The shopping is over
By Mohini Bhatnagar | 10 Nov 2008
Mall magic and shopping mania seems to be dying out in India going by the shelving of expansion plans of all retail majors here.
While footfalls are on the way down, purchases have crashed and retailers are shelving expansion plans. Shopper's Stop a pioneer in the organised retail sector added just 57,000 sq feet of space in the first half of the year taking its total space to 1.66 million sq feet. During the September quarter, Shopper's Stop added just two stores. Over the past three years, Shopper's Stop has added about one million sq feet.
This is not all. Shopper's Stop reported an operating loss of Rs60 lakh in the September 2008 quarter. Its turnover has fallen by 26 per cent to 350 crore and that too in the festival season. Same store sales, for the flagship department stores, were up just 7 per cent during the quarter as fewer customers visited the shops.
Gross margins were down by 160 basis points to just below 36 per cent during the quarter. Shopper's stop had plans to expand operations to cover 4 million sq feet. It was planning a rights issue but has put it off for the time being.
In the current year, the retailer is expected to post turnover growth of around 35 per cent from Rs 1,159 crore reported in FY08. However, analysts say there is a chance of it posting a loss.
The Mukesh Ambani-controlled Reliance Retail also slowed down new store openings mainly in non-urban centres like UP, Bihar, Orissa, MP, Chhatisgarh, and Jharkhand. The main reason is that returns have fallen short of expectations.
Mukesh Ambani also feels that the speed of the turnout is far short of targets. The company's target as on January last year was to have 1,000 stores by December 2007. By April, this year their target was to have 585 stores. But as on April, Reliance Retail was able to achieve just one-tenth of the original target.
Another South based retailer Subhiksha that has attained pan India status is postponing expansion plans. The retailer's plans to set up consumer durables stores may be delayed by six months. Senior officials attribute this to a slowdown in the retail and the real estate sectors. Subhiksha was planning to set up a white goods and consumer durables and has plans to start its operations around January-February. The retailer is now looking at re-scheduling plans to May-June next year.
Earlier, Subhiksha the country's largest super market, pharmacy and telecom retail chain had said that it would set up 150 consumer durables retail outlets at an investment of Rs 600 crore by June 2009. The company currently has 1,580 retail stores. It plans to fund its expansion plans partly through internal accruals and rest through debt and equity raised from domestic and overseas market.
Subhiksha's plan to list on Bombay Stock Exchange and National Stock Exchange has also been pushed to early 2009 instead of by the end of this calendar year.
According to a retail survey by Harish Bijoor Consults in 38 malls across 10 cities there was a 14 per cent drop in mall visits and 22 per cent fall in purchases compared with the average for the previous three months. This is all the more worrying as this is in the October festival season that is usually accompanied by a sharp rise in sales.
That's not all. According to the Confederation of All India Traders festival shopping has fallen by 30 to 40 percent this year compared with last year.
India's urban retail sector was said to be in the boom phase till a few months ago with soaring aspirations and changing lifestyles of a shop-till-you-drop middle class. Consumer spending grew by 75 percent over the past four years, and the Indian retail market, valued at $511 billion, was projected to grow to $833 billion in the next five years.
