The Hindu Business Line : Retailers put brakes on expansion

New Delhi, Nov. 10 Faced with a slowdown, retailers are revisiting their business plans by slowing down on expansion, closing economically unviable stores, optimising space utilisationbesides focusing on performance improvements to tide over the situation.

“Though the overall retail market has grown by about two per cent in the quarter ended September, the growth is still far less than anticipated. Companies that had earlier chalked out massive expansion are facing a bumpy ride. The middle market has taken a hit in the wake of a tightening of the credit situation and rentals. However, the luxury retail market so far has not shown any recessionary trend,” said Mr Asitava Sen, Director, Retail Consulting, The Nielsen Company.

Noting that the concern is more about operational challenges than slowdown, he said a clutch of retail companies are putting a brake on expansion.

According to Mr Ambeek Khemka, Group President, Vishal Retail, “Footfalls have been affected as the trend is more towards saving than spending. We are still analysing the numbers on the decreased footfalls. All our expansion plans have currently been put on hold and we are going more for the franchise route rather than the company owned and operated models.” He said the public-listed company is also relocating some of its retail outlets to rationalise on the rentals.

Mr Samar Singh Sheikhawat, Vice-President of Spencer’s Retail, said: “As a part of our cost restructuring, we have shut at least 10 per cent of our economically unviable stores. Though the food and grocery business has been least impacted by the slowdown, we are extremely cautious about the situation and new store openings are being postponed temporarily.”

Mr Rajan Bharti Mittal, Vice-Chairman and Managing Director, Bharti Enterprises, said, “Cost cutting has become a reality. However, cutting down the fat doesn’t mean cutting the muscles. We are renegotiating with our vendors. Many retailers who pick up stocks on credit are prolonging their vendor payments.” He, however, said the company is going ahead with its expansion albeit slowly and cautiously.

According to another analyst, retailers are striking a revenue-share agreement with mall developers, besides inking the franchisee route. “This way a lot of saving is achieved on fixed costs like rentals and margins to the franchisee.”

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