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Archive for January, 2009

Lifestyle retailers upbeat despite fall in growth rates

Posted by retailigence on January 12, 2009

In the face of the economic slowdown, lifestyle brands are putting up a brave front. While consumer buying may not be as big as one would like it to be and sales growth rates have dipped, the scene is not as bad as in the Western world, say retailers as they hope for a positive year ahead.

“Fashion retail has not been impacted in a big way. Not even 0.5 per cent of the working population has been hit in India,” says Mr Tarun Joshi, CEO and MD of Brandhouse Retails, which manages exclusive outlets for S.Kumars Nationwide brands – Reid & Taylor, Carmichael House, Stephens Brothers and Belmonte. (Brandhouse is also the exclusive India franchisee for luxury brands Alfred Dunhill and Escada.)

The Indian economy is more stable than other economies across the world and one must not confuse India with the rest of the world, says Mr Sandeep Kulhalli, V-P, Retail and Marketing, Tanishq. While admitting that the company’s rate of growth has slowed down, the Rs 2,000-crore jewellery brand believes it can still post a 30 per cent growth in sales this year.

At Tanishq, studded jewellery had a sales growth of 40 per cent in the first few months of the financial year; it has dipped to 20 per cent now. “But this is good enough for us to maintain competition and sustain. The people who are hit worst in India are those who invested in real estate, property and the stock market, not retail. Of course, sentiments are poor; there is some pressure. Spending may not be robust but people are still buying. The salaried class will still be with us,” says Mr Kulhalli.

Which is why Tanishq is keen to remain connected with the consumer. It hopes to continue marketing efforts with zeal as it sees no reason to cringe and “pull out of consumer space.” Currently, a TV campaign is on air featuring its new diamond collection – Aria. Tanishq plans to launch more collections backed by customer activities. It is planning a marketing effort for plain gold in association with the World Gold Council next quarter.

Brandhouse Retails too has big plans for the Indian market, which includes a joint venture with a European private apparel label the next financial year, apart from the launch of a few more international brands.

The current crisis in the real estate market may have put the brakes on its store expansion plans, but Brandhouse hopes to tide over the situation and meet its target. “Real estate and mall projects are being delayed endlessly. That has set us off a bit. But we hope to meet our target of 859 stores by FY09. Currently, we are close to 700 stores,” says Mr Joshi. He hopes the Rs 313-crore Brandhouse Retails will finish this year with a topline of Rs 700 crore.

Sources :- The Hindu


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Luxury brands still a tough sell in wealthier India

Posted by retailigence on January 12, 2009

Mumbai: On a recent evening at Mumbai’s luxury Taj Mahal Hotel, shoppers tried on sequined sandals and handmade moccasins at Joy Shoes, a family business that has sold out of its only shop for nearly 70 years.

Around the corner, a Moschino store with stylish displays of apparel and accessories off the Milan runways stood empty. Starting at 3,500 rupees ($70) for a pair of men’s shoes, Joy is not cheap. But the key to its enduring popularity, says Munna Javery, the third-generation owner, is knowing what customers want and maintaining relationships with them over the years.

These are just two of the already considerable challenges facing global luxury retailers in India. Despite its growing number of millionaires, India lags emerging market peers China and Brazil because of a lack of quality retail space, high import duties on luxury goods, a cap on ownership in local units, excessive red tape and piracy.

India had 123,000 millionaires in 2007 and showed the fastest pace of expansion, a Merrill Lynch/Capgemini report said, but that was the smallest number in the “BRIC” emerging markets quartet, with China already having more than triple that number of super-rich. BRIC comprises Brazil, China, India and Russia.

Luxury goods in India also make up the smallest proportion of the overall retail market, just 0.4 per cent, according to a Bain & Co report, compared to 2.7 per cent of China’s retail market.

“For luxury in India, the path is bumpy and long,” said Mohan Murjani, chairman of the Murjani Group which launched Gloria Vanderbilt jeans and Tommy Hilfiger globally, and partners such brands as Gucci, Calvin Klein and Jimmy Choo in India. “You need size, experience and patience for the long haul.”

Allowing global retailers access to India has long been a controversial topic because of concerns of job losses, and it was only in 2006 that foreign single-brand retailers were permitted to take up to 51 per cent in a local venture, opening the doors to brands such as Gucci, Versace, Chanel and Burberry.

But most brands have been forced to curtail their grand ambitions despite an economy that grew about 9 per cent in the last three years, with Louis Vuitton only having four shops to show for its five years in the country, compared to 25 in China, already the world’s No. 3 market for high-end goods.

“In any emerging market you can only target a very small part of the market for luxury,” said ClaudiaD’Arpizio, a partner with Bain & Co in Milan, who authored a recent report on luxury. “In India, in addition to that challenge is the regulatory framework and the undeveloped retail infrastructure,” she said.


Once the exclusive preserve of maharajas and business tycoons, luxury brands in India have found new customers in an increasingly wealthy middle-class, the growing ranks of working women and a youthful population that is not afraid to splurge. But challenges abound, such as high store rentals and taxes.

New Delhi’s small Khan Market, with its decrepit buildings, was recently ranked among the world’s most expensive retail real estate, where monthly rental is 1,200 rupees ($25) per square foot, higher than better equipped retail areas in Amsterdam and Stockholm.

The absence of quality locations has forced luxury brands to set up shop in top-end hotels, which is not ideal, said Murjani, who has just two Gucci stores in India, compared to 16 in China.

Add to that the high tariffs on imported goods, which can bump up prices by more than 25 per cent compared to Dubai or Singapore, and a long-abiding suspicion of foreign brands from a time when local importers sold overpriced, outdated products. For this, brands have only themselves to blame, Murjani said.

“Brands have to satisfy the consumer on the price point, the offering, the total experience — a small store in a corner of a hotel is not going to do the trick,” said Murjani, who last year opened India’s largest luxury space, a 3,400-sq ft Gucci store.

“Consumers will simply shop in Paris or Singapore,” he said, noting Indians still splashed out about $500 million on luxury brands abroad a year, nearly the same amount they spend at home.

The money goes mainly on watches, fragrances, sunglasses, leather goods and menswear, with Indian women still favouring traditional apparel and jewellery, despite the growing numbers of Bollywood stars who get decked out in Western designer wear. “India has a strong tradition in luxury apparel and jewellery so it should be easier to sell the concept,” D’Arpizio said.

“But the preference is for the intrinsic value of the jewellery rather than the brand, so a Cartier or a Tiffany’s will have a hard time cracking the market,” she said.


There is hope for luxury retailers, though.

India’s trade minister recently said he was “seriously considering” allowing foreign retailers to fully own their units in the country, a legislation analysts say is not so controversial as it does not threaten small mom-and-pop shops and traders.

There is pressure from the EU to cut taxes to meet WTO requirements, and high-end retail spaces are coming up in Mumbai, Bangalore and New Delhi, including the Emporio Mall, the first all-luxury complex, with gold-plated ceilings and marble floors.

Over the long term, the rising incomes and expanding economies of emerging markets such as India will provide plenty of opportunity for luxury retailers, D’Arpizio said. India’s luxury market is likely to grow at an average annual rate of 25 per cent over the next five years, she said, trailing only China’s 30 per cent growth and Brazil’s 35 per cent.

But while India’s super-rich may seem better insulated from the financial crisis that has curbed the appetite for luxury goods elsewhere, they will be harder to entice. “India has her own concept of time for absorbing change,” said Neville Tuli, chairman of auction house Osian’s in Mumbai.

“It’s not enough to just throw a nice party and talk about the glamour of your brand. It can take 10 years, maybe more to build something, and most companies don’t want to wait 10 years.”

Sources :- The Financial Express

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Dabur changes strategy for retail venture

Posted by retailigence on January 12, 2009

NEW DELHI: Having curtailed expansion plans of its retail venture, Dabur India’s wholly-owned retail subsidiary H&B Stores now plans to setup smaller format stores with revised targets. The company announced the opening of its latest store on Monday in New Delhi. Though the positioning of the outlet is the same as before – focusing on beauty, health and wellness products – it is of smaller format of about 800 sq ft. The company said in a statement that this outlet marks the introduction of branded private labels, beginning with baby care products.

The company proposes to set up 12-15 additional stores to its Newu network by the end of the 2009-10 fiscal. “The newu brand hopes to set new standards of customer focus and service,” Newu head (North) Manish V Asthana said. As of now, eight Newu outlets are operational across the country.

The company had initially planned to set up large format stores of 1,500-6,000 sq ft. But as part of the revised plan, most upcoming outlets will be in the range of 700-1,200 sq ft. Initial plans also included setting up 350 health and beauty stores on an investment of Rs 140 crore by 2010.

As first reported by ET last month, the CEO of H&B Stores Peter Baker has put in his papers. The company has not yet appointed a replacement to Mr Baker, and day-to-day operations of the retail venture are being overseen by the management committee of H&B Stores.

H&B Stores was set up in early ’07.

Sources :- Economic Times

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Retailers look for fortune at bottom of pyramid

Posted by retailigence on January 12, 2009

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

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

Posted by retailigence on January 12, 2009

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

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Reliance Retail plans private label sale to kirana stores

Posted by retailigence on January 12, 2009

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

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Key players in the Indian Retail sector

Posted by retailigence on January 5, 2009

Who are the top retailers in India today?
Here’s a brief summary of the key players..

Pantaloon Retail (India) Pantaloon’s managing director Kishore Biyani believes in changing the rules. When Pantaloon started the Big Bazaar discount stores in 2002, malls were not part of the shopping culture. Big Bazaar became a hit, as it combined the look and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality. Headquartered in Mumbai, the Rs 3,500-crore company now operates over 5 million sq ft across 40 cities.

Jockey POCO BriefShopper’s Stop A menswear store owned by K Raheja in the Mumbai suburb of Andheri in 1991 has now transformed into Shopper’s Stop, with 27 departmental stores. The company entered airport retailing in a joint venture with the Nuance Group. It also launched India’s largest hypermarket, Hypercity. In 2005, it bought the Crossword bookstore chain.

Lifestyle Growing from one store in Bahrain in 1973, the NRI-led Landmark Group today operates over 5 million sq ft in the Middle East and India. The group’s first Lifestyle store in India opened in Chennai in 1999. Now it has 325,000 sq ft in Chennai, Hyderabad, Bangalore, Gurgaon and Mumbai. Its first hypermarket, branded as ‘Max’, is expected to open soon.

Reliance Retail Mukesh Ambani’s 15,000-people Reliance Retail has opened 250 convenience stores, branded as ‘Fresh’, across the southern states. It is now planning to launch 30 such outlets in Mumbai. Reliance Retail plans to invest Rs 25,000 crore on hypermarkets, supermarkets and specialty stores in the next four years. The first hypermarket will be up in Ahmedabad by the end of July.

Aditya Birla Retail The company, which will operate under the brand ‘More’, has selected two formats – hypermarkets and supermarkets – for its initial foray. The first store has opened in Pune. Last January, the company acquired Trinethra Super Retail, which has given it more than 5,00,000 sq ft and a strong presence in the South. The Birlas’ outlay for the business over the next three years is Rs 9,000 crore.

Bharti Retail The world’s largest retailer Wal-Mart, which prefers to go it alone outside the US, chose Sunil Mittal’s Bharti Enterprises as its partner in India. The venture will start with the cash & carry (wholesale) format, which could be extended to retail operations once foreign direct investment is allowed in multi-brand retail, as is expected. The entity is yet to start operations as the formal agreement has not been inked.

Sources:- India Retail News

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The future of organized retail in India

Posted by retailigence on January 5, 2009

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

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Falling retail rents give stores a lifeline

Posted by retailigence on January 5, 2009

Retailers get boost in tough times with more power to negotiate rents

Retail rents fell for the first time in 15 years in 2008 and will not return to growth until 2013, handing struggling retailers a potential lifeline to stave off administration. The decline in annual rents will give retailers substantially more negotiating power over landlords, as they battle some of the toughest trading conditions on the high street for 30 years and as an extra 2.5 million sq ft of new UK shopping centre space opens in 2009.

Retail rents fell by 0.4 per cent in 2008 – the first annual fall in rents since 1993, when they tumbled by 1.9 per cent, according to the property services company King Sturge. Stephen Springham, the head of retail research at King Sturge, said: “It is not going to be an easy 2009 for retail sales, but there will be some leeway on the rental side which will allow retailers to continue trading on slightly more favourable terms – giving them some much-needed breathing space.”

King Sturge forecasts that retail rents will tumble by 5.6 per cent in 2009, 4.7 per cent in 2010 and 2.1 per cent in 2011. In 2012, there will be zero rental growth, but rents will finally increase by 1.6 per cent in 2013. King Sturge said that more than 90 per cent of the 2.5 million sq ft of new shopping centre space that will open in 2009 will be leased, but on fav-ourable terms to retail tenants such as monthly rental payments, rent-free periods, break clauses and generous incentives, including contributions to shop fitting fees. Over the past few months, retailers including House of Fraser, the department store, and Focus, the DIY retailer, have agreed with landlords to pay rents on a monthly basis on some stores, instead of the hitherto standard practice of paying a quarter in advance.

Mr Springham said: “Most retailers will push for monthly rents. It is a bit more than retailers whingeing – 12 payments a year does give you a lot more fluidity. Landlords will have to back down on a number of issues.”

The property firm said there is little evidence to date that the schemes slated for 2009 will be pulled completely but “some may lapse into 2010”. King Sturge’s retail forecasts are part of its wider 2009 property predictions survey to be published tomorrow. Retailers still remain committed to taking space in quality new shopping centres. Of the 10 million sq ft of retail space that opened in 2008, about 95 per cent is already let, said King Sturge.

It forecasts that the volume of retail sales will fall by 1 per cent, and 0.6 per cent in terms of sales value, in 2009. The worsening economic conditions this year will lead to an increased number of retailers collapsing into administrations and subdued occupier demand.

However, in contrast to the recession of the early 1990s, King Sturge said the greater involvement of private equity firms in retail and more rigorous business recovery procedures – notably pre-pack administrations – mean that large numbers of shops will not be left empty. The property firm said: “Consequently, the ‘boom – bust – disappear’ cycle is now largely defunct.”

In the past month, Whittard of Chelsea, the coffee and tea specialist, The Officers Club, the discount menswear chain, and USC, the young branded fashion chain, have been bought out of pre-pack administration with reduced liabilities. Experian, the data specialist, has forecast that 440 retailers will collapse in the first four months of 2009.

Sources :- The Independent

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More stores expected to close in ’09

Posted by retailigence on January 5, 2009

Circuit City, KB Toys, Mervyn’s, Steve and Barry’s, Whitehall Jewelers, Linens ‘n Things, Showcase Home Entertainment. How many more will join the growing list of bankrupt and shuttered chain stores before the end of the economic crisis?

The International Council of Shopping Centers predicted in December that, by the end of 2008, 148,000 stores would close nationally. The New York-based retail trade group expects an additional 73,000 store closings in the first half of 2009.

Retailers face three main challenges in the tough economy: Increasing shopper frugality, tighter lending standards from banks and tougher bankruptcy laws. Experts say that some stores that might have emerged from bankruptcy a few years ago will close permanently under regulations that make it harder for stores in financial trouble to get loans.

Also, some retailers – including Sears Holdings Corp., Talbots Inc. and Ann Taylor Stores Corp. – have said they may close a number of underperforming stores in the new year. Other chains have said they will postpone expansion until the economy improves.

But retail is “not all doom and gloom,” said leasing expert Kim Choukalas, vice president for leasing at Westcor, the Valley’s biggest shopping center company.

Experts – including Choukalas; marketing Professor Stephen Hoch at the University of Pennsylvania’s Wharton School; and retail analyst Mary Brett Whitfield, senior vice president at TNS Retail Forward in Columbus, Ohio – have identified keys to retailing success in 2009.

“It’s an ever-evolving world out there,” Choukalas said.

Here are some trends to watch:

• Marketing to teens and young adults. Stores such as Buckle, Forever 21 and Aeropostale are coveted by many shopping-center developers. Forever 21 is expected to fill a number of vacant Mervyn’s stores. And even J.C. Penney has jumped on the trend and says it is no longer your grandmother’s store – but your teen daughter’s.

• Luxury within limits. Coach’s success shows that shoppers still want quality in the down economy but are unwilling to go into deep debt for it. Handbags at Coach range in price from less than $100 for a canvas wristlet to $300-plus for a large leather bag.

• Family-friendly. PetSmart, BestBuy and GameStop don’t have much in common at first glance. But experts expect all of them to do well in the new year for one reason: They sell products that families can use while cocooning at home with kids – or pets.

• Deeper discounting. It’s no surprise at least one report shows Wal-Mart Stores Inc. made more money during the holidays than its competitors combined. Even the wealthy want deals on groceries, basic apparel and electronics these days. Look for competitors such as Target to try to beat some prices at Walmart Supercenters.

• Uniqueness and interactivity. Stores that can come up with new and different products and formats will be winners. Think Apple, a store that is more focused on educating and entertaining customers with its product than making instant sales. Or Sephora, which allows customers to experiment with cosmetics in the store, or take home free samples to try.

In bankruptcy or gone

Amid a deepening recession, a number of big-name brands filed for bankruptcy protection or went out of business in 2008. Here’s a list of some of the biggest:


Circuit City Stores Inc., the nation’s second-biggest electronics retailer, is closing more than 150 stores and laying off thousands of employees as it keeps operating and attempts to restructure under Chapter 11 bankruptcy protection.

Mervyn’s LLC filed for Chapter 11 bankruptcy protection in July and began liquidation sales at its remaining stores to wind down its business.

Linens ‘n Things filed for bankruptcy protection in May. It announced liquidation sales at its stores in October after failing to find a buyer that wanted to operate the firm.

Steve and Barry’s filed for Chapter 11 bankruptcy protection in July, then later abandoned plans to keep stores open and said it would liquidate.

KB Toys filed for bankruptcy protection two weeks before Christmas and has begun to liquidate its stores and plans to shutter operations. It is the second time KB Toys filed for bankruptcy protection; the first was in January 2004.

The Bombay Co. declared bankruptcy in September 2007 and shuttered the last of its stores in January 2008.

Sharper Image Corp. filed for bankruptcy protection in February and closed all its stores in the past year.

Woolworths Group PLC in the United Kingdom failed to find a buyer in December and put its nearly century-old business into administration. It is closing its 800-store business in stages, set to end this month.

Sources :- The Arizona Republic

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