Retailers plan more stores as consumer spending improves

With improved consumer spending, retail companies have revived their expansion plans. Additionally, more foreign retailers are setting up shop in the country with the possibility of a relaxation in foreign direct investment (FDI) norms in retail, according to retailers and consultants tracking the sector.

Wal-Mart, the world's largest retailer, is opening its first cash and carry outlet in Punjab tomorrow. India's organised retail market stands at just 5 per cent of the total $400-billion retail sector and, according to Indian laws, foreign retailers are barred from entering the multi-brand retailing space.

“The next few months will be far better than what they were in the last couple of months. Spending desires are coming back to consumer minds. We will be lot more ambitious in opening our stores compared with last year,” said Bijou Kurien, president and executive director for lifestyle at Reliance Retail, which runs 40 lifestyle stores across the country.

Even Ajit Joshi, managing director and chief executive of Tata group's Infiniti Retail, accepted that April and May have been good months so far.

"To that sense, consumer sentiment has already improved. We are planning to add over 20 stores this fiscal of which three will open by June," said Joshi, whose firm runs the Croma chain of electronic and durable stores.

Retailers such as Future Group, Aditya Birla Retail and Reliance Retail had gone slow on expansion plans in the last 6-9 months as consumers curbed spending to save cash during the downturn.

While Aditya Birla closed 75 stores, Mukesh Ambani's Reliance Retail closed 40 stores in a year. Kishore Biyani's Future Group, which was targeting a retail space of 30 million square feet by the financial year 2011, now expects to have the space by FY13.

"Even as we are going ahead with expansion, we will be a lot more cautious now as the last three months gave us an opportunity to introspect our model," Kurien said.

Speaking on the sidelines of the Indian Shopping Centre Forum, retail experts said many more international retailers will follow in the footsteps of Wal-Mart, Carrefour and Tesco who have already set up shop in the country or plan to, mainly in the wholesale and back-end operations of retailing. Some would tie up with Indian partners for single-brand retailing, like Marks and Spencer. Trent, the retail arm of the Tata Group, has announced a joint venture with Inditex Group to develop and promote Zara stores in the country. According to reports, Kishore Biyani's Future Group is also in talks with French companies Carrefour and Groupe Casino for a possible tie-up.

"There are retailers with investment capacities. Some are here and some are waiting to enter. When norms are relaxed, the constraints in doing retailing will change dramatically," said Kurien of Reliance Retail. Consultants say the current downturn, with lower valuations, may attract more overseas retailers here.

"We have advised all our clients to look at India now as the elements associated with retailing are available at competitive prices. The current opportunity in Indian retailing is much less riskier now," said Jayant Kochar, managing director of the retail consultancy Go Fish Retail Solutions.

Wal-Mart to sub-let space in its outlets

Wal-Mart, the world's largest retailer, plans to sub-lease additional space in its cash and carry stores to smaller retailers in the country to earn additional revenues, according to a person close to the development.

Senior officials of Wal-Mart, which is launching its first cash and carry store in Punjab on Saturday, held meetings with small retail chains in a Mumbai hotel on Friday. The model will be similar to the shop-in-shop concept in retail stores and have book stores, food courts and others, the person said. "They want to lease out additional space in their large stores to us so that they can avoid wastage of space and earn some extra money,'' a retailer who attended the meeting said.

"We will lease space to those retailers who can fulfill the needs of our customers,'' said a senior Wal-Mart executive. Bharti Wal-Mart, the joint venture between Bharti Enterprises and Wal-Mart, plans to open 10-15 wholesale facilities in the country under the name Best Price Modern Wholesale. Each centre will measure about 50,000-100,000 sq ft each, and employ about 5,000 people over the next seven years.

"Standalone big stores are normally located outside the city and, hence, they have to complement with other facilities in their complex,'' said a retail consultant.