July 20, 2009
Consider this. Retail economy is 2/3rd of the overall US economy. So from pure common sense perspective, it would be wise to assume that what is good for retail is good for US. Or is it? That is the question that Congress is debating while making the decision to whether or not bail out CIT.
CIT sprang to limelight recently for all the wrong reasons. For the uninitiated, CIT is a a major lender to small and mid size businesses in USA. A significant chunk of their clients are part of Retail Supply Chain links and a failure of the bank would mean trouble for Retail Supply chain network. CIT bankruptcy would mean a sudden lull in the lending which would potentially have a cascading effect on the retail vendors leading to a vicious domino effect.
The counter argument to not bail out the firm says let ‘Capitalism do its work’. The point argued here is that credit market in general has thawed in last couple of months and even if CIT is allowed to go under, other credit providers will assume its place and market will play itself out.
Next couple of weeks will show which way the Congress bends and would also highlight how strong the market confidence has become in last couple of months since ‘green shoots’ has started to appear.
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July 8, 2009
Just wached the trailer and boy did I get hooked on to it. I must watch the movie. It raises some fundamental questions against which American society has turned a blind eye.
I always used to question myself how can McD sell a burger for less than a dollar and still make money. The movie promises to answer this and many more questions. Food industry has turned into one of the largest lobby groups in America and they have significantly influenced the way we eat.
Following are some tit-bits from the trailer:
1. Our food habit has changed more in last 50 years than in last 10,000 years.
2. Supermarket has on an average 47,000 products.
3. The tomato we find in the supermarket is not tomato but an idea of a tomato.
4. If you can get a chicken grill ready in 49 days why would you grow one which takes 90 days?
And btw the answer to McD question is not by cross-selling Coke & Chips! Check out the movie website for more – http://www.foodincmovie.com/
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August 3, 2008
Reliance has decided to launch reliance fresh again though this time with less fanfare. However the Take 2 comes with an interesting twist. For its West bengal stores, Reliance has got into an arrangement with local Fruit and Vegetable entrepreneur Mahendra K. Jalan, to sell fruits and vegetables from its stores. (Jalan owns Keventer Fresh and Metro Dairy). Keventer already supplies vegetables and fruits to More, Food Bazaar, and Spencer’s so in a way reliance is simply playing catch up here but it is better late than never.
As I also mentioned in my earlier posts, the way to go for indian retail is to get in collaboration with local entrepreneurs rather than being in loggerheads with them. Future group was the pioneer in this area and it did pay dividends to them. With more big ticket retailers going this route, one can safely say that indian supply chain has a distinct indigenous feel to it which needs to be considered to be successful. Just a pure off the shelf replication from western economy is not going to work.
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July 20, 2008
$100 billion. That is the size of the Indian 3PL space. It is projected to be in the range of $150 billion by 2010. These are the numbers which are attracting both international and domestic players in the Indian market. The kind of growth that retail industry is witnessing, means 3PL is going to be more and more relevant in Indian context.
Slowly many retailers are realizing that it is not possible to have all the supply chain expertise in house. It is simply not possible. Hence the trend to out-source the logistic services to outside firms. However that is not always the case. A case in point is Reliance Logistics Limited (RLL). It is owned by Reliance group and of course primarily caters to the needs of reliance retail. However a significant one fourth of its turnover is coming from customers other than realince retail.
RLL is keenly focused on further strengthening its position and looking for potential acquisitions of small ans mid size firms in the similar space. It would be interesting to watch how this space further condolidates and who all emerge out to be key players.
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July 16, 2008
Did I have it on the title of the post? Well, the news had me as well when I read that Ahmadabad based Arvind group is planning to launch a retail outfit around the idea of fastfood stores selling Pani-puris and other indigenous fast food items like Chat etc.
According to plans, the group will initially roll out 500 small format “NRI panipuri” retail shops. These shops entailing an investment of Rs Six crore will be based on franchisee model. Initially, the shops will be set up in Ahmedabad followed by other cities like Vadodara, Rajkot, Mehsana and Bhavnagar in Gujarat. (Source: IndiaRetailBiz)
What next, Mithai shops, Hot fries shops? To me, this trend to foray into small vending segment spells a wrong strategy. No, not from financial perspetive. I’m sure India is at such a inflexion point where any kind of organization around any kind of segment will generate profit due to gain in efficiency and economy of scale. However, from a socio-economic perspective, it’ll mean competing with small thelawalas who are definitely not going to be be happy with this development. God forbid, but chancecs are very high that it may trigger a revolt leading to recreation of Reliance Fresh fiasco.
What you folks think about this development? Do you think it to be a good, bad or a mix kind of event. Please share your thoughts.
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February 7, 2008
If you have happened to watch Shrek 2 lately, you must remember the irritating donkey saying time and again ‘Are we there yet?’ Well, nowadays when I’m reading the media and analyst reports, I’m having the deja vu feeling with news text screaming ‘ Has depression arrived yet?’Not to undervalue the gravity of the situation, but the soundbites in the media has really started to bother me. other problem is the heightened noise to signal ratio in news, making it twice as difficult to figure out the whole situation.
I decided to do a little research of my own with primary focus on retail industry since it is one of the first sector that gets affected by depression. Yes, situation is definitely challenging with sales not picking up but to term it depression will be an overstretch. Most of media comparisons that are being cited as examples are saying sales are x% lower than last year. However that may also mean that last year was a great year and this year is perhaps not that great. Another factor to consider is that the media report itself may also be acting as a cause to dampen the sales and more people who will hear about impending depression will perhaps try to keep a tab on their expeenses.
I’m not saying that there is no depression but I’m also not saying that we are absolutely, positively sure that there is. Yes, the situation is challenging but thats about it. It perhaps is an introspective time for retailers to become realistic and understand that year on year growth is not always a reality and a dip in the profitability doesn’t really mean the same as a loss in business.
so much for my 2 cents. Please share your thoughts.
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January 27, 2008
Lately the entry of foreign retail giants in India has become so common that it may not come as surprise that Carrefour has planned to join the bandwagon as well. It has decided to enter in the Cash and Carry format following the footsteps of Walmart. Bessides Walmart, currently, Metro AG of Germany and Shoprite Holdings of South Africa are already engaged in wholly owned cash and carry business in India.
It has been learned that Carrefour is in the final round of negotiation to select an Indian franchisee partner for all other retail stores. The announcement came through the French embassy during the visit of French President Nicolas Sarkozy to India.
It kind of strengthens the opinion that I have already mentioned previously that Indian retail is quickly getting into the positive accelerating spiral of growth with more and more participants coming on board thus making the entire landscape even more lucrative for the fringe watchers.
It will be interesting to watch who is going to be the next to join the party. Any guesses?
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January 3, 2008
As we are ushering in the new year, I thought to share certain key statistics about the Indian retail industry with you all. Some of the numbers are really eye poppers whereas others are a reflection of how different a ballgame Indian retail is, compared to its western counterparts.
All in all an interesting read. Hopefully it’ll paint a realistic picture of the business opportunity that is so hyped up.(or is it?)
1. Total business size of Indian Retail business is going to touch $365 Billion in year 2008
2. Retailing in India accounts for 35% of GDP
3. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent
4. India has highest number of outlets per person (7 per thousand)
5. Indian retail space per capita at 2 sq ft (0.19 m²)/ person is lowest in the world
6. Indian retail density of 6 percent is highest in the world
7. 1.8 million households in India have an annual income of over 45 Lakh
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January 2, 2008
Here is a quick quiz to test your Indian retailing acumen. A retail firm in India is planning to open a chain of 200 restaurants with an estimated capital outlay of Rs 50 crore that will serve vegetarian food with emphasis on South Indian delicacies. Guess the retailer.
The company in point is Vishal Retail which recently had highly successful IPO. What is noteworthy is the fact that even second and third rung firms are thinking big when it comes to retail landscape in India. What is noteworthy is the fact that news like these are trickling over at consistently accelerating rate for last couple of months thus showcasing another proof of the promise that Indian market holds today.
There is another subtle message that I am seeing in all these newsreels. The confidence, the ‘Think Big’ and ‘Can Do’ attitude, the optimism etc. are all a reflection of the erstwhile generation of United States which went on to shape up the economy as we know it today. (barring weakening dollar and sub-prime loan crisis which are recent phenomena).
Let’s hope that all this energy, enthusiasm (and money) doesn’t go in vain but act as the driver to push the economic growth. Hereby wishing all the readers a very happy and promising new year!
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December 7, 2007
I have a thing for conspiracy theory, so the idea of US economy slump impacting Indian retail interested me from a purely academic point of view. I believe that it will. Here is my hypothesis.
At this point in time, Indian retail market is not mature enough to sustain fluctuations in consumer spending power. If one look closely, most of the retail development has surfaced in the tier 1 cities like Bangalore, Mumbai, Delhi etc. Target consumer is primarily upper middle class. A significant chunk of this consumer base are employed by is IT & ITeS firms.
A slump in US economy will mean a conservative spending from US companies meaning cost cutting on the IT offerings. This might impact the outsourcing IT firms whose major market is still USA. Thus there will be a dip in revenue which will lead to drop in employee remunerations. It’ll be further affected by the increase in supply of skilled resources in the market. A lower earning will mean more emphasis on savings and less expenditure thus impacting the retail houses.
So in my view, till the time, retail market matures and reaches to the tier 2 & 3 cities and starts serving a more diverse diaspora of Indian population, the challenge of exogenous factors like US Economy slump will always be a threat.
Note – However there is also an alternative view of this whole theory where to reduce the cost of IT operations, US firms will outsource more work to Indian firms thus increasing the revenue rather than depleting it. It will be interesting to observe which way it tilts?
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