Monday, June 06, 2005

Retail round-up

Shivaji and I covered the trends in retailing last week on how people are buying new refrigerators and cupboards and new homes to stock impulse purchases from Food and Big Bazaar, how shopping has become a cool way to chill out , how the great Indian male is slowly embracing change in roles thanks to the ease of cooking and shopping, how people with sizes more than the fastest selling inventory would have niche shops (how does XXXL sound as a name) catering to them and how new pyschological disorders are emerging due to excess shopping. In fact we are planning to write a movie script about a Rampal Yadav from Rampuria who gets trapped inside a mall (like Tom Hanks in Terminal).
Just in case, anybody is interested HSBC has come out with a detailed equity research report on retailing and are heavily bullish on Pantaloon, although it trades at a princely 64 P/E valuation.
Some excerpts
Organised retail gets hyper
India’s urban consumers want more. They are richer, younger and more aspirational than ever before.Now the nascent organised retail sector is showing signs of being able to keep in step with its customers. Shopping malls, supermarkets and hypermarkets are springing up in cities all over the country and franchised foreign brands have never been more popular. In this report, we show that Indian retailers with the right formula face enormous growth opportunities. We believe organised retail penetration (ORP) will increase from less than 3% in 2005 to 8% by 2010e. We see rapid growth, especially in three key segments - food and grocery, apparel and household improvement.
The last one is still nascent, so thats where interesting business plans can still be made, can leather sofas be sold at Rs.10k , modular kitchens for Rs.15k?. I am already thinking, lets see...


At 3:33 AM, Anonymous Anonymous said...

HSBC being bullish on pantaloons means its in a sound business backed by good strategy and managment, the stock price though is driven not only by these byt demand supply and market sentiment as a whole.... markets are not perfect

and food and groceries being good business for retail, thats another fad. Firstly unlike textiles, the average spend doesnt wary in multiples between people and secondly Unlike west, in india every village or a smaller combination are self sufficient and its unlikely that it shall change very fast. So as a percentage of spend it can never reach more than 2-3%

At 4:25 AM, Anonymous Anonymous said...

I disagree with the second part of this 'Anonymous' comment. Food and groceries retailing growth is not a fad if you look at how branded foods have grown over the last 15 years. Before that, most of our snack foods and drinks etc was unbranded.

Regards the textiles example, well, the spend on foods does vary by the number of people. The more people in a household, the more they will eat.

Organised retailing will grow as lifestyles become more mobile, more aspirational and people will have more money to spend. Also, the growth in more 'national' brands will be a contributor. Today, there are shops which sell furniture (Living Room in Mumbai), but for these to become 'organised retailing', there will have to be an 'Ikea' in the market.

Organised retailing brings in the benefits of bulk purchase, and hence, reduced prices (look at Walmart's model). Thus, a villager may also go to the nearest Chaupal Sagar to buy their requirements. After all, villages may be self sufficient in food (assumption), but a lot of them do not make their own soap!


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