IndiaRetailBiz

Could spiralling realty prices and other costs sore India’s big retail dream?

Yes, at least in the short run, if recent warnings of retail biggies are to be believed.

Kishore Biyani, Chairman of the Future group, who has already rolled out over seven million sq ft of retail space under different formats, had only recently warned that “At current property prices, you can’t exist in the modern retail business. Either productivity has to increase significantly or rent has to come down”

Now comes the news of another big retailer, annoyed with rising rental costs, having been forced to take  a review of its growth plans.

Aditya Birla Retail, the retail arm of  Kumarmangalam Birla-led A V Birla group, according to a CNBC-TV18 report, thanks to increased costs has been forced to revisit its growth plans in non-metro (tier II) cities. Currently, A B Retail operates ‘MORE’– a general merchandise retail chain owning over 500 supermarket and hypermarket stores across 40 cities of the country.

Further penetration in tier II cities may not be feasible and the company may have to pass on the increased cost of operations to its customers, warned Sumant Sinha, Chief Executive Officer, Aditya Birla Retail, while speaking to the TV channel.

The group is also looking at format size, product mix (branded vs private label), merchandising and sourcing, among others, to keep control on spiralling costs, added Sinha.

The retailer has also begun renegotiating lease rent contracts with landlords of store premises. This should bring down lease rentals of its store premises.

Incidentally, 180-odd premises of More retail chain were acquired a few years earlier by promoters of the erstwhile Hyderabad-based Trinethra supermarkets chain. To give kick start to its retail operations, A V Birla group had acquired Trinethra retail chain in the beginning of 2007.