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Global Retail Majors May Come To India In ’11

December 28, 2010 By Leave a Comment

If consolidation was the buzzword for the retail sector in 2010, the coming year is expected to see some big-bang entries of global retail majors as the sector looks forward to a positive outcome on the relaxation of FDI norms in retail.

Even while India added around 5 million sq ft of retail space in 2010, some stores were relocated and some unviable ones faced closure. Once-lucrative businesses were bought out. While Vishal Retail was acquired partly by Shriram Group and partly by private equity fund Texas Pacific Group, Indiabulls, which had acquired Piramal’s Piramyd Retail in 2007, put its retail expansion plans on hold to focus on its main businesses of financial services and real estate .

Yet, with the lessons learnt from the past few years, prudent modern retailers managed to clock double-digit growth rates. Same store growth was well above 15%.

According to Thomas Varghese, CEO, Aditya Birla Retail, 2010 can rightly be called a revival year as “starting from the budget announcements to modifying income tax slabs, good salary increase across sectors and a fairly good monsoon—all aided in driving consumption across categories”.

carrefour

The revival though, had to overcome hurdles such as high rentals, attrition, higher cost of compliance and low investments flowing into the sector.

According to Varghese, the recession was a blessing in disguise for the retail industry. Though it slowed down the pace of growth, it helped retailers to introspect and revisit their business models. As a result, strong business fundamentals took over ambitious expansion plans, which warranted restructuring exercises, relocation of stores and renegotiating rentals.

These initiatives helped improve the profitability and viability of different retail formats and also enabled retailers to innovate, adopt best practices and bring in efficiencies in their operations. “I am confident that rich learning from the last couple of years will enable them to expand and build a sustainable business,” said Varghese.

What’s in store for ’11

In 2011, consulting major PwC expects more focus on the issue of FDI. This should facilitate the much-awaited entry of French retail giant Carrefour, possibly in a tie-up with Kishore Biyani’s Future Group.

According to N V Sivakumar, leader retail and consumer practice, PwC India, “It is only a matter of time before the retail sector is fully liberalized.” FDI will ensure necessary capital inflows to steer the retail industry ahead.

Shopping experience the key

APwC thought leadership report entitled ‘The Benefits of Modern Trade to Transitional Economies’ indicates that modern trade positively benefits consumers , producers/farmers as well as the exchequer.

Since growth is the result of high footfalls in stores, enhancing the consumer’s shopping experience will continue to be an important factor. “It is interesting to note that most of our population is young and have high aspirations. To understand the psyche of this evolving Indian consumer and ensuring his needs are taken care of will be key driver for growth,” said Thomas.

Till now, Indian consumers had access to private label products in food and beverage, apparel, footwear and FMCG products. An enhanced focus on workforce management would also be critical.

 

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Aditya Birla Retail Mulls Expansion Of Supermarket Chain

December 26, 2010 By Leave a Comment

Aditya Birla Retail (ABRL), that operates supermarkets and hypermarket formats under ‘more’ brand, is eyeing a break-even at the company level by FY 15, a top company official said. The retail major also is looking at scaling up its supermarket and hypermarket chain to 1,300 and 65 respectively by 2016. Currently it runs 540 supermarts and nine hypermarkets across the country.

“We are hoping to be PAT positive by FY 15 at the company level. We see EBIDTA break even by 2013. However most of our stores are already profitable and the new stores will be profitable in 15-20 months,” ABRL’s CEO, Thomas Varghese told PTI here.

On investments for store expansion, Varghese said it will invest Rs 18-20 crore in its hypermarket and around Rs 40-lakh in supermarket every year. This company plans to have 12 hypermarkets and add around 100 supermarkets by end this fiscal, he added.

aditya birla more

The hypermarkets will come up in existing metros like Delhi, Bangalore, Hyderabad and Mumbai, while the supermarkets will come up in Tier II cities such as Surat, Nagpur, Kolkata and Bhubaneswar among others.

 

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Top Retail Chains Offer Plethora Of Consumer-Oriented Services

October 1, 2010 By Leave a Comment

Destination retailing is the new buzz in the country’s $20-billion organised retailing sector. Besides their regular offerings, top retailers now woo consumers through services such as salons, spa, laundry and even travel services. Retail chains such as Spencer’s Retail, Hypercity, and have already initiated moves to convert their large-format outlets into destination stores that offer a plethora of consumer-oriented services.

“The line between products and services is blurring in organised retail,” says Sanjay Gupta, head (marketing) at Spencer’s Retail. “Services retailing is going to be the next big thing that retailers will offer in order to truly become a one-stop shop, since shopping time is slowly becoming a premium with most consumers of modern trade,” he adds.

Spencer’s Retail is already offering exclusive wine and liquor corner, cigar zone, live bakery, gourmet section, pet care and florist service in select outlets. The RPG Retail flagship is also in talks with reputed chains to introduce salons and laundry services by the end of this financial year.

Country’s largest retailer Future Group has set up salons, fitness centres and food courts inside all its Big Bazaar Family Centers, while Retail offers laundry, salon and spa services in seven outlets. Jewellery retailer Gitanjali Group too plans such a model for its Maya chain.

“What retailers are looking at is to engage the customers. These services lead to a lot of additional footfalls and help increase the average ticket value, says Rohit Bhatiani, principal consultant (retail and consumer products division) at Technopak.

Destination retailing is an established concept in the global market, with retailers such as Wal-Mart and Tesco even selling financial services like insurance, auto loans and medical insurance under their store banner. Analysts expect the concept, now primarily targeted at metros and other top cities, to pick up in India over time as shoppers look for new concessions and retailers add new offerings to increase footfalls in their outlets.

The model of operation is hybrid. While sometime retailers run such services themselves, they also partner with established players for other services. For instance, while Hypercity runs bookstores under its own banner Crossword, it also has a number of partnerships: Kodak for imaging service, Vodafone for telecom, Café Coffee Day for cafes, Pressto and Jyothy Fabrics to run laundry, Enrich Salon and Pinks & Bloos for salons and Orchid Thai Spa for spa services.

Likewise, Future Group runs the salon ‘Star & Sitara’ under its own label. When the retailer ties up with a partner, it charges a rent and usually has a revenue-sharing deal with the service provider. “It is a win-win-win model for the retailer, consumer and the concessionaire,” says Kumar Rajagopalan, CEO of industry lobby, Retailers Association of India.

On an average, hypermarkets in India are spread over 45,000 sq ft to one lakh sq ft, while some of the small-town stores are operating at 35,000 sq ft. Typically retailers give up to 20% of their space for concession, says Mr Rajagopalan.

Destination shopping is still at a nascent stage in India. Across the country, Spencer’s has only nine wine and liquor corners, one cigar zone, four live bakeries and one pet care centre. And, across its seven stores, K Raheja Group’s Hypercity has one ATM, four bookstores, five cafes, two laundries, one pharmacy and three spas and salons.

But they plan to scale it up. Kishore Biyani, CEO of Future Group, says the group plans to open around 11 salons and 4-5 entertainment zones inside the upcoming Big Bazaar stores over the next one year. “It’s all about engaging with the customer. We try and develop niches which would build up a better engagement with our stores,” says Mr Biyani.

Hypercity, which also runs the Shopper’s Stop and Crossword stores, plans to roll out 3-4 more salons and spas and has three ATMs under installation. “We develop concessions based on need and market development,” says B Nagesh of Hypercity.

“For instance if we can get a lady to stay back for 30-35 extra minutes within our store for a haircare or pampering session, that’s good for us.” He estimates that such services account for 3-5% of Hypercity’s overall revenues. According to Spencer’s Gupta, such services improve customer loyalty, adding they have led to 25-30% growth in store revenue.

Aditya Birla Retail is using concessions selectively for its network of 525 More superstores and the eight hypermarts, says its CEO Thomas Varghese.

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Bharti Retail To Enter Western India Soon

September 28, 2010 By Leave a Comment

After the north, Sunil Mittal’s Bharti Retail will soon enter western India with its first hypermarket in Mumbai, said an executive close to the development. It has signed a 60,000 sq ft store in the Neptune Magnet mall of the city’s Bhandup area and this is expected to open in the first quarter of 2011, the executive said. After Mumbai, the retailer plans to open 20 more stores in cities such as Mumbai, Pune and Nanded, he said.

The retailer is also planning to set up a mother distribution centre on the Mumbai-Pune highway, said the executive. Unlike other retailers such as Reliance Retail, which set up stores across the country in one go, Bharti is focusing on creating a cluster in one region before entering another.

bharti walmart

“Our strategy is to consolidate presence in one market, before expanding to another geographic region,” said a spokesperson. Currently, it operates over 90 stores across Punjab, Haryana, Uttar Pradesh, Uttarakhand and New Delhi, among others.

Bharti Retail, a unit of Bharti Enterprises, operates Easyday neighbourhood stores and hypermarkets called Easyday Market. Bharti also has a joint venture with Walmart, the world’s largest retailer, which runs cash and carry stores called Best Price Modern Wholesale in Punjab.

Analysts say the cluster strategy helps retailers to draw efficiencies on supply chain and logistics. “In case of hypermarkets and supermarkets, retailers can derive a lot of benefits if they can create a cluster of stores in one region, as logistics involve maximum investments,” says Susil Dungarwal, founder and chief mall mechanic, Beyond Squarefeet.

Bharti is also planning to open stores in the south and signed half a dozen stores in the region, property consultants said. Earlier this year, it said it planned a tally of 140 stores in the country by year end. However, analysts say Bharti has a lot of catching up with the ambitious plans it had announced in the past. In 2007, it talked of a total retail area of 10 million sq ft by 2015 and investment of Rs 10,000 crore and revenues of over Rs 20,000 crore by then.

Even other newcomers have moved ahead. Reliance Retail, which was set up in 2006, today runs nearly 1,150 stores, while Aditya Birla Retail, set up during the same time, runs around 640.

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Aditya Birla Retail to invest up to Rs 200 cr in FY11

May 13, 2010 By Leave a Comment

Aditya Birla Retail on Thursday said it will invest up to Rs 200 crore this fiscal to expand its ‘More’ brand as it aims to capitalise on the revival of organised retail market and falling rentals. The company, which is the retail arm of Aditya Birla Group, said it will open around 100 supermarkets and 8-10 hypermarkets by March 2011 as part of plans to grow by over 25 per cent this year.
aditya birla more
“In the last three years, we went through phases of nationwide roll-out of our ‘More’ brand and then consolidation. We will now embark on the third phase which will entail renewed growth to take advantage of the reviving market and falling rentals,” Aditya Birla Retail Ltd (ABRL) Chief Executive Officer Thomas Varghese told PTI.

Elaborating further, he said, “We will invest up to Rs 200 crore this fiscal to expand our chain. While we will open 100 odd new supermarkets of ‘More’, we have also lined up 8-10 new hypermarkets under our More Megastore brand.” Varghese said the company will fund its expansion from internal accrual and debt.

ABRL currently operates 540 More supermarkets and six large format More Hypermarts in 167 cities and towns across India. “Besides, we are also aiming to make all our existing stores fully profitable by this fiscal. Currently, 60 per cent of our outlets are showing profit and we want the rest to be in the same league,” Varghese said. ABRL is looking for an over 25 per cent growth in turnover in 2010-11.

“Our target is to clock a turnover of around Rs 1,850 crore this fiscal, up from Rs 1,460 in 2009-10. We believe that the new outlets which are lined up for opening this fiscal will also turn profitable within 15 months of start of their operations,” he added.

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Less is ‘More’ for Aditya Birla Retail – Downsizing yet again!

April 4, 2010 By 1 Comment

Aditya Birla Retail, which runs More supermarkets and hypermarkets, has closed 39 stores, including two-thirds of its outlets in Gujarat, company CEO Thomas Varghese said. The retail venture of the $29-billion Aditya Birla Group has closed these stores over the last nine months as part of a strategy to discontinue unprofitable stores.

“Any store that is not making money by next fiscal will be shut down,” Mr Varghese said. That could mean a gradual end to its Gujarat operations. “The firm is reviewing its remaining six stores in the state where high rentals and a culture of heavy discounting have made profitability unlikely”, Mr Varghese said.

aditya birla more

“The Gujarati consumer is extremely discerning. This has resulted in a culture of heavy discounting and it has reached a level where it didn’t make sense for us anymore. Also, landlords in the state were unwilling to renegotiate rent even after real estate rates dropped across the country”, he said.

The cement-to-cell phone conglomerate,which ventured into retail in early 2007 by acquiring Trinethra Super Retail with more than 170 stores across four South Indian states, today operates more than 600 “More” supermarkets and a handful of “More Megastore” hypermarkets.

When it entered the business, the company had set a target of opening 1,000 stores in three years. But an economic slowdown in 2008 hit the organized retail business forced the company to go slow on expansion, just like other big-ticket retailers such as Mukesh Ambani’s Reliance Retail and Kishore Biyani’s Future Group.

Expansion is back in the agenda. But the new buzzword is profitability. Aditya Birla Retail has decided that every store in the network has to be profitable, no matter how profitable the chain is. “We want every store in the network to be profitable,” said Mr Varghese. “So, after we open a store, we will give it some time and a lot of support. But, despite our best efforts, if it is not showing promise, we will not hesitate to take a hard decision.” He said the company will achieve profitability by 2012.

For expansion, the retail chain is now focusing on hypermarkets, or mega stores, which are much bigger than supermarkets. “We plan to open 10-12 hypermarkets every year,” Mr Varghese said. He said the company has been ignoring the hypermarket format compared with its supermarket business and now it will undertake a course correction.

It opened a hypermarket in Mumbai’s Thane suburb this month and will open one in Delhi’s Rohini suburb in May.

Most retailers in India are caught in an expansion dilemma. If a company is too slow to expand its network, rivals will take positions in key areas in important cities and towns. If it expands too soon, it could affect the company’s financial stability if sales slow. ‘More’ clearly wants less risk.

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Aditya Birla Retail to rope in investor, looking for funding

March 11, 2010 By Leave a Comment

Kumar Mangalam Birla’s retail venture, Aditya Birla Retail, is reportedly open to roping in a financial investor to fund its expansion plans. Even though the company declined comment, it is learnt from sources that the firm is not
averse to diluting its equity by about 10% to a sleeping partner. However, it would rather wait for more clarity on the regulatory front with respect to such investments.

More Megastore

Given the rate at which Aditya Birla Retail is expanding , funding will be an important factor especially with the rising rentals in the realty market, industry sources said. Aditya Birla Retail operates supermarkets under the “more” brand and hypermarkets under the “more.megastore” brand across the country.

It has opened its sixth megastore in Thane (the first in Mumbai/Thane). With 632 supermarkets and 6 hypermarkets under its wings, Aditya Birla Retail is gradually moving ahead with its expansion plans, even as it continues to identify and shut down unviable stores.

“We may close down 40-50 stores which we feel are not viable. However, this year we would also be adding around 48 more stores as part of our expansion drive,” Thomas Varghese, CEO, Aditya Birla Retail told TOI.  According to Varghese, this year is critical for all the company’s stores from the profitability point of view.

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Aditya Birla Retail to become $ 2.5-bn entity by FY18, IPO on the Radar

March 8, 2010 By Leave a Comment

Aditya Birla Retail Limited (ABRL), the retail arm of the Aditya Birla Group, aims to be an USD 2.5-billion entity by 2017-18, a top company official said. “We aim to become an USD 2.5-billion entity by 2017-18. The growth will be driven by opening new stores, launching private labels and closing unviable stores, among other initiatives,” Aditya Birla Retail’s CEO, Thomas Varghese, told PTI here.

aditya birla more

“In the next one-two years, our focus will be on consolidation and getting us to profitability. Our focus will be on profitability of the existing network rather than to grow the network,” he said. “We will be opening 12 hypermarket stores every year at an investment of nearly Rs 18-crore per store, spread across 55,000-75,000 sq ft. This year, our stores will come up in places like Delhi (May), Hyderabad (June), Surat, Pune and Nashik, among others,” Varghese said.

“Besides, we plan to open 70-100 supermarket stores every year at an investment of nearly Rs 50-60-lakh per store, spread across 2,500-2,800 sq ft pan-India,” he said. The company currently has 632 supermarkets and six hypermarkets under the brand ‘MORE’ and ‘MORE Megastore’, respectively.

The company also plans to close down unviable supermarket stores this fiscal, Varghese said, adding, “in FY 10, the company closed down about 55-60 odd stores across Mumbai, Pune, Delhi, Punjab, Haryana, Gujarat and in the south. The closures in the south are less as compared to the north.”

“If the business is not profitable then it does not make any sense to continue with it. Stores are closed due to several reasons including high rentals, poor locations, poor catchments, infrastructure issues like roads dug up, etc. In Mumbai and Pune, the predominant reason for closure is high rentals,” Varghese said.

On the company’s IPO plans, Varghese said, “it is on our radar but not at this juncture. We are definitely open to an IPO but it will happen when we are closer to profitability. We are not thinking about it now.” The company expects revenues of Rs 1,450-1,500-crore this fiscal (FY 10). The company closed FY 09 at Rs 1,130-crore. “We are targeting a growth of 25-30 per cent in FY 11,” Varghese said.

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Aditya Birla Retail speeds up, to open one hypermarket a month

March 4, 2010 By Leave a Comment

Aditya Birla Retail plans to invest Rs 1,800 crore over the next eight years to scale up its ‘More’ hypermarkets across the country. It looks to open one store per month at an investment of around Rs 20 crore per store, said Thomas Verghese, CEO of the company, on Wednesday at the launch of a hypermarket at Thane.

More Megastore

Aditya Birla Retail, which has 632 supermarkets and six hypermarkets, plans to increase the number of `More Megastore’ stores to 100, while shutting down some loss-making super markets. “We are focusing on our hypermarket format where we can introduce more stock keeping units (SKUs) to churn out more profits from large shop formats,” Mr Verghese added.

Currently, ‘More’ has 13 in-house (private labels) power brands in various categories with 320 SKUs in the FMCG segment. Hypermarkets have a minimum size of 50,000 sq ft compared to super market’s 2,500 sqft. “As a part of our cleaning up process, we are planning to wind up quite a few number of supermarket stores which are not profitable,” Mr Varghese said.

According to a report published by PricewaterhouseCoopers (PWC) on retail and consumer industry in association with Retail Association of India (RAI), the country’s retail sector is worth $350 billion and growing at around 15% annually.

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