Indian Retailer

The transformation of retail in the post-liberalisation decade was dramatic. It not only forever changed our consumption habits and patterns, but also left indelible imprints on the landscape of our cities in the form of monstrous malls and superstores.

THE FIRE’S HERE

Organised retail grew at a blistering pace. In 2000, it was so small that formal estimates of the industry’s size are unavailable. But in 2002, it grew to a $2-billion industry. Today, according to consultant KPMG, the sector has an annual turnover of $37 billion, while the retail industry is at about $350 billion. This year, consultant AT Kearney ranked India as the most attractive emerging retail destination in the world

THE RISE OF ORGANISED RETAIL

In 2000, today’s marquee retail chains were fledgling operations, with one or two stores. Piramal Group’s Crossroads, considered India’s first mall, started operations in 1999. For retail chains such as Pantaloons, Big Bazaar, Shoppers’ Stop, Spencers and FoodWorld, it was a decade of scorching growth

Big profits spawned ambitious expansion plans, many of which ran into roadblocks when real estate prices zoomed ahead of the economy. Retailers started hurting further when consumer confidence levels took a hit following a nasty economic downturn in major Western economies in September 2008. Some retailers, who did not recast plans in time or weren’t nimble enough, went out of business, or are teetering on the verge of insolvency

The decade that created a major new industry is ending with many of the players in the sector in disarray

POLITICS AND FDI

The rise of organised retail and the thorny issue of foreign direct investment made headlines as small ‘kirana’ store owners’ concern that organised retail would put them out of business became a political issue. Violent protests erupted across the country; Uttar Pradesh even banned the operations of Reliance Retail

Global majors such as Wal-Mart and Carrefour, facing slowing growth in home markets, forged partnerships in India, where foreign capital is allowed only in cash and carry stores, or stores catering to other businesses and not the end consumer

ET Comment

FDI in retail a distant dream

Foreign Direct investment in multi brand outlets will continue to be a political hot potato even as domestic retailers shed their animosity towards their foreign counterparts and say they can benefit from the transfer of technology, superior supply chain management and logistics expertise, apart from capital, of foreign retail groups. The next two years will see consolidation in the Indian market. Chains with less than 100 stores will either merge with large players or shut shop. Furthermore, shoppers are unlikely to see the mindless expansion of the past two years.

Indian retailers may be rejoicing at better sales in the October-December festive season, but a full recovery of the retail real estate sector still hinges on availability of spaces at competitive rates and improvement in consumption, global consultant C B Richard Ellis has said.

“The retail sector will take some time to fully recover, depending on the economic growth or improvement in domestic consumption , consumer sentiment and availability of retail space at competitive costs,” CB Richard Ellis (South Asia) chairman and managing director Anshuman Magazine said in a statement here on Wednesday.

Improving consumer sentiment and competitive retail rentals had, however, resulted in the sector “ambling towards better activity levels, especially in Tier I cities” , he added.

The global real estate consultancy firm also expects an oversupply of new office spaces across the country, which will keep rentals flat in 2010 despite positive indicators that demand for commercial real estate was improving.

“On the office market front, demand is expected to improve although the rentals are expected to remain flat in the medium term due to the forecasted large supply of office space,” Magazine said.

The year 2010 may, however, see “some sustainability in the residential market as activity levels have improved,” he said.

Prices for residential, retail and commercial real estate across the country plummeted in 2009 as a global economic meltdown and tight liquidity froze demand.

Residential sales declined significantly and demand for office spaces saw a substantial drop, triggering a decline in rentals and postponement or cancellation of projects , while retail real estate was also significantly impacted.

However, each of these three segments have witnessed an improvement since the previous year as reduction in prices, softening of interest rates and an improvement in the economic sentiments led buyers back to the market, the consultancy firm said.

Kishore Biyani-led Pantaloon Retail India Ltd (PRIL) will hive-off its value segments — Big Bazaar and Food Bazaar — into a separate company called Future Value Retail from January 1.

The BSE-listed company has completed all formalities and gained shareholders approval through a postal ballot to hive-off this segment, the company Managing Director, Mr Kishore Biyani, said on Wednesday.

“The postal ballot and other processes are complete and we are looking at January 1 as the starting date for Future Value Retail,” Mr Biyani told reporters on the sidelines of a conference here.

The value retailing segment of the company consists of supermarket Food Bazaar and hypermarket Big Bazaar, which constitutes up to 55 per cent of PRIL’s total revenues.

“At the company level (PRIL), we are expecting growth to jump by 30-40 per cent,” Mr Biyani said, indicating that the Indian retail industry has finally crawled out of the woods.

The company has plans to open 140 Big Bazaars and Food Bazaars over the next 4-5 years in addition to the 120 stores it already operates across the country.

Mr Biyani said that Pantaloon Retail will spend close to Rs 400 crore in the rest of this fiscal (till June 2010) for expansion. — PTI