The year that was

The year 2007 can surely be referred to as ‘The Golden Year’ in the history of the Indian retail industry. For emerging economies, there is no better example than India, which recorded the fastest GDP growth in 18 years, with the economy growing 9.4 per cent in 2006-07. While India continues to alter the coordinates of global trade, the country itself has seen robust growth in manufacturing with the sector growing 12.3 per cent in 2006-07 as compared to 9.1 per cent in the previous year.

India had tremendous growth in attracting foreign direct investment (FDI) and recorded an estimated growth rate of 9 per cent. Over the next five years starting 2007-08, the country would need an investment rate of 35.1 per cent of GDP. The opportunities presented by India’s farm and food processing sector, identified as a priority area are enormous. Also India’s strength in the sectors of gems and jewellery as well as automobile and auto-components is noteworthy. Besides this, the Indian pharmaceutical industry is projected to grow to $ 25 billion (approximately Rs 1,000 billion) by 2010.     As far as retail sector is concerned, the organised retailing is expected to grow at the rate of 37 per cent in 2007 and 42 per cent in 2008. In the year 2006, the most significant development in Indian retail industry was the Wal-Mart-Bharti’s golden handshake in November, 2006. FDI did not permit the retailer’s foray into the Indian market, thus Wal-Mart joined hands with Bharti Enterprises to open new avenues from the so far latent backdoor onto the Indian shores last year. Scripting November 27, 2006 as a red-letter day, Wal-Mart and Bharti Enterprises launched a joint venture and wrote history. All major retail developments in India thereafter followed these forerunners. The Indian retail industry is estimated at about $ 300 billion (approximately Rs 12,000 billion), and is forecast to grow to $ 427 billion (approximately Rs 1,7080 billion) by 2010 and to $ 637 billion (approximately Rs 2,548 billion) by 2015. Small local stores account for 97 per cent of the market.

Organised retail accounts for about four per cent of the total retail market in India and this share is expected to increase to about 15 to 20 per cent with the entry of a number of corporates into the segment. Modern retail formats grew by 25 to 30 per cent during the past one year and could be worth $ 175 to 200 billion (approximately Rs 7,000 to 8,000) by 2016. India topped the AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. According to Euromonitor International, the Indian retail market would grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost seven per cent a year. Driven by changing lifestyles, strong income growth and favourable demographic patterns, Indian retail expanded at a rapid pace during last year. Almost all the sectors in retail - be it food and beverage, apparel, FMCG, footwear, real estate, lifestyle or luxury - grew tremendously. Not only national but also international brands showed excellent growth in India.

What follows is a ‘year 2007 wrap up’ covering major retail developments and analyses of the growth and success of the retail industry in India.

 

Best newsmakers

Ample retail development took place in India in the year 2007. Listed below are the best newsmakers in the Indian retail industry.

Reliance

Looking at the top newsmakers in Indian retail in the year 2007, the first name that strikes is Mukesh Ambani’s Reliance Retail Ltd. Last year, the Reliance Retail launched five retail formats that include Reliance Digital, Reliance Mart, Reliance Fresh, Reliance Wellness and Reliance Trends. In the very beginning of the year, Reliance announced plans to build multi brand car service stations with one acre for each station in mall premises within one or one and half year’s time. The Rs 250 billion telecom deal that Reliance signed with Bharti is a venture in mobile and enterprise communication services. Reliance Fresh, $20 billion (approximately Rs 800) Reliance Industries’ retail venture, reached the national capital region (NCR) with opening of nine stores in Ghaziabad, Faridabad, Greater Noida and Gurgaon covering a total area of 19,000 sq.ft and Rs 8 billion ($180 million) investment despite oppositions for it could prove to be a threat to local vendors.

Another retail venture of Reliance Retail is its entry into airfreight services. Reliance retail plans to launch airfreight services to ferry fresh fruits and vegetables from their various sources in India. In still another venture, Reliance looks for stakes in Carrefour and considers the possibility of buying 13 per cent stake. Reliance also planned to transform acquired Adani general purpose outlets into speciality stores. With the entry of big players like Tata’s and Future Group in the digital retail sector, how could Reliance be behind? In August 2007, Reliance launched ‘Reliance Digital’, a pilot consumer electronics concept mega store. Reliance Digital is the second format of stores from Reliance Retail launched within six months of its foray into the organised retail sector. World’s biggest spirit company Diageo tied up with Reliance Fresh to retail to its international wines portfolio in the country.

In September, Reliance retail decided to enter the footwear market with a chain of 100 shoe stores across the country under the brand, Reliance ‘Footprint’. On October 31, 2007, Reliance Retail announced launching of  'Reliance Jewelry'. Reliance Retail, part of Reliance Industries, forayed also jewellery retail segment. Reliance is the second corporate after the Tatas to enter the Rs 70,000 crore Indian jewellery industry, which is dominated by almost three lakh traditional family jewellers.

On October 29, 2007, billionaire Mukesh Ambani became the richest person in the world, surpassing American software czar Bill Gates, Mexican business tycoon Carlos Slim Helu and famous investment guru Warren Buffett. With India's most valued firms - Reliance Industries, Reliance Petroleum and Reliance Industrial Infrastructure - belonging to him, the net worth of Mukesh Ambani rose to $63.2 billion (approximately Rs 2,49,108 crore).

Ambani recently gifted an Airbus 319 corporate jet to his wife on her birthday on November 1. Besides a business office, the plane has a special cabin for games and a music system, satellite television facilities, a master bedroom, a sky bar and mood lighting. The Airbus 319 is a 120-seater in a commercial operation and can fly up to 6,800 km non-stop. In November, Reliance Money tied up with McDonald's to distribute financial plans. Reliance Money, the financial services and products distribution arm of Reliance, Anil Dhirubhai Ambani Group, tied up with global fast food chain McDonald's to provide services like free trading account, gold coin retailing, mobile financial portal and Reliance money express to customers and even assist them in opening a Reliance money account.

Future Group

Another newsmaker in the year 2007 is Kishore Biyani, MD, Pantaloon Retail. He launched his autobiography entitled ‘It Happened in India’ in the year 2007. The book cannot be called an autobiography as Mr Biyani is just 45 and has a long way to go. The book conveys a message: ‘If an idea is nurtured well, it can turn out to be a successful business model’. Born into a small trading family, India's retail king Kishore Biyani replaced conventional wisdom with ‘guts and instincts’ to create Future Group, a $1 billion (approximately Rs 40 billion) company that includes Pantaloon Retail, a department store group; Big Bazaar, the company's name for hypermarkets; Food Bazaar supermarkets, and Central Mall, a more upscale aggregation of merchandise. Known for his insights into Indian consumer behavior, Biyani also represents an enigma to the country's emerging retail players, both domestic and foreign.  Major retail developments of Future Group in 2007 include Kshitij Investment Advisory’s decision to develop 51 properties across the country. Kshitij Investment Advisory Co. Ltd, the real estate company promoted by Future Group will develop 51 properties across 160 lakh sq.ft pan-India. Pantaloon Retail (India) Limited also made plans to expand its southern operations by increasing the number of apparel outlets (Pantaloon Fresh Fashion) to 25 in a period of two years. Future Brands, a part of Future Group, launched another brand called Dreamline brand for home category. In October, the Future Group announced another plan to roll out three new formats.

Bharti and Wal-Mart

WalMart Stores Inc., the world’s biggest retailer, entered India’s sprawling retail market through a tie-up with Bharti Enterprises. With plans of opening stores in Asia’s fourth largest economy from 2007, the joint venture expects to have several hundred stores across the country in the next four to five years. The joint venture is a winning combination. Wal-Mart’s logistics skill and Bharti’s execution capability create potent force in the Indian market. Bharti Enterprises will own the retail shops under the WalMart franchise. Bharti Enterprises and Wal-mart stores signed an agreement on August 6, 2007 to establish Bharti-WalMart Private Limited, a joint venture for wholesale cash-and-carry and backend supply chain management operations in India. Under the agreement, Bharti and Wal-Mart hold 50:50 stakes in Bharti Wal-Mart Private Ltd. The new company plans to open 15 stores in the north Indian states in the next five to seven years. The first store of this type would be operational in the first quarter of 2008. Over the next seven years, the venture is expected to open 10 to15 wholesale cash-and carry facilities and employ approximately 5,000 people.       

Trent

Trent, a retail venture of the Tata Group, on January 31, 2007 clocked a 67-per cent rise in its net profit in Q3 FY 07 at Rs 10.71 crore as against Rs 6.42 crore in the year-ago period. Total income rose 30 per cent from Rs 96.37 crore to Rs 125 crore in the same period. The company's net sales and income from operations increased by 28 per cent at Rs 121.82 crore from Rs 95.16 crore in the same period last year. On August 29, 2007, Trent, well-known for its Westside chain of stores, announced Rs65 crore for the next year and Rs 250 crore for the next three years. Of the 27 stores in 18 cities, 24 are leased up to a period of 21 years, while three are company-owned.

Also, on September 19, 2007, Trent joined hands for strategic partnership with Benetton. The company was appointed as the master franchisee for the Benetton Group's Sisley brand in India for a period of five years. A strategic partnership was forged between Benetton and Trent, whereby the latter operates existing Sisley stores, apart from setting up additional 20 to 30 stores in the eight major cities across the country.

Another retail arm of Tata’s, TCL (Tata Coffee Ltd) plans to launch 100 coffee outlets in the country over the next five years to enhance its presence. The company also plans to take up franchise route. Infiniti Retail, a wholly-owned subsidiary of Tata Sons, plans to have 31 'Croma', multi-brand consumer durable and electronic mega stores by March 2008. Tata Sons Director and Infiniti Retail Chairman RK Krishna Kumar and Tata Sons Director Arun Gandhi inaugurated the 10th Croma store in Navi Mumbai’s Vashi area on October 27, 2007. Nine Croma stores in the country include four stores and a Croma Zip store at Mumbai's domestic airport and two Croma stores, one each in Pune and Ahmedabad. The first store was launched in Mumbai's Juhu area in October 2006.

Aditya Birla Group

This year, the Birla Group launched its retail operations in May under the brand name 'More', and plans to set-up 1,000 super-markets across the country in the next three years. The new Birla brand promises more quality and convenience and even a store by that name. The Birlas expect to roll out 15 stores in Pune soon. Hypermarket is the other format the group plans to enter. And for this retail foray, the group plans an investment of Rs 7,000 to 8,000 crore. ‘More’ is being positioned as a neighbourhood supermarket, but unlike Pantaloon and Reliance, it keeps itself away from being a price warrior. One can expect the usual set of private labels, not only in staples, but also in categories like home and personal care. The group is busy tying up with vendors. Birla's domestic acquisition, retail chain Trinethra with 500,000 sq.ft of space and 170 stores, gave it a presence in South India. And Trinethra's hypermarket in Mysore, is now a learning ground for Birla's hypermarket rollout.

Gitanjali

The Gitanjali Group, a leading diamond trading corporate, announced its foray into the luxury retail market through its new venture Luxury Connextions (LX) and luxury malls in 2007. With an investment of 100 crore, the company’s retail stores would offer international brands through ‘Luxury Connextion (LX)’ outlets. The company also plans to bring luxury malls in eight leading cities. In another retail venture, Gitanjali Gems is betting big on the US retail market. Following acquisition of Samuels Jewellers in December 2006, the firm is presently going ahead.

ITC

ITC is all set to launch small format stores in rural areas by early 2008. The store would be on the lines of its existing hypermarket chain, Choupal Sagar. In another venture, NIS Academy, a division of NIS Sparta Ltd, entered into a co-branding agreement with ITC’s Lifestyle Retail business, ITC Wills Lifestyle Retail business division ITC Wills Lifestyle, and set up the school of employability. Will Lifes+tyle planned also for a major image makeover through a range of new look stores this financial year 2007-2008.       

Godrej speciality stores

In May-June, Godrej Group announced to lunch speciality boutique retail stores in four categories of products viz home appliances, home furniture, office furniture and non apparel lifestyle products. Godrej and Boyce Manufacturing Co., the group’s flagship store finalises the roll out plan which will crystallise in 2007-2008.  

Triumph international $ 40 million investment

The Switzerland-based $ 2.6 billion (approximately Rs10 4 billion) lingerie company, Triumph International planned a $ 40 million (approximately Rs 160 crore) investment for India. The company is in discussion with retail players to launch flagship stores in six cities in India, and looking at JV with a local partner for planned flagship stores in four metros

Hermes applies for FIPB approval

The Paris based Hermes group applied to India’s foreign investment promotion board (FIPB) for permission to sell Hermes products through retail and wholesale outlets. The company formed alliance with Khanna specialty retail and distributors Pvt. Ltd.

Medicine Shoppe plans 500 drug stores

Medicine Shoppe India, the Indian arm of the largest pharmacy chain, Medicine Shoppe International, owned by US-based drug trading major Cardinal Health, plans to add about 500 stores in India within two to three years. Medicine Shoppe follows the model of franchisee stores in India.

Subhiksha eyes on kingsize profit

In June-July 2007, Subhiksha announced its expectation of Rs 30 billion turnover this year adding 300 shops to its existing 700 stores.  The company plans to open 300 stores soon at an investment of Rs 150 crore. Of these 300 new stores 100 are planned in Maharashtra while the remaining 200 slated for the north and the south.       

UK’s Hi-Tec exclusive outlets in India

UK-based shoe maker Hi-Tec sports announced its entry into India with the plan of setting up exclusive stores in major state capitals by next year. High Tec appointed chogori (I) Ltd as its master licensee to market and distribute its brand in India. The company also plans to launch, by next year, Hi-Tec apparel showrooms across the country.

Bata’s first Hush puppies outlet in India

Bata launched the country’s exclusive Hush puppies outlet at Hyderabad. The company entered into an agreement with US- based footwear giant Wolverine to manufacture and sell hush puppies brand in India.

Mahindra Retail, Mahindra group’s retail arm

Mahindra group announced its foray into the Indian organised retail market with chain of premium lifestyle stores offering apparel, toys and furnishings.

Dabur India to acquire 60 per cent stake in Unza Holdings

Dabur India is close to acquiring 60 per cent stake in Unza Holdings, a Singapore based Consumer Goods Company. The deal enhances sales of Dabur by 22 per cent and makes it third largest company in the country after HLL and ITC.

Spencer’s retail expansion

Spencer’s retail is set to open 1000 stores in the coming years. Of the RPG Group owned 400 retail outlets, 125 outlets are Spencer’s retail stores. RPG Group, is in talks with international retailers for a possible JV in India to introduce new formats.

adidas launches first lifestyle outlet ‘adidas originals’

The store was launched in September 2007 and is located in the heart of the New Delhi city. This lifestyle store promises to be a favourite destination for youngsters who love value and fashion.

Top managers quit Yum! Restaurants, India

In March 2007, the top management team quit Yum! Restaurants India, leading fast food chain that owns Pizza huts and KFC’s.  The team includes Sandeep Kohli, head, Ajay Bansal, director (operations), and Anupam Bhattacharya, CFO. The exit of the top managers came at the time when the QSR (quick service restaurants) format in India is in for expansion and competition.

ASW to enter India

In the first quarter of 2007, ASWatson disclosed its plans to foray into India through health and beauty specialist Watson’s ‘Your Personal Store’, retail format.  This, of course, is subject to policy changes in the retail sector as ASW would like to enter the country only when the government allows majority stake in multi-brand retail.

HOPF store chain for India and UK

In February-March, 2007 HOPF planned to invest Rs 73 crore for setting up a chain of stores in India. The company plans to enter the retail business in India as well as in the UK. A holding company, HOPF operates completely through its subsidiaries located in many countries such as US, UK, Indonesia, Bangladesh and India. In India, its operation is carried out through its 60 per cent subsidiary Pearl Global.  

LVMH Group to acquire stake in Hidesign

In May 2007, French luxury retailer LVMH Group announced to acquire a stake in Hidesign, a leading leather goods maker. LVMH Group identified the Indian premium leather accessories brand as a partner as it sees a similarity in the way Hidesign approaches craftsmanship.

Raymond foray in women-wear segment with Colorplus

Apparel company Raymond Ltd announced a foray in the womenwear segment with the launch of its ColorPlus brand. The company plans to open 175 stores in the next three years to retail ColourPlus apparel products that include day wear, sports wear, business wear and formal wear.

Fashion TV and Chisel to redefine lifestyles

Fashion TV and Chisel came together for first time in India to redefine lifestyles.

 

Major Joint ventures

Indian companies for JV with Italian brands

Raymond announced its Italian tie-up and the inking of 50:50 venture with Italy’s Grotto Spa for apparel and accessories brand, GAS. The foreign investment promotion board (FIPB) approved a proposal from Grotto SpA for single brand retail as well as wholesale trading. Estimated investment of the Italian fashion company, which owns GAS brand, for 50:50 joint venture with Raymond amounts to Rs 3.7 crore.

Argos British retail major enters India

In the early second quarter of the year 2007, British retail major Argos announced plans to enter India via joint venture with Shopper’s Stop and HyperCity Retail India. Named as HyperCity-Argos, the new stores are planned initially in the Mumbai region.

Diesel, Arvind in JV

Italian Luxury and casual apparel maker ‘Diesel’, in June 2007, agreed to set up a joint venture company with Arvind Mills Ltd, under the name ‘Diesel India Fashion Arvind Pvt. Ltd’ for representing Diesel in India. Through this JV, 15 exclusive stores in India would come up in the next three years.

Gitanjali Group and Sanghavi exports JV with HPCL

Spectrum Jewellery, a joint venture between Gitanjali Group and Sanghavi exports,  partnered with Hindustan Petroleum Corporation Limited to offer jewellry and diamonds to customers at HPCL outlets, while refueling their vehicles. The first of its kind Convenience Store was inaugurated at HPCL pump in Bandra (W).

Emaar MGF enters into JV with ACCOR

Emaar MGF formed an alliance with ACCOR, global leader in the sector of the economy and budget hotels. The JV brings the internationally acknowledged chain of budget hotels, Formula 1, to the Indian Hospitality market. Emaar MGF Land Private Ltd  emerged as India’s foremost joint venture in real estate sector.

Genesis colours looking to luxury retail JV: Genesis colours, the marketer of Satya Paul brand, forges a luxury retail joint venture with Sports station International (SSIPL). Genesis will be a majority stakeholder in the venture with an equity stake as high as 75 percent.

UK B&Q plans India entry

In June 2007, UK home improvement Co. B&Q planned to enter India.  Top company executives are in India to hold talks with the host of Indian companies for the debut into the country’s $12 billion (approximately Rs 480 organised retail mart. Part of the UK based retail major Kingfisher group, the company explores both franchise and joint venture options.

Axiom-Pantaloon JV         

Axiom Telecom and Pantaloon Retail (India) entered into a 50:50 joint venture to focus on developing backend sourcing infrastructure in order to support Pantaloon Retail’s existing telecom retailing business and enable it to expand exponentially. Creating a nationwide network of state-of-the-art after sales service centres for mobile services, it plans to get added more than six million subscribers every month. This attracted Axiom Telecom to expand its operations and establish a presence in India. 

 

Major tie-ups

Tesco looking for partners in India

In February-March 2007, Sir Terry Leahy, global chief of UK retail giant Tesco, was scheduled to meet with Ratan Tata and Landmark Group. The initiative aims at Tesco’s retail foray in India. It was assumed that if Tesco-Tata tie-up works out and finalised, then it would be a hat trick for Tata, which has already acquired steel maker Corus and Tetley a few years ago.  In its attempt to enter India, Tesco made another announcement in May 2007. It plans to join hands with Mahindra and Mahindra.

Carrefour-Wadia tie-up

French Retailer Carrefour was learnt to enter probably into a tie up with India’s Wadia Group for a foray into the retail market of the country. Carrefour-Wadia tie-up would be latest in a series of moves that are taking place in India’s retail market, which is worth about $ 200 billion (approximately Rs 8,000) a year. However, Carrefour might enter India through the wholesale cash-and carry route. As India allows 100 per cent foreign direct investment (FDI) in the wholesale cash-and-carry route, the Carrefour’ venture may be without any Indian partner.

Essar Group tie up with Richard Branson’s Virgin

In May-June 2007, a tie-up between Richard Branson’s Virgin group and Essar Group was inked to introduce ‘The Mobile Store’, India’s first national chain of multi brand and multi service telecom retail outlets. Essar Telecom Retail plans to set up over 2,500 stores in the next three years across 600 cities, covering virtually every town in every state across India.

Diageo entered into tie up with Reliance

World’s biggest spirit company Diageo tied up with Reliance Fresh to retail to its international wines portfolio in the country. Diageo also expected to enter into tie-ups with other major retailers and malls in the company.

Primus retail acquires lifestyle brand Weekender

Primus retail leading small format retail chain in India entered into the retailing and apparel business by acquiring Weekender brand.

 

Overview

Analysing the major retail developments in India in the year 2007, it is obvious that the top newsmaker of 2007 is Reliance Retail. There is hardly any area of retail where the company did not mark its presence. Despite oppositions to its entry into retail industry, especially to the opening of Reliance Fresh stores in various parts of the country, Reliance managed to capture the market. Overall, the retail industry grew tremendously in the year 2007.