HUNGAMA READIES MUSIC STORE

Posted by Dr. Vishesh Rawat

Hungama, which thus far operated in the B2B space, mostly as a developer and publisher of mobile content such as ringtones, is launching an entertainment store with an iTunes-like business model. Hungama.com is in the beta stage currently with about two lakh content pieces across music, videos, ringtones, and wallpapers. It’s a subscription model — pay Rs 10 for a single download or Rs 99 for unlimited downloads a month. But the firm has the difficult task of initiating a mind shift change; from free illegal downloads to paying for stuff that is Digital Rights Management (DRM)-protected. Hungama says getting people to pay for legal downloads is possible because of multiple reasons. One, its site is ad-free at the moment and there wouldn’t be any unwarranted pop ups. Illegal download sites have multiple versions of the same content that creatres confusion and are less secure as well. Hungama.com’s content can be downloaded both on PCs and mobile phones. The firm, in a way, would compete with Nokia that in August launched its Music Store service in India. Nokia’s store has over 3 million international, Bollywood, and regional soundtracks across 20 genres. Hungama has Bollywood and regional music content but no international labels as of yet.

AT MALLS, LUXURY STILL TO COME OF AGE

Posted by Dr. Vishesh Rawat

The onset of the long festive season and improving consumer sentiment has brought some cheer to malls and retail stores. For the luxury market, however, there is no succour. India has only three large format luxury malls -- that exceed 2 lakh sq ft of retail space -- UB City in Bangalore, DLF Emporio and Select City Walk in Delhi. Another luxury mall project called Bergamo by KKA Buildtech is scheduled to open in Chennai in June 2010 and is more on the lines of a luxury shopping complex of about 40,000 sq ft. Mumbai's first luxury mall -- Palladium, at High Street Phoenix -- is starting operations on September 26,6 months behind the original plan to launch in March, and that too with only 20% operational capacity. "It took longer than expected," said Gayatri Ruia, business development director, Palladium at High Street Phoenix. "There was a business plan to be met -- in terms of rates, correct mix of retailers, etc." Palladium has 4.5 lakh sq ft mall space, in addition to 3 lakh sq ft of car park. The mall will be 50% operational by November and 100% operational by February. Analysts say the luxury market in India is at a very nascent stage with a lot of entry barriers for retailers and malls, but that there definitely is potential. "There is a high-class community but there also is a lot of brand consciousness slowly emerging in the young earning consumers. In Delhi or other metros, A-list consumers know their Gucci and Louis Vuitton well. The luxury and super-luxury market may be very small currently but most of the malls that are coming up now are for a long term and definitely have a future," an industry analyst said. Ruia concurs. "The luxury market has little depth in it. But we are here for longevity. This mall will be here and a leader in its segment for the next 15 years at least so there's no worry for us," she said. Palladium, for example, will not break even until four years. But Ruia said one has to take calculated risks. "The retail and real estate sectors are emerging and also have risks involved. If you are a serious player, you have to take calculated risks," she said. The concept of luxury malls is fairly new. When Select City Walk started leasing space to retailers in 2005, not many super luxury brands were keen on entering the mall. "The super luxury brands were placed in the five star hotel lobbies, they were not keen to come to out mall then. As a result, most of our retailers are semi-luxury brands like Mango, Esprit, GAS, Calvin Klein," said Yograj Arora, director, Select Infrastructure. DLF's Emporio Mall came up later, in 2008-09, by when the super luxury brands were looking at malls. However, common to other malls, the slowdown has forced luxury malls to lower rentals or opt for revenue-share model. Select City Walk has rolled out a revenue-share model with certain retailers. Palladium will also look at this model, Ruia said.

RAYMOND PLANS TO SELL STAKE IN APPAREL, ENGG ARMS TO PE COS

Posted by Dr. Vishesh Rawat

Raymond is planning to sell stakes in its apparel and engineering subsidiaries to private equity (PE) funds to unlock value, according to Gautam Singhania, chairman and managing director of the 84-year-old textile company. “Talks with PE funds will be initiated at the appropriate time,” Singhania said. He declined to comment about expected valuations, stake to be offloaded and other details. Raymond Apparel, the company’s wholly-owned subsidiary that owns brands, such as Manzoni, Park Avenue, Parx and ColorPlus, has an annual revenue of Rs 350 crore. Engineering subsidiary JK Files & Tools, which was hived off into a separate company last month, has a turnover of Rs 225 crore. Proceeds from the proposed equity sale will be used to fund expansion plans of the two subsidiaries. Raymond Apparel plans to set up 88 small-format stores in the next one year, a company official said. It is also looking at repositioning the operations of its ColorPlus brand. Raymond, which is working on a restructuring plan to boost revenues and nudge back to profits, is also exploring the possibility of combining garmenting business with the flagship textile business. “This is too early. But it may be a possibility,” Singhania said.

RETAIL RENTALS CONTINUE TO FALL

Posted By Dr. Vishesh Rawat

Retail rentals across metros corrected by about 10 percent in the first half of 2009 compared with the second half of 2008. The drop could be as high as 40 percent in many locations when seen in the context of rentals in the first half of 2008, said a CB Ellis retail market review for the first half of this calendar. The report said retailers were also renegotiating rentals to make their operations viable and many developers had a renewed stance on revenue sharing agreements, unlike earlier when demand was favourable. Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis, South Asia, said, “India is one of the fastest growing retail markets in Asia-Pacific. “Due to the current global economic recession and slowdown in the Indian economy, retail rentals across key markets did witness a fall as compared to the same time last year. “However, I expect the long term growth to stay on track.”

ORGANISED RETAILERS BULLISH ON DIWALI SALES

Posted by Dr. Vishesh Rawat

Players in the Rs 40,000-crore organised retail industry are expecting a revival of fortunes this Diwali, thanks to their new marketing initiatives and improved consumer sentiment in recent months. Most retailers hope footfalls to increase 50 percent during Diwali compared to last year. Retailers are also hoping for an increase of 20 percent to 25 percent in business at premium malls during the festive season. This year, retailers like Westside, Shoppers Stop, Pantaloon and Lifestyle have seen an average monthly footfall of 50,000.
Future Group’s retail arm, Pantaloon Retail India, has associated with Remanika Fashion Apparels to launch new consumer promotions for Diwali. Jalaj Kakkar, chief executive officer, Remanika Fashion Apparels, said, “Gifts are assured for consumers who make purchases worth Rs 3,000 to Rs 4,000. At every Remanika store, as well as in our shop-in-shop formats, we plan to issue gift vouchers worth Rs 400 on purchase of apparels worth Rs 2,000. The promotions will be spread across eight exclusive stores, 22 Shoppers Stop outlets, 30 Pantaloon, 16 Lifestyle, 12 Central and 8 Reliance Trends outlets. At Remanika exclusive stores, on the purchase of three garments from our new merchandise range, customers will get merchandise from the last season free.”
According to Virendra Ghole, head, marketing, Monginis Foods, “Since health conscious Indians are moving away from consuming mithais, we are introducing cookies and chocolates.” Monginis hopes to achieve a 25 percent sales growth this Diwali compared to the same period last year.
Ghole adds that with real estate prices diving, the company is able to accelerate the pace of new store launches. By the end of the current fiscal, it hopes to increase number of exclusive Monginis stores from 440 to 600.
@home by Nilkamal will offer gifts to customers on the purchase of goods worth over Rs 2,500. Manish Parekh, director, @home, said, “With new offers, we hope to witness actual sales conversion this Diwali.”
Treasure — The Jewellery Lounge will offer discounts on jewelleries — up to 30 percent on diamonds, 40 percent on kundan and 50 percent on uncut diamonds — between September 25 and October 31, targeted at Navratri, Dussera and Diwali shoppers.
According to Bineet Bhatt, chief operating officer, Treasure - The Jewellery Lounge, “We have entered into co-branded strategic tie-ups with nine brands in India which includes Yash Birla Group Company Evolve Medspa, Enrich, Flag restaurants, Florista, Great Escape Water Park, Pagli, Power House Gym, Puresin chocolates and Stylekist. Consumers buying jewellery worth Rs 5,000 will get gift vouchers from any of the nine brands.”
Sales suffered last Diwali season largely because of the liquidity crunch, in line with the situation across global markets.
According to some estimates, sales had dived as much as 40 percent in the run up to Diwali last year. Obviously, retailers are leaving nothing to chance this year.

Reliance digital to introduce private label

Posted by Dr. Vishesh Rawat

Reliance Digital, a unit of Reliance Retail Ltd, is planning to introduce private labels and will target nearly 150 large format retail stores over the next three years.
“Categories like small home appliances, memory cards, etc., where the degree of commoditization is high...people are not bothered about the brand,” chief executive officer Anil Baijal said.
While retailers generally have private labels for categories such as apparel, footwear and consumer goods, not many have them for consumer electronics and durables.
By December, Reliance Digital plans to launch another four-five stand-alone large format stores.

BHARTI WAL-MART'S CSR BEGINS IN AMRITSAR

Bharti Wal-Mart has provided 10 pushcarts to the unemployed and economically disadvantaged from rural areas located near its cash-and-carry store, Best Price Modern Wholesale, in Amritsar today.
Posted by Dr. Vishesh rawat

The pushcart owners, now holding legitimate businesses, have been signed up as members of Best Price Modern Wholesale, to enable them to procure fresh produce at best prices and pass on these benefits to their customers.
In keeping with its strong commitment to sustainable development, Bharti Wal-Mart joined hands with Coca-Cola India to undertake a plantation drive in and around Best Price Modern Wholesale store as part of their drive to plant over 2,000 saplings in Amritsar.
This initiative also rolls out Bharti Wal-Mart’s project, in partnership with the Amritsar Municipal Corporation, to adopt and manage the road stretch from Taranwala Bridge up to the end point of Amritsar Municipal Corporation.

Rental Vs Revenue sharing

Written and Posted by Dr. Vishesh Rawat

As the corporate houses – the Piramals, the Tatas, the Birlas, the Ambanis, the Rahejas, the Mittals, the Biyanis, the Goenkas, and mega foreign retailers- Walmart, Carrefour, Tesco and Landmark Group race to revolutionize the retailing sector, retail as an industry in India is coming alive. However current global and Indian economic scenario has brought a caution in supersonic expansion (Reliance’s slogan of one store a day) and operations of new stores in last couple of years. With shutters coming down on non profitable stores of many major retail chains, the initial euphoria in retail is settled now and the retailers have become more pragmatic in their approach. To survive and grow retailers are now looking for different cost cutting measures including staff reduction, salary cuts, spending less on ads and rationalizing the real estate rentals. However in last one year rents have gone down 30-50% on an average, still retailers are finding it difficult to sustain on these rentals and now try to get revenue sharing deals with the developers.
In retail real estate “Rent vs Revenue share” is one of the most frequently debated aspect, Proponents of both ideas have their own unique reasons. According to mall developers they invest huge money in developing shopping malls so they need to raise funds by selling the units for developing the project and once sold to investor’s mall have no right to give it to retailers on revenue sharing. Due to high construction cost and very expensive land the retail real estate is pretty costly. Most of the retailers have yet to establish themselves as a totally professional outfit with transparency in sales and accounting processes to inculcate faith in the mall owners. Mall owners/investors have no experience of retail so it’s difficult for them to have faith in the format of the retailers; most of the retailers are comparatively new and don’t have long and successful track record of retailing profitably in Indian markets. Why revenue sharing with mall owners, do retailers has a revenue share arrangement with their suppliers or warehouses, do multiplex operators do revenue share with producers/distributers? Mall owners allege that this is only an arm-twisting gimmick of the retailers and retailers are into profits or losses mainly due to their business format and operations, why the mall owners should have a stake in profit or loss of the retailers.
On the other hand retailers feel that they are paying 12-15% of sales as rentals in India compared to 2-3 % of sales in western countries. Such a high rental makes the entire retailing a loss making preposition. It is very important that the developer do not abandon the project after constructing and selling the mall, they must take the responsibility of running the mall efficiently by proper promotions, events and management of the assets. A stake of the developer in sales of the retailers in the mall will make them more responsible and participative in mall management and the mall will continuously strive to increase footfalls and conversion into sales. Revenue sharing model will help the retailers in expanding at lower risk of fixed costs as the rent will be directly relate to the sales of the store.
Both parties have some valid and logical points and for the sake of the retail industry they need to work together to create synergy. As per AT Kearney’s 2009 global retail development index, India’s largely un-modernized retail sector remain attractive to both domestic and international retailers, in spite of government regulations that prevent 100 per cent foreign ownership of retail stores. Lots of potential is there to grow for both stakeholders.

AADHAAR LOOKS TO MAKE PROFIT, OPEN 200 STORES

Posted by Dr. Vishesh Rawat

Aadhaar, the rural market-focussed 70:30 joint venture (JV) between the Future Group's Future Ventures India and Godrej Agrovet, hopes to turn around and starts making profits, by 2011.
Aadhaar, a modern retail chain operating in semi-urban and rural markets, has opened around 70 outlets across the country. The chain has mapped out an expansion plan of around 200 stores to be achieved over a period of time and therefore needs to balance the strain of losses from new outlets against the profits from older outlets as it expands in rural India.
The retail chain targets to leverage the Godrej's brand franchise with consumers in these markets and Future's expertise in the retail business.
"We have been steadily expanding the chain under its new chief executive officer Saurabh Chaddha as 3,000-sq-ft format stores.
On an average, each outlet takes around two to three years to become profitable," said a top Godrej official in charge of the group's retail interests.
Damodar Mall, group customer director, Future Group said that the group has reconfigured the format to meet consumer needs. "To do this, we have also changed the look and feel of the store," he said.
In the restructured format, the stores now sport the strengths of the JV's promoters by way of `The World of Godrej' section and `Big Bazaar Best Deals'. While the former offers a selection of products from the Godrej Group ranging from furniture, locks, white goods and its fastmoving consumer goods (FMCG) range, the latter section offers a selection of fashion and general merchandise selected from Big Bazaar outlets.

EXPLORING NICHE CONCEPTS IN RETAIL

Posted by Dr. Vishesh Rawat

The retail sector was poised to be a sunrise industry with a large number of corporate groups and multinationals entering the country. B-schools had launched several courses in retail management, including in subjects like supply chain management (SCM), anticipating a boom in the sector. That's when the slowdown brought the sector down along with some dreams.
The SCM industry goes hand-in-hand with the retail and manufacturing sectors. The benefits of SCM were recognised by the global corporate groups much earlier, though the concept is still nascent in India. However, the challenges unleashed by globalisation and the competitiveness of the Indian industry has brought about the need to recognise the importance of the industry.
According to Ansuhman Singh, CEO, Future Logistics, the industry is picking up pace in India. "The importance of this industry is evident in every sphere of manufacturing -- right from storage of raw materials, work-in-process inventory and transporting finished goods from point of origin to the point of consumption."
SCM courses are offered at a number of colleges as a postgraduate diploma. Most institutes offer SCM as a paper within the curriculum of retail management or operational management and there are institutes offering full-fledged courses on the subject (see box).