Retailing giants now stock up on moms-n-pops

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

S Kumars plans to list Brandhouse Retails

S Kumars Nationwide (SKNL), the flagship of the S Kumars Group, intends to list its demerged retail entity Brandhouse Retails within three months.

The company is awaiting court approval for the demerger plan, under which shareholders are to receive one free Brandhouse share for every five shares of the company. Once approved, the demerger will become effective from January 1 this year.

“We will be rolling out 1,200 stores over the next three years. The stores will sell our group’s brands, foreign labels that we tie up with and also domestic brands that do not belong to S Kumars,” said Nitin Kasliwal, vice chairman and managing director, SKNL.

SKNL has entered into an exclusive arrangement with Dunhill, a luxury brand for menswear and accessories. Unveiling the first store today at the Shangri-La Hotel in the capital, Kasliwal said the company would roll out 10 Dunhill outlets over the next five years. Each store requires an investment of around Rs 4 crore.

Brandhouse Retails specialises in setting up and managing exclusive brand outlets for SKNL brands - Reid & Taylor, Carmichael House and Belmonte. It is also the exclusive India franchisee for international luxury brands like Dunhill and ESCADA.

The company intends to have over 400 stores by the end of this financial year. “We already have over 70 operational shops including two for ESCADA,” Kasliwal said.

In fact, another Dunhill store was coming up at DLF’s Emporio mall at Vasant Kunj, with two more stores, for which locations are being scouted, planned in north and south Mumbai, he said.

Mark Newman, regional managing director, Richemont Luxury Asia Pacific, said the company had high expectations from the Indian market. The tie up with Brandhouse Retails is for three years, extendable by a similar period of time.

Significantly, the concept store is based on the Dunhill brand’s recently revised identity. Richemont’s luxury goods interests encompass brands including Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC, Alfred Dunhill and Montblanc.

Aditya Birla Group to go it alone in retail

Labelled 'More', first store expected in Pune in June.

Ending months of suspense over its retail plans, the Aditya Birla Group today said it would go solo in setting up a 1,000-store network that would involve an investment of Rs 9,000 crore over three years.

Significantly, the company, which entered retail by acquiring 170 stores of retail chain Trinethra Super Retail this January, will rebrand these stores “More”.

The company is looking at acquiring smaller retailers to rapidly gain share in the organised retail market that has players like Kishore Biyani’s Future Group, Reliance Retail and the proposed Bharti Wal-Mart chain.

The organised retail sector accounts for nearly 4 per cent of India’s $360 billion retail market.

Aditya Birla Group Chairman Kumar Mangalam Birla said the stores would be a mix of large hypermarkets of around 75,000 sq feet and supermarkets of 10,000 sq ft. The first store is being opened in Pune this June and will be positioned as a value-for-money outlet.

“The Indian shopping environment is underdeveloped due to the lack of economically viable real estate, a developed supply chain, trained manpower and backward linkages of suppliers. We will offer consumers more than what they expect. Hence the brand,” Birla said.

He said Aditya Birla Retail will hire between 10,000 and 15,000 employees over five years and establish direct linkages with farmers, vendors and suppliers to lower costs.

Products at the outlets, starting with food and groceries, will be a mix of private labels and brands. “The basic private label will be called More and the medium range Select,” said Aditya Birla Retail CEO Sumant Sinha.

Typhoo to hit India next year

The UK's iconic tea brand Typhoo is to be produced for Indian consumers by the start of next year. Apeejay Tea, which bought Typhoo from Premier Foods in 2005, will start production from a factory in Kolkata using tea from Assam, Nilgiris and Darjeeling. The company would not say whether this would affect future production from the UK factory in Moreton.

Diesel starts up in India with two stores

Diesel jeans will shortly arrive in India through the company's newly formed partnership with Arvind Mills, one of India's leading textile companies. Two stores will be opened this year, in Delhi and Mumbai with an extra 13 to be added by 2010. Arvind Mills also holds licensing or joint venture contracts with Tommy Hilfiger, Lee and Wrangler.