Selective leaks through the national press (including HT Mint) have indicated that the ICRIER Report will substantiate the adverse effect that organized retailers have wrought on small, local retailers. In particular this has translated into a steep 16% decline (10% annualized) in sales and profits for 800 surveyed small stores located within a 2-5 km radius of newly opened national chains. This is all the more damaging in comparison to a control group of 800 stores outside the 5 km zone which recorded a 2% increase in sales and a 5% increase in profits. There is, however, little or no impact on employment at these same stores although 17% of them indicated that they had cut back on the workforce. Over half the small retailers gave ‘competition from branded retailers’ as the major cause for their decline. The retailer’s business responses included improvements in their stores – display, merchandise, self service – and defensive tactics – cutting expenses, prices, staff.

ICRIER (Indian Council for Research on International Economic Relations), a semi-government research outfit and think tank, conducted the research on the orders of the Prime Minister’s Office. The initiative was taken up by Congress President and UPA Chairperson, Sonia Gandhi who wrote to the PM earlier this year indicating concern on a politically sensitive area. The survey on the impact of big, branded retail chains on unorganized small stores was started in Mar this year. The sample included 800 small stores located within a 2-5 km radius of newly opened chain stores. During the survey another 800 stores outside this range were taken up as a control sample for benchmarking. Mint reported that the survey results have been out for a month but would be officially submitted to the Government only next January because of its politically sensitive nature.

Lobbyists for large retailers state that the report is relatively neutral on job losses, that lower sales and profits are inevitable with keener competition that benefits consumers and that many of these issues will get ironed out in the long run when the Indian retail industry restructures. It is unlikely that the position of the Government will change with the results which are along expected lines. It will, however, give the opposition a stick to wield and delay still further the opening up of the Indian retail sector to large retailers whether Indian or foreign. The Government has another pending report with the National Council for Applied Economic Research (NCAER) which is focused on effect of FDI on agriculture. The Minister of State for Industry, Ashwani Kumar has told the Rajya Sabha that the Government will only review its policies once it receives both reports.

Landmark Group to launch Gloria Jean’s coffee chain
The Dubai based Landmark Group is planning to launch Gloria Jean’s coffee chain in India. Over the first four years, Rs 40 cr will be invested to open 90 outlets. Gloria Jean’s is a US based coffee chain. The Landmark Group already has a business unit in India, Citymax, headed by MD Ravi Saxena to develop hotels and restaurants. The first outlet is expected to be opened as early as Feb next in Mumbai, followed by Delhi and Bangalore. A franchising model will be sed for expansion. The established coffee chains in India include Café Coffee Day, Barista, Costa Coffee, etc which do a business estimated to be Rs 500 cr.

DFS bags Mumbai Airport Retail Contract
DFS has bagged the lucrative Mumbai Airport (Chatrapati Shivaji International Airport) contract for duty-free retailing spread over 24,000 sqft. This follows the termination of the contract with ITDC-Aldeasa by Mumbai International Airport Ltd (MIAL) that presently runs the airport. It is reported that the combine wanted to re-negotiate their huge Rs 570 cr contract. DFS was the number two bidder with a minimum guarantee of Rs 260 cr. The contract also stipulates a revenue share (above a stipulated amount) with MIAL. Operations are to start as early as Jan next. DFS is a subsidiary of the giant Paris based luxury group, LVMH. It operates over 150 shops at major airports around the world.

M&S to dump Planet Retail & take-on minority partner
The growing promise of the Indian and Chinese markets has prompted the $16 bil, UK based retailer, Marks & Spencer into a strategic re-think. In India this is translating into shifting from the current ‘franchised’ model to direct Company control of the existing 20 outlets. On the ground, this would mean terminating the agreement with the Indian franchisee, Planet Retail. M&S would then set up a JV for India of which it can take a 51% ownership as per present FDI guidelines. The Company is reportedly in discussion with a few Indian companies for such a JV partnership. Inside reports now indicate that the shortlist consists of Trent, Mahindra and audit firm Lodha & Co.

Revamped Nirula’s targets 200 stores by 2010
The recently acquired and revamped Indian fast food chain, Nirula’s is targeting 200 stores by 2010. Currently the chain has 56. The Company feels that their formats and relative affordability would find favour in class II and III towns. This would include towns such as Meerut, Pathankot, Ludhiana and Moradabad. Multiple formats are being offered: Nirula’s family restaurant, food courts in malls, ice cream and beverage kiosks, express booths in petrol pumps and railway stations, and casual dining outlets called Potpourri. The investments required for the expansion will exceed Rs 100 cr.

ITC scales down rural retail
ITC’s admission of hurdles in rural retailing led it to curtailing an aggressive rural retailing program. The Company is now proceeding cautiously with ‘farm linkages’ as opposed to ‘rural retailing’ as the new mantra. The scaled down version now is to open 50 new Choupal Fresh stores, clustered in 10’s around each town, over the next two years with a budget of Rs 200 cr. Another format will be the cash-n-carry for fresh produce. The present one at Hyderabad has been successfully supplying to hotels, restaurants and push-cart vendors. The other focus will be on growing the fresh produce supply chain to established food retailers in addition to the current Food Bazaar and Q Mart.

Reliance scales down Fresh, opens TimeOut
Faced by determined opposition from ‘small India’, Reliance India has scaled down its Reliance Fresh roll-out but is continuing unabated with its other formats. Reliance Fresh four year target has been reduced to 1500 from 2000. Currently there are 430 such stores. This reassessment acknowledges the protests by small local traders and intermediaries of fresh produce and the wide political support that this has generated. This has particularly slowed roll-outs in West Bengal, Kerala, Orissa and Uttrakhand. In UP it has shut down existing stores, sacked staff and withdrawn totally. Surprisingly, some of the rivals such as Subhiksha have not be affected so severely and even continue with expansion plans. Reliance Retail has launched its books and music chain with the opening of its first TimeOut store in Bangalore. The range of products includes toys and gifts. The spacious 21,000 sqft store has a Karaoke studio for customer recordings, a reading bar, a kid’s wall and a cafe. Another 47 TimeOut stores are planned by 2010 with the next 40,000 sqft store coming up in Gurgaon next month. Rumour has it that Reliance is close to buying out India Book Depot, the largest book distributor in the country.

Violent Kerala protest targets modern retail
A protest called by an affiliate (AIYF) of the ruling CPI political party, targeting modern retail in Kerala turned violent. Across the state protesters marched up to outlets of Big Bazaar, Reliance Fresh, Fabmall and Spencer. Many turned violent. At Thiruvananthapuram, the marchers clashed with the police and damaged the Big Bazaar outlet damaging signage, lamps, glass panes and other fittings. Nineteen protesters were arrested but later released as a result of intervention by the ruling CPI. The protesters claimed that corporate giants were hurting small traders by monopolistic tactics.

The NV Retail Index last Friday was 146.31. This was a decrease of 1.64 points (1.1%) over the previous week.
The NV Retail Index is a capitalization-weighted market index reflecting the performance of 'retail related' equities on the BSE.

LMG Brands launches ‘Springfield’
The Dubai based Landmark Group prooted, LMG Brands has launched a Spanish brand, Springfield. Two standalone stores have been opened in Mumbai and Bangalore. Internationally Springfield boasts of a turnover in excess of 9 mil euros and a footprint of Europe, Mexico, Middle East and Asia Pacific. The pan in India is to open 20 stores in the next two years. The brand will sport men’s casual wear line and perhaps women’s wear later.

Reliance Brands in JV with Italy’s Sixty Group
Reliance Brands Pvt. Ltd. is in the process of signing up a JV with Italy’s Sixty Group. This will enable the Reliance Company to bring in their brands including Miss Sixty, Energie, Killah and Murphy&Nye. The $900 mil Sixty Group is one of Italy’s fashion trend-setters present in over 100 countries and with many Hollywood clients. The JV will be under the permissible single brand FDI guideline which will enable 51% of the JV to be controlled by the Italian Company. The JV will rollout 56 individual, up-market brand stores in the first tree years. Reliance Brands was set up recently by the Reliance Group with ex-Arvind Brands honcho, Darshan Mehta as head to bring in international brands.

Café Ritazza The Rs 400cr food service provider, Radhakrishna Hospitality is planning to accelerate the expansion of its retail arm under the nameplate Caffe Ritazza. Ten will be opened in the next year and a half. The first opened at Mumbai airport last year while the second one has just opened. The overseas chain specializes in locating the cafes at airports, motorways and railway stations. Radhakrishna Foods also has 800 vending machines for coffee and is planning to add snack food vending.

Maspar opened its eighth store of contemporary home furnishings at Delhi’s prime market, South Extension on 22nd Nov. Sprawling over 3500 sqft, the flagship store carries Maspar’s wide range of home fashion. Maspar’s next store is to open soon at the Ishanya, a specialty mall for interiors at Pune.

Shubh Jewellers Rajesh Exports Ltd has announced that it will launch a new jewellery chain called Shubh Jewellers. The target is to open 100 franchised outlets across Southern India.


Peacock Alley The US based premium bed and bath brand has tied up with Alok Industries for an India entry. The range will be retailed through stand alone stores and department stores such as Shoppers’ Stop. Alok Industries own 15 H&A stores but these are considered unsuitable as they are ‘value-for-money’ formats.

S.Oliver’ India’s premium apparel exporter, Orient Craft, has quietly launched two exclusive stores in Delhi and Mumbai called ‘S.Oliver’ which carries a collection of a premium German fashion brand. Over 70 stores are planned in the next three years. The Company hopes to partner other international retailers and premium brands. After four years, the expectation is that 30% of the revenues would be from retail. The current export turnover is Rs 750 cr.

Metro Cash & Carry has already started construction on a Rs200cr investment to open outlets in Kolkata and Mumbai by Apr 2008. The stores’ total floor space will be 75,000 sqft. The German wholesaler has been carefully navigating political hurdles and court cases but has come out unscathed so far. Unlike the Hyderabad store, its two stores in Bangalore do not trade in fresh produce as the APMC Act prohibits them from accessing the farmer directly. Metro has a customer base of 100,000 registered buyers in Bangalore and 60,000 in Hyderabad.

NTC The Public Sector textile giant, National Textile Corporation is looking at spinning off its retail operation as a separate company. This would then be run as a JV with a private sector partner who would manage the chain. The contender for this is the Future Group. NTC currently has 113 company owned and run retail stores selling textiles from nationalized BIFR mills. The PSU disposed off surplus prime mill land in Mumbai last year.

Barista The Italian coffee major, Luigi Lavazza SpA which acquired the Barista coffee chain (Mar 2007), is investing Rs 105 cr for further expansion over two years. The chain will expand from the current 175 outlets to 220 by Mar end and thereafter at the rate of 100 outlets every year. Offshore outlets will increase from the current 9 (Oman, sri Lanka) to 20 by Mar end. In India the chain will penetrate Tier II towns. There will be a three tier pricing policy which will depend on the town. An example given is Meerut where the price for a coffee will be 20% lower than that of Delhi.

Dominos Pizza India is planning to invest Rs 250 cr over three years to expand its network of stores cum delivery centre and to upgrade its manufacturing facilities. The stores will be increased from the current 180 to 500 during this period. Turnover is targeted at Rs 1000 cr by 2010.

Staples Future Office opened its first office stationery outlet in Bangalore. The plan is to open 50 standalone and 100 shop-in-shops. Smaller ‘express’ formats will be opened in office buildings. The projected turnover in the fifth year is Rs 500 cr. The chain is a JV between the $18 nil US based Staples Inc. and the Future Group.

Amway India The Rs 800 cr direct selling retailer is planning to add a range of new products to its current 85 product offerings. A new category will be introduced which will include water purifiers, air treatment machines, cookware etc. Additional products in personal care and skin care will also be introduced.

HyperCity the Shoppers’ Stop promoted hypermarket chain has launched a shopping catalogue in a fran chise association with UK based Home Retail Group. Branded HyperCity Argos, shoppers can access the printed catalogue at home and order on the telephone. An online browsing facility has also been provided.

Indians abroad
Pearl to acquire UK distributor
Gurgaon based exporter, House of Pearl Fashions, has signed an MOU to acquire a 50% stake in UK based distributor, FX Imports. Pearl will retain management control and will have the option to acquire the balance 50% over five years. The purchase by Pearl will be routed through its UK based subsidiary, Poeticgem. FX supplies imported fashion apparel to mid-market retailers in the UK. Its turnover last fiscal was Rs 80 cr.

Gitanjali buys out US jewellery chain
Gitanjali Gems has bought out a US based jewellery chain, Rogers, for Rs 80cr. An all cash deal of $20 mil has been made for the 46 stores. Only last Dec, Gitanjali purchased a 97 outlet, loss making US chain called Samuels Jewellers Inc. The Company intends to invest another $15 mil in the US to consolidate its expansion. Gitanjali also announced a 50:50 JV with the Italian jewellery and watch major Morellato and Sector Group. This will enable the Company to manufacture and assemble branded watches at upcoming SEZ’s.

US
Discounters reap shoppers gloom in the US
The slowing US economy and less discretionary income in shoppers hands is benefiting discounters such as Wal-Mart. Increasingly shoppers in the US, feeling financially stressed and eager to cut their expenditure, are being more price and credit conscious resulting in their ‘trading down’ in terms of brands and retail stores. Brands such as Starbucks and Coach are being seen as unaffordable. Discount retailers have already recorded an 8% growth over last year and experts feel that chains such as Wal-Mart, JC Penny and drug store chains such as Walgreen and CVS Caremark will benefit the most from the holiday rush. Traditional department stores such as Macy’s have reduced their sales outlook. This is in spite of the fact that ‘Black Friday’ – the Thanksgiving Day gauge for holiday sales – had a robust 8.3% increase over last year translating into $10.3 bil.

The beneficiary of the season, discounter Wal-Mart, had better than expected sales in the Third Quarter ending Oct 31 with net income rising by 8% to $2.86 bil. The Company claims better results were because of their efforts in controlling expenses and in drawing customers into their US shops earlier than normal for holiday shopping. Another measure was a cut in prices on 15,000 items. A unique initiative in cost control was to schedule hourly employees based on customers in the store.

Nike launches new chain ‘House of Hoops’
Nike is looking at innovative new retail concepts to further business especially in the current downturn. The ‘House of Hoop’ recently opened its first (planned 50 stores/ 3 years)) store in New York City’s Harlem area. The specialty store focuses on the American ‘craze’ for basketball. Customers can watch sports clips, read magazines, customise T-shirts and choose limited-edition footwear, basketball shoes, apparel and equipment. It has been opened in partnership with Nike’s largest retail partner, Footlocker. This may be the first of other concept specialty stores. Nike’s strategy is also to raise its direct sales to customers through its own stores from the present 12% to 15%.

Europe
Benetton posts 8% net growth
Italy based Benetton SpA, posted an attractive 9% growth in net profits (to 103 mil euros) in the first nine months of this calendar. Sales grew by 9.6% (to 1.5 bil euros) during the same period. The Company attributed the growth to increased volumes, broader & more segmented product mix and growth in overseas sales in Russia and India. It is pushing the new Benetton Baby brand for prenatal mothers, babies and toddlers (under 5) and will open 50 sales points next year. An geographical focus for new Benetton stores is Eastern Europe and Russia.

Topshop sets sights on China, US
UK based fashion retailer, Topshop will open its first store in China next year and in the US in September. In China the retailer has already booked rental space at the Shanghai Superbrand Mall. European competitors Zara and H&M already have stores in this mall. In the US, the British retailer was all set to rollout its first shop in Manhattan (New York) in September next year. The Broadway flagship will cover 40,000 sqft over three floors. This is part of an ambitious US plan that will see two more stores in Manhattan and flagship stores on the US East & West including Las Vegas, Miami and Boston.

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Outrunning a speeding treadmill Year!
It is curtains for yet another year! Overall, it spelled a third straight year of ‘power’ growth for retail. The winners were quite clearly the first movers – Pantaloon, Shoppers, Tata, Lifestyle – for they not only had unbridled growth in their core retailing businesses but were also able to open accounts in totally new formats. The Government – Left/small trader tussles only added to their free run by delaying the entry of international retail giants. While many small players were overwhelmed by deeper pockets (Trinethra, Landmark, The Home Store), nifty and nimble players such as Subhiksha were ready to show a trick or two. Those who milked the markets through IPO’s (Vishal, Koutons) struck oil. There were losers too. The Piramal Group ran out of steam and step and tumbled down the Piramyd. This did not faze many new entrants – especially developers - who only saw the glitter. Reliance’s sheer size mesmerized all but by the close of the year they became a punching bag for ‘small India’. But with a lot more resolve and steam, the Company was looking to re-group and fight another day.

If the retail players galloped into the start of the year, they needed to get off the high horse towards the end. The ‘mistresses’ they serenaded during the year demanded ever increasing commitments. As we go into the New Year, many mountains still loom such as unviable real estate costs, political fallouts and the lurking danger of big brothers overseas. But with many players ready to pick up the gauntlet, it has become a question of who can out-run an ever-speeding treadmill!