Organised retail in India gathers momentum

Despite the government's silence on FDI in multi-brand retail, the domestic retail sector is picking up pace with more and more Indian companies entering the sector either on their own or in alliance with foreign retailers to set up premium or niche outlets.

The government is expected to examine FDI in multi-brand products only after it receives a report from the Indian Council for Research on International Relations and the National Council for Applied Economic Research.

Ever since the government permitted majority control for foreign single-brand retailers in 2006, a large number of premium-brand outlets have established their presence in the country.

While Indian companies such as Bharti, Reliance Retail, Essar, Future Group, Shoppers Stop and the Aditya Birla Group are still trying to consolidate their markets, others such as Mahindra & Mahindra, realty groups like Parsvnath and DLF, two-wheeler maker Hero Honda, chemicals and foods firm Jubilant group and brokerage and realty firm Indiabulls have announced plans to enter the retail sector.

Even foreign multi-brand retailers such as Carrefour and Wal-Mart have outlined plans to enter the cash & carry segment.

According to industry estimates, the overall size of the retail sector in India is expected to touch $427 billion by 2010 and $637 billion by 2015 with the organised segment expected to account for 22 per cent by 2010, up from the present four per cent.

Consulting firm Ernst & Young predicts that the organised retail market in India will touch approximately $30 billion by 2010.

The latest to make a big splash in the retail scene is the Aditya Birla Retail (ABRL), the retail arm of the $24-billion Aditya Birla Group, which plans to invest between Rs250 and Rs300 crore for setting up a dozen hypermarkets under the brand name 'More Megastore' in the country.

The hypermarkets will offer 60,000 products sourced through over 500 suppliers say company officials. The group also plans to open 'Family Stores' stocking apparel from Madura Garments, the owner Louis Philippe, Van Heusen, Allen Solly and Peter England brands and also distributes the international brand Esprit in India.

The action promises to hot up further with the Mukesh Ambani-controlled Reliance Retail entering into talks with UK fashion retailer Marks & Spencer (M&S) to float an equal joint venture for apparel, gourmet food and cafes.

If the deal goes through, the UK retailer would bring in new food and cafe formats into India. The gourmet food format may be integrated with Reliance Fresh wherever possible. This would help M&S attain immediate scale in food business as Reliance Fresh has 491 stores selling foods, fruits and vegetables, and may be scaled up to 1,400 stores by the end of next fiscal.

Marks &Spencer is present in India through a franchisee arrangement with Planet Retail since 2001 and operates more than 20 stores in India out of its 760-strong global network. Within four months of rolling out its first store in November 2007, Reliance Retail opened 500 stores in various formats, spanning 3-million square ft of occupied space in various cities.

Tobacco major ITC is planning to set up more of its Wills Lifestyle, John Players and Miss Players stores across the country. The company plans to increase the number of Wills Lifestyle stores from 250 to 400 by the end of 2008-09. These stores will come up on the lines of the concept store, designed keeping cultural context and customer profile in mind.

ITC has embarked on an exercise to create a stronger brand and retail identity for Wills Lifestyle. For this, ITC is piloting a new store concept with FRCH Design of the US, a specialist in store and mall design. It has launched three concept stores, two in Mumbai and one in Delhi. It is also working with the UK's Elemental Design and the US-based The Friedman Group in areas like product presentation, visual merchandising and retail training.

Atul Chand, vice president, sales and marketing for ITC's lifestyle retail business division says, "We want to make the Wills Lifestyle brand more upscale, international and personalise the experience for the customer."
 
Home Solutions Retail India (HSRIL), a part of the Kishore Biyani-owned Future Group, will soon start retailing lightings and electrical products under the Bijli Ghar brand. This is the first time a major corporate retailer has unveiled plans to enter the unorganised Rs80,000 crore lighting market dominated by small and medium city and region-specific players across the country.

The company already has a joint venture with Asian Electronics and Idiom Design & Consulting to launch the products. The lighting stores will open in 80 Big Bazaar outlets across the country and, in the next six to nine months, the company is planning of opening standalone stores, targeting revenues of Rs100 crore in the first year of operations.

Hemchandra Javeri, chief executive, Home Solutions, said, the stores would be a one-stop shop for all lighting and electrical needs of our buyers."

The Future Group is also tying-up with Godrej for rural retailing Biyani wants Godrej's partner Hershey's to get a touch and feel of what India has to offer.

Godrej will spin off its rural retail arm Godrej Aadhar into a separate company and Biyani's venture arm Future Ventures India, will pick up a majority stake in it.

A Mahendran, managing director, Godrej Hershey Foods & Beverages Ltd, said, "We are planning to expand and thus a strategic partner will help us."

RPG Group's Spencer's has also begun a new branding strategy and trimmed the number of its current retail formats. It however, remains focused on retailing food with plans to invest up to Rs2,500 crore ($635 million) until March 2009.

Indiabulls Wholesale Services, the retail arm of Indiabulls Real Estate has acquired 63.92 per cent stake in Piramyd Retail for Rs 208 crore ($53 million).

Adani Agrifresh is another Indian retailer planning to invest $250 million in the next three years in the country to create a supply chain from farms to retailers of fruits and vegetables.

Wal-Mart's (the world's biggest retailer) tie up with Bharti Enterprises for cash & carry operations, seems to have encouraged French retailer Carrefour, to enter the Indian market through the wholesale route also as 100-per cent foreign direct investment (FDI) is allowed here.

Carrefour seems most likely to come in on its own, without an Indian partner. Globally, Carrefour operates many retail formats such as hypermarkets, supermarkets, discount and convenience stores, but its cash-and-carry business is restricted to the home market of France and Italy. Of the 154 cash-and-carry stores from Carrefour, only 20 are in Italy. The remaining 134 are spread across France.

Carrefour's cash & carry stores vary between 2,000-4,000sq m in size and in France, the cash-and-carry operations carry on under the Promocash brand. In Italy, it's known by the Docks Market and Gross Iper brands. Carrefour's decision to begin wholesale operations in India comes after months of unsuccessful deliberations with potential Indian partners that are said to include the Essar group, the ADAG Group, DLF and the Future Group.

Single brand retailers have virtually flooded the country and that too mostly in the luxury segment. This segment is expected to grow to $30 billion by 2015 from the current $3.5 billion. Hence one now comes across premium foreign labels like Lladro, Mothercare, Tommy Hilfger, Nina Ricci, Gucci, the French Connection, Hello Kitty, Jimmy Choo, La Pearla and Calvin Klein and many others having a prominent presence in malls mushrooming across urban centres in the country.