Big retail born again | business | Hindustan Times
Today in New Delhi, India
Feb 21, 2018-Wednesday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Big retail born again

After experimenting and learning from mistakes in modern formats, organised players are surging back, this time with consumer insights far more grounded in reality.

business Updated: Jan 16, 2011 20:20 IST
Rachit Vats

The game has changed.

Modern retailers, wiser from experience, are drawing up expansion plans after a period of introspection and market shocks. This time, they are reworking their strategies to ensure that growth is not hindered by high rents and operating costs. At the same time, smaller, regional players are enhancing their ambitions to the national level.

And, while some high street single store brands are closing shop to come into the multi-brand retail formats – especially to malls that draw larger footfalls, others are raising their profiles on their own strength.

Whatever the detail, it is clear that modern retail is trying to raise again. Organised retail firms from the Future, Relianceand Aditya Birla groups are committing new money for supermarkets, convenience stores, hypermarkets and specialty stores.

There is a greater influx of newer, smaller brands entering organised retail and more players are looking beyond the big cities. At the heart of it all is rising consumer spending power that keeps them in the game.

According to Ernst & Young, organised retail (around 5% of the total pie) currently accounts for nearly US$17 billion (R76,381 crore) of the US$350-billion (around R15,72,550 crore) retail industry in India, with significant presence in categories such as jewellery and watches, footwear, apparel and consumer durables.

“The share of modern retail is going up across sectors. Different companies have different strategies and are looking at different formats for growth. Modern retail is growing outside of malls and there is a growth from newer players and more organic modernistation of retail. By 2015, modern retail is predicted to have a 15% share of the overall pie,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight.

While a number of organised players shut shops in the last two years, they are back now with new strategies. Aditya Birla Retail Limited (ABRL), for instance, has cut costs, re-negotiated rents and now eyes profits by 2015.

“We are coming back to the aggressive growth phase and expanding

with a clear view,” said Thomas Varghese, CEO of ABRL. “In fact, we have seen a swing in our performance in the last two financial years, with improvement of R350 crore. In 2011, we reckon we will improve by another R100 crore.”

ABRL plans to expand both its supermarket chain, More, and its hypermarket chain, More Megastore, adding 50 supermarkets to its count of 532 and three hypermarkets to its nine as “anchor stores” in malls — all by March. By 2016, the retailer aims to scale up its supermarket and hypermarket chain to 1,300 and 65, respectively, with an aim to invest R300 per year.

That’s quite a change for ABRL that closed nearly 200 stores during the downturn.

“The last two years was a journey

to consolidate our position,” Varghese said. “Consultancies gave very optimistic figures for the retail industry and the benchmarks set were nowhere near the actual numbers. All things are behind us and we have implemented the corrected business model, which has already started showing extraordinary results.”

Godrej, which entered the retail space with its gourmet proposition with Godrej Nature’s Basket, is moving beyond Mumbai to open stores in Delhi, Pune, Bangalore and Hyderabad, four years after getting started. Shoppers Stop plans to have 60 malls in two years, up from the current 34, while raising its hypermarket number to 26 from eight.

“Expansion plans are very much on course. The aspirations and depth are high in smaller cities and thus very much on our agenda,” said Govind Shrikhande, managing director.

The Future Group, which runs the Big Bazaar chain, is focusing now on the hinterland -- West Bengal, Bihar Jharkhand, Orissa and Andhra Pradesh. “The hypermarket model seems to be the flavour of the day. Our intent is to keep growing and consolidate the business. The next phase is hypergrowth and we envisage it coming in from smaller towns even as major cities continue to expand. In the last four-five years, we have been growing at a CAGR (compounded annual growth rate) of over 30%. Last year, we touched R 8,000 crore in revenue and are looking at crossing R 12,000 crore this year,” said Raghu Pillai, CEO, Future Group.

Electronics chain NEXT Retail is looking at malls and larger formats for growth. It has 600 stores and is aiming at district-level presence with the addition of 400 stores in the next two quarters. “So far, we were primarily in high streets, but now we are looking at malls in 10,000-15,000 square feet spaces. Large format is the place to be,” said Sunil Mehta, CEO, NEXT Retail.

Vijay Sales, another specialty retail chain and a player in consumer electronics, is now looking at smaller cities. “We are in an expansion mode and looking at another 10 stores across important cities in the next one year,” said Nilesh Gupta, managing partner, Vijay Sales.

Reality checks have helped.

“The earlier euphoria of taking a property at any cost has died down. Pressure is certainly up but decisions are now taken on many factors, especially that the stores need to remain profitable,” said Future Group’s Pillai.