IndiaRetailBiz

Zedds, a leading retailer of fashion footwear, unveiled its second store, in Jubilee Hills area of Hyderabad, on Thursday, the 2nd July, 2009.

The new store of Zedds, spread over 1,500 sq ft area, showcases an exclusive range of over 200 formals to casuals and ethnic to party wear products.

“In order to set a new definition of fashion and style and meet the ever growing demand of our products we have set up this second store in Hyderabad. The new store opening is a part of our National Expansion & Brand retailing strategy. Zedds is looking at rapid growth of the brand across India. We have plans to reach the total count of 10 EBOs (Exclusive Business Outlets) by 2010 with traces in Metros, state capitals and tier-2 cities following a mix of company owned, franchisee or a store in store format. We have made strategic awareness about our brand in Mumbai with Zedds Kiosks at PVR & Cinemax and plan to open a standalone store in Mumbai soon,” said Rajesh Rawtani, Director, on the occasion of opening of the new store.

“With contemporary designs, beautiful textures and interesting sizes, Stilletoes, Meule and Thongs Flip Flop are some of the hottest products that Zedds has ever offered,” added Rawtani.

Apart from Hyderabad, Zedds is going to target high potential areas of the country in the coming months. It is ready to expand into Mumbai and Indore in the next quarter.

Founded 15 years ago in 1994, Zedds  is acclaimed for its “contemporary styling,’ and has always been known as a ‘design ahead’ brand.

The fast growing brand attributes success to its ability of understanding the desires of its target audience, and offering them something unparalleled to satisfy their quest of ‘individual style statements’. Many of Zedds’ shoes include comfort features, like quilted lining and shock-absorbing padding. Technology, Design and Quality are three guiding principles of the brand. Zedds claims to be the first and only home brand that offers Shoes of any size.

The Economic Survey 2008-09 tabled in the Parliament, on Thursday, the 2nd July, 2009, by the Finance Minister Pranab Mukherjee, has made many ambitious and bold recommendations on many sectors of the economy.

Paying heed to long standing demand of opening retail sector to foreign capital (FDI), the Survey has sought to allow FDI in retailing (multi-brand, front-end), beginning with the food segment.

According to the Survey, while this will address the concerns of small traders (mom-and-pop stores), it will also help the country’s farmers to gain from ‘farm-to-fork linkages.

Although, the implementation of recommendations made in the Survey are not binding on the government, they do provide direction to the governmenment’s thinking on the subject.

Most modern (organised) retailers, who have been asking for removal of ban on FDI in retail, were excited with the recommendation made by the Survey in its report.

“It is a welcome suggestion and will help the Indian retail sector grow, by leading to inflow of money from overseas brands,” said Kishore Biyani, Chief Executive Officer, Future Group, to PTI.

According to Biyani, Foreign Direct Investment (FDI) will ensure a bigger playing field and sustained competition, resulting in reduction of prices for the consumer. He, however, recommended fixing a certain threshold investment for entering into the sector.

“The government should also fix a certain minimum threshold for FDI in the multi-brand segment,” Biyani said.

In India, while no FDI is allowed in multi-brand retail, it is allowed up to 51 per cent in single brand retail. Many single brand MNC retailers are unhappy with this condition. Only a few weeks ago, the iconic Swedish furniture and home improvement retailer IKEA, pulled out from the country, saying it would wait until the full FDI is allowed in the sector. IKEA had planned to invest $1 billion in India.

According to Ramanathan, “If large Indian organised retail players can exist, then why not foreign brands. The sector will become more competitive.”

Spencer’s Retail, the retail arm of RPG Group, a wholly owned subsidiary of group company Calcutta Electric Supply Company, also welcomed the Survey’s recommendation.

“We view it in favourable light. There is enough room in the Indian retail sector for everybody to grow and FDI will bring about competitiveness between Indian and foreign players,” a Spencer’s Retail spokesperson said.

According to KPMG, a global management consultancy firm, to facilitate FDI in food multi-brand retailing, the government should take steps to strengthen the structure of APMC (Agriculture Produce Marketing Committee).

“APMC has not being rolled out in all the states. There are currently many intermediaries between the producers and the consumers in the food market and APMCs could prove valuable for international food retailers and Indian farmers,” said Anand Ramanathan, Manager of KPMG Advisory Services.

Indian Council of Research in International Economic Relations (ICRIER), a premier economic think tank of the country, which was appointed to look into the impact of BIG capital in the retail sector, had come to conclusion that investment of ‘big’ money (large corporates and FDI) in the retail sector would in the long run not harm interests of small, traditional, retailers. ICRIER has estimated the worth of Indian retail sector at $309 billion dollars (2006-07). According to ICRIER, the sector is projected to reach $496 billion by 2011-12.

Interestingly, recommendations of The Economic Survey have come close on the heels of tabling of another report on retail (prepared by Parliamentary Standing Committee on Commerce) in the parliament, which fearing job losses, has recommended a “blanket ban” on entry of domestic and foreign corporates into the retail sector. Incidentally, the retail sector, after agriculture sector, is the country’s second largest employment providing sector.

All retailers, including those who were initially reluctant to allow rush of foreign capital in the sector, have been asking for full opening retail sector to foreign investment in India.

The main reasons for such an unequivocal demand stems from the realisation that (a) while retail requires heavy investment for expansion, there is hardly any local capital left in the capital markets as a consequence of global financial meltdown, and (b) efficient management of multi-brand, multi-product, multi location retail, especially in the area of back-end operations, require heavy dose of technology, which over the years has been developed and perfected by foreign players.

Although, foreign investment (FDI) in India is fully admissible in ‘cash and carry’ wholesale (back-end retail), it is admissible only up to 51 per cent in single-brand front-end retail. Importantly, there is a complete ban on foreign investment in multi-brand, front-end retail. THis has resulted in keeping all the big ticket retailers of the world like Walmart (USA), Carrefour (France), Tesco (UK), and Metro (Germany), who are very keen to foray into India’s retail sector, away from entering into the country. All of these retailers, therefore, to make their presence felt  in the country, have either tied-up or trying to tie-up with local corporates, to offer their services for back-end operations like sourcing, logistics, inventory management, among others, for front-end, multi-brand retail operations of such corporates.

The present UPA government’s thinking, as reflected in The Economic Survey 2008-09 tabled today in the Parliament, raises hopes of all those who are looking for a favourable response of the government on the subject. While, the Economic Survey has made a strong case for opening up the FDI for multi-brand retail, it has recommended a gradual opening of the sector.

Improving the investment environment would require “FDI in multi-format retail, starting with food retailing,” said the Survey, adding that initially the FDI could be allowed subject to the setting up a modern logistics system, perhaps jointly with other organised retailers. “A condition could could also be put that it must have (for five years say) wholesale outlets where small, unorganised retailers can also purchase items (to facilitate transition),” added the Survey.

It may be interesting to note that the present recommendations come in the backdrop of recent tabling of a report on retail in the parliament. The report on retail was prepared by a 40-members committee headed by ex-HRD minister and senior BJP leader Murli Manohar Joshi. The report has recommended a ‘blanket ban’ on entry of ‘big’ corporates in the retail sector as well as stoppage of issuance of ‘free’ licences to foreign retailers even for ‘cash & carry’ business operations.

Although, the government this time has not to battle ideological battle on the subject with the ‘Left’ parties, whose support earlier was crititical to the survival of the previous UPA government, it should not be forgotten that even today, two of the largest allies in the present government, (Trinamool Congress and DMK) are fiercely opposed to the opening of the retail sector to the foreigners. It may be worthwhile to recall that firebrand Mamta Mukherjee-led Trinamool Congress was alleged to have vandalised the under-construction shops of Reliance Fresh, prior to celebration of Durga Pooja festival in Kolkata

Samsung India Electronics Limited, the consumer electronics giant, opened a new channel for sales, when it launched its first ‘IT brandshop’ in Hyderabad on Wednesday.

The new IT brandshop is a conceptually different distribution model as Samsung India, which so far has focused on targeting consumers through channels and to some extent through government sales, has for the first time gone in for its own exclusive retail store.

The new ‘IT brandshop’ store located at Arihant Arcade, Ameerpet in Hyderabad will to showcase Samsung’s entire range of IT and consumer products, including, notebooks, netbooks, monitors, printers, consumables, digital cameras, digital camcorders, MP3 players and mobile phones. The shop will also offer IT accessories like laptop bags, headphones etc.

“Retail is a big thrust area for us as we are looking at enhancing our consumer interface this year. The IT Brand Shop will represent a one-stop shop for all Samsung IT products, ranging from notebooks to printers. In the coming months, we plan to set up IT Brand Shops in the other metros as well,” said JungSoo Shin, president and CEO, Samsung South West Asia, who inaugurated the store along with Ranjit Yadav, director, IT, Samsung India, in the presence of other Samsung representatives, dealers and customers.

The new Samsung ‘IT Brand Shop’ store has also created an ‘Experience Zone.’ This zone showcases commonly used applications like music, gaming, movie and imaging. Other digital products have been also integrated into this Demo zone to showcase convergence of digital devices.

Koutons Retail, Delhi-based fashion retailer, which offers a range of fashion products under apparel, accessories, and footwear catagories, mostly in value segment, has reported a healthy growth of 31.91 per cent in sales over previous year (Rs 1,046.68 cr vs Rs 793.68 crore). The consolidated net profit, however, grew by only 15.01 per cent from Rs Rs 69.15 crore last year (2007-08) to Rs 79.53 crore this year (2008-09).

The company, which markets its products, among others, under Koutons, Charlie Outlaw, Les Femme, Koutons Junior, K2ONE, FeeMe brands is looking at increasing the number of its stores from over 1,420 to 2,000, by the end of this financial year (31st March, 2010).

The company, which unlike many of its counterparts, operates with comfortable leverage is looking at expanding the network through additional debt. Since, Koutons prefers franchise model for expansion, it does not require much capital to expand its network. As such, it will raise capital through equity dilution only when it becomes necessary to do so.

Koutons is also trying to restrict expansion of its outlets as it wants to focus on converting existing stores into ‘family’ stores where all product categories (apparel, accessories, and footwear) are available under one roof. It will, therefore, consider increasing the size of some of its stores than to open new stores.

Koutons has also put its overseas expansion plans on hold until it is able to consolidate its position in the local market.

Koutons has in the past won several awards, including “Best Retailer Leadership Award 2008,” “Most Admired Fashion group,” “Value Retailer of the Year,” “Chain Store of the Year,” among others, while its Chairman DPS Kohli has won the “Most Admired Fashion Face of the year,” and “Brand Entrepreneur of the Year” awards.

Pantaloon Retail, the country’s largest muli-format, multi-products, listed retailer, part of Kishore Biyani-led Future group, has decided to severe its commercial ties (joint ventures) with Planet Retail Holdings and Blue Foods.

Planet Retail Holdings Pvt. Ltd., a joint venture between Kishore Biyani  (49 per cent) and V N Sharma (an Indonesian resident of Indian origin), operates several retail chains in lifestyle segment for products covered under fashion and sports categories. While, the JV operates Planet Sports, Sports Warehouse and The Athlete’s Foot under sports segment, it operates Guess, Next and Women’s Secret, among others, in fashion segment. The company had recently ventured into beauty segment with the launch of The Body Shop stores in India. Prior to Mark & Spencer’s tieup with Reliance, Planet Retail was also operating 14 stores of the UK-based iconic fashion and homeware brand in India.

According to Kishore Biyani, Planet Retail JV had to be terminated because Pantaloon is already in a sports business, which has now become a wholly owned subsidiary of Pantaloon.

Blue Food, on the other hand, operates several restaurant chains under brand names of Bombay Blue, Noodle Bar and Copper Chimney, among others. The JV with Blue Foods, operating under the name of Pan India Food Solutions, had to be terminated because Blue Foods has already merged into a different entity.

According to Sunil Kapur, chief executive officer of Blue Foods, no operational or management changea are envisaged as a consequence of termination of the JV. It may be recalled that Indivision Capital, a private equity (PE) firm, had agreed to invest Rs 100 crore in Blue Foods in October 2008.

Mothercare, the iconic UK-based, retailer, which operates 21 retail stores (8 standalone and 13 shop-in-shop format outlets) for kids and expecting mothers in India, according to an ET report, may be looking for severing its ties with Shoppers’ Stop.

The Rahejas-led Shoppers’ Stop is among the country’s pioneering and leading listed retailers. It operates a flagship retail chain under its own name of department format stores across India. Soppers Stop operates Mothercare store in the country under an exclusive franchise agreement signed with the UK-based retailer in August, 2005.

While, standalone Mothercare stores in India ocuppy between 3,000 and 6,000 sq ft of space, the shop-in-shop outlets, which are located inside Shoppers Stop stores occupy an average of 2,000 sq ft in space.

Mothercare has a vision of becoming the country’s number 1 retailer of mother’s to be & baby products in its target segment. It sources 70 per cent of its product requirements in India from global vendors.

Mothercare, the £723 million retailer operating over 1,000 stores across 50 countries of the world, according to reports, is reported to be unhappy with performance of its stores operated by Shoppers Stop in India. The UK-based retailer, according to unconfirmed reports, is believed to have already commenced talks with Trent Limited, a Noel Tata headed retail arm of Tata group, for a possible tieup with the latter. Trent currently operates three retail chains under Westside, Star Bazaar, and Landmark brand names.

In fact, there is not much difference the retail formats operated by the two companies. Westside, the flagship brand of the retail is a lifestyle chain of department store format stores similar to Shoppers Stop’s flagship chain. Both of these draw a large part of their revenues from lifestyle fashion and homeware products and focus on private labels. Star Bazaar is a hypermarket value chain that mainly deals in food, grocery, fresh foods, apparel, and fast moving consumer products. Shoppers’ Stop has a sister retailer in hypermarmarket space called HyperCity. Landmark, on the other hand is a books and leisure products (music, games, toys, stationery) retail chain similar to Shoppers’ Stop’s ‘Crossword’ retail chain.

While, Shoppers’ Stop has several franchise and licensing arrangements with iconic European retail brands, Trent has recently tied up with Tesco, the world’s third largest UK-based food and grocery retailer, to set up a chain of 50 hypermarket stores. Of course, Tesco will provide only back-end and technical services as still no foreign investment is allowed in India in multi-brand retail.

Arvind Brands, a branded apparel retail chain company of Ahmedabad-based Sanjay Lalbhai group, which was spunned off a few months ago from the country’s largest textiles company Arvind Mills, to focus on building retail business across the country with a slew of fashion apparel brands, according to an HBL report, looking at strengthening its portfolio of  international and homegrown fashion brands.

Apart from famous global apparel brands like Wrangler, Lee, Arvind Brands is also retailing a number of home grown fashion labels like Newport, Flying Machine and Excalibur, among others.

While, the retailer under a licencing agreement had last month launched Polo Association, it is now working on introducing the US sportswear brand I-Zod in India.

Arvind Brands is now also going ahead with the relaunch of women’s formal wear under ‘Arrow’ brand in September, this year.

“Women’s formal wear business is growing in India. We launched it in 2005 but withdrew after the slack response. Now the market is evolving and we are re-launching the category by September,” said J. Suresh, CEO, Arvind Brands.

Arvind Brands, which undertook a Rs 400-crore investment on expansion between 2008 and 2012, has already spent Rs 100 crore on the expansion of its product portfolio. The company, which posted a turnover of Rs 440 crore in 2008-09, is expecting a turnover of Rs 550 crore this year.

The Confederation of All India Traders (CAIT), a body of traders in the unorganised sector, is seeking immediate implementation of the recommendations made by the Parliamentary Committee on retail trade.

“The recommendations of the Parliamentary Standing Committee headed by Dr Murli Manohar Joshi laid down in Parliament few days back for imposing blanket ban on MNCs and big corporate houses in the retail trade should be adopted by the Government as it is a unanimous document of the Committee comprising members of all political parties,” said Mr Praveen Khandelwal, Secretary-General, CAIT.

According to Khandelwal, the report will prove to be an instrumental document for protecting indigenous trade and employment of crores of people. The report, it may be recalled, has warned of ’far reaching consequences’ of ‘big’ investment on retail trade in India.

CAIT is also asking the government to announce a national trade policy for retail trade in the Budget being presented by the Union Finance Minister Pranab Mukherjee on the 6th July, 2009.

The traders body is also seeking the formation of a National Commission to study the intricacies and issues facing the retail trade in India. CAIT has demanded a proper representation of traders and other retail related sections in the Commission.

The committeee of 40 parliamentarians from all political parties headed by Murli Manohar Joshi, ex-HRD Minister and Senior BJP leader, in its report “Foreign and Domestic Investment in Retail Sector” has sought a ”blanket ban” on Foreign Direct Investment (FDI), as well as investment by heavy weight domestic corporates, in retail sector. The report tabled in the parliament about a fortnight ago has also demanded scrapping the policy of issuing free licences to foreign retailer for setting up ’cash & carry’ wholesale business in India.

It may be relevant to mention in this context here that acoording to the current government policy, while there is a complete ban on FDI in multi-brand front-end retail, there are no restrictions whatsoever on foreign investment in setting up ‘cash & carry’ format wholesale stores in India. Taking advantage of this policy large MNC retailers like the world’s largest US-based Walmart and the world’s fourth largest Germany-based Metro AG have already set shop in India by opening C&C stores either on their own or in partnership with local parties. The other two biggies of the retail industry in the world, namely, Carrefour of France and Tesco of UK are also in the process of foraying into the country through this format.

Even as Subhiksha, the Chennai-based cash strapped, food and grocery, discount retail chain, battles hard in the Madras High Court, to defend legal cases filed by some of its stake-holders, its founder, promoter, and managing director R Subrahmanian is confident of completing the process of obtaining financial bailout package from its lenders.

The financial package is being processed under the CDR programme of Reserve Bank by 12 of the 13 consortium members led by ICICI Bank. The dedline for finalising the process under the scheme will come to an end by 31st July, 2009. While, one of the consortium members Kotak Mahindra Bank has withdrawn from the process, six of the remaining 12 consortium members are ready to participate in the CDR. The remaining six members, though, are said to be also participating in the revival process.

“Twelve of the 13 bank lenders together with the three major shareholders are thrashing out the contours of the debt restructuring as well as the funds infusion into the company to revive operations. The contours of the revival plan of the company have been agreed (upon),” said R Subramanian in a statement.

“The deadline for closure of CDR is July 31, 2009, and the company is confident that the process will be completed well before that date,” added Sbrahmanian.

While, Kotak Mahindra Bank having filed a winding up petition against the company has withdrawn from the CDR process, “…all the other 12 banks, including the six banks that are part of the CDR and the other six which are not part of CDR, have all been working together on the revival package,” said Subrahmanian.

Subhiksha, according media report, is also believed to have filed a counter petition against Kotak Mahindra Bank in the Madras High Court.

According to Subrahmanian, various stakeholders of Subhiksha are agreeable to finance the revival mainly through equity. Subhiksha, it may be recalled, before suspension of operations of 1,600-odd stores across the country had asked for a debt restructuring of Rs 300 crore. Subhiksha is believed to be owing slightly more than Rs 550 crore to banks, while overall liability to employees, vendors, property owners, and service providers, among others, may be in excess of Rs 750 crore.

According to reports, ICICI Bank has an exposure of over Rs 180 crore, while HDFC Bank has the exposure of around Rs 150 crore. Bank of India, Federal Bank and Yes Bank have exposures of Rs 50 crore each, while Bank of Baroda may be carrying debt of Rs 75 crore in its books.