After a year-long lull, the organised retail sector is on an expansion drive. Biggies like the Future Group, Aditya Birla Retail, Reliance Retail, Trent and Spencer?s Retail are adding new stores and charting out plans to set up hypermarkets on the back of lower rentals and buoyant consumer demand. The Future Group is confident that the recovery is in sight. Though its retail plans have been delayed by two years, the group believes that the revenue would touch Rs 25,000 crore within the next four years. The group plans to have 30 million sq ft of space and an operating profit margin of up to 10%. The company?s revenue in 2008-09 was Rs 5,000 crore.
Mayur Toshniwal, president (retail operations), Future Group, says, ?We are planning to add at least two Big Bazaar stores every month. We would come up with 15 Big Bazaar stores and add one million sq ft over the next six months.?
The company plans to open outlets in cities like Chennai, Kolkata, Banglaore and Udaipur during the next three months, adds Toshniwal. Big-ticket investment of Rs 3,000-4,000 crore would be required by the group to attain its sales target and to increase its retail space.
Their expansion plans are supported by factors like falling rentals. The rental of malls has come down by almost half compared to the rentals in 2007-08 due to a dip in the demand from retailers who put their expansion plans on hold with the onset of the downturn.
Even several retail companies had brought curtains down on unprofitable outlets over the past one year. For example, Subhiksha closed down the operations of its 1,500-odd neighbourhood stores.
Says Toshniwal, ?The slowdown did affect retail companies because big-ticket purchases like electronics went down by 30% and household electronics and furniture tumbled by 30%.? Saying that the market sentiment is improving now, he adds the company is growing by 10% at present and expects to register a double digit growth over the next two to six months.
The Future Group is not alone. Aditya Birla Retail?s More is planning to open a hypermarket every month. RPG Group, which owns Spencer?s Retail, is mulling to infuse Rs 1,000 crore to expand its retail business over the next three years.
It plans to open 10-15 small format stores and an equal number of large format stores by 2010, according to an industry source .
Sanjiv Goenka, vice-chairman, RPG Group, says, ?Our plans are very definite. We plan to opening more outlets across the country over the next two to six months.? The company is in talks with private equity firms to raise funds for its expansion. The company is not divulging the amount it proposes to raise. The group is also planning to offload 20% stake in its retail arm Spencer?s Retail.
Currently, Spencer has 250 stores, which includes 36 large-format stores across 50 cities in India. Spencer focuses on verticals like food and grocery, fruit and vegetables and FMCG goods. Retailers like Pantaloon Retail India, Provogue and Titan
Industries are also on an expansion spree and are opening outlets across various formats. Reliance Retail has announced that it will come up with 21 large-format Reliance Digital stores with an investment of Rs 4-5 crore on each store.
Bharti Retail plans to continue to focus on the northern market. The group is planning to double the number of its Easy Day stores (from 27) over the next six months. Vinod Sawhney, president and chief executive officer, Bharti Retail, says, ?Right now we are focusing on the northern market and would continue to expand in this region before moving to other parts of the country. We aim to be present in top 25 towns of the north.? The company launched its food-and-grocery stores under the brand name Easy Day in Punjab last year.
The Indian retail market, which is the fifth largest retail destination globally, was ranked the second most attractive emerging market for investment after Vietnam in the retail sector by AT Kearney?s seventh annual Global Retail Development Index, in 2008. The share of retail trade in the country?s gross domestic product was between 8-10% in 2007 and is likely to reach 22% by 2010. Also, according to AT Kearney, organised retail, which accounts for almost 5% of the market, is expected to grow at a CAGR of 45% to $60 billion by 2014. All these numbers bode well for the organised retail industry.
