Retail Dude

The annual AT Kearny GRDI report ranks the 30 top retail destinations across the globe based on its growth, risks and markets. The ones mentioned are a few of several other parameters. India slips to third spot after emerging as a leader last year. Shuttling back to the top spot is China going all out to grow its confidence to the world retailers. And a surprise entry at second rank is Kuwait.

India today is considered as a mature market where there has been significant growth and now can only has to sustain its growth. Although there are tough challenges that lays ahead, retail in itself is undergoing a consolidation process of its own. If the economic downturn brought some sense into the retailers, there is still a lot of sensibility that has to grow in. Having deep pockets isn’t just enough to give you the biggest pie share. Consumers are now used to the buffet of services which the retailer had once used to lure them in the race to grow and now, they are setting up standards of their own. Global standard on sustainability and greening is just piping in more standards. The new taxing systems to be induced will make life difficult even for private labels. The real estate bubble finally went bust and the rentals gave some respite but still don’t deliver on quality space even today. The retailers in my opinion should keep it tight, close and integrated and stop experimenting with formats.

The most preferred way of entry for retailers and consolidation according to the report will be the Tier 2 and 3 cities where the whole focus has now shifted. The mad expansion in the metros is now over; it’s the time for the other tiers that prefer the Hero Honda to the Harley, to get flooded. The retailers propose to tap the bludgeoning middle class population, but they mustn’t forget that they will still be the stricter price and quality conscious customers. I have seen V Marts, Vishal’s and Big Bizaar’s close and cut down floors in these towns. Seasonality of shopping marked by occasions and festivals will be the key to the survival here and so, the franchising model looks as promising which will kick in the go-getters of these towns.

A major challenge to the retailers is the ongoing debate on foreign direct investments, which doesn’t seem to end anytime soon. The Indian Government still bears the fear of compromising their locals’. They fail to understand that high flying brands won’t be much effect but to allow investor groups to retail firms which can make a significant improvement in the Tier 2 & 3’s. That’s what is going to keep the GDP a flyer. Has it ever considered Wall Mart, Carrefour or Tesco to partner in absolving the misery of food grains rotting in the godowns and allow them use their masterful supply chain accomplishments? Not to forget the jobs it would create. A quick look at the FDI index will allow you to measure that access to new markets and building capacity is on priority list of all investors.

Green everything, is the new mantra. I just wonder what future it holds to JV’s, acquisitions, mergers and investments hold as the carbon credit values go under revision. Under strict EU norms and the UN (CDM) the Europeans will reach out to countries which will minimize their carbon taxations. What happens to India as a destination with the entire infrastructure lying haywire? Is a Green Supply chain even remotely possible?

Now, is the time for our domestic retail conglomerates to let go and share some of individual resources and build upon a collectively strong unit, one which is capable of rebounds.

Cheers

Sudip

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Whole world is eying at $350 billion Retail Market of India which is expected to double its size by 2015. Wal-Mart & Tesco have planned to open its first Cash & Carry store by 2009 end. Carrefour has also decided to enter Indian market in same format. Seeing the plans of its rivals, Metro AG who is already established in Indian Cash & Carry business has planned to double it’s presence in India. They plan to invest $120 million to open at least four new centers in Bengal. They are waiting for the license from Bengal Government to deal in agricultural produce and source directly from farmers. They will wait for a decision till 29^th September by which the government will decide on course of action. I hope that Metro AG will have a good time with Forward Bloc who is opposing organized retail in the state.

- Rajeev Damani

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You guys must be thinking that I am crazy about Wal-Mart. But actually I can’t help it; there is always so much to post about this retail giant. According to analysts, Wal-Mart is currently reaping benefits of the strategies it took almost a year back. Almost more than a year ago, Wal-Mart decided to slow the pace of new store growth. Recently they have also decided of remodeling the existing stores.

H. Lee Scott, president and chief executive officer, re-emphasized the company’s plans to invest more in remodeling as it continues efforts to improve the shopping experience when he addressed retail analysts Thursday at a conference in New York.

As I have discussed earlier that Wal-Mart reported 3% growth in August sales which was almost double of Analysts anticipation, it was more because of its ability to foresee the future and take decisions.

Indian Retailers need to learn from Wal-Mart that it’s not important to open a store in a day or week rather it’s important to invest in improving customer experience in existing stores.

-          Rajeev Damani

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As we all are aware that Retail Sales for same store in US is continuously diminishing, but the it’s not so in case of Discounters. Wal-Mart has showed growth in same store sales by 3% beating the expectations of analysts which was only 1.6%. This is not a surprise as US consumers are now very focused on value, stretching their dollars, and anything deemed not absolutely of need, they are forgoing those purchases. Other low-price chains like Family Dollar Store, BJ’s Wholesale Club have also shown increase in same store sales more than expected. Retailers in Luxury sector like Saks & Nordstrom posted worse-than-expected sales.

Department Stores and Luxury Stores had good expectation this month from back to school deals. But their expectations were shattered.

- Rajeev Damani

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Just few days back I posted that Walmart is entering SFR (Small Format Retailing) with Marketside chain of stores ( http://bimtech-retail.com/blog/2008/wal-mart%e2%80%99s-marketside-small-format-retailing/ ), and now its turn of India. Vishal Retail, one of the biggest retailers in India has ventured in SFR with first store opened in Indore last week. They are planning to open 250 such stores by the end of this fiscal and 2000 by end of 2009-10. The company already has around 140 hypermarket in 80 cities.

These stores will be of smaller size (1000sqft – 1300sqft) and will be under franchise model, and will be located in metros, tier II and tier III cities. The store will be of three types:

·         FMCG Stores: Vishal Dailymart

·         Apparel Stores : Vishal Fashion Mart

·         Durables & IT Stores: Vishal Technomart

SFR has been majorly part of unorganized sector, but this initiative by Vishal Retail will fuel the growth of SFR in organized retail sector too.

-          Rajeev Damani

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