Organised Retail: Trying hard to survive the slowdown

Researches are aggressive about the growth prospects of India’s organised retail industry. And each report has attributed the growth to positive consumption and rising consumption statistics. However, most players are finding themselves

on the other side of the fence, cautiously watching the failures of retailers who tried to expand at a fast speed in a short span of time opening big outlets. High inflation, low consumer buying and impact of slowdown continue to remain the reasons for them to worry.

Amidst all this, they are aware that they cannot stop opening new stores. And they have now adapted a new strategy to keep the businesses running. While on one hand they are pulling down shutters on the non-profitable stores, on the other, they are opening small sized outlets in Tier II, III cities to increase their reach.

Shutting down non-profitable stores

And their new-found retail strategy seems to be working in well for them. For instance, India’s biggest and oldest retailer, Future Group, closed down 6 Big Bazaars; 4 eZones; 2 Food Bazaars and 2 Home Town Express stores this year. And it opened 3 new Big Bazaar and 5 eZone stores during that period in the areas where they expected to make profits. Even last year, the company closed 9 Big Bazaar stores, 5 Food Bazaar supermarkets and 20 eZone stores that were not so profitable.

Tata Group’s retail arm Trent closed four Westside stores during FY13, of which one was shut down in the January-June period, in Delhi NCR. It also did not open any Star Bazaar last year but opened seven new Westside stores. Aditya Birla’s ‘More’ closed about 50 supermarkets in the past one year. The retail store chain had gone on an expansion spree in 2007. K Raheja’s Shoppers Stop too has been cutting down on its bookstore chain, Crossword. The company has closed 6 Crossword stores since the beginning of the year, while opening 4 new ones. The company also shut one HyperCity store in Ludhiana.

Another big name, RPG Group-owned Spencer’s Retail, which has 25 hypermarkets in the country, shut down 9 stores in Pune in December and Globus Stores closed its prominent store in Mumbai’s upmarket Bandra area this May.

Meanwhile, store sizes are also being reduced to save rentals. For example, Shoppers Stop has reduced the store sizes of loss-making hypermarket chain, HyperCity for the third time. The company has now opened a store of 30,000 square foot much lower than the 1,50,000 square foot it began with. Future Retail has also merged the operations of eZone and Hometown, while reducing the size of Hometown. And The Collective, Madura Garments’ multi-brand luxury retail outlets in Delhi, Mumbai and Bangalore, has now opend 10,000-12,000 square feet outlets from the original 17,000 square feet ones.

Economy hampering growth

Retailers are not expecting growth for next few seasons. Along with other factors, sliding rupee has further had a negative impact on those, who stock imported goods. Even Fitch Ratings’ India Ratings & Research has maintained a negative outlook on the retail sector for the second half of the year and has said that higher inflation and marginal nominal wage growth will act as deterrent to consumer spending.

Except the end of season sale where people thronged stores, shopping areas have donned a deserted look once more and there are very few takers for the new stocks. No wonder, brands and retailers are taking a cautious approach against opening stores at such places since attracting real shoppers in such areas is a task in the current situation. The top three listed retailers, Future Group, Tata Trent and Shoppers Stop, are expected to add about 1.98 million square foot of retail space this year, 22 percent lower than last year.