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An upwardly mobile population makes Bangalore's suburb Jaya-nagar a lip-smacking catchment area for organised retailers. The significance of this 'must-have' location was not lost on Indian retail's biggies Reliance Retail, Big Bazaar, Aditya Birla Group and Spencer's Retail. By 2007, all four had already set up 5,000-6,000 sq. ft supermarkets in the area. But the stores were still to break even when they had to deal with a new contender. Dubai-based Micky Jagtiani's Landmark Group started its 70,000 sq. ft hypermarket in collaboration with Dutch retail chain Spar in the locality in 2007.

Just a year after Jagtiani built his first store in India, the aftershocks of the global meltdown hit the Indian retail industry. The tight money conditions saw even the big Indian retailers slow down their expansion plans. One would have assumed that Spar, being a newcomer, would find the going tough in this period as well. But in the midst of the slowdown, Spar has added one hypermarket and one supermarket in Bangalore. Another hypermarket is expected to come up in March.  In fact, managing director Viney Singh is preparing a nation-wide plan to launch five more stores by the end of the year and at least 10 in the following four years.

DANGER ZONE In a highly competitive market, smaller retail chains have cracks in their business models

None of the retailers offer a customer loyalty program, except Spar, which has data for 200,000 customers Only Namdhari Fresh, Spar and 6Ten, which are in the food segment, have strong supply chains in place The model most follow is to attract customers with the convenience of buying fruits and vegetables. But what brings in the money is additional impulse buying When inflation is high, their fresh produce prices are on par with the market, and footfalls reduce. This model depends heavily on other products for revenue. Namdhari Fresh, however, follows a model of delivering high-quality fruits and vegetables Apparel has higher margins and the formula is in discounts, designs and having a strong private label portfolio

Landmark, which also owns Lifestyle, Home Centre and Max retail chains, is among a handful of retailers still expanding rapidly after an investment storm blew through India's $350- billion retail industry, first giving rise to a huge tide, before the inevitable ebb. In the past 48 months, local entrepreneurs pumped in $10 billion (around Rs 46,200 crore at Rs 46 to a dollar) in a dozen formats to strengthen their presence in the market as the government pondered over opening up domestic retail to foreign companies. But lack of experience, poorly conceived strategies, over-ambitious plans and a slowdown triggered by the global recession has left them all bruised and battered. Weaker retailers such as Subhiksha who over-reached, had to bite the dust. Those left standing are taking a breather for the moment.

But as the haze clears, nearly a dozen new players beyond the Big Five - Kishore Biyani's Pantaloon, K. Raheja group's Shoppers Stop, Mukesh Ambani's Reliance Retail, R.P. Goenka Group's Spencer's and Aditya Birla Retail's More - are moving briskly to build up significant retail empires. Most of them are small, but they have survived the worst part of the slowdown. They are experimenting with models very different from the Big Five. They may still be tweaking their models but they are confident and competitive. And more than anything else, they are proving that you need pluck, not necessarily loads of money, to weather a storm.

But can they graduate to the next level and become serious rivals to the Big Five?  Can they scale up their models without hitting the same roadblocks that the Big Five did in their quest for growth? Those are the big questions facing this pack of retail enthusiasts.

It is inevitable that as they open more stores and expand into more areas, at least some of the players featured in this story will stumble. Some will fade away. And some opportunistic ones have already started negotiating to sell out at a profit to a bigger player instead of trying to build a long-term business. But at least a few of them are showing the determination that market leader Kishore Biyani wore five years ago.

Their reasonable successes, despite varied interests and diverse strategies, infuse hope that India's choppy retail industry may be settling down.

Behind The Scenes
Interestingly, hypermarket player Spar is an exception in this lot of new players because, first, it has a retailing pedigree, and second, because it is backed by a big group with deep pockets. Most of the others are product companies that have now got into the retail business. A few are backend specialists who have logically forward integrated to set up retail stores.

Take the case of Bangalore-based Uday Singh whose Rs 200-crore hybrid seeds company Namdhari Seeds got into retail sale of premium fruits and vegetables through Namdhari Fresh. Singh, who is the parent company's managing director, says he was so busy building the seeds business that retail was just a natural extension and nothing more. Though food retailing can take more than five years to break even, Singh says the Rs 30 crore-Namdhari Fresh turned cash positive in 2009. Having tasted blood, he now plans to expand the 20-store chain in Bangalore to 100 in the next two years.

Sanjay Agarwal
26 Jan, 2010 2:08 PM
While consumer spend on goods is captured, similar consumer spend on services, such as healthcare and education, is also undergoing a transition (instead a metamorphis). Various models need to be experimented and the markets as of now are almost virgin. Of the early birds, those with execution focus are likely to survive in each of the models.