Updates on the Indian Retail Sector

Weekly Retail News

The categories covered in this report are: (Click to view)

Big players – plans and investments
International
Regional Trends
Support Industries
HR News
Unique formats
Government Policy
Sector specific

Big players – plans and investments

1. Future Group to invest $250 million in hospitality sector
The Future Group will soon be getting into the hospitality sector by setting up a chain of fast-food thali restaurants. The company is still finalizing strategy to enter the hospitality sector. The company will be investing close to $280 million through its financial division Futures Capital. According to sources, the company will be leveraging its Yatra brand for the chain of thali restaurants.

The Future Group is also looking for partners in the hospitality business for setting up budget hotels and mixed use hospitality services and is likely to target business hubs such as Gurgaon, Noida, Mohali, Navi Mumbai, Bangalore and Hyderabad.
Tuesday, November 21, 2006
Source: The Economic Times

2. Reliance Retail looks for new partners
Reliance Retail is looking to tie up with companies such as Dabur, Sanyo, Godrej and Timex as suppliers to boost its organized retail venture. The company will be reviving its ‘Vimal’ brand with a Rs. 400 million marketing and advertising campaign. The company will soon be appointing a brand ambassador to popularize this brand.

Reliance is also working to include several small garment manufacturers in Gujarat to supply merchandise. After its launch in Hyderabad, the company will be opening stores in Delhi by December 28, 2006, opening 22 stores in the city, including stores at Star City mall in East Delhi, Noida, Paschim Vihar and Gurgaon.

Reliance will also be opening stores in Bangalore and Ahmedadad in December 2006. The feedback from the Hyderabad store opening have been encouraging, especially for the business to business sales strategy. In this format, Reliance stores open at 4am for small vendors and local buyers at a wholesale rate. The company’s loyalty programme has also received good reports, with 27,000 members signed up so far.
Friday, November 24, 2006
Source: Business Standard

3. Future Group to open more stores in Kolkata
The Future Group announced that it will be opening all-formats to Kolkata, including its mega stores, in the next two years. At present the company has 31 formats under its Pantaloon Retail name and will be adding more on a regular basis. While some of these formats are clubbed together at Pantaloon of Big Bazaar stores, most function separately such as Food Bazaar or Fashion Station.

The company’s mega stores are currently located in Mumbai and Ahmedabad and will be opening in other cities. Most of these stores have over 200,000 sq ft of space and are both stand alone or as part as malls. Pantaloon Retail has classified all its formats as either value or lifestyle.
Tuesday, November 21, 2006
Source: Business Standard

International

1. Shoprite firming plans to open in India
South African retail chain Shoprite Holdings, a division of wholesaler Shoprite has been making firm plans to enter the Indian retail market. The company is the largest retail chin in Africa, with 846 outlets over 17 countries in Africa, the Indian Ocean Islands and South Asia.

The company is planning to launch wholesale trade in food products, with their own trademark and brand. The Indian division will pay royalty to the parent company for the use of its brand. At present the Shoprite proposal is under consideration with the Foreign Investment Promotion Board (FIPB). Metro of Germany has been in the country in the wholesale sector for the past few years.

According to reports, Shoprite will be investing Rs. 250 million in the Indian company, with Rs. 60 million in the initial phase. Shoprite will be setting up a cold chain in suburban areas of large cities, with an eye on good road connectivity from highways. Shoprite is also keen on providing technology to kirana stores to work with them, instead of competing with them.
Saturday, November 25, 2006
Source: The Economic Times

2. Future Group in talks with WPP
The Future Group is reportedly in talks with $10 billion worth communications group WPP to possibly set up Future Media, a new division to oversee development and management of the retail media. If it goes through, Future Media will add all of WPP clients as advertisers. Sources also suggest that WPP could invest in Future Media.

Although, Kishore Biyani MD of Future Group declined to comment, he spoke of talking with several players to increasing company revenues, and a clearer picture is likely to be seen after November 2006 end.
Tuesday, November 21, 2006
Source: The Economic Times

Regional Trends

1. Tier III cities growing rapidly due to significant cost advantage
India’s tier III cities are likely to see significant growth due to significant cost savings, as they are one of the most preferred investment locations for global real estate and investment companies over the next 3-5 years. The preferred locations are Jaipur, Coimbatore, Ahmedabad and Lucknow.

According to surveys, these cities have the talent pool, low real estate costs that will lead to increasing interest in investment in these cities, as compared to mature markets such as Mumbai and Delhi, which have high real estate costs and socio-political risks. Bangalore and Gurgaon are considered transitional destinations as they have a large pool of human resource and lower cost real estate.
Friday, November 24, 2006
Source: Business Standard

Support Industries

1. Spin-offs galore from the retail sector
India’s retail boom has seen several beneficial spin-offs for a variety of allied industries such as logistics and air-conditioning. Newer industries are seeing a boom arising from the rapid growth of the retail industry in India. With an expected $412 billion investment projected to come into the Indian retail industry by the year 2011, there are several sectors that will continue to profit from this boom.

Both Indian and foreign companies in sectors such as airlines, commercial refrigeration and air-conditioning, logistics, smart card makers are all tying up with retailers to be part of the growth. One of the first industries to see this growth is the commercial refrigeration and air-conditioning sector, due to the rise of organized food retailers.

Logistic companies are also poised for significant growth and several foreign companies such as Bax Global, Prologis and PWC Logistics are expanding operations in India. Indian operators include The Tata Group which as tied up with DHL for its Croma Stores, Air Deccan which is in talks with several retailers and Go Air which is soon launching its cargo division.
Thursday, November 23, 2006
Source: The Hindu Business Line

HR News

1. CEO of Inorbit resigns
Yogesh Samat, CEO of Inorbit Malls, a division of K Raheja Group has put in his papers and will be moving to a new retail venture. He joined Inorbit Mall in 2004 from Barista, where he has the COO, and before that with Lakme, where he was part of the team that developed the Lakme Salon business. As the CEO of Inorbit Mall, he was responsible for expanding the mall to three new locations, in Navi Mumbai, Thane and Hyderabad.

Inorbit Mall is widely known as being India’s premier mall destination and was given an award as the Mall of the Year in 2005 in the ICICI Bank Excellence in Retail Awards. He told Economic Times that, “I feel that this is the right time to move on and start my own retail venture. This is a very interesting phase in the retail climate of the country and there are very few entry barriers.”
Monday, November 20, 2006
Source: The Economic Times

Unique formats

1. Godrej Aadhaar ties up with HPCL
Godrej Agrovet’s agri-services and retail division, Godrej Aadhaar signed an agreement with Hindustan Petroleum Corporation Ltd (HPCL) to set up Aadhaar Express, at HPCL’s ‘Humara Pump’ rural retail outlets. According to C K Vaidya, MD of GAVL, "We believe that strategic partnership is the key mechanism that would enable us to work towards a viable business model in the long term. The vast network of `Hamara Pumps' will enable us to reach out to the masses and larger catchments of villages in a short span of time. With this establishment, the rural customer will now have an option of meeting his agricultural, household and fuel requirements under one roof."

At present, there are 775 ‘Humara Pumps’ across India and will be increasing them to 1,100 by March 2007. Godrej Aadhaar also opened its first Greenfield hub at Barnala in Punjab, a 15,000 sq ft outlet.
Wednesday, November 22, 2006
Source: The Hindu Business Line

Government Policy

1. Retailers appeal to include retail under Apprentices Act
Indian retailers are appealing to the ministry of Labour and Emp0loyment to cover retail sales and customer service assistants under the Apprenticeship Training Scheme of The Apprentices Act. The Retailers Association of India (RAI) has conveyed its desire to the Directorate-General of Employment and Training (DGE&T) to create some guidelines.

According to Gibson Vedamani, CEO of RAI, "Modern retailing is growing in India. There is currently a huge gap between the demand and supply of manpower, with a requirement of over 2 million retail sales and service personnel in the next two years. The current supply of trained manpower is very negligible. There is an impending need to train people manning the retail industry."

If retail sales and customer service assistants are included under the apprenticeship training scheme (ATS), it will help in people finding jobs and being able to meet the manpower needs of the retail sector.
Tuesday, November 21, 2006
Source: The Hindu Business Line

Sector specific:

Apparel & Footwear

1. Madura plans to increase retail presence
Bangalore based Madura Garments, a division of Aditya Birla Nuvo division, will be doubling its stores, Planet Fashion and Trouser Town, in emerging urban areas in India and West Asia. At present, the company has over 200,000 sq ft of space. Madura Garments sells several well known brands such as Louis Philippe, Van Heusen, Peter England, Allen Solly, SF Jeans and Byford.

New stores will be set up in towns such as Nagpur, Aurangabad, Madurai, Mangalore, Thrissur, Salem, Belgaum, Gulbarga, Agra, Baroda and Jaipur. Average store size is likely to range for 5,000-10,000 sq ft.
Wednesday, November 22, 2006
Source: Business Standard

Home Furnishings

1. S Kumars plans to increase investment for expansion
S Kumars Nationwide Ltd (SKNL) announced that it will be increasing its investment by Rs. 2.12 billion in several categories by 2008-09. The company will be increasing investment in the home textile category from Rs. 800 million to Rs. 1.96 billion and in the High value fine cotton (HVFC) category from Rs. 1.3 billion to Rs. 2.26 billion.
Sunday, November 19, 2006
Source: Daily News & Analysis

2. House Full to establish 52 retail outlets
House Full International Ltd announced that it will be setting up a complete home improvement chain store across India, setting up 52 retail stores in the next three years with an investment of Rs. 3.5 billion. The company opened its store in Malakpet and announced that it had already started operations in Pune, Surat, Chandigarh, Nasik and Hyderabad. Besides these, the company will be setting up 9 stores by March 2007, 5 in the western region, three in the northern region and one in Kolkata.
Tuesday, November 21, 2006
Source: The Hindu Business Line

Consumer Durables

1. Reliance Retail in talks with Sanyo
Consumer durables manufacturer Sanyo will become the first Japanese company to form a marketing agreement with Reliance Retail. Tomoyo Nonaka, Executive Director and Chairman of Sanyo, said, "Sanyo is looking at an agreement with Reliance Retail for selling its air conditioning products and other consumer electronic goods."

Reliance Retail opened its first retail outlet earlier this month and will soon be opening multi-brand outlets and large format stores. The company plans to invest Rs. 250 billion in the next five years to set up a chain of stores across the country.
Tuesday, November 21, 2006
Source: The Economic Times

FMCG

1. Reliance Retail ties up with Dabur
After its major tie ups with Timex and Sanyo, Reliance Retail has tied up with Dabur to sell various medicines, personal and healthcare products at its retail outlets. The company has formed a one year agreement with Dabur to sell its Ayurvedic products such as chawanprash and personal care products such as hair oil. With this agreement, Dabur will generate Rs. 900 million annually.

Reliance Retail is also said to be holding talks with Godrej’s pesticide division Hi-care to provide pesticides to farmers, from whom it purchases agricultural products.
Wednesday, November 22, 2006
Source: The Economic Times