Retail Dude

2008 was a very confusing year. In starting of the year, we saw a very positive wave in retail sector. All major retailers were on expansion spree which started in 2007 only. We were seeing collaborations, mergers, acquisitions in Retail. Many international brands were entering India or expanding their scale of business. Some of the headlines in beginning months were:

• Reliance Retail to open 30 hypermarkets
• Rado & Tommy Hilfiger to expand in India
• Armani bows down to DLF in India
• Reliance Retail & Bata form alliance
• Mahindra & Mahindra to enter lifestyle segment
• Bharti keen at acquiring Big Apple
• Retail Brands to focus on brand acquisitions
• Trent to double its store by 2010

These kinds of headlines for Retail continued till July 2008 though the intensity was diminishing after Q1. With global meltdown and recession in following month’s consumer spending and demand decreased. Retail Rentals diminished, corrections and consolidations were happening everywhere. We saw store closures, downsizing, cost cutting and hold on expansion plan. The headlines were like:

• Downsizing & Cost Control in Action
• DLF’s ‘Mall of India’ on hold
• Subhiksha blocked by the vendors
• Slowdown promotes consolidation in Lifestyle segment
• Big Bazar closure in Ahemdabad
• Subhiksha white goods store launch postponed
• Triveni Khushali Bazar on sale
• Dabur halts expansion, expects rental to fall further

Year 2009 kicked off with Satyam’s scam. Retailers need to learn a lot from Satyam’s case. Satyam overstated and inflated it financials to shoot up the market price of its shares and showcase itself as a huge company. It loosed on its fundamentals and continued it for many years. At the end everything became unmanageable and we all know the result now. Similarly in 2008, retail companies also spread there operations, increase numbers of stores, hired huge number of people and did everything possible to showcase a dominant market presence . Consequently it is becoming tougher for them to manage and we already saw some closures and downsizings in Retail Sector. But if these are not controlled, it will again become unmanageable for Retailers and they may have to shut down their operations completely.

- Rajeev Damani

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