Aditya Birla to invest 2 bn dollar in retail

Aditya Birla group will invest Rs 80-90 billion ($2-2.2 billion) in its retail venture in the next three years, the group's chairman, Kumar Mangalam Birla, told reporters on Friday. Aditya Birla Retail Ltd, an unlisted firm of the group, plans to launch the first store in Pune, in western India, this month, he said. "We are really going it alone, without a joint venture partner," Birla said.

Birla has more to offer

After months of speculation, the Aditya Birla group on Friday unveiled its retail store brand, More, which will be launched as a mix of supermarket and hypermarket formats across the country. The first store will be opened in Pune next month, kicking off the metals-to-telecom conglomerate’s pitch to grab a pie of the $300 billion retail market. Group chairman Kumar Mangalam Birla said he expects to spend about Rs 8,000 crore to Rs 9,000 crore for its retail operations, most coming from unlisted companies. The initiative will be funded through a mixture of debt and equity, he said. Pune is a representative area with a combination of all the elements of our target markets, said Sumant Sinha, CEO of Aditya Birla Retail. While the average supermarkets would have a floor size of 10,000 sq ft, the hypermarkets would be larger than 75,000 sq ft. The recently acquired south-based grocery chain, Trinethra, will also be renamed More once all the back-end operations are in place. Trinethra has over 500,000 sq ft of retail space through 170 stores, and has given the group a leading edge in southern India, Mr Birla said. The move has also raised Aditya Birla Retail’s employee base to 4,000. “The retail business would have about 5,000 employees in three to four years,” said Mr Sinha. Shopping patterns across cities were studied with the help of consultants such as Technopak, AT Kearney, McKinsey. Retail experts from emerging markets have been hired to develop the formats. Expats hired recently include Andrew Denby, who was formerly with A S Watson in the Philippines, and is incharge of supermarkets. The hypermarkets chain would be managed by Russell Berman, who was earlier with Carrefour in China. The group is also learnt to have recruited people from competitors; Sanjay Badhe from Shopper’s Stop joined the group nine months ago to head the retail unit’s marketing operations.

US retail design firm to set up ops in India

India's booming retail market is attracting global players hoping for a slice not just of the retail market, but associated industries. WD Partners, a US-based architectural firm specializing in design and development of multi-unit retail and restaurant outlets, has opened for business in Mumbai with a team of 25 architecture and engineering professionals, and plans to ramp up to a team of 105 in two years. "We build offices where we believe our retail and restaurant clients are going," said WD Partners CEO Chris Doerschlag. "It made sense to expand into a city where retail is expected to grow very quickly over the next decade." WD Partners has 39 years of experience in designing and rolling out stores for multi-unit retail and restaurant operators. Its clients include BP, The Home Depot, ExxonMobil, Gap Inc., D'Angelo, Abercrombie & Fitch, Cosi, Benihana, Safeway, Wendy's, and Starbucks. The Mumbai office will assist global retailers seeking to expand in India, as well as target mulit-unit Indian retailers to grab a slice of what the company calls "a highly fragmented but rapidly growing $300 billion retail economy in India". In Mumbai, its operations will be headed by architect Rajesh Chhablani, who has worked on international projects and with retailers like Gap and Victoria's secrets. WD Partners has 39 years of success based The Mumbai office will share its signature processes and systems for multi-unit development, assuring the quality of work is standardized and consistent. Interoffice exchange programs for the Mumbai professionals will serve as "hands on" training in WD Partners' protocols, as well as team-building exercises between US and Mumbai colleagues. The firm has an international office in Malaysia in Asia, and India will be its second.

Smaller brands are moving into malls

While small brands are vying for a coveted place in the malls, it is the big retail players who are treading safely. A lot of the retail biggies want to strike a fine balance between opening stand alone stores and presence in malls. Smaller brands are moving in at a fast rate which can result in growing number of mass buyers Property developers view this change as a healthy trend offering varied options Property developers are definitely more cautious these days about putting their money into malls as the big ticket growth sector. The euphoria of 2005-2006 has clearly taken a dip and the signs are beginning to show. An interesting trend is that while more and more small brands are vying for a coveted place in the malls, it is the big retail players who are now carefully watching each step. Aiming to strike a fine balance between opening stand-alone stores and presence in malls, the big brands want to play it safe. So, is it only the smaller brands that are contributing towards growth in mall rentals? While that may not exactly be the case, big players are getting more choosy about setting up shop in the malls as rentals spiral upwards and footfalls go down. Says Shubhranshu Pani, president, retail services, Trammell Crow Meghraj, property consultants, “The mall rentals have increased between 20 and 40% over the last one year. Hence, most brands are being very careful about where they sign up. They are also more choosy now as there are a good number of malls that have come up. Supply is not an issue anymore.” An example of a retail player steering away from the mall format is Pulse Foods India, promoted by the Poddar Heritage group. “We were initially quite focused on malls. But today it makes no sense to open an outlet in a mall. The developers are asking for crazy amounts as rent. The numbers are completely illogical. Stand-alone stores are proving a better option in the given scenario. In fact, we have deferred plans for expansion domestically and are focusing on the international market till rental overheating cools down,” says Neeraj Jain, CEO, Pulse Foods. Retail biggie Pantaloon, though, has a different perspective on the issue. With most of its stores located in malls, the company feels that only a small segment of brands are moving out. “It may be happening in a small way but those complaining are the ones who are finding it difficult to get spaces inside malls. And the fact remains that there is not much space on high streets either. The famous streets are already crowded out. As far as we are concerned, we have got large space requirements and our stores are located 90% in malls,” says Kishore Biyani, CEO, Future Group. Some players attribute such decisions to a company-specific strategy. Essar Telecom Retail, for instance, which has 30 of its 200 stores located in malls and the rest at high streets. “Ultimately it depends upon the strategy of a company. Our own strategy is to locate stores where our customers are. They buy from everywhere and we also want to bring convenience by locating ourselves near them. Many offices are locate in CP, for instance, while others are Gurgaon or Noida - we want to be at all these places.”

Retail stores in India, a sign of rapid change

Brightly-lit and splashed in day-glo colours, new supermarkets sprout each month in India's capital in a sign of rapid economic change that appears to be leading shoppers to shun small, traditional and family-run shops. By the time New Delhi hosts the 2010 Commonwealth Games, a retail consultancy estimates, there will be one supermarket every kilometre (half-mile) in the sprawling city of 14 million compared to about five in 2004. Kriti Pallav, a married working woman, said she switched from her local grocer to the new Big Apple supermarket chain because the outlets were air-conditioned and open until late. "This shopping experience is new and welcome. I don't have to haggle for prices here as I have to with the local vendor. The quality is good and overall there is great hygiene in the store," she said as she waited to pay through a computerised system. Big Apple, owned by Express Retail Services, has opened 22 outlets in New Delhi in the past two years and says it plans a five-fold increase by the end of 2007, offering everything from groceries to cosmetics. "We have 22 operational stores in Delhi at the moment but plan to open 100 outlets this year for which we have earmarked an investment of around one billion rupees (25 million dollars)," said Express Retail managing director Munish Hemrajani. The trend is not confined to New Delhi. The retail consulting and research agency KSA-Technopak predicted in an April report that by 2010 annual retail sales by chain stores will reach 21.5 billion dollars, from 7.5 billion dollars now. But there are also pockets of unhappiness about the impact that the advent of modern supermarket shopping is having on traditional shopping habits. Earlier this month, thousands of irate street vendors attacked stores set up by Indian giant Reliance Industries in eastern India, saying the new nationwide chain threatened their livelihoods. Some 5,000 vegetable sellers vandalised three Reliance Fresh stores in Ranchi in the first violence against the firm's plans to build a local version of US retail giant Wal-Mart, police said. In the nearby Marxist-ruled state of West Bengal a powerful communist leader last week threatened similar protests against Reliance. The small stores are facing an aggressive push by newer stores like Big Apple to cut them out by buying directly from farmers. Companies such as Reliance have the advantage of being able to negotiate bulk deals and then offer low prices to lure people away from the small shops as, Hemrajani said, bargains were the only way to break the public's affinity for the estimated 15 million small retailers in New Delhi. Extended hours for stores like Big Apple are hard for family-run shops, he said, adding that 7 am to 11 pm opening hours meant that "more than 50 percent of our daily sales" take place after smaller outlets had closed. US-based Wal-Mart is expected to open mega stores in India by mid 2008 after reaching a deal with India's Bharti group. Bharti, the country's largest publicly-listed phone company, has a wholly owned front-end retailing venture, Bharti Retail that plans to spend 2.5 billion dollars by 2015 to set up hypermarkets, supermarkets and other stores across India. French retail giant Carrefour has put on hold plans to invest in India due to concerns over political opposition to multinational retailers entering the market. The world's second largest retailer, Carrefour wants to see how Wal-Mart fares before it steps in. India does not allow foreign direct investment in the retail sector except for single-brand stores, so foreign companies must sign franchise deals with local companies to gain access.

Retailing giants now stock up on moms-n-pops

In a bid to increase their presence across the retail spectrum, industry biggies are increasingly looking at tapping the unorganised segment, which accounts for nearly 96% of the sector. Retailers like Metro, Reliance, Bharti-Wal-Mart as well as the Future Group are either floating business-to-business ventures (cash & carry) or roping kiranawalas in as franchisee partners to get the first mover advantage. The idea is to open new revenue streams in the unorganised segment and become more competitive. The move will also help the retailers build their image at a time when organised retail is being widely criticised for displacing the mom-and-pop stores, industry sources claim. Retail analysts attribute the partnering of kiranawalas and big retailers to attractive prices being offered by these cash & carry venture for its merchandise. “Since the demand of these kirana stores is small, their bargaining power becomes limited. But if they source from cash-and-carry outlets, they manage to save an extra 3-5% on their sourcing cost,” said Mr Arvind Singhal, chairman, Technopak Advisors, a retail consultancy. While players like the Future Group and Bharti-Wal-Mart are in the process of rolling out their cash-and-carry outlets, Reliance Retail is busy drawing up such plans as the business also tends to generate much higher turnover. “We are also exploring the franchisee model to partner with the smaller stores in segments like food & beverages, farm products, FMCG, pharmaceuticals, lifestyle, apparels and footwear,” said a top Reliance Retail official. German major Metro Cash & Carry is currently the biggest player in this segment. The business potential can be gauged by Metro’s 80,000-member strong client base in Kolkata alone where it intends to open its maiden outlet by December 2007. These cash & carry ventures improve supply chain of the mom-and-pop stores through their modern trade infrastructure and systems. “This not only makes the small retailers competitive in the range of offering and price but also lowers their transaction costs,” Metro Cash & Carry India’s deputy MD Gerardo Monzillo said. Metro, industry sources claim, often provides its merchandise to small retailers at unbelievable discounts to ensure their loyalty. “They do some crazy promotions. For example, if a kiranawala is able to source goods from distributors by keeping a margin of 5%, a cash & carry outlet may provide higher discounts of say even 25%,” said R Subramaniam, MD at Subhiskha. Future Group CEO (innovation & incubation), Damodar Mall, said: “The categories that we plan to keep will be significantly localised and the pricing will be such that even the mofussil retailers will find it profitable to buy from us.” “While yielding lower margins as a percentage of sale, B2B is an interesting business because of significantly higher volume throughput it can generate. Hence, it makes an interesting business for the group to be in,” he said. Incidentally, the group’s first B2B venture christened ‘KB’s Wholesale Market’ is coming up in West Bengal. On the benefits of entering into franchisee arrangements with small kiranawalas, a senior industry official said, “The move will help the retail bigwigs to expand their brand footprint besides improving the earning potential of the smaller stores.” The quest for partnership with smaller stores doesn’t end here. Metro has plans to launch training academies for the kiranawalas replicating their model in Turkey. These academies will train kirana owners on the latest practices in accounting, merchandising and store operations.