Pantaloon Retail net up 5.97 pc to Rs 33.54 cr in Q2

Future Group&aposs retail arm Pantaloon Retail India Ltd today announced a net profit of Rs 33.54 crore for the second quarter ended December 31, 2008, up 5.97 per cent over the corresponding period a year ago.

The company had a net profit of Rs 31.65 crore in the same quarter last fiscal, Pantaloon Retail India said in a filing with the Bombay Stock Exchange.
Total income increased to to Rs 1,527.20 crore for the quarter under review from Rs 1,228.07 crore in the same period previous fiscal.
For the half-year period ended December 31, 2008, the company&aposs net profit rose to Rs 69.72 crore from Rs 6134 crore in the same period last year.
While, the total income of the company jumped up to Rs 3039.57 crore during the six-month period under review from Rs 2315.24 crore in the same period last fiscal.
Pantaloon Retail operates multiple retail formats in both the value and lifestyle segment of the Indian consumer marker. It operates over 1000 stores across 61 cities in India.
Its principal formats include Pantaloons, a chain of fashion outlets; Big Bazaar, an Indian hypermarket chain and Food Bazaar, a supermarket chain.

UniverCell to retail low-cost feature-rich mobile sets

The retailer plans to bring features like colour display, FM and camera, which usually available in mobile phones upwards of Rs 3,000 in established brands, in better-priced mass market handsets. It also plans to bring in dual SIM-card phones, currently available only in very high-end phones, at the same price points .

"Once we are through testing these products for quality, we will start test-marketing them. If customer response to these products is good, we may even consider selling them under the UniverCell brand name," UniverCell managing director D Sathish Babu told ET. Now, 60% of the mobile market is dominated by phones priced below Rs 2,000. Phones costing upwards of Rs 10,000 contribute just 1%, he added.

The Chennai-based retailer is also eyeing the eastern markets, especially Calcutta, where it will set foot in the first quarter of the coming fiscal. "We are planning 25 stores in the city in the first phase. Apart from West Bengal, we will open outlets in Orissa and Chattisgarh. In the second quarter we may also look at the west," Mr Sathish said.

UniverCell has 199 stores across the south, 80% of which are in tier-II towns. It is getting ready 25 stores and they will be up and running in a couple of weeks. Babu, who had pioneered the multi brand mobile retail store concept said his venture has been on an expansion spree in the last couple of years and is now stabilising operations. He is waiting for prices to rentals to fall further before signing up more stores.

The retail chain expects to close this fiscal with a turnover of Rs 500 crore and plans to double it in FY10. It stood at Rs 350 crore at the end of March 2008.

UniverCell also has tie-ups with Nokia, Motorola and LG to sell some of their international models exclusively at its stores. Most of these are variants of existing models and come with some value addition. "Usually accessory bundling is done by the brands themselves. Sometimes we bundle these models with connection. With such products we are able to deliver value to our customers as we can negotiate with the manufacturers over price," Mr Sathish said.

Realty takes another blow as buyers back out

The recent terror attack has dampened the already slackened demand in the realty sector. Several expatriates and visitors to Mumbai have kept their business plans on hold, hitting the sale and rental market in this segment.

Property consultants say NRIs and expatriates have deferred, if not backed out of, their plans to buy property in the country’s financial capital. Sandeep Sadh, CEO of Mumbai Property Exchange, says three of his clients, who were in the process of finalising deals last week, have now deferred their decision. “An expatriate employed with a multi-national company had finalised a high-end property in Bandra. But following the attack, his wife has decided to wait until January before going ahead with the deal. A Singaporean, who was planning to relocate to Mumbai, too has deferred his decision,” said Sadh. He is hopeful, however, that the affect on the economy will be short-lived.

Demand for property is down also in Colaba, which bore the burnt of the attacks with Nariman House, Taj Hotel and Leopold's Café having been targeted. “Business ekdum down hai,” said Chandu Naik, a local estate agent. He added that transactions were virtually nil once the share market started its downward spiral. “Now after the recent attacks, even enquiries have stopped,” said Naik.

Financial markets research group Macquarie Research has predicted that the terror attacks will also affect the demand for office and retail space in Mumbai.

“The sense of identification with Taj and Oberoi is very strong, not only for the business community but also for visitors and investors from foreign countries. We have not seen a more sombre mood,” said Anshuman Magazine, chairman and MD for CB Richard Ellis. He added that several visitors planning business trips to Mumbai have cancelled plans.

“This time the short-term impact would be much more than one would think. The risk perception has increased and none of the MNCs want any threat to the lives of their employees. The immediate impact will be seen on the leave and licence market. However, Mumbai is known for its ability for resurgence and over the next few months the mood will definitely improve,” said Magazine.

The impact has been felt also in the retail sector. A Morgan Stanley report looks at the impact in the weekends before and after the attack. Sales for Pantaloon’s declined 18 per cent in Mumbai while rising 10 per cent in the rest of the country. Shoppers’ Stop sales dropped 12 per cent in Mumbai against a 5 per cent growth elsewhere.

R. Subramanian, managing director of Subhiksha, claims that the retail firm is on an extremely high growth path

Discount retailer Subhiksha Trading Services Ltd has been in the news lately. In early September, there were allegations that the firm was not paying its suppliers (Mint, 5 September), and reports that the firm had sold a 10% stake to billionaire Azim Premji for Rs230 crore. Then, the company said that after its merger with Blue Green Constructions and the subsequent renaming of the firm as Subhiksha India, the merged entity would seek a listing (Blue Green is already listed on the exchanges).
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us.
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.

So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.

Spencer’s ties up with international apparel brand

Retail chain Spencer’s has signed an exclusive tie-up with international apparel brand Beverly Hills Polo Club (BHPC) and their collection will be available at Spencer’s stores located in 66 cities.“BHPC epitomises refined comfort and stylish elegance for today’s successful and confident Indian youth and we are very proud to associate with them,” Sanjiv Goenka, vice chairman of RPG enterprises said here at a press conference Friday.
Spencer’s, which is a part of the RPG group, already has a private label programme in fashion that has internationally acclaimed brands like Island Monaks and Mark Nicolas.
Goenka said: “BHPC covers a wide range of lifestyle clothing for both men and women. Fashion has been a significant segment in the evolution of Indian retail industry; not due to its size but the way it has influenced lifestyle.
“It was apparel that led multi- national brands to explore and invest in the Indian market, which set the ball rolling towards organised retailing,” he added.
Referring to the growing importance of fashion in Spencer’s retail business, Goenka said: “Fashion currently contributes 10 percent to the company’s revenue which is expected to increase to 25-30 percent in the years to follow.”
BHPC’s fall/winter collection comprises polo t-shirts, sweat shirts and sweat pants, casual shirts and trousers for both men and women. The merchandise starts at Rs.399 and goes up to Rs.1,499.

Reliance Retail close to break-even

Reliance Retail Ltd, which runs at least 590 stores across 57 cities in India, has already managed to achieve a near break-even by posting a loss of less than Rs1 crore in its first full year of operations, just 17 months after opening its first store.

Closely held Reliance Retail posted a net loss of Rs0.82 crore on sales of Rs1,486 crore for the fiscal ended 31 March.

The results appear to underscore why Reliance Retail, owned by India’s largest private company by sales, Reliance Industries Ltd, has eagerly embraced an early mover strategy despite bearing the brunt of protests, including vandalism, from small shopkeepers and wholesalers in some of the 13 states where it operates its stores in.

The results for Reliance Retail, which is normally reticent about discussing its financial profile given the continuing backlash against organized retail in India, are tucked away on Page 149 of the 2007-08 annual shareholder report from Reliance Industries, which is controlled by Mukesh Ambani.

Organized retailers such as Reliance Retail were not expected to show a profit in their first several years of operations, partly because of high capital expenditure involved in setting up a chain of stores, especially with spiralling real estate costs of the past two years in India that have led to a doubling of lease rentals in some cities.

Reliance Retail’s first-year results, while not necessarily an automatic indicator of how the still-rapidly expanding business will perform in year two, are nonetheless impressive given the state of profit margins in the retail business, where most Indian companies are still learning and experimenting with branded stores.

Indeed, even for Chennai-based Subhiksha, which opened its first store in 1997 and claims to be India’s largest supermarket brand, net profit margins are only around 2%, said R. Subramanian, founder and managing director of Subhiksha Trading Services Ltd, in an earlier interview with Mint.

But, that hasn’t stopped large industrial groups such as Reliance, Kolkata-based RPG Group and diversified conglomerate Aditya Birla Group, from entering the organized retail market. On deck is a similar venture from the Bharti family, promoters of India’s largest mobile phone company. Part of that stems from the desire to grab customers’ wallets and minds before what is seen as the inevitable saturation of India with branded stores. The Indian retail market is estimated at Rs14.1 trillion and the share of organized retail was around 4% or Rs51,100 crore in 2006, according to India Retail Report 2007 prepared by Technopak Advisors, a management consulting firm.

But, the land rush also stems from large industrial houses such as Reliance having deep pockets and the ability to sustain substantial investments.

Indeed, Reliance Retail’s reported revenues are just around 1% of Reliance Industries’ total sales of Rs1.39 trillion for the fiscal 2008.

Reliance Retail already has 3.5 million sq. ft of trading space and has outlined a total investment of Rs25,000 crore over the next few years, even though protests from small retailers and wholesalers have slowed some of its expansion plans. So far, Reliance Industries has invested nearly Rs4,400 crore in Reliance Retail in the form of equity and preference shares. The equity investment amounts to Rs3,785 crore, giving Reliance Industries a 98.74% stake in the retail venture, according to the annual report.

Not all the performance is rosy. Other retail subsidiaries of Reliance Industries such as Reliance Fresh Ltd (formerly known as Ranger Farms Ltd) and Reliance Dairy Foods Ltd have reported losses for the year ended March. Reliance Fresh has a loss of Rs20 crore on a revenue of Rs357 crore, while Reliance Dairy Foods incurred a loss of Rs3 crore on revenues of Rs66 crore.

The interlinkages between Reliance Retail results and these losses were unclear. Reliance Retail operates under 12 different store formats ranging from convenience store concept to consumer durables concept and automotive speciality formats. It has also entered into two joint ventures —Pearle Europe for optical retailing and Marks and Spencer for apparel retailing.

Birla plans big expansion of lifestyle retail chain

Kumar Mangalam Birla is putting his best foot forward almost 10 years after storming the fashion space with the acquisition of Madura Garments. In his most ambitious retail foray move, he is scripting India’s high-street luxury retail play similar to Barneys or Harvey Nichols.

Madura Garments Lifestyle Retail Company, a 100% subsidiary of AV Birla Nuvo, is working on setting up 12-14 stores to meet the fashion needs of the urban Indian man. The new store chain — The Collective — will open doors in Bangalore, Mumbai and New Delhi initially.

The retail initiative will bring in some of the world’s edge of the fashion, super-premium brands like 7 For All Mankind and True Religion to India for the first time. Then there is the enduring high-end names like Kenneth Cole, Ted Baker and Valentino entering the market through a distribution deal.

Going beyond apparel and accessories play, the company has roped in Paris-based Jean Claude Beguine to set up salon within the stores while Sonodea from the US will decide the music for the store. The retail chain is also enlisting the leading names on Saville Row for tailored suits, besides offering laundry and fabric-care services.

“There should be more than one reason to come to our stores,” says The Collective CEO George Santacroce, who has in the past steered several international brands in the US market. Mr Birla’s luxury foray is targeted at men in the 30-45 age bracket, with income ranging from $50,000 to $200,000. AV Birla Nuvo will invest around Rs 275 crore from internal accruals in the project over the next 3-4 years, adds company director Vikram Rao.

Mr Santacroce says the chain will essentially be a bridge between premium and luxury brands, with some degree of overlapping with luxury market. “There’s a long list of brands entering India’s pureplay luxury segment, and we leave that space to them,” he adds. However, be sure to find the apparel pricing in the store in the range of Rs 4,000 to about Rs 1 lakh for a suit.

So the brand check list will include Armani Collezioni, Versace Collection, Z-Zegna, Cheap Monday, Rock & Republic and footwear and accessories brands like Puma Black, Mandarina Duck, Bally and Church’s Footwear. It is believed that The Collective has inked agreements with 35 apparel and around 20 accessories brands.

“Accessories are the first acquisition in an emerging market as people change their bags, shoes and watches more readily,” says Mr Santacroche.

Slow Moving Merchandise -- A Bane or An Opportunity?

Every shop, gallery or store selling decorative items runs into the problem of having slow moving merchandise. Unused, dated, end-of-line, discontinued and unsalable merchandise is the bane of all businesses no matter what the products are. Here are twelve ideas for you to consider. Rather than the problem being a negative, trying to solve it will open up many opportunities for having a more profitable business.

Method #1. Close-out sales -- usually done after Christmas or in January. Today, there is so much merchandise being sold at reduced prices (even when the reduced price is not really a reduced price) that few people look down on sale goods. Many customers look for sales in order to buy something they thought about but didn't buy at full price.

Some stores like to start the sale immediately after Christmas so the goods are gone before January 1. Some prefer to wait until the week after New Year's Day or later in January or early February. The sale does not have to be limited to Christmas goods. General merchandise can be put on sale during the same time. Some stores have found that with event goods (last year's Valentines, Mother's Day, Father's Day, etc.) it is best to put these goods on sale about 30 days after the event.

It does not say that by putting goods on sale means they were faulty when sold at full price. It may indicate that the buying was faulty. The thing to be wary of is re-buying what was sold on sale.

Method #2 Selective temporary retirement. This relates to #1. Where it differs is that these goods are perennials, ones that would be reordered the next year anyway. The justification for not putting them on sale is that the saving on freight offsets the interest on the money lost because the goods sit on the shelf. Keeping these goods from one year to the next may be advantageous if the prices increase the next year. This hold-over method calls for keeping a very tight inventory control with a very good “rate of sale” information (which differs from total sales). It is wise to re-ticket and price these items when they are reintroduced.

Method #3. Trade-back agreements. Some suppliers offer trade-back agreements. This gives the store the opportunity to exchange slow moving merchandise against an order of faster selling items. Usually it is on a 2 or 3 to 1 basis, i.e., for each dollar returned, the store buys $2 or $3 worth of new goods. If a supplier does not offer a trade-back program, a store might try to work one out with the supplier. Suppliers may subtract 10% or 15% from the trade-in amount to cover repackaging and handling costs. There are several “arguments” or reasons of justification for such a trade-back program. One, the store will, most likely, order more than the amount needed; two, the supplier will get more reorders later of the better selling goods; three, the store will be more loyal to the supplier because the store has a better selection of better-selling items.

Method #4. Buying less. Oh my, what an easy thing to say, what a difficult thing to do. Many buyers believe or are told by their management that the savings gained by ordering and shipping larger orders are a justification for the large order. Some suppliers, in order to encourage larger orders, will offer an extra discount for orders over X amount (determined by quantity, weight, or dollar amount) or pick up the part or all of the freight charges. Whatever saving may be realized is offset by having goods in stock longer than necessary and leads to leftovers...

Experienced buyers find it is best to buy small quantities of an item until such time as it is proven that it can sell. There is nothing wrong with giving a supplier a “Russian order” -- one-of-each. Vendors may not like it, but a buyer's job is not to please the vendor, it is to please their customers and their business. When the latter two things happen, suppliers will also be pleased. By ordering smaller quantities one can control some aspects of what has to be put on sale.

Method #5. Moving goods around. It is not unusual to find that some goods haven't sold because of where they are placed. Moving goods around has, on occasion, made a slow seller into a good, if not great, seller. In retail stores, different things sell better at different times in different places. Some spots are dead for some items at a particular time; the same spot may be a hot spot for others at another time. Because the layouts of stores differ, what is a hot spot for one store may not be a hot spot for others.

Hence, rearranging merchandise may lessen the number of things that need to be put on sale.

Still another plus factor for moving around is that handling items brings to mind goods that, because they have been in one place for such a long time, have become part of the fixtures.

Method #6. Grouping -- putting like things with like things. One aspect of having leftovers is that they are treated as left overs. It does not take more than a few minutes to find a store's leftover area. This melange of items is not a way of showing off the items to their best advantage -- something every store owes to the goods they buy. Grouping items from various suppliers or lines can be by design, color, use, shape, price, material or a combination of any two themes. Pulling things into groups separated by space makes each group important.

Grouping is best when there are 8 groups of 5 items rather than having 1 group of 40 items or 40 individual items. As items are sold out of a group, the group can be reorganized. When merchandise is in one big group nothing is important because customers' eyes get lost in the multitude or variety. Trying to give each item its individual space also means that because all are important, no one is more important than the others. Making groups with a common theme abates the leftover look.

Method # 7. Signage -- something that allows customers to know what the price is without having to turn it over to see the price. Tickets should be placed in a logical placement such as aligned with an edge or rim or to the left of a handle, and always right side up. Many items remain unsold because the price was not where it could be seen . Customers hesitate to ask because they don't want to be embarrassed if the price is too high for the situation they are looking to fill or, they don't want to waste their time if it is not up to their standards (often determined by the price). And, looking for someone to ask is seen as a waste of time.

Stores are now beginning to use point-of-sale or bar coding price stickers (tickets). Although they help with sales figures, they are large and unsightly. They can take away from the perceived value of an item especially if it is of high quality and/or price. Because the price stickers are large, people think that removing them will be difficult (which is true), or doing so will damage the goods. How many sales are lost because of this? I'd say, “Way too many!” Small, “come-clean” price stickers are readily available.

The other format is to type a price list (no more than 5 or 6 items) on a tent card or card in a card holder. With good signage, customers can ask about goods without the previously mentioned fears of being embarrassed or for wasting their time.

Article By:

Alan J. Zell, Ambassador Of Selling
P.O. Box 69 Portland, Oregon, USA 97207-0069

Email: azell@aol.com
Telephone: (503) 241-1988

Interactive And Entertaining Stores - new trends in retail marketing

Consumers are getting more of what they increasingly demand from retailers these days. They want--and get--more entertainment, high-tech, and interaction from retail stores than ever before.

According to Karen Schaffner, publisher of Display & Design Ideas magazine, entertainment is a significant factor in drawing customers and then encouraging them to stay. Whether it is creating a lounge area where teenage girls can hang out or a souped-up demo area that appeals to men, stores are being built to create customer participation.

"The future of retailing includes such technologies as touchscreens, body scanning, biometric identification, real-time Web broadcasts, and faster, more-accessible multimedia content? she notes. "The result will be a shopping experience that is greatly enhanced--but not frivolous. Experts agree that these technologies must make sense in order to justify the investment of money and floor space."

In San Francisco, for instance, home base for Levi Strauss & Co., a four-level store serves as a backdrop for new fashion and music experimentation, "sponsored" by the giant jeans retailer, while also selling jeans. New technology and interactive stations--including body scanners, periscope directories, and shrink-to-fit tubs--make it a multisensory experience. Each floor is carefully "curated" to give the customers a sense of discovery, with areas devoted to multimedia presentations, lounges for teens to congregate, artist presentations, Internet stations, a DJ booth and listening stations, and an entire floor devoted to the customization of individual jeans through stamps, embroidery, and personalized fitting, all done in a matter of minutes.

Videocon for Rs 800-crore retail spread

Videocon Retail, a part of Venugopal Dhoot-promoted Videocon Industries, plans to invest Rs 800 crore to expand its electronic retail format, Next Retail, and Planet M, the mobile, music, entertainment and lifestyle chain, in the next three years, said Saurav Dhoot, director, Videocon Retail.

Videocon, which acquired the leisure format from media conglomerate Bennett, Coleman and Co in November 2007, has so far launched 80 revamped Planet M stores.

The company plans to take the number of outlets to 1,500 from 200 at present in the next three years. Simultaneously, the number of Next outlets will be increased to 650 from 400.

Dhoot said the company was witnessing 40 per cent revenues from sale of mobile phones and accessories at Planet M. It is looking at offering company-labelled telecom products, including mobile pouches, phone insurance and extended warranties. It is in talks with a few general insurance companies.

Apart from retailing mobiles and IT products, the company has plans to launch laptops, mobile phones and gaming solutions under the Videocon brand, he added while declining to divulge further details.

Meanwhile, Videocon Retail on Sunday launched the country's first cafe-in-store Cafe eARTh, a platform for young budding artists to portray their talent, at its Planet M store in Hyderabad. "Our idea is to launch 250 cafe-in-stores in the next three years," Dhoot said.

Videocon Retail garnered revenues of Rs 800 crore from Next and Rs 100 crore from Planet M last year. With the enhanced retail presence, this year's revenue contribution from the two formats will be Rs 1,500 crore and Rs 400 crore respectively, he said.

Where mall glamour palls

Two years ago, India’s first designer mall, Gallops, came up in Ahmedabad, announcing that Gujaratis looking for global lifestyle brands would no longer have to travel to Singapore, Hong Kong or Dubai with their shopping lists.

But the globe-trotting Gujarati customer, who may dig into his deep pockets outside the State, is known to bargain hard within it. Today, many shops at Gallops are gasping for breath. A ‘designer mall’ is one where the outlets are specifically designed to give the customer a ‘global experience.’ For instance, an outlet of, say, ‘Lifestyle’ at Gallops has exactly the same look and dimension as its outlet in Mumbai, Frankfurt or New York so the customer would not feel out of place in any of these.

Today, few outlets in the swanky mall can boast of ‘business’; many have, in fact, closed shop due to lack of customers; others, who had booked space, have not even opened shop.

Of course, the parking lot is seen almost packed, but the car-owners are either shop-keepers themselves, window-shoppers, or those heading straightaway to the food court on the top floor of Gallops.
Elusive footfalls

Simply put, many of these outlets are yet to break even. But this trend is not restricted to Gallops alone. Many other malls, whether marketing lifestyle products or grocery, are crying for customers’ attention.

The so-called ‘footfalls’ have hardly translated into actual business in most cases. And, of course, the traditional grocery stores (kiranas) have not disappeared, as feared by many only a few months ago. If anything, they are now giving stiff competition to the big boys of retail after the public’s initial enthusiasm wore off.

A number of reasons may have contributed to customer disinterest in retail, locals say. The Gujaratis are known to generally store their supplies of basic articles — foodgrains, sugar, edible oil — for the whole year and shop for the remaining needs in their neighbourhood store.

They even shop for clothes for the entire family in the ‘sales season’ of July and August. So, grocery and clothes, which constitute major portions of a retail outlet’s billing, do not really attract the customer in Gujarat to the swanky malls unless some freebies are thrown in.

Vegetable and fruits retail stores such as Subhiksha and Reliance Fresh face another problem: Gujarat being a ‘hot’ state, vegetables and fruits have low shelf-life. Most people buy these in small quantities, daily or even twice a day, from the larri-wala .
Where corner shops score

According to realty developer Mr R. K. Patel, the ‘old world’ shopkeepers have several advantages — rents at old rates, non-air-conditioned shops, minimum manpower, no-frills environment, flexibility of business hours and meagre overhead costs, they have more staying power and can afford competition. Few retailers, including the pioneering Big Bazaar, have, therefore, managed to break even.

In a mall, on the other hand, the shopkeepers are required to shell out for electricity bills , skilled manpower andrents.

Lease rents in Ahmedabad, for instance, have increased four to five times during the last three years compared to the high street, stand-alone old shops.

Unlike Mumbai, New Delhi or Bangalore, malls in Ahmedabad, Surat and Rajkot do not attract the high net worth individuals (HNIs), such as IT professionals, simply because Gujarat is yet to emerge as an IT-major State.

Moreover, sale of branded articles is often split amongst the many shops selling the same articles in a limited area. For instance, about a dozen outlets in a radius of just 3 km sell the same brands of shoes, wristwatches or computers; this has split business and adversely affected these outlets as they all have set up shop in each of the half-a-dozen malls or hyper-markets within a 2-3 km radius.
Supply exceeds demand

There is too much supply but little demand, according to Mr R. K. Jain, a realtor. However, this has not deterred construction activity, although some of the mall developers are rethinking or recasting their plans: some have simply postponed construction, mainly due to increased costs involved now, or have changed plans to construct commercial, corporate and business complexes instead of swanky malls.

Interestingly, some of the major malls are now actually downsizing their outlets due to various reasons. Some shop-keepers at malls, according to another realty developer, have even formed ‘unions’ threatening to pull out unless their lease rent was reduced by mall managements! Some have, even after signing up, cancelled occupation

‘Unrealistic’ least rents on the new business artery of Ahmedabad, the Sarkhej-Gandhinagar Highway, have only compounded the problem: rents on this Highway have increased three-fold during the last six months, from Rs 1,400 to Rs 1,500 per sq.ft to Rs 3,400 per sq.ft. As a result, more than 10 lakh sq.ft of retail space is ready but has no occupiers in Ahmedabad.

Again, this has not deterred some of the developers: they are still busy constructing some 20 lakh sq.ft in the city this fiscal. Any takers?

Article courtesy: http://www.thehindubusinessline.com/iw/2008/07/20/stories/2008072051031700.htm

Indian Retail to Comprise 25% of Retail Revenue by 2011

As per Deloitte Haskins and Sells, the Indian organized retail market is rapidly growing and is expected to account for 25% of the total retail revenue by 2011.

A study by the accounting company Deloitte Haskins and Sells has found that the organized retailing in India is growing faster than anticipated. As forecasted in the study, the organized retailing could represent one-fourth of the total retail revenue by 2011 from its present 8% share, as reported by Livemint.

Presently, both organized and unorganized retail sectors in India are valued at $295 Billion (Rs 12.3 Trillion). The growth in the Indian organized retail market is primarily due to change in customers’ behavior owing to rise in income, changing lifestyles and demographic patterns – the most essential factors for the growth of the retail industry of any nation.

Moreover, the retailing framework is also growing at a rapid pace. Shopping malls are gaining popularity in India with new projects for shopping malls are being announced. Indian supermarkets have also captured a large chunk of the Indian food and grocery market. Customers also prefer to shop at a place where they get food, recreation and shopping facility under one roof that has boosted the Indian organized retail market.

Also, rising customer spending capacity and availability of credit is promoting organized retail market in India. By 2011, the growth in the Indian organized retail market is projected to grow strongly due to growing income, which will be further supported by the favorable demographic patterns. The success of organized retailers in India is largely due to reaching prospective customers at the lower end of the income graph.

However, as the retail market in India is growing, the distribution is also getting better, but it still continues to be a disorganized area. Poor standard infrastructure, together with weak distribution sector, cause high logistics costs, which is very high in terms of proportion of GDP.

According to a Research Analyst at RNCOS, “The biggest challenge in the Indian consumer market is distribution and marketing cost. Decline in distribution and marketing prices could allow retail sales to grow as anticipated. The Indian retail firms and retailers can apply innovative methods to cut down this cost, such as upgrading the existing infrastructure and introducing new methods like public relation to sustain growth in organized retail sector of India

This article was first seen on: http://www.rncos.com/Blog/2008/06/Indian-Retail-to-Comprise-25-of-Retail-Revenue-by-2011.html