Category: Press Quotes

Retail jobs attain respectability amid rush for branded stores

admin

August 30, 2007

With the sector expected to create at least 2mn direct jobs in 5 years, there is a rash of grooming courses.

Mint (partner to the Wall Street Journal), New Delhi, August 30, 2007

When Shoppers’ Stop Ltd was planning to roll out its first department store in Mumbai in 1991, less than 10 candidates showed up for a job advertisement for a dozen openings. One of the front-end employees quit soon after as his fiancée’s family objected to their would be son-in-law being a store associate. “So he decided to change (jobs) because he wanted to marry the girl,” says B.S. Nagesh, managing director of Shoppers’ Stop that currently runs 22 department stores and is India’s second biggest listed retail firm.

Today, thousands of job seekers troop to the offices of Nagesh’s company, and other modern retailers in many Indian cities every month. Most of the jobs on offer are for front-end positions.

As several companies roll out hundreds of branded stores, retailers say they have turned the corner in their ability to make the sector respectable from the employment point of view. “Acceptability has gone up like anything…nobody raises an eyebrow when you say you work for a retail store now,” Nagesh says.

Some people say that thanks to companies such as Shoppers’ Stop and India’s largest listed retailer Pantaloon Retail (India) Ltd, retail jobs have gained some sort of acceptability in the last decade.

“ It took a while for Shoppers’ Stop to gain the visibility, Pantaloon was not considered a great place to work at,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy firm. “The whole visibility of retail itself and the brands and the large retailers has been written about and talked about so much, that itself has brought a lot of desirability to the sector,” he adds.

In recent years, several large Indian companies, including Reliance Industries Ltd, the Aditya Birla Group, Bharti Enterprises, and Wadia Group, among others, have lined up ambitious multi-billion dollar plans to open supermarkets and hypermarkets across the country in the coming years.

In India, retail jobs were once synonymous with sales staff and delivery boys that toiled at millions of small shops, known as kirana stores that dot every nook and corner of India. Even today, modern retailers control only 3% of India’s $300 billion annual retail business, but their share is expected to swell 20% in the next eight years.

Many parents are beginning to encourage their sons and daughters to look for a career in retail to cash in on the expected boom. New Delhi stockbroker Prem Prakash Saluja asked his 20-year-old daughter, Kanika, to do a retail management course after finishing her graduation later this year in economics from Delhi University.

“I felt that India will have the same (kind of) retail industry as Europe and America and I told her this sector will grow very fast,” says the 44-year-old Saluja. “Earlier, retail jobs were only salesman and it was unorganized and that’s why it was considered low-profile…in the coming years, it will be a very respectable job and will get big money,” he adds.

Market watchers say the industry will create more than two million direct jobs in the next three-five years and several institutes, government agencies and non-profit groups have jumped in to provide weeks- to years-long retail courses to fill the gap.

Dutta of Third Eyesight says organized retail in the country is currently at the same stage technology outsourcing was five years ago. India’s IT and back-office companies have redefined the country’s image globally and created more than a million jobs over the last several years.

“ Even just saying (some one is) working in a software company raises the platform (of respectability),” Dutta says. India’s retail sector has a long way to go to reach that stage, yet. “Just saying I am in retail doesn’t do that,” adds Dutta.

Nagesh of Shoppers’ Stop says that although the sector is attracting a lot of interest, in the “social ladder, the hierarchy of the role and the job and the designation… it’s (a retail job) still in the bottom three…but it is changing very fast.”

Meanwhile, Saluja is asking his clients to invest in retail companies. “In 1991, I advised a lot of my friends to buy shares of technology companies and they made crores,” he says. “Now, I recommend them to buy retail sharesand if they can hold it for four-five years, it (the prices) will at least go up by eight to ten times.”

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FARM RETAIL

admin

July 9, 2007

FARM RETAIL
The New Middle Man

In recent weeks, Usha Tandon’s routine has changed slightly.

She has been walking an extra half kilometre to get her supply of fresh vegetables and fruits from a swank new retail outlet. Tandon, 50, is cook-cum-housekeeper to a busy professional couple in Delhi’s Saket locality, and it is part of her job to lay in the groceries. She has a tight schedule herself but Tandon doesn’t mind walking that extra stretch because she likes ‘the experience’ — an airconditioned store with attractively shelved wares and half a dozen uniformed assistants to attend on customers. But primarily, she goes there because fresh vegetables and fruits are 10-15 per cent cheaper there than at her usual street vendors.

“I no longer buy fruits and vegetables from the street, specially now when temperatures are scorching,” says Tandon. Even the veggies for her family come from this private outlet, although earlier she would patronise the stall set up by the Mother Dairy milk cooperative near her home.

It is a small but significant shift in buying patterns and offers a clue as to why the biggest names in corporate India, from Reliance Industries (RIL), the oil and petrochemicals behemoth, and the AV Birla group to the Mittals of telecom fame, Pantaloon Retail and RPG group to a host of smaller players have jumped into retailing of fresh vegetables and fruits along with other groceries. They have joined a clutch of slightly older firms like Mahindra Shubhlabh Services, Godrej Agrovet and R. Subramanian and associates who promote the standalone Subhiksha chain.

The food and grocery business offers a beguiling prospect, although estimates vary widely. The India Retail Report 2007, put together by leading Indian and foreign consultancies, estimates that the retail pie was worth Rs 1,200,000 crore in 2006, with food and groceries accounting for a whopping 63 per cent. But the share of organised retail in this sector was negligible.

According to Crisil Research, food and grocery (F&G) items account for a significant 74 per cent of total retail sales, which it places at Rs 12,80,000 crore (Rs 12.8 trillion) in 2006. However, F&G accounts for only 18 per cent of the total organised retail market, as the penetration of organised retail in the F&G vertical is a mere 1 per cent.

What it means is that the “opportunity in agriculture is very, very big” as Rakesh Bharti Mittal, vice chairman of Bharti Enterprises, says. The company, which revolutionised telecom in the 1990s by expanding its reach to millions of customers, is hoping to do the same with its foray into agriculture, specifically vegetables and fruits. It has launched FieldFresh Foods in partnership with ELRo Holdings India, an investment company of the Rothschild family, and expects a turnover of $1 billion (Rs 4,100 crore) in five years.

Mittal says he will be investing Rs 10,000 crore ($ 2.5 billion) to cover 10 million sq. ft. of retail space by 2015. By then, he hopes to cover all cities with a population of one million and above. The underlying philosophy, the company says, is to link Indian farms to the world “by creating the country’s first global outsourcing opportunity in fresh produce”. Its 300-acre farm leased from the Punjab Agricultural University has been experimenting with exotic vegetables destined for the European market. Snow peas, cherry tomatoes, bell peppers and sugar snap peas are being tested out at the Ladowal farm close to Ludhiana, which is the lynch pin of its farming initiative.

The numbers get bigger with RIL. Officials have refused to discuss its retail plans with media, but company sources say it is setting aside Rs 50,000 crore to build its farm-to-fork linkage. Reliance has drawn up plans for a presence in 784 towns and 6,000 mandi (wholesale market) towns with 1,600 rural business hubs to service these. It has already rolled out 177 Reliance Fresh stores across major towns in 11 states. According to a company report, RIL is targeting a turnover of Rs 40,000 crore in the next few years.

All of a sudden, the farmer is in demand. Retail chains want his produce — they also want his farm. Companies from DCM to the Tatas to Triveni are investing big to help the country’s notoriously inefficient and hamstrung agriculture to scale up production, modernise farm practices and persuade farmers to use the best seeds and improved irrigation system.

For most, one of the inspirations has been PepsiCo. The food subsidiary of the US soft drink company has been successful in transforming agriculture in a part of Punjab where Pepsi pioneered the concept of contract farming for bulk procurement of crops like potato, tomato, groundnut, chilli and paddy. In partnership with the Punjab Agriculture University and Punjab Agro Industries Corporation, it used location-specific R&D to boost yields of tomato and chilli by almost three times.

It is the same idea that is driving the latter-day corporate farm evangelists. Mittal says drip irrigation methods will be promoted to stop the wastage of water which he terms “an ecological nightmare”. Other good practices are part of the package that companies are offering farmers across the country: improved seeds, fertilisers and pesticides, technical support on multi-cropping, better irrigation methods, the works.

All of which would raise farm incomes by at least 30 per cent. Even better, farm employment would go up since horticulture is labour-intensive and would keep more people employed on the farm than other crops. Alongside, this would come an impressive network of infrastructure from pre-coolers and pack houses to cold stores and refrigerated trucks.

For Indian agriculture, this could be a Godsend as it struggles to move up the value chain. Horticulture growth rates in India have been dismal at 4 per cent for the last decade compared with a staggering 56 per cent globally. A 2 percent increase in growth of production in the last two years has brought total production to 184.8 million tonnes.

India is the second largest producer of fruits and vegetables (15 per cent and 11 percent respectively) but way behind China which accounts for 34 percent of world output.

Fortuitously for the farmers, retail interest is happening at the right time when the interests of big business, the farmer and the consumer are coinciding. And as it happened with the Green Revolution, a public-private partnership is falling into place. Since 2004, the agriculture ministry has been taking more than a cursory interest in this sector and set up the national horticulture mission to give the much needed thrust to the farm-to-fork campaign. S. K. Pattanayak, joint secretary in the agriculture ministry, says the basic effort is to help farmers equip them to meet domestic and export demand more efficiently. A star feature of this plan is the terminal market, a one-stop shop that will offer state-of-the art facilities for grading, storing and transport of perishables, besides banking.

The first of these is coming up in Chandigarh and Reliance is among the four companies that have been shortlisted by the Punjab agriculture department. Eight of these terminal markets are coming up in the country in an initiative that is being monitored by Yes Bank as the consultant to the project. For both farmers and the retail chains, these markets will be linked to a number of collection centres in key centres.

Why should the entry of big companies in F&G mean good news for the farmer, 75 per cent of whom are small and marginal cultivators with less than a hectare of land? The simple reason is that almost all of these companies are planning huge backend operations to create captive agricultural bases, either for their retail outlets or for supply. For starters, it means that farmers can sell directly to these retailers or aggregators such as Trikaya Agriculture and break free of the regulated mandis (see ‘Restrictive laws’). In this scheme of things, the farmer’s share in the retail price is as little as 12-15 per cent compared with 40 per cent for farmers in Thailand.

The World Bank believes that huge investments by the retail biggies in the supply chain infrastructure could usher in a service revolution that would shorten the distance that fresh produce travels to reach the consumer. In a supply chain analysis of 13 high value commodities that covered 1,400 farmers, 200 commission agents and 65 exporters across the country, the Bank found that high transport costs and multiple players in the linear supply chain were crippling horticulture. India is a large low-cost producer of fruits and vegetables but is unable to compete in the global market on account of what it terms the logistics tax on fresh farm produce. The inefficiencies in the system also mean that 25-30 per cent of the produce (valued at Rs 50,000-52,000 crore) is wasted, imposing additional burden on both the grower and the consumer.

Big retail’s plans to clean up the back-end may change all this. Trikaya Agriculture and Mahindra Shubhlabh are just waiting for organised agro-retail business to take off. According to the Central Potato Research Institute of India (CPRII), India produces 25 million tonnes of potatoes. For those who can link the supply chain from the farm to the shelf, a business worth Rs 2,500 crore is up for grabs. Mahindra Shubhlabh is upbeat about this development and is already testing different supply chain models to link agro-retail firms. It would either enable the transportation of farm products to a store or become what are known as “aggregators” of farm produce. This term is used when the retailer leases out a small section of a store to the aggregator, whose business is to collect produce from different farms and fill up empty shelves in the store.

The profit sharing margins on the particular space leased in the store would depend on the retailer. The aggregator could use a mix of warehouses, cold storage facilities and refrigerated trucks depending on the kind of product that is to be put on the shelf. He will also bear the loss in the case of perishable items when in transit. Tesco in Europe has 7 per cent of its $40 billion business being managed by ‘aggregators’ and ‘distributors’. “If this happens in India with agro-retail, there is a lot of money for us,” says Vikram Puri.

Mahindra Shubhlabh is already working in 100,000 acres of farmland, which includes contract farming. They have also leased 55 acres from farmers in Punjab for the same purpose.

In the process of setting up the retail networks, these large corporations are changing the domestic agricultural landscape. For starters, they are introducing the Indian farmer to better seeds, new technology, supply chain management and food processing. These companies have already brought in technology that increases the shelf life of fruits and vegetables.

Primarily, there are three models being worked on by India Inc. First, a model farm like Bharti’s FieldFresh. Second, contract farming. Third, contact farming. In contract farming, the farmer is supplied seeds and other ingredients by the company. The contractor buys the entire farm produce at a pre-fixed price. However, in case there is a supply shortage and the price offered by the government is higher than the price contracted by the company, the farmer can sell it all to the government.

Contact farming is a more complicated. Here, a farmer takes land on lease from other farmers. He is generally paid Rs 15,000 per acre every year, while the marginal farmer is employed to work on his land for which he is paid a monthly salary. But Bharti says it is switching to contract farming because of the complexities of contact or collaborative farming.

Not surprisingly, Punjab is ground zero for both Bharti and Reliance’s food retail ventures. After all, Punjab is where the Green Revolution changed the face of Indian agriculture in the mid-1970s. Punjab is also the first state to set up the terminal market that will act as a major catalyst for farm growth.

In other parts of the country too, companies —like farmers — will be benefiting from the groundwork done by the government to promote precision farming in horticulture.

Companies from Mumbai are making a beeline for Tamil Nadu’s Dharmapuri village, which has made a signal success of its fruit and vegetable production, thanks to government support. It has corporates with big retail plans knocking on the doors. Officials from Reliance and the Aditya Birla group have visited the village, looking to source vegetables directly.

These retail chains are sourcing produce through three routes. One, from village markets or mandis. Second, from APMC yards. And, third, by linking directly with farmers. Food Bazaar has links with farmers growing potatoes and fruits. It has even gone on to link farmers in the dairy business with the help of a company called Dynamic Dairy in Maharashtra. It has also sourced produce from farmers growing exotic vegetables like red pepper, mushroom, etc.

In Ratnagiri, Maharashtra, farmers have formed cooperatives and regularly supply mangoes to retail chains. “We sold 35,000 tonnes of mangoes from Ratnagiri last year. The farmers managed to get 90 per cent of the original cost,” says Arvind Chaudhary, CEO Pantaloon Retail’s food business.

If they had gone to a mandi they would have realised only 70 per cent of the cost. This year, Pantaloon’s Food Bazaar is planning to buy 100,000 tonnes of mangoes. The supply chain is managed such that mangoes are transported to the store a week before they become ripe. Cold chain is used only in the case of potatoes, where 5,000 tonnes are stocked in UP. Pantaloons food business is growing at 25 per cent in the entire Big Bazaar chain, which also sells FMCG products.

However, there are certain issues that agro-retail chains will have to address before they can make the farmer smile. “Hurdles such as bad infrastructure, high cost logistics management, the middleman and the limiting APMC Act will have to be crossed if retail has to assist the farmer,” says Choudhary. Since the existing supply chain allows them to connect with only those farms that are nearest to the cities, those living in the hinterland still have no access to markets. Importantly, the best of these stores shy away from commenting on the investments.

Godrej Agrovet on the other hand has tactfully used its marketing experience in rural areas by opening advice centres called ‘Aadhar’. These centres will enable the farmer to increase his production from 40 tonnes per acre to 100 tonnes per acre. This year, the company will cover 2,500 villages and farms in these villages will be directly linked to its retail business, Nature’s Basket, in Mumbai. “The proposition here is to remove the intermediary who is adding more cost than value,” says C.K. Vaidya, managing director of Godrej Agrovet. Godrej too does not use the cold chain. A modern supply chain, including refrigerated trucks and warehouses, would come at a high cost and the burden is borne by the consumer. “The consumer should be prepared to pay this cost,” Vaidya says.

This development poses two challenges for retail firms. First, they would have to squeeze the supply chain in order to offer the best prices. Here, the farmer will have to bear the brunt and could end up sacrificing more than he can in terms of price realisation. Second, the consumer is left with no choice but to pay a higher cost for getting fresh farm products. This is an issue that retail stores will grapple with and only certain items such as oranges and potatoes will be stored in the cold chain. Importantly, they will stick to proximity. Access to farms within a 4-5 hour reach will determine pricing and the product mix in the agro-retail business.

This apart, there has been a call to set up an exchange market for agricultural produce. This free market principle, CEOs feel, will liberate the farmer in terms of actual price realisation and keep him out of debt for the coming season. The National Spot Exchange Limited, an exchange which is dedicated for agri-produce, is supposed to create a benchmark even for the small farmer who can sell only one quintal. “The price in the exchange will be determined by many buyers around the country and not the local trader,” says Anjani Sinha, managing director and CEO of NSEL. The NSEL is in the process of setting up 117 warehouses and cold chains of 700,000 metric tonnes capacity each to make the exchange operational.

Though farmers are upbeat about selling directly, they are still wary. “They (corporate retail chains) wanted to ink a deal with us and were even talking about a partnership model. But we need a fixed price over a certain period,” they say.

Right now, companies are mostly dealing with farmers on the periphery of cities but analysts say they would ultimately have to invest in cold chains and move into the interiors. Whether companies — except for those with deep pockets like Reliance — will have the courage to do that is in question. According to the confederation of Indian industry, if India has to double fruits and vegetables production to 300 million tones by 2012, it would require pumping in close to Rs 20,000 crore. But analysts warn that such investment may not pay dividend since it doubles the cost of transportation.

So, how will retail chains be able to pay the farmer a higher price, subsidise the cold chain and yet give it cheap to consumers in the long run? Most vegetables and several fruits don’t need cold chains, says S. Sivakumar, ITC’s chief executive, agri businesses. “Vegetables are grown in the periphery of towns and they can move in ambient chains. What’s required is better coordination along the chain to minimise wastage.”

But, for the moment, retail chains continue to side-step the key question: Will farmers benefit? “It is competition that will bring down the margins but the savings will be pocketed by the retailers themselves. But the savings could very well be pocketed by the retailers themselves,” concedes Siva Kumar.

“It’s a different universe out there,” says he. “Companies need to empathise with the farmer and build relationships on a win-win wicket. Otherwise, it just won’t work.”


 
  Article from BusinessWorld, 9 July 2007
 

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DRAPING THE WORLD

admin

June 20, 2007

OUTLOOK BUSINESS , 20 Jun 2007
Ranjana Kaushal

Veering to the left of the Hero Honda roundabout in Manesar, Gurgoan is a nondescript road. A 100 meters down this path stands a building, which symbolises the rising global acceptance of India’s fashion design industry—the 3,50,000-square feet designing and manufacturing unit of Orient Craft, one of India’s largest export houses. On the ground floor of this Rs 750-crore company, in a glass cabin overlooking the work stations of 100 associates, 42-year-old Anoop Thatai, Joint Managing Director & CEO of the company, is busy discussing the new spring collection for a US customer. Finally, after hours of discussions, a few cuts, silhouettes and fabrics are short-listed. Then the design team of around 100, along with a support staff of 700, begins work on rolling out the products. Says Anoop Thatai: "The team has to complete the project in the next 14 days. Then we begin work for a major European retail brand. I am running at full capacity. Besides manufacturing prototypes, we are developing our own design lines."

For Orient Craft, it has been an eventful journey, for, just 10 years back it was manufacturing apparel for international clients with little value addition. But the company has climbed up the value chain. Says Sudhir Dhingra, Chairman and Managing Director, Orient Craft: "Out of the 65% women’s wear produced by us, almost 40% have our own design input and we produce 2,000 design samples a day. This differentiates us from competition and certain clients get back to us for particular designs."

The design element in the apparels and accessories industry—apparel alone is a Rs 30,000-crore market—has risen by almost 80%. Graduating from assembly line operations for Western labels, Indian design firms are now creating their own lines based on strong in-house R&D capabilities. Says Devangshu Dutta, Chief Executive, Third Eyesight, a Delhi-based fashion consulting firm: "The days of cut, copy, paste are coming to an end as every exporter looks for a distinct image. This is possible only if you innovate in design."

While big export houses like Orient Craft are enhancing their businesses by emphasising on design, international firms are looking at India as an outsourcing hub. This is spawning many start-ups, such as Bangalore-based Munch Design and Delhi-based Bricolage, which are developing lines of apparel and accessories for global brands like Nike, Reebok, Esprit, Adidas, Zara, Guess, Macy’s and Gucci. Says Narinder Mahajan, Founder, Bricolage: "Clients depend on us for forecasts and trends. Right from deciding on the theme-based collection names to the final sampling, everything is done by us." Bricolage is now developing a casual clothing division for Reebok and a range of shirts and tees for Benetton.

A Cut Above The Rest

Design in apparel as a key differentiator comes at a premium. According to industry sources, a prototype consignment of 10,000 shirts to the US would cost $10 per shirt. But with elements of design like embroidery, embellishments and cuts, the same shirt would cost $20 or more. Says Vijay Agarwal, President of Apparel Export Promotion Council: "India’s strength is design, whereas China is a mass producer. We need to balance the two—numbers and design innovation—for enhancing exports."

However, not just exports, the design element is slowly creeping into the lives of domestic consumers too. No more the plain shirts for the Indian male. The choice has widened to embroidered, pleated, crushed, crystal-laden and metallic shirts. For women though, there’s practically no end to the need for choice.

Homegrown companies like Pantaloon and Madura Garments are busy satiating the design needs of Indian consumers. Says Hemchandra Javeri, Senior Executive President, Madura Garments Lifestyle Brands and Retail: "The importance of design will be further heightened in future as Indian consumers get more in sync with global trends. Indian companies will have to compete in design, branding and retail. I see these as the key differentiators of the future." Madura Garments owns brands like Allen Solly, Allen Solly Womens, Peter England, Van Heusen, SF Jeans, Louis Philippe, Byford, Elements and San Frisco. "We try to balance fashion, innovation and commercial logic," he adds.

Pantaloon Retail too offers a variety of apparel and accessories targeted at men, women and kids. Says 43-year-old Kishore Biyani, MD of Pantaloon Retail: "We are a design-centric company. Right from kids wear—the Gini and Jony range to middle class brands like Big Bazaar to high-end fashion like Pantaloon—each product has a strong design element. This, I would say, is the biggest value add-on."

Points out Kailash Bhatia, CEO, Apparel Line: "Designers travel a lot, get customer feedback from surveys and marketing before launching a line for a particular season." Bhatia is aided by a team of 30-inhouse designers. For global players with a presence in India, apparel design is a key element. Says Manjala Tiwari, Brand Head, Esprit India: "Our business has grown three-fold over the past two years. We present the same range in India as overseas. We cannot present a six-month-old Western line in India."

Sums up fashion designer Ritu Beri: "When I joined the industry in 1990, fashion was a diversion for a small elite. Now, it’s more about being well dressed all the time."

More To The Design

The impact of design has spread to bags, shoes, hair clips and even interior furnishings. This has resulted in institutes such as NIFT launching courses to address this new market segment. Says Jatin Bhatt, Professor, Department of Fashion & Lifestyle Accessories, NIFT: "Seeing the market demand for trained accessory and interior designers, a four-year degree course, called Fashion and Lifestyle accessories, was launched. We now train students in leather, metal, jewellery and interior designing."

At Magppie, one of the first branded steel accessory players, products are designed by 10 designers in India and 28 overseas. Says Vinod Jain, MD of Magppie: "For an accessory player like us, design is the only differentiator. Consumers are ready to pay a premium for better designed products."

Agrees V Govind Raj, Vice-President, Tanishq: "9 out of our 10 customers prefer designs in terms of jewellery." Every season, the Rs 3,000-crore company introduces a new collection developed by its in-house team of designers. "We also promote our designs through cinema. Actress Rani Mukherjee adorns our jewellery in the movie Paheli. The soon-to-be-released Jodha-Akbar too will have our collection," he says. Earlier, Madura Garments had promoted its range of formal wear for men and women through the film Corporate.

Handbags and purses have also undergone changes over the years. From being a utility item, these have assumed the status of a style statement. Global brand LVMH (Moet Hennessy Louis Vuitton) is looking to acquire 20% stake in the Pondicherry-based leather goods maker Hidesign. Dilip Kapoor, Founder and MD, Hidesign reveals: "We will retain our brand identity and not be the outsourcing destination for LVMH. My team of nine designers is working closely with the team of LVMH to develop new collections."

The old idiom ‘A man is best known by the shoes he wears,’ stands true even today, as shoemakers Bata, Liberty, M&B, Nike, Reebok, Mirza Tanners and Adidas invest heavily in the Rs 11,000-crore domestic shoe market. Points out Bhupinder Kharbanda, ex-Head of Design, M&B: "The concept of having multiple pairs of shoes of different designs for different occasions is new in India. People are now paying more for a better-designed product than they were five years back. However, we are still at the tip of the iceberg."

With international and Indian consumers becoming more design-savvy, the dynamics of design is sure to change in the coming times.

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India’s retail revolution begins

admin

May 15, 2007

Special Correspondent Raj Menon, Mumbai (From TDCTrade.com)

 
With long-term experience in modern supply chains and provisioning, Hong Kong firms in the food and related products sectors – the likes of Heng Tai Consumables and ABS Procurement Co – are sure to be viewing the changing Indian retail scene with more than passing curiosity. Others, like ACM China, the greenhouse specialist, are already getting involved.

Recent news tells a fascinating story: Reliance Retail is to invest US$5.5 billion by 2010-2011, to create 100 million sq ft of retail space. Bharti-Wal-Mart is to invest US$2.5 billion by 2015, to create 10 million sq ft of retail space. Future Group (Pantaloon Retail) will invest US$260 million by 2008, to increase its retail space to 10 million sq ft. The list goes on.

Subhiksha, the US$73 million discount store will set up 1,000 stores in India by the year end, while Metro AG is investing US$400 million over the next three years to set up some 18 stores in the country.

Other giants of the mass provisioning industry are not out of the picture either. The ninth largest food retailer, France’s US$50 billion Auchan, is eyeing the Indian retail market, while Carrefour is in talks for tie-ups with some of the top Indian industrialists.

So also venture the UK’s Tesco and Home Retail – the latter signing an MoU with Shoppers’ Stop and HyperCity, the retail ventures of the K Raheja group to develop Argos Retail Format Stores.

Local groups are shaping up as well, with the Aditya Birla Group and Tata Group among those also finalising new and exciting retail plans.

These retailers have big ideas to speed up the revolution in the US$300 billion Indian retail industry. The sector is expected to increase to US$427 billion by 2010 and to US$637 billion by 2015. Organised retailing, which up to now has accounted for just 3% of the total retail market, will increase its share to up to 18% by 2015.

According to a study by ICICI Property Services-Technopak Advisors, most of the investments being planned are in the supermarket/hypermarket format, where food and other groceries with related household goods will attract maximum investment. Food and other groceries account for 70% of total retail sales in India.

The Indian food and grocery retail market is estimated at US$168 billion, of which foodgrains and unprocessed fruits and vegetables account for half of total food and grocery sales. Given the predominance of the sector, it is understandable that most international and domestic retailers are making a beeline for it. Apparel, home furnishings, furniture, electronics are other product segments of interest, if slightly less lucrative.

With almost all retailers moving into these segments, the need for differentiation, quality enhancement and value for money are all becoming increasingly pressing. Retailers are moving fast to set up supply chain infrastructure and lines with vendors, to spruce up sourcing operations.

Retailers estimate that total investment in supply chain infrastructure is to the tune of US$500 million. Backend operations are taking front seat. Until now, volumes in the organised retail sector were small, which did not require too much investment in supply chain management.

However, every big retailer today is investing in this crucial operation to control costs, improve efficiency, cut down inventories and source quality products.

Another reason for this is the entry of the international retail giant Wal-Mart, through a joint venture with Bharti Group, whereby Wal-Mart will manage the back end operation, and Bharti the front end.

Wal-Mart has stated that it would replicate its global supply chain model in India, while taking into account the unique features of the Indian market. Also, emphasis would be on local sourcing of goods, as far as possible. Wal-Mart officials, after a study of the Indian retail scene, are confident they can offer better prices to Indian consumers.

This has got other retailers moving too, to enhance efficiencies of their own supply chains and bring down costs, while offering consumers the lowest possible prices.

It is well known that Wal-Mart operates on volumes, and can buy the entire production of its vendor plants, thus lowering costs and passing on the benefits to consumers.

Wal-Mart, through its international operations is also in a position to source globally. The company is set to roll out its first set of stores by the first quarter of 2008, in cities that have a population of one million. The formats would be hypermarkets, supermarkets and also partnerships with some existing local stores through franchise.

Food and grocery is expected to account for up to 40% of the venture’s turnover, and the retailer would offer lower pricing on home products, clothing and kitchenware, which are globally sourced.

Wal-Mart claims it will take 35% of the Indian retail market by 2015.

In response to this, India’s Future Group is sprucing up its vendor network. The company has identified up to 40 anchor vendors, each with turnovers of US$45 million, to achieve economies of scale.

The group is keen to ensure that its smaller vendors are able to reach turnovers of around US$1 million and a growth rate of 40% annually, to be able to pass on the benefits of scales. The company is also working towards bringing its 1,200 vendors online, like Wal-Mart.

Reliance Retail looks at the small picture

Reliance Retail has announced plans to set up one store for every 3,000 families within a radius of 2 km across all locations by 2011. The company is competing directly with the large number of traditional local provision stores. Reliance Retail is either going to set up new stores in the identified areas or take over existing stores. The company has already done that in Mumbai and other cities.

Of the four million sq ft of retail space to be created under the “Reliance Fresh” brand (for groceries), one million will be through acquisitions. The retailer is also moving into laundry, personal care and apparel product lines, in which it plans to launch private labels.

Reliance is planning to roll out its specialty format stores this year, beginning with consumer durables, for which it has struck sourcing deals with companies in Hong Kong, the Chinese mainland and with Videocon in India.

To strengthen its links with farmers, the company is setting up integrated agri-retail business centres, which include three processing and distribution centres, 51 retail outlets for farmers and 75 rural business hubs, all with an investment of US$445 million.

Many companies, looking at the retail boom in food and grocery, are setting up ventures to help retailers source these goods.

Field Fresh, a joint venture between Bharti Group and NM Rothschild, is providing premium quality fresh produce to markets worldwide, has over 5,000 acres of land under cultivation all over the country producing many varieties of fruits and vegetables and is planning to double land under cultivation by the end of 2007.

The company is to supply fresh produce to the Bharti-Wal-Mart venture. To ensure best qualities and varieties, Field Fresh has engaged ACM China, an industry leader in building greenhouses, to set up state-of-the-art glass-based greenhouses at the FieldFresh Agri Centre of Excellence in the Punjab.

Field Fresh is also planning investments to the tune of US$220 million in the backend, including investments in cold chains and warehouses.

The Indian fresh produce marketing, till now controlled by state-owned Agriculture Produce Marketing Cooperatives (APMCs), is also changing with reforms in the APMC Act in many states. This has opened up the space for private players, and all major retailers are planning to set up private ‘mandis’ (marketplaces/bazaars), from where they can directly source their requirements of fresh foods.

Bharti’s Field Fresh will enter this segment within the next three months. A number of companies are also venturing into this segment to service the backend needs of retailers. For instance, DCM Shriram Consolidated Ltd (DSCL) finds that sourcing fresh foods for major retailers is big business and is in the process of tying up with them to source fruits and vegetables from farmers and supply to the retail chains.

DSCL is already doing this for Future Group’s Food Bazaar, south based Subhiksha and RPG’s Spencer. The new tie-ups would help the company to operate on economies of scale, and to operate all over the country.

Importers have a ramshackle infrastructure

Almost all retailers in the food and other groceries segment have a section for imported fresh fruits and vegetables from Hong Kong, the Chinese mainland and some European countries. These are normally costlier than the Indian goods, and quality is almost always never good, because of lack of warehousing infrastructure on landing in India.

Being novelty products, however, these are finding a place in Indian kitchens. Realising this, Indian companies, through their contract manufacturing, have begun growing the same in Indian farms.

Brands such as Godrej Nature’s Basket are planning to begin global sourcing directly, to ensure better quality, product mix, handling, and continuity in supplies. Subhiksha, which is expanding its retail outlets very rapidly, has a separate team that continuously looks for best prices in groceries across the world. Reliance Retail has stated that it stocks over 100 international brands, which are not available in other formats.

The retail boom is creating a flurry in the other product segments too – apparel, furnishings and furniture, electronics. While global sourcing in these segments is only 5% of total merchandise, it is growing at a rate of 50% per annum.

According to Devangshu Dutta, a retail consultant with Third Eyesight: “most of the international retailers would prefer to have localised sourcing as quality, inventory, cost is better managed. However, there is the issue of whether Indian manufacturers can supply the volumes that Wal-Mart, Reliance Retail, and others will demand over the next few years.”

Almost all retailers, big and small, have some percentage of goods which are sourced mainly from Hong Kong, the Chinese mainland, Thailand, Malaysia, Indonesia, the Middle East and Europe.

Future Group (formerly Pantaloon) has recently set up a sourcing office in Hong Kong as well as on the Chinese mainland. The main items sourced are apparel, fashion accessories, furniture and furnishings and electronics.

Meanwhile, almost every Indian apparel exporter has begun supplying to domestic retailers too. And most of these exporters – Orient Craft, Texport Syndicate, Leela Lace, Kaytee Corporation and Creative Outerwear – are set to increase their production for domestic supplies.

Of the non-food domestic products stocked by larger retailers, a lot of furniture is also being sourced internationally, again from China, Malaysia and Indonesia. Specialty stores such as Durian in India source almost 90% of their merchandise internationally.

Also, some Italian companies have entered the Indian market, and are retailing from some of the big retail chains such as Shoppers’ Stop. Tata Trent Ltd, which has set up Westside chain stores, sources a large part of its kitchenware and fashion accessories from Hong Kong and the Chinese mainland.

Industry circles feel as domestic retailers grow in size, more and more chains will look at the option of setting up overseas global sourcing hubs, mainly in Hong Kong and some selected centres on the Chinese mainland.

However, global sourcing would still remain small in Indian retail due to continued the high import duties in India. “The sourcing happening today is mainly to bring in variety that is not available within the country,” says Dutta.

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Retailers rush to TEMPerate zone

admin

May 10, 2007

MOINAK MITRA & BHANU PANDE

The Economic Times

DELHI, 10 May 2007

If temping is passé, weekend temping is the new passport for retailers to tide over footfall pressure during the weekends. As families make a beeline for high streets and malls during the weekends, the normal workforce looks helpless.

So, retailers are increasingly training their eyes on droves of undergrads who’re willing to work for money, recognition or just the fun of hanging out. Heavyweight retailers like Shoppers’ Stop, Wills Lifestyle, Timex and Airtel to name a few, who see a sudden spike in footfalls over the weekends, are roping in agencies for outsourcing manpower for that short one-to-two-day duration.

With organised retail breaching the Rs 48,000-crore mark, there’s no telling where outsourced manpower can go, especially on Saturdays and Sundays. Temping agency TeamLease has witnessed a huge demand for workforce across the retailscape over the weekends, and aptly cashed in on the opportunity.

“The numbers (of outsourced manpower during weekends) fluctuate owing to seasons, festivals, launch of a movie or a product,” says Rituparna Chakraborty, vice-president, TeamLease. She cites the summer sun as a key driver for weekend temping.

“People also want to escape the summer heat and throng air-conditioned stores. Soaring footfalls call for more people to manage those footfalls,” she adds. TeamLease engages 500 people at Shoppers Stop through the weekend temping model.

Even retailers who have so far shied away from the weekend temping format, seem keen. Take the case of Kishore Biyani, managing director, Pantaloon Retail. For his mid-market retail chain, Big Bazaar, weekends account for as high as 45% of the business and that jacks up manpower requirement by almost 25%. “This is the real issue facing us today,” says Biyani.

“We are figuring out ways to address it and looking for firms that can feed us with temporary staff during the weekends.” For now Pantaloon and Big Bazaar are managing in-house, using the students who attend courses run by Future Group in 14-15 educational institutions across country. “While they get first-hand retailing experience, we get our spike in weekend manpower requirement fulfilled,” Biyani explains.

Acknowledging the crunch, ITC’s apparel chain Wills Lifestyle, recently signed on the dotted line with TeamLease. “During the weekends, footfall pressure on average is twice, and at times, thrice that of on normal days.

But since our requirement is very specific, even when we outsource talent, there’s substantial handholding from our end,” points out Chittaranjan Dar, CEO, Wills Lifestyle. Countrywide, Wills hires 40-50 people over weekends as temporary workers.

For Devangshu Dutta, chief executive of Third Eyesight, a retail and fashion services firm, the retailers face real manpower issues during the weekends and this is bound to go up. “For Indians, shopping is more of an entertainment than just a plain utilitarian activity and that explains the chaos in malls during weekends. So retailers need staff reinforcement for basic functions such as attending to customers, restocking, etc,” he says.