Bindu D. Menon, The Hindu Businessline
Mumbai, April 7, 2014

However, industry sources said the party may soften its stance and allow FDI in retail but with riders. They pointed that an indication of this softening can be seen in a speech by BJP’s Prime Ministerial candidate Narendra Modi given in February where he made strong pitch for use of technology in retail sector.

Arvind Singhal, Chairman, Technopak, a retail consulting firm, said, “The manifesto is a document of political convenience. Almost all parties want to woo voters and the BJP is no exception. Having said that, once the party comes to power it is unlikely to remain silent on the subject. BJP Government in its past avatar has been highly liberal with business. We see room for negotiation in retail as well”.

A Deloitte report notes that emerging markets enjoy strong demand and retailers based in India, Brazil and Russia continued to see strong consumer demand.

“Economically, India appears to be on a low growth trajectory largely due to the astronomical growth turning out to be unsustainable, leading to bottlenecks that created inflation. However, as an emerging market, India promises a positive long-term outlook for global as well as Indian retailers. Many reforms pertaining to the retail sector of the country are likely to take a speedy implementation route post the upcoming elections,” Gaurav Gupta, Senior Director, Deloitte Touche Tohmatsu India, had said in a report.

Our Mumbai Bureau adds: Devangshu Dutta, retail consultant, said that the “explicit” declaration is not only a major disappointment for international multi-brand retailers that are looking to invest in India, but also for large Indian multi-brand businesses that might be looking at attracting equity.

However, experts are also of the opinion that this single agenda would not impact the party’s chances, because there are several other issues that make for perhaps bigger and more immediate concerns for the electorate in this election.

(Sourced from The Hindu Businessline.)

Fairy Dharawat, Point of Purchase Online Network
Mumbai, April 5, 2014

"The industry is seeing a transition as there is shift in the consumers’ preference for non-carbonated fruit beverages, thanks to obesity and other health related issues. There is huge potential and scope in the industry resulting in a lot of investment and growth at the point of purchase." – Harsh Nayak, Regional Director Posterscope Asia Pacific

"With the temperatures rising, the heat on branding and brand promotions has begun in the beverages category. We are seeing price wars, introduction of new SKUs and surely expect new variants. The shopper has multiple options to choose from, right from powdered, to concentrated, to non-fizz to fizz drinks and the list can go on. It would be interesting to see how the shopper behaves and how beverage players will woo the shoppers." – Bharat Virmani, Director, Saatchi & Saatchi X

(Sourced from Point of Purchase Online Network.)

Vaishnavi Bala, Financial Express
Mumbai, April 5, 2014

Last year, Kishore Biyani’s Future Group closed about 40% of its food and grocery chain of Food Bazaar stores that were not performing well, even as it continues to undergo restructuring in neighbourhood stores, KB’s FairPrice and the home-furnishing chain, HomeTown, apart from Food Bazaar.

While Future Retail (FRL) shut down 18 supermarkets, it opened only one store last year. At the end of December, the company had 26 stores. With a cut in consumption spends resulting in slowing same store sales growth — at 3.3% in the three months to December — and rising cost of operations, FRL is revamping the food and grocery space now.

The company is currently renovating existing stores in terms of design and product mix by exiting slow-moving categories, going in for visual appeal. The format is also allocating space for categories that have higher margins, for example in-house bakery.

“With the company laying more emphasis on Big Bazaar Direct, there is a sort of reorganisation that is taking place. Big Bazaar Direct will have lower operational costs than running Food Bazaar. So they are clear to keep only those Food Bazaar stores that are operationally profitable,” says Prashant Agarwal, joint managing director, Wazir Advisors. Big Bazaar Direct is a franchisee-based model where franchisees personally visit consumers and take orders for products.

At the end of December, Future Retail had a total debt of R5,065 crore. The company raked in revenue of R2,200 crore, with a net profit of R20 crore in the December quarter. These numbers are not comparable. Future Retail did not respond to an email seeking details on its format.

Food and grocery retailing, which forms the largest chunk of organised retail, is a tough business to be in. Food and grocery typically has a gross margin of 10-15%, compared to 40-50% for apparels. “Supermarket chains are struggling to create a profitable model. At the store level, it can take 12-18 months to break-even but is taking much longer now,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

With many challenges at hand, retail baron Biyani has been equally ruthless with his other food and grocery chain — KB’s Fairprice — closing about 35 stores of the neighbourhood grocery store format last year. Most of these stores are from the Big Apple chain of food and grocery stores in New Delhi that the group acquired in 2012. The company closed these stores as they were not profitable and were located in more expensive locations, thereby increasing rental costs. At present, the company has a total of 175 Fairprice stores.

According to Fairprice CEO K Radhakrishnan, “The company is now repositioning itself for the lower-middle class segment. We are not keen on serving the same customer who also goes to a supermarket or a hypermarket. We want to go one level lower to the lower-lower middle class.”

“We are making some changes in our new stores that will have a self-service option, with better visual appeal and systematic stacking of products,” he said.

Apart from these two food and grocery formats, the company is also revamping the HomeTown format by streamlining its supply chain management and exiting categories like heavy furnishing. “The format will be in a position to be profitable at the Ebitda level next year," according to Future Group president (retail strategy) Rajan Malhotra. This comes after FRL managed to turnaround its eZone format last year that turned Ebitda positive in the April-June 2013 quarter.

The rejig in the formats follow a big-bang round of restructuring where Biyani sold Pantaloons to Aditya Birla Nuvo in 2012, divested a 53% stake in consumer finance company Future Capital Holdings and signed term sheets to exit both the insurance businesses of Future Generali India Life Insurance and Future Generali India General Insurance.

(Sourced from Financial Express .)

Fashionunited.com

April 3, 2014

After starting delivery services to Indian patrons through its global site, American lifestyle clothing retailer Gap is now inching closer to them by partnering with ecommerce portal Myntra. As per reports, talks are on to finalize a deal with Myntra to launch its online store in India.

It may be recalled that the largest casual wear retailer in the US is also said to be in talks with Arvind Lifestyle Brands to open brick-and-mortar stores in the country.

According to a Third Eyesight survey, eight US department stores and brands are currently shipping their products to India. Experts feel that this strategy being adopted by most foreign brands and retailers indicate their strategy to test the market before making a formal entry.

If the Gap’s deal gets through, Myntra may handle the operations of San Francisco-based Gap’s online store. Both offline and online stores may be launched simultaneously early next year. After securing funding from PE investors recently, Myntra is racing ahead to be the leader of India’s ecommerce store amid tough competition from rivals like Flipkart and Jabong. Sources say the fashion e-tailer, which is projecting sales (gross merchandise value) of around Rs 2,000 crores this fiscal, may also partner with the Dutch clothing brand Scotch & Soda.

The e-tailer, currently at half the sales figure of Shoppers Stop and Lifestyle, aims to match their figures in another 15 months. While on one hand, the portal is looking at becoming India’s largest retailer, on the other, it would utilize the raised amount to increase mobile-led services, while focusing on expansion of in-house fashion brands. The company aims to reach a turnover of Rs 1,500 crores in fiscal 2015 and grow to Rs 10,000 crores in the next three to four years.

(Sourced from Fashionunited.)

Arpita Mukherjee, Business Today
New Delhi, March 30, 2014

Last year, electronics retail store Croma Retail decided to sell JBL speakers at its store in Delhi’s T3 domestic airport terminal. To begin with, it was an experiment. After all, why would anyone buy a set of speakers at an airport terminal of all places? But the strategy paid off. The entire stock of speakers, priced at Rs 5,990 each, flew off Croma’s shelves.

"The price was not reduced nor was there a special deal. All we did was give the brand prominent shelf space, which makes a huge difference to sales," says Ajit Joshi, MD, Infinity Retail Ltd. Croma is part of Infiniti Retail, a 100 per cent subsidiary of Tata Sons.

Croma was among the first of the big retailers to foray into airport retail in India in October 2007. Today, airport retailing has become a business no chain can ignore. Croma already has seven airport stores across Mumbai, Delhi, Hyderabad and Ahmedabad. It has plans to set up stores at Kolkata and Chennai airports soon. Sales at its airport stores are growing at about 17 per cent annually, says Joshi.

The products especially in demand at Croma’s 850 to 2,000 sq ft airport stores are accessories such as scratch guards, covers, mouse, power banks and pen drives. These are typically in the price range of Rs 600 to Rs 4,000. The affluent Indian traveller today is also open to shopping for big ticket items at airports such as tablets and smartphones. Croma sold close to 15,000 smartphones at its airport stores in the past year.

Airport retailing is a popular concept globally but is still in its infancy in India. The non-aeronautical revenue (largely from retail) is more than double the aeronautical revenue at most airports abroad, but in India it is the opposite. Singapore’s Changi International Airport’s revenues from retail operations – with more than 350 stores – were over S$1.9 billion (US$1.5 billion at current exchange rates) in 2012/13.

However, airport retailing appears poised for an impressive take off in India. The renovation of most major airports is underway with large dedicated areas for retail stores. The recently opened T2 terminal at Mumbai’s Chhatrapati Shivaji International Airport for instance, has about 700,000 sq ft area – the size of over 10 soccer fields – dedicated to retail, food and beverage, lounge and travel services. Similarly, the retail space in Delhi’s T3 terminal is spread over 290,000 sq ft.

Apart from Croma, prominent brands with a presence at Indian airports are Shoppers Stop, Hidesign, William Penn, Pavers England, WH Smith, among a host of others. Delhi’s Indira Gandhi International Airport, for instance, (terminals T1 and T3 combined) has close to 500 brands spread over 323,000 sq ft. Most of these retailers plan to scale up and are upbeat about the future.

Shoemaker Pavers England operates 14 stores at airports, and its officials say the products that sell more are the high priced ones. Its stores are small, between 150 and 300 sq ft in size, with products offered varying according to location. "What Chennai airport has may not necessarily be there at Mumbai airport, and what Mumbai airport has might not be available in Cochin," says Utsav Seth, CEO of Pavers England India. "White shoes sell well in Hyderabad, they don’t in Delhi." Pavers England’s stores at airports do better than its regular ones, adds Seth.

It is a similar story for pens and accessories retailer William Penn. "The highest selling products are writing instruments," says the company’s CEO, Nikhil Ranjan. The company gets about 10 per cent of its total revenue from its airport stores, three in Delhi and one in Mumbai. It is now actively looking at setting up shop at most of the newly developed airports across the country.

"In recent years, not only has passenger traffic gone up significantly with more low-cost airlines on the scene, but also the time spent by passengers at airports has increased due to early check-in times set by airlines following security and operational concerns," says Devangshu Dutta, CEO of consulting firm Third Eyesight. "This has increased retail opportunities, and airports in recent years are planning retail as an integral part of operations, rather than tucked away in low-traffic corners."

Retailers say it makes sense to be present at airports. "Airports are a very good place to get customers. More so, since there has always been shortage of quality retail space in India," says Dileep Kapur, President of leather bags and accessories-maker Hidesign. Already, global airport retailers are eyeing opportunities in India. Nuance Group AG, the world’s largest international airport retailer, through its joint venture with Shoppers Stop Ltd, has been present in the Indian travel retail market for six years. The company currently operates 19 stores at Mumbai International Airport and five at Bangalore International Airport.

Nuance manages almost 770,000 sq ft of retail space globally and operates 300 outlets in 64 locations across the world. It reported an aggregate revenue of CHF (Swiss francs) 2.6 billion (Rs 18,116 crore) in 2012. "India has huge potential to grow. Airport infrastructure is being developed and we will see the results soon," says Anirban Dutta Chowdhury, Country Head, Nuance India. The retailer’s highest selling product is liquor, followed by confectionery and perfumes.

Not so long ago, in 2004, when GMR Infrastructure was given the task of developing the Delhi airport, it had to cajole and incentivise brands to open shop on the premises. "There were genuine concerns about whether customers would buy the products," says Romy Juneja, Vice President and Chief Commercial Officer, GMR Delhi International.

But most retailers which chose to enter early are still there and thriving. These include the likes of Shoppers Stop, Croma Retail, Ethos Watch Boutiques and Hidesign. "The Hidesign brand is a perfect fit with airports, considering its customer is the corporate traveller," says Kapur of Hidesign, which has eight Hidesign and Holii stores at airports.

Retailers, however, have to pay much higher rent per square foot for the space they occupy at airports compared with other locations in cities. "There is an assured customer base and you can directly target your core customers, that too seven days a week, so it makes sense for companies to be there, if they’re ready to pay the higher rent," says Sushil Patra, Associate Vice President, Retail, Technopak, a consultancy firm.

The returns per square foot are much higher at airports than at other stores. For Croma, the annualised realisation is close to Rs 1.2 lakh per sq ft at airports, while in the cities it is close to Rs 30,000 to 40,000 per sq ft. It is more profitable than the regular stores, says Joshi. "Our stores are as profitable as those at malls or high streets," says Govind Shrikhande, Managing Director, Shoppers Stop. It operates six stores at airports across the country. "Retailers would not stick around at airports if things were not working out for them," says Dutta of Third Eyesight.

Airport retailing then appears poised to take root in India.

(Sourced from Business Today, issued dated 30 March 2014)