No easy days for Bharti growth plan

Bharti Retail, the wholly owned unit of Bharti Enterprises, has opened only 100,000 square feet (sq ft) of retail space in the country so far, well behind what it had indicated during the announcement of a strategic roadmap for its retail operations two years ago.

Till date, the company has opened 24 supermarkets, called Easy Day stores, in northern parts of India, and a smaller version of a hyperstore (large retail store) in Ludhiana. But in February, 2007, when Bharti unveiled its retail strategy, it had said it would have 10 million sq ft space by 2015 and invest $2-2.5 billion by that time. It was to open multi-format outlets across all cities with a population of over a million.

It means the retailer needed to open 1.25 million sq ft space every year. Going by this, the company should have covered 2.50 million sq ft by the end of the current fiscal. It had also talked of employing 60,000 people, including former soldiers, women and others, to offer multi-faceted career opportunities. Its retail operations have 3,400 employees so far.

“We are not going slow. We are on track as far as our plans go. We are learning the consumer behaviour and fine-tuning the proposition. Once everything in place, we will grow vertically,” said Vinod Sawhney, president and chief operating officer, Bharti Retail. “We will hire more as we go along. Exployees are linked with expansion,” he said.

Bharti’s slow implementation comes at a time when many retailers are slowing expansion. The Future Group, which was targeting 30 million sq ft of retail space by financial year (FY) 2011, now expects this by 2013. Analysts said Pantaloon had almost halved its plans for FY09 and FY10 to 2.5 million sq ft a year from 4 million sq ft a year, earlier.

Apart from slower economic growth, analysts cited high leverage positions and rising debt to equity ratios for the slow expansion. “Across the board, expansion plans are being re-looked at because of capital scarcity and catchment reassessment. Given the high debt levels and an almost dormant equity market, capital for growth has become scarce,” said a report from Edelweiss Securities.

Both Pantaloon and Vishal Retail added less space in the December quarter of the current financial year compared with the corresponding quarter of the previous year. However, Shoppers Stop added the same space in the December quarter of this year as the corresponding period of the previous year as its numbers were lower. Also, Reliance Retail has closed 30 stores, Aditya Birla has closed 45 of its stores in the past year.

Sawhney claims Bharti’s stores provide the best products at better prices. “We are not in the game of opening stores but want to get our retail preposition right. We have the best merchandise, a good sales teams and offer good retail experience at our stores. That’s why our footfalls are increasing,” he said, without giving figures.

Bharti Retail is also planning to increase the share of private labels from 8-9 per cent at present to 40 per cent in the coming years, which is expected to bring in more profits. Currently, the company has a private label in food called Great Value. Its apparel label is called George.