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Retail Troubles
posted by
Vivek Sharma
09 Sep 2008, 22:03
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labels: companies, branding/marketing
Just a year back, retail was the most happening sector. Big, small, flashy, sober – stores mushroomed in all shapes and sizes. After covering the big cities, the retailers spread out to new frontiers – tier II and even tier III towns. Though the battle over FDI in retail was far from settled, it was generally perceived to be a matter of time before we have large global retailers in our neighbourhoods.
But recent news flows indicate that the going is not so great in retail, not anymore. The large number of retail players, flush with money and in a hurry to expand at any cost ensured that there are even 8 to 10 modern retail stores in most localities, in every major city. Most of these stores were set up at huge capital outlays, paying exorbitant rents. Even the biggest of the neighbourhoods in our cities cannot support the large number of stores that have come up.
Apart from the very few stores that have succeeded in differentiating themselves from the crowd, most stores have very low footfalls. Profitability of even the most established players have come under severe pressure. It was only a matter of time before the enthusiasm waned and the reality of mounting losses dawned.
Smaller players like Subhikhsa are the worst hit, and the company is reportedly facing a severe cash crunch and is struggling to pay creditors. The company has been trying to raise money through an IPO for a very long time. Finally, it has succeeded in convincing Azim Premji to acquire a 10 per cent stake and is talking to overseas investors for up to $100 million.
Even the big retailers are not completely immune to the slowdown. Though Pantaloon Retail denied it, reports indicate that the company has closed down two Big Bazaar stores in Ahmedabad.
Will this get worse and take a heavy toll on the retail industry? How soon will the industry see some major consolidation moves?
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