One year on, retail story in need of retelling

Sep 21 2013, 17:41 IST
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In short, the organised retail story has not had a happy beginning. In short, the organised retail story has not had a happy beginning.
SummaryIn short, the organised retail story has not had a happy beginning.

and ended the year with a 42% higher turnover at R10,800 crore. This was the first time that Reliance Industries’ retail business crossed the R10,000-crore mark in turnover, making it number two amongst Indian retailers. Reliance Retail also broke even with earnings before depreciation, finance cost and tax of R78 crore.

The Future Group is now focusing on the profitability of stores and is planning to open stores at places only where it can ramp up faster, the company's joint managing director, Rakesh Biyani, maintains.

“Retailers have started to look at their business model in a sensible way. They have realised that they should consolidate their operations first, before rolling out another set of stores,” said Mohit Bahl, director, transaction services at KPMG.

"The market is still very uncertain with the rupee depreciating and reforms not taking place. So people are not too optimistic right now. We are working towards higher sales, but I would not bank upon higher growth for the next few quarters,” Govind Shrikhande, managing director of Shoppers Stop, said recently.

Analysts continue to maintain a muted outlook on the growth of the sector. Fitch Ratings' India Ratings & Research, which has maintained a negative outlook on the retail sector for the second half of the year, sees higher inflation and marginal nominal wage growth acting as major deterrents for consumer spending. “Margins pressures will continue to impact credit profile of retailers,” the agency said in a recent report.

A Confederation of Indian Industry and the Boston Consulting Group report states, "Modern retail is struggling to drive efficiencies due to a nascent and largely unorganised supply chain”.

India Ratings analyst Janhavi Prabhu expects estimates lower operating profitability, higher funding costs and working capital requirements to continue to exert pressure on operating cash flows this year.

Direct employment in the sector is still skewed towards informal employment. “Nearly 97% of direct employees in the retail sector are hired through informal channels and this accounts for nearly 22 million people, while corporatised retail provides direct employment to only 0.7 million people,” says Saloni Nangia, president, Technopak Advisors in a report released earlier this month.

Nangia added in her report that certain structural issues will hamper the growth of organised retail in the decade ahead. “Share of corporatised brick-and-mortar retail in total merchandise retail will at best grow from the current levels of 7% to 17% by 2023... This retail channel will continue to face

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