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| Retailers back in expansion mode as consumers return |
| Ranju Sarkar / New Delhi Sep 29, 2009, 00:34 IST |
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The retail king is back to what he does best: Expand. Future Group Chairman Kishore Biyani is planning to add two Big Bazaar stores every month and open 15 hypermarkets over the next six months.
‘‘The stress is no longer there,’’ Biyani says. This, coming from someone whose flagship company, Pantaloon Retail, reported a 54 per cent drop in net profits for the full year ended June 2009.
And, he’s not alone. B S Nagesh, vice-chairman, Shoppers Stop, says this is the best stage for retail in India because companies that have a good balance-sheet, low debt and a strong franchise will do well. This means the downturn has separated the men from the boys.
Nagesh says retailers are seeing genuine customers returning to the stores. So, conversions have gone up — a very positive trend for retail. As a result, retailers who were busy shutting stores and correcting their cost structures for much of last year are planning to add new stores as sales pick up.
This doesn’t mean everyone is doing well. Although weaker players are falling by the wayside — Piramyd was sold to Indiabulls; Subhiksha ran out of cash; Vishal Retail and Kuotons, which grew too fast, are in distress — it is the stronger players that are quietly consolidating their position after bringing down costs. This includes the Future Group, Aditya Birla Retail, Reliance Retail, Trent and Spencer’s Retail.
The focus this time, say analysts, is on bigger formats where it is easier to make money than on smaller formats where there is strong competition from traditional mom-and-pop shops.
Aditya Birla Retail, which has 642 supermarkets and five hypermarkets, plans to take the tally to 700 stores and seven hyper markets by March-end. Industry experts estimate that both of them are clocking sales of around Rs 200 crore a month, which is significant.
It’s not just about big players like Reliance and Birla. Lifestyle, owned by Dubai-based Landmark Group, which clocked a turnover of Rs 800 crore in 2008-09 with 15 stores, now plans to invest Rs 450 crore to set up 44 new stores in tier-II cities of the country.
Bharti Retail, which has set up 28 stores, plans to add 40 more by December 2009. Metro, which has set up five stores in six years, is planning to set up six to seven stores in Punjab; Carrefour’s is likely to open its first wholesale store in the next 12 months.
“Some of the biggest names — Marks & Spencer, Carrefour or Metro, etc — are expanding in partnership or on their own. Just because one or two retailers have closed doesn’t mean the sector is doing badly,’’ says Arvind Singhal, chairman, Technopak Advisors. In fact, many of the specialist retailers like Tanishq, Geetanjali, Mobile Store, Guardian Pharmacy, Reebok and Nike have also done well and are expanding.
Damodar Mall, group customer director, Future Group, says optimism is back. ‘‘In the last year, unchecked optimism went out of fashion. Now, companies have done the maths, cut costs, and had the courage to close stores that were unviable,’’ he said.
Mall says retail chains have gone through “sanity checks”. Those models that are viable and have traction with the customer will grow.
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