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Organised retail started late in India, but expanded aggressively and soon became one of the most sought-after sectors for investors. Then came the problems of high rentals, project delays, wafer-thin margins and competition.
Today, the scenario has started to look nightmarish for retailers, especially with inflation threatening to slow down consumer off-take. Is it time for consolidation? Do we now see the weaker players getting weeded out? he general consensus may be in the affirmative.
Andrew Levermore, chief executive officer, HyperCity Retail (India) Pvt Ltd said, “I think there may be some poorer performing players and formats whose appetite for losses are waning. These could be big or small players. Consolidation will come when they give up.”
Analysts Anirudha Dutta and Prakhar Sharma of CLSA Asia Pacific indicated as much in their June 25 report on organised retailing, “As competitive intensity increases, smaller retailers are likely to sell out and consolidation will take place. We have already seen retailers like Trinethra and Adani group selling out to larger players. More such deals are likely.”
The Shopper’s Stop management expects small and unprofitable retailers with a business size of Rs 15-20 crore to look to consolidate or even withdraw from the market, the report added.
Scale has become extremely important for survival in the retail industry. At the same time, with rentals skyrocketing and input costs spiralling upward, profits are harder to come by, let alone sustain.
Srinath Sridharan, vice-president and head - strategic alliances, Wadhawan Holdings believes scaling up is the only way.
“It has become difficult to judge whether rentals are a percentage of sales or the other way round. Industry has to consolidate. It is impossible to survive with just four stores,” he said. But not everyone is convinced it is about size alone.
Jay Gupta, managing director, Loot (India) Pvt Ltd said, “People who don’t have the right concept and are not able to provide any value to their customers will shut down. If a retailer begins to grow with wrong fundamentals, the problems are only going to multiply.”
Today, the scenario has started to look nightmarish for retailers, especially with inflation threatening to slow down consumer off-take. Is it time for consolidation? Do we now see the weaker players getting weeded out? he general consensus may be in the affirmative.
Andrew Levermore, chief executive officer, HyperCity Retail (India) Pvt Ltd said, “I think there may be some poorer performing players and formats whose appetite for losses are waning. These could be big or small players. Consolidation will come when they give up.”
Analysts Anirudha Dutta and Prakhar Sharma of CLSA Asia Pacific indicated as much in their June 25 report on organised retailing, “As competitive intensity increases, smaller retailers are likely to sell out and consolidation will take place. We have already seen retailers like Trinethra and Adani group selling out to larger players. More such deals are likely.”
The Shopper’s Stop management expects small and unprofitable retailers with a business size of Rs 15-20 crore to look to consolidate or even withdraw from the market, the report added.
Scale has become extremely important for survival in the retail industry. At the same time, with rentals skyrocketing and input costs spiralling upward, profits are harder to come by, let alone sustain.
Srinath Sridharan, vice-president and head - strategic alliances, Wadhawan Holdings believes scaling up is the only way.
“It has become difficult to judge whether rentals are a percentage of sales or the other way round. Industry has to consolidate. It is impossible to survive with just four stores,” he said. But not everyone is convinced it is about size alone.
Jay Gupta, managing director, Loot (India) Pvt Ltd said, “People who don’t have the right concept and are not able to provide any value to their customers will shut down. If a retailer begins to grow with wrong fundamentals, the problems are only going to multiply.”
3 comments on "Retail Shake out?????"
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Mallikarjuna Gupta Bhogavalli, Sr. Product Manager, Oracle India Pvt Ltd
| 07 24 2008 20:37:07 +0000
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Hardik Patel, Team Lead (Staffing and Recruitment), Rishabh Softwares Pvt. Ltd. / Rishi Infotech Pvt. Ltd
| 07 24 2008 12:35:24 +0000
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sadasivuni ganesh, Marketing Manager, ZODIAC MARKETING CONSULTANCY
| 07 02 2008 05:10:38 +0000
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