Retail Dude

The Indian retail industry has been hailed as sunrise sectors of the economy. India has been recognized as leading Retail destination and whole world is eying on it. Retailers globally are effected by stagnation in consumer demand in their home countries, and so double digit growth in consumer demand in India looks like hot cake to them but the same is secured by FDI policies in India. Keeping these facts in mind, it was no news that US President Barack Obama was pushing India to liberalize and open its FDI policy for multi-brand retailing. He said that the stereotype concern that small shopkeepers in India will be impacted, ignores today’s reality.

As we know, currently India allows 51% FDI in single-brand retail and 100% FDI in cash-and-carry stores who can only sell to other retailers and business concerns and not to individual consumers who shops for home consumption.

FDI in Retail has always been a very sensitive issue in India. Supporters of FDI have been highlighting positivity it will bring to Indian economy like greater efficiency, better selection, improvement of living standards, integration with global economy and of course price reduction as a result of better technology and knowhow. But at the same time, people opposing it feels that it is a labor displacing act and will jeopardize unorganized and small retailers of India as well as Indian Retail Players. They believe it will effect balance of our economy when these foreign investors will draw billions of rupee as profit out of our consumer spending.

But if we see many other developing nations like China, Malaysia, Thailand etc., have opened up there Retail Sector without much problems. They faced some hiccups but then they introduced conditional laws to check expansion of foreign Retailers in their country and hence restored wellbeing of locals too. India also need to adopt similar approach where they analyze possible barriers to FDI and ensure that they are addressed in their policies while lifting FDI.

If we see GDP composition of Indian economy, Service sector contributes most, followed by Manufacturing and then Agriculture. But for a developed economy, contribution of Manufacturing sector should be most as it indicates more of saving for the economy. Opening up Retail may result in some losses in Service Sector but if it is accompanied with proper conditions and policies safeguarding interest of domestic retailers and small players it will be fruitful. We need to open it up with conditions which will boost our Manufacturing and Agriculture sector which will not only compensate loss in share of Service sector, but will also bring Profits from rise of Manufacturing and Agriculture sector. Some of the conditions and their benefits which I can think of are as follows:-

• Fixing quota of Indian make products in their offerings in India. Say for example if they are offering Rs. 100 values of products, than Rs. 80 worth products should be made in India. This would increase demands of Indian Products and will boost Manufacturing sector too.
• Above clause will encourage them to get manufactured some goods in India as there private label. Cost of manufacturing some of these labels may be too less and so Retailer may export it to their outlets in other countries boosting India’s export.
• Govt. can impose that 100% of Fruits & Vegetables they are offering are produced in India. This will encourage contract farming by these Retailers in agreement with farmers ensuring high quality produce and better earnings to poor farmers of India.
• Further Govt. needs to monitor Prices in order to ensure that price efficiency of these retailers is not killing small Indian players. One of the way will be higher taxation on foreign Retailers.
• Government need to analyze the possible harm it could do to Indian Retailers and put appropriate conditions to ensure safeguarding their interest.

But again a big question which arises in our mind is that is our Govt. capable of finding such conditions and open Retail Sector in structural way? Keeping in mind corruption and bureaucracy in India, implementing it would be a challenging job. And if Retail is opened up without such terms and conditions, then it may turn as a grave error for India!

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- Rajeev Damani

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With the domestic retail market witnessing a gradual revival, mall owners are implementing various schemes in order to expand the sources of revenue generation.

As store vacancies in malls started to swell during 2008–09 in a psychological recession plagued India, developers tried to hold their bleeding noses, trying to look out for additional sources of income to give a push to their operating revenues. Although necessity is the mother of invention, the latter soon becomes a habit and then culture. Such is the case with most promotional or additional revenue generating activity that present-day malls practice on a routine basis.

Major Sources of Additional Revenue

Some of the non-conventional ways in which additional revenues are being earned by shopping centres over and above the ‘fixed rentals from their tenants’ include the following:

Temporary leasing area: These are referred to the vacant stores that are let out to vendors. It could be a fixed kiosk wherein different retailers display variety of merchandise and operate on a rotational basis. Certain service kiosks are also mushrooming at present such as kids play area, tattoo stations, photo stations and spas, among others. Lately, developers are eyeing to rent out their vacant stores for exhibitions as well as small gatherings.

Events: Almost every mall these days has some buzz in the air about an upcoming or an ongoing event. These events were initially conceived as promotional activities, but at present mall marketers use such events as brand building activity. Either ways the idea is to generate extra revenue.

Over the years there has been a steep increase in the types of events that are organized. Categorically they can be demarcated into:

· Mall events such as celebration on Valentine’s Day, Republic Day and such other
special occasions.

· Mall tenant events such as store launch parties, fashion shows by apparel brands and organising musical evening for brand promotion including visits of brand ambassadors, among others.

· Events as venue partner are witnessing an upward trend as mall areas are rented for brand launches, IPL related events, events in collaboration with various television/radio channels etc.

· Organizing corporate social responsibility oriented events that are not aimed at colossal revenue generation but certainly help mall retailers to connect with customers. Events organised in association with NGOs on occasions such as Women’s Day and Labour Day along with free health and yoga camp are picking up pace.

Promotion and Advertising: Different revenue generation activity through advertising are not only meant for tenants but are also undertaken by most brands/organizations. New product launches in a particular store can be advertised through floor graphics, standees and even drop-downs leading to the store. Companies utilize digital and graphic signage like Wi-Fi, Bluetooth and plasma screens to promote their products in malls. In return they pay rental charges, thereby generating revenues for mall owners.

Miscellaneous sources: Other sources of revenue churners could be a range of services such as valet parking, gift coupons and crèche facility, among others in order to create extra revenues for the smooth functioning of malls. Although these are used only by a fixed percentage of people, they do provide an impetuous to revenue generation.

Malls developers, nevertheless, have to keep greasing their elbows and constantly strive to differentiate themselves to maintain a competitive edge. Malls will have to keep opening up innovative ways of revenue generation. This will not only keep the average Indian shopper interested but also withstand economic backlashes in times of restraint. Developers will have to conceptualise, plan and provide for these activities
right from the time they are putting up the pillars. Innovations will age and become habit but constant innovation will keep feeding ‘the mall-ers’ with ‘extra bites’.

Himani Paul
Commercial Manager
SEGECE INDIA Pvt. Ltd.

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With only a dozen of malls surviving out of more than 200, I think the picture of Indian malls is fading gradually. This is the scenario of the Indian Malls at present and I presume it will be enough for the readers to envisage what I am going to mention.

It has been almost one decade of presence of shopping centres in India, as the first center appeared in late 90s - Ansal Plaza, New Delhi and since then the expansion really accelerated in 2002 – 2003. In the year 2008 – the year of economic slowdown, the development was less than expected and it is evident due to the fact that:

• 34 centres were opened (whereas 74 were planned for opening at the beginning of 2008)

• 8, 50, 000 square meter GLA (whereas 1,800,000 square meter was expected)

Besides the economic downturn, the problem also comes from the developers and retailers. In order to understand them better, a detailed study of the same is given below:

A.) Developers - The Greed for More

On one hand, it is good to see Indian developers investing and providing excellent infrastructure to the country which certainly enhances the overall image but on the other hand it is disappointing to see the blunders done by them for their own properties. Personally, I believe that a developer can accord to both Residential and Commercials at one time but when it comes to Shopping Centres (SC); they should not fire at their own feet!

The following attributes will give a brief idea of the mistakes done by the developers in past:

1. Poor site selection:

Selecting a location without even analyzing about the primary catchment area is a mistake commonly seen. There are many instances in the country wherein erecting a mall at National Highways has been a failure.

2. Vertical expansion:

This country has seen a lot of vacant malls with multiple floors. The ideal case is to have a shopping center with lesser number of floors no matter even if the size of the shopping center is small.

3. Commercialization Issue:

Poor commercialization is like a house built on sand - it will fall down any day. The first objective should be to position anchor stores in their respective position and second is to attract the vanilla brands by using anchors as a tool. It is also important to note here that with a good floor plan and bad commercialization, things could still work but poor floor plan along with good commercialization may lead to irreversible changes.

4. Lack of professional advice:

It is always better to take professional assistance before the commencement of project rather than after its completion, which undeniably reduces the scope of improvement as well as increases costs more.

5. Design issues:

It is rightly said that easy plans normally work, the more complicated you make, the more difficult it becomes. There are many instances like: the strange floor plans - proving to be a hurdle for the shoppers, no sitting arrangements, unplanned tenant mix – not making a mall a destination, low quality local stores or kiosk and so on that is diluting the overall image of the project.

B.) Retailers – Irrational decisions

The slowdown of 2008 has been a great lesson to the Indian Retail companies; they call it lately as correction! Before the year 2008, the expansions had been enormous but now the buzz is “expanding but cautiously.” After reading the factors listed below, one can certainly say the retailers have burnt their fingers themselves:

1. Juvenile expansion:

Before the downturn in 2008, the retailers used to expand frantically almost in every SC without giving much importance to factors like location, catchment analysis, long term vision, presence of the actual buyers, reputation of the developer and much more. These lead to problem of surfeit for which the retailers are still in distress.

2. Sky –scraping commercials:

During this massive expansion, the retailers were at ease to pay high fixed rentals which resulted in high fixed operating cost. Equivalently, the slowdown had a direct impact on the turnover which landed retailers in a miserable condition.

This resulted either in closing down of unprofitable stores or re-negotiations with the developers to reduce the rentals.

Thus, the term Revenue Sharing was introduced; convincing people of the fact it is a Win - Win model.

3. Brand visibility was more important than store profitability:

The expansion (prior to year 2008) accelerated in the most imprudent manner considering the fact that brand visibility* is more important than store profitability leading to calamity for many!

*For retailers, the numbers of stores are directly proportionately to brand visibility whereas store profitability is the result of high turnover and low operating cost.

4. Poor store visibility:

In order to enhance brand visibility; more and more outlets were opened which lead to poor project (mall) and location (store) selection. This yielded in low turnover and wastage of enormous capital expenditure on every store. The selected locations were so poor that even with the best marketing and information tools; no one was aware about the existence of these stores.

Hence, it was a Win–Lose situation wherein; the developer was successful enough in leasing out his space but not the retailer!

The road ahead:

The coming year will have a lot of consolidation. The existing smaller or vacant malls will either be converted into commercials or will be acquired by the larger players. The commercialization strategy will improve as the developers have seen enough and have learned to reject the worst and select the best. The tagline “everybody is welcome” will no longer be entertained and the landlords will be more selective in case of tenant mix and assigning locations.

Conclusion:

To assimilate the above, complete and professional asset management services are required to assist the developers and to create a good balance between the customers, retailers and the owners. It is possible by correct succession of steps beginning from thorough market research till the designing of the property.

Considering the fact that Indian real estate market has high potential and long way to go; the current phase demands improvisation through professional consultancy and other allied services. It is the time to see how owners employ the best use of these services in future.

And if all this is incorporated, one can hope that Indian Malls can once again be on a path of glory.

-
Amanpreet Singh Banga
Commercial Manager, Segece India, New Delhi, India

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Guest Post:

When we say that the market is changing we should ask ourselves who is changing the market? If it is not you, changes done by your company will not yield significant gain.

I am going to discuss changes in market dynamics with respect to introduction of new products. If a company is not leading the product innovation in the market, company is bound to compromise on the bottom line. In such situation the new product will be new to the portfolio of the company only but not to the market. A real new product introduction means surprise to market.

In one of my earlier post I discussed the correlation between new product introduction and market share. I listed some variables like working capital of channel, rotation of working capital and pace of introduction of new products should be properly planned well before laying out the product road map. It seems theoretical but I convincingly suggest to focus on following parameters at the time of introducing a breakthrough product to make sure that the planed gains are intact:

1. Pace of introduction: It is a philosophy of a company’s strategy which defines dynamism and youthfulness. High risk with high returns. If executed properly, it will establish a product leadership image of the company. Every successful introduction will fetch a yield, during its life cycle, much more than the cost incurred in ten mediocre or failed introductions. When we say pace, it’s important to assume the competition will copy it in no time. Pace is introduction of real products in the market, consistently with a motto to surprise expectations of the customer every time. In competitive environment it will give you a first mover advantage with better sales realization and in monopolistic environment it will increase barriers on entry of competition. The pace of introduction can be decided based on the intensity of existing competition.

2. Working capital of channel: Only new product introduction may not give the desired growth. Think this in a way that if cumulative working capital of all the channel partners is constant, the retail will only replace the existing portfolio with new one. This may give better top line because of higher realization from new product but overall volume will remain constant. If a company’s thrust is to expand, the sales volume will increase only with increase of selling capacity of the channel. This can be done with penetration into untapped market. More distributors or more retailers means more working capital. If such distribution plans are in place the real volumetric growth of new products can be assessed.

3. Cycle time: Or the speed of rotation of working capital of selling channel. This is the area which any company in any industry will love to improve. This is also a measure of supply chain performance. With the proposed implementation of GST (in India) we will see a radical shift in collaborative supply chain management with better distribution at lower cost. A longer term strategy on depot and inventory planning in line with product road map and futuristic capacity planning is required.

This is a guest post, the original article can be found here: http://santoshsrivastava.wordpress.com/2009/10/24/surprise-expectation-of-consumer-every-time/

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Dear Readers,

Let me wish you on behalf of the Retail Dude Team a very prosperous year ahead. Let it be a year of change.

With the advent of new modern technology and business methods, one thing that most organization does is to create wealth for themselves. In primitive a few companies did go public and created wealth for its shareholders and gave a handsome to employees as esops which of course strengthened our national economy. But today a new economy has emerged the one of Social Economy where entrepreneurs make a far greater impact to a societal section primarily the disadvantaged ones. Slowly but steadily Social Entrepreneurs are the new wealth creators and I believe they are far more innovative in approach that can be a lesson to the government and companies alike.

But do not make a mistake of realizing that they are just mere charities for they use all modern methods and technologies and yet are not greedy but have a drive of creating a social impact. Some may quote that bigger companies do their bit by funding and resolving issues of the communities so called as CSR, but the prime difference is that a handful actually are sustainable!  I am yet to quote a few notable existences of people who have transformed this picture and yet can find that they have managed to evolve themselves even in the shades of the bigger corporate giants. Almost like a phoenix have created values and wealth from dust.

“DesiCrew” is one of the efforts of Saloni Malhotra who started this venture of a rural BPO in the villages of Tamil Nadu in 2007 and managed a turnover of over 2 crores last year. Not to mention Satyams Gram IT was already in place by then, but today the winds of change have hit Kollunmangudi and created a big social and commercial impact. “Bamboo House India” of Prashant and Aruna Kappagantula realized that bamboo art comes naturally to the tribes residing in Tripura and the fact that most bamboo furniture sold in the country was made in China! After they setup their company, the earning potential through a cultural art has thrived in the region and has a potential to bail almost 5 million people above the poverty line. The bamboo ecosystem also revitalizes the environment, a classic triple bottom line result.

“Industree Crafts” created by Gita Ram and Neelam Chibber (NID) set up in 1994 is another tale of how the modern economics can fortify the rural talent. The chain of Mother Earth stores which stands proud today is no more than a market linkage of the urban demand to the rural artisans. In fact they also managed to bag orders from global brands like Ikea, Crate&Barrel and Interface boosting the lives of more than 350 artisans groups.

Talking of crafts and hand work none can challenge Fab India’s niche and its vast network of over 100 retail outlets.  Set up by John Bissell, today Fab India supports more than 30000 artisans and over 17 small producer / community companies. Through their sourcing of materials, has also boosted cottages industries spread across geographies. It actually recorded over 300cr as revenues for FY09, truly FAB!

The focus is not only on delivery but also on affordable innovation as “D.Light Design”  and “Selco” have done to bring in cheap solar powered led lamps that run up to 12hrs a day with a minimal charge. The innovation also was a hit with poorly electrified states with items like mobile chargers, cookers etc using all but using solar cells. The dilemma and the question that lies unanswered now is that if such technological advances can take place to help the poor, why isn’t it being used as an alternative power/ fuel solution to the urban?

To talk of young entrepreneurs, none match Dr Vikram Akula creating “SKS Microfinance”, which today has disbursed over 3000 Cr as loans to 3.95 million lives. SKS single handedly changed the face of microfinance which even the state owned banks couldn’t do.  Nearly 4 lakh Sangam members of the Company own Kirana or small grocery stores. The Company has launched this project to provide working capital finance to help these Sangam members to buy Fast Moving Consumer Goods (FMCG) and groceries through a dedicated vendor. The Company has partnered with METRO Cash & Carry India Private Limited, one of the world’s most-reputed wholesalers, who deliver 13,000 SKU (Stock Keeping Unit) at competitive prices and standard quality at their doorstep. Insurance is yet another feather which SKS has added. No matter how significant the business idea may be, it is SKS that did lay out the very foundation to carry it out, by economic empowerment through small credits. No wonder that they still have a 99% credit recovery record.

And who can forget the firebrand Ela Bhatt’s “SEWA” which had helped millions break the bonds of poverty in Gujrat setup in 1972 and now into more than 8 states. From financing small rural entrepreneurs helping them earn a livelihood to healthcare, insurance, schooling, eco tourism SEWA has done it all. In fact it also set up Rudi multi trading company a marketing channel for the rural by the rural. Bajaj Electricals uses packaging made by Rudibens. SEWA also broke the national barrier with it importing 10Tonnes of dry fruits from Afghanistan creating a market for them whilst a market for us. Guess where her next stop is? Africa!

Social entrepreneurship describes a set of behaviors that are exceptional. These behaviors should be encouraged and rewarded in those who have the capabilities and temperament for this kind of work. We could use many more of them. We need social entrepreneurs to help us find new avenues toward social improvement as we enter the next century.

Cheers!

Sudip

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“Organized Retail to touch $ 45 billion mark by 2010”. Does this sound outlandish to you? Well, this was the headline in a daily publication called Midday dated 11/1/07. And, the figures are taken right out of the India Retail Report 2007, released by Retail Association of India. Looking at the present day scenario whoever projected these figures might want to look back and certainly make a few corrections here and there. As it stands today, the retail business amounts to only $ 18 billion. If we peak a bit more in the past in 2006 Retail was projected to grow a handsome 37% in 2007 and 42% in 2008. Any guesses as to how much did it actually grow? “We had assumed a GDP growth of 8% to 10% during 2007-12 in the report” adds Joseph who headed the ICRIER team researching on the impact of modern retail on small outlets as per the directions of the Union Commerce Ministry. He sums it up by saying “this is now impossible, at least for the current year 2008-09 and the coming year.”

So that gives us a good idea as to why a number of retailers felt like packing their bags while others just started pulling back their resources. “We had expanded rapidly; most of the growth was debt-led. The company had planned to raise equity during 2008 and was close to doing so in September when calamity hit the global markets” says R. Subramanian, MD Subhiksha (once India’s largest retail chain). The first evident rationale is the erroneous projections or rather over-projections, as most of these organizations went by things as they looked on the face of it, eventually having to face the music as none of these projections came true.

Second, imperative reason for the failure of retail chains has been splurge of investments in real estate. Though, the retailers cannot be exclusively blamed for this reason. Even till date there is no governing authority which controls circle rates for properties, and restricts them within a reasonable limit. “Those who had big expansion plans had [acquired] real estate earlier at much higher prices. They are now re-looking at their expansion plans and renegotiating the rates” observes Gibson Vedamani, Director, RAI. Why would they no, Mr. Vedamani?

Third, the delusion in the mind of organized retailers, that with the advent of organized retail the consumer focus was bound to shift. “Mom-and-pop stores could become part of the system, benefiting everybody.” Personally, I would not agree with the fact that the retail sales of the kirana stores shelves has actually gone down in the past few months. It’s just that the anticipated pace with which the companies expected to the consumer to shift from unorganized to the organized stores which did not quite realistic. This specifically applies to smaller towns and cities where value retailers like Vishal are sailing in troubled waters.

Fourth, the only value proposition which most of the retailers relied on for luring their consumers was discounts. Many a times this lead to drop in quality of the merchandise being sold. All but a few retailers tried to introduce promotions that went beyond price offs.

Fifth, would be a coalesced effect of the a number of factors such as insufficient investment in strengthening back-end operations, inability to retain talent, in turn leading to high attrition, lack of sufficient support in logistics and infrastructure, inefficient supply chains and lower quality produce.

If you are a retailer..don’t sigh. Just hang on for the next post as it’ll be the answer to all that has gone wrong in the past. And, surely enough I won’t be projecting any figures.

- Vivin

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As Sudip very well quoted some examples that retailers are using to cope with the situation as well as to show sustainability. Reducing size of format or closing the stores can be the solution but it’s not what business permits. Business is all about profits and these measure mentioned can take care of your top line but what about bottom line what about the driving force for which you are in retailing. For the sake of business instead of closing I would like to suggest opening or I should articulate it and should say “Use different channel”, use the internet. Because of this crisis many shoppers are turning towards online shopping and this is not only coz u can get the item cheaper online but because of this economic condition, daily you will see promotions and price cuts on products and internet is the fast and easy way to get this information.

Internet analyst James Wallace, co-founder of free price information website PriceProtectr.com, says “The Internet is more optimized for information than commerce,” But ultimately this information drives the customer to the shop to buy. Online shopping last year raked in $25 billion, and online shopping growth should exceed 10% as compared to single digits for overall consumer spending. But, online transactions still account for less than 5% of total consumer spending. But anyways it’s a sale whether it’s online or through brick and mortar model. By providing the information on internet helps customer in their buying decision and every sale which have any kind of prior online enquiry, should be credited in internet shopping.

And because of this economic crisis many promotional offers and discounts are floating in the air of internet. “We’ve seen price drops as much at 95%,” said Wallace. “A $1,800 set of leather-bound books went on clearance for under $20. It sold out in minutes. In the Indian context I would like to quote my own example: I prefer to buy gadgets and electronic stuff from ebay rather than going to Electronic market (S.P. Road, Blr). I get almost a discount of 500-2000 INR depending on the amount of purchase. My apple iPod classic which was for MRP 12500 INR, I got it from ebay for just 10999 INR and that too in 6 month EMI, five months back, who won’t prefer the easy installment method or a discount of 1500 INR and guess what I got a portable vacuum clearer free with the order as the order exceed 10000 INR mark. What else would you wish?

Again as Ebay.in turned 4 they are giving gift and I just bought an external hard disk which was for 5800 INR in electronic market and I get it for 5500 INR and 3 month EMI and a gift: Nokia Bluetooth may be it worth around 1000 INR. So I believe this to be a steal deal.

The prices can vary depending on locations, as previously my favorite place for gadgets buying was Nehru Place, Delhi and I still believe items are cheaper there any ways. So whenever I plan to buy some electronics item I check Nehru place’s official site for price quotes I check with the local electronic market and then I check it on ebay and with all these offers and promotions I just can’t resist buying it from ebay. It’s convenient, easy, 24×7 access and cheap (think abt EMIs).

Riding on the online shopping wagon, many sites  evolved recently, but each one with different business model, like ratetag.com, naaptol.com, bechna.com and the ultop.com etc, which just provide the comparison for the already existing online shops like indiatimes shopping rediff and yahoo shopping portals (But I must say these shopping portals miss something) And secondly there are online counter parts of retailers like futurebazaar.com. and just to try their online service I searched  for external hard disk 1 TB which I bought from ebay for 5500 INR and future bazaar was selling that for 9999 INR, are you kidding me, this is even dearer then my local electronic shops. ”Garv se kaho hum kanjoos hain” won’t fit here. Why they are not creating something like ebay. I know Ebay is a marketplace but when someone is selling a product so cheap why don’t a biggest retailer of India source the same product for the same rate. I have no doubt on the vendor network of future group; it might be the biggest one I guess. I believe they can do this.

For big ticket item every consumer look for information and more details. So the online counterpart of a retailer will definitely help a consumer in their decision and can also lure the customer to their brick and mortar model. Thus I think online thing is a powerful weapon in the hands on retailers to shoot this crisis, but not in a way future bazaar is doing. Not in a “Oops! page not found” way.

- Prateek Katiyar

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Recession has bitten almost entire Retail Sector, but in India, Pharma Retail is a format which has been growing and is still growing. And this is quite obvious as customer can postpone their spending on everything other than pharma products. In 2008, it grew by 10% and this year it has started very optimisticaly with growth for January being 15% and the domestic retail market value being Rs. 2908 crore.

Top 5 Pharma Companies:

- Rajeev Damani

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We have seen worst in the last quarter and even during the beginning of this New Year. We were unable to properly welcome 2009 because of the global crisis and credit crunch. But what I am hearing form all around is the worst is still to come. What will be that worst even a blurred thought of that shivered me to the bottom. So instead of thinking of the worst, I tried to analyze things and tried to find out are there some facts that really backup the predictions people are making or it’s just a negative aura around people which forcing them to say like that. I can see in the last few months to cope with the economic crisis RBI and Govt. had taken lots of steps and so do the retailers and manufacturers. The Reserve Bank swiftly initiated a series of measures, which helped to assuage liquidity conditions, while reassuring the market that the Indian banking system continued to be safe and sound, well capitalized and well regulated. And because of some of the steps taken by govt. we saw an increase in consumption demand mainly reflecting rise in basic exemption limits and tax slabs, Sixth Pay Commission awards, debt waiver for farmers and pre-election expenditure. So there is still consumerism prevailing in the market, there can be different factors for that like the policies and measures taken by govt., reducing oil prices, bumper promotions given by retailers, reduction in inflation, decline in WPI driven by decline in prices of minerals oil, iron and steel, oilseeds, edible oils, oil cakes, raw cotton. Also retailers are controlling their inventories and manufactures are regulating their production, Manufactured products inflation, year-on-year, also moderated to 5.9 per cent on January 10, 2009 as compared with the peak of 11.9 per cent in mid-August 2008. So the policy measures are now in place and many other are in pipeline which resulting as a healing effect for the situation and I can see some stability in the economy. And as far as consumer behavior is concerned, Most of the consumer behavior we saw in 2008 will continue well into this year, Rosalind Wells, the National Retail Federation’s chief economist, predicts “Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power.” indicating shoppers will shop.

The GDP growth declined but it’s still positive and there is still GROWTH. I might sound too optimistic so using this open forum I will appreciate reader’s comments on this topic. I know in the back of everyone’s mind this is a question- “Are there any signs of recovery?”

- Prateek Katiyar

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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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