The Hindu Business Line : `Retail may soon become high-cost enterprise'

FROM not-too-bad to better. That's where retailers across categories see their business going in the New Year. While higher sales and heavier in-store traffic are indicative of a rise in customer confidence, retailers also recognise that customer expectations have increased.

Says Ms Hemu Subramaniam, Partner, Landmark, the Chennai-based books, music and gifts store, "April-September 2003 was fabulous. The feel-good factor was really at work — hotels were full, flights were full. There were a lot of NRI arrivals in August. Also, the Brand India campaign in Sri Lanka, Malaysia and Singapore seemed to have worked — there were a lot of tourists from these countries and they see a lot of value in buying things from India." In Landmark, books, VCDs and DVDs and lifestyle products have been selling well.

If customer confidence has built up, so has competition, according to Mr Sanjay Badhe, Customer Care Associate (CCA), and Director (Operations), Shoppers' Stop.

He says the emergence of malls in city suburbs such as Gurgaon near Delhi and Mulund and Vashi in Mumbai are reflective of consumers' higher aspirations. He sees consumers entering a new lifestyle phase. "They are willing to try more and more products at a fast pace of change. A case in point is the spend on mobile phones," he adds.

According to his colleague, Mr Govind Srikhande, CCA, and Director (Buying and Merchandising), designer and fashion merchandise is growing at a fast clip. Shoppers' Stop has witnessed "superb" growth in ladies' western wear and personal accessories such as watches, cosmetics and fine jewellery, fuelled by high-profile advertising by various brands in these categories.

Retailers are hopeful of a brighter and better 2004 because of the stable economy, booming stock market and the resultant feel-good factor, which is expected to continue.

According to Ms Subramaniam, "If tariff rates for luxury goods drop further, and if the dollar drops to Rs 40, it will be good for retailing."

Shoppers' Stop sees new malls opening up and resulting in greater choice for the consumer. It also sees opportunities for more retail space in larger, varied and different formats.

Retail is going to become a high-cost enterprise — jobs in this sector are going to be sought after, staff is going to be high-cost and maintenance costs such as that on electricity, are going to go up with customer expectations rising on various fronts, says Ms Subramaniam.

Mr Ramesh Ramanathan, President of the Chennai-based FoodWorld Supermarkets and Health & Glow, says he expects consumer spending to increase in 2004.

According to him, FoodWorld has been growing aggressively month on month. Growth for a chain like this will hinge on larger consumption of value-added items such as ready-to-eat foods or basmati rice or a whitening toothpaste and not really the monthly grocery list as a certain budget is fixed for it, he says.

Landmark continues to see the books category performing well as "the country's core competence is knowledge across categories." Book prices are coming down as the rupee strengthens against the dollar.

In early 2004, Shoppers' Stop is opening three large units in Mumbai suburb Malad, Bangalore and Kolkata, apart from one or two more later in the year. It plans to expand in footwear, infants' merchandise and ladies wear. It also plans to add more value to its First Citizens loyalty programme.

However, retail spending should be tracked and the figures made available, as in the West, says Ms Subramaniam.

"They record that cash has been received for products sold — that is the absolute truth and the best economic indicator," she adds.