India Retail News.

Splash Lifestyle Fashion retailer, part of the Dubai based Landmark group opened its 2ndstore in Bangalore [the first one is operational in Hyderabad]. In order to move with the slowdown in economy, all future Splash stores will be opened as a Store in Store.

Mr. Beig of Splash said,

Initially we were looking to setup 15 standalone stores in 19 cities in three years. But days after the opening of Hyderabad store, the market has crashed and footfalls are low. The mood in the market is low and thus we have decided to pursue shop-in-shop model of business.

The company is banking on an aggressive marketing campaign. If we can drive people to our stors then we are confident of converting them into customers. The company has slashed its sales target by 30%.

Splash plans to have 5 stores operational within the next 18 months each getting an investment of $1 mn. Splash caters to Men, Women and Kids.

The Indian retail sector is going through a rough patch currently. While falling real estate costs provide some relief, slowing same store sales growth and a capital crunch have impacted growth prospects and profitability.

Q4 FY08 Same Store Sales growth for the Indian retailers turned negative for the first time. The problem was sharper in the high-end products (lifestyle retail) versus items of daily consumption (value retail). Shoppers Stop saw its SSS growth fall in the quarter.

The credit crunch has also hit the sector hard with debt funding becoming difficult (and expensive) and no appetite for equity raisings. Pantaloon's operations can support growth of around 1m - 2m sqf per year with limited external funding in our view. Shoppers Stop, on the other hand, cannot do without external funds. Subhiksha is on the verge of bankruptcy while Vishal Retail has drastically scaled down its ambitions.

Falling Realty Costs Provide Some Relief: The last three years saw a sharp rise in retail rents due to supply-demand dynamics. With more supply coming through and a slowdown in store opening plans by most retailers, rents have started falling. We expect this to continue and average rents to fall at least another 25% over the next 12 months.

Footwear retail major - Bata India - is planning to open up 40 new retail stores across the country in the first quarter of 2009 in a move to cater to the customers in tier-2 and tier-3 industries.

These stores will be based on the international format of Bata Stores and will be spread across 3,000 square feet.  These stores will also come up in cities like Sonepat, Kota, Jodhpur, Ludhiana, Kakinada, Berampur, Mandya, Gangtok, Hassan, Hubli, Ahmednagar, Nasik, apart from the metros.

Last month we had an exclusive coverage on How Bata India Transformed its retail Business to brace itself to the competition from deep pocket retail players like Reliance Footwear.

Kishore Biyani's Pantaloon Retail has reversed the sales trend, atleast in Jan-09. The stimulus provided by robust discounts (the extension of the Great Indian Shopping Festival that commenced in Dec08) appears to have had the desired effect, with Pantaloon Retail India Ltd - PRIL reporting +4%, +12.1% and -4.3% Same Store Sales growth across the Value , Lifestyle and Home retailing segments. Home retailing down due to Greedy Real Estate bubble bursting in India. FreePress India is reporting the actual numbers of the sales figures.

Over the month, PRIL (including Home Solutions) added ~260,000 sq feet of space, primarily in the Big Bazaar and Food Bazaar formats. The most important observation to make here is Food Bazaar [Reliance Fresh, Subhiksha kind of small format supermarket] accounts for 28% of the FMCG sales that occur through modern trade (MT) formats. Except for chocolates (14% market share), FB's market share within MT formats across FMCG categories is 20-33%.

The big question now is will Future Group be able to continue to outperform the peers ?

If this report is to be believed, Reliance Retail has bid Bye to the Cash & Carry business at least for the time being. In our opinion, we believe this as a totally wrong move as Reliance under Mukesh Ambani is best suited to implement large B2B projects with economies of scale.

The report further claims that it is a cash intensive business and we can assure you that Reliance is never dearth of cash. The announcement comes at a time when Bharti Wal-Mart announced their brand name for the Cash & Carry business. It is also hard to believe the newspaper report citing that Political developments were a hurdle for this business. Does it mean Bharti Wal-Mart, Tesco, etc have not done due dilligence ?

In our view, Reliance should have built large Hypermarket and Cash & Carry stores first and then should have netured into other formats - Departmental, JV with Global Brands etc. Tata group is in talks with Tesco while Careefour which is flirting with any and every business house in India hasn't been able to choose its partner yet for the cash & carry business.

And during the boom period, Vishal Retail had pitched a different business model for Kirana Stores in India.