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.

"Trinethra" being rebranded as "More" by Aditya Birla Retail

Chennai, Dec 20: Aditya Birla Retail Limited will rebrand 'Trinethra' grocery retail supermarkets to 'More', to offer consumers a more fulfilling retail experience. Talking to newspersons here today, Aditya Birla Retail Limited CEO Sumant Sinha said the 'More' stores would offer the customers a wide range of products, including fruits, vegetables, home care and dairy products.

''The acquisition of Trinethra Super Retail has provided Aditya Birla Retail a strong retail footprint in South India, extending to 260 stores over more than half a million sqft in Andhra Pradesh, Karnataka and Kerala,'' he said. He said the 'More' stores were developed after an in-depth research to understand the needs and expectations of Indian consumers.

Mr Sinha said to ensure supply of fresh fruits and vegetables to the customers, the company was building direct linkage with the farmers. ''It is also investing to develop a robust supply chain, connecting households more directly with the farmers,'' he added.

Stating that the demographic movements in India over the last two decades had made organised retail a necessity, he said ''the retail industry is today valued at around US Dollar 320 billion.''

Hype over for hypermarkets?

In February 2004, RPG Retail was launching its second hypermarket – Giant and had plans to open 20 more Giant hypermarkets by the end of 2006 at a total investment of Rs 10 crore for every store. Since then, things have not gone quite to plan. Giant, now renamed Spencer’s, has opened barely six stores in all in the three years since.

Back in 2004, it was widely expected that the hypermarket would emerge as the dominant model in the fledgling retail space, virtually snuffing out competition from neighbourhood grocery stores. The motto was quite simply: Think Big.

Yet today, what is growing, and rapidly, are the smaller retail formats - convenience stores, food and grocery and discount stores. In a period of just under a year, Subhiksha, with its 1200 sq. ft. discounting format has become the largest domestic retail chain, on the verge of become the first 1000 store chain.

More interesting, the biggest entrants in the space are all thinking small - whether it’s Reliance Fresh, now close to 300 stores, Aditya Birla Retail’s More and ITC’s Choupal Fresh. The Bharti Wal-Mart joint venture will also look at opening smaller stores in tandem with their larger hypermarket and cash and carry operations.

Even Pantaloon Retail is joining the bandwagon. Less than a month ago, India’s biggest retailer announced that it was setting up a chain called KB’s Fairprice Value, a neighbourhood convenience store that reach 1200 stores in another year. Hypercity CEO Andrew Levermore has picked up the same cues: last week he announced that they were setting up a neighbourhood convenience called Expresscity, each no larger than 4000 sq ft and driven largely by food and grocery and will grow to 250 stores in five years.

August 18, 2007
Source: Economic Times

The Choupal Saagar is rural hypermarket and is situated around 6-10 kms from small towns. This concept might not be doing record-breakingly well, but the stores are in handsome operating profits.

But the same concept hasn't caught on in Urban India. The concept of going to a hpermarket situated a little outside the city is still far away and too much of a gamble to take for big retailers. The One-Stop-Shop hasn't materialized yet. The only store that is currently in running is the Metro Cash and Carry concept, as in bangalore. The minimum amount of purchase here is Rs.1000/-. But this store plays the role of a wholesaler more than a retailer.