Founded in 19991 by K Raheja group, Shopper’s Stop, currently operates around 27 stores and occupies a total retail space of 1.88 million sq ft. It is looking at setting up 15 to 18 new stores of its flagship chain operating under its own name. The expansion will take the tally of its stores to around 45 stores in the next 3 to 3.5 years by March 2013. Each of the new stores is expected to require an investment of Rs 12 to 15 crore.

Shopper’s Stop is also raising an amount of Rs 100 to 120 crore to exercise its option of purchasing additional 32 per cent stake in HyperCity– a hypermarket format, retail chain owned by the group. HyperCity is currently operating three stores at Malad (Mumbai), Vashi, and Hyderabad. The purchase of additional 32 per cent stake will help Shopper’s Stop become majority shareholder in HyperCity as its stake will then rise from present 19 per cent to 51 per cent. Shopper’s Stop can exercise purchase option up to June, 2010.

Coming out of the specter of falling footfalls and declining ticket size last year, Shopper’s Stop has recorded a rise of 7 per cent in sales to Rs 720 crore during the first six months of this fiscal (April-September, 2009). The rise in sales (Rs 413 crore) was even more significant at 11 per cent during the latest quarter ending September, 2009.

Thanks to several measures of cost cutting and increase in sales, the lifestyle retailer was also able to earn a net profit of Rs 12.06 crore in the last quarter as against the loss of Rs 11.02 crore for the same quarter of the previous year.

“The net profit,” according to Govind Shrikhande, President & CEO, Shoppers Stop, “was due to a combination of cost reduction, maintained margins and increase in sales.”

Among the several cost cutting measures, top management of the company, agreed to take a cut of 15 per cent in its salaries. During the difficult period, Shopper’s Stop refrained from resorting to retrenching of staff, it also refrained from hiring new staff and met requirement of new stores through existing people.

Apart from operating large format, flagship, department format, retail chain, Shopper’s Stop also operates several other home and specialty retail chains. Besides, Crossword– a leading specialty books and leisure chain– Shopper’s Stop is operating retail stores of well known global brands including M.A.C cosmetics (under a retail agreement with Estee Lauder), Mothercare (under distribution tie-up), and Mustang (German lifestyle and jeanswear) in India.

The targets set by Biyani, though ambitious, are quite doable for the group. They translate into annual growth rate of around 20 per cent per number. It must, however, be said that this growth now onwards will have to come from much bigger base. The targets will mean doubling the group turnover from present Rs 15,000 crore to Rs 30,000 crore as well as doubling the occupied space from 14 million sq ft to 30 mn sq ft in a time span of less than 4 years.

According to Kishore Biyani India’s consumption business market at $350-400 billion is 35 to 40 per cent of the country’s $1 trillion total economy.

Future group keeps track of consumption habits of consumers belonging to different religions and communities on a continuing basis. “We keep track of nine communities and observe what they eat and consume,” said Biyani.

TiE-ISB, billed as the country’s most exciting annual networking event for entrepreneurs and investors, was held at Hotel Marriot on the 22nd and 23rd October, 2009 in Hyderabad. The theme for this year’s event was “The Crisis will pass….Will You, addressing real issues.” TiE-ISB Connect enables interaction of aspiring entrepreneurs, early-stage ventures, and growth-stage ventures with potential investors, successful entrepreneurs and mentors.

Compared to the boom year of 2007, which had seen a large number of serious and non-serious players entering the sector, the year 2008 turned out to be quite tough. Global financial meltdown, which also resulted in loss of jobs and evaporation of retail credit in India, many retailers were forced to shut down a few or all of the shops in the face of falling footfalls and declining purchases.

The retailers were, therefore, cautious this festive season in projecting growth. While, they would have been happy achieving growth of around 15 to 20 per cent, were pleasantly surprised to see the growth of over 30 per cent, sometimes even going beyond 100 per cent.

Most interestingly, festive season, which began two months ago from early September with Onam festival in Kerala, according to media reports, has seen consumers buying not only apparel and fashion items but consumer durables and home improvement products, as well. These categories were incidentally most affected last year as there was a decline of business in home retail category.

While, Samsung saw the growth of 40 per cent growth, the growth for LG– another Korean consumer electronics and home appliance rival– was equally happy with over 40 per cent increase in home appliances business.

Both LG and Samsung, who between them control large part of durables pie, saw nearly one-third of their overall annual sales coming from festive season. For Samsung it meant $700 million (or 35 per cent) of targeted $ 2 billion sales during the year. LG, on the other hand, while not revealing exact figures, was quite happy with most of its products like washing machines, micro ovens, and LCD TVs doing very well in the market place.

Kishore Biyani-led Future group, which has been facing the spectre for over a year of declining same-store-sales in the home retail segment, the turnaround has been most satisfactory. The retailer, which operates retail chains like Home Town and e-Zone in this segment, saw quite happy registering a growth of 5 to 7 per cent in home products like furniture and 20 to 30 per cent in consumer electronics.

“The home segment recovered in this festive season. It showed a positive growth of 5-7 per cent. In electronics, we saw a 20-30 per cent jump in sales,” said Kishore Biyani, CEO, Future Group.

The group, which had targeted Rs 500 crore worth of sales during the week beginning 15th October, has already crossed targeted growth of 24 per cent. According to Rakesh Biyani, Chief Executive (Retail) of Future Group, “Consumer sentiment looks very positive and there is good traction in sales.”

Reliance Retail too has witnessed month-on-month growth of around 35 per cent in consumer electronics, home appliances and IT related gadget categories, among others.

Shopper’s Stop’s Vice Chairman B S Nagesh is also satisfied with positive consumer sentiment and is positive on the next two quarters. While, the retailer has seen increased spending on non-apparel, jewellery and cosmetics, it is also satisfied with stable business for apparel category.

Pantaloon Retail, part of Future group, and Reliance Retail have also seen improved business in apparel business this festive season. While, Pantaloon has witnessed 20 per cent growth in its fashion segment, Reliance is happy with growth in this category.

Vishal Retail, which for past few months has been facing lot of financial stress, is happy with 20 per cent growth in festive sales. It is confident of touching growth number of up to 35 per cent before the end of the season.

We hope to further cover festive performance of other important — large and small– retailers in the coming days.

The company on a standalone basis has achieved net sales Rs1,663 crore representing a 20% YOY growth in comparison to performance of the company in the same quarter of the previous year. Thanks, however, to several cost containment measures initiated by the company, EBITDA (earnings before interest, taxes, depreciation, and amortisation), of Rs 183.2 crore represented a higher rate of growth at 29.8 per cent, during the quarter.

The net profit for the quarter at Rs 36 crore was, however, continued to remain under the pressure on account of higher interest and depreciation charges during the quarter.

Apart from cost rationalisation measures initiated during the period, Pantaloon was able to lower lease rentals after negotiating the same with property owners. The impact of these measures could be seen in the increased EBITDA margin at 11 per cent during the quarter.This was 80 bps (0.8 percent) higher than the previous period.

This means that the company in a change of strategy has now begun to pay more attention to profits than growth. This was visible in terms of physical growth of the company during the year.

The country’s largest retailer, which in the last 10 years had focused on capacity addition to grow, had to cut down its plans during the year. Pantaloon could just add 1.8 million sq feet during 2008-09 compared to 2.8 million sq feet during 2007-08. Capacity addition was affected on account of higher cost of capital and scarcity of space during initial months of the year.

Accordingly, Pantaloon Retail (Future group’s retail arm), which operates several multi-format, multi-product, retail chains in value, lifestyle, and home retail segments, across the country and provides direct employment to 40,000 persons, after a short blip, has begun hiring new employees for retail chains.

Retail sector, one of the biggest job creators in any economy, according to Biyani, is a key growth driver for the country’s economy. The sector offers great potential for creation of jobs everywhere. India’s retail sector, like other global economies, too has great potential for creation of jobs.

According to Biyani, increase in urban consumption leads to rural prosperity as well. According to a study conducted by his group, every Rs 100 worth of urban consumption results in channeling of Rs 39 to rural areas.

Biyani was participating in meeting of top industry leaders convened on Tuesday by India’s Finance Minister Pranab Mukherjee. The meeting was called to chart out a road map for reforms and sustainable economic growth.

According to a FICCI-Technopak report, the sector is expected to grow 4-fold from Rs1.25 lakh crore ($25 billion) sales in 2008 to Rs 4.5 lakh crore ($95 billion) by 2018. Even without the implementation of FDI and GST, though unlikely, the sector will continue to grow at 10-12 per cent annually. According to estimates, the turnover in the next 5 years (by 2013) is expected to rise to Rs 2.06 lakh crore ($47 billion) and in the next 10 years (by 2018) it is expected to rise three-fold to Rs 3.55 lakh crore.

While making wide-ranging recommendations to the government, the FMCG companies and the retailers to put their act together, it has urged the government to rapidly implement GST with a view to replace the multiple indirect taxes currently levied on FMCG products.

While, the report has, on the one hand, asked modern retailers to work with FMCG companies to improve fill rates, better capture consumer and shopper needs, and explore co-branding and co-promotion opportunities, on the other, it has advised traditional retailers (Kiranas) to invest in better customer service, product display and store ambience and invest in infrastructure, particularly for products that require controlled environmental conditions.

“Demand from the rural areas would be instrumental in fueling the growth of FMCG companies in India,” said Amit Mitra, FICCI General Secretary, while releasing the report.

Coming heavily on counterfeit products, which account for nearly 5 per cent of all products produced by the industry, the study has urged the government to enforce trade mark and copyright laws so as to protect the rights of the consumers and FMCG companies. These products while impacting tax collections significantly, also pose serious challenges to the sector’s growth, says the report.

The FMCG sector is among the largest employers in India and livelihood of 13 million people associated with it across 8 million Kiranas are directly depended on it, said Mitra while talking about potential of the sector.
Indirectly, 25 million more people employed at wholesalers, distributors, stockists, etc are also affected with well-being of sector.

The FMCG sector is also one of the major contributor to the exchequer as it contributes Rs 31,000 crore ($6.5 billion) though direct and indirect taxes.

Global financial meltdown resulting in collapse of capital markets had its impact on India’s HNWIs (high networth individuals or dollar millionaires), as their number dwindled by 39,000 (or 31.6 per cent) from 123,000 (2008) compared to 84,000 in the previous year (2007). This is the first drop recorded for India in the past seven years.

An HNWI is defined as the one who owns net assets of at least $1 million, excluding his/her primary residence and consumables. HNWIs are among the largest spending consumers patronising purchase of lifestyle and luxury products.

These are findings of the report titled “World Wealth Report” released by DSP Merrill Lynch and Capgemini, investment banking firms, on Thursday.

“India’s HNWI (high net worth individuals) population shrunk 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007,” said the report.

“India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation of 64.1 per cent in 2008,” adds the report.

Globally, HNWIs are concentrated mainly in North America, Europe and Asia. While their combined wealth in 2008 dropped by 19.5 per cent to $32.8 trillion, their overall number was down by 14.9 per cent to 8.6 million.

This was a direct consequence of global market capitalisation plummeting by $30 trillion, or nearly 50 per cent, during the year.

Responding to the crisis in equity markets, HNWIs poured more money into fixed income, cash-based investments, and real estate, said Pradeep Dokania, DSP Merrill Lynch managing director and global private client head.

“HNWIs significantly increased allocations in art and jewellery, gems and watches in 2008 compared to pre-crises levels in 2006, as alternative flight to safety,” added Salil Parekh, Capgemini, CEO, financial services, India, Asia SBU.

The report, however, is quite upbeat on hopes of economic activity gain momentum in the coming years. It predicts an annualised growth rate of 8.1 per cent until 2013 and expects the overall wealth to rise to $48.5 trillion by then.

“HNWI financial wealth will grow to $48.5 trillion by 2013, advancing at an annualised rate of 8.1 per cent driven by the recovery in asset prices as the global economy and financial system right themselves,” says the report.

Our earlier report on the subject:

After having been pushed down to second rank on A T Kearney’s Global Retail Development Index (GRDI) in 2008, India has bounced back to rank number 1, on the Index (GRDI) for 2009.

GRDI is an annual study of 30 emerging markets that ranks attractiveness of these markets for retail investment. The annual ranking reflects on the urgency (potential) for retailers to enter a particular country. The study is has been prepared and published by A T Kearny, a global consultancy firm of repute, since 2001.

While, Russia and China (ranked 2nd and 3rd on the Index) have also improved their position by one rank each, Vietnam– the top ranked market in 2008– has sunk to the 6th position, this year. UAE and Saudi Arabia are ranked 4th and 5th on the GRDI 2009.

The scores on the GRDI are based on 25 variable parameters across four primary categories: economic and political risk; market attractiveness; market saturation; and time pressure (difference or addition between gross domestic product and modern retail area growth).According to GRDI 2009 report, ”India’s largely unmodernised retail sector remained attractive to both domestic and international retailers, in spite of government regulations that prevent 100 per cent foreign ownership of retail stores. Overall … the country risk is low and the market potential is still very high, making it the most attractive option for growth.”

Emerging markets continue to represent attractive investment opportunities for global retailers and the economic downturn has made entry to many of these markets more critical and relevant, according to global management consulting firm A.T. Kearney’s eighth annual Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets.

“With economic conditions in developed markets improving so slowly, emerging markets are becoming much more important sources of growth for global retailers,” says Hana Ben-Shabat, co-leader of the study. She is also a partner in the consultancy firm. “Leading global retailers must develop a portfolio strategy that balances big and developed markets with small and developing markets to manage risks across the globe,” adds Hana Ben-Shabat.

Turtle Ltd, Kolkata-based fashion apparel maker that specialises in sale of ‘mass premium’ menswear and accessories, under ‘Turtle’ brand, is close to completing the process of  strategic stake transfer to Kishore Biyani-led Future group within one month. The apparel company, owned by Landasaria family, has for quite sometime been in talks with Future group for strategic investment through partial sale of its equity. Although, terms of the transfer deal, for which the two parties are in talks for some time, have been finalised, the process of actual transfer of stake may take a month.

According to the deal worked out between Turtle and Future, the fashion apparel maker will induct the retailer as a strategic investor, by selling a minority stake (in double digits) in the company.The deal will allow the leading menswear apparel brand to increase its retail presence across the country by shop-in-shop and other format stores in the retail chains operated by Future group. Turtle brand, which earlier was having its major presence in the Eastern states of Assam, West Bengal, Bihar and Orissa, is now availble across the country. The brand is currently sold through more than 1,200 retail points across 400 cities. While, leading retail chains like Central, Globus, Pantaloons, and Shopper’s Stop (which include Future groups chains as well) are already selling Turtle braded apparel, the brand has also set up over 30 exclusive stores under the Turtle World brand. These stores are located in Ahmedabad, Bangalore, Chandigarh, Chennai, Kolkata, Surat, Vadodara, Varanasi, among others.The company is also exporting its products to the middle East, while looking at entering into the lucrative European markets.With a view to increase cost competitiveness of its products, Turtle is also planning to set up a new manufacturing facility for making trousers at Howrah. Currently, trousers manufacturing is outsourced by the company.Conscious of its social responsibilities, Turtle embarked on the task of saving turtles in the country, particularly in Orissa and Gujarat.

]]> http://www.indiaretailbiz.com/blog/2009/05/18/turtles-strategic-sale-of-equity-stake-to-future-group-may-be-completed-within-a-month/feed/ 0 http://www.indiaretailbiz.com/blog/2009/05/04/retailers-demand-single-regulator-with-a-comprehensive-national-retail-policy/ http://www.indiaretailbiz.com/blog/2009/05/04/retailers-demand-single-regulator-with-a-comprehensive-national-retail-policy/#comments Mon, 04 May 2009 00:29:08 +0000 K http://www.indiaretailbiz.com/blog/2009/05/04/retailers-demand-single-regulator-with-a-comprehensive-national-retail-policy/

Indian retail sector should be regulated by a single authority, says industry body Assocham. Currently, multiple authorities are entrusted with the task of regulating the emerging sector.

According to a survey of 150 organised (modern) retailers conducted by Association, an ovewhelming 95 per cent of them are opposed to their sector being regulated jointly by the Ministry of Commerce and Industry as well as the Ministry of Consumer Affairs. While, the Department of Commerce is responsible for making policies for retailing, watching their implementation comes under purview of the Consumer Affairs Ministry.

Multiple regulating agencies need to be eradicated as they cause confusion in the sector. They also create distortions and ambiguities as far as the growth of the retail sector is concerned.

“The retail sector should, therefore, be governed by a single central authority that not only makes policies but ensures their proper implementation,” said D S Rawat, Secretary General Assocham.

The findings of the survey collated under the title of ”Indian Retailing: The Way Forward” have been submitted to the concerned ministries and the Planning Commission. The industry body has demanded creation of a comprehensive ‘National Retail Policy.’

Among countries in the Asia Pacific region, India was ranked 11th, lower than smaller countries like Singapore and Indonesia. This ranking waas, perhaps, on account of a variety of reasons including non-allowance of FDI in retail, relatively lower purchasing power, cost and availability of real estate, and issues relating to infrastructure and supply chain management. In the Asia Pacific region, while China was ranked first, Japan was placed at the second position. While, the UK outperformed other major European economies, China, Russia and Japan performed well in 2008. They were ranked at the 6th, 7th, and 14th positions respectively.

Interestingly, despite the US being one of the largest and most established retail markets, it ranked 10 th globally. (via)

After disastrous decline in ’same-store-sales’ across all segments (value, lifestyle, home retail) during December, 2008, Kishore Biyani-led Future group’s consumer retail arm Pantaloon Retail– soon to be rechristened as Future FMCG Limited– has begun to display signs of revival.

While, the same store sales decline in December 2008 was at 3.56 per cent for ‘value’ segment, 13.97 per cent for ‘lifestyle’ segment, and 10.00 per cent for ‘home retail’ (including durables) segment,  In March, 2009, the situation in the last month appears to have changed for the better. Barring ‘home retail’ segment, which continues to remain a cause for concern (-10.29 per cent), the situation is much better as far as value (+5.32 per cent) and lifestyle (+4.28 per cent) are concerned.

What is more exciting, however, is the overall growth in sales as of 31st March, 2009. Pantaloon is back to ‘growing’ at 30-35 per cent range. While, overall Sales across all segments for all new and old stores for  the month of March grew at 32.40 per cent (from Rs 419.73 crore in March 2008 to Rs 555.74 crore in March, 2009), the cumulative sales for 9 months ending 31st March, 2009 at Rs 5,363.52 crore against Rs 4.016.76 crore were 33.53 per cent higher than in the corresponding period last year.

“India’s consumption story is intact,” said Kishore Biyani, Chairman of the group, while commenting on the group’s consumer retail performance. According to him, slowdown or no slowdown, consumers can not stop buying basic necessities of food and other items of consumption. Although, much of the growth during the 9 months of current fiscal can be attributed to opening of new stores, Kishore Biyani says, “The worst should be behind us.”

On March 27, 2009, Pantaloon opened three stores of different retail formats on a single day. The doors of Big Bazaar & Food Bazaar, Pantaloons, and Celio stores were opened to customers on this day in the R City Mall located at Ghatkopar (West) in Mumbai. The same location will also see the opening of ‘Ethnicity,’ ‘Staples,’ and ’Planet Sports’ soon.

Pantaloon Retail now boasts of 112 Big Bazaar and 153 Food Bazaar stores in the ‘value’ segments, while Pantaloons has 44 stores in the ‘lifestyle’ segment.

Organised retail in India, which grew just 11 per cent in December 2008 compared to 34 per cent in December 2007, may continue to show a truncated rate of growth in sales of a mere 8 to 12 per cent through 2009 and beyond (middle of 2010). This would mean that the organised retail penetration, currently at 5 percent, may now be able to reach around 10.4 per cent against earlier expectation of 16 per cent by 2012.

This has also led to slowing down of investment flow in the organised retail sector. An estimated investment of $25-billion was expected in the sector over the next 4-5 years.

These are some of the findings of a new research study entitled ‘Indian Retail: Time to Change Lanes,’ prepared by global consulting firm, KPMG. The report was released by KPMG on Tuesday, the 31st March, 2009.

Falling footfalls and poor conversion ratio are identified as factors responsible for severe decline in rate of growth.

In the current context, store rationalisation, working capital management, regionalisation, cost optimisation and manpower resizing are some of the other key “top of the mind” issues for the retailers, says KPMG.

“We believe that players which take immediate strategic measures will be the dark horses. Be it store rationalisation, change of supply chain, consolidation of operations, improvement in IT infrastructure, retailers need to think quick to protect their margins,” KPMG global head of markets Neil Austin said.

The retail sector is also bearing the brunt of the liquidity crunch, according to Ramesh Srinivas, Consumer Markets National Industry Director of KPMG.

“Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers,” says the study.

The slowdown, which is dependent on the government policies, is likely to last for 12 to 18 months, and the government should, therefore, increase spending on infrastructure and other development initiatives, says the study.

Shoppers’ Stop, the country’s India’s largest department store format lifestyle retailer owned by construction major K Raheja group, like its larger counterpart Future group, has also reported declining same-store sales for the quarter ended 31st December, 2008.

Like multi-format, multi-segment, Future group, reported year on year, same store decline of 9 per cent, Shoppers’ Stop has lost 3 per cent in sales during the quarter. While Future group had reported 9 per cent year on year, same store, increase of sales for the preceding quarter, for Shoppers’ Stop the increase was 7 per cent for the July-September, 2008 quarter.

While the numbers are strictly not comparable as Future group garners over 60 per cent of its sales from value segment (Big Bazaar), Shoppers’ Stop is mostly into high end lifestyle segment mainly comprising fashion apparel, accessories, and home enhancement products.

The adverse impact of economic slowdown is not only visible but has been confirmed by industry leaders. This is reflected in terms of downward revision of annual sales targets by other big retail players like Spencer’s and Vishal Retail.

The impact of slowdown, however, is most visible in fashion segment. Almost all local, regional, national, and global brand players are still offering hefty discounts and deals on clothes and accessories in the name of year end sales. Analysts expect the trend to continue until the end of February, 2009.

B S Nagesh, CEO and chief customer care associate, Shoppers Stop, has also cautioned about difficult times ahead for the sector. He expects actual recovery in the retail sector to happen only around the next festive season. The festive season in India begins around end-September, every year.

Looking at the trend, while most big ticket retailers like Spencer’s, Next, Vishal, etc, have already closed, relocated, right sized, or down sized, a few of their under-performing stores, other like Reliance and Future group are restructuring their operations to bring about operational efficiencies. While, some of the retail chains have shut shop, many others like Indiabulls, Etam, Subhiksha, etc have either substantially cut down on their operations, or are in the process of even closing down a major part of their operations.

In a new study conducted on inexpensive coffee mugs, a team of researchers led by James Wolf has found that even a mere fingering of an item lying on a store shelf is enough to create an attachment for that item. Once a feeling of attachment for an item is developed, the shopper is willing to pay even higher for the same.

The first of its kind study, has shown that the feeling of ”mine, mine, mine” could begin in as little as 30 seconds after of the item has been touched first.

James Wolf, who is currently teaching as Assistant Professor of Information Systems at Illinois State University, began work on the study, while he was a graduate student at Ohio State University in the U.S.

“The amazing part of this study is that people can become almost immediately attached to something as insignificant as a mug,” says Wolf

“By simply touching the mug and feeling it in their hands, many people begin to feel like the mug is, in fact, their mug. Once they begin to feel it is theirs, they are willing to go to greater lengths to keep it,” adds Wolf.

Retailers for years have used the technique of ‘first- try-then-buy’ with success. For example, car dealers routinely arrange  for test drive of cars for customers interested in buying cars. Even mail order houses offer to take back sold item, if the customer is not happy with its performance.

Source: Yahoo News