Relocating and rationalising retail stores has become a top-of-the-mind concern for companies, after the retail slowdown in the second half of FY09, which saw retailers shutting stores, pruning expansion plans and turning retail space into business and housing properties. Mafatlal joins other retail majors like Spencers Retail, the retail arm of RPG Enterprises, and Kishore Biyanis Future group that have been restructuring their retail business.
Spencers, after closing or relocating 140 stores in 2008-09, is in the process of opening new ones and entering new markets. Future Agrovet Ltd, part of the Future group, is closing down non-profitable KBs Fair Price Shops and is reducing its presence from five cities to three. The Aditya Birla group has also been in the process of identifying locations to relocate its More retail stores to Tier-II cities from the metros.
The Indian retail industry, however, has seen a revival in the first quarter of 2009-10 and is now growing at 10-15%.
A senior official with Mafatlal Industries told FE, Of the 65 stores being revived, some of the stores will be relocated to different locations in Tier-II and III cities where demand is more for branded family retail stores, (and) certain stores will be rationalised with the right product mix and well-trained staff.
Citing that low growth is the reason behind the decision, the official elaborated that the low growth is because the consumer demand is low in the middle end of the branded retail market. Amidst the scenario, these stores must change their product mix and appoint well-trained staff to make sure that footfalls are converted into sales. In Tier-II & III cities, Mafatlal competes with Grasim, Vimal and Siyaram, among others.
Mafatlal plans to increase its exclusive stores to 500 in Tier-II & III cities in two years. It is aiming at revenues of Rs 200 crore, up from Rs 60 crore now.
Mafatlal has very few family retail stores in the metros. It has five in Mumbai, two in Delhi and three in Bangalore. In metros, the middle-end of the branded retail business is not effective, unlike certain locations in B & C class towns where the demand is buoyant, the official explained.