SpiceJet aims to enter retail business through wholly-owned stores

Experts cry foul saying this will be diversion from core business plan

Low-cost carrier SpiceJet which was revived from the verge of closing down business is now looking to enter new territories. Airline sources have confirmed to Business Standard that it is on the final stages of preparation of entering retail business.
 
The foray will be through a separate subsidiary company called SpiceJet Merchandise Private Limited which was incorporated last year.

The development was first reported by CNBC TV-18.

While SpiceJet owns 99 per cent of the company, one percent is held by promoter Ajay Singh.

“The company is looking to find spaces for wholly owned stores across malls in metro cities of India, to sell products under the Spice brand,” a company official said without disclosing further information.

Along with SpiceJet merchandise, apparel and electronic products will be available in the stores. “Customers can order online also and we will develop a strong distribution channel to send the product to their home,” the official said.
 
All the products available will be under private labels i.e fully owned and sold under the company’s brand name. “The brand name is likely to be Spice but nothing has been finalised as of yet,” the official said.

Both Ajay Singh and a SpiceJet spokesperson refused to comment on the issue.
 
From the documents filed with the regulator by the company it appears that company aims to enter all forms of distribution chain which will pit it against direct completion from retail giants like Future group and e commerce companies like Amazon and Flipkart.  The wholly-owned subsidiary SpiceJet Merchandise Private Limited said that it would “engage in the business of consumer merchandise and goods that will include electronic items, readymade apparels, accessories etc."

The company noted that the business would be carried out through various channels like online shopping, creating virtual malls, and brick and mortar stores. It will also appoint agents, dealers, sales representatives to build up a distribution chain.

A rival airline executive said that this will be a complete distraction from running a core airline business while the SpiceJet official said that a foray through a separate subsidiary will mean it will be independent from the operations of airline business.
 
The company of late has been trying to open new revenue stream which includes a door-to-door cargo delivery business and tying up with taxi companies for pick and drop facility of passengers. An increased focus on ancillary business saw one of its Boeing 737 to brand logo of Tata Hexa- a new car from the Tata stable, on its fuselage. But such an extension into a sector will be first from any airline entrepreneur in the country.  

“It’s very premature to comment without knowing the final plans of the airline but I don’t think it is a prudent business decision, retail is not a natural extension of aviation business and with the promoter and holding company having stake in the new arm, shareholders are not very kind to such adventures,” said an analyst who tracks SpiceJet.
 
SpiceJet as an airline made a stunning turnaround coming back from a deep financial crisis, which saw a change of management, to placing an order of $11 billion order for 100 Boeing 737 max aircraft early this year.