is definitely leading the retail revolution in India.
Chennai alone boasts three mega stores (upward of 12,000
sq ft). And the big names are still heading south.
Landmark made its debut into India via the south. The
RPG group has met with a lot of success with its three
models of retailing in Foodworld, Health and Glow, and
Musicworld, enough for the models to be studied seriously
by organised retail industry and analysts alike. Both
Shoppers Shop and Globus headed south after their first
stores were established in Mumbai and Indore respectively.
Some southern cities offer huge opportunities for growth.
Kemps is so caught up with Bangalore that it doesn't feel
the need to move beyond the city.
Expansion of chains, takeovers, experiments and new formulae,
they all seem to be happening in the south at the fastest
pace. Chennai has proved to be the most vibrant market
in the vibrant south, although when you compare purchasing
power, the Mumbaikars, Delhiites and even Bangalorians
would rank above Chennai's spenders. So why is Chennai
New corporate investments (a lot by multinationals) and
cheap real estate are cited as the main reasons. Corporate
investments have resulted in the city's residents enjoying
higher disposable incomes, and a better quality of life.
And now there are enough foreign executives, who have
added to the drive to modernise the retail network.
Real estate prices are necessarily a major consideration
for the retail business, since an estimated 50-70 per
cent of the project outlay has to be assigned to land
and brick and mortar. The fact that sales per sq ft, along
with transaction values, is a measure of a store's efficiency
is proof enough of the importance of the property costs.
Also, the conservative 'Madrassis' are known to swear
by brands. Smithkline Beecham Ltd, for example, clocks
about 60 per cent of its Horlicks sales in the south,
with Tamil Nadu accounting for a lion's share of that
Says Oscar Braganza, chief executive officer of RPG Guardian
Ltd, "Our customers are familiar with international
brands and want to try out newer products." He also
insists that it is erroneous to slot Chennai shoppers
as conservative. Roshan
Mathew, marketing manager, Lifestyle International, provides
added perspective: "A Chennai shopper is a conspicuous
buyer, but at the same time looks hard for his money's
Mathew is making a relevant point here as far as organised
retail is concerned. Value-for-money is part and parcel
of the Indian consumer's psyche and that is something
retail will have to focus on, increasingly. Ambience and
convenience don't necessarily mean higher prices. In any
case, as organised retailing expands its reach, consumers
will come to expect these value adds.
On the other hand, Subiksha, the pharma and dairy products
retail chain in Chennai, in fact, uses price discounting
(thanks to bulk sourcing) as a major unique selling proposition.
R. Subramanian, director, Subiksha Trading Services Pvt
Ltd, running the Subiksha chain in Chennai, insists, "Frills
apart, we should remember that everything boils down to
Subiksha offers a 10 per cent discount on the 'maximum
retail price' of all products it sells. By doing this,
the chain has raised a hornets' nest. Other pharmacies
didn't like this discounting at all -- it was driving
customers away from them -- nor did the state government's
milk federation, Aavin. Aavin refused to supply its products
to Subiksha, which was selling Avin products cheaper than
Avin's own parlours! Anyway, Foodworld and Vitan, both
south-based, have also started offering sales promos and
discounts on select products' MRPs.
"A saving of Rs 400 in the monthly bill will be
more appealing to a consumer than the half-an-hour spent
in an air-conditioned store, a comfort which he/she can
anyway enjoy at home, cinema theatre or other such places,"
argues Mr Subramanian. He may have a point there, but
then such a mentality may not cut across the purchase
of all product categories. It may hold true for groceries
and food shopping, though.
A number of existing players in retail are also drawing
up aggressive expansion plans. The Chennai-based Vitan
chain of supermarkets, in order to pursue really big ambitions,
recently became among the first retailers to go public
to finance 25 more outlets by end-2000.
Again, the Rs 90-crore Chennai-based Vivek & Co,
a consumer durables retail chain entity, recently acquired
competitor Jainsons, alongwith its 14 stores -- eight
in Chennai and the rest in towns of Tamil Nadu. Vivek
has also managed to get a term loan from ICICI, ICICI
Bank and Lakshmi Vilas Bank to fund it to the tune of
Rs 20 crore to expand its current eight outlets in Chennai
and three in Bangalore, to 10 in each city. The balance
of the funds required is expected to be met from internal
accruals and increased share capital.
present, total shareholder funds at Vivek are a mere Rs
4 crore. Managing director B.A. Kodandarama Setty, intends
to increase that to Rs 10 crore in three years, by means
of private placement or public issue.
In order to bring its entire operations
online, Vivek has approached TCS for a special package.
will, apart from streamlining our operations, also reduce
our inventory holding," says Setty. The current inventory
holding period is about 30 days, which Vivek hopes to
reduce to 21 days.
also see :
Retail in greater detail