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<\/i>From \n RETAILER, Varun Jain<\/p>\n <\/i>From \n RETAILER, Varun Jain<\/p>\n
<\/i>September \n 2010 <\/p>\n
Vishal Retail is reeling under a debt of Rs 730cr; Subhiksha \n has already closed all their 1600 outlets; Wadhawan Retail’s ambitious \n retail chain, Spinach, ran out of steam in this competitive retail \n scenario; and Raymond’s Be: Home, a home furnishings retail format, \n is already a thing of past. <\/p>\n
These are a few examples of big retailers who could not able \n to sustain their retail businesses, while other players struggled \n successfully to be on the road to recovery. Let’s do a reality \n check, as in what other players did right to be still in the game \n and what went wrong with the formers.<\/p>\n
Faulty Expansion Plan<\/b><\/p>\n
"Retail is a long term game, where there is no immediate \n success. For this a business should be capitalised keeping the \n long term investments and returns in perspective", opines \n Mr Purnendu Kumar, Associate VP, Technopak Advisors Pvt. Ltd. \n An expansion primarily with a debt can lead to serious troubles, \n and it happened with Subhiksha, he adds. <\/p>\n
Many retail business in India, initially adopted an experimental \n strategy for their retail venture, in the absence of organised \n retail history. "It is important that for further expansion, \n there is a clear strategy in tune with the company’s vision. Retailers \n must understand the needs of their target or captive customers, \n and offer appropriate products through the right formats backed \n by appropriate services to build customer loyalty. There is a \n need for a strong back-end foundation in terms of merchandising \n and supply chain that is efficient and aligned to the targeted \n scale of operations", opines Ms Tarang Gautam Saxena, Sr. \n Consultant, Third Eyesight. <\/b><\/p>\n
It is rather a paradox that discount retailers such as Subhiksha \n and Vishal Retail have run into difficulty during the business \n slump when they could have been thriving. Ms Saxena further feels \n that Subhiksha tried to do too many things for many people in \n its ambition to scale up rapidly. Its rapid growth across multiple \n product categories and through different formats clearly was not \n sustainable. Further, the scale of its operations (1,650 stores), \n making losses did not go down well with consumers. Vishal Retail \n may have experienced some difficulties on account of financing, \n but the main issue they needed to address was related to merchandising \n and supply chain. <\/p>\n
Mr RC Agarwal, MD, Vishal Retail Ltd. also admits that and comments, \n "Coupled with the external challenge of global turmoil, our \n overambitious expansion plan and low consumer sentiment brought \n us in a challenging situation". Vishal Retail Ltd, with 170 \n outlets countrywide, is seeking to reschedule debt of around Rs730 \n crore. Café Coffee Day, the largest and the most successful \n café chain in the country, understand the market and its \n potential extremely well before taking on expansion, confirms \n K Ramakrishnan, President- Marketing, CCD. We gauge the catchment \n in terms of the number of footfalls that could be, and ensure \n that we can undertake conversions before we open an outlet, he \n informs.<\/p>\n
Where Else Does the Problem Lie?<\/b><\/p>\n
Wadhawan Retail, which downed shutters of their Spinach stores \n operating across Mumbai and Kolkata, has interests in real estate, \n retail, financial services, education and hospitality, and runs \n operations in India, the UAE and UK. They didn’t take their business \n too seriously, and if reports are to be believed, the caretakers \n of the company were busy looking after their real estate business \n and many suppliers backed out from their commitment with the company \n because of the non-payment of the bills, which were huge. <\/p>\n
In case of food retailing, this is one segment which is very \n difficult to manage. "This is more so in the food and grocery \n business where the trade margins are lower and there is a very \n strong competition from the kiranas. For a retailer in this category, \n a proper value proposition with private labeling is the key to \n make the store profitable", quips Mr Kumar. What also drives \n a footfall in these outlets are the availability of the fresh \n products. Visiting many of the affected store, you will find the \n shelves empty with very little or nothing to choose from. Stock \n and supply chain were not in sync. "Having a sound supply \n chain and well stocked stores is an absolute must as nothing is \n more fatal for a retail business than disappointed customers who \n do not find products in the store. Having processes for the retail \n operation and trained store staff adhering to certain store operating \n principles are equally important at the front-end during the growth" \n explains Ms Saxena.<\/p>\n
Be: Home which was relaunched in 2008, with the intent of selling \n premium fashion designer labels in soft furnishings at affordable \n prices, sourced from across the globe in large volumes, closed \n down all its four stores within two years of its operation. This \n can also be the result of venturing into the space which is already \n cramped up with major players like Future Group, Bombay Dyeing, \n Shoppers Stop and many more. The timing was also not perfect for \n a brand which is primarily an apparel retailer to venture into \n a new space. Thus, it becomes very important to evaluate the market \n before taking the plunge.<\/p>\n
Economic Slowdown, A Spoilsport <\/b><\/p>\n
Vishal Retail, which created history by creating 149 stores in \n a span of almost 10 years, bore the brunt of economic slowdown. \n "The recent global turmoil, which affected the Indian retail \n industry deeply, had implications on Vishal Retail also to some \n point. But Vishal Retail has stood through all the odds and managed \n 35% YoY Sales growth last quarter", says Mr Agarwal. <\/p>\n
But then there are retailers who were extremely cautious during \n the slowdown and made very calculative moves to see the light \n of post-recession. Big retailers like Reliance and Spencer’s went \n on the back foot and let the rough weather pass. They slowed down \n expansion, started cost cutting and today they are back again \n healthy in the same old ways. For Lifestyle, recession was like \n a blessing in disguise and just by tweaking the price range to \n suit the condition, their business grew four times. <\/p>\n
"To survive the lows in a business cycle, the retailers \n should have focused on its core strengths in terms of its product \n offers and formats. The retailers should have had a grip on the \n performance of various product categories and pruned down the \n non-performing categories", opines Ms Saxena, further adding \n that the retailers that survived the economic downturn took the \n market slump as an opportunity to critically analyse their operations, \n closed down non performing categories and stores, and made corrections \n in their back-end processes rather than amplifying the weaknesses \n through rapid expansion.<\/b>
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From RETAILER, Varun Jain September 2010 Vishal Retail is reeling under a debt of Rs 730cr; Subhiksha has already closed all their 1600 outlets; Wadhawan Retail’s ambitious retail chain, Spinach, ran out of steam in this competitive retail scenario; and Raymond’s Be: Home, a home furnishings retail format, is already a thing of past. These […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-3185","post","type-post","status-publish","format-standard","hentry","category-press-quotes"],"yoast_head":"\n