Hope rides on retail

Though the hangover from last year's economic slowdown continues to weigh on it, the retail sector is gearing up for the next wave of growth.
While retail sales globally are still down, there is some respite for the industry in India. If industry analysis is anything to go by, a strong recovery is in prospect.

According to a PricewaterhouseCoopers (PwC) report, the outlook for the developed world over the next two years is still not optimistic. Asia, on the other hand, is poised to emerge as the fastest growing region in 2010-13, with relatively robust growth coming from India and China.
The report says retail sales will be less badly affected by the global crisis in Asia than elsewhere. While the growth in worldwide sales slowed to an estimated one per cent in 2008 from 2.8 per cent the year before, Asia and Australia witnessed growth of 6.4 per cent against 5 per cent in 2007.
An ‘insightful' year
In India, Asia's third largest retail market after China and Japan, the volume of retail sales is forecast to rise by 7.5 per cent in 2009, up 4.3 per cent. The outlook for general retail is relatively upbeat. With diets becoming richer, food retail sales are showing signs of growth.
D.P.S. Kohli, Chairman, Koutons Retail India Ltd, observes, “We have been through turbulent times in the past. However, regardless of all the troubles, I would consider 2009 one of the most insightful years for the retail business. It gave us a moment to sit back and realise how our growth path was progressing and take corrective initiatives before significant damage was done.”
According to him, a number of new markets are developing within India and customers are becoming more demanding and specific. “It's our belief that 2010 will be a year of sensible pricing at par with quality and the industry. Foreign players vouch for the Indian market and this is a good sign as it will increase the size of organised retail, creating healthy competition in the market. Having said that, I must add a caveat that success will not come without a rider. Indian companies in the retail segment will have to strengthen their research base to a level where they pioneer the designs and forecast trends for the coming seasons.
Given its size and inherent strengths, the Indian market has to take a leadership position and the base will have to be laid out in the coming year.”
While many analysts believe that a global recession will not slow expansion, companies are focusing on efficiencies and productivity. Retail biggies are also experimenting with smaller formats where the payback period is shorter, and even juggling with product assortments.
Private labels
The retailing of private labels or goods that are sourced and sold under the retailer's own brand name is showing signs of growth. These goods appeal to consumers because they are cheaper and retailers offer higher discount margins. In India, retailers have latched on to the trend and are launching a slew of brands under their own label.
Analysts say India may be Asia's most receptive market for private label goods. Today, it accounts for 10-12 per cent of the retail market. However, the number is set to grow by 2013. The products that are best suited for private labels are apparel, consumer electronics and durables, home care products and food.
The PwC report points out that local and foreign players too are upping the ante in the private label business. The biggest player in India is Trent followed by Reliance Retail, Pantaloon, Nilgiris, India Bulls and FoodWorld. Companies such as Wal-Mart and Tesco too are focussing on strengthening their private label businesses.
The Kishore Biyani-led Future Group is developing well-performing labels from among its private labels into standalone brands. The company is looking to enter 10-15 new categories every year.
“Our endeavour is to develop the brands as any other FMCG product. As they don't use the crutches of Food Bazaar, it will help in developing the market for these products,” Devendra Chawla, Head, Private Brands, Future Group, said recently.
The company will be adopting in-store branding and marketing initiatives to popularise the brands. Food Bazaar's other private labels include Fresh-n-Pure dairy-based products such as butter and ghee, and home care and personal care labels, Care Mate and Clean Mate.
Luxury retailing
The appetite for luxury brands is also growing. While global sales of luxury goods are reported to have slumped 10-20 per cent in 2009, the Asian market is showing no signs of a slowdown. While China is by far the biggest consumer of luxury goods in Asia, India promises to go down that road sooner than later. Brands such as Versace, Gucci, Cartier, Louis Vuitton and Oakley are making a beeline for the Indian market.
“We will keep looking at opportunities in markets that are growing. The slowdown in our business is temporary and we will keep looking at opportunities to grow our business,” says Marc Duhm, Wholesale Director, Versace. The second Versace store in Delhi, which is about 4,000 sq. ft in size, is one of the brand's largest outlets in the world. Versace is also mulling increasing the floor space in its Mumbai store, an exclusive accessories outlet. “We will be adding an apparel line to the Mumbai outlet as well.”
Blues Clothing Company Executive Director Abhay Gupta says consumers are seeking high-end brands and purchasing power is back with a bang. “We have had a good response with Versace. Our next venture will be to launch a high-end jewellery brand in India. However, the easing of FDI norms will help the industry grow,” he says, adding premium brands add value by helping improve the retailing experience as also manpower training. The company is a master franchisee for luxury brands such as Versace.
Industry analysts say the premium and super-premium category have been growing at about 30 per cent per annum in India.
Hiring
Sunil Goel, Director, GlobalHunt India, an executive search firm, says the retail sector is showing positive movement and has become a happening sector once again. Retailers are zeroing in on the yet untapped tier-two and tier-three cities. The sector, just five-six years old in our country, has seen a number of requests for staff come up across levels, the way it happened in the IT and BPO sectors 10-12 years ago.
Narayanan Ramaswami, Executive Director (Retail and Durables), KPMG, says, “The industry has been through a bad phase. In the next six months, things should look up and normalcy should be restored. Retailers, however, are still cautious about expansion.”


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