IndiaRetailBiz

LifeKen Medicines, a Bangalore-based pharmacy chain of Lifetime Healthcare Pvt. Ltd, is close to being acquired by Delhi-based Religare Wellness Ltd. Relligare, erstwhile, called Fortis Healthworld is part of Ralligare group owned by Malvinder Singh and family, which recently sold its promoter interest in India’s largest pharmaceuticals company Ranbaxy Laboratories to Daiichi Sankyo of Japan. Apart from Raligare Wellness, Singh family also owns Fortis Hospitals and Ralligare Finance.

Religare Wellness is currently operating around 40 stores in North India and has drawn out plans to expand across 100 cities in the next two years. Raligare was earlier reported to be in talks for an arrangement with Bharti Retail to set up shop-in-shop format pharmacies in their front-end retail stores.

Lifeken, which operates around 70 pharmacy stores in the South, is second biggest pharmacy chain of South India. Lifeken, according to trade circles, has been on the block for quite some time as it has been incurring losses since its inception in 2005. The chain is believed to have accumulated losses of Rs 12 crore. Although, no price for the deal has been mentioned, according to a Mint report, it is estimated at Rs Six crore. The price is believed to have been arrived at after adjusting losses and liabilities.

Although no official comment has been made, all legal and other formalities for the acquisition are believed to have been completed. Lifeken, according to its promoter, was forced to get out of the business as it could not find a partner and raise funds required to run the business.

Lifeken acquisition, when completed, will be the second takeover for Raligare Wellness as it had had bought 90 percent of equity stake for Rs 14 crore in 30-stores strong CRS Health from SAK Industries, in August 2008. Interestingly, both CRS and Lifeken had grandiose plans for expansion. While, CRS was aiming to set up 150 stores by this year, Lifeken was planning to rollout 700 stores by 2011.

Spencer’s Retail, the retailing arm of RPG group owned by CESC, according to media reports, is close to signing franchise deal with Beverly Hills Polo Club (BHPC), a US-based casual apparel brand.

Beverly Hills Polo Club (BHPC) is a well known international fashion and accessories brand that has retail presence in 100 countries across the world. BHPC offers a wide range of ready-to-wear casual dresses for men, women and children. Its range of accessories over the years has gained in popularity.

The BHPC fashion apparel is expected to be initially offered from Spencer’s hypermarkets in Delhi. This will later on be made available from Spencer’s stores across the country.

This is in line with Spencer’s strategy of increasing its focus on high margin apparel fashion business.

Rationalising the retailer’s shift in focus on non-food categories, Samar Singh Shekhawat, Spencer’s Retail’s Vice President (Sales), had earlier said, “Food gets in the traffic, it gets the topline, the revenues, it doesn’t get the bottomline. Fashion and home get you the bottomline so you need to sell a whole lot of food but you also need to sell a whole lot of fashion and home.”

Spencer’s Retail already retails a wide range of private labels in the fashion segment including Island Monks and Mark Nicolas in the men’s and women casual/formal wear, Puddles for infants and Little Devils for kids.

Spencer’s has also inked a joint venture agreement with the UK’s Woolworths Group to sell Ladybird range of children’s wear. In the non-food segment, Spencer’s also has arrangements with Chad Valley– a well known toy brand from the UK.

Subhiksha, the country’s largest food, grocery, and pharmacy retail chain, according to R.Subramanian, its Chairman and Promoter, has stopped selling fresh foods like fruits and vegetables from its stores.

This move, according to Subramanian, is a specific market strategy initiative of of the company.

Subhiksha’s fruits and vegetables business is an “add-on” business for its core business of supermarkets, said Subramanian justifying the action.

Merchandise mix of each region is based on factors like profitability and utilisation of space, added Subramanian.

The fruits, vegetables and foods segment is believed to have contributed around 10 to 11 percent in Subhiksha’s total volumes.

Subhiksha is currently operating 1,580-odd small format, no frills, deep discount, retail stores across the country. Subhiksha is also operating a value telecom chain, which sells mobiles and related products.

Subhiksha, the Chennai-based pan-India, small format, no frills, discount, food, grocery and pharmacy chain, which also operates a discount telecom chain, faced with the adverse impact of ecomic turbulance, has decided to go slow on its diversification and expansion plans.

The retailer had earlier announced diversification in the area of consumer durables. According to R Subramanian, its promoter and Managing Director, the retail chain was planning to set up 150 consumer durables retail stores at an investment of Rs 600 crore. The new durables chain was to focus on Tier-II and III towns across the country. It was planning to occupy an estimated 2 million sq ft of space.

The rollout of the new vertical was to begin from early 2009. This, according to a BS report has been postponed to the middle of 2009.

“White goods and consumer durables vertical was what we were looking at. Earlier, the plan was to start somewhere around January-February, but now we have postponed it to a slightly later date,” informed a Subhiksha official. “This is mainly because of the economic problems. Slowdown is affecting us also. We are looking at re-scheduling our plans to May-June next year,” he added.

Apart from diversification, Subhiksha had also been looking at expanding its flagship food & grocery retail chain from over 1,500 stores to 2,200 stores by injecting Rs 800 crore as investment this fiscal. The major thrust for expansion was expected to come from West Bengal, Kerala and Madhya Pradesh.

This may also get delayed as the exercise to raise new capital for the purpose from capital markets has also been delayed due to volatile market conditions. The plan to list the company’s equity shares on the bourses by the end of this calender has also been postponed by a few months. For this purpose, Subhiksha had acquired majority interst in Blue Green Construction & Investments– a Chennai-based listed NBFC– a few months ago. The process of reverse merger for indirect listing of its shares was expected to be completed by December, 2008. The relisting of the newly structured company is now expected to happen in early 2009.

Currently, 10 percent of Subhiksha’s equity is held by private investment company of IT moghul Azim Premji, while 14 percent of the same is held by ICICI Venture Capital. Azim Premji had incidentally bought 10 percent equity a few months ago from I-Venture for Rs 230 crore.

“Consumers are spending more on value for money products. All categories in food and fashion are doing well. In fact, the same store growth of 50 per cent in value formats is a record increase for us.” — Kishore Biyani, CEO, Future Group.

While, the entire world is battling with unprecedented decline in retail sales, as the U S is about to announce lower October sales (4th consecutive monthly decline; worst since 1974), few, and we repeat only few, of the Indian retailers are bucking the trend by registering hefty growth in their sales.

Pantaloon Retail, India’s largest listed retailer, part of Kishore Biyani-led Future Group, has reported 87 percent increase in October, 2008 (over October, 2007) sales from its discount retail chains– Big Bazaar and Food Bazaar. Even, when the ‘value’ format sales of ’same’ stores (stores, which also existed a year ago) are compared, the increase, according to a BS report, was also very impressive at 49.26 percent.

The growth for ’same’ stores sales in lifestyle and home durables (Home Town and e-Zone) segments in October, 2008 was, however, slightly lower at 33 percent and 23 percent respectively, this year.

“Before Diwali when the markets were down, we saw a dip in the sales of furniture and electronics. That picked up again during Diwali,” said Biyani.

During October 2008 sales of value chains of the group were placed at Rs. 455 crore compared to Rs 243 crore a year ago. Compare this to 25 percent dip in growth during October 2007 and seven percent growth in October 2006, over the same period in their previous years.

September, October, and November are three most important months in festive season of India. Depending on configuration of Hindu calender, festivals like Ganesh Chaturthi, Durga Pooja, Dashera, and Diwali, in one form or the other, are celebrated during these months across the country. Even equally important festivals of joy other faiths like Paryushan (Jains), like Id-ul-fitr (Muslims) and Navroz (Parsis) also celebrated during this period. In 2008, by coincidence, most of the major festivals from Dashera to Diwali and Id-ul-Fitr fell in October, 2008.

These festivals are important in India because most consumers not only buy new clothes, shoes, etc, during this period, but also spend a lot on items like sweets, crackers, and exchange of gifts.

Most of the Indians also prefer to buy durables like consumer electronic and home appliances as well as precious metals, during these festivals both for religious and economic reasons. While, purchase of gold and silver during Diwali is considered auspicious, almost all organised and unorganised businesses distribute annual bonuses to their employees during Diwali festival. No wonder, even marketers wait for this period to offer best deals on their merchandise during this period.

It is interesting that while most big ticket retailers like Reliance, Spencer’s, Birlas, among others, are rejigging their formats and structures, Future group has added 150 new stores across all formats during August -October, 2008 period. Apart from targeting 15 to 16 million sqft of retail space, Kishore Biyani is also aiming to cross gross revenues of over 10,000 crore in 2008-09 (financial year ending June, 2009).

Besides, Big Bazaar and Food Bazaar, Future group has interestingly also begun to push its low cost, no-frills, convenience, value formats like Big Bazaar Deals, KB’s Fair Price Stores, and rural format Aadhar.

Reliance Digital, a specialty format of Reliance Retail, the retailing arm of Mukesh Ambani-led Reliance Industries, is going ahead with its plans of rolling out over 50 stores in the next two years.

Reliance Digital, offers a range of multi-branded home appliances, consumer electronic, telecom, and other professional electronic products.

“We have planned to open 55 stores on home appliances and electronic goods across the country over the next two years under the Reliance Digital brand” said Ajay Baijal President and Chief Executive (Consumer Durable IT and Telecom) Reliance Retail Ltd.

Baijal was speaking on the occasion of opening of the company’s first ‘iStore’ outlet in Tamilnadu at Chennai. Chennai is slated to have one more iStore.

“iStore” -part of Reliance Digital- offers full range of Apple’s consumer and professional electronic products including iPods, iPhones, iMac computers, and MacBook notebooks. iStore also offers the complete suit of Apple software products and over 500 accessories and peripherals that compliment Apple products.

The Chennai store, spread over an area of 1,100 sqft, is iStore brand’s ninth shop in the country. Other eight iStore shops are located at Bangalore (2), Hyderabad, Mumbai, Ahmedabad, Bhopal, Jaipur and Ludhiana.

The iStore shops, according to Ajay Baijal, are also equipped to provide specific training on different Mac applications like iPhoto, iMovie, Mac OS, X Leopard, through regular Apple training modules.

Chinese suppliers of Wal-Mart will now be required to incur 20 times the current cost of providing identification on their products being supplied by them to the world’s largest retailer.

The move comes in the wake of recent safety concerns surrounding products originating from China.

Wal-Mart has instructed its vendors in China to use RFID tagging instead of standard bar-coding to provide information not only about the name and factory but also the details on any sub-contractors involved in production. While, the system has already begun to be introduced from October, this year, it will become standard procedure effective from January, 2009, according to an RFDI News report.

Wal-Mart has clarified that any suppliers who fails to meet the new information standards will be dropped from Wal-Mart’s supply chain.

Apart from providing quick information on products, it is expected that Wal-Mart would be able to save up to $8.35 billion annually, once the new technology is introduced.

This will also provide big fillip to RFID technology, which despite its promise has not been able to make significant inroads in retail business.

Wal-Mart is slated to launch its ‘cash and carry’ operations in India from early 2009. India’s telecom giant Bharti is Wal-Mart’s equal partner in India.

Tesco HSC (Hindustan Service Centre), the global services arm of the world’s third largest retailer Tesco, has appointed Sandeep Dhar as its Chief Executive Officer. The appointment became effective from Thursday the 6th November, 2008.

The UK-based Tesco plc operates around 3,200 stores, employs over 400,000 persons, and services over 15 million customers every year. Tesco earns annual revenues of more than £45 billion.

Bangalore-based Tesco HSC, which was founded in 2004, currently employees over 3,000 persons who provide services in the areas of IT, business, finance and HR services to Tesco’s operations spread across Asia and Europe. It provides multiple geographical support from India to countries like the UK, Ireland, Hungary, Poland, the Czech Republic, Slovakia, Turkey, Thailand, South Korea, Malaysia, China and Japan.

Tesco has announced its foray into India through ‘cash and carry’ subsidiary. It has also inked an agreement with Tatas to provide back-end and sourcing services to ‘Star Bazaar’ — their hypermarket food and grocery retail chain owned by their retail arm Trent Limited.

Dhar was earlier working with Sapient Technologies as its Managing Director of the India operations.

Big ticket retailers have begun to feel the heat of economic meltdown as they are finding it hard to raise resources from capital markets.

Only last week, Shoppers’ Stop announced paring down of the size of its Rights issue from Rs 500 crore to Rs 300 crore. Adverse market condition was cited as the reason for 40 percent cut down in the original size of the rights issue by the company.

“Considering the prevalent market conditions, the Board reviewed the plan for the proposed right issuance and have decided to reduce its size to up to Rs 300 crore by deciding not to pursue the warrant portion as envisaged,” Shoppers Stop said in a filing to the Bombay Stock Exchange.

Vishal Retail, until recently a darling of the equity markets, according to a Reuters report, has also pared down its expansion plans as it has postponed its earlier proposal of raising equity of Rs 200 crore. It has cited current market conditions as the reason for postponing the issue. Vishal was looking at expanding its floor space from around three million sqft to ten million sqft after the issue.

“We have kept it on hold looking at the market,” said Manmohan Agarwal, Chief Executive (Corporate Affairs), in a conference call to investors.

“We have also held back a lot of growth and expansion plans…We do expect a reasonable growth of 30-50 percent next year. But growth, which could have been driven with expansion of retail space, would get moderated,” added Agarwal.

Vishal Retail has now decided to focus on growth through franchisees model. This model will help the retailer to have access to franchisees’ properties for housing its retail stores. The franchisee in turn will get the opportunity of getting a share in the retailer’s revenues, says the report.

Vishal, which began its franchisee model from Indore in Madhya Pradesh, has 9 franchisee stores. It hopes to add another 40-50 stores in three to six months with a total retail space of around 0.2 million sqft, said Agarwal.

Reliance Retail, the retailing arm of Mukesh Ambani-led Reliance Industries, which in the past two years since its inception, has already rolled out over 800 stores. Most of these stores are part of neighbourhood, convenience, food & grocery format, retail chain called Reliance Fresh.

Reliance Retail is now going all out with the expansion of its specialty formats, as well.

Reliance is looking at extending the footprint of Reliance Footprint, its footwear and related products format, in the next four years, from the existing 10 stores to 150 stores. This, according to a DNA report, will entail a gross investment of Rs 750 crores. The company has already unveiled 10 stores of this format after investing Rs 50 crore at an average investment of Rs 5 crore per store.

In the past one year, the company has opened Footprint stores in Bangalore, Hyderabad, Delhi, Noida, Mangalore, Ludhiana, Mumbai, Cochin and Jaipur.

Reliance Footprint offers a wide range of 20,000-odd SKUs under local and foreign lables priced between Rs 299 and Rs 6,000 and more. While, private lables currently account for one-third of sales, the company is keen to increase their share to 50 percent of the total sales.

Of the 150 stores planned to be rolled out in the next four years, the company is expecting to set up 25 stores by the end of March, 2009. Rest of the planned 150 stores will be set up over a period of four years at the rate of 30 stores every year. Each of these large format Footprint store will occupy seven to 10,000 sqft of trading space.