Though a large number of retail investors - national and international - are in line to invest crores of rupees over the next three years in the organised retail sector of India, their expansion plans may come to a halt if proper and required infrastructure and manpower are not provided. Indian retail has been booming continuously for the last five years while manpower has also been growing. Vis-à-vis retail booming and setting up of more and more outlets by big players, will India be able to meet infrastructure-needs and demand for skilled workforce of these biggies in the coming years?
Before declaring any large-scale investment, it would be wise if the retailer-investors, first, examine and understand local market dynamics in India. Retail chains need ensuring management, manufacturing, supply chain, planning and execution. Though many global and domestic retail investors are in queue for investing crore of rupees in the next few years in the organised retail sector of India, plans may go in vain if proper and required infrastructure and manpower are not arranged for them. By 2010, India would be investing around $ 130 billion (approx. Rs 5,200 billion) in infrastructure. Before going ahead with their expansion programmes, big players - global or domestic – should seriously see and check if quality of supply chain, logistics, infrastructure and skilled manpower available is adequate or booming organised retail may hit them badly. Therefore, companies planning to go for expansion programmes in near future should, first of all, draw a blueprint that takes into account of all these factors.
When it comes to ‘expansions’ Indian retail is facing an acute shortage of trained manpower and space. To fill up these lacunae, various joint ventures are underway in almost all the countries.
The scenario
The following gives information about expansion ventures of retail biggies in the sector.
Dabur
This homegrown FMCG major has decided to partner with 12,000 neighbourhood kirana shops under a promotional initiative called Pariwar initiative. These small retailers are expected to generate sales revenue of about Rs 120 crore for Dabur by March 2008. In the first phase, around 5,000 key grocery outlets across 15 major cities will be covered. By the end of current fiscal, the number of Parivaar outlets is expected to reach 12,000 to account for eight per cent of our consumer care division sales.
Spar Hypermarket
The company, an outcome of a licence agreement between the Dubai-based Landmark Group’s Max hypermarkets India and Spar International, (the Netherlands-based, retail franchisee, which launched its first 75,000 sq.ft hypermarket in Bangalore on September 29, 2007), is all set to launch seven more hypermarkets across metros in the country by 2009-end. According to Viney Singh (Managing Director), Max Hypermarkets will invest around Rs 200 crore to set up these formats and each would occupy between 70,000 and one lakh sq.ft of space.
Raymond’s
This major player has planned to invest around Rs 600 crore in the next three years for its expansion of 1000 outlets. International companies and brands like Walt Mart, Peter England, The Spa Group, Tommy Hilgiger, Levi are making their presence to witness the country’s retail boom. The Tommy Hilgiger would increase its outlets to 20 by current year-end. The company is also planning to start factory outlets in the select cities.
King’s Corner
Kings Corner is one of the top retailers of the country with over 300 stores in prime locations across 150 cities of the country. Reid & Taylor in its bouquet, S Kumars Group is planning 10 more exclusive outlets against 16 at present.
Levi’s
Levi’s is planning expansion in the country and double the number of brand outlets for unisexual clothing in the next two years. The company would increase the present number of 160 outlets to 300.
Donear
It expects to increase the number of retail stores to 400 in a period of one year, most of which will come up in tier II and III cities at an investment of around Rs 50 crore.
DePot
DePot, the one-year old retail books, music, gifts and stationery format of Pantaloon Retail and the listed flagship company of Kishore Biyani-owned Future Group, is looking at strategies to double the format’s turnover from Rs 50 crore at present to Rs 100 crore. Currently operating 85 outlets, DePot will add 65 more outlets.
Future Group
Kishore Biyani’s promoted Future Group has decided to expand the current network of six stores at Bangalore, Pune, Hyderabad and Ghaziabad to 50 stores in the next three years by 2010-11 in metros and A-class cities. Brand factory stores offer merchandises of well known brands like Arrow, Espirit, Van Heusen, Louis Philippe, Levis, Titan, Lee, Pepe, Wrangler, Lee Cooper, Nike, Adidas, Liberty, Red Tape, Reebok and Revlon under one single roof.
Vishal Mega Mart
Presently operating 54 stores in 42 cities occupying gross retail space of 14 lakh sq.ft, the company is in the process of setting up 100 more stores at an investment of about Rs 200 crore.
Big players
Players like Walt Mart, Reliance, Big Bazaar and Subhiksha are in search of good-location spaces in malls, high streets and residential colonies markets for they have big plans of their expansion. Landmark group is planning to triple the number of its outlets in the country at a cost of Rs 450 crore while Globus of Rajan Raheja Group has prepared a budget of Rs 150 crore for 50 exclusive outlets in the next three years. At present, the company has 18 stores. Lladro has earmarked Rs 150 crore investment in the next three years for expansion. Spa is the sole distributor of Lladro, Christoph, Versace Home, Boch and Baccarat in India. The company would have around 30 stores by the end of this year.
Grocery retailers
Retailers like Subhiksha, Big Bazaar, Big Apple and Food Bazaar have lined up for large-scale expansion in the coming years. Big Apple has planned to double its outlets at a cost of Rs 45 crore in 2008-09 while Future Group’s grocery retail has planned to double its outlet to 150 at a cost of Rs 80 crore.
Subhiksha is close to 1000-mark outlets today and still plans to open around 200 new outlets.
The expansion fever has caught every company: the multiplex or PVR is also not behind other in this race for expansion. DLF is also planning around 40 new movie screens in the country in the next two to three years at an investment of around Rs 160 crore. Around 300 new malls would also be added in the country’s retail business by 2010. Satyam too has planned expansion and has earmarked Rs 600 crore-fund for this. From merely 1.6 crore sq.ft shopping-centre space in year 2004, India has today over 6 crore sq.ft of quality mall space. Permission to FDI in the real estate sector has provided a further boost as evident from the record of $ 10.6 billion-inflow (approx. Rs 424 billion) in the first nine months of 2006-07 and real estate accounts for nearly half the inflow. Shopping centres however represent just a miniscule share of the real action. From the 1.2 crore kiryana shops in the country until 2000, the number has now gone up to 1.5 crore. Retail and wholesale now account for 8.7 per cent of the total employed and self-employed workforce in the country - approximately five crore people. The retail sector growth is recorded at over 42 per cent till last year while a meagre 4.6 per cent of the retail trade is organised.
Today, the great question is whether India would be prepared fully to meet the requirement of space and trained manpower in the coming time. Failing to meet the demand may lead to the busting of ‘bubble’ in the retail boom. Small or big, retail players who keep declaring new outlets should think over infrastructure and manpower first.
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