Pace of Activity Picking Up in India
Corrections were made in terms of store openings, retail rentals and consolidation, and many retailers tweaked their formats and product offerings to retain their leading positions in a retail environment that, by modern grocery standards, is still in its infancy.
Modern grocery retailers in the country welcomed the New Year with optimism; some announced expansion plans in the first week of January. Future Group, RPG Group-owned Spencer's Retail and K Raheja-owned Shoppers' Stop plan to invest a combined $123 million in 2010.
Store openings ahead
Future Group alone raised $102.4 million in November through qualified institutional placement. Its Pantaloon chain is enjoying same-store sales growth in excess of 25 percent, and the company is “looking at opening 10 to 12 Pantaloon stores in 2010," according to CEO Kishore Biyani.
Spencer's Retail expects to open a dozen large-format stores this year, and is planning to introduce new stand-alone pilot outlets offering fish, meat and gourmet foods catering to local tastes and preferences.
Consumer electronics players also have ambitious store-opening plans. Tata Group operates Croma stores through subsidiary Infinity Retail (Infinity owns and runs the retail operations, while Australia-based Woolworths manages wholesale operations like supply and technology). It plans to open four new stores every month in the current quarter and two to three stores monthly thereafter for the foreseeable future.
Reliance Retail plans to open 45 Reliance TimeOut stores over the next three to five years. The company currently operates seven stores and is aiming to tap into India's book retailing industry, less than half of which falls under organized retail.
The past several years have seen many retailers, both domestic and international, become over-enthusiastic about growth opportunities in India. Many domestic manufacturing conglomerates jumped in with the launch of Indian versions of modern grocery stores, where products are displayed in neat aisles and arranged in rows and columns, while loose grains are offered in open tumblers, catering to more traditional consumer preferences.
Steps to scale back
The economic slowdown had a cascading effect, how-ever: Domestic and international retailers were forced to readjust the size of their portfolios by closing unviable units, scaling back the number of new stores and undertaking major cost-cutting exercises. The slowdown became evident when Subhiksha, one of the country’s leading discount retailers, went bankrupt and was forced to close all 1,600-plus stores. Shortly thereafter, Vishal Retail had to completely restructure its corporate debt.
Following the scaling-back exercise, retailers have witnessed stronger sales and growth in the last quarter. With the rise of consumer spending and a relative fall in property rentals, retailers have a generally optimistic view of the overall retail market and are positive about their forthcoming expansion plans.
Value/discount retail has emerged as an important format – so much so that Reliance Retail is converting some of its existing small-format stores to Reliance Value to lure in more price-conscious consumers.
Additionally, leading international players are joining the Indian retail bandwagon. Wal-Mart launched its first cash & carry in Amritsar, Punjab, and U.K.-based Marks & Spencer has entered a joint venture with Reliance Retail to open clothing stores across the country. Tesco and Carrefour are planning to establish wholesale outlets across the country as well.
