Thursday, November 12, 2009

Indian retail is emerging wiser from the experience

2008-09 was a year of across-the-board losses for retailers. Shoppers Stop, Reliance Retail and Aditya Birla were some of the big names to post losses, while chains such as Straps, Etam, Subhiksha and Pyramid headed the list of high-profile casualties forced to fold. But now the blues are being shrugged off, and Indian retail is emerging wiser from the experience. When the crunch from the GFC hit India in the second half of last financial year, it surprised as industry too caught up with the good times.

Too many retailers were expanding fast, chasing too many stores and pushing too many products, formats and promotions than what the market was ready for. Too much of focus was on what competitors were doing rather than on viable and sensible market strategies.

Really, at that time, our industry was in a bubble and the result of the downturn was to prick the bubble. It was tough, but it forced businesses to trim fat.

Those that survived have moderated the pace of their store openings. Prudent stock management, focus on proven formats and products, leaner teams, optimising costs are now the mantras for revival. This new self discipline has also helped companies deal with other problems. In reaction to the recent doubling and tripling of power costs, Shoppers Stop has been able to cut power usage by 14%.

A number of external factors have also helped to boost industry’s optimism. At the height of the boom, rental prices skyrocketed. And when the services tax on rent was introduced, rentals accounted for a whopping 35 % of all costs for most retailers. Fortunately, with the downturn, rental prices have normalised and landlords are now open to revenue-sharing agreements in combination with lower minimum rents.

Likewise, key consumption indicators are up again; stock markets have revived & the global economy is slowly recovering.

This combination of improved externals, along with Indian retail’s renewed focus on profitable growth, has not only shrugged off the blues, but has also been a blessing in disguise. At Shoppers Stop, we think we now have a business model that can weather future downturns.


Anonymous said...

This article was contributed by Mr. Govind Shrikhande - President & CEO of Shopper's Stop Limited specifically for the Cross Word column of The Economic Times and had appeared in the November 12 edition of the publication!!

Anonymous said...

Yes that's correct.

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