INFLATION HAS US FIRMS RETHINKING MADE IN CHINA

From southeast China to the California ports, a seemingly endless fleet of container ships has carried more and more cut-price merchandise to bargain-hungry US consumers.

But the flow is now slowing as soaring costs for food, fuel and a host of other raw materials drive up prices inside China, making its exports more expensive too. The result is higher prices at US stores like Wal-Mart and Target that have increasingly filled their shelves with Chinese-made goods.

It may also mean thinner profit margins for a wide swathe of Corporate America, which for years looked to China to drive down costs. And it is beginning to spur a global treasure hunt for the world's next low-cost factory.

The price pressure comes at a delicate time for a US economy still limping through a housing slump now in its third year. Homeowners are feeling poorer, and that has cut into consumer spending, making it harder for companies to raise prices to keep up with inflation.

"It has been China that held down (U.S.) inflation, and I think that's what we're going to lose," said Jerry Hausman, an economics professor at the Massachusetts Institute of Technology who has studied Wal-Mart's impact on inflation. "Not only is China exporting inflation, but China .. is a reason for a lot of the commodities inflation. They're both cause and effect of the inflation," he said.

As China's fast-growing economy gobbles up a greater portion of the world's resources, pushing up inflation, its export machine is starting to choke on the higher prices. The rest of the world is feeling the pressure as well, most acutely in poor countries that are struggling to feed their populations as food costs climb. Wages for China's factory workers are rising sharply.

Some 50 nations, representing 42 percent of the world's population, currently have inflation rising at double-digit rates, according to Morgan Stanley research. That helps explain why U.S. import prices posted their biggest three-month rise since 1990 through May.

The cost of imports from China were up 4.6 percent for the year ended in May, the largest annual increase since that index was first published in December 2003. The end result is that each US dollar buys less than it did last year. US Labor Department data shows that it now takes $104.48 to deliver the same buying power as $100 last year. From 2006 to 2007, that change was a more modest $2.85.

The China connection is perhaps most visible inside the largest US retail chains. Wal-Mart Stores Inc, Target Corp and other mega-stores have ramped up imports from China over the past decade, one of their sharpest weapons in the battle for the lowest prices.

Imports now account for nearly 18 percent of the US aggregate demand, up from 10 percent in the late 1980s, US Federal Reserve Vice Chairman Donald Kohn said on Thursday. The reason is simply price.

In 1997, a dozen men's shirts cost retailers on average $59.15, according to US Commerce Department data analyzed by Sanford Bernstein & Co. In 2007, they cost $42.14. The rise of China as an exporting powerhouse was a big reason behind that fall in retailers' costs.

But more recent data shows prices are rising inside the stores that have long prided themselves on lowering prices. JPMorgan analysts conduct a monthly pricing survey at chains including Wal-Mart and Target. In May 2007, a basket of 23 identical goods cost $106.92 at Wal-Mart and $110.21 at Target.

In May 2008, those same goods cost $108.79 at Wal-Mart, and $111.93 at Target. Lena Michaud, a spokeswoman for Minneapolis-based Target, said the retailer was starting to see inflation on clothing and housewares it is buying for the second half of the year.

"In all cases, we will attempt to maintain our gross margin rate on affected items but of course the outcome depends on the market's response to any cost increases," she said. Uta Werner, retail sector analyst with Sanford Bernstein, said retailers were searching for other regions to replace China, but their profit margins would likely take a modest hit in the meantime.

HENKEL EYES RS 100 CRORE BUSINESS

Henkel India today said it is expecting a business of Rs 100 crore from its 'Pril' brand of utensil cleaners by the end of this year, besides planning to capture 25 percent market share in household cleaners segment.

"We are anticipating a turnover of Rs 100 crore from our utensil cleaning segment in 2008 against the sales of Rs 75 crore in 2007," Henkel India, Category Manager (Laundry and Home Care), Debashis Das said.

The company's strength in the utensil cleaner segment could be gauged from the fact that sales have grown 500 percent in this segment to Rs 75 crore in 2007 from Rs 12.5 crore in 2003.

The company is quite hopeful that the newly launched 'Pril Multi Degreaser' — a specialty cleaner would significantly contribute to the sales of Pril brand products.

Giving details regarding the size of the market, he said presently, the household cleaners segment is divided into floor cleaners, multipurpose cleaners and specialty cleaners with Rs 226 crore which is growing at 18 percent per annum.

"We are looking to capture 25 percent market share in the first year," he said.

ITC EXITS GREETING CARDS BIZ

Facing up to the reality of a digital age in which interest in greeting cards is diminishing, ITC has exited the category. Launched in the year 2000 under the brand Expressions when the category was estimated at Rs 300 crore and growing at 15-20 percent, the move comes in the wake of the market size shrivelling to Rs 100 crore.

ITC has also re-branded this business as the Education & Stationery Products Business (earlier known as Greeting, Gifting & Stationery) to accurately reflect its current focus on the Rs 9,000-crore market that comprises notebooks, copier and printer paper, writing instruments and ‘scholastic products’ (erasers, geometry boxes, sharpeners and the like). In the previous fiscal, greeting cards contributed only 5 percent of the business unit’s turnover. Cheaper telephony and cell phone SMS services have proved to be a double whammy for greeting cards, while e-greetings has also contributed to the decline.

Chand Das, Chief Executive, ITC-Education & Stationery Products Business, told Business Line that the company decided sometime last year to withdraw from the category and has since stopped production. ITC’s paperboards and speciality papers facility at Bhadrachalam has invested in equipment worth Rs 500 crore that will manufacture and supply the paper.

Das said ITC is the largest national player in the Rs 3,000-crore notebooks market with a market share of 8 percent, followed by Navneet Publications at 5 percent and Ballarpur Industries Ltd (BILT) at 2 percent. Considering that these national brands account for just 15 percent of the market, there is a huge opportunity for turning a commodity market into a branded market, he said. Also, given that the segment is growing at 9-10 percent every year, he expects it to double in size over 6-7 years.

“The notebooks, branded Classmate and PaperKraft, will cater to the student and executive segment. The printer and copier paper will also be branded PaperKraft. This category is estimated at Rs 1,800 crore, where JK Paper, BILT and Tamil Nadu Newsprint and Papers account for 70 percent of the market. ITC’s notebooks business has been growing at 100 percent every year for the last three years, Das said, pointing out, though, that the growth came on a small base. In general, branded notebooks are priced 10-20 percent higher than unbranded ones.

Most of the categories that are aimed at students will go by the Classmate name, including pencils and scholastic products, some of which will be outsourced from China. Of the Rs 9,000-crore market, writing instruments are the next biggest category, estimated at Rs 2,500 crore. Between October and December of this year, ITC will launch pens and pencils (the latter a Rs 400-crore market) that straddle the low-end, mid-range and premium segments of this category, Das said. This business unit has, over the years, set up a separate distribution chain to market its stationery products.

Das expects the education and business products unit to cross the Rs 1,000-crore turnover mark in five years from now. The business unit ended the previous financial year with a turnover of Rs 180 crore and expects to double that by the end of the current fiscal.

Archies, a leading player in the greeting cards business, which has a 50 percent plus market share, has also seen a steady decline in its profit margins in this business over the past few years. Between 2003-04 and 2006-07, even though Archies’ greeting cards sales rose from Rs 34 crore to Rs 38 crore, its profits from this business slid from Rs 9.78 crore to Rs 8.12 crore.

DREAMING BIG IS THE KEY TO SUCCESS

A fledgling Ahmedabad-based garments and fashion accessories company, Liverpool Retail India Ltd (LRIL) made a splash in the retail space by launching 151 outlets of a new brand ‘Barcelona’ across the country covering 15 states in one day.

Its chairman, 50-year-old Vijaysingh Rathore may well is another retail czar in the making to take on the likes of Future group chairman Kishore Biyani. That’s largely because, like Biyani, Rathore is a man who has unerringly got his finger on the pulse of the consumer.

Recounting his days as a struggling entrepreneur, Rathore recounts how the idea of launching affordable but value-for-money readymade garment stores for the fashion-conscious aam aadmi came to him while visiting a sale in a small town. “I saw how poor quality garments were selling like hot cakes largely because they were at discounted prices.

For the rate-conscious lower and lower middle-class consumer, price is a major factor while buying a product. That’s what gave me the idea of trying my hand at selling good quality, readymade garments which would offer value for money at really affordable prices,” he confesses.

What he has also factored in while giving a final shape to his retail dream is the fact that the Indian consumer, apart from being extremely price-conscious, is also a sucker for discounts. “That’s the reason that ours are essentially discount stores which offer hefty discounts for eight to nine months in a year,” reveals Rathore.

TESCO CHARGED OF GROSS UNDER-PAYMENT AT INDIAN FACTORY

A charity group today accused British retail giant Tesco, which has been mulling an India foray for long, of exploiting workers at a Bangalore garment factory, saying employees are paid only half the minimum wage.

War on Want, a group fighting against poverty in developing countries, charged that workers making clothes at a factory in Bangalore for the top UK retailer are toiling long hours for as little as 16 pence (Rs 14) an hour.

The investigation was conducted by an Indian labour rights organisation, Cividep, and its report will be presented at Tesco's AGM tomorrow.
The charge against Tesco follows a BBC TV report earlier this month, which showed some of India's poorest people, including children, working long, gruelling hours on Primark clothes in slum workshops and refugee camps.

Last week, Primark reportedly sacked three suppliers in India after finding that they were sub-contracting work to companies, which used children for embroidery work.

War on Want said the new investigation found "employees at a large Tesco supplier factory in Bangalore struggling to survive on less than 1.50 pound a day for a 60-hour week, with a 20 percent hike in rice prices making life even harder."

Employees in the factory earn on average 38 pounds a month, and the lowest paid receive just 30 pounds, while the Bangalore Garment and Textile Workers Union last year calculated the minimum wage as at least 52 pounds a month.

"Employees complained that bosses forced them to work overtime or face the sack and they receive only half the extra hours recorded," it noted.

RRL OPENS ITS SIXTH STORE IN AHMEDABAD

Reliance Retail Limited (RRL) on Thursday launched its sixth Reliance Super store, a Minimart format here. Shoppers will have the option to choose from a wide variety of products in every category including fresh produce food and grocery, home care products, apparel and accessories, non-food FMCG products, home appliances and automotive accessories and lifestyle products, a company release said.

Reliance Super, which will carry a range of over 13,000 products across 15,000 sq ft area. The store will also host Reliance's own apparel brands in select categories along with products that will be exclusively available in Reliance Super stores only, the release added.

"The launch of Reliance Super is yet another step by RRL towards providing an international shopping experience to customers," said President and CEO-operations of RRL Raghu Pillai, after the launch. RRL is a subsidiary of Reliance Industries Limited and operates 590 stores in 57 cities in 13 states

RELIANCE RETAIL SET TO ENTER BENGAL IN 4 WEEKS

After waiting for almost a year because of political resistance to its entry, Reliance Retail Ltd, a subsidiary of Mukesh Ambani-controlled Reliance Industries Ltd, is set to launch its stores in West Bengal in about a month.

“We should be there, hopefully, in the next four weeks,” said Reliance Retail’s chief executive Raghu Pillai. “We’ll launch in Kolkata first.”

Reliance couldn’t launch its retail business in West Bengal last year because of resistance from the Forward Bloc, which is part of the ruling Left Front and controls the agriculture ministry. The Forward Bloc, which runs the state’s agricultural marketing board, wouldn’t let Reliance source farm products from rural wholesale markets.

In August, Forward Bloc supporters vandalized two outlets when Reliance tried to launch its retail business in the state. The Forward Bloc defended the action, saying Reliance’s entry would kill small retailers.

“We are doing a legitimate business, and there are so many others doing the same business. So why should people try to stop Reliance alone from entering Bengal. I appreciate there’s some anxiety, but such things happen all over the world. We’ll have to address it,” said Pillai.

SMALL SHOPS CRY ‘INFLATION!' BIG BOYS SAY ‘NO PROBLEM...YET

Small kirana stores have started feeling the heat of inflation wave. At over 11 percent, inflation has resulted in lower stocks and falling sales, casting doubts on their medium-term existence. Some have shut shop, while others are considering getting into new businesses.

"We have started keeping lesser stocks (reduced by up to 25 percent) owing to inflation," said Bharat Shah, owner of Jatin Traders in Kandivli, a suburb in North Mumbai. "Prices of products like rice and pulses have gone up by more than 1.5 times. The sales are clearly falling."

Compared to a monthly business of Rs 5-6 lakh, Shah's current monthly turnover is down by a third to around Rs 3.5-4 lakh. "It is fine if business improves, otherwise many of us are in a situation where we may have to close down." The challenges for small retail and departmental stores are not limited to any one city to retailers across Delhi, Ahmedabad, Hyderabad and Kolkata, inflation has hit low-income groups hard, which in turn has taken its toll on the business of retail stores. From 5 litre packs, consumers are shifting to 1litre packs and preferring cheaper brands for all their purchases.

"While earlier we used to clock sales of Rs 8000 daily, now it reaches only Rs 6000," said C.H. Srinivasa, proprietor and owner of a 300 sq feet medical and general store in Hyderabad, who is feeling the pinch. "Consumers purchase medicines in the form of individual units instead of buying the whole pack." These retail shops are hit as salaries of people who do small-time jobs have not risen in proportion to the rise in inflation.

"After the recent fuel hike, sales have been immediately hit by 25 percent," said Darshan L. Mehta, whose brother runs a 100 sq feet kirana store in Paldi, Ahmedabad. "In fact, some small shops have also shut down, especially those located in and around malls."

PANEL TO EXAMINE VAT STRUCTURE, DEVIATIONS

The Economic Times

State tax regime could be in for a facelift. State governments have finally come around and have decided to evolve common value-added tax rates sans deviations.

The empowered committee of state finance ministers that discussed the issue at its last meeting early this week has set up an expert group to look into the VAT structure and deviations in rates that existed across the states, sources said. The expert group comprises commissioners of sales tax from all states.

Bihar deputy chief minister and finance minister Sushil K Modi said, “The panel has set up a committee to examine the issue of deviation in detail. The committee will give its recommendations in three months.”
The empowered committee has permitted each state to exempt 10 items out of a list of about 50 items of ‘goods of local importance’ to charge an appropriate rate of tax.

Industrial intermediate goods and raw materials are to be taxed at the floor rate of 4 percent while the rate of 12.5 percent is the general VAT rate. Most of the state governments have surpassed the empowered committee permissible level of 10 items. States like Kerala, which has imposed higher value-added tax rate of 20 percent on certain luxury items.

Some other states have imposed a lower rate of VAT on certain consumer goods that impacts businesses in neighbouring states. The deviation issue has been hanging fire for some time now with the centre has asking the states, time and again to bring about uniformity in the rates.

Various industry bodies and trade associations have also demanded that states to correct the deviation in the structure. It may be pointed that under the unified goods and service tax regime that is to roll out from the 2010, such deviations would not be possible except for petroleum products.

RETAILERS MOOT STEPS AS SHIELD AGAINST INFLATION

The Economic Times

Though inflation is in full swing, retail majors are yet to witness dwindling footfalls. But they are definitely bracing for long haul in the wake of rising prices, and cutting costs, wherever possible, to improve efficiency.

Across the board, top retailers in India are looking closely at supply chain, logistics and brand performance to protect their margins. Shoppers Stop CEO Govind Shrikhande says although the impact of high inflation and tightening of consumer spends is not immediately evident at the stores, plans are afoot to look at ways and means to counter the slowdown.

So, when it comes to replenishment, Shoppers Stop is looking to shorten the turnaround time. “If one can get the turnaround time of replenishment from 18-12 hours, it gives us a chance to sell goods the very next day. It assumes significance considering that one gets an additional day of trade,” he said.

At Croma, the consumer durables retail chain of Infiniti Retail; officials are looking at ways to bring in efficiencies in logistics. The plan is to work closely with major vendors supplying to the chain and implement measures, which is beneficial to both the retailer as well as the manufacturers.

“Woolworths does most of our sourcing and they are talking to vendors like LG, Samsung, Sony and HP to work together of reducing overheads,” says Infiniti Retail CEO Ajit Joshi. Joshi says that the warehousing facility of one of the vendors in Mumbai can be used as a distribution centre instead of taking delivery and routing it to Croma’s distribution centre.

“Every Re saved will improve bottom line. So, one will have to look at every aspect of the business closely and see where one can save costs,” says Joshi.

Route optimisation and efficient transport from farm to shelf is high on the contingency plans of retailers in case the going gets tough in the time to come. Hypercity business head (food & grocery) Ashutosh Chakradeo believes reducing wastages through better planning in logistics will come into play if inflation keeps moving northwards.

“From procurement to delivery, one will have to aggregate and ensure maximum efficiency. Which simply means making the most out of lesser number of trips from market to the store,” says Chakradeo.

At Sabka Bazaar, the food and grocery format of Wadhawan Retail, route optimisation involves clubbing delivery to more stores than earlier in a single trip. The chain is looking to open the store an hour before scheduled opening for deliveries which will enable the chain to service more stores than before.

Shrikhande says that performance appraisal will become shorter as brands which are not witnessing off take will be taken off to be replaced by ones which have high off take potential. “Though performance of brands is a regular exercise, the period of review will come down from six months to every quarter,” he says.

Sabka Bazaar CEO Salil Sahu says if the downturn persists, the chain will look at focussing more on economy range of brands on the shelves. “One will have to get economy brands in planned categories. For example, economical tea brands will be given more space on shelves than premium brands,” says Sahu.

'Bag’ging to go green from the retail store (Final part)

Say it loud – I'm green and I'm proud.

We’ve replaced ‘black’ with ‘green’ in this famous James Brown number, as what we had assumed to be a less-talked-about issue among our retail community, is appreciatively being talked about and pondered upon. The first two parts of this series plainly put forth the idea of encouraging the use of handmade and biodegradable shopping bags. These two stories, in the last two days, easily had more than double the expected impact. Retailers approached Indiaretailing to know about the makers of such bags, and vice versa, while some also shared their experiences and reasoning for not being able to find alternatives.

Responsible alternative:

Here it is, the final part, discussing some alternative ideas, acknowledging those interested in using biodegradable bags and appreciating the ones taking pains in creating the same.

Chander Shaker Baddam of Luxor Writing Instruments mailed to Indiaretailing enquiring about Jan Sandesh, the NGO that sells paper bags handcrafted by needy women.

Sharing plans of supplying eco-friendly plastic bags to corporate retailers, Gaurav Vora, director, Black Sheep Ventures, the company that has been supplying bags to various leading retailers, told Indiaretailing: “We are planning to introduce the concept of a ‘lifetime bag’, wherein a customer will have an option of buying a long-lasting plastic bag. These bags will not be dumped by the consumer; instead, he will bring it back to the outlet every time he comes to shop. If damaged, this bag will also be replaced free of cost, while the worn-out bag can be sent for recycling, ensuring its further utility and also preventing it from harming the environment.”

Retailers including Westside, Planet M, Globus and Reliance source bags from Black Sheep Ventures, and are probably considering the company’s proposal of introducing the ‘lifetime bag’.

TS Ashwin of Odyssey expressed his support of biodegradable shopping bags and told Indiaretailing that for the last four years, Odyssey has been intermittently sourcing such bags from an NGO. He said, “All our products – toys, for instance – cannot be sold in a paper bag, as they have varied sizes and shape. However, we do use them for smaller items, and plan to introduce biodegradable bags at all our express-format stores that sell smaller products.” Ashwin assured he will engage an NGO to get such bags, while also making it a point to remind that it’s not just plastic that is harmful – even paper is not environment-friendly as it’s obtained from trees. He stated that the company is exploring options to have a 100 per cent eco-friendly solution.

People Tree is another retailer who, in association with an NGO, has been using green bags. Speaking to Indiaretailing about their idea of introducing environment-friendly bags, Satyajit Ranjan of People Tree said, “Since our inception, our motive has been to introduce environment-friendly products through our shops. We have identified tremendous potential in Jan Sandesh and, hence, are sourcing bags from them. In a month, we take around 700-800 bags from them.”

People Tree retails garments, jewellery, books and accessories. The company operates through a franchisee in Great India Place mall in Noida and also has its own outlets in Pondicherry and Surajkund.

Literacy India introduced itself to Indiaretailing, claiming it has an eco-friendly solution. Speaking to Indiaretailing, Indrani Singh, founder of Literacy India, a charitable organisation that has been supplying waste-paper bags to various corporate groups, said, “We have been delivering paper bags to Revolutions, a fashion retailer based in Noida, and Tupperware, a direct-selling company and manufacturer of kitchen ware. Till date none of the retail biggies have contacted us, though we do have the potential of delivering such products to them.”

Literacy India is a Gurgaon-based NGO that focuses on providing education and self-employment opportunities for the needy children in villages.

It is to be noted here that NGOs that are in the process of making paper bags actually craft these by using waste newspapers (newsprint) generally obtained from junk dealers, and this paper is biodegradable and can be recycled to produce paper maché handicraft.

By Ranjan Kaplish and Satrajit Sen

ALOK IND MAY LAUNCH IPO FOR RETAIL BIZ

Alok Industries, a Rs 2,160-crore textile company, is planning an initial public offering (IPO) for its retail business to raise Rs 500-600 crore, sources said.

Alok, which entered the $15-billion organised retail sector in the country in 2006, operates 23 retail stores called ‘H&A’, short for Home & Apparel, in Mumbai, Bangalore, Vapi, Hyderabad, Ahmedabad, Silvassa and others.

A few days ago, chief financial officer Sunil Khandelwal had said that Alok would set up 100 new stores in FY09 with an investment of Rs 40 lakh per store. So the total investment marked is Rs 40 crore.

The expansion would be funded through a mix of internal accruals and debt. By 2010-11, the company hopes to take the number of stores to 400. The retail business presently contributes 1% to the company’s turnover.

In April, Alok’s board had approved the spin-off of the H&A business into a separate subsidiary called Alok Homes & Apparels.

“The fact that Alok is heavily increasing the number of stores means it wants to generate awareness about its retail presence and list the business as a separate entity,” said a source.

MODI-REVLON ENTERS PROFESSIONAL BEAUTY PRODUCTS BIZ

Modi-Revlon is widening its product basket by introducing an array of professional beauty products targeted at the beauty salons. The company is also upping its ante to have a larger presence in the new format stores, which it hopes will be a major revenue churner in the future.

“In the next couple of years, we hope at least 70 percent of our sales will come from modern retail outlets. We are scaling up our presence in these outlets as it generates considerable impulse buys,” Deepak Bhandari, Director- Marketing, Modi-Revlon, said. Modi-Revlon is a joint venture between the Modi Group and Revlon of the US.

Speaking on the professional beauty range, Bhandari said the Revlon Professional range will be a key growth driver for the company. “The professional beauty products market in India is estimated to be close to Rs 350 crore and is witnessing a 20 percent growth annually. We hope to capture at least 10 percent market share in the first year of launch,” he said.

The range comprises 44 stock keeping units, including hair colour creams, conditioners and nail enamels, which will be sold directly to salons.

The new range would be marketed in Sec A and B cities with a slew of below the line marketing initiatives. The products will be manufactured at the company’s plant in Guwahati

TITAN PLANS NEW KIDS RANGE

Titan Industries, one of India's leading retailers of watches and jewellery, is planning to launch 40 colourful watches under a completely new brand for kids this financial year.

According to Rajiv Verma, regional sales manager, the company earlier sold kids' watches under the brand ‘Dash', which was discontinued as the market for children's watches was not large enough at that time.

"But parents like to indulge their children these days, so we feel this is the right time to launch a children's watch brand. We will, however, find a different name for the children's brand this time," Verma added.

The company will tie-up with multiplexes and will look at school-level activities for promoting the kid's brand. It will also look at tying up with cartoon channels for promotions.

"We are in the process of finalising the price structure for the children's brand. It should start at Rs 500," Verma added.

The watch industry is estimated to be around Rs 3,000 crore, with 60 percent of the sales coming from the unorganised sector. Of the 35 million watches sold annually in India, less than 5 million watches are priced at over Rs 1,000.

Titan's main brands for watches are Titan, Sonata and Fastrack.

In a parallel development, Titan Industries is exploring possibilties for associating itself more closely with Tanishq, its jewellery brand, to bring together their special collections during special occasions and market them as part of the same package.

Titan Industries is expecting a growth of 20 percent for its watches in 2008-09.

Titan Industries reported a turnover of Rs 3,046 crore for the year ended 2007-08. The watch division of the company has a domestic market share of over 70 percent of the organised market.

RADO EXPECTS INDIA TO BE ITS 3RD BIGGEST GLOBAL MKT IN 3 YRS

Expecting India to be the third biggest global market for its luxury watch brand 'Rado' by 2011, Swatch Group is embarking on an expansion drive to almost double its exclusive stores.

"We are looking for growth by increasing sales in our existing exclusive franchisee outlets, shop-in-shops and multi-brand outlets. Rado intends to be the biggest brand in the premium watch segment in India, where last years we were among the top two," Rado Vice President for Sales Peter Kaiser told PTI.

He said India is currently its eighth biggest global market and expects the country to occupy the third slot in next three years.

Kaiser said exclusive Rado brand stores would be almost doubled to 15 from the current eight, besides launching 6-10 new models by end of current fiscal to meet the target.

Among the new cities to be covered by exclusive outlets are Ahmedabad, Chandigarh and Bangalore.
"We are also launching three more shop-in-shops, up from the existing five, to cover new Tier II cities like Jalandhar and Ludhiana," he added.

SINGAPOREANS BIGGEST ONLINE SPENDERS: SURVEY

Singaporeans and South Koreans are the region’s biggest online spenders, a survey by MasterCard said on Tuesday. Singapore online shoppers spent $770.70 over a three-month period, followed by South Koreans who spent $707.50, the survey found.

It studied the behaviour of more than 4,000 people with bank accounts who used the Internet at least once a week, in Hong Kong, mainland China, Australia, Japan, India and Thailand as well as Singapore and South Korea.

Online shoppers in Thailand spent the least, at $406.30 over the three months, while those in Japan spent $581.00, the survey said. Shoppers in the region averaged 3.1 purchases during the period, it said.

It added that 63 percent of survey respondents said they made purchases online. That figure was even higher in Japan and South Korea, where 83 percent said they shopped using the Internet. The MasterCard study said that by 2010 China’s online shopping population is projected to increase to 480 million, contributing 58.6 percent of the region’s total online shopping population, up from 49.9 percent now.

COUTURE COMES IN STYLE TO THE MILLENNIUM CITY

To keep you well informed about what’s new in Gurgaon, I ventured out this week to see what’s been happening. Someone told me that Aditya Birla’s retail venture, called more, has opened near Epiccentre. It’s on the same lines as Spencer’s and Reliance Fresh. I drove all the way there, only to find that the bright orange lettering on a tall building was their corporate office. I don’t think their store has opened yet.

Next up was Gurgaon Central: the Future Group’s seamless mall. Located on MG Road, ahead of MGF Metropolitan on the same side (closest to Iffco Chowk), the Central was quite a revelation.

I had no idea it stocked brands such as FCUK, Calvin Klein, Tommy Hilfiger, Esprit, EDC, Lee, Levi’s, Converse, Bossini, Benetton, Wills Lifestyle, Van Heusen, Etam, UMM, Miss Players, Color Plus, Remanika and many, many more.

It’s divided into four floors: the ground floor has a wide variety of perfumes and cosmetics (Clarins, Estee Lauderx and even Jaun Paul Gaultier which is a brand I haven’t seen elsewhere)

RELIANCE SUPER OPENS IN AHMEDABAD

Reliance Retail Ltd opened its first Reliance Super in the mini-mart format at Ahmedabad. This is its sixth in Gujarat. Spread over 15,000 sq. ft it will house over 13,000 products, including food and grocery, home care, apparel and wellness products. "The launch of Reliance Super is yet another step by Reliance Retail towards providing an international shopping experience to our customers at unmatched affordability, guaranteed quality and choice of products and services," said Raghu Pillai, President and Chief Executive Officer, Operations and Strategy, at the launch

RASOI GROUP MULLS ACQUISITION IN FMCG SPACE

The $250-million Rasoi Group plans to acquire a mid-sized FMCG company before the end of this fiscal, a top company official said.

"We are looking at acquiring an FMCG company in the $10 million range. Talks are in the initial stages but we hope to seal the deal before the end of this financial year," Rasoi Group's Director, Varunn Mody said.

"We are looking at both organic and inorganic growth as part of our expansion plans," Mody said.

Besides the proposed acquisition, the Rasoi group was also in talks with a couple of overseas companies in the consumer durables and healthcare sector for forging partnerships, he said.

"We are in advanced stages of negotiations with some French and Spanish companies, which we hope to conclude shortly," Mody said.

The acquisition would be financed partly through internal accruals and partly through loans from the financial institutions, he said, adding 'the group is cash rich and there is lot of cash flow to fund the acquisition.'

J L Morison (India) Ltd, Rasoi Ltd and Hindustan Composite are part of the Rasoi Group with a presence in the personal and healthcare, edible and food products and real estate segments.

FUTURE GROUP'S HOMETOWN TIES-UP WITH AQUALIFE

Future Group's home improvement store, HomeTown, today announced its tie-up with Italy-based AQUAlife for selling the latter's luxury range of bath products.

AQUAlife's products would now be available at all HomeTown stores across the country, a press release issued here said.

"Through this tie-up, we are able to offer these luxury products at an unimaginable (low) price and thereby making the panache of Italian design and opulence very affordable to our customers," HomeTown's CEO, Mahesh Shah, said. Various AQUAlife products available at HomeTown are Calipso Dual, Igea Classic, Venere Classic and Vittoria.

STATE GOVT THROWS ITS HAT IN RETAIL RING

In talks with Kendriya Bhandaars to set up mobile delivery vans to retail essential commodities

The Delhi government is planning to revive the mobile van service to retail essential commodities in collaboration with the Central Government Employees Consumer Cooperative Society, which runs the Kendriya Bhandaars.

The move would bridge the gap between consumers and retailers, and provide options to consumers, Chief Minister Sheila Dikshit said today.

“We have spoken to Kendriya Bhandaar and they have shown tremendous interest in the idea of launching mobile vans to retail essential commodities along with some other daily use items,” Dikshit said.

ROSEBYS TO INVEST RS 100 CRORE FOR 700 OUTLETS IN INDIA

The UK's store, which was acquired Gujarat Heavy Chemicals Limited in 2006, plans to pump in Rs 100 crore for expanding the chain in India, which will be positioned as 'affordable premium' stores targetting young working women.

Besides the stores roll-out, which is expected to start by September this year in three states, the company is also undertaking an aggressive brand building exercise by spending about Rs 30-40 crore. It has hired advertising agency Saatchi & Saatchi for the purpose.

"There is a huge potential to be tapped in the affordable premium home interiors and furnishings space in India. Our aim is to target young working women and we plan to open about 700 stores in the next three years," Rosebys Director Nikhil Sen told PTI.

He said the company would be adopting mostly franchise model for its stores. "The investments for the stores roll-out could be about Rs 100 crore in the next three years and we may spend about Rs 30-40 crore on brand building campaign," he added.

Sen said Rosebys would position its stores as a one-stop shop for both soft and hard home furnishings offering from bed and bath items to accessories and lamps. "We will also offer personal care products such as soaps and shampoos with our own private label and also kids range of products."

Borders lines up suitors for Paperchase

Borders is understood to have received indicative offers from Luke Johnson and WHSmith for its stationery chain Paperchase.

Sources said Risk Capital Partners chief Luke Johnson – who owns Borders UK – has offered about half the £80 million thought to be wanted by Borders US for the chain, which was put up for sale last month (Retail Week, May 16).

WHSmith is understood to have also made an offer and retail entrepreneur Theo Paphitis, who owns the Ryman chain, is believed to be interested, although it is unclear whether he has made a bid.

Private equity businesses previously linked to the sale, including HgCapital, Isis Equity Partners and Change Capital, are understood to be watching with interest.

The deal is complicated by the fact that Paperchase operates 40 per cent of its outlets as concessions in Borders UK stores.

"The business cannot survive without Luke Johnson," said one source, who added that Johnson's offer is likely to have been rejected.

Another source said: "The key to the puzzle is what will happen to the Borders concessions."

Johnson was unavailable for comment. WHSmith and Theo Paphitis declined to comment.

Zara forces Dhaka factory closure

Fashion firm Zara has forced the closure of a supplier's factory after workers told the BBC they had suffered harsh treatment there.

An inspection of the premises in Bangladesh's capital, Dhaka, prompted by revelations to the BBC, found "really poor conditions"

The factory did not make clothes for Zara, its owner Inditex said, but was part of a firm that supplied the chain. Inditex told the supplier it must close the factory and redeploy its workers.

Unions must also be introduced to its other plants.

'Abuse'

One woman worker told BBC World Service's Global Business: "The overall factory condition is not good, especially there is verbal abuse and the physical abuse as well.

If the guy wants to be our partner for the future he has to close this factory because it's like a gangrene

Javier Chercoles, Head of Corporate Social Responsibility, Inditex

"If we make any kind of small mistake they beat us and or they deduct our wages," she said. Another woman claimed they were not able to leave the firm as they were always owed outstanding wages.

"If I leave without permission they will not give my outstanding salary of the previous months. So that's the problem. It's not just easy to leave the factory," she said.

The two women said they had made clothes for Zara.

'Shocked'

Inditex's head of Corporate Social Responsibility, Javier Chercoles, told Global Business that Zara had not knowingly bought clothes from that particular plant in the past five years.

As a result of the allegations, he visited the factory in Dhaka.

Mr Chercoles said it took some time to be allowed in, but after a thorough search he established that clothes were not being made for Zara there, although he saw evidence of clothes being produced for other international brands.

We will provide transport to whoever is willing to move to the new premises

Spokesperson for the factory's owner

He said he was shocked by what he saw.

"The factory was really poor conditions. We realised that not any evidence for any garments of any seven brands of Inditex were placed there.

"[It] was full of other brands producing there, other international brands, but not for Inditex," he said.

'Clean-up'

However, Mr Chercoles discovered that this was a sister factory to a plant where clothes are made for Zara, a factory which he said has been monitored and where conditions are much better.

The two factories are some distance apart but he conceded that it was possible that work could have been passed between the two plants but without Inditex's knowledge or authorisation.

He told the owner of the company that if Inditex was to remain a customer he had to "clean up the situation", close the factory and move the staff to another plant.

"If the guy wants to be our partner for the future he has to close this factory because it's like a gangrene."

Independent monitors

The supplier's owner has agreed to close the sister factory and redeploy its staff within the group by 25 September.

He has signed an agreement that the workers will be protected, the process will be overseen by independent monitors and trade unions will be recognised and introduced at the other plants in the group.

Independent monitors have started work in the factory in the past few days.

A spokesman for the supplier said they were unaware of the physical and verbal abuse alleged by the workers who spoke to the BBC.

"We will provide transport to whoever is willing to move to the new premises and any worker who freely decides that they do not wish to transfer then we will pay them all the benefit," the spokesperson said.

The action taken by Inditex as a result of allegations put to them by the BBC illustrates just how sensitive retailers are becoming to revelations about working conditions in their supply chains, said Global Business' producer Caroline Bayley.

They know that consumers are becoming more aware of how and where their cheap clothes are made and realise that their reputations are on the line, she said.

Stuart Rose faces shareholder revolt at M&S annual meeting

Marks & Spencer shareholders are being urged to vote against the retailer's chairman Sir Stuart Rose at next month's annual meeting in protest at his promotion from chief executive.

Corporate governance research group Pensions and Investment Research Consultants (PIRC) has advised its clients - who include many local authority pension funds and faith-based investors - to show their disapproval of Rose's new role. His promotion to executive chairman in March contravenes the City code on boardroom standards. The code favours independent, non-executive chairmen appointed from outside the business. It says chief executives should not be promoted to the chairman's role and it also warns against an individual simultaneously holding the roles of chief executive and chairman.

Legal & General, one of the retailer's top five investors, described Rose's role as "potentially damaging".

In a bid to soothe angry investors Rose agreed to put himself up for re-election to the M&S board annually, rather than every three years as required by law. But PIRC's recommendation says: "The roles of chairman and chief executive are completely different and should be separated."

It adds: "Combining the roles represents a dangerous concentration of power that is potentially detrimental to board balance, effective debate and board appraisal".

PIRC says combining the roles can only be justified "on a temporary basis under highly exceptional circumstances". Rose intends to do both jobs for three years while he grooms a new chief executive from the ranks of his lieutenants.

M&S's rationale for the promotion is that it is impossible for the best successor to be identified while Rose is still in the job. But PIRC does not accept the retailer's reasoning and described the three-year timescale as "beyond a reasonable length of time". The research group also revealed that it had considered filing a special resolution to address the "specific question" of Rose's new job, so that shareholders could vote in favour of him as a chief executive but show their opposition to him being named as chairman too.

However, PIRC said: "despite being able to meet the ownership requirements to file, the costs involved within the timescale were prohibitive."

An M&S spokesman said that filing a resolution would have been free if it had been submitted by the end of March. However, the PIRC campaign was not announced until March 10 and it was April 3 when the then M&S chairman Lord Burns sent a letter to shareholders explaining the reasons behind the promotion. He has since stepped down, and is receiving a year's salary, £450,000, as a pay-off. Burns will not be fronting the annual meeting to explain why he allowed the move. Commenting on the PIRC voting guidance the M&S spokesman said: "They are entitled to their views. We have made our position clear."

The Association of British Insurers, has stopped short of recommending a vote against Rose. But in its voting guidance it gave the company an "amber top" - which urges shareholders to consider the issues carefully before voting.

Senior fund managers estimate that up to 20% of shareholders could vote against Rose at the annual meeting on July 9. There could also be a substantial vote against proposals to change boardroom incentive plans that will make it easier for directors to achieve big payouts.

China - Ministry Of Commerce To Build 5,000 Convenience Stores By August

To rebuild commercial outlets and ensure market supply in the Wenchuan earthquake areas, the Ministry Of Commerce has decided to build 5,000 convenience stores in these areas by the end of August 2008.

Chang Xiaochun, director of the Department of Market System Development, said that to resume the commercial operation of the seriously affected areas as soon as possible, the Ministry Of Commerce will support these areas in setting up temporary commercial outlets in two ways. One is to offer mobile goods sales vehicles. By June 16, the ministry had sent 370 mobile vehicles to 15 disaster areas in Sichuan and the accumulated sales was over CNY8.5 million.

The other is to set up tent stores with the help of the local civil administration departments. So far, there are a total of 2,455 tent stores in Sichuan and the average daily sales of each store is about CNY2,000. In addition, the ministry will build one to three 20 square meter convenience stores in every temporary settlement area. These convenience stores are made of portable plates and the lifespan of these stores is about two to three years.

At present, the first batch of 200 portable plate convenience stores has been set up in Chengdu, Deyang, Mianyang, Guangyuan, Yaan, and Aba. By the end of August, the Ministry Of Commerce will have set up 5,000 convenience stores and will extend the set up to Gansu and Shaanxi.

Baugur exits cash'n'carry to focus on retail

Baugur, owner of House of Fraser, has sold its 31.4% stake in the cash'n'carry operator Booker as it focuses on the retail sector. The Icelandic group's exit raised £100m, in a placing that saw the proportion of institutions' share rise from 23.7% to 43.7%.

The Icelandic bank Kaupthing sold its 6.2%, while its investment fund Kaupthing Capital Partners acquired 22%, agreeing not to sell for a year without the consent of Booker and its adviser Investec.

Tom Hunter's West Coast Capital and HBOS reduced their stakes to help accommodate institutional demand, according to Booker's chief executive, Charles Wilson; he bought 2m shares, taking his holding from 8.1% to 8.3%. The non-executive director Kevin Lyon bought 200,000.

Baugur held its 31.4% stake through its Milton investment vehicle but said it was the right time to sell, three years after being in the consortium that bought Big Food Group, the company behind Booker and the Iceland supermarket chain. Gunnar Sigurdsson, chief executive, said: "Given the exceptional turnaround ... and the fact Booker has now successfully made the transition back to the public markets, now is the right time for us to exit."

Baugur said earlier this year it would sell its media, technology and financial investments for £430m to expand in retail.

Booker, the UK's largest food wholesaler, returned to the stockmarket last year via a reverse takeover by the Aim-listed grocery wholesaler Blueheath. With greater institutional ownership, it now plans to switch to the main market of the London Stock Exchange next year. Shares in Booker closed down 1p, or 4.4%, at 21.75p, valuing the firm at £324.1m.

Pier 1 Withdraws Offer to Buy Cost Plus

FORT WORTH, Texas–Pier 1 Imports has withdrawn its proposal to buy rival Cost Plus for $88.4 million. Cost Plus had rebuffed the offer, saying it would go against the best interest of its shareholders.

The combined retailer would have generated over $2 billion in annual sales and operated about 1,400 stores.

“Our goal in pursuing a combination with Cost Plus was to create a stronger, more efficient company,” Pier 1 said in a statement.

Both retailers are emporiums of imported home goods and share a similar store concept and sourcing model.

“We have concluded, however, it is unlikely that we would be able to acquire a majority interest in Cost Plus at a price that would make sense for our shareholders,” the statement said.

Some analysts said the timing of the purchase was premature as Pier 1 is still in the midst of carrying out its own turnaround.

“Even if Pier 1 is on target, this transaction would distract management form the tricky task of executing at Pier 1,” said Matt Fassler, a Goldman Sachs analyst, in the research note at the time Pier 1 made its offer for Cost Plus.

“We wish to assure our shareholders that our turnaround is on track and we remain confident about the future of Pier 1 Imports,” Pier 1’s statement said.

How The Supplier And The Government Are Handling Inflation

Aditya Rao

Inflation figures for the past week showed that the inflationary disease had grown to an astounding 11.05%.A dramatic rise of almost 3% from the previous week. So the question must be asked how come you’re still paying more only for food products and fuel but the exact same price for consumer and retail goods?

The answer is in the fine print.

Granted, some goods do cost more than before like mosquito repellant or moisturizing lotion but most everyday household goods still cost the same. The catch is that unknown to most consumers producers of these goods have been slowly decreasing the quantities of the goods they sell.

So if you pick up a bottle of cleaning phenyl for about forty five rupees for a bottle containing half a litre of it earlier. You are still paying the same forty five rupees but unknown to you the quantity of the product has been decreased from 500 ml to 475 ml. A simple case of the company hoping that you won’t notice the slight decrease in quantity and be satisfied that despite inflation you are still paying the same amount as before.

Few might blame them .The Indian supply chain is extremely difficult to comprehend. Inflation hits each arm of the chain. The link between the direct manufacturer of the product and the store that you buy it from is extremely long with many stops. At each stop of the chain inflation eats into the quantity of the product and its price.

The finance department is clearly worried. The finance secretary came out with a statement earlier that describes the inflation curse as “Clearly Worrying”. In bureaucratic circles those words are only used to describe a situation that can lead to a government’s fall.

The cabinet seems to have taken note. Proposals are on to hike the CRR and interest rates by another 25 to 50 points, a second hike in a month. The government’s aim is to stem the supply of money flowing into the economy and to keep borrowing to a minimum.

For the first time the finance minister has openly stated that inflation is being caused by rising fuel prices. The dramatic increase in the cost of crude has put a lot of pressure on fuel consuming countries. In India the situation has become so drastic for the Manmohan Singh government that he will personally be sending the Finance And Petroleum ministers for a meeting between the Saudi government and oil consuming countries in the upcoming Jeddah oil summit to persuade the Saudis’ to increase oil production.

The oil price increase has hit India’s supply chain massively. Even the wholesaler has openly increased prices. Every commodity is being sold at a higher price and those that aren’t as said earlier are being done so at smaller quantities.

It’s no wonder then that the markets in turn are falling. The Sensex’s amazing Bull Run is definitely over for quite some time. Big or small if the investor is paying more on fuel and food there is no way he’s going to put the same money into the markets.

Which means that as of right now, both you and I will have to pay more for less.

Genesis Colors gets Rs 110cr investment from US consortium

Genesis Colors Pvt. Ltd. has received an investment of Rs110cr from a US based consortium: Sequoia Capital Fund, Mayfield Fund and Silicon Valley Bank. The investors are being issued a minority stake in the company in return. The Company plans to utilize the funds to expand retail operations of Satya Paul which which is on a rapid expansion spree in India and overseas. The first Satya Paul international store is opening in Singapore in July 2008. The money will also be used for investments in technology – ERP solutions and a CRM program.

Bata India targets 200 new outlets

Bata India Ltd is on an expansion spree and is targeting 200 new outlets. These will come up primarily in areas where Bata is not adequately represented. The Company will focus on four formats: up market flagship stores, trendy city stores, large super stores and traditional family stores. Bata already runs 1100 stores and refrains from franchising. Product wise, the Company hopes to focus on its traditional weakness - women’s shoes category.

My Maspar Home in Pune

Maspar has launched its ninth exclusive store in Pune at the Ishanya Arcade. The store, which is spread over 3000 sqft, offers the latest Maspar Home Fashion collection with 400 varieties of fabrics for curtains and upholstery and 8 bed collections with themes such as Moulin Rouge, Placid Beauty, Enchanting Nature and Caravan Collections. The launch had artists draped in Maspar fabrics jiving and dancing the Salsa and Rumba

Estee Lauder to venture into Indian market

New Delhi: Estee Lauder, one of the world's leading manufacturers and marketers of beauty products is venturing into the Indian market. With the growing number of well-to-do Indians, the popularity of beauty products is increasingly on the rise in India. Estee lauder will be setting up the first of its four exclusive outlets in Mumbai, and later enter the Delhi and Bangalore markets over next six months. It plans to open 20 outlets over the next three years, spreading out into other Indian cities like Pune, Hyderabad, and Kolkata.

"The timing is right to bring Estee Lauder to India," said John Demsey, Group President, The Estee Lauder Companies. "Many Indian women are already aware of Estee Lauder, and we are thrilled to bring them their brand of choice, and introduce the brand to a whole new generation of women. I am confident that Estee Lauder will be a huge success in India," he added.

Keeping in mind the Indian and Asian preference for skin brightening creams, the company is introducing a skin care range called Cyber White, which prevents skin discolouration, age spots, and improves the overall texture, colour and tone of the skin.

The company’s internationally well known products like Re-Nutriv luxury skin care line, Advanced Night Repair, Double Wear long-lasting liquid and powder foundations, Signature Hydra Lustre lipstick and fragrances like 'Pleasures' and Pure White Linen, would also be included in Indian outlets, said Demsey. He also added that along with India specific products, the brand's best selling global products would also be sold from all Indian regions.

Sainsbury's non-food plans hit by defection

Sainsbury's has lost an important player in its ambitious move into non-food retailing with the defection of Richard Jones, head of general merchandise and global sourcing, to its bitter rival Tesco.

Jones is believed to have tendered his resignation late last week and is still in negotiations with Sainsbury's to terminate his 12-month contract.

He was brought in to the supermarket five years ago and has helped spearhead its expansion into the selling of items such as clothing and homewares. Formerly with Marks & Spencer, he helped develop Sainsbury's successful TU range of clothing, now worth about £300m in annual sales.

Sainsbury's has been moving further into non-food retailing, which has higher margins than its traditional business. About half the new retail space it adds over the next few years will be devoted to non-food merchandise.

A spokeswoman for Sainsbury's last night confirmed Jones's resignation but stressed the company's non-food strategy is well advanced. "We've got a great team and they will be cracking on with the job," she stressed.

Jones has not yet been given a start date or a job title at Tesco but his arrival will raise questions about the future of Terry Green, the former Debenhams and Bhs boss brought in to run the supermarket's clothing business. A Tesco insider, however, said last night that Jones will have "a fairly senior role but he's not a Terry replacement".

A Tesco spokesman said that Jones will be working "in non-food sourcing and range development across the group".

Linens 'n Things to dispose of real estate

CLIFTON, N.J.

Linens Holding Co., the operator of Linens 'n Things, said Monday it hired DJM Realty to manage disposing of 120 underperforming stores.

Linens 'n Things said it would close the stores when it filed for bankruptcy protection in May.

The hiring is subject to bankruptcy court approval.

DJM plans to hold an auction before July 1.

China to Become Second-Largest Global Retail Market by 2012, TNS Retail Forward Forecasts

TNS Retail Forward

TNS Retail Forward forecasts China will sustain double-digit nominal retail sales growth in the next five years despite short-term pressures.  This will push the size of the retail market in China to more than $1.4 trillion by 2012, surpassing Japan to become the second-largest retail market in the world behind the United States.

The forecast is outlined in the company’s latest study, China’s Retail Landscape.  This report, published in the Global Retailing Program of the Retail Forward Intelligence System™, also assesses China’s retail landscape, profiles the country’s leading retailers and delivers shopper insights about the Chinese shopper.  

“While China’s short-term retail outlook is vulnerable because of pressures ranging from inflation to heightened government regulation, the continued entry of new retail banners is evidence that China remains one of the best retail opportunities in the world, with strong growth forecast across retail categories,” comments Frank Badillo, Senior Economist and Manager of the company’s Global Retailing Program. 

Contributing to a tougher operating environment and some consolidation in the near term are: inflation and speculative pressures, growing government emphasis on product safety and environmental regulation, and heightened Chinese nationalism.

Regardless, a continued influx of new retail banners, with particular interest among upscale apparel retailers, suggests there remains opportunity for entry into China. The continuing opportunity in China also is evident in the stepped-up expansion plans by a broad spectrum of retailers.

China’s leading domestic retailers remain focused on aggressive expansion, but they are also showing the effects of competitive pressures.  Some of these pressures are most evident at retail conglomerate Bailian Group and consumer electronics retailer Gome. 

Foreign retailers in China continue to plan for aggressive expansion but more often have fallen behind plan.  “Carrefour’s small-format focus has helped give it an advantage over Wal-Mart’s big-format focus,” according to Badillo. “While Taiwan-based RT-Mart, a partner of Auchan, has quietly built up a sizeable presence in China, Tesco is only now gearing up its expansion. Kingfisher is reorganizing and Best Buy is ramping up slowly,” he adds.

TNS Retail & Shopper Insights research indicates that China’s new retail formats are drawing strong interest from Chinese shoppers, but there remains room for inroads against local neighborhood markets—which remain popular among Chinese shoppers.

“The continued popularity of local neighborhood markets in China suggests that local independent retailers and longstanding shopping habits remain strong,” states Badillo.  “At the same time, our research illustrates that high shopping frequency at hypermarkets, convenience stores and traditional department stores shows strong interest among Chinese shoppers for the new modern retail formats that are fast entering the marketplace,” he adds.

“Despite inflation pressures weighing on near-term growth, China presents one of the best retail opportunities in the world,” Badillo confirms.  “The country’s strong growth opportunity significantly outweighs the challenges presented by a developing market facing speculative risks,” he concludes.

'Bag’ging to go green from the retail store (Part II)

24 Jun, 2008

Yesterday, Indiaretailing spoke to some retailers about the ‘violation of an essential part of the society’s environmental code through using non-degradable carrybags’. Some majors in the business agreed that while the bags that they are using are not environment-friendly, they cannot yet avoid the use of polythene bags as there are no convenient alternatives. Retailers also appreciated Indiaretailing’s idea of association with NGOs who make paper bags out of waste material, citing it as an ‘add on’ to their corporate social responsibility (CSR).

Indiaretailing, thus, went a step ahead to locate the ones who can associate with retailers and help in meeting their CSR objectives and business needs by providing economical alternatives to polythene bags. Jan Sandesh, a charitable organisation that employs needy women to manufacture paper bags, says that it has the potential to meet the needs of corporate retailers who seek an economical alternative to polythene bags. Sakar International, manufacturer and exporter of handmade paper bags, also provides eco-friendly alternatives to polythene bags.

The potential ones:

Speaking to Indiaretailing, Shanti Paswan, joint secretary of Jan Sandesh, said: “Till date, none of the corporate retail giants from India has approached us. On the other hand, a UK-based jewellery retailer is our regular buyer. In India, a major export house takes our bags to meet demands of his foreign buyers. People Tree is the only Indian corporate retailer in out list. They have been sourcing our bags from day one of our operations, and this has been a successful association – in sync with our social ideology and People Tree’s CSR.”

Paswan informed that many traditional retailers have opted for their bags. “We move from market to market to sell our products. Some of the kiranawallas do show interest in the bags, but understandably, they cannot buy in bulk.”

Jan Sandesh’s handmade bags made from waste material are priced at Rs 5 - Rs 22 per piece, and are costlier than polybags. However, if a retail company places the price factor in the larger context of the monetary value of what it spends on various CSR and branding activities, the price may seem to be a non-factor considering that it also boosts the company’s image and respectability.

“The manufacturing cost of these bags is high as they are handmade and a lot of labour and time goes into their making. We also have to hand-paste the labels or logos of the companies for whom we manufacture. A lot of raw material is also expended in training the new, unskilled recruits,” informed Paswan.

Jan Sandesh is a charitable organisation operating from a rented location in one of Delhi’s slum areas and provides training, jobs and income to needful women and adolescents. It earns not more than two to three rupees per bag, and lesser if selling in bulk.

Citing alternatives for polythene bags, Vijay Kumar, business head, Sakar International, a company engaged in exporting handmade paper bags to international retailers, said: “Retailers should try and focus on using bags made of recyclable paper. These bags will cost lower than the handmade bags.” He further said that many international wholesalers and retailers have been sourcing decorative paper bags from the company, and are selling these in the overseas market.

Asked whether the company will be able to provide retailers with alternatives for polythene bags, Kumar said, “We have not yet thought about the proposition as none of the country’s corporate retailers have approached us. If anyone approaches us, we will definitely think of joining hands with them.”

p.s. Watch out to know some responsible ones in part III

– Satrajit Sen

Madura plans Indian version of Barneys and Harvey Nichols

 

Madura Garments, the apparel retail division of Aditya Birla Group, has planned a luxury lifestyle destination store for men on Bengaluru’s Vittal Mallya Road. Apparently, the country's first luxury mall, The Collection, is poised to open in UB City at the same location.

Confirming this, Vikram Rao, business head, textiles and apparel business, Aditya Birla Group, said: “This luxury lifestyle store will be similar to the Barneys in New York or the Harvey Nichols in England. It will stock multiple global brands in the luxury and super-premium categories along with our private labels.”

According to Rao, the first store, covering an area of 17,000 to 19,000 square feet, will come up in October in Bengaluru and retail apparel and accessories, in addition to featuring an in-store juice bar and providing services of a salon, a tailor and dry cleaning.

With an investment of around Rs 270 crore, the company hopes to open 10 to12 stores in the next three to four years in cities including Mumbai and Delhi. “We are looking to open at least three stores between October and April next year,” Rao confirmed.

Reliance Retail to launch Paul & Shark

 

Reliance Brands, the wholly owned subsidiary of Mukesh Ambani-led Reliance Retail, has entered into a 50:50 joint venture with the Italy-based Dama Spa to launch the latter’s luxury sportswear brand Paul & Shark in the country.

Announcing this, Darshan Mehta, president aand CEO, Reliance Brands, said, “Paul & Shark and Reliance Brands will have an equal stake in the newly formed company Reliance Paul & Shark Fashions Pvt. Ltd. The brand will be launched in India in March 2009 with the Spring/Summer collection.”

Andrea Dini, owner and CEO, Paul & Shark, said, "Over the next few years, the Indian market will surely become one of the largest new luxury markets of the world."

Sharing plans, Mehta informed that in the next five years, the company is looking to set up around 20 stores in tier I cities. Each store will be around 2,500 to 3,000 square feet. "To start with, we will have standalone stores, and once the luxury department stores come up in the country, we will also have the shop-in-shop format," Mehta informed.

RELIGARE TO SET UP RETAIL STORES IN PERSONAL FINANCE SPACE

After a well-planned exit from Ranbaxy Laboratories, Malvinder and Shivender Singh are on a fast track. And if activities in the financial services space are any indication, Religare Enterprises tops their agenda list.

According to industry sources, the integrated financial services firm is now planning to set up multi-product, multi-brand retail stores in the personal finance space. The new retail initiative, under the brand name Finmart, will serve as a one-stop destination for personal finance needs of an individual.

Sources disclosed that the company would invest more than Rs 100 crore over the next 10-12 months to set up 200 such stores across the length and breadth of the country. “Religare wants to go a step beyond its competitors.

BIRLA CELLULOSE CARVES CATEGORY FOR DISPOSABLE NATURAL WIPES

With a forward integration strategy, Birla Cellulose (the fibre division of the Aditya Birla group) has entered the disposable natural wipes category, taking the onus of creating a new FMCG segment in the country.

Segmenting its disposable wipes under brands such as Kara (skincare), Purreta (Baby care), Prim (homecare) and Handy (hand santizers), the fibre maker will now sport its branded wipes with value-added ingredients.

With a special focus on the institutional segment, Birla Cellulose is planning to tie up with airlines, travel agencies, pharma companies and schools to promote and build this sector.

Vijay Kaul, Chief Marketing Officer, Birla Cellulose, said, “We are targeting a turnover of between Rs 30-40 crore in the first year of launch and have the onus of creating the disposable wipes segment in the country.”

Focussing on institutional sales, the fibre maker is also planning to tie up with Kingfisher Airlines to promote its range of disposable wipes and with travel agencies like Akbar travels besides reaching out to doctors and students.

“For our hand sanitizing wipes, we are planning to promote it to pharma companies and doctors and even take the product to schools,” says Kaul. Instead of using the product from a bottle, the value-added wipes are being positioned as an easier and convenient way of using the product.

“Our pricing for the wipes is significantly cheaper than the price charged for a bottle of the same product, be it hand sanitizer or a sunblock wipe,” adds Kaul.

RELIANCE BRANDS TO LAUNCH PAUL & SHARK SPORTSWEAR

Reliance Brands, wholly owned subsidiary of Mukesh Ambani's Reliance Retail, has formed a 50:50 joint venture with Dama Spa to launch the luxury Italian Sportswear brand Paul & Shark in the country.

Paul & Shark and Reliance Brands would have an equal stake in the newly formed company christened Reliance Paul & Shark Fashions Pvt Ltd, Reliance Brands' President and CEO Darshan Mehta said here today.

The brand will be launched in India in March 2009 with the spring summer collection.

On the road map ahead, Mehta said that over the next five years, the company was looking at a store network of around 20 in Tier I cities. Each store would be around 2,500- 3,000 sq ft each.

To start with, we will have stand-alone stores but once the luxury departmental stores come up in the country, we will also have the shop-in-shop format," he said.

Mehta said that premium leisurewear, high-end fabric and great fit is what consumers were looking at.
"The collection and pricing would be more or less identical to the Dubai market," he said.

"While over the next few years, the Indian market would surely become one of the large new luxury markets of the world, the feature that makes India appealing to the Paul & Shark brand is its youthfulness," Paul&Shark's owner and CEO, Andrea Dini said.

NILGIRI’S TO SELL REAL ESTATE ASSETS

Nilgiri’s Dairy Farm is planning to sell some of its prime real estate assets in south India in order to raise funds to expand its retail chain.

Three of the company’s high street properties—on Brigade Road in Bangalore, on Radha Krishna Salai in Chennai and on Avinashi Road in Coimbatore—are on the block. The total amount raised from the three properties could be upwards of Rs 300 crore; some think it could go up to about Rs 500 crore.

Private equity major Actis, who picked up a 65% stake in Nilgiri’s from the founding Mudaliar family in 2006 for a sum of Rs 300 crore, is said to be looking for buyers for these properties. Some of the Mudaliar family members who continue to hold stakes in the company are objecting to the move. But Actis is expected to have its way.

The UK-based fund wants to exit from Nilgiri’s non-core businesses of real estate and hotels, and give momentum to the core business of franchised retail.

Each of the properties has Nilgiri’s Supermarket, as also a hotel and cafe. Actis is likely to want to lease back part of the properties from the buyers to continue running the supermarket.

The Mudaliar family started the Brigade Road facility in 1939, and the Chennai facility some 30 years ago. This long association probably accounts for the family’s reluctance to part with the properties.

If the deals go through, then the amount raised would be pumped in to expand the network of Nilgiri’s outlets from 100 stores to 400 stores in the next two years. Actis is also looking at building a backward integration platform by setting up supply chain centres of over 1 lakh sqft in Bangalore and Chennai. Nilgiri’s Blue Oven outlets, which offer premium bakery products and patisserie, and Nilgiri’s Masala Bread, a cafe chain, too are in the process of being expanded.

The amount raised would be pumped in to increase Nilgiri’s outlets from 100 to 400 stores.

FMCGs TRY TO FEND OFF PRICE WARRIORS

It’s deja vu for the FMCG industry. Down-trading, a phenomenon which disappeared from the FMCG universe a few years ago, is expected to make a comeback, thanks to high inflation.

Fearing the worst, consumer goods companies, which were getting used to high-margin products gaining ground riding on higher disposable incomes, are revisiting strategies for their price-warrior brands and are turning them into focus areas.

Discount detergent brands like Nirma, Ghadi and Fena, toothpaste brands like Ajanta and Anchor and a host of other brands in soap, hair oil and biscuit categories, could once again pose a threat to the big players, as consumers have started looking for cheaper alternatives. This will be a repeat of 2003-04, when these smaller players forced the big brands to significantly alter their marketing and pricing strategies.

Neeraj Chandra, biscuits major Britannia India’s vice-president (sales, marketing & innovation) said, “In the current scenario, some amount of downtrading is certainly expected. We have started preparing for this not only by stepping up focus on our mass brands, but also by exploring new value price points which may emerge.”

The mass-priced Tiger, Britannia’s biggest brand by volumes, could be specially vulnerable to losing share from smaller regional brands. It’s the same story for soaps. “There may be a resurgence of downtrading across categories. To counter this, we have decided to increase focus on our price-warrior brands, specially Godrej No 1 soap,” said Godrej Consumer Products executive director and president, Hoshedar Press.

Among the company’s leading brands, Godrej No 1 competes directly against HUL’s Breeze and Nirma beauty soap.

Dabur is another company gearing up to cope with downtrading. Dabur India chief executive officer, Sunil Duggal, said, “We are taking a closer look at some of our competitively-priced brands.”

Steve & Barry's Faces Cash Crunch

Fast-Growing Chain
Seeks $30 Million;
Chapter 11 May Loom

By PETER LATTMAN and JEFFREY MCCRACKEN

As one of the country's fastest-growing store chains, Steve & Barry's LLC was billed as the future of discount retailing. It boasted of massive expansion plans, built on the back of fire-sale prices of clothes and shoes promoted by the likes of actress Sarah Jessica Parker and professional basketball player Stephon Marbury.

Don Lansu/WireImage for Steve and Barry's

Sarah Jessica Parker fans overflow into the mall waiting for their favorite star to sign autographs on Aug. 3, 2007, in Mount Prospect, Ill.

That future now looks bleak.

The closely held retailer is racing to find rescue financing of about $30 million. If it is unable to secure backing, it could seek protection from creditors sometime in the next month, say several creditors, bankruptcy lawyers and retail experts familiar with the matter. Steve & Barry's has hired Goldman Sachs Group Inc. to seek out financing and hired a bankruptcy lawyer to advise it on a restructuring, say these people.

A spokesman for Steve & Barry's declined to comment. Its attorney, New York-based retail-bankruptcy veteran Paul Traub, also declined to comment when reached Thursday.

The cash crunch comes even as Steve & Barry's expands across the country, with stores already in 40 states hawking exclusive fashion lines endorsed by tennis player Venus Williams and actress Amanda Bynes. Since May 15, it has opened nine stores, from upstate New York to Kokomo, Ind., and San Jose, Calif.

Steve & Barry's is just the latest retail player hurt by the economic downturn, and its demise would be a big blow to struggling mall owners. An ailing economy and $4-a-gallon gasoline have wreaked havoc upon the retail landscape, pushing the likes of Sharper Image Corp. and Linens n' Things Inc. into bankruptcy protection.

Sarah Jessica Parker is among Steve & Barry's celebrity collaborators.

With fashionable clothes priced below $10, Steve & Barry's deep-discount model was built to thrive in such an environment. In a 2006 interview with The Wall Street Journal, co-founder Barry Prevor said the U.S. market could support 5,000 stores. Its founders have dubbed their effort the "Google of retailing."

The company currently has 270 stores and projected 2008 revenue approaching $1 billion, with earnings before interest, taxes, depreciation and amortization of roughly $20 million, said two people familiar with its finances.

But some of the forces pushing Steve & Barry's growth were not tied to end-consumer demand, but the needs of mall owners in a softening commercial-real-estate market. Much of the company's earnings came in the form of one-time, up-front payments from mall owners. Those payments were designed to lure the retailer to take over vacated sites, say several people familiar with the company.

Without these payments, the stores are barely profitable, if at all, people familiar with the company's finances say. In recent weeks, the retailer has been seeking at least $30 million to fund operations through 2008. It has approached a number of financing sources, say these people.

Without additional capital, the company's fate will largely be determined by the commercial-lending unit of General Electric Co. It provided the company with a roughly $200 million credit facility in March, and the company is already in default on that loan, said three people familiar with the matter.

Steve & Barry's closing would be another blow for owners of malls and shopping centers, who have struggled to cope with the 6,500 store closures predicted for this year by the International Council of Shopping Centers.

Steve & Barry's eagerly snapped up big-box sites vacated by consolidating chains like Macy's Inc. At a shopping-center conference in May, several mall owners said Steve & Barry's was one of the answers to the industry's problems filling vacant space.

"They should be able to see through this," said Anthony Cafaro Jr., a vice president at Cafaro Co., a large Youngstown, Ohio-based mall developer that leases 10 sites to the company. "They still have that sensational 'wow' factor in terms of their prices—it's a great concept."

Part of the chain's attraction has been its low prices. Everything from sweatpants to jeans to down jackets cost less than $10. The chain has a miniscule advertising budget. Mr. Prevor is also considered a master "tariff arbitrager," carrying an encyclopedic knowledge of tariff codes so the business can reduce costs by manufacturing products in such far-flung locales as Lesotho and Malawi.

Steve & Barry's has received much attention for its celebrity-branded products. In 2006, it signed National Basketball Association star Mr. Marbury to endorse a line of $14 sneakers called Starbury, which were hailed as an antidote to the prices for Nike and other basketball shoes. It also made a splash with a line of clothing designed by Ms. Parker, who named the line Bitten because she was "bitten by the Steve & Barry bug," she has said.

Last year, Ms. Parker and Mr. Marbury appeared on the Oprah Winfrey Show to promote their lines and the trend toward "cheap chic."

Mr. Prevor and Steven Shore were childhood friends from Long Island, N.Y., and opened their first store in 1985 in Philadelphia, selling discount University of Pennsylvania apparel and undercutting the campus bookstore. They slowly opened outlets in college towns across the country before transforming Steve & Barry's into a big-box-mall retailer.

In 2005, the International Council of Shopping Centers honored the chain with its "Hot Retailer Award," given each year to stores considered by mall managers as the best at generating buzz and bringing more shoppers to the shopping centers they occupy.

Later that year, the duo fueled those ambitions with investment capital obtained during the credit boom. Private-equity firm TA Associates Inc. paid $320 million for roughly half of the company. About half of that went into the company, with the balance -- about $170 million -- being paid to Messrs. Prevor and Shore.

Adidas sues Wal-Mart for trademark infringement

Adidas AG is set to face off with Wal-Mart Stores Inc. for the third time on allegations that the retailer sold lookalike striped shoes that amount to trademark infringement.

The Herzogenaurach, Germany-based sporting goods maker and Wal-Mart are scheduled for a jury trial Oct. 6 in a federal court in Portland, Ore. where Adidas' U.S. headquarters are located.

It is the same court where in May Adidas was awarded a $304.6 million verdict against Payless ShoeSource for selling knockoff striped shoes.

Wal-Mart has twice settled with Adidas on what it calls "confusingly similar imitations" of Adidas' three-stripe shoe.

The company in 2002 admitted to selling a four-stripe shoe and promised a second time not to mimic Adidas' three-stripe pattern.

But the retailer's responses to a third round of accusations of trademark infringement and other charges repeatedly denied in court documents that their striped athletic shoes are imitations or that the public associates the pattern with Adidas.

"Wal-Mart... denies that the public well-recognizes and understands that the three-stripe mark distinguishes and identifies Adidas' merchandise," Wal-Mart said in court documents.

Wal-Mart spokeswoman Daphne Moore declined to comment on the suit, citing ongoing litigation.

Adidas did not return calls seeking comment.

Adidas has sued about 36 companies for trademark infringement since 1999 to protect the three-stripe pattern the company says distinguishes and identified Adidas' merchandise.

Other recent lawsuits against Steve Madden, Target and Nordstrom settled before going to trial.

Bill Gates to retire from Microsoft at end of this week

A Harvard University dropout who ushered in the home computer age and made billions of dollars along the way will have his last official day of work at Microsoft on Friday.

Three people will fill the void left behind when Microsoft chairman Bill Gates retires from the company he and friend Paul Allen cofounded in 1975.

Since Gates began his transition from leading Microsoft to heading his personally bankrolled charity, The Bill and Melinda Gates Foundation, his job as chief software architect has been handled by Ray Ozzie.

Craig Mundie inherited Gates’ chief research and strategy officer duties, while former Harvard classmate Steve Ballmer became chief executive officer.

Gates left Harvard after two years to found the firm that became Microsoft. He later received honorary degrees from Harvard and other universities.

After retiring, Gates will remain chairman of the Microsoft board of directors and its largest shareholder.
“I don’t think anything is going to drastically change,” said Matt Rosoff, of the private analyst firm Directions On Microsoft. “If he thinks something is important and tells Steve Ballmer, Ballmer will listen to him.”

Still, Gates’ departure may be symbolic. “The challenge Microsoft has when the founder departs is remembering its heart,” said analyst Rob Enderle of the Enderle Group in Silicon Valley. “At some point the firm has to take the essence of what made Bill Gates successful and make sure that is preserved. Whether it is a company or a person, once you’ve lost your heart there isn’t much left but a shell.”

Enderle said there are signs that Microsoft has been struggling since Gates stepped away from managing operations.

Microsoft has “missed a number of opportunities” and the Windows and Office software on which its fortune is built have stumbled, Enderle said.

Microsoft’s Windows Vista operating system has flopped with customers.

The software giant also sees its bottom line threatened by Google, which offers free online programs that compete with Office and other Microsoft products.

Macy’s Offers Free TV With Mattress Purchase

NEW YORK–In an unusual promotion, Macy’s is offering a bonus Sharp 19-inch liquid-crystal-display, high-definition television with selected mattress purchases.

For the purchase from a list of Hotel Collection mattress sets between yesterday, June 19, and July 6, a shopper receives the TV once he or she fills out a mail-in bonus form. The offer is part of a promotion promising the lowest prices of the season, with savings of from 35 percent to 50 percent, on Sealy, Serta, Simmons and Hotel Collection mattress sets. The offer is valid at all Macy’s locations that sell mattresses (excluding clearance centers); the retailer’s mattress toll-free number, 1-800-MACYBED; and on macys.com.

Anheuser-Busch to buy out India JV partner

Anheuser-Busch plans to buy the 50 percent of its India-based joint venture that it doesn't already own, the brewer said Friday.

The maker of Budweiser beer said it plans to buy Crown International's half of Crown Beers India Ltd. company. The deal includes a brewery in Hyderabad. The two companies founded the venture last year.

The financial terms of the deal were not disclosed.

Anheuser-Busch is currently considering a $46 billion takeover offer from Belgian brewer InBev that would create the world's largest brewing company. The St. Louis brewer did not solicit the bid.

Anheuser-Busch shares fell 7 cents to $60.96 in afternoon trading.

Open India to Big Retail Chains - Interesting Reading

The paradox in India is that while one can buy practically any product in any brand from exclusive outlets, policy makers have kept out multibrand retailers in the guise of "protecting" local retailers

by B V Krishnamurthy

One of the most common weaknesses of individuals, organizations, and nations is procrastination. We tend to put off taking critical decisions till it is too late to justify the decision or to derive any benefits thereof.

When the price of crude was reaching a boiling point, the government dithered, wavered, and did nothing to stop the colossal loss of $50 billion that the state-owned oil companies were projected to suffer. Finally, out of desperation, the price of petrol was increased by 50 cents a gallon yesterday along with the prices of diesel and cooking gas. The opposition could not have hoped for a better stick to beat the government with. The unprecedented increase is expected to push inflation to a 13 year high—into the double-digit zone.

To do a reality check on inflation and its impact on people, we conducted a study spread across five cities. The surprising finding is that there has hardly been any change in the prices of essential commodities in large retail outlets—organized retail for the developed world. The increase in prices has been sharper with stand alone retailers, including small vegetable and fruit vendors, often operating out of road-side kiosks or even in the open. How does one explain this anomaly?

The retail industry in India is a $320 billion industry, expected to grow to $600 billion in the next four years. Organized retail accounts for a dismal 4% of this huge opportunity. India's score on this front is pathetic compared to China's 20% and Russia and Brazil's 35%. A report prepared by the Indian Council for Research on International Economic Relations has concluded that organized retail is not likely to have an adverse impact on stand-alone stores.

Ironically, the council was commissioned to prepare the report by the present government. Of particular significance is the finding of the council that less than 2% of small stores had to close down due to the competition provided by large retailers.

This finding is quite similar to the one in the United States where a study of the impact of Starbucks on "mom-and-dad" stores has demonstrated that with a few exceptions, the "mom-and-dad" stores have benefited from the establishment of a Starbucks outlet nearby.

Among the reasons given for this phenomenon are the waiting time, mind-boggling variety that often confuses customers, and perhaps most importantly, the personalized service that one experiences in "mom-and-dad" stores. A significant percentage of these stores have reported revenue increases of 25% and more.

The paradox in India is that while one can buy practically any product in any brand from exclusive outlets, policy makers have thought it fit to keep out multi-brand retailers in the guise of "protecting" local retailers.

It is time the government realized that small retailers are quite capable of protecting themselves. The kind of courtesy, service, credit facilities, delivery at your door step, and an affiliation for generations that the neighborhood store offers is hard to replicate for organized retail chains. Thus, the 12 million small retailers have nothing to fear.

At the same time, organized retail can bring in disintermediation that benefits both producers and consumers. Studies have shown that marginal farmers are able to get 25% more for their produce from organized retailers compared to what they were getting from intermediaries. Economies of scale, bulk purchases, improved logistics, and cold chains leading to increased shelf-life all have made it possible for corporate retailers to maintain prices stable even in the face of 8—9% inflation. One can even argue that corporate retailers can help small outlets to improve their efficiency and inventory management.

Any MNE that wishes to enter India would be well-advised to look at the failures in the organized retail sector. One of the earliest players to enter the field over 15 years ago is up for sale. Many have simply closed down. Among the reasons are poor inventory management, insensitivity to customer expectations, and reluctance to invest on human capital. In any service oriented facility, the interface with the customer is critical. One would be appalled at the level of ignorance and the almost total absence of a customer focus among sales personnel who need to directly interact with customers. Organized retail, to be successful, has to invest significantly on training the people and sensitize them to provide a great shopping experience for customers.

As pointed out in last week's post on a different sector, customers must have the final choice. If a centrally controlled economy like China does not have problems in having large retail chains, it is difficult to understand why the world's largest democracy with over a billion people, of whom some 350 million (more than the population of the USA) are supposed to have the purchasing capacity, should feel shy or be afraid of encouraging foreign investment in retail. Some form of checks and balances is fine—already the Competition Commission is there—to ensure that errant players are made to follow the rules of the game—fair play and customer first always. The government has an excellent opportunity to prove that good economics and good politics can work in tandem by courageously taking decisions that are in the best interests of the country instead of looking at the survival of a coalition alone.