It is an every day challenge for a retailer to satisfy the diversified demands of discerning customers. The further challenges are to reel in more customers, assure their loyalty, drive in more footfalls and the ensure the conversion rate. In order to gain more profits, retailers try to lure the customers with in-store signages, advertisements and customer-loyalty programmes. No matter how unique these strategies may be, they do not guarantee a success rate.

Thus, to ensure a minimum return on investment, the retailers need to ascertain that the format, product assortment and the location of their store assures profits. Exclusive brand outlet (EBO) does ensure that the store is never out of stock, thanks to the predominant one-brand presence. However, veterans argue that it is the multi-brand outlets (MBOs), which drives more footfalls. In the MBOs, the retailers offer wider range of merchandise but EBOs are in command with better visual merchandising, more control over the brand, customer experience etc.

In the response to the open poll question on IndiaRetailing — Exclusive brand stores may allow for greater depth and branding of merchandise, but multi-brand outlets and shop-in-shops are really the revenue drivers for a brand — 91.67 per cent of the respondents support the statement while the remaining 8.33 per cent of them negated it.

Devangshu Dutta, chief executive, Third Eyesight observes, “MBOs and shops-in-shop (SIS) can certainly help a brand build its footprint more rapidly and with lower capital than it could with only exclusive brand outlets. However, EBOs provide more control to the brand on the overall customer experience, merchandise assortment, pricing and margins."

Gopalkrishnan Sankar, chief executive, Reliance Footprint says, “MBOs and shop-in-shops give the size and scalability opportunities. Customers also look for variety of products, choice of price points all in one place. This is best captured by MBOs, particularly the ones who are positioned as destination stores.”

Sunil Sanklecha, managing partner, Nuts ‘n’ Spices maintains, “From any business perspective, the model that leads us to bottom line is the right strategy which depends on different aspects, such as, is the individual brand strong enough to survive with exclusive store format? How do we want to position our brand? Are we looking at the long-term or short-term strategy and strength of the finance on the marketing part.”

He strongly believes that EBOs have better future than MBOs or SIS format. He says, “Everyone wants the larger pie. We see the that the big stores want bigger margins and they start building their own brand. The manufacturers want their presence everywhere in the store but without sharing a larger pie.”

“A well-put together and well-located MBO is usually a destination for most of the categories that sit within it. Also by virtue of the range and brands that it encompasses, the customer engagement is strong. This ensures good footfalls and hence individual brands in MBO’s stand a far better chance of maximising revenues vis-a-vis exclusive stores,” says Viney Singh, MD, Max Hypermarket India Pvt Ltd.

T S Ashwin, managing director of Odyssey India Ltd, which has recently opened an SIS at Easyday Market comments, "This depends on what kind of brand it is. If the brand is niche and has a clear TG, then it needs more exclusive stores to showcase the width and depth of the range. Also it may really not have the market size for selling through multi-brand outlets. If the brand is not niche, then the exclusive stores help in building the brand and the multi-brand stores and shop-in-shops will help in increasing the visibility and reach of the brand as sales channels for the fast moving SKU’s in the brand."

Thomas Varghese, CEO, Aditya Birla Retail Limited says, “Exclusive brand stores have a place in the marketing strategy for a brand as they enhance visibility within the catchment, a consistent story to the consumer and a depth and breadth of merchandise. However, positioning a brand in multi-brand outlets enables the brand to enhance reach across a cross-section of customers thereby driving revenue.”

In the further analyses on the store formats in India, Dutta says, “In a market like India, brands need to follow a blended approach since in many locations MBOs or department stores suitable to the brand may not be available and the only option may be to open EBOs directly or through franchisees.”

“There is no ideal balance between EBOs, MBOs and shops-in-shop. The mix would differ from brand to brand and also change over the lifecycle of any single brand,” concludes Dutta.

Sapna Agarwal

MINT, Mumbai, February 18, 2010

Grocery supermarket chain Spinach appears to be caught up in a slide that has seen a number of Indian retailers, particularly from low-margin food and grocery industry, down shutters in the wake of the economic slowdown.

Empty shelves and aisles greet you at the chain’s flagship store in Mumbai’s Bandra Kurla Complex. Its branch in Juhu, known for its prime location and suburban Mumbai clientele, presents a similarly dismal picture.

Fresh stock hasn’t arrived for past three months at any of the Spinach stores, owned by Wadhawan Food Retail Pvt. Ltd, a Wadhawan Group company. “We don’t have any official communication on when the fresh stocks will come,” said Ganesh Thyagarajan, a manager at the Juhu store.

Outlets in Versova and Kalyan have already downed shutters. Another employee said on condition of anonymity that the firm was thinking of closing down more branches in coming weeks.

A spokesman for Wadhawan Food said, “The company is in the process of cost-cutting and consolidation, and looking at store-level profitability across the chain, which could entail some store closures.”

Wadhawan Food runs food and grocery supermarket stores under the brand names of Spinach in western and eastern India, Sabka Bazaar in the north and Smart Retail in the south. Mumbai also has stores under the brand Maratha Cooperative. The group has close to 180 supermarkets under various formats and has closed nearly 50 stores across the formats in the past year, according to people close to the company.

Mint reported on 6 September that Sabka Bazaar outlets had stopped receiving supplies. They are yet to resume.

Wadhawan Group is not the only one to have taken a hit. Over the past year, the sector has seen 1,600 supermarket of Subhiksha Trading Services Ltd down shutters nationwide after defaulting on loans, vendor payments and staff salaries.

Vishal Retail Ltd, with 170 outlets countrywide, is seeking to reschedule debt of around Rs730 crore. The correction, which started last year with retailers such as Aditya Birla Retail Ltd, which has food and grocery stores under the brand name More, RPG Group’s Spencers, Reliance Retail Ltd, Future Group’s Big Bazaar and Food Bazaar, is still claiming new victims.

The Wadhawan Group has businesses spread across real estate, retail, food and beverage, education, financial services and hospitality sectors.

“Following collapse of Lehman Brothers and the ensuing liquidity squeeze, the group has prioritized its funds for investments in core?businesses and retail lacked the investments,” said Narayanan Ramaswamy, executive director, retail advisory service, KPMG Advisory Services Pvt. Ltd.

Industry watchers agreed organized food and grocery retail was yet to find its feet in India.

“Other retail formats saw one store closing for every 20 that have opened. In food and grocery retail, the number of closures versus the opening of new outlets is higher,” said Anuj Puri, chairman and country head of property advisory Jones Lang LaSalle Meghraj.

Devangshu Dutta, chief executive of consultancy Third Eyesight, said retailers were still finding out the right size, positioning, demand and supply equation for stores.

“There is no stigma attached to store closures,” Dutta said. “If a location is unprofitable, companies take a call on rationalization and profitability, and decide on store locations.”

But Ramesh Viswanathan, executive director, CavinKare Group, put the onus on retailers and said they needed to grow out of the “neighbourhood store” mindset. “The principal challenge for modern retailers is to innovate to drive footfall and increase consumption,” he said.

Raghavendra Kamath
Business Standard, Mumbai, February 12, 2010

Aigner, the German luxury brand, and Genesis Luxury, the up-market retailing arm of Genesis Colors, have ended their tie-up in the country, as their plans did not go as expected, said a person close to the development.

Genesis and Aigner had agreed in 2007 to import and distribute merchandise. The partnership ended last month. Genesis Luxury, which ran the Aigner stores in Mumbai and Delhi (three in all), has shut these, through mutual agreement.

Aigner, part of Etienne Aigner AG, hadn’t tied up with any other company, sources said. The company did not respond to emails from Business Standard.

When asked, Sanjay Kapoor, managing director, Genesis Luxury, said: “Yes, we have ended the marketing tie-up with Aigner in India, after successfully running the brand for three years.”

Kapoor denied any difference of opinion between the partners. “In fact, we have had a very cordial relationship with the brand. It is a pure business-related decision. And, we will be looking at bringing in other newer brands to India in the next few months,” he said.

Aigner entered India in 2004 on a tie-up with Sports Station India Pvt Ltd (SSIPL) and set up the first store in Delhi. SSIPL had plans to open three more stores in the country, but the partnership didn’t continue beyond 2007. Aigner then signed the deal with Genesis.

Aigner is not the only luxury brand in recent times to end its relationship with an Indian company. The Murjani Group, promoted by Vijay Murjani, parted ways with luxury brands such as Gucci, Bottega Veneta and Jimmy Choo as part of its plans to shift its focus to premium retailing from luxury retailing. Bottega Veneta and Jimmy Choo are now with Genesis.

In fact, half-a-dozen international brands have pulled out of their partnerships or from India in recent memory. Raymond, the apparel maker and retailer, ended its partnership with Italy’s GAS. Kishore Biyani’s Future Group ended a tie-up with Italian brands Replay and Etam.

Britain’s Marks and Spencer ended its franchisee agreement with NRI businessman V P Sharma’s Planet Retail and tied up with Mukesh Ambani’s Reliance Retail, as it could not expand the way it wanted.

"Typically, break-ups happen when there is any shortfall in the performance expected from both sides. From the international brand side, either enough sales were not happening or Indian firms found returns on investment too low,” says Devangshu Dutta, chief executive of Third Eyesight, a management consultancy.

However, Genesis has planned to open more stores under its luxury portfolio, including those of Jimmy Choo, Bottega Veneta and Just Cavali — in all, 10 to 12 stores each for these international luxury brands over the next three to five years. Also, 100 Tie Rack Landon stores and 50 Satya Paul accessory stores will be opened over the same period, to achieve a target of becoming a Rs 1,000-crore company in five years.

Recently, Genesis signed a joint venture with Burberry, the British luxury goods retailer, where it took a 49 per cent stake. The company plans to open stores in metropolitan cities.