Mahindra Group plans to rejig retail business, may open stores outside India


October 18, 2012

Sagar Malviya, The Economic Times

Mumbai, October 18, 2012

Mahindra Group plans to rejig its retail business by changing the product mix at its stores with more apparels, expanding aggressively through franchisee stores and even setting up stores abroad.

“We might look at apparel centric mother and kids store,” K Venkataraman, MD of Mahindra Retail, said. He said the company plans to increase the share of apparel in the total merchandise at its ‘Mom & Me’ stores to 60% from 40% now.

Mom & Me caters to children and expecting and new mothers across categories such as baby food, strollers, toys and apparel. Mahindra Retail also owns toys chain Beanstalk.

So far, the Rs 200-crore company has been selling apparels mostly through its own private labels along with some of its exclusive licensee brands such as Disney and Fisher-Price. It recently started stocking kids brands such as Benetton and Puma in their stores and plans to bring a few international brands in the country.

That’s because apparel offers almost double the margins compared to other merchandise such as toys and baby products. The product mix change will reflect in almost half their stores, said the company.

“This move will surely increase the viability of their stores,” Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said. “But women’s wear is fashion driven and it requires more planning in merchandising and stocking needs to be appropriate compared to other products within the segment. Hence, the risk also increases,” he added.

In India, brands such as Lilliput, Gini & Jony, Catmoss and Benetton Kids account for nearly two-fifth of the total organised children’s apparel market worth Rs 3,000 crore. However, there is an influx of international brands in the segment since last year. Tommy Hilfiger, Zara Kids, Benetton Kids, Disney Mothercare, Chicco and Burberry Kids have steadily increasing their presence nationally and even in smaller towns.

Mahindra Retail plans to bring local entrepreneurship into play as it charts an ambitious expansion plan that will cover several small towns.

The car-to-creche retailer, which launched its first store in 2009, plans to add around 50 outlets, including franchisee stores, to its existing network of 100 Mom & Me stores. Mahindra Retail is also looking at some proposals to take Mom & Me to South Asia and Africa, Venkataraman said.

“It is something that we are considering actively but we have no clear-cut plans now,” he added. He said Mahindra Retail plans to remain focused on specialty formats and has no plans to enter crowded retail segments such as food and grocery. Experts too feel that specialty retail with a razor sharp focus is generally more viable in the long run.

Mahindra plans retail blitz with 65 new stores, e-comm integration


October 17, 2012

Raghavendra Kamath, Business Standard

Mumbai, October 17, 2012

After opening 100 stores in the last four years under ‘Mom & Me’ brand, Mahindra Retail, the low profile retailing arm of of $15.5 billion Mahindra Group, wants to go full steam.

The company, which retails maternity and baby products under ‘Mom & Me’, wants to open 50 stores under that brand, another 15 stores of its toy store Beanstalk in the next five and half months besides integrating e-commerce venture with physical stores and expanding its kidswear category by signing agreements with global brands.

The company has also set up ‘Destination Maternity’ store as a master franchisee of the latter which is based in US.

Besides, the company will also consider setting up franchisee stores in Middle East and Africa for which it has got requests, said its managing director K Venkataraman today.

The idea to integrate online and physical formats will be part of its ‘hub and spoke model’ where it has larger stores of 3,000 to 4,000 sq ft in cities and smaller on the peripheries, and aimed at increasing customer comfort besides saving on real estate costs.

“You can either click at home and collect products at the store after seeing it yourself or click at the store and get the products delivered at home.” Venkataram said.

The e-commerce sites will also help stores which are smaller in size, around 2,500 sq ft, which do not have the full range, he added.

When asked about the potential of e-commerce venture, he said: “There is a certain potential of e-commerce venture. We are developing the market first,” he said.

Consultants such as Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy, believe that integrating both channels augurs well for the business.

“An offline retailer who has built that relationship with customer has better chance in online venture. You can encourage customers to cross shop across channels,” Dutta said.

Besides, the company is also looking to expand its stores via franchisee way. Currently, the chain has two franchisees out of 100 stores is also looking to have 10-15 stores out of the planned 50 stores, he said.

“Cities such as Mumbai and Delhi can take 40 to 50 stores each but due to expensive real estate costs, we need to go slowly,” he said. Mahindra Retail has 25 stores in Bangalore.

“Out of 700 cities, top 100 are important for us but we have not decided how many stores we will open in the next three years,” he added.

The company which has got Rs 300 crore from the parent till now, looking at revenue of Rs 200 crore this financial year.

Mahindra Retail is looking at concluding licensing pacts with UK apparel brands in kidswear in the next couple of months.

The company is also looking other brands such as Benetton and Jiny & Jony to expand its kidswear segment, Venkataraman said. Mahindra already has exclusive agreement with US-based Disney and Fisher Price of Mattel.

“Till July last year, we had only private lables but we realized that older kids need more products and brands. We would like to add more brands,” he said.

Third Eyesight’s Dutta believes there is enough headroom in the segment given that there are not many brands in the segment and consumers want more choice.

VIP repositions itself as lifestyle brand


October 15, 2012

Sapna Agarwal, MINT (A Wall Street Journal Partner)
Mumbai, October 15, 2012

VIP Industries Ltd, India’s largest listed luggage company, is positioning itself as a lifestyle brand by diversifying into handbags.

“Forty years ago, there was no branded luggage company in India. VIP created the category,” managing director Radhika Piramal said. “Now with Caprese (handbags), we hope to do the same thing,”

VIP has a 65% share in the branded luggage market that is estimated to be anywhere between Rs.650 crore and Rs.1,000 crore, according to Piramal.

Caprese aims to become a Rs.100 crore brand in five years and hopes to generate revenue equal to VIP’s luggage business within a decade, she said.

The company will also get into complementary categories such as clutches, wallets and leather bags.

“The idea is to be a lifestyle brand,” said Piramal, who took over the business three years ago as managing director. Since then, she has relaunched Skybags as a youth brand with a focus on backpacks and doubled revenue from the segment.

There are more than 200 international fashion and lifestyle brands in India and more are coming, according to Third Eyesight, a retail consultancy.

Lifestyle brands such as Espirit, Guess, Calvin Klien and Tommy Hilfiger sell everything from apparel and watches to handbags and accessories.

Ikea explores giving India touch to different products and designs


October 11, 2012

The Economic Times

Mumbai, October 11, 2012

Swedish furniture retailer IKEA is playing "a local carpenter" by taking cues from Indian consumers on product design and function as it waits for the government nod to open stores in the country.

"We have found that maybe we need to do things differently in India," Juvencio Maeztu, country manager of IKEA Retail India, said. "Maybe, we need to have different product function and quality in India that we don’t have globally," he said on the sidelines of the Indian Retail Forum on Wednesday.

A few months ago, a team from IKEA visited Indian homes across various income groups to understand what kind of design and products could work in India.

The world’s largest single-brand retailer has proposed to invest up to Euro 1.5 billion (more than Rs 10,000 crore) in two phases to open 25 stores in the country.

Experts say such a localisation strategy will help IKEA connect with Indian consumers.

"Food and home category require huge localisation and consumers can provide insights on what kind of products could sell," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said.

IKEA had faced initial hiccups in China when it entered the market with global products and ideas.

Maeztu, who worked for IKEA in Europe for 12 years before moving India, said the company will retain its global strategy of large-size store formats and build long-term partnership with its suppliers in the country.

"The beauty of India is that we have been working with the whole pipeline since the beginning," he said. IKEA sources goods from India for its global stores and many of its partnerships here were made more than 25 years ago.

India could be the 45th country to have IKEA stores.

Known for its affordable and modern furniture and home products, IKEA has 336 outlets with annual income of more than Rs 1.7 lakh crore in 2011.

After nearly four months of negotiations with the Indian government over a mandatory 30% local sourcing norm, IKEA Group this week said it will comply with the country’s newly diluted single-brand retailing regulations.

Once the government clears its proposal, it will take three years for IKEA to build a supply chain to roll out its first store in India. The company plans to invest Euro 600 million (about Rs 4,100 crore) in the first stage spanning over ten years to set up a chain of ten stores and its allied infrastructure. In the second phase, IKEA plans to bring in another about Rs 6,150 crore to open 15 outlets.

Slowing same store sales to hurt retailers


October 6, 2012

Nupur Anand, Daily News & Analysis (DNA)

Mumbai, October 6, 2012

The buoyancy in retail stocks is unlikely to last, experts would have us believe.

The sector has been upbeat since the government gave its go-ahead last month to 51% foreign direct investment (FDI) in multi-brand retail and 100% FDI in single-brand retail.

Retail stocks have gained anywhere between 7% and 36% in the past three weeks.

However, analysts believe poor earnings will poop the party.

Brokerage CLSA said in a note earlier this week that September quarter earnings will remain tepid for the sector with players like Shoppers Stop and Pantaloon expected to report up to 43-74% decline in profitability.

The key worry is same store sales growth (SSSG), which refers to sales logged by a retailer’s existing stores during a certain period vis-a-vis the corresponding period a year ago. In short, therefore, the reference is to stores that have been open for at least a year.

According to CLSA, SSSG has been hovering in low single digits for leading formats and is even negative for some.
Other experts corroborate the claim.

Devangshu Dutta, CEO of retail consultancy firm Third Eyesight, in fact, feels any huge improvement in same store sales growth is unlikely. “The business is still under pressure, margins continue to remain thin and it is unlikely that the festive season will be able to fuel growth for the retailers.”

Sales growth for the 14 listed retail players has slowed from 23% in the September 2011 quarter to 10% by the June 2012 quarter.

For a retailer, a healthy SSSG in the current economic scenario would be 14-15%, said Arvind Singhal of Technopak.

But going by analysts, most retailers won’t reach this figure in the coming 2-3 quarters.

Blame it on inflation and dampened consumer spirits.

An extended period of discount sales this year has also nibbled on margins, bringing down overall profitability even though volumes have improved, Dutta pointed out.

This is likely to reflect in the retailers’ balance sheets soon.

To be sure, separate consumer surveys by BluFin and Assocham have found that consumer sentiment continues to remain subdued and is unlikely to improve in a hurry.

Also, in August, rating agency Fitch had revised the outlook for the retail sector to negative from stable for the second half of this fiscal.

In the midst of all this, a slowing SSSG could wreak havoc on retailers’ bottomlines, to put in mildly.