Retail opening cheers big firms

Commercial space and shops in Tier-1 and Tier-2 cities will now see a jump in prices. In London Tesco Express is ubiquitous and found in every corner of the city. Tesco Express'es operate in 1000 sq ft of space. I forsee every suburb to have multiple mini big box express shops of every retailers as there is very little available retail space in most of these areas.  I would not be surprised  if prices of commercial shops rise another 25% from here. 

(Reuters) - India's move to open its supermarket sector to foreign investors brought relief to its capital-starved local chains but failed to impress small-shop owners who dominate retail in the country, despite rules intended to safeguard small operators.

The government approved its biggest reform in years by allowing global supermarket giants such as Wal-Mart Stores Inc and Tesco to enter India with a 51 percent stake in the hope it would attract capital to build much-needed supply chains and improve efficiency to alleviate food-driven inflation.

"This is an extremely important step for domestic retailers as this will get in much-needed capital, apart from domain knowledge," said Thomas Varghese, chief executive of Aditya Birla Retail.

Chain stores account for just 6 percent of a $500 billion retail market dominated by street stalls and corner shops.

Many Indian chains are cash-strapped and loss-making, struggling to build scale given high costs, poor supply chains and scarce real estate and have been eyeing equity investments and joint venture partnerships with global firms to build scale.

Vijay Karwal, head of consumer, retail and healthcare for Asia at Royal Bank of Scotland based in Hong Kong expects more than $5 billion in foreign investment into the Indian retail sector over the next five to seven years.

Given the relative lack of modern retail infrastructure in India, and particularly in the enabling back-end infrastructure ... the vast majority of investment this change is expected to trigger would be greenfield investment into new retail sites and infrastructure," he said.

Shares in Indian retailers Pantaloon Retail, Shoppers Stop, Trent jumped -- bucking a fall in the wider stock market -- on expectations that they will form tie-ups with foreign players, and not just compete with them.

Debashish Mukherjee, partner and vice-president at consultancy firm AT Kearney, expects joint ventures and investments in local players from overseas operators over the next six months.

"The set of transactions which will happen fast is foreign players who are in existing joint ventures with Indian firms, the increase or decrease in stake, will happen quickly," he said. "The second are a set of deals that are waiting to happen and have been just waiting for the announcement."

SMALL SHOPS UNHAPPY

To appease opponents, the government said foreign stores will only be permitted in cities of more than 1 million -- of which India has more than 50 -- and individual states can decide whether to allow global players on to their patch.

It also insists that foreign retailers source almost a third of their produce from small industries, invest at least $100 million in India and spend half of that on infrastructure such as cold storage and warehouses.

Many small shop owners fear for their livelihoods.

"It will affect my business as families prefer going to air-conditioned stores with fancy packaged goods these days," said Vinod Jain, a 27-year-old small grocery shop owner in the Lower Parel neighborhood of central Mumbai.

A trade group representing so-called "kirana" shop owners is planning protests.

"The move to let the foreign retailers in will most certainly lead to job losses," said Praveen Khandelwal, general secretary of the Confederation of All India Traders.

"They should have worked on some kind of protectionist mechanism for smaller traders before coming out with this policy," he said.

Foreign retailers who welcomed the Indian government's move to open the sector also view the entry conditions with caution.

"Some of the conditions look quite stringent. The investment in particular -- it's all quite big money. We'd need to know the details, and how that would be accounted for," said an official with a major global retailer who did not wish to be identified.

Retailers try new ways to counter soaring rentals

Common sense is uncommon.
Raghavendra Kamath & Tejal Deshpande / Mumbai March 31, 2008
# Fashion retailer ETAM Future, a joint venture between the Future Group and French retailer ETAM, has closed three shops in Delhi, Surat and Ahmedabad owing to high rentals.

# For the same reason, Liberty Shoes has put plans to launch its high-end brand “Pairs” on hold.

# Indiabulls, the new entrant in retail with its brand Trumart, recently closed five stores, one each in Thane, Jaipur and Pune and two in Ahmedabad. The company has opened five new stores (two each in Ahmedabad and Pune and one in Jaipur) with better deals with developers.

Sky-high rentals are forcing retailers to explore new ways to stay afloat. Many have done the obvious thing by shifting to cheaper locations or simply downing their shutters. But others are renegotiating deals with developers to ensure business sustainability.

New deals like longer “rent-free” periods, no “lock-in” clauses in agreements and revenue-sharing deals with developers are becoming common.

“Today, 90 per cent of retailers are not making money. Many of them are earning only half of what they should make to break even. Zooming realty costs is the main culprit,” said a property consultant.

A cross-section of retailers Business Standard spoke to said rentals should account for 10 to 12 per cent of sales to make business sense but now make up 20 to 30 per cent of sales in many cases.

“We have decided not to pay more than 20 per cent of our sales as rent. How can one pay rents that are equivalent to total sales in some high streets?” said Jaydeep Shetty, chief executive of ETAM Future Fashions.

Retailers have started bargaining for more with developers. “We do not sign up for a lock-in period. If you do not make money in a place, what is the point in staying there,” said Subir Ghosh, chief executive of music and lifestyle retailer Planet M.

Most retailers sign up for three-year lock-ins that require them not to vacate the premises in that time-frame.

Revenue-sharing agreements are also catching up as footfalls wane in many malls in the country. French brand Lacoste has already opted for such arrangement with three of its stores.

“As our occupation costs go up, the revenue sharing model can help sustain operations, especially in high streets,” said Vikas Gupta, managing director of Lacoste India.

Retailers that are unwilling to opt for revenue sharing are looking at new retail formats. Arvind Brands, for instance, plans to launch multi-brand stores for its international brands.

“Multi-brand outlets are cost-effective since they make a 10 to 15 per cent difference in sales per square foot. It will also help improve footfalls because many brands are available under one roof,” said J Suresh, chief executive of Arvind Brands.

Reliance Retail splurges Rs 1,000 crore on real estate acquisition

HinduBusinessLine

NEW DELHI: Putting its mega retail plans on full throttle, Mukesh Ambani-promoted Reliance Retail has spent close to Rs 1,000 crore in two days acquiring commercial properties in the national capital.

According to sources, Reliance Retail on Tuesday acquired a property at Vikaspuri in West Delhi valued at around Rs 280 crore.

Yesterday, it had acquired seven properties valued at around Rs 700 crore. Of these, six were at Dwarka near the Indira Gandhi International Airport and one at Rohini in West Delhi.

"The overall space size of the acquisition is over five lakh square feet," the sources said, adding the company would be taking part in another bid tomorrow for two properties at Vasant Kunj in South Delhi.

These two properties at Vasant Kunj are together expected to be valued around Rs 25 crore, the sources added.

When contacted, company officials declined to comment.

The properties acquired by Reliance Retail were a part of auctions by the Delhi Development Authority, through which it had collected about Rs 900 crore against a reserve price of about Rs 400 crore.

Yesterday, the DDA had auctioned 16 commercial plots totalling around 40,000 square metres. Mr Mukesh Ambani had last year unveiled mega plans for expansion in the retail space entailing an investment of Rs 25,000 crore in the next few years. - PTI

Landmark to kick off Kolkata entry with 3 big store

TIMES NEWS NETWORK[ TUESDAY, JANUARY 16, 2007]
MumbaiEdition
KOLKATA: Within days of snapping its ties with the Emami group, book-and-gift retail chain Landmark is busy chalking out plans for its Kolkata foray, whereby it proposes to open at least three large size retail outlets and a slew of smaller format stores across the city.

Talking to ET, Landmark's chief operating officer Himanshu Chakrawarti said: "We are looking to launch three stores, each spread over some 25,000 - 30,000 square feet. Total investment for these three stores is estimated to be about Rs 15 crore."

The Chennai-based retail chain is eyeing prime properties in and around Camac Street - Theatre Road area, Salt Lake as well as in south Kolkata. "To begin with, we plan to hit high-street areas with large format stores.

Subsequently, we will focus on opening stores in malls," Mr Chakrawarti added. He, however, refused to identify the properties citing confidentiality reasons. Realty sources said the company has identified prime properties on Camac Street, Lansdowne Road as well as on Hazra Road, but a final decision is yet to be taken. The properties will be taken on lease.

Till recently, Landmark used to operate in Kolkata through a joint venture with FMCG major Emami. With Trent acquiring a controlling 76% stake in Landmark as well as its subsidiaries from its founder Hemu Ramaiah last year, ties with the Emami group was severed last month.