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The Month in Retail
India economic growth predicted to dip below 7%
Real Estate prices in free fall
Organised retail growth decelerates
Subhiksha mired in legal tangles
Biyani in major overhaul of Pantaloon
No less than an electioneering PM, Dr Manmohan Singh, admitted to a slowing economy from a one time high of 9% to a decelerated 7% growth. Analysts were even less sympathetic at predicting a below 6% figure. With a world in recession, provisional data for March indicated a plunge of Indian exports by 31% year-on-year. It is not expected to get much better for the next six months. What was more shocking was a contraction in domestic demand leading to a 1.2% drop in industrial output for February year-on-year. The deficit was also revised from 2.5% to 6% of GDP for last fiscal. For the current fiscal, it is estimated at 5.5%. The Government’s revival efforts have included a cut in interest rates by 400 basis points since October, slashing of duties and increased public spending. Any further efforts are in limbo till a new Government takes office after the elections.
Indian Retail has been hit with declining footfalls at ground level. Retail sales growth has been estimated to have decelerated from a high of 35% a year back to 11% according to one report. The crisis in consumer confidence and discretionary purchases has had a major effect on retail strategies. The chief of these is to switch from lifestyle formats to value retailing. The effect of the slowdown seems to be less severe on food retailing which is very much in its early stages. The earlier expectations of Indian retail attracting $25bil in investments over the next five years are unlikely to be met.
Real Estate prices continued to be an unsettling issue even if prices were travelling South. Over the last several years, property prices had grown by an unrealistic 250% times in transaction prices. In the last several months they have declined by 25 to 30% and continue to be in freefall. It is expected that they will decline by another 15 to 20% over the rest of the year before they bottom out. The decline has been devastating for real estate developers and should have enthused retailers. While the latter have been able to renegotiate rentals by as much as 30%, they are weary of continuing expansion in a slowing market.
Retailers are in the process of introspection, consolidation and resizing. They have woken up to shifting gears from profligacy to discipline. One area of intense efforts is leaner supply chains and logistics. This includes collaborating with vendors to cut waste,
" We all have made mistakes, but this re-launch is meant to get things right. Now, we will open stores only when we have everything right, be it the location of the store, the product mix or the loyalty programmes. "
- Thomas Varghese (CEO, Aditya Birla Retail)
" Rentals have come down 25-30%, already.
But that’s not the only factor.
Fixing back-end is more important. "
- Rajan Bharti Mittal (Vice Chairman & MD, Bharti Enterprises)
" The Indian market in the long-term is very promising. We hope to break even in two years’ time"
- Mr. K Venkatraman (MD, Mahindra Retail)
"The economic slowdown has definitely impacted footfalls in food joints as families have cut down on eating out, "
- Poonam Bijlani (BJN Group Director)
" It’s taken us some 12-14 months to implement SAP. The investment on such ERP implementation has been around Rs 20-25cr. "
- Sumantra Banerjee (RPG Retail president and CEO )
* * *
rationalising product lines and cutting down supply points. Future Group has shut down 20 smaller warehouses and consolidated into bigger ones of areas up to 2.5 lakh sqft. In a bid for greater efficiency there has been a greater investment in IT. RPG Retail and Shopper’s Stop have also enabled automatic replenishment system which enables them to track stock movement on a store level. RPG Retail has further tied up with vendors to enable direct supply to some of their big Spencer’s stores instead of a warehouse to cut costs.
Mired in legalities and a multitude of suits, the Subhiksha story receded into the background. Amongst the cases doing the rounds is the winding-up petition submitted by Kotak Mahindra Bank to the Madras High Court. As a result Subhiksha was compelled to submit accounts from April 1 onwards to the court in a sealed envelope. The retailer was arguing against the appointment of a provisional liquidator. Their argument was that they continued to be a going concern in the process of restructuring its debts (CDR). In another case, ICICI Bank is opposing the merger of Subhiksha with Blue Green, a listed company.
Kishore Biyani, the maverick of modern Indian retailing, has always been in the forefront of change and adapting to new circumstances. Up till now he has been timing himself now. With an economic slowdown, Mr Biyani hopes to stay ahead of trouble through a major restructuring of the listed company, Pantaloon Retail.
The first step in Mr Biyani’s game has been to change the name of pantaloon Retail to Future Markets and Consumer Group Ltd. The change also involves the appointment of a new Chairman, Shailesh Haribhakti. The new company will be a holding company. The next step will be to form separate wholly owned subsidiaries for retail and fashion. The fashion company will be called Future Fashion Merchandising Ltd and the retail company, Future Consumer Enterprise Ltd. The Future Group has already decided to spin off two of its other chains, Big Bazaar and Food Bazaar into a separate entity called Future Value Retail. This will be the third leg. Some observers feel that Mr Biyani’s restructuring will eventually include a JV with a foreign retailer. Speculations surround its recent talks with France’s Carrefour.
Observers suggest that the overhaul has been devised to raise Rs1500cr through a preferential issue of shares to promoters and private equity players. This will include Rs1200cr from PE players (Carlyle, Blackstone, Bain Capital, KKR, Goldman Sachs) for shares in newly created companies and Rs300cr from preferential allotment to promoters.
Pantaloon Retail has issued this month, 1.1 crore equity shares and warrants on a preferential basis at a price of Rs 183 per share aggregating to Rs 201.30cr to promoters and their associates. It has also issued 41,00,000 equity shares at a price of Rs 183 per share aggregating to Rs 75.03cr to Dharmyug Investments Ltd and 50,00,000 warrants at a price of Rs183 per share aggregating to Rs 91.5cr to the promoters and their associates with an option to convert the warrant in 18 months. After the preferential issue, the promoter’s stake will go up by 5% from the current 46.5%.
The retail business is expected to end 2010 with revenues of Rs 14,000cr, followed by the FMCG and consumer durables entity with Rs 1,800-2,000cr and the fashion venture with Rs 2,000-2,200cr, according to the Future Group's own projections. The Pantaloon Retail scrip has gained around 60% over the past one month and is trading around Rs 171 on the BSE.
Operationally the company has moved to preserve cash reserves and reverse its current negative cash flows. Accordingly it has slowed its expansion plans from the earlier planned 4 mil sqft to 2.5 mil sqft this year. Other efforts include negotiating better credit terms, merging stores and squeezing its supply chain.
Aditya Birla in re-launch strategy
Wadhawan puts hypermarkets on hold
Reliance Retail to focus on private labels business
Titan launches children’s ‘Zoop’ watchs
Yum to launch Taco Bell in India
This is the time for retail strategists to confess and still not pay with their necks. Aditya Birla’s retail CEO, Thomas Varghese, did just that when he called their new strategies a re-launch (see B&W column). Wadhawan is postponing the April launch of its first hypermarket. Others have cited the property crash to wait and watch. Some feel that the best bet is to rely on in-house efforts such as private label. With Reliance Fresh sporting 30% private label sales, the Indian retail upstart hopes to consolidate further in this direction.
After closing 70 stores, Aditya Birla Group’s strategy is aptly called a re-launch. Apparently senior managers of the company owned up to their failures in a workshop and decided to hammer a new strategy. Come May and the remaining 635 ‘More’ shops will start sporting a new look starting from Delhi NCR, Mumbai and Kolkata. The up-grade package includes visual merchandising, store replenishment and product mix. A Rs 20cr amount has been committed for this. The new strategy calls for a focus on private labels that will push it from just 5% of sales currently to 30%. Already 40 new private label products have been launched. ‘More’ executives claim that this has resulted in a 1.5% better margin. One hundred new ‘More’ stores are planned for this fiscal.
Fearing the current economic slowdown, Wadhawan Food Retail Pvt Ltd has put its plans to launch hypermarkets on hold. The first 100,000sqft store was to be launched this April in Bhandup, Mumbai. The 35 strong project team is also being pared down. It had also closed 18 of its 200 grocery stores which include Spinach, S-Mart, Sabka Bazaar.
Reliance Retail hopes to take up private labels with full gusto as a separate business. Earlier this year a separate division headed by Gunener Kapur was set up. This is focussing on inhouse designing, packaging and marketing but outsourcing for manufacturing. The categories being embraced are personal care and FMCG. The new brands will be marketed nationally through retailers outside the Reliance network. The suggestion is that Reliance may even offer turnkey development of private labels for other competitive retail chains as well. Reportedly, this is part of a greater strategy of focusing on value formats such as Reliance Fresh but marking time on consumer durables and electronics such as Reliance Digital.
Titan Industries launched children’s (5-10 years) watch branded ‘Zoop’ late last year. It is now be available in 400 outlets spread across 11 towns. The plan is to triple the points of purchase and take it to 40 towns. The points of sale are in World of Titan showrooms, MBOs and large format stores. The brand is being expanded to include eyewear for children.
The US based restaurant chain major, Yum Brands Inc is planning to launch its Taco Bell format in India. Three restaurants shall be opened by the middle of this year. These will be Company run but additional stores may have a different arrangement. Meals of the Mexican food served at Taco Bell will be cheaper than McDonald’s for a meal. The meals will be customised over time to suit the Indian palate. The Indian subsidiary, Yum Restaurants Pvt Ltd already runs 200 fast food outlets in India including Pizza Hut and KFC. The organized fast food market in the country is currently estimated at Rs 2,500cr and growing at 20-22% each year.
Mahindra Retail to invest Rs 100cr in retail
Speciality to invest Rs 250cr for restaurant expansion
Lifestyle to invest Rs 450cr for expansion
Samsonite to open 50 outlets this year
With the prevailing mood one for consolidation, there are far fewer players committing themselves to major expansion. Notable amongst the exceptions is Dubai based Lifestyle International and Indian restaurant chain Specialty Restaurants. A major new player in the game is the $6.7bil Mahindra Group. However, their entry seems to be in a niche sector and presently low key.
Lifestyle International Pvt Ltd plans to invest Rs 450cr over two years primarily for retail expansion. This will include 35 Lifestyle stores and 15 Home Centres. A part of the strategy is to lower prices to encourage more footfalls.
Specialty Restaurants is planning to invest Rs 250cr in an ambitious expansion and up gradation plan. The current 50 restaurants (Mainland China and Oh!Calcutta) will grow by 20 outlets this fiscal. In addition there will be an expansion of the cuisine profile through outside acquisition. Speculation is that Yo! China (Moods Hospitality) is being looked at for a takeover. The company closed the last financial year with a turnover of Rs 200cr.
Mahindra Retail has added a multi-storied high profile, flagship ‘Mom and Me’ store in Delhi’s power house – South Extension. This is the third store after a low profile launch in Ludhiana and Ahmedabad a few months ago. The company seems to be getting into higher gear and has declared that they will be investing upto Rs 100cr by 2010 in retail. ‘Mom and Me’ is a niche concept which offers a combination of maternity wear, infant and kids fashion, educational toys and host of wellness products. Mahindra Retail is looking for additional international licenses and tie-ups.
Samsonite India plans to open 50 luggage and accessories outlets this year. The company now plans to make inroads into Tier II towns including Vijayawada, Guntur, Madurai, Rajahmundry, Nellore, Kolhapur, Rourkela, Muzaffarpur and Salem. All the outlets will be franchised adding to the 167 current ones. The stores offer multiple brands in addition to Samsonite. These include Tourister, Timberland and Lacoste.
Spencer’s to launch ‘Beverly Hills Polo Club’
RPG Group’s Spencer’s Retail is entering lifestyle retailing by launching exclusive stores of Beverly Hills Polo Club. Initially five stores will be set up by June – all in the Delhi NCR – with an outlay of Rs 5cr. The stores will be upto 2000sqft in area. Already nine shop-in-shop corners have been set up inside Spencer’s Hyper stores. Spencer’s has obtained a licence to market the brand from BHPC International LLC.
Hearty Mart takes kiranas to villages
Venturing where no retailer has ventured before, Hearty Mart is offering a ‘kirana’ type of franchise in villages. Founded by Nadeem Jafri, its stores target the ‘bottom of the pyramid’. Locations include little known inhabitations such as Illol (near Himmatnagar, Gujarat), Pipodar, Kakoshi, Vadnagar and Idar. The village franchise has to have access to suitable space (300-500sqft) and pay a deposit of Rs 25,000. Hearty Mart’s promotional campaign is: ‘Sabse khaas, ghar ke paas’ (the best, closer home). Interestingly, the stores operate under two nameplates – Hearty Mart of the franchisor and one chosen by the franchisee: Sahyog, Easy Shop, Tiny Shop. Hearty Mart charges 1.5% royalty on turnover. Fifteen stores are planned over two years. The franchisor is looking to developing private labels for ketchup, spices, etc. The initiative was floated with an initial capital of Rs40lakhs and is now touching a turnover of Rs60lakhs.
Wal-Mart’s first store set for May opening
Bharti Wal-Mart Pvt. Ltd is all set to open its first cash and carry outlet in May in Amritsar. Two more outlets in the North will be opened later this fiscal. The company is a JV between the world’s largest retailer, Wal-Mart and Indian telecom giant, Bharti Enterprises.
BusinessWeek declares Bata as unsung innovators
Business publication BusinessWeek has declared Bata India as one of the unsung innovators. Bata is part of a list of 25 companies that the publication claims are firms which have failed to get a position on the list of world's most innovative companies but are likely to become household names like Apple, Google in the next 10-20 years. Other Indian companies of the list are Indian Hotels, Bajaj Holdings & Investment, Godrej Industries and Yes Bank. The 'unsung' list is based on a Boston Consulting Group survey of senior executives across the world when asked to name an innovator others would not think of.
Carrefour to launch next year
A long awaited milestone has been deferred once again – Carrefour is to launch its cash-n-carry outlet in India early next year. The international retailer no 2 is still actively pursuing its ambition. It has reportedly met over 600 suppliers to finalise arrangements.
A company statement said: “This meeting had three objectives: to introduce Carrefour Group and its project in India, to return on the concept of the cash-and-carry store and to present the working specifications and the mode of collaboration with suppliers.”
The first outlet will be opened in Delhi.
Pantaloon crosses swords with R-ADAG over ‘Big Bazaar’
Pantaloon Retail (India) Ltd is seeking to cancel trademark ‘Reliance Big Bazaar’ given to Reliance ADAG. Their contention is that it is in conflict with their own ‘Big Bazaar’ nameplate which is well known. Technically there is a difference in the two trademarks as the one obtained by Reliance is for clothing, footwear, headgear, games and toys. Reliance’s argument is that it used the ‘Big’ moniker for many of its businesses. They also spell Bazaar with a single ‘a’.
KPMG: Slow down not effecting food retailing
A survey conducted by the consulting firm KPMG has revealed the obvious: reduced footfalls and conversion ratio have resulted in a decline in sales growth to 11% in December 2008 compared to 35% in December 2007. The only exception is food and FMCG retailing which remains insulated from the slow down. Expectedly, KPMG predicts that retailers, having been adversely affected by the slowdown are soon going to make a switch from lifestyle retailing to value retailing. The penetration predictions for organized retail has been scaled down from 16 to 10.5% by 2012 from the current level of 5%. A large number of retailers have cut down on their expansion plans. The report predicts continued slowdown of the retail sector for another 12-18 months.
CIFTI urges more franchising in food retailing
According to a report by the Confederation of Indian Food and Trade Industry (CIFTI) and Franchise India the future of food retailing hinges on a big surge in franchising. Currently, the food and beverage industry in India is estimated to be Rs 58,000cr and is growing at a rate of 40% annually. There is a great scope for growth through franchising for fine dining and quick service restaurants. The food service sector in India consists of approximately two million licensed and unlicensed restaurants, of this only about 30,000 are registered. The Café and Juice bar culture is also on the rise because of the younger population. Casual eating from kiosks has also increased following the rise in mall culture. According to the report, more than 30 per cent of the new food outlets coming up in almost all cities across the country are through franchising. However, there are many hurdles to be sorted out at the ground level.
According to a spokes person of McDonald’s India: “The promise that franchising holds still remains to be exploited. There are many issues on this front; individual franchisees are found wanting in commitment towards the business as they are too focused on short-term returns, which hurts the brand in the long-term. The commitment has to be 100 per cent and you cannot treat the franchise business as another business in the portfolio.”
Statistics indicate that the growth prospects are tremendous. In Bangkok, on an average, people eat out about 44 times a month and about 14-15 times in Jakarta compared to only six times in Mumbai.
The world’s largest online retailer, Ebay has announced that it is planning to buy control of a South Korean on-line company. This is part of a regional strategy to expand in Asia. The final purchase price could reach $1.2 billion if all shares are tendered in Ebay’s offer.
Bata India, the footwear giant, has disclosed the financial results for the Q1 FY-2009/10 and has posted a 6.8% growth in revenue at Rs 23,303.2 lacs as against revenue of Rs 21,819.9 lacs in the same period last year. The Profit before Tax grew 27.1% at Rs 1,623.5 lacs as against PBT of Rs 1,276.9 lacs in the same period last year. With view to bringing in the customers in Tier 1 and 2 cities, in this quarter they have opened 32 new retail stores based on their international format having a minimum area of 3000sqft and renovated 3 existing stores. These stores are primariliy located in cities like Kota, Jodhpur, Ludhiana, Kakinada, Berampur, Mandya, Gangtok, Hassan, Hubli, Ahmednagar, Nasik, and many others, apart from the metros. Marcelo Villagran, MD Bata India Limited, said, “In today’s challenging market, Bata has performed remarkably. Our strategy of opening large format stores has been successful and we continue to invest in expanding our retail business. Along with this, we have also focused upon providing our customers with a new trendy collection and better shoe designs. Our value pricing, coupled with improved customer service, has helped us to grow.”
Marico looks at expansion
The Rs 1,907cr Marico Ltd is planning a major expansion in spite of an economic slow down. The Company’s International Business Group wing is especially active and is planning to reposition its recently acquired brands in South Africa, Bangla Desh and Egypt. Analysts say Marico’s expansion plans are a good bet.
The company is better known in India as the seller of Parachute hair oil and Saffola edible oil.
The NV Retail Index last Friday was 49.87. This was an increase of 2.03 points (4.2%) over the previous week.
The NV Retail Index is a capitalization-weighted market index reflecting the performance of 'retail related' equities on the BSE.
NV Retail Index
49.87
24th April 2009
Company Name
Price as on on 02/04/09
Price as on 24/04/09
%Change
Company Name
Price as
on 02/04/09
Price as on 24/04/09
%Change
Bata India
114.30
118.85
3.39
Shoppers Stop
102.00
125.45
22.99
Celebrity Fashions
10.30
12.35
19.90
Titan
812.60
757.50
-6.78
Liberty Shoes
39.30
44.55
13.36
Trent
332.05
328.55
-1.05
Pantaloon Retail
167.9
202.05
20.34
Vishal Retail
38.15
42.45
11.27
Indiabulls Retail
12.50
13.60
8.80
Zodiac
182.20
190.00
4.28
Provogue India
35.70
35.00
-1.96
Kewal K. Clothing
100.00
105.05
5.05
Koutons Retail
453.80
450.05
-0.83
Sensex
10348.83
11329.05
9.47
Performance of retail scrips on BSE-
4TH Quarter FY 2008-09
Performance of retail scrips on BSE - First Week
April of 2007, 2008, 2009
Performance of retail scrips on BSE -
20/04/09 and 24/04/09
Moods Hospitality to sell majority stake in Yo! China
Market reports indicate that Moods Hospitality is ready to sell a majority stake in its fast food chain Yo!China. The Chinese fast food chain currently has 20 outlets. Observers suggest that Speciality Restaurants is one possible buyer. The deal is likely to be worth Rs 20-25cr.
Debt servicing key focus
Tenants down shutters in two DLF Malls
DLF’s Mall of India hits ‘speed bump’
Parsvnath puts its hotel projects on the block
Unitech to raise Rs 1,250cr via QIP
The beleaguered real estate industry’s main focus continues to be raising funds to service maturing debts. This has taken many forms such as sale of non-strategic assets. Real estate major, Parsvnath Developer has reportedly put its four hotel projects on the selling block. These projects are currently under construction and are located in Hyderabad, Goa, Ahmedabad and Lucknow. DLF has put its wind power generation business on sale. Reportedly bidders include Adani Group, Essar Power Ltd, Infrastructure Leasing & Financial Services Ltd, Hong Kong-based CLP Group and the UK’s BG Group Plc. DLF hopes to raise Rs 2,000cr. Another innovative effort by the developer has been lease rental discounting. DLF has been able to raise Rs 1100cr from HDFC to whom they have pledged the future expected rentals.
Real estate developer, Unitech is reportedly planning to raise Rs 1,250cr through a qualified institutional placement (QIP). The institutions looking at the offer include SBI, LIC and HDFC. The cash strapped Company has to meet an April 19th deadline to meet a Rs 500cr outstanding debt to mutual funds. If the QIP fails, the mutual fund companies will have no option but to roll over the debt.
Most developers are resigned to another quarter of poor sentiments and low sales. The unsold real estate inventories are only piling up. As projects are getting delayed, many tenants are deciding to pull out. There have been some efforts by developers to push low margin affordable housing. Some of the projects are being converted from retail to a more marketable mix. Another effort has been to entice new tenants with lower rentals and terms. But this is creating problems of its own.
Agitated tenants in two new DLF malls, located in South Delhi (DLF Place in Saket and DLF Place in Vasant Kunj) have downed shutters. Amongst the fifty odd brands making this novel protest include Meena Bazar, Indigo, D&A, Laxmi Optical, Archies and ColorPlus. A note issued by the joint association of retail stores at the two malls reads: “The DLF has failed to live up to its reputation with indifferent and inept management and incompetent marketing furthered by high-handed brow beating.” The retailers are especially peeved about the alleged more favourable terms given by DLF to new tenants in a bid to fill the mall. The favourable terms include substantially lower rents and revenue sharing. The retailers were also peeved about the delay in opening the malls leading to substantial losses. The association claimed that there were only five function out or 24 shops at Vasant Kunj and only 10 out of 48 in Saket.
At 4.5mil sqft, the DLF’s mega project, the Mall of India, coming up in Gurgaon was billed to become the largest mall in India. Now with a slowing economy and immense pressure of funds, the project seems to have been moved to the backburner. Worst, DLF is now considering altering the project. This will include reducing the size of the mall to a more manageable level and including a hotel and office in the complex. On the ground, the project is at the excavation stage. The original project would have cost as much as Rs1500-2000cr. Now, DLF is exploring private equity funding for the development. In total, DLF has admitted to stalling 16mil sqft development of office and retail space out of 62mil sqft it has under development.
Two senior managers desert Vishal
Two senior managers have resigned at Vishal Retail. This includes Manmohan Agarwal, CEO Corporate Affairs and Sanjay Goel, VP Finance. Vishal Retail is currently going through a major financial crunch. The fear is that the departure of these two senior executives would lead to a major exodus of professional managers in the Company.
Kamal Gupta joins Carlton as CEO
Carlton Overseas Pvt Ltd has appointed Kamal Gupta as CEO of Indian operations. The UK head quartered organisation has made major investments in India in manufacturing, distribution and retailing of fashion footwear. Mr Gupta has sixteen years of experience in footwear and was last with Lilliput Kidswear Ltd as VP-Marketing. One of Mr Gupta’s new targets is to open 50 exclusive Carlton stores this financial.
Mobile phone retailing is growing in leaps and bounds in India unmindful of the recession all around. Newsvision brings an overview of the new trends in this booming industry.
Select your caller tune
By Paulomi Patel for Newsvision
Here’s a riddle that even a child could solve: What is that one thing common to the owner of a swanky new car, an auto rickshaw driver, the director of a major corporate firm, a vegetable vendor? Answer: A mobile phone. Be it a high profile iPhone, Blackberry or a more plebeian low cost model, one can not help but notice that a mobile phone has become a must-have across all Indian economic classes.
Wireless connectivity offered by a mobile device has made life considerably easy. Here is one instance. In the coastal towns of Southern India, fishermen spend less time waiting idle on shore and at sea with their catch. Their owners and agents go to the landing centers once they receive information (the fishermen call from their mobile phones) that their boats are about to dock. This saves time and keeps the fish fresh. A mobile phone has justifiably earned the status of a necessity more essential than a watch. And when it comes to mobile phones in India, there is almost no limit – upper or lower – to the amount one can spend on a phone. Naturally, it is the best selling item of the moment and retailers of all kinds – new debutantes and experienced visionaries – have jumped on to the mobile phone retail bandwagon.
The Indian mobile phone market is considered to be over Rs 20,000cr and while so far the cell phone makers or perhaps a few small mom-and-pop style stores that sold phones, lately there is an increasing corporate presence in this market.
Chennai-based Subhiksha, originally a grocery retailer, started selling mobile phones through Subhiksha Mobile retail concept a few years ago. The chain’s mobile phone stores in Delhi, Mumbai, Chennai, Punjab and Gujarat was performing much better than their original grocery store concept. In view of flagging sales Planet M, the music store chain, has incorporated a section for sale of mobile phones to improve footfalls.
Pantaloon Retail India Ltd recently signed a joint venture agreement with Axiom Telecom of the United Arab Emirates to distribute mobile handsets. As a part of Axiom’s regional expansion, the 50:50 joint venture with Indian’s leading retailer, will allow Pantaloon Retail to distribute mobile handsets and accessories and establish service centers in India. Mr. Kishore Biyani, Group CEO, Future Group said at the JV, “The current explosion of the telecom retail market that we are seeing is breaking new barriers every day. There is no doubt that mobiles will soon be the single largest electronic product retailed in the country. Future Group, with the knowledge and expertise of Axiom Telecom’s systems and process in this area, will be best positioned to retail and service the Indian telecom market.”
According to a recent report in the Business Standard, in another sign of consolidation in the mobile retail space, BK Modi’s Spice Group fully acquired the Indian arm of Dubai-based mobile retail player, Cellucom. Under the share-swap deal, Spice will acquire 100 per cent stake in Cellucom, which in turn will get 26 per cent stake in HotSpot, the Spice Group’s mobile retail venture. HotSpot already has over 500 retail stores across the country and this along with Cellucom’s 120-plus retail stores will make it the leading entity in the mobile and technology-product retail category. On the same lines, the Essar group’s mobile retail arm, The Mobile Store, plans to raise $75 million (approximately Rs 375cr) to fund its acquisition plans in India with which they will probably hope to take on the unorganized sector and thousands of neighbourhood stores that sell handsets at lower prices, top ups and SIMs. The Mobile Store already offers mobile accessories, music and gaming gadgets, DTH packages and services like bill payments, mobile repairs and exchanges to better the consumer experience in their stores.
The attractive factor of the mobile market in India is that it is not hit very seriously by recession. While the sales of handsets are dropping across the globe, in India, the sheer economies of scale allow this market to continue to remain buoyant. The Mobile Store’s bullish expansion plans include reaching a target of 1800 mobile retail outlets by the end of the decade and 2500 by the next two years. The retailer also plans to launch its own range of branded handsets that will target the youth in terms of their design and price.
The original big daddy of all, Reliance – which can be credited to hail the mobile revolution in India – is expanding its retail and consumer outlets network in Punjab. It also plans to open 82 more mobile stores to sell its CDMA and GSM handsets, products and services exclusively, according to a recent report in Economic Times.
There is so much happening in the wireless space. The trend seems to only get better with the user base increasing in hundreds of millions every year. With rural expansion, cheap handsets have caused a significant growth in subscriptions. On the other hand, in the relatively saturated urban markets, value added benefits and data growth have kept the consumer charmed. To top it all, new operators entering the fray, mobile number portability rollout (where a user can keep his number even if he changes service providers), 3G services, and the MVNOs (Mobile Virtual Network Operators) are all set to improve the over all landscape. The writing is on the wall, that the coming years hold more promise and this is the time to enter mobile retailing.
Quite understandably, the West influenced modern retailers started setting up shop in only a handful of metros. The other towns seemed to be mired in poor infrastructure, filth, and political chaos. The retailers often preferred to compete with themselves in common neighbourhoods rather than look for pastures outside. All this seems to be changing as consumers, fed with a common source of communication, are beginning to demand the same high standards both from their politicians as well as the retailer. These second rung cities, labelled Tier II, are now overhauling themselves up and offering a major new potential for organised retailers. The new destinations of choice are often State capitals (Jaipur, Lucknow), old industrial towns (Ludhiana, Jamshedpur, Faridabad, Surat, Coimbatore) previously neglected commercial centres (Indore) or have close proximity to metros (Thane).
Tech. & Logistics
Handheld Mobile Computers multiply efficiency in Supermarkets
Rugged mobile computing with state of the art hand held devices is raising efficiency in the retail supply chain and in-store to a new dimension. European supermarket chain, Kaiser’s Tenglemann recently issued 660 Nordic ID PL3000 mobile computers throughout its 300 branch network. The handhelds have been designed to assist merchandise planning and control through item-level real-time inventory management. The result is paperless operations in the movement of goods – incoming, outgoing and inventory management. The PL3000 was preferred because of its stable WLAN Roaming performance, remote maintenance and software distribution options. The user friendly instrument permits one hand operation and has a large display.
At the supermarket the handhelds are put to use from sales floor to warehouse to cold store. There is a standard Web application installed on the devices. Through it, the employees communicate by WLAN and VPN with the merchandise planning and control system at the computing center of Kaiser’s Tengelmann. For the employees, the Nordic ID PL3000 computers are the multi-functional interface to the merchandise planning and control system – the mobile computers enable them to spend more time on the sales floor where – by scan process and via the Web application – they can manage the movement of goods, process incoming and outgoing goods, carry out permanent inventory or make inventory postings. With the Nordic ID handheld terminals, the staff is informed at all times of the current status of stocks at their branch.
PepsiCo introduces ‘green’ vending machines
With public opinion in the West going ‘green’, retailers are working overtime to provide a clean face to their often messy actions. PepsiCo Inc is showing its serious intent on eco issues by testing a more efficient and less polluting vending machine. The new machine reduces electricity consumption by 15% and emits 12% less greenhouse gases. This has been achieved by replacing the usual HFC gases for cooling to carbon dioxide. PepsiCo also claims that they have been working with Greenpeace Solutions for more frugal packaging including using less plastic in bottles and reducing water use in the process.
An estimate at a recently held advertising conference pegged online advertising at Rs 600cr. The fact that this is only 3% of total ad spend highlights the tremendous growth potential. India has as many as 40 million online users and the country is rated as the top five internet user in the world. The projection is that as many as 300 million users can join the ranks in the next 3-5 years. A corollary of this is internet commerce which is stuck at approximately Rs 300cr. Roadblocks include expensive broadband services, low credit card penetration and the near absence of local languages. The extensive penetration of mobile phones and new technology is likely to change all this. Online has tremendous potential in the Indian setting where retail and distribution infrastructure is minimal and costly. The need today is of entrepreneurs who can seize the hour and blaze new directions! Every retailer and brand marketer should consider how he can leverage online!
No less than an electioneering PM, Dr Manmohan Singh, admitted to a slowing economy from a one time high of 9% to a decelerated 7% growth. Analysts were even less sympathetic at predicting a below 6% figure. With a world in recession, provisional data for March indicated a plunge of Indian exports by 31% year-on-year. It is not expected to get much better for the next six months. What was more shocking was a contraction in domestic demand leading to a 1.2% drop in industrial output for February year-on-year. The deficit was also revised from 2.5% to 6% of GDP for last fiscal. For the current fiscal, it is estimated at 5.5%. The Government’s revival efforts have included a cut in interest rates by 400 basis points since October, slashing of duties and increased public spending. Any further efforts are in limbo till a new Government takes office after the elections. 
Real Estate prices continued to be an unsettling issue even if prices were travelling South. Over the last several years, property prices had grown by an unrealistic 250% times in transaction prices. In the last several months they have declined by 25 to 30% and continue to be in freefall. It is expected that they will decline by another 15 to 20% over the rest of the year before they bottom out. The decline has been devastating for real estate developers and should have enthused retailers. While the latter have been able to renegotiate rentals by as much as 30%, they are weary of continuing expansion in a slowing market. 
Mired in legalities and a multitude of suits, the Subhiksha story receded into the background. Amongst the cases doing the rounds is the winding-up petition submitted by Kotak Mahindra Bank to the Madras High Court. As a result Subhiksha was compelled to submit accounts from April 1 onwards to the court in a sealed envelope. The retailer was arguing against the appointment of a provisional liquidator. Their argument was that they continued to be a going concern in the process of restructuring its debts (CDR). In another case, ICICI Bank is opposing the merger of Subhiksha with Blue Green, a listed company.
The first step in Mr Biyani’s game has been to change the name of pantaloon Retail to Future Markets and Consumer Group Ltd. The change also involves the appointment of a new Chairman, Shailesh Haribhakti. The new company will be a holding company. The next step will be to form separate wholly owned subsidiaries for retail and fashion. The fashion company will be called Future Fashion Merchandising Ltd and the retail company, Future Consumer Enterprise Ltd. The Future Group has already decided to spin off two of its other chains, Big Bazaar and Food Bazaar into a separate entity called Future Value Retail. This will be the third leg. Some observers feel that Mr Biyani’s restructuring will eventually include a JV with a foreign retailer. Speculations surround its recent talks with France’s Carrefour. 
This is the time for retail strategists to confess and still not pay with their necks. Aditya Birla’s retail CEO, Thomas Varghese, did just that when he called their new strategies a re-launch (see B&W column). Wadhawan is postponing the April launch of its first hypermarket. Others have cited the property crash to wait and watch. Some feel that the best bet is to rely on in-house efforts such as private label. With Reliance Fresh sporting 30% private label sales, the Indian retail upstart hopes to consolidate further in this direction. 
The US based restaurant chain major, Yum Brands Inc is planning to launch its Taco Bell format in India. Three restaurants shall be opened by the middle of this year. These will be Company run but additional stores may have a different arrangement. Meals of the Mexican food served at Taco Bell will be cheaper than McDonald’s for a meal. The meals will be customised over time to suit the Indian palate. The Indian subsidiary, Yum Restaurants Pvt Ltd already runs 200 fast food outlets in India including Pizza Hut and KFC. The organized fast food market in the country is currently estimated at Rs 2,500cr and growing at 20-22% each year.
With the prevailing mood one for consolidation, there are far fewer players committing themselves to major expansion. Notable amongst the exceptions is Dubai based Lifestyle International and Indian restaurant chain Specialty Restaurants. A major new player in the game is the $6.7bil Mahindra Group. However, their entry seems to be in a niche sector and presently low key.
Venturing where no retailer has ventured before, Hearty Mart is offering a ‘kirana’ type of franchise in villages. Founded by Nadeem Jafri, its stores target the ‘bottom of the pyramid’. Locations include little known inhabitations such as Illol (near Himmatnagar, Gujarat), Pipodar, Kakoshi, Vadnagar and Idar. The village franchise has to have access to suitable space (300-500sqft) and pay a deposit of Rs 25,000. Hearty Mart’s promotional campaign is: ‘Sabse khaas, ghar ke paas’ (the best, closer home). Interestingly, the stores operate under two nameplates – Hearty Mart of the franchisor and one chosen by the franchisee: Sahyog, Easy Shop, Tiny Shop. Hearty Mart charges 1.5% royalty on turnover. Fifteen stores are planned over two years. The franchisor is looking to developing private labels for ketchup, spices, etc. The initiative was floated with an initial capital of Rs40lakhs and is now touching a turnover of Rs60lakhs.
Carrefour to launch next year
KPMG: Slow down not effecting food retailing
According to a report by the Confederation of Indian Food and Trade Industry (CIFTI) and Franchise India the future of food retailing hinges on a big surge in franchising. Currently, the food and beverage industry in India is estimated to be Rs 58,000cr and is growing at a rate of 40% annually. There is a great scope for growth through franchising for fine dining and quick service restaurants. The food service sector in India consists of approximately two million licensed and unlicensed restaurants, of this only about 30,000 are registered. The Café and Juice bar culture is also on the rise because of the younger population. Casual eating from kiosks has also increased following the rise in mall culture. According to the report, more than 30 per cent of the new food outlets coming up in almost all cities across the country are through franchising. However, there are many hurdles to be sorted out at the ground level.
Bata India, the footwear giant, has disclosed the financial results for the Q1 FY-2009/10 and has posted a 6.8% growth in revenue at Rs 23,303.2 lacs as against revenue of Rs 21,819.9 lacs in the same period last year. The Profit before Tax grew 27.1% at Rs 1,623.5 lacs as against PBT of Rs 1,276.9 lacs in the same period last year. With view to bringing in the customers in Tier 1 and 2 cities, in this quarter they have opened 32 new retail stores based on their international format having a minimum area of 3000sqft and renovated 3 existing stores. These stores are primariliy located in cities like Kota, Jodhpur, Ludhiana, Kakinada, Berampur, Mandya, Gangtok, Hassan, Hubli, Ahmednagar, Nasik, and many others, apart from the metros. Marcelo Villagran, MD Bata India Limited, said, “In today’s challenging market, Bata has performed remarkably. Our strategy of opening large format stores has been successful and we continue to invest in expanding our retail business. Along with this, we have also focused upon providing our customers with a new trendy collection and better shoe designs. Our value pricing, coupled with improved customer service, has helped us to grow.”
The beleaguered real estate industry’s main focus continues to be raising funds to service maturing debts. This has taken many forms such as sale of non-strategic assets. Real estate major, Parsvnath Developer has reportedly put its four hotel projects on the selling block. These projects are currently under construction and are located in Hyderabad, Goa, Ahmedabad and Lucknow. DLF has put its wind power generation business on sale. Reportedly bidders include Adani Group, Essar Power Ltd, Infrastructure Leasing & Financial Services Ltd, Hong Kong-based CLP Group and the UK’s BG Group Plc. DLF hopes to raise Rs 2,000cr. Another innovative effort by the developer has been lease rental discounting. DLF has been able to raise Rs 1100cr from HDFC to whom they have pledged the future expected rentals.
Wireless connectivity offered by a mobile device has made life considerably easy. Here is one instance. In the coastal towns of Southern India, fishermen spend less time waiting idle on shore and at sea with their catch. Their owners and agents go to the landing centers once they receive information (the fishermen call from their mobile phones) that their boats are about to dock. This saves time and keeps the fish fresh. A mobile phone has justifiably earned the status of a necessity more essential than a watch. And when it comes to mobile phones in India, there is almost no limit – upper or lower – to the amount one can spend on a phone. Naturally, it is the best selling item of the moment and retailers of all kinds – new debutantes and experienced visionaries – have jumped on to the mobile phone retail bandwagon.
Chennai-based Subhiksha, originally a grocery retailer, started selling mobile phones through Subhiksha Mobile retail concept a few years ago. The chain’s mobile phone stores in Delhi, Mumbai, Chennai, Punjab and Gujarat was performing much better than their original grocery store concept. In view of flagging sales Planet M, the music store chain, has incorporated a section for sale of mobile phones to improve footfalls.
The original big daddy of all, Reliance – which can be credited to hail the mobile revolution in India – is expanding its retail and consumer outlets network in Punjab. It also plans to open 82 more mobile stores to sell its CDMA and GSM handsets, products and services exclusively, according to a recent report in Economic Times.
Quite understandably, the West influenced modern retailers started setting up shop in only a handful of metros. The other towns seemed to be mired in poor infrastructure, filth, and political chaos. The retailers often preferred to compete with themselves in common neighbourhoods rather than look for pastures outside. All this seems to be changing as consumers, fed with a common source of communication, are beginning to demand the same high standards both from their politicians as well as the retailer. These second rung cities, labelled Tier II, are now overhauling themselves up and offering a major new potential for organised retailers. The new destinations of choice are often State capitals (Jaipur, Lucknow), old industrial towns (Ludhiana, Jamshedpur, Faridabad, Surat, Coimbatore) previously neglected commercial centres (Indore) or have close proximity to metros (Thane). 
Rugged mobile computing with state of the art hand held devices is raising efficiency in the retail supply chain and in-store to a new dimension. European supermarket chain, Kaiser’s Tenglemann recently issued 660 Nordic ID PL3000 mobile computers throughout its 300 branch network. The handhelds have been designed to assist merchandise planning and control through item-level real-time inventory management. The result is paperless operations in the movement of goods – incoming, outgoing and inventory management. The PL3000 was preferred because of its stable WLAN Roaming performance, remote maintenance and software distribution options. The user friendly instrument permits one hand operation and has a large display. 
An estimate at a recently held advertising conference pegged online advertising at Rs 600cr. The fact that this is only 3% of total ad spend highlights the tremendous growth potential. India has as many as 40 million online users and the country is rated as the top five internet user in the world. The projection is that as many as 300 million users can join the ranks in the next 3-5 years. A corollary of this is internet commerce which is stuck at approximately Rs 300cr. Roadblocks include expensive broadband services, low credit card penetration and the near absence of local languages. The extensive penetration of mobile phones and new technology is likely to change all this. Online has tremendous potential in the Indian setting where retail and distribution infrastructure is minimal and costly. The need today is of entrepreneurs who can seize the hour and blaze new directions! Every retailer and brand marketer should consider how he can leverage online!
