Retail Dude

Hello Readers,

Its good to see that when nature strikes, the riverine always finds a new course. From something that was entirely created by man, we need more perseverance and effort to claw back. FDI regulations thinning out investments, to the real estate corrections to retailers closing out. There so much that has been happening in and around. But finally we get to see some good moves which definately promises a sustained growth. Although the growth rate be just for the time being, slowing down.

To talk about some of the recent happenings, we find Subhiksha in an utter dismay. Possibly the dream run of Subramaniam’s expansions have brightened his mismanagement with funds.The intention was there, but clearly a mismatch of optimism and reality. We find Shoppers Stop closing down Crosswords and Cafe Brio, although that means good for the book lovers as they have continued a 80% discount for clearance and  the Coffee lovers will get their neighbourhood CCD there!

 ”Garv se kaho hum kanjoos hain” is the internal slogan for the Future Group this year, coined by none other than Biyani himself, showing a great proactiveness to cut down on costs. There have been remarkable methods that have taken place. Firstly, a hard negotiations that have come by with the vendors to supply at much lesser rates than usual. Margins have been thus effective. It has forced players to play on volumes than on small consignments. Reliance Retail have started scaring realtors “Lessen or we vacate”. Most of its initial 18 months lock in contracts are expiring soon and thus a bargain for heavy negotiation to reduce them. They have drastically reduced the format sizes and altered a few to give them maximum coverage. Eg a hypermarket which was initially planned for 1.6 L sq ft are now operating at 50-60K sizes. Reliance Timeout (books and music) have reduced to almost half of its roll out size of 25K sq feet. With store development cost of around 2000/sq ft, the company claims to have saved a whopping 190Cr just scaling the size. Pantaloons have integrated Back-end operations such as marketing, human resources and information technology support to create one common back-end entity for all stores. This is surely to save a huge chunk.

Vishal retail also have saved big bucks on rentals which it claims that are lower by 25%-30% lower than the actual levels. They have also closed out many of their warehouses and operate only a few to maximise the potential savings on logistics. Sale period across retailers this year have exceeded an usual month period to almost two, to generate sales. Closing down of non profitable stores and sections has been yet another feature adapted by most retailers. Big Bazaar has been examplary to close down certain sections to save on non moving goods.  Apart from private labels which has been the breather to most, the retailers have seemed to focus on inventory levels. Most of them now keep very low inventory to keep circulating the capital instead of blocking it.

The most unappreciated move though is related to human resources through the re-distribution of staff across stores and rationalisation of manpower per store. There has been a freeze on fresh hiring since last August for most. Although the savings are great for the retailer.

In future though, i would not be surprised, if retailers gave more attention to their supply chain. We may possibly see sharing of resources within them.Optimised logistics will be a key area of consolidation and growth. A focused expansion will be made to covering more cities than offering a full width of the lineup within a city. It will just be about holding the stallions back for sometime.

Cheers!

Sudip

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