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\nBy Rasul Bailay<\/i> <\/p> \nBy Rasul Bailay<\/i> <\/p>
\nMINT (Exclusive Partner The Wall Street Journal)<\/i> <\/p>
\nNEW DELHI, 11 August 2008<\/i> <\/p>
As costs rise and economic growth slows, \nIndian retailers are looking at ways to trim expenses and protect their profits.
Pantaloon \nIndia Ltd, the country’s largest listed retailer, has begun integrating the \nmanagement, marketing, human resources, or HR, and information technology, or \nIT, departments of its units into one. The company says this one step will help \nit save around Rs. 165 crore (Rs. 1.65 billion) a year.
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“It is \nonly cost and efficiency that we are focusing on now,” said Kishore Biyani, \nmanaging director of Pantaloon. “Instead of having separate management, administration, \nHR and IT teams for different business units, we are merging them. So all the \nsmaller businesses are getting managerially integrated into the larger ones.”
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This \nessentially means the company will have a common HR team, one IT team and one \nmanagement for all its business units. Pantaloon is also planning to prune its \nadvertising budget, reduce electricity bills and cut packaging costs.
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The \ncompany recorded a revenue of Rs. 3,236 crore (Rs. 32.36 billion) and net profit \nof Rs. 120 crore (Rs. 1.2 billion) in the business year ended June 2007. <\/p>
Inflation, \nwhich has jumped to a more than a 13-year high of 12.01%, on the back of a surge \nin food and fuel prices, increasing interest rates and concerns of a slowdown \nin consumer spending, are for the first time casting a shadow on the ambitious \nexpansion plans of organized retail companies.
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Rapid economic growth \nin the past three years had prompted retailers to step up spending on opening \nnew outlets, hike marketing and advertising budgets and spurred a frenzied hiring \nspree.
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“Unlike mom-and-pop stores, large retail formats have \nmuch higher cost obligations,” said Devangshu Dutta, chief executive of retail \nconsultancy firm Third Eyesight, based in Gurgaon. “Organizations with larger \ncost heads will be first to get hit in case of a slowdown.”
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Shoppers \nStop Ltd, the country’s No. 2 listed retailer, said it was studying options \nfor cost rationalization and will take steps to prune overheads. “If the \ncompany fails to achieve its sales target, then there is a possibility of reducing \ncosts to that the company’s revenue target is protected,” said C.B. \nNavalkar, chief financial officer at Shoppers Stop.
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A recent study \nby Mumbai-based Edelweiss Securities Ltd said Pantaloon’s “same store”—stores \nthat have existed for more than a year—grew between 11% and 12% during July \n2007 and May 2008, compared with 16-17% a year ago. <\/p>
Though Shoppers Stop \nmaintained the same stores growth was 20% in fiscal year ended March 2008, Edelweiss \nsays it came mainly from price increases rather than growth in volumes.
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Subhiksha \nTrading Services Ltd, which operates the country’s largest chain of discount \nstores, said it had no special plans to prune costs. “We are a low-cost (retailer) \nand cost- cutting is a perpetual part of our life,” said R. Subramanian, \nits managing director.
Reliance Retail Ltd said the company is still in \ninvestment mode and has no plans to launch any cost-cutting drive. “For us, \nit’s business as usual,” said a top Reliance official, asking not to \nbe identified.
Some retailers are even seeing a silver lining in the economic \nslowdown. Sky-rocketing real estate rentals, which had doubled in the last three \nyears, have stabilized. “There is a perception among the retailers that there \nmight be a slowdown and (rental) prices might cool off,” says Shubhranshu \nPani, president for retail services at real estate consultancy TrammellCrow Megharaj. \n“Some of them are optimistic and feel that in some pockets the prices will \nfall.” <\/p>\n","protected":false},"excerpt":{"rendered":"
By Rasul Bailay MINT (Exclusive Partner The Wall Street Journal) NEW DELHI, 11 August 2008 As costs rise and economic growth slows, Indian retailers are looking at ways to trim expenses and protect their profits.Pantaloon India Ltd, the country’s largest listed retailer, has begun integrating the management, marketing, human resources, or HR, and information technology, […]<\/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-3193","post","type-post","status-publish","format-standard","hentry","category-press-quotes"],"yoast_head":"\n