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In fact, retailers have now realised that having too many stores was perhaps not the right strategy to increase sales, as now handling rising operating expenses is beginning to get difficult for retailers. Moreover, rising manpower costs and sky-rocketing rentals too are adding to their dilemma. So, most of the retailers are now either merging their different retail formats or are relocating and resizing. They are even shutting down stores. This is certainly a natural move on retailers part, however, what is intriguing is that how did such a situation rise, especially when the Indian retail boasts of some of the biggest names of India Inc.?
Answers Vasal, “The reason for some retailers closing down stores is the general slowdown & fault in the strategies of the retail players. Some players entered the market during boom and hence the calculations weren’t done adequately.” Recently Videocon-owned consumer electronics store Next revisited its strategies and announced the closure of 20 outlets in prime cities. However, K. S. Raman, Director, Next Retail has a different reason for the same. “We now want to consolidate our presence in the interiors of the country and North East,” he argues. Similarly, Spencer’s Retail, too has shut down 56 stores (out of a total of 400 stores) purely on account of non-performance. Exclaims Goenka of Spencer’s Retail, “It is not an alarming news but a sensible decision.” Reasons cited by Goenka for non-performance of his stores were that in certain places, rents were too high and did not commensurate with the revenues, while in certain other places revenues just didn’t pick up. “You have to see what product(s) you are selling and then choose on a location. In few cases, this was done in a reverse manner,” he adds.
Apart from closing down stores, retailers are also considering to merge different retail formats they opened during the process. Reliance Retail is expected to merge its hypermarkets, supermarkets and convenience store formats. Certainly a merged management will help Reliance save on man-power, operational and recurring expenses. Kishore Biyani-owned Pantaloon Retail has also shelved its plans to hive off Big Bazaar as a separate entity and therefore cut on the costs that were expected to rise with the formation of a new company.
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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