Biyani rolls out ethnicity, denies retail slowdown

The Future is changing track. The pioneer of organised retail in India, the Kishore Biyani-promoted Future Group has altered its strategy. From mass to class, the aspirational top-end consumers, to be specific. The undisputed king of Indian retail tells ET that he will focus more on the group’s fashion-driven retail formats like Pantaloon and the latest, Ethnicity, to achieve a turnover of Rs 10,000 crore in 2008-09. Mr Biyani insisted that slowdown is not reflecting from consumer spend. Excerpts:

Despite retail slowdown, you have launched yet another format Ethnicity. What makes you so sure that the concept will click?

Who says there is a slowdown? Although the environment looks gloomy, the Indian consumer is spending on FMCG, consumer durables and garments. Sales do not drop even if the sentiment is negative. Roti, kapda, makaan are essentials and consumer does not stop buying them.

Ethnicity is targeted at the aspiring urban Indian consumer who is looking for exclusive ethnic product-mix during marriages and festivals. It is an attempt to go back to our roots and create a niche category of ethnic wear and products like mojris, semi-precious jewellery, handbags, home decor products, handicraft, etc.

With brands deserting Ahmedabad and two Big Bazaar outlets closing down, are the times too challenging? Do you see a retail graveyard here?

It is a wrong presumption. With Nano happening in Gujarat, there is so much positivity around the state. If Nano can happen, so can Ethnicity. As it is, the success rate of any brand is 20-30%. While we had to wrap up one of the stores because of high rentals and another because we targeted the wrong consumer, we are expanding other formats (in Ahmedabad).

We have plans to set up eight Ethnicity stores across India in the next two years at Rs 8 crore per store spread over 25,000-30,000 square feet. Considering the urban poor customer is devoid of aspiration, a Big Bazaar would not click with them. At the same time, we have realised that we have to focus more on fashion even in Big Bazaar outlets to draw the aspirational `India One’ customer. (Future has re-categorised its target segment under India One, India Two and India Three.)

You are known to experiment with different retail formats. Which one has been your favourite?

All formats launched by the group are close to my heart. At this point in time, Ethnicity and Pantaloon are my favourite formats. That’s where the money is. Pantaloon is overachieving its target. We expect to record a turnover of Rs 10,000 crore in 2008-09 compared to Rs 6,500 crore in the last fiscal.

Ethnicity alone would fetch us revenues worth Rs 25 crore in the first year of operation.
How have real estate prices hit you?

Real estate scenario in a city like Ahmedabad is not inhibiting. In fact, realtors are so welcoming that they let us set shop without expecting any rentals for the first six months. We will add 5-6 million square feet of retail space in the near future.

There was a simultaneous boom in retail and aviation sectors. Now that the crisis looms over aviation sector, do you expect retail to be hit sometime soon? Could retail sector expect lay-offs?

Growth is important to avoid such stagnation. We believe that retail is booming and so there is no question of lay-off at this point. While investors like lay-offs (as it cuts down on the expenditure), promoters believe otherwise. One has to strike the right balance between the capitalist and socialist ideologies. I am a mix of both. A socialist-capitalist and vice-versa.

After Ethnicity, what next?

We are going to open the first stand-alone outlet of John Miller in Mumbai on Friday. The outlet will be located at Kala Ghoda and at the same store where I had started my first journey as an apparel supplier.

Ab har kisaan ho kamyaab

Recent economic woes—sparked off by rising oil and commodity prices earlier in the year, then sustained by the ongoing Wall Street crisis—would suggest that retailers should be a worried lot today. But accounts from across the world offer a mixed bag of good and bad news. In the US, with the holiday season standing around the corner, the National Retail Federation has said that sales growth will be down to the worst in six years. Other forecasts are even gloomier, with TNS Retail Forward predicting the worst holiday showing in 17 years. On the other hand, China, where economic growth has slowed for the fourth straight quarter, is yet seeing retail sales growing at close to the fastest pace in at least nine years.

As for India, although some headlines have been focusing on organised retail taking a hit, most analysts remain upbeat about future prospects. A Northbridge Capital report released late last month finds that this segment is growing at 40% a year. Organised retail is currently valued at $300 million, with only 7.5% of the total retail pie, but this share is projected to grow to 20% by 2010. There are other reports offering other figures, but what they all have in common is 1) a certain bullish tone on growth projections and 2) a certitude that a big chunk of this growth is going to take place in the country’s hinterlands, which extend from tier II and tier III towns to rural India.

By some accounts, the rural market puts away almost 50% of the goods consumed in the country and about 35% of the offtake for FMCG products. And the affluent sector in rural India is growing faster than the urban one, with per-households spending in rural India forecast to reach current urban levels by 2017. The news is good even on the employment front, with an Icrier study showing that the 3.93 million jobs added in rural retail during 2000-05 put the urban growth of 0.51 million to shame.

Recently, the Rural Marketing Agencies Association of India and Francis Kanoi Marketing Research conducted a study of the retail habits of rural India. According to Francis Xavier, managing director of Francis Kanoi, “the main finding from the study is that the number of retail outlets in rural areas is booming, with nearly 45% of them set up in the last five years, and the rural folks seem to be favouring the retail outlets in their villages to meet most of their daily needs.”

All’s under one roof

ITC, which has already scripted a great success story with its groundbreaking eChoupal initiative, whereby local internet kiosks link farming communities with global markets by providing information on everything from comparative crop prices to weather forecasts, is now creating a physical version of the same concept with Choupal Saagars. These are being set up at the hub of every 40 eChoupals, to facilitate all the material transaction needs of farmers, ranging from the sale of produce to the purchase of household goods. From one in 2004, the Choupal Saagars have now grown to 23, with ITC shooting to scale these up to 100 in the near term. Guiding mantra: Jaruratein Anek, Jagah Ek.

The one-stop shop idea is integral to DSCL’s Hariyali Kisaan Bazaar (HKB) initiative as well, which has also been on an expansion spree, with the five projects set up in 2002 having grown to 203. Their motto: Ab har kisaan ho kamyaab. As for the future, HKB president and business head Rajesh Gupta says that the company has an all India plan, but location decisions for each new unit are based on intensive microanalysis of whether the demographics and spending ability of a given catchment area suits the HKB business model: “This includes factors like literacy, receptiveness to new ideas at the agricultural level and even TV penetration.” This data dynamic is also critical to determining the product mix being carried at different stores. HKB’s merchandise list is made up of 60-70% core commodities, with the variables being determined by local brand and price preferences.

In the last three years, according to Xavier, the strongest growth in the number of retail outlets has been in the North zone at 38% as against an all-India growth of some 30%: “Notwithstanding the popular stereotypes, the prosperity levels now seem to be growing the most in the North.”

The entry of such enterprises has transformed product choices. With the rapidly expanding outlets offering both branded and non-branded versions of consumer goods, electricals, durables, kitchen appliances, construction materials and, of course, agri-inputs, Xavier says: “Even the infrequently bought products are entering villages rapidly.”

S Sivakumar, who heads the international business and agricultural division of ITC, points out: “The buying and usage habits of consumers in villages and small towns are changing rapidly with increasing incomes and greater exposure to media. They have started experimenting with newer products and also at higher price points. The demand for the products that were not available earlier through normal retail channels is also growing.” Here, he gives the example of how ready-made garments now comprise 95% of his apparel sales, in sharp contrast to how 80% of these are in fabric form as far as traditional rural retail channels are concerned. Another fast growing category Sivakumar points to is that of products that provide innovative solutions to day to day needs, “where organised retail has taken the role of a market maker”. A good example: the BP Oorja stove that uses biomass pellets as fuel.

Too much , too soon?

Still, at a time when retailers’ shares are going South along with the rest and when various players are paring down their headcounts and expansion plans, shouldn’t rural retail be a worried sector as well? Was the bugle sounded too early on this frontier? Gupta says that there is no question that a shakeup is on the way, and we will see some players fall by the wayside in the next few months. This, he predicts, will be as much on account of faulty business models as of failures in the due diligence processes propping up these models. HKB, however, seems to be on a strong wicket so far because of its traditional agri-strengths, which complement a robust and efficient supply chain in a sector where the cost of servicing the markets is very high.

Vishal Retail chairman Ram Chandra Aggarwal, who opened his first hypermarket in 2003 and now oversees 135 of the same spread across tier II and III towns, explains that his company’s strength lies in its foresight: “We want to be among the top five companies in Indian retailing, and any company operating in the retail space today has to recognise that a major chunk of consumers is in the hinterlands. This is where the masses are located and all the players are eyeing them. In these virgin markets, our first mover’s advantage will reap exponential returns.”

For a sector that predominantly relies on farmers and agriculture as a source of business, the future is also dependent on the government. As of now, Sivakumar says that the laws restricting agricultural produce marketing, procurement of essential commodities and futures trading constrain companies in significant ways. If theAPMC, Futures Trading, and Essential Commodities Acts were to be reformed, this would help the players procure in large quantities, hedge against risks and so on.

Sivakumar also identifies two factors as critical for any player’s future in the rural sector: First, every market has to discover its own ideal model and this discovery process involves experimentation. What is also natural in this process is that some formats wind down over time while others, the more prescient ones, move on and on. Second, in contrast to the FMCG goods for which there is a well laid out map for moving brands through the country’s interiors, stores have to sort out supply chain issues, delivery formats and reaching out processes for many other goods from scratch.

His final word: “There is no question of the rural retail revolution having been mistimed. Even if it had occurred five years later, we would still have to go through a process of consolidation and shakeouts. But as for whether the rural Indian is ready for this format, he always has been.”

Big Bazaar footprint explodes all around

Kishore Biyani does not subscribe to the view of a global meltdown. His Future Group's strategy is paying off in numbers and his outlets seem to have more and more goods to offer.

In effect, he is increasing the real estate that has been leased out to his company for more and more retail outlets. 
One wonders whether people are buying more things if they enter a pretty looking showroom or a mall such as Pantaloons or Big Bazaar. To put it in John Donne's language , "Wasn't the customer weaned till then?" 

For one, the Future Group's retail chain Big Bazaar is itself is planning to have 300 hypermarkets in the country by 2010-11 . 

The company may also increase its annual turnover to Rs 13,000 crore by 2010-11 , up from Rs 3,600 crore last fiscal on the back of its expansion. They had reported begun with their first store in October 2001 and till date have crossed the 100-store mark. This was capped with three stores that opened recently in Pune, Cuttack and Delhi. The company's top brass plans to increase the number of stores to 300 by end of the 2010-11 fiscal. 

Big Bazaar chief executive officer, Rajan Malhotra has reportedly concurred on that figure. The company has also gone on record saying that it would have another 35 stores by the end of its fiscal in June 2009 to take the total number to 135. To achieve this they are targeting a turnover of Rs 5,000 crore in the current fiscal year and have formulated plans for reaching a figure of Rs 13,000 crore by 2010-11 fiscal. 

Malhotra has also reportedly concurred on such figures as well. 

Ror the expansion, the company would be looking at both the metros and Tier I cities, besides Tier II and smaller cities. 

The strategy seems to be perfectly on track as the Big Bazaar hypermarkets had a footfall of 11 crore last fiscal and the company is aiming for an increase in the numbers up to 14 crore this year. The average size of a Big Bazaar hypermarket is 30,000 sq ft to one lakh sq ft. 

The retail industry is the largest in India among the new and the old economy industries. It employs around 7.93 per cent of the total workforce in this happening economy and also contributes to over 11 per cent of Indian's GDP. 

The retail industry in India will keep growing as it is not yet targeting even one per cent of the potential customer base and their day to day needs. 

The industry as a result is expected to rise by 25 per cent yearly growth being driven by strong incomes, mutating lifestyles, and a young and spending populating compared to an aging one in other parts of the country. 

It is widely believed that by 2015, the burgeoning retail industry in India will be worth $175 - 200 billion. Incidentally, it seems that India's retail industry is one of the fastest growing with revenue to touch $320 billion in 2009. It may also be growing at a rate of six per cent every year. 

A still higher increase of seven to eight per cent is expected owing to growth in spending in urban areas, rising incomes, and a parallel rise in consumption in rural areas.

Reliance may merge retail arms to beat slowdown

Faced with a difficult retail environment and on the lookout for a winning formula, Reliance Industries is mulling the merger of its different formats to make its retail arm more efficient. 

The company is considering merging the management of hypermarkets (Reliance Hypermart), supermarkets (Reliance Super) and convenience formats (Reliance Fresh) just a year after these formats started as separate profit centres , according to people familiar with the development. The idea of the merger is still at a conceptual stage and the company hasn’t taken a final decision. 

A Reliance spokesperson denied that the company was proposing any move to merge its three formats. Reliance Retail, which operates around 650 stores under different formats, has already taken several measures to cut operational cost, ranging from rationalising manpower to cutting office expenses. It has also reduced by almost one-third the size of its hypermarket in Ahmedabad. 

The merger of three formats will potentially kick in economies of scale and help the company rationalise its human resources, thereby bringing down overall recurring expenditure. Sources said the company is close to taking the first step in this regard by merging the respective IT and HR functions of Reliance Super and Reliance Hyper. 

Lack of experience in retail adds to Reliance’s woes 

Sources say the company’s decision a year ago to have all three formats as separate profit centres was aimed at bringing in higher efficiency and more accountability. Three formats , even if they offered several similar products, targeted different audience and needed to have separate strategies, the company had felt then but it is now re-examining this. 

India’s potentially multi-billion dollar retail industry has attracted mammoth interest from Indian and overseas corporate heavyweights in the past few years. Reliance too jumped on the retail bandwagon two years ago with a bigbang announcement. 

The outlook for the retail sector, however, has changed since then. Lack of experience in retail has only added to Reliance’s woes. The company though is not alone in battling a tough time in retail industry. A 16-year-high inflation, high interest rate, slowing Indian economy and the world teetering on the brink of recession is spelling trouble for domestic retailers. They have been struggling to keep up sales even at the cost of losing a fair share of their margins. 

Due to this, despite its financial muscle and ability to attract the best talent in the industry, Reliance has, in its short journey in retail, regularly kept revising strategies. The biggest strategic shift has been its decision to forge joint ventures in over half-a-dozen speciality formats and logistics spaces. 

Unlike other retailers, which have been more cost-conscious, Reliance is said to have been more extravagant and possibly because of that, sources say, it may be forced to take stricter measures. The company has had more employees than required on its payrolls, augmenting its costs. However, Reliance is also more capable of withstanding difficulties.

Slowing economy may offer respite to retail sector

Inflation may be eating into consumers’ wallets, but domestic retailers are not giving up just yet. Retail rentals are showing signs of fatigue after soaring multi-fold until recently. A slowing economy, hardened home loan rates and liquidity crunch indicate rental rates will soon fall in a manageable range. As of now, rentals have dropped by 5-10 % and are set to see a further fall of 15-20 % in the next few months. Even older deals are being renegotiated towards lesser per sq foot cost. 

Currently, lease rentals account for 15-25 % of retailers’ revenues in India and constitute the second-largest cost head, next only to merchandise cost. Salaries & wages and energy bills are next in line. Given the fact that operating profits of major retailers range from 5-10 % of their net sales, small savings on lease rentals can have a dramatic influence on their profitability. 

For instance, Pantaloon Retail’s rental cost for FY07 was Rs 209 crore, which was 6% of its net sales. The 80% growth in rental costs, compared to the 73% increase in sales, has hit operating margins. Though a part of the rise in rentals can be attributed to the company’s rapid expansion, the effect of soaring realty prices last year can’t be ignored. 

However, one cannot help miss the savings in the total operating cost. Even if we were to consider that rentals will stabilise at current levels, it will help Pantaloon Retail’s operating margins as the company continues to grow its revenues. 

The scenario is quite similar for Shopper’s Stop with rentals bills at Rs 101 crore for FY08, comprising 8% of the company’s turnover. Here also, the rental growth has doubled vis-a-vis the increase in retail sales. If rentals were to decline by an average of 10% at the current sales level, the company would have ended FY08 with a positive bottomline. 

EMERGING TREND: 

The domestic retail industry is following in the footsteps of its international counterparts. Having attained a decent geographic reach, players are experimenting with various formats to suit their respective business models. This is done keeping in mind the needs of the catchment area as well. 

Another important trend that has emerged from this drop in rentals is the co-existence of the revenue-sharing model in the domestic retail sector. In this system, there is no fixed monthly rent. Instead, there is a minimum guarantee amount, plus a revenue-sharing percentage between the landlord and the retailer. 

For instance, a typical co-existence deal will consist of the minimum guarantee of Rs 20-25 per month per sq ft with about 5% of revenue, compared to the Rs 70-110 per month per sq ft rent for an anchor tenant. 

In the current scenario, this model works well for the bigger players rather than the smaller players, as it is difficult to keep track of their ,sales. Big Bazaar, Shopper’s Stop, Provogue and Vishal Retail are going ahead with their expansions as planned. Some of these players have already worked out deals on a revenue-sharing basis. 

Online retailing or e-tailing is another format which is fast catching up with the conventional brick and mortar form of retailing. The fact that products can be delivered anywhere makes it a seamless form of shopping. Retailing through mobile phones, though a very recent phenomenon, is also catching up. 

GLOBAL VS INDIAN: 

Typically, international retailers pay just 3-4 % of their sales as rentals. Moreover, it is during similar downturns that global retail majors like Wal-Mart , Carrefour and Tesco increased their store presence, as rentals were low. Till not too long ago, real estate developers in India were not ready to negotiate prices, as there was ample demand for any mall located in a good catchment area. 

As retailers went on an expansion spree to attain geographical reach, it was a seller’s market. However , things have changed now. Not only have these organised retailers realised the importance of a sizeable reach, but they also know that good mallmanagement is important for a thriving business. 

Internationally, good facility management seems to be the key differentiating factor for the success of any mall. In India, too, it is now being recognised as an important deciding factor. As they say ‘customer is king’ ; it will be the customers who can make or break this entire euphoria about the retail industry’s success.

RCF in talks with rural retailers for tie-ups

State-run Rashtriya Chemicals and Fertilisers (RCF) is in talks with some leading private sector rural retail chains for innovative marketing strategies and for trading in new arenas.

RCF, which last year entered into strategic alliance with rural marketing companies such as ITC e-Choupal and Godrej Aadhar, is planning to rope in more such retail chains to enter into trading of cement, pesticides and seeds.

RCF, which is one of the largest domestic fertiliser and industrial chemical manufacturers, is in discussions with regional retail players such as the DCM Sriram Group for an alliance in South India and with Triveni of Uttar radesh.

“We are also talking to Hindustan Insecticides (HIL) to offer their entire pesticide range to farmers and with two to three cement manufacturers for strategic marketing alliances to offer cement through our network and reach. Though margins are thin in trading business, it contributes to our growth and product basket since the needs of the rural markets are changing,” said J Kohareswaran, director (marketing) of the Rs 5,243-crore turnover company.

Further, the company is planning to take up floriculture as another area of diversified business, utilising the surplus land available at its facilities. A Yes Bank report estimates that India’s rural retail market is expected to grow by 29 per cent to Rs 1.8 lakh crore by 2010, thanks to rising incomes and changing consumption patterns.

Kohareswaran said the marketing initiatives include soil testing and field demonstrations, undertaken in association with the expertise of rural retailers. The farmers will get scientific advice and training in modern agricultural practices to increase productivity through such programmes and the increase in turnover was mainly from the acceptance of such initiatives. The firm carried out over 4,000 field demonstrations during the 2007-08 period, alone with ITC e-Choupal.

RCF, which achieved the highest ever turnover during last year with a quantum jump of 46.17 per cent from the previous year’s Rs 3,643 crore, had 43 per cent of its revenues from sales of traded products.

Indian retail market to touch Rs.18.1 tn by 2010: report

(IANS) The country’s retail market will grow to Rs.18.1 trillion ($395 billion) by 2010 as organised retail is expected to be 13 percent of the total market, according to a report.”The organised retail market, which is expected to grow at 45 percent, will be worth Rs.230,000 crore (Rs.2.3 trillion) by 2012,” said the India Retail Report 2009, released by the New Delhi-based research group Images F&R Research.

“This will require investments in real estate alone of over $50 billion, much of which will be FDI spurring the balance of the trade,” it added.

“The consumer spending in India has increased by an impressive 75 percent in the last four years and will quadruple in the next 20 years, even when this quarter has seen some decline in spending on account of inflation,” the report added.

This will trigger the growth of this sector.

Food and grocery dominated the retail segment with 59.5 percent share valued at Rs.7.92 trillion, followed by clothing and accessories with a 9.9 percent share at Rs.1.31 trillion.

However, the report said the market for specialised retail, especially the luxury retail, will grow significantly in the next few years.

“Even when the metros and tier II cities will get the major share of organised retail, emerging cities like Chandigarh and Jaipur, which have a growing cosmopolitan population and high purchasing power, will emerge as new centres for the global luxury brands,” it added.

The report has contributions from over 100 think tanks in the retail industry.

“However, to enable this sector to realise its full potential FDI restrictions will have to be relaxed further and retail rentals will need to go some degree of rationalisation,” it added.

Commenting on the report, Commerce and Industry Minister Kamal Nath said: “India retail model needs to go beyond the urban shopping malls and create an attractive retail environment where a large number of rural population can also find products and services.”

Organised retail to form 18% of overall retail pie: McKinsey

This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.

“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report.

Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.

Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.

The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.

“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.

Retailers plan course correction to beat slump

Indian retailers are focusing on lower capital-intensive formats and also restructuring operations in an attempt to boost revenues and counter the slowdown.
The Future Group now plans to focus more on growing this segment in the next 12 months, said Kishore Biyani, chief executive officer of Future Group.
Aditya Birla Retail has embarked upon restructuring its operations including administration, to beat the slump in the economy, a top company official said.
The Future Group’s low-capital intensive focus includes expanding its no-frills store model, KB’s Fair Price Stores, small convenience store format Big Bazaar Best Deals, rural retail venture Aadhar, and home solutions venture Home Town.
“We are focusing a lot on return on capital employed. We are growing those formats which require less investment but have high business potential,’’ said Biyani.
The Future Group runs nearly 140 KB’s Fair Price Stores in cities such as Mumbai, Delhi, Ahmedabad among others, and plans to open 1,500 such stores in the next 18 months.
“We are trying to make our business model profitable so that we can sustain all the costs involved in the business,’’ said Thomas Varghese, chief executive officer of Aditya Birla Retail, which has over 615 stores in the country.
The group is also conducting a pilot project on smaller grocery stores under Big Bazaar Best Deals in Kandivali, a suburb of Mumbai, and if successful, the group would launch nearly 200 stores in the next couple of years, a company official said.
“We are focusing on such models where we invest Re one as capital but can reap a turnover of Rs 10,’’ Biyani said.
The Future Group is also expanding its rural retail venture Aadhar in 800 towns and villages in the next couple of years from 60-odd towns now.
“We have grown the business of Aadhar from Rs 5 crore a month to Rs 17 crore now,’’ Biyani said. The Future Group bought 70 per cent in Aadhar from Godrej for an undisclosed amount last year.
While elaborating on the business potential in the rural areas, Biyani said, “With rentals not more than Rs 8 per sq feet, business potential is huge.’’
On the other hand, the Aditya Birla group, as part of its restructuring process, plans to eliminate unnecessary posts, freeze recruitments in back-end operations and simplify administrative process, Varghese said. He, however, declined to quantify the cost saving from the restructuring process.
Aditya Birla Retail joins the likes of the Future Group which is planning to save nearly Rs 165 crore in the current financial year by cutting administrative and operational expenses.

CavinKare to take on HUL, ITC in bottled shampoo biz

CavinKare, a Chennai-based unlisted FMCG company known for its Chik brand, has embarked on a strategy which will test its mettle as a low-cost bottled shampoo-maker in the southern markets.
The company, which has successfully competed with multinationals, including Hindustan Unilever (HUL), in the sachet segment to retain leadership in key southern markets, will now have to prove its acumen in the bottled shampoo segment, which is increasingly getting competitive with the new marketing strategy of ITC and other players.
CavinKare’s sub-brand Chik Satin will address the affluent customers, pitting the company against HUL’s Clinic Plus and Sunsilk brands. Chik as a shampoo brand has predominantly been sold in the sachet format and has been positioned as an economy brand consumed largely in the rural market.
In effect, while attempting to address a larger portion of the urban market, CavinKare is also pushing its economy brand to the next level, currently populated by brands from HUL and P&G.
The overall market for shampoos in India is estimated at Rs 2,000 crore a year. The popular segment, where Chik Satin has been positioned, commands an estimated 25 per cent of this market.
According to a CavinKare executive, 75 per cent of Chik sales come from the rural market, while the industry sells only 52 per cent of its shampoo brands in the rural markets.
In the Indian shampoo market, where sachet (7ml) format accounts for 75 per cent of the total sales, Chik has been bringing in 90 per cent of its sales in this format.
CavinKare’s Executive Director Ramesh Viswanathan said, “Chik Satin is not a premium or niche segment product. It is slightly higher in the value chain.”
Experts believe that what CavinKare is attempting now is a bit risky and has not worked in the past. However, the earlier failures were at a time when affluence levels in the Indian market were far lower than what it is now. “Traditionally, when brands tried to move from the bottom of the pyramid to the top, they have not succeeded. For instance, Lux to Lux International and liquor brands such as Bagpiper to Bagpiper Gold. But then, times have changed. Those were when the economy was liberalising and now it is liberalised. It may work. We just have to wait and watch,” said Madhukar Sabnabis, Country Head (Discovery & Planning), Ogilvy & Mather.
The pricing of the new product is also done with an intention of taking on market leaders such as Clinic Plus. Chik Satin is priced at Rs 56 for a 200-ml bottle, while Clinic Plus is priced at Rs 63 and Sunsilk at around Rs 87 at the higher price point.
Sabnabis cites another recent success — Ponds Age Miracle, an anti-aging product that has found a niche for itself.
Santosh Desai, CEO of Future Brands (part of Kishore Biyani’s Future Group), believes that there is no one stand on whether what CavinKare is attempting will succeed. “When you attempt to move the economy brand up the value chain, it will not work if you peg it on price or as a category about status. It would be a numerator game, if value is equal to what you offer divided by the price.”
Desai cities the success of Lifebuoy soap that had managed to move up the value chain from being an economy product for several decades.
CavinKare has budgeted Rs 4 crore on television commercials to promote the new Chik Satin over a four-week period.

SAP sees strong retail growth

Major retailers partner with SAP to invest in an integrated solution portfolio

With over 60 high growth Indian retail companies embracing SAP technology for Retail Solutions, SAP India has made a mark in the growing Indian retail sector. This came about at the SAP Retail Customer Value Networking Event, being held in Mumbai, September 10.

According to a press release, SAP has a strong foothold in India, some of the major retail players such as are Future group, Reliance Retail, Tata Trent, ITC Retail, Great Wholesale Retail Club, Vishal MegaMart, Welspun, Nilgiris Dairy Farm, Videocon, Spencers etc. have partnered with SAP in their move to invest in an integrated solution portfolio to catalyze consumer demand across multiple channels, increase cost efficiencies, adapt to market changes and maximize profit margins. These retailers continue to increase their business in India and also SAP footprint in the Indian retail market to get better return on Investment.

Ramesh Shanmuganathan from John Keells Holdings PLC said, "We are beginning to realize the strategic benefits from our investments in SAP by leveraging its end-to-end capabilities which has helped us manage our IT footprint effectively through better business and IT alignment, whilst driving innovation and pursuing flexible business processes in providing for a stronger platform of growth for our businesses."

Some of the retailers who went live with SAP in India this year include Dabur, Nilgiris Dairy Farm, IndiaBulls, Subhiksha, Varkeys and the customer in global environment John Keells Holdings PLC (Srilanka) and Meena Bazaar (Bangladesh). SAP for Retail has further strengthened its presence with successful wins such as DLF Retail, Numerouno, Om Store Book Store in India and Gemcon Food and Agricultural Products Ltd. (Meena Bazar) and Otobi Ltd in Bangladesh. Worldwide, 6,200+ retail and wholesale customers run on SAP including 33 of the top 50 global retailers.

Tthe recently held SAP Retail Customer Value Networking Event, provided a common platform for discussion on Indian retail industry related topics, the event saw SAP showcase its investments in retail solutions, and product roadmap for the retail industry.

The other topics of interest included leveraging technology for growth and maximizing profitability through rural retailing. The forum witnessed participation from Sankarson Banerjee - CEO, Future Bazaar, Amit Mukherjee - CIO, RPG Group, Rajashekar, Executive Advisor, Wadhawan Group, Anil Garg, General Manager, Dabur, M VR Kumar – VP Asia Pac, MENA for SEAL INFOTECH and Ramesh Shanmuganathan, CIO John Keells Holdings PLC amongst others.

Speaking on the occasion, Amit Mukherjee - CIO, RPG Group, "In an industry faced with daily pressures on margins, performance and the bottom line, SAP offers robust solution which is able to handle large volumes of transactions and adapt to the changing industry landscape of the future."

Expressing his views, Anil Garg, General Manager, Dabur commented "A flexible solution platform that allows for incremental enhancements based on business needs and a clear road map for the future is critical to the long-term success. Dabur sees SAP as the IT provider of choice and a trusted partner who truly understands our business, and one that will continue to support its customers in the long run."

"Obtaining the flexibility to grow and adapt to market changes is a common objective for all of our retail customers. Having fully globalized technology in place to exploit new market opportunities and seamlessly integrate into a global operations network is crucial for many of our retail clients," said Dr. Deb Bhattacharjee, Vice President, Value Engineering, Industry & Solution Group, Indian subcontinent, "We continue to design a retail environment that puts customer needs in its epicenter and empower them to evolve as the best-run-business."

SAP has created and is operating an SAP Retail Innovation Center in India to better serve both the Indian and global markets with forward-thinking uses of retail technologies. The center houses fully globalized technology to exploit new market opportunities and seamlessly integrate them into operations network, best practices-based retail expansion and consumer intimacy programs a crucial for many SAP retail clients, states the release.

Integrated technology platform

Retailing continues to gain momentum in India with the main focus being on growing customer experience and increasing retails footprints. A Springboard Research study on IT in India's retail sector confirms SAP's strong position in the Indian market, with 27% of study respondents identifying SAP as the leading primary influencer in terms of solutions investments.

"Technology is a high-priority investment area for most large and medium-sized Indian retailers, as they look to scale up their business operations in a competitive market," said Nilotpal Chakravarti, Senior Analyst - Vertical Markets at Springboard Research. "We have seen a strong momentum for investments in ERP and other back-office solutions and SAP has emerged as a leading player in this space," he concluded.

SAP for Retail provides an integrated technology platform for retailers and a one point solution for supporting and managing different business models such as owned stores, franchise stores, shop n shop concepts. Strong business decision and analytical capabilities have enabled retailers of all sizes the power to make the right decisions quickly and profitably.

The SAP for Retail solution portfolio combines the SAP Business Suite family of business applications with a broad set of integrated retail applications to help companies profitably serve consumer demand across multiple channels.

Some of the most common solutions used in the retail industry by its customers are:

Merchandise and Master Data Management: Harmonized, synchronized and optimal workflow controlled master data across the different lines of business

Merchandise and Category Management ensures that assortments meet the expectations of customers within specific micro markets, determines optimal product mix, prices and promotions – supporting step-by-step cooperation and coordination in development, implementation, and monitoring of business plans.

Forecasting and Replenishment; solution that enables retailers to dramatically improve on-shelf availability, reduce inventory, and optimize the supply chain.

Workforce Management - A centrally managed, Web-enabled workforce management solution gives retailers improved flexibility and control over their business processes. It allows corporate management to take more ownership of schedule planning and execution, giving managers more time to assist customers and coach employees.

Store Management: Store management systems need to cater to the fast-changing needs of customers today. These systems must quickly gain fast and reliable, accurate, and insightful customer information in many ways,

POS Data Management - enables you to examine all your key issues – events and promotions, prices and margins, and reason codes for returns – as well as a host of other parameters.

RFID Framework

FMCG companies get IT savvy

Adoption of projects like ‘push technology’ in sales expected to improve efficiency.

Fast moving consumer goods (FMCG) companies are looking at 10-20 per cent improvement in production and efficiency levels this year because of the adoption of newer technologies to track expansion of product portfolio and manufacturing locations, besides aggregation of godowns and shipment warehouses.

FMCG companies will spend around 10-15 per cent of their net profit on technology. Companies like ITC Limited, Emami and Marico have forayed into diverse businesses in FMCG alone. This has not only led to the rapid expansion of the supply chain but has also increased complexities.

ITC’s manufacturing locations have increased rapidly to about 200 from about a dozen-owned manufacturing facilities for its different businesses. In addition to these manufacturing locations, ITC’s aggregating of godowns and shipment warehouses have grown exponentially in a couple of years.

Emami’s recent investment in IT has ensured finalisation of its balance sheet in a record 35 days against the 60-day norm.

Mohan Goenka, director, Emami, says: “We foresee an improvement of 10 per cent in production and efficiency levels at Emami for financial year 2008-09. This will be achieved by implementing sales and operation planning, demand management and distribution resource planning which will enable system control to forecast sales, check inventories at locations, plan manufacturing resources and logistics to meet the customer schedules.”

Marico, on its part, is investing in better connectivity through enterprise portals, wi-fi enabled offices and in unified communications.

Marico is investing in automation of many workflows like Writeoffs, insurance claims, and media spend management portal.

According to Udayraj Prabhu, head, business applications, Marico: “We have commenced Project Edge, an initiative to improve the budgeting, planning and review systems using the TM1 tool of IBM-Cognos. This will enable us to strengthen our budgeting, planning and review processes by making them quicker, error-free and less tedious. This should lead to a significant saving in time for those involved in these activities.”

The company has also launched HR portal platforms as active channels of communication within the organisation.

ITC Ltd is building an IT infrastructure to bar code its produce at the warehouse itself, even before it reaches the retailers.

This is expected to help ITC keep track of product manufacturing time, thereby enabling implementation of first-manufactured-first-out (FMFO) strategy, which means items manufactured first are shipped out of the factory and the warehouse earlier than products manufactured later.

Among other projects, ITC will also implement this year usage of ‘push technology’ for its sales force.

VVR Babu, chief information officer, ITC Ltd, says: “Each salesman is allotted specific locations and he has to track sales and requirements of all shops and stores of a particular area. We are working on an integrated IT system which will gather and push information onto our salesmen’s laptops so that they don’t have to waste time looking up details on the company portal. For instance, if a salesman is covering 10 outlets of a region, every evening ITC’s systems will push onto his laptop the sales, distribution and requirements of that region and also the target to be met.”

Business Std: Thursday, Sep 11, 2008

To open 30 Xcite consumer electronic outlets in India by 2009.

Impact Retail Private Limited, a newly-incorporated company promoted by West Asian retailer Tony Jashanmal, has drawn up plans for the Indian consumer electronics retail market.

“We plan to open 30 exclusive Xcite consumer electronic showrooms in top 15 cities in the country by the end of 2009 with an investment of Rs 200 crore,” Srikant Gokhale, chief executive officer of Impact Retail, told mediapersons, after inaugurating the company’s first store in India at Hyderabad on Wednesday.

Impact retail has forged a franchise and original equipment manufacturer (OEM) relationship with Alghanim Industries, a Kuwait-based conglomerate with interests in consumer electronics retail, auto retail and manufacturing, to run its stores under the Xcite brand.

Gokhale said each of the multi-branded large-format stores, with a carpet area of over 20,000 sft, will offer over 3,000 products across different categories – home entertainment, small appliances, white goods, computers and peripherals, communication, music, imaging and gaming – from 150 national and international brands.

Besides, it will sell its private label products (excluding laptops and mobiles) under the Wansa brand, sourced from the OEM.

“The company will soft launch eight Xcite stores in cities like Pune and Bangalore by the end of 2008 to fine tune our understanding of customers and the format. With this learning, we plan to expand aggressively for a pan-India footprint,” Gokhale said.

The Indian consumer electronics market is currently pegged at $13.3 billion and growing at 10 per cent a year. Of this, organised retail accounts for 7.3 per cent.

5 Reasons Retailers Replace their Retail Management System

Article From:Software advice

http://www.softwareadvice.com/articles/retail/5-reasons-retailers-replace-their-retail-management-system/

As software selection advisors, my team has talked to thousands of retailers considering a major new software purchase. The vast majority are replacing an existing system - one they’ve used for years. Why?

Why replace what’s familiar? Why pay up for something entirely new when an upgrade is - on paper - less expensive? Why move away from a long-term vendor relationship?

There are plenty of reasons. Here are the top five responses we hear when we ask, “What’s driving you to replace your existing system?”

1. Improve usability and adoption. For many businesses, the system that best matched their functional requirements turned out to be too difficult to use. In an environment where employee turnover is high, poor usability can make it very difficult to get new employees up-to-speed. By far the biggest challenge we hear from buyers is that their existing system is non-intuitive; they are looking for a new system and their primary requirement is ease-of-use.
2. New store growth. It’s a big leap to go from managing one store to managing two, five ten, one hundred or more… This challenge is especially difficult if a retailer plans to manage their inventory and accounting for multiple stores in one single POS software or inventory management system. Often the simple, single-store system that was easy to get going is grossly insufficient for rapid new store growth.
3. Poor tech support. Frequently, buyers come to us when they’ve gotten too frustrated with the poor support they are getting from their existing vendor. Either the vendor was a “one-man shop” that couldn’t keep up, or the vendor “lost its personal touch” as it grew too big, too fast. This impetus for change is even more powerful when poor service is combined with increases in support fees.
4. Integrating multiple channels. Many retailers are moving to support multiple channels - retail stores, e-commerce websites, mail-order catalogs… As they roll out new channels they often implement separate, redundant software systems - one for each channel. We talk to a lot of buyers that are now looking for a new, all-in-one system for multi-channel retailing.
5. Hardware failure. Many retailers have been on the same system for a decade or more. They may have remained patient with an old, DOS-based system, but their hardware eventually gave out. An upgrade to new hardware presents a logical opportunity to bring their software up to current standards as well. Much of the time, they can’t even install a dated system on new hardware and are forced to move to new-generation software.

We’ve heard many other reasons for replacing existing systems, but these are the most common. They also present a good lesson for new retail organizations that want to invest ahead of rapid growth. Consider these challenges and invest in a retail management system that will support your expansion plans.

ITC’s ‘holy smoke’ biz adds to the bottomline

Business Line:

If there is a product that requires lighting up, ITC will make it — cigarettes, of course, but also agarbattis and candles.

ITC officials say that the company’s leap into fragrant incense sticks received a telling comment from Sri Sri Ravishankar — “from smoke to holy smoke.”

In a business context, the contribution of Mangaldeep agarbattis to ITC’s turnover is a trifling Rs 40 crore to the company’s net sales of Rs 13,000 crore. However, the business is growing and is profitable. The three-year-old agarbatti division has now gathered enough momentum to grow, like its safety matches business did, into a medium-sized business in a few years.

Now, ITC wants to replicate the agarbatti model in its new candles business. The company got into this business only in November last year. A Bangalore-based company Wellburn makes the candles for ITC which are packed and exported under the brand ‘Expressions’. In November-March last year, ITC sold Rs 1.2 crore worth of candles.

US market

But the US market for aromatic candles is $3 billion big. Mr V. M. Rajasekhar, CEO of ITC’s agarbatti division, who is also incharge of the candles business, says that ITC saw an opportunity when the US imposed an anti-dumping duty on Chinese candles. The market held by the Chinese is now slowing moving into Vietnam and Thailand and ITC moved into for a bite.

However, why does a company of ITC’s size get into these little businesses? (There are many of them — stationery, greeting cards, and organic manure.) Mr R Srinivasan, Member, Corporate Management Committee, notes that first of all these businesses have a synergy with one of ITC’s main lines of operations — FMCG. Secondly, they are profitable, with prospects to grow to a few hundred crores of sales in good time.

Building managers

But according to Mr Srinivasan, more important than these considerations is the management-bandwidth spin-off that ITC gets from these divisions. “Each division is an incubation centre for a future manager,” Mr Srinivasan told Business Line. Professionals who manage these divisions, like Mr Rajasekhar, learn aspects of brand building, quality control, handling human resources, and above all, working under tight budgets.

Marketers adapt retail trends in changing times

ET: Monday
MUMBAI: Traditional shopping-streets, bazaars and markets, predecessors of India's organised retailing, have emerged as equal contributors to the country's retail eco-system and have become resilient.

India's leading high streets such as Connaught Place or Khan Market in Delhi, Mumbai's Linking Road, Colaba or Breach Candy, Brigade Road in Bangalore, T Nagar in Chennai, Kolkata's Park Street and Pune's F C Road have adapted themselves to cater to the changing aspirations of consumers as well as changing retail trends.

The appeal of the high street is expected to be enhanced in the future, a study conducted by international property consultants Jones Lange La Salle-Meghraj (JLLM) said.

"India's leading high streets have been at the forefront of India retail and consumer change and have demonstrated their resilient nature."

"The prime shopping street rentals across the board in these streets have almost witnessed an increase over the last few years ranging anywhere from 30% to up to 100%," said JLLM country head Anuj Puri in its study "Leading High Streets, Embracing Change."

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Kolkata, Pune, Bengaluru, Hyderabad and Chennai also figure in the pecking order. More than 50% of the top 30 brands with high penetration are of international origin, while the rest are domestic brands.

High streets in particular enhance the retail appeal and attractiveness of a brand. Malls on the other hand, enhance the overall shopping experience for any brand.

But the ability and willingness of the buyers to spend and the catchment area are some of the key factors for growth of these high streets, Mr Puri said.

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Malls in India are taking time to establish themselves as a one-stop destination. Also, the construction of a mall takes time. Moreover, usually high-end malls come up in some distant suburb or off-prime locations.

But high streets do not have that kind of customised environments. Pantaloons CEO Rakesh Biyani said, "High-street shopping areas are existing since ages.

It is expected that they will do well, in spite of organised retail coming in. Retailing is a new phenomenon as far as Indian consumers are concerned. But unfortunately there are not many high streets in India."

The retail supply is limited in inner city locations of high streets. With the customers base exploding over the years, there is a greater demand for products.

Despite the high valuations and the spectre sealing in the non-regularised commercial streets, Delhi's main high streets have been successful in targeting consumers, as well as national and international retail brands.

Innovative retail concepts trigger consumer frenzy

Source: ET, NEW DELHI:

They are making enough noise to pull people to malls, they are the toast of big retail set-ups and are a small but fast growing part of a multi-million dollar industry within the country. Yes, we are talking about recreational retail. From pottery-painting to portrait-making, creating toons or casting gold and silver impressions, there are a variety of concepts that abound in malls or exist as standalone ventures. In fact, a whole new concept of leisure retail beckons the Indian consumer like never before.

“Indian consumers are rapidly upgrading lifestyles and their recreational spend is growing by leaps and bounds. But entertainment options for them are still very limited. That’s when we decided to come up with Colour Factory, places where people can come and be themselves,” says Vikas Verma, Founder and CEO, Colour Factory. The company started operations in January 2006. At its stores, people can choose utility items such as cups and mugs and colour them at will with food-safe colours. These are then glazed, fired and returned to them within a week.

Verma noticed something similar in an outlet in Netherlands and brought the concept to India. “We are a small part of the Indian recreational industry that is approximately worth Rs 20,000 crore. We currently have five stores and plan to have five more by the year-end. The fact that we are growing at 70-80% per annum proves that people are liking the concept. We had set up a temporary camp in Meerut and people there too were extremely excited.”

Besides Verma, there are others who have some illustrious clients for their unconventional retail concepts. Ask Bhavna Jasra, CEO, First Impression, who casts 3D hand and foot-impressions in gold, silver and bronze. Bhavna, who started the concept six years back after chancing upon tiny foot impressions of a friend’s daughter in London, today counts famous names such as Abhishek-Aishwarya, Rani Mukherjee, Anil Kapoor and Subhash Ghai as her clients.

Says Bhavna, “I have been achieving steady 30-40% y-o-y growth over the last three years. It’s an extremely niche concept and I have deliberately kept it class rather than mass.” With a price point starting at Rs 15,000 for babies and Rs 30,000 for impressions of a couple holding hands, the concept no doubt is niche. But that hasn’t stopped its growing popularity and Bhavna has already introduced her second brand under First Impression called ‘Photo Concepts’.

Ditto for Meghna Pant, CEO and founder of Make My Toon, which is into the business of making customised cartoons online. The costs vary from Rs 3,000-10,000 depending on the clients’ needs. “We got a very encouraging response. We started a year back and at that time we barely got one-two orders a month as against 30-40 orders a month now,” she says.

But how effective are these concepts in a market where acceptance of unconventional business models is yet to pick momentum? “We have 50 people visiting our store everyday. The conversion rate is greater than 50%. This is an American concept but today’s Indians are ready for it. They are well travelled and give us great response,” says Surabhi Sawhney, director, StarShots, a store where people can get themselves properly modelled and have photographs clicked.

The fact that these concepts are affordable adds to their popularity. While a StarShots portrait costs anywhere between Rs 2,500 and Rs 5,500, Colour Factory’s products cost in the range of Rs 145-200. But even if they are priced in a higher range, the concept is unique and does draw eyeballs. “When I started six years back, the concept was novel. But now with increasing travel, exposure and awareness, the market has opened up considerably. I get at least 100-200 enquiries a month and convert close to 50% of them into sales,” adds Bhavna.

What’s more, their traction power also keeps mall management in high spirits about housing such retail concepts. “More than footfalls, such stores help drive interest to our mall. That is why they are so popular. We take extreme care before selecting the outlets. They are unique and that’s why they are here,” says Anjali Wadhawan, senior business development manager, Select CityWalk Mall in Delhi. The mall has invited some such stores to start operations in its premises. Their growing numbers and customer interest is a clear sign of the fact that leisure retail is definitely here to stay.

Strong consumer demand should help boost revenues

Growth in consumer spends and value generated by price hikes are expected to deliver steady growth for fast moving consumer goods (FMCG) companies in the quarter ended March, 2008.

The year-on-year average growth in the operating profit growth could be around 18 per cent on a net sales growth about 15 per cent while the net profit is expected to be about 20 per cent.

The better performers in the FMCG space could be Nestle and Godrej Consumer: the former is expected to post the highest growth in net sales over around 17 cent whiel the latter Godrej is expected to post the highest growth in net profit at 40 per cent. Both these firms should benefit from margin expansion resulting from price hikes taken by them to offset cost increases.

ITC may well post a decline in volumes growth due to the recent excise duty hike on non-filter cigarettes. However, together with the FMCG and other businesses, ITC should turn in a growth in net sales of over 11 per cent and growth in operating profit of close to 18 per cent. (Rs crore) Company Net sales Operating profit Profit after tax Q4FY08 E Q4FY07 Change % Q4FY08 E Q4FY07 Change % Q4FY08 E Q4FY07 Change % ITC 3,867 3,466 11.6 1,095 930 17.7 753 650 15.8 HUL 3,627 3,184 13.9 446 362 23.5 397 333 19.2 Nestle 1,054 899 17.2 220 178 23.2 139 111 25.4 Dabur 480 444 8.0 86 73 18.0 75 65 15.0 Marico 359 335 13.0 42 38 12.0 30 27 11.0 Tata Tea 287 251 19.0 18 15 26.2 11 2 636.3 GCPL 210 186 12.9 39 32 21.2 35 25 40.6

Price hikes taken in the detergent category and growth in personal care products business could help Hindustan Unilever deliver a growth in net sales of about 14 per cent and an operating profit growth of about 24 per cent.

Other companies which are expected to witness strong growth in earnings are Dabur, Marico and Tata Tea. However, Dabur's expected net sales growth of 8 per cent and operating profit growth of 18 per cent would be primarily volume-driven as it has not taken any price increase in this quarter.

Marico should deliver a revenue growth of 13 per cent and an operating profit growth of 12 per cent, enabled by the growth in sales of its functional foods and hair care brand Parachute.

For Tata Tea, the impact of profit from Glaceau stake sale could cause a jump of over 600 per cent in net profit. However, its operating profit due to better domestic performance could grow by 26 per cent and net sales are expected to grow by about 19 per cent.

State Bank of India takes no-frills ATM to rural masses

India's largest bank is turning to one of the country's smallest technology companies for a new minimalist cash machine it hopes will solve the subcontinent's chronic financial services shortage.

State Bank of India (SBI) has 10,000 branches, the second largest network in the world, but struggles to reach the farming communities that make up 70 per cent of India's population.

About 85 per cent of India's workers are employed in the "unorganised sector" – where wages are paid in cash – and at least half do not have a bank account. Hoping to reach the underbanked masses, SBI is trialling a new automatic teller machine (ATM) that costs a tenth of the price of conventional models and is cheap enough to deploy in areas where the average transaction is 100 rupees (£1.25).

Built around a pared-down software platform and connected to a bank via the web, the Gramateller ATM makes do without the frills found on its Indian city cousins, such as the ability to make payments to the local temple.

Instead it includes features useful for country living. A fingerprint scanner provides an identification system suitable for a country where 70 per cent of the population is illiterate. It runs on just 60 watts of electricity – a fraction of the 3,000 watts required by a conventional ATM – to cut the cost of supplying backup power in areas where blackouts are common. The new generation ATM also emits far less heat, which means unlike a traditional cash machine, it does not need to be housed in an air-conditioned closet.

Moreover, though it will only handle a single denomination of currency, the Gramateller can take deposits and deal with dirty and crumpled notes – helpful, since rural users are often suspicious that crisp new cash is forged.

The machine has been developed by Vortex, a Madras-based technology start-up funded by a 2 million rupee (£60,000) investment from Aavishkar, a specialist "micro venture capital" firm that is backed by groups including Deutsche Bank. ICICI, India's largest private bank, is also piloting the technology while one of Indonesia's largest retail banks has told Vortex it will "buy as many ATMs as the company can build" – provided the Gramateller passes its current field tests.

"Manned branches are too expensive; conventional ATMs cost too much and are not equal to the challenges of rural environments," Lakshmimarayan Kannan, of Vortex, said. "We built the Gramateller to bring banking in reach of those not covered today."

Comparisons with developed economies suggest the market for the minimalist ATM is potentially massive. In the US, where credit cards are common, there is a cash machine for every 1,000 people. In India, where cash is still king, there are only about 30,000 machines in the entire county – one for every 43,000 people – and most are densely packed into big cities.

However, the Gramateller is only one of several "branchless banking" models being tested around the world. In the Philippines, for instance, Globe Telecom customers can operate electronic accounts through mobile phones and similar systems are being used across Africa. In India ICICI already uses microfinance institutions, which specialise in granting tiny amounts of credit, as retail agents.

Against mobile-phone based systems, the Gramateller may be relatively vulnerable to thieves. However, Mr Kannan points out that it will carry only about a fifth of the amount of money found in a city ATM. "There won't be a need to have very much cash in our cash machine," he said. "Actually, there are likely to be plenty of assets around it worth more."

ITC to expand its retail footprint

ITC`s lifestyle retailing business division is planning to expand its retail footprint further by setting up more Wills Lifestyle, John Players and Miss Players stores across the country, reports Economic Times.

The company has also embarked on an active exercise to create a stronger brand and retail identity for Wills Lifestyle, which it wants to position as a more international and aspirational brand.

ITC has piloted a new store concept with FRCH Design of the US, a specialist in store and mall design. Three concept stores have already been launched, two in Mumbai and one in Delhi. It is also working with the UK`s Elemental Design and The Friedman Group from the US in areas like product presentation, visual merchandising and retail training.

The company intends to increase the number of Wills Lifestyle stores from 250 to 400 by the end of 2008-09.

Fortis HealthWorld enters rural India with Godrej Aadhaar

Fortis Group company Fortis HealthWorld Ltd (FWHL) on Monday said it has tied up with the rural retail initiative of Godrej Agrovet Ltd, Godrej Adhaar, to open pharmacies in rural areas.

By setting up FHWL pharmacies jointly with Godrej Adhaar, the company seeks to empower the rural India mainly the farming community by providing all encompassing health needs under one roof, FWHL said in a statement.

These stores will also be equipped with a wide range of fast moving health good and support systems. To start with these Aadhaar Pharmacies are being launched at the key Aadhaar centres, at Taran Taran, Batala and Mehta Chowk in Punjab, it added.

"This partnership with Godrej Aadhaar is an integral part of our commitment of providing world class pharmacy and allied services to rural India," FWHL CEO Ashish Kirpal said.

"The rural market in India holds huge potential for pharma industry. Godrej Aadhaar with its extensive reach in Rural areas is uniquely positioned to provide a platform for products and services for rural areas," Godrej Agrovet Ltd CEO B S Yadav said.

Fortis HealthWorld is the retail arm of the Fortis Group, which is planning to set up retail network of health stores across the India.

Hariyali Kisan Bazaars: DSCL

Hariyali Kisan Bazaars are helping transform rural India by providing all manner of services to farmers.

While the retail revolution in urban areas is going ahead at its own pace, the retailing in rural areas is also getting modernised in a unique manner to cater exclusively to the wide-ranging needs of customer-farmers. The trend setter in this case has been the “Hariyali Kisan Bazaar” chain launched by the DCM Shriram Consolidated Ltd (DSCL) in 2002-03 with a well-conceived model of value-added retailing.

Beginning with just five outlets, the Hariyali chain has already grown into 127 centres spread across seven states. Interestingly, the turnover of this chain has clocked a massive 75 per cent growth in last one year due to higher sales and rapid expansion of the network. The footfalls in each of these outlets averaged around 150 to 200 per day, rising to even 1,000 a day during key phases of the cropping cycles.

The spectacular success of the DSCL initiative has, significantly enough, attracted the attention of the Harvard Business School which took it up as a case study and discussed it in the prestigious international agri-business seminar held last month in Boston.

Indeed, what sets the Hariyali enterprise apart from normal retailing is that it goes beyond just the sale of farm inputs or household necessities to provide farmer-clients technical guidance and other support services to improve farm productivity and net returns. All the salesmen in these bazaars, notably, are agricultural graduates and trained agronomists. Besides offering guidance on cropping patterns and technology issues, they also hold training courses at various Hariyali centres and even visit the farmers’ fields to offer on-the-spot problem-solving counsel.

Besides, Hariyali outlets are information technology-enabled and have running strips displaying current as well as futures prices of agricultural commodities. The farmers are advised on post-harvest operations like grading of farm produced to fetch higher prices in the market. Many outlets have petrol and diesel dispensing stations attached to them. The bottomline is that these centres seek to meet most, even if not all, the needs of the farmers under one roof.

The men behind this rural retail movement, Ajay S Shriram and Vikaram S Shriram, DSCL’s chairman and vice-chairman, respectively, attribute its success to winning the trust of the farmers through the supply of genuine products and fair and transparent business. They have, indeed, chosen to adhere to the best practices for retailing as are followed by organised urban retail ventures. As such, these outlets deal mostly in branded products of reputed companies, offering the customers wide range to choose from. “The farmers want good quality products and they are willing to pay for them,” they maintain.

DSCL plans to expand its outlets to have an all-India presence in about two years. “We want to open Hariyali centres in all agriculturally important areas,” say the Shriram brothers. The products on offer, apart from all farm inputs, range from consumer durables like television sets, dish TVs, mobile phones and washing machines to factory-packed grocery, luggage items, cosmetics and toys.

DSCL has already tied up with ICICI Bank for providing banking services at the Hariyali outlets. Talks are in progress to have similar arrangements with a few other banks, including HDFC Bank. For providing insurance cover, the company has tied up with ICICI Prudential and some others.

The scope of the Hariyali model is now proposed to be enlarged to provide warehousing facilities to enable farmers to defer the sale of their produce to get better returns. Five warehouses with an area of around one lakh square feet are currently under construction in various northern states. These are likely to become operational in the next couple of months. The receipts of these warehouses for stored products will allow farmers to get bank loans against them.

Not only that, a medical centre is being set up at one of the Hariyali outlets in Punjab with facilities for tele-medical services. Fortis Hospital is collaborating in this venture. Besides, DSCL is in touch with NIIT to offer computer training facilities at Haryiali bazaars.

Indeed, the Hariyali bazaar initiative has shown how well thought out initiatives in rural retailing can help transform Indian agriculture and improve the economic conditions and living standards of village dwellers, even while being a commercially sustainable business. As such, there can be little doubt that rural retailing on modern lines is here to stay.