JSW Steel plans to open as many as 5,000 shops in the next five years to sell custom-made steel to tap demand in rural and semi-urban India, where rising incomes have boosted construction of homes and non-food spending.
“There are 600 districts in India with 7,000 talukas (administrative divisions),” Jayant Acharya, director, commercial and marketing, at JSW, said. “We are going to the taluka level. We may look to populate 3,000-5,000 of these with our retail shops.”
At the end of FY14, JSW will have 450 retail shops.
The major thrust of JSW’s retail push banks on the big consumption rush in rural and semi-urban India, Acharya said, adding that the company aims to have low-investment, franchisee-model outlets.
Steel makers are looking for new markets as they add capacity and as the slowing economic growth has led to a slump in construction activity in the cities and lower sales of automobiles and consumer goods.
While home buyers in urban areas have largely disappeared, forcing property developers to delay or even abandon housing projects, a better-than-expected monsoon is likely to boost farm income for the second year in a row, boosting rural demand for homes and consumer goods.
Analysts say JSW’s move is timely especially as steel capacity will stand at 100 million tonnes (mt) by the year ending 31 March 2016.
“Steel was always bought, never (aggressively) sold. Now companies are trying to reach out to consumers and educate them on possible applications,” said Chirag Shah, director, research, at investment bank Barclays Capital. “Retail steel is like the one rupee shampoo sachet—it won’t increase sales in a big way immediately, but the segment offers longer term benefit.”
Read on here