as apparel chain Reliance Trends, beauty and wellness format Reliance Wellness, consumer durable chain Reliance Digital have private labels or are in the process of launching private labels.

“The whole idea of private labels is based on pricing and retailers get enough volumes on their shelf at marginal costing. Retailers have an opportunity to sell their private labels to kirana stores. But it depends on their strategy on pricing and marketing right products,” said Naimish Dave, a director with OC & C Strategy Consultants.

Added Sadashiv Nayak of Food Bazaar, a unit of Future group: “We do sell products of regional vendors in many stores and they compete exceedingly well with national brands. If product-price proportion is good, I do not see any problem in a retailer selling others’ private labels,” Nayak said.

Business consultancy Technopak’s Purnendu Kumar says retailers can sell their products to mom-and-pop stores only through their cash and carry ventures as reaching out to individual stores would be tough preposition.

“Supplying to kiranawalas is a tedious job as you need to have different points of sale, enough manpower and transport and delivery systems. But selling products through cash and carry stores is a viable preposition,” said Purnendu Kumar.

Sources :- Business Standard

The future of organized retail in India

What is the future of organized Retail in India?

There is no magic answer to this question. However, one can make some educated guesses based on established best practices and how Indian conditions will modify or replace conventional wisdom. Let’s consider some of the factors that could affect the future of organized Retail in India.

Consumers - Who understands the Indian consumer the best will win in the end. What do we mean by the Indian consumer? Is it the teenager in Mumbai who commutes by local train, buys fashionable clothes from Linking Road and watches movies at the multiplex? Or is it the housewife who buys vegetables from the sabzi mandi and saves up money for chicken on Sundays. Or is it the fisherman out at sea who uses a cellphone to communicate his catch to the market on the shore? The Indian consumer is hard to pin down. As someone wisely said, the Indian consumer shifts loyalties with every 25 kilometers and with every 10 Rupees. The dimensions to deal with include class, education, language, caste and local customs in addition to the standard marketing dimensions used in the West.

Merchandising – Merchandising is what retailers do. This aspect has not received much media attention in India. However, this is often what differentiates a successful retailer from a flash in the pan retailer. Examples that come to mind include Zara, 7-Eleven and Walmart. Put simply, merchandising is the art-science of deciding what to sell where, at what price and when. The retailers that understand the Indian consumers and provide the right products at the right price will beat the competition.

Talent - This is already becoming a bottleneck for several Indian retailers. Experienced corporate professionals as well as fresh talent at the store level are hard to come by. The retailers that are able to retain their talent and provide them with growth opportunities could easily gain an upper hand in running a successful operation in India.

Real Estate – This is a huge concern in India where quality real estate has become too expensive for many retailers to run a successful operation in cities. This is especially true for mass merchandise/discount retailers who operate on razor-thin margins. The acquisition of cheap leases in prime areas could decide whether a retailer becomes profitable at all or not. Another strategy is to expand in smaller towns and villages where real estate is still affordable and purchasing power is not as bad as one might think.

Supply Chain - This often quoted but not-so-often understood term basically refers to the back-end operations of a retailer. This includes the entire network of suppliers, warehouses, distribution centers and logistics operations. Effectively getting products to the right place at the right time is a lot tougher than it sounds when there are thousands of items and hundreds of stores involved. The supply chain infrastructure needs to be built from the ground up in India. This could easily affect the balance sheet of any retailer planning to start operations in India.

Policy - Although most people agree that FDI in Retail is just a matter of time, what this means is that till FDI is allowed, we will see our domestic players like The Future Group and Reliance Retail leading the way. What will happen when FDI is eventually allowed is anyone’s guess. If the examples of Brazil or China are taken into account, we will see a lot of consolidation with a few (6-8) large players remaining and several smaller niche players. Retail is a highly localized business (local preferences, local talent), so there is no guarantee that a foreign player will do better than an Indian player, as evidenced by Walmart’s failures in Germany and Korea. Surely, there are interesting times ahead!

Sources :- Indian Retail News

Mom-and-Pop stores stay alive

The year 2008 saw some dramatic twists in the discourse on big retail. From a spate of controversies surrounding the entry of corporate houses and fears that big players will swallow small kirana stores, the debate has clearly shifted to whether big retail can survive in its current form.

“Kiranas have clearly won the first round. The story of ‘modern retail vs Kirana’ is over. The past year was about the survival of modern retail,” said Kishore Biyani, CEO of India’s biggest retailer Future Group that operates hundreds of stores in multiple formats.

Modern retail players such as Future group, Reliance, Aditya Birla group, Subhiksha and Vishal Retail went on an expansion spree creating footprints across the country in different formats. Many other smaller players such as 6Ten, Wadhwan Retail, LM365 too joined them. And in the expansion frenzy, many of them lost their way.

By the end of the year, retailers were struggling with sales, shutting down stores and laying off staff in hundreds. “We have grown too fast. With this kind of pace, we make mistakes,” says Thomas Verghese, CEO of Aditya Birla Retail. He admits that retailers chose wrong locations or paid too high rentals in the race to open more stores.

Meanwhile, Kiranas rarely shut shop. Not that big retailers failed to attract shoppers. But they failed to manage cost. “Before modern retail could attain scale, the economy went into a tailspin,” said Mr Biyani, adding that Kirana has been more efficient at managing cost.

Both Kirana and big retail had their sales going up, possibly because a booming economy, rising income levels and a higher propensity among middle class to consume more. Both Kirana stores and local vegetable vendors survived because they offered a value proposition, which modern retailer couldn’t match- local vegetable vendors almost always offered fresher vegetables than the modern retailer, while Kirana offered the luxury of home delivery and interest-free credit. Naturally, customers chose different shopping destination for different needs.

“One could see a slight bias towards processed food and personal care products in terms of sales through modern retail stores,” said Mr Verghese.

A downturn in the economy and terror strikes also played spoilsport for the big retail, still in its infancy in India. “Consumers don’t want to spend as they fear for their jobs. Terror strikes have further eroded consumer sentiment and reduced footfalls at shopping destinations,” said R C Agarwal, chairman and managing director of Vishal Retail.

Retailers see 2009 as the year of consolidation and are cautious about expansion. Most retailers are already in cost-cutting mode and some are even looking at exiting the business lock, stock and barrel. Some of the smaller retailers have been seeking buyers and lobbying for FDI in retail. “I will sell my entire stake as soon as FDI is allowed in the sector,” said a Delhi-based retailer who had earlier held talks with at least two potential buyers, but failed to seal a deal. He says no retailer with less than 150-200 stores will survive. While Mr Biyani is in favour of calibrated approach towards FDI in retail, Mr Agarwal favours 51% FDI in multi-brand retail.

As sales slipped and cost mounted, several retailers were also engaged in a tug of war with suppliers. Major suppliers refused to supply goods to many retailers after they failed to pay or delayed payments. Pilferage was another challenge retailers struggled to find solution to, which made a significant dent in their margins.

The silver lining, however, was a fall in real estate rentals, which is likely to bring down the cost for retailers.

Sources :- Economic Times

Big bazaar launches second store in Nashik

Nashik: Big bazaar, country’s largest hypermarket chain from Future Group on Thursday launched its second store on Nasik-Pune road near Nehru Nagar.

With this launch we now have 103 stores in 62 cities, Pantaloon Retail (i) Ltd’s West Zone Head, Rajesh Joshi said.

The new store will display over 1.6 lakh products in various categories, including apparel, general merchandise, food, non-food, fresh vegetables and fruits as well as electronic, furniture, books music and stationery, mobiles, health zone and others, he said.

Various concessions, including shopping has been arranged till January 5, 2009 for consumers, he added.

Sources:- The Financial Express

Future Group hopes to sail thru difficult times in Q4

MUMBAI: Retail chains may be struggling in the face of the economic slowdown, but Kishore Biyani’s Future Group seems to be buoyant in the New Year, expecting to do well in the quarter ending March 2009.

“I don’t see a problem in this quarter. February and March are traditionally good months for us…and with interest rates coming down, we hope to do well (in the quarter),” Future Group Chief Executive Officer, Mr Kishore Biyani said.

With regard to Future Retail, Mr Biyani said October and November were “two good months” for them in terms of sales. Then in December, it announced the three-week long Great Indian Shopping Festival, which would end on January 4. “We have had requests to extend the shopping festival. We are thinking about it,” he said. “Most formats have done well, save for the home segment,” he said and attributed the reason to the realty sector having been through volatile times.

Overall, he termed quarter three as having done well, but did not give details on the sales clocked or a comparative view on performance year-on-year. “We are trying to boost consumption. We are working on something else (on similar lines as the GISF). We have something lined up in February and March across all segments,” he said but refused to reveal more. The group has another shopping bonanza plann ed for January 26 as well, he said. – PTI

Sources- The Hindu

Retail chains gear up to combat slowdown

KOLKATA: The Year-end sales may have been good, but the country’s leading retail chains are now gearing up to fight for an overall slowdown in sales in the second half of the fiscal. The big retailers are looking at inventory optimisation, efficiencies in supply chain, better product assortment and reducing the number of stock keeping units (SKUs).

The retailers feel these strategies will ultimately help them tide over the fall in consumer demand, improve gross margins and safeguard their net profit. All such initiatives come at a time when the country’s apex retail trade body Retailers Association of India (RAI) feels the growth of the organised retail industry will fall down from 35% to 10-12% in 2008-09. The organised retail industry in India is valued at Rs 27,000 crore as against the total retail market of Rs 20 lakh crore.

“Despite of good year-end sales led by promotional offers, there has been a fall in overall sales in the October-December period. While value retailers are slightly better-off, the worst hit are those targeting the upper-middle class. Hence, almost all retailers have started taking initiatives to reduce cost and drive efficiencies,” RAI CEO Gibson Vedamani told ET.

India’s largest retailer Future Group is looking at customising product assortment in each of the stores to suit a particular locality and has taken several steps to improve processes. Future Retail CEO Rakesh Biyani said such initiatives should help better sales and margin realisation over the next 2-3 quarters.

Shopper’s Stop has decided to spruce up consumer experience to get the maximum share of the consumer’s wallet and is also tightening its supply chain. “We are scaling down our back-end infrastructure. For instance, if we had earlier planned a distribution centre for our hypermart Hypercity, keeping in mind the need for 20-30 upcoming stores, we are now building just half of the space to meet immediate requirements. This helps us save on our capital,” managing director BS Nagesh said.

Tata Group’s book-music-gifts retailer Landmark has started inventory optimisation to ensure better cash utilisation. “We are cutting down on our stock by lowering the number of units of a particular SKU. This will ultimately improve the efficiencies of suppliers,” said COO Himanshu Chakrawarti. Mr Vedamani said several retailers are even lowering operating costs such as re-negotiating rentals, electricity cost and are rationalising employee salaries. “If all such efforts even translate into 2-3% improvement in gross margins, it will ultimately secure their net profit,” he said.

Sources:-Economic Times

FutureBazaar selects CyberSource for anti-fraud solution

Driven by Indian B2C eCommerce sales, that is expected to grow at 195 per cent between 2008 and 2011 (eMarketer, Asia-Pacific B2C E-Commerce, January 2008), FutureBazaar India, the online shopping portal of Pantaloon Retail, one of India’s leading retailers, has selected CyberSource Ltd’s Decision Manager anti-fraud solution.

FutureBazaar offers a wide range of home products online including toys, clothing, books, consumer electronics, and larger items such as kitchen appliances. CyberSource Ltd is a subsidiary of UK-based CyberSource.

On the development, Virendra Chhatbar, chief finance officer, FutureBazaar, said, “As eCommerce continues its rapid growth in India, retailers large and small must be increasingly vigilant to the threat of fraud. CyberSource’s proven risk management solution gives us that greater level of intelligence. CyberSource has considerable experience working in the Indian online environment, a factor that strongly influenced our decision.”

Using Decision Manager, FutureBazaar can now access over 150 global validation tests to screen for fraud and determine in real time whether online transactions should be accepted, rejected or marked for further review, said a company press release.

Sources:— IndiaRetailing Bureau

Triveni to sell off its rural superstore chain

MUMBAI: Triveni Retail Ventures, a 100% subsidiary of Triveni Engineering and Industries, is understood to have sounded out leading retailers for selling off its rural superstore chain Triveni Khushali Bazaar. Industry sources said the group may either divest the venture or offer controlling stake to prospective buyers. The company is planning to focus on its core operations. Grappling with a tough business environment, most corporates have been unable to infuse sizeable investments to scale up their non-core ventures.

Also, corporates have been unable to take on the challenges of managing a retail venture, the supply-chain dynamics and scaling it up. As a result, the ventures have been largely confined to certain states and, therefore, unable to achieve economies of scale. Very recently, the Godrej Group sold off a 70% stake in Aadhaar, its rural retailing initiative, to the Kishore Biyani-led Future Group.

Sources said investment bankers have sent feelers to players like Future Group, Aditya Birla, ADAG and Reliance Retail for the Triveni entity. When contacted, an official spokesperson declined to comment on the move. “If there are some discussions at the board level, we would be unaware of it,” he said.

At an analysts presentation on April 29, 2008, a company official had said in response to a query that “partnerships are the mantra for retail going forward at least in the near term, where people are looking at consolidation of supply chain, both in terms of sourcing of farm produce and bringing produce for sale right down to the rural areas.” “So, we are certainly open to relationships,” the official had said.

Triveni is in the business of sugar, steam turbines and engineering activities. Triveni Khushali Bazaar has over 40 stores, primarily in the northern rural markets, with verticals like agri products and services, non-agri products and financial services. These are essentially one-stop shops for farmers and rural customers to buy agri-inputs, cattle feed, cycle, plastic furniture, FMCGs, automobiles, etc.

Retail majors like Future Group and Reliance Retail are keen on stepping up their presence in rural markets, which constitute a significant portion of the Indian consumer base. Aadhaar now serves as a procurement hub for the Future Group’s retail formats like Food Bazaar and KB’s Fair Price, and will also be a supplier to other retailers. In 2007, ADAG’s Reliance Money had tied up with Triveni Retail Ventures to retail financial products and services.

Reliance Retail had announced plans to set up town centres with low-cost malls and rural hubs in towns with a population of less than 50,000. India’s rural retail market is expected to grow by 29% to Rs 1.8 trillion by 2010, helped by rising incomes and changing consumption patterns, an industry body report said. Issues like poor infrastructure, supply chain inefficiencies and competitive pricing in the rural markets are the main challenges in tapping an otherwise large consumer base.

ITC’s e-choupal and Choupal Sagar, Triveni Khushali Bazar, DCM Shriram’s Hariyali Kisaan Bazaar, IOC’s Kisan Seva Kendras are some of the main players in the rural retailing sector.

source:-economictimes.indiatimes.com