Organised retail to form 18% of overall retail pie: McKinsey

This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.
“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report. Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.
Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.
The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.
“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.

Reebok Retail India set to bring in Classics

Reebok India, in an effort to capture the fitness-inspired lifestyle clothing market, is bringing its global lifestyle brand ‘Reebok Classics’ to India. The company will set up separate stores for Classics, 75 outlets by March 2009.

Reebok India has built up a lifestyle-product portfolio for apparel, shoes and accessories. It has signed up style icon Bipasha Basu and youth icon Yuvraj Singh to represent the fusion of fitness and lifestyle through Reebok merchandise. To be rolled out in the menswear and womenswear segment, Classics will cater to niche market of style-and-fitness conscious youth in the country.

Reebok India MD Subhinder Singh Prem told ET: “The lifestyle space will be a focused business for Reebok. We see more people interested in wearing stylised sportswear, and hence we will be rolling out up to 70 specialty lifestyle retail outlet stores by this year-end, besides existing 700 Reebok performance stores.” With the introduction of this new vertical, Reebok India expects to garner revenues of Rs 1,400-crore by this year-end. Reebok, currently, claims to enjoy 51% marketshare in the Indian sports-footwear and apparel market.


The global Classics collection to be launched in India will include lifestyle merchandise for dance, biking, NFL sports gear and street style. Besides these four ranges, the company will also launch designer products—a collection
under Hollywood actress Scarlett Johansson name, jeans styled by cricketer MS Dhoni, Manish Arora collection, besides many other inspired by global sports like skating, et al.

Dispose of Slow Moving and Obsolete Inventory

In every business there are hits and misses--hot selling goods or services and real dogs that nobody seems to want. Often, the difference between a businesses' success or failure is the ability to distinguish between the two, and the courage to cut losses quickly by disposing of the doggies.

Because time is money, the key word is "quickly." As a rule of thumb, we figure that the expense of maintaining goods in inventory averages about 2 percent of the cost of those goods each month. If you carry an item in stock on the shelves or in a warehouse for a year, you're down 24 percent. There aren't many businesses that can overcome this kind of a cost handicap even in the best of times. When business is bad, a slow moving inventory can be a killer.

For many business people, however, disposing of obsolete inventory is difficult because it means they have to admit making a mistake. Some have gone to the grave without making that admission.

One businesswoman who inherited a small gift shop in a resort area was surprised when she paid a visit to the store. The shelves were crammed with a lot of dingy looking merchandise that seemed to be priced far too low.

Upon closer inspection she discovered why. Based on the price tags, some of the goods had to have been sitting on those shelves for at least 15 years! But even at prices from the 1970s, this shopworn merchandise was no bargain. Indeed, much of the inventory was virtually unsalable.

She junked most of merchandise, sold what she could at a distress sale, and restocked the store with fresh inventory. Today the shop is a viable business again, and the owner has an iron-clad policy of getting rid of dogs. If an item doesn't sell in six months, she cuts the price 40 percent and moves it out.

n some industries, it's possible to work out arrangements with suppliers to limit your vulnerability to slow-selling inventories. An auto parts retailer established a relationship with a wholesaler that allowed the store to return any unsold merchandise for full credit within a year.

Unfortunately, however, the company's warehouse manager failed to keep records necessary to establish the purchase date of merchandise in stock. In reviewing the businesses' inventory the owner discovered thousands of dollars of old, obsolete parts sitting alongside new merchandise.

Had these old goods been identified in time, they could have been returned to the supplier in exchange for fresh merchandise. Instead, the retailer wound up disposing of them for a few cents on the dollar.

Wills Lifestyle`s rejig bears fruit

TC's garment retailing arm Wills Lifestyle, which embarked upon a major rejuvenation and brand makeover late last year, is tying up with budding designers, Italian fabric makers and established designers in a bid to have cost advantage and premium look.

The move is aimed at wooing the young upwardly mobile segment, which is expected to bring 30 per cent growth for the company.

The company has tied up with leading design institutes such as NIFT, NID and Pearl Academy for promoting budding designers to be selected through regional competitions.

Wills has also collaborated with international design studios Alessandra Macchi Studio (Italy) for superior quality flat knits and with Ricardo Rami Studio (Italy) for fashion wear for women.

The company is also planning to take leading Indian designers including Rajesh Pratap Singh, Rohit Gandhi, Rahul Khanna, Manish Malhotra, Rohit Bal among others on board to showcase their products during the Wills Lifestyle Fashion Week. Their collection will also be available at its stores.

According to a retail analyst who wished to remain anonymous, "Wills Lifestyle's plan for a makeover was essential in the face of a modern, youth-friendly retailing becoming the buzzword. Moreover, with the advent of several new retail chains in India, established brands like Wills Lifestyle had to go for innovations in order to stay ahead of competition."

The brand makeover will be reflected through new-look stores, launch of premium product lines, and tie-ups with leading architecture and management companies for superior product presentation inside stores.

The changes have resulted in 20 per cent increase in footfalls in its stores and 15-20 per cent rise in productivity.

"Women's wear contributes about 35 per cent to the chain and we see this as a big growth opportunity. We are also focusing on the men's formal wear category as part of our strategy to focus on special consumer segments," informed Atul Chand, vice-president (marketing and retail) of ITC.

The company has also roped in FRCH, an architectural, planning and interior design services firm, to get the desired new-look.

The new concept store design will enable differentiated product presentation through interplay of hangs and stacks. The company is now providing more elbow room to its customers through spacious trial rooms.

The company has also tied up with Friedman Group, the retail management expert, which would train its store managers and staff on engaging customers for a superior shopping experience.

In other tie-ups, Elemental Design, a UK-based visual merchandising communications, event management and design agency, will assist the company with an improved display and presentation inside the stores.

From 50 stores at present, the company plans to have 80 stores by the year-end.

Reference: http://www.business-standard.com/common/news_article.php?autono=329410&leftnm=5&subLeft=0&chkFlg=