Retail in greater detail

When countries grow, more people buy more things. More products become available. They need more shelf space. The result: a retail revolution. That's what's happening in India today. A new generation of retail outlets is emerging, which will change the landscape of the country's cities.

The revolution is fuelled by huge sums of money being poured into real estate, modern logistics, and the creation of new retail brands. Everybody is joining the fray. From existing retail groups, Indian business groups that have had nothing to do with the retail business until recently, and foreign retail chains.

Take the case of Tata group's Simone Tata. She didn’t wait long after the sale of the cosmetics business of Lakme, which she managed, to Hindustan Lever in 1996, to buy up the Indian operations of Littlewoods, including the Bangalore store and its sourcing operations. Everything has been combined under a new entity, Trent, which will build a nationwide retail chain. Already, a store each in Chennai, Hyderabad and Mumbai, now branded Westside, have been added (see ). No one’s wasting any time here.

Shoppers Stop, owned by the K Raheja group, better known for its real estate operations, opened its first store Mumbai eight years ago, and then added one store each in Bangalore and Hyderabad. Now it will open 15-plus stores across India in the next few years, if the Foreign Investment Exchange Board clears the foreign equity it wants to bring in (see ). A 50,000 sq ft store in Delhi and another in Jaipur are expected to be launched by end-1999. The group is redesigning its chain along Western lines, to charge up its appeal in shopping experience.

Meanwhile the related Rajan Raheja group has launched its Globus chain, launching the first of its 35,000-sq. ft. department store at Indore, primarily for apparel and accessories, on 9 June this year, following up with a 36,000-sq. ft. store in Chennai soon afterward. "In three years, we plan to have 10 stores in different cities and towns," says Ved Prakash Arya, head of Coronet, the group’s retailing division that manages Globus. He’s even open to two stores in a town/city if one is not large enough.

If you guessed that ownership or knowledge of the real estate business has something to do with the urge to build large shopping areas, you're not far from the truth. The acquisitive Piramal Enterprises, which has been involved with a series of takeovers in the pharmaceuticals industry, has culled some prime real estate properties from the acquisitions into a separate division, and is utilising them to create shopping malls.

The group has used a prime property in south Mumbai it acquired when it took over Roche, to build Crossroads, a massive 1.5-lakh sq ft mall that has begun to cause traffic jams at Haji Ali, one of the busiest crossroads in Mumbai. The Piramals are now considering a solution to the traffic problem. Will it create more traffic problems at Bandra? The group is converting the Bandra Talkies into another Crossroads.

The Khorakiwalas, pioneers in the Indian department store industry, are not sitting idle. Their Mumbai-based Akbarally’s that’s discontinued its pharmaceutical counter and is concentrating more on apparel and accessories, and consumer durables. There's greater emphasis on lifestyle, better choice and display of cosmetics and toiletries. Confined to running three department stores and two furniture stores, occupying some 35,000 sq. ft., in Mumbai so far, Akbarally's is now considering spreading its chain of department stores across India.

Delhi-based food retailer Nanz, which has 15 superstores occupying 70,100 sq ft, is also working on major expansion plans. The bookstore chain, Crossword, which is currently present in Mumbai, Delhi, Goa, Pune, Nashik and Ahmedabad, is planning another mega store in Mumbai and new stores in Surat and Baroda. Apparel brand Pantaloon, which currently has 12 stores and 40 Pantaloon Shoppes (on franchise), is planning 11 garments, household and leisure product superstores in the near future.

Some retail organisations say they prefer to remain regional or local, but will expand operations within the areas they operate in. The Bangalore-based Kemp chain of stores, for instance, is adding Kemp City — a 2,000-acre retail-cum-entertainment store -- to its existing Big Kids Kemp and Kemp Fort, in the same city.

The new retail rush is springing up new models, some experimental since there are no real precedents in India. The south is where the maximum action is (see )

What’s also interesting is retail chains looking beyond the four major metros for expansion. Globus starting with Indore is a case in point. The expansion of Spencer’s of the RPG group into Pune is another example. Crosswords, the bookstore chain owned by India Book House, expanding into Nashik and other non-metros, is yet another example. And then there’s Shoppers Stop's plan to be in Jaipur.

Simultaneously speciality stores, which could well metamorphose into chains in the future, are coming up. Their areas of specialisation - products such as books, music, electronics, cosmetics and jewellery - are throwing up new opportunities as the consumption of these products grows. Side by side, international retail consultants are throwing up suggestions of new formats that could well be viable for India (see ).

With all this activity, some churning is inevitable. Some shakeout must happen as too many shops vie for the consumer's attention. Some consolidation will accompany some failures, before well-defined and permanent models emerge.

There are already indications in these directions. For example, the more than three-decade-old general provisions shop, Jawahar Stores, a landmark on Sir C.P. Ramaswamy Iyer Road, Alwarpet, an upmarket area in Chennai, has now switched to bakery products. Admits K.N. Rahman, owner of Jawahar Stores, "The change in the resident's profile, the shopping ambience provided by Foodworld and the product range it offers, resulted in our sales graph going down. Unlike Foodworld, we have to depend on manufacturers for promos, and that also impacted us."

On the other hand, the Chennai based Vivek & Company, which is into consumer durables retailing, recently took over competing chain, Jainsons. Are Jawahar and Jainsons stray cases of reaction to competitive pressures? B.A. Kodandarama Setty, managing director, Vivek, provides a part answer: "Consolidation is bound to take place in the 8,000-strong consumer durables retail industry. But it will be a slow affair."

Mid-sized single stores and smaller stores may well feel the pinch as larger chains and malls appear, because they will provide ambience and shopping experience that the smaller stores cannot hope to match. K. Radhakrishnan, vice president operations, Foodworld Supermarkets Ltd, drives the point home: "Foodworld or similar other chains would be a threat to stores that try to offer our kind of shopping experience but fall woefully short of standards."

But there's one question that begs an answer: what prices will consumers be willing to pay for the added ambience? The Indian consumer is notoriously price-conscious. Subiksha, the pharma and dairy products retail chain in Chennai, in fact, uses price discounting (thanks to bulk sourcing) as a major unique selling proposition.  (see South India - the retail trailblazer)

The world over, retail chains mean lower prices for consumers. The reason: better cost management per square foot of retail area, cost efficiencies in supply management, bulk sourcing efficiencies, even own store brands, and better returns not through higher margins but through larger volumes.

Another challenge on the horizon is e-retailing. E-commerce will, in its own way, threaten brick-and-mortar retailing, though large retailers will probably hop on to the e-bandwagon too .

Meanwhile, the neighbourhood grocer, the one bloke who customises best according to daily consumer needs, is not going to die out. He’s just going to get more sophisticated, diversify further—he’s already getting himself a pharmacy licence and selling imported goods, thanks to the grey market; he's open to home-delivering even a single product if the consumer so desires, provided the consumer is valuable to him—all with a keen eye on what will sell best in his locality.

A.T. Kearney predicts that by 2005, organised retail will be worth Rs 1,60,000 crore. How’s that for a figure to chew on? And yes, according to an ORG study, polarisation is already happening amongst the small and large outlets in throughputs.