i-Retail Insight

BIG Cinemas, Cinepolis in talks for alliance

2012-04-09T07:32:00.000-07:00

Anil Ambani-promoted multiplex chain may sell stake to the Mexico-headquartered global giant

The Mexico-headquartered Cinepolis, the world’s fifth largest multiplex operator with over 2,500 screens, is in talks with the Anil Ambani-promoted BIG Cinemas for a strategic alliance.

The alliance may entail buying a stake in some of BIG Cinemas’ screens.BIG Cinemas is the exhibition arm of Reliance MediaWorks (RMW), which also has a presence in film services, including motion picture processing, studio facilities, film restoration, equipment rentals, visual effects, animation and post-production.

BIG Cinemas has the largest number of screens in the country, at 256, and 530 worldwide. The next in the country are Inox-Fame with 212 screens, PVR with 162 and Cinemax with 141.

Cinepolis, which started operations in 2009, has screens in six countries of North and South America. In the US, it has more than 250 cinemas. In India, it has a small presence, with 32 screens at five locations, including Amritsar, Bangalore, Patna, Amritsar and Surat. It does not have a presence in the four main metros, though it has announced an ambitious plan to set up 500 screens in 40 cities by 2016 with an investment of Rs 1,500 crore.

According to sources, the talks have been on for the past two months. “BIG Cinemas is planning to focus on its film and media services business and trying to reduce dependence on the multiplex business. Cinepolis is looking to either buy several key properties or get into a tie-up,” said a person familiar with the development.

RMW has already restructured its multiplex business into multiplex and single screens. Typically, multiplex operators invest Rs 2-2.5 crore per screen. A query sent to the Anil Ambani-controlled Reliance group remained unanswered. A spokesperson of Cinepolis India did the same, as Milan Saint, the country head and managing director, was travelling abroad.

Last year, RMW decided to restructure the company into two business segments by creating subsidiaries for film exhibition and film and media services. The company said that would “allow it a strategic investor to invest in a business of choice”.

The UAE-based Grand Cinemas, several South Korean players and others are looking at the Indian market for growth. Most of them are looking at the acquisition route, as a slowdown in the real estate market has affected their expansion plans.

If the Cinepolis-BIG Cinemas deal goes through, it could be the second biggest after Inox Leisure took over the Shravan Shroff-promoted Fame Cinemas, after a bitterly contested battle with RMW.

Inox now owns 72 per cent of Fame while Reliance has 22.5 per cent after a recently concluded rights issue. RMW had bought around 36.5 per cent at a higher price of Rs 84 per share.

In the December quarter, RMW posted a net loss of Rs 150.56 crore, with a revenue of Rs 215.61 crore. The exhibition business contributed Rs 147.83 crore, while film processing contributed Rs 53.44 crore and film production Rs 12.88 crore. On Tuesday, the scrip closed at Rs 97.4, down two per cent, on the Bombay Stock Exchange. The company has a market capitalisation of Rs 380 crore.

Will India scuttle potential Rs700 cr investment of Apple stores?

2012-04-03T21:16:00.001-07:00

iPad and iPhone maker Apple operates more than 360 company-owned, company-operated (COCO) stores in 12 countries. Of these 360+ COCO stores, almost a third (115 stores) are outside the USA.The average annual sales per Apple company store in the last 12 months was a whopping $48.4 million (Rs242 crore).Apple’s retail business employs more than 41,000 people.

Apple’s flagship store on Fifth Avenue in New York City’s Manhattan borough (overlooking Central Park) is open 24 hours a day, 365 days a year, and supposedly did business of $800 million (Rs4,200 crore) in 2011.That’s more than the total turnover of Lifestlye and Shopper’s Stop put together. This iconic store is the most photographed place in all of New York City — more than Empire State Building, Rockefeller Center or Times Square.

In India, Apple does not have any COCO stores as yet. The company’s products are retailed from 35-odd exclusive Apple stores labeled as Apple Premium Resellers (APR) or from hundreds of multi-brand stores such as Croma, Reliance Digital and Vijay Sales. Apple’s product sales in India are now estimated to be above Rs6,000 crore per annum, including products bought by Indians while traveling abroad. The best performing Apple Premium Reseller stores in India are almost touching sales of Rs30 croreper annum — reason enough for Apple to consider opening COCO stores, at least in the three major metro markets - Mumbai, Delhi and Bangalore.

If Apple does open COCO stores in India, these are likely to be standalone stores on prominent high streets, as Apple usually likes to make a strong statement with its retail presence. But where? Will either Brihanmumbai Mahanagarpalika, New Delhi Municipal Corporation or Bruhat Bengaluru Mahanagara Palike allow Apple to put up iconic stores on footpaths (we don’t even have any left!) with the main retail area underground? Current municipal bye-laws in these Indian cities do not allow human habitation or commercial business in basement floors.

Apart from the archaic municipal bye-laws, there is another major hitch that may become an unnecessary and unwanted show-stopper. Apple COCO stores typically sell speakers, cameras, bags, sleeves, cases, printers, scanners, storage media, as well as other peripherals and accessories from dozens of third-party brands. Does this make an Apple store a multi-brand store?

If it does, this is really bad news for India, as Indian policy still does not allow foreign direct investment (FDI) in multi-brand retail. This is a pity, as Apple stores are basically single-brand stores but the third-party accessories technically make them a multi-brand retailer. Apple currently invests an average of $38 million per new COCO store globally. If we factor lower costs in India than the global average, the investment per store is unlikely to be below $23 million (or, Rs117 crore) per store.

If Apple were to open COCO stores in India, it would probably set up at least six stores, with a potential investment of $138 million (around Rs700 crore). In the six-year period from February 2006 (since FDI up to 51% in single-brand retail has been allowed) to January 2012, the actual foreign investment inflow in the retail sector has reportedly been less than $45 million. And here is a potential $138 million investment which will get disqualified on unnecessary technical grounds. No wonder China is far ahead of us in attracting foreign investment - not just in manufacturing, but in most sectors of the economy.

The government should have an immediate relook at the foreign investment policy, and define single- brand retailers as those who derive more than two-thirds of their total revenue from a single family of brands owned by the retailer itself. This will allow genuine single-brand retailers such as Apple to open stores in India.

We are proud of our IT industry and give it all kinds of concessions and incentives. Can’t we give it a proper retail environment to buy Macs, iPads and other Apple devices? In fact, can’t we give the fantastic Apple retail experience to hundreds of thousands of Indian youth who love Apple products? Or will Mamata Banerjee stall this potential investment also saying that apples, bananas and oranges can be sold only by pavement-dwelling thelawalas and kirana stores?

The writer is chairman of Asipac, India’s leading mall development managers and retail research consultants, and founder of Men & Boys, Asia’s largest chain of retail stores for men’s skincare and grooming

Big Bazaar's value added services at no extra cost boost sales

2012-02-23T08:12:00.000-08:00

Future Group's Big Bazaar is making its biggest move into Indian households yet. The value retail chain is not just retailing grain, but grinding it, kneading the dough and even making chappatis for its consumers-at no extra cost.

Such services, including de-seeding pomegranate, grating coconut as well as cutting pineapple and jackfruit on the spot, are presently offered only at its prototype Rajaji Nagar store in Bangalore, but will soon be rolled out in all the 12 family Big Bazaar outlets across the country.

"The idea is to take care of all the pains of cooking, to reduce the negative labour that families do not typically reward the women for," says Ashni Biyani, director of Future Ideas, the innovation and incubation cell of Future Group.

"The consumer is familiar with modern retail and is willing to move to the next level," adds Future Group Founder and Group CEO Kishore Biyani's only child.

Industry watchers say the move will help Future Group, which launched value retailing a decade ago, win the loyalties of working women, students and singles with the new services.

"This will help the company not just be relevant to consumers as international competition increases, but also in smaller cities such as Aurangabad, where the consumer may expect such services," says Raghav Gupta, principal at management consulting firm Booz & Co.

Big Bazaar has a team of 'sevaks' at the Rajaji Nagar store, which opened doors on Wednesday, to offer different kinds of additional services.

If it's vegetables, they can be diamond cut, in cubes, for salad or sambar as per choice and zipped into a bag or chutneys can be whipped up.

The store also has a tailor to stitch curtains and a vendor to dry clean carpets and provide after sales services for electronics.

Future Group has also opened an office for citizen service centre Bangalore One, which allows consumers to pay utility bills within the store.

With grain, the store allows the consumer to buy, for instance, a kg of multi-grain such as wheat, jowar and bajra. Once billed, the consumer has the option of getting it ground, kneaded into dough and even made into chappatis either for the full weight or in parts.

Soaring rents worry retail chains

2012-02-22T05:47:00.000-08:00

Both Indian and international retailers find the challenge of locating suitable commercial space daunting. Now, such space is also one of the most expensive internationally. So much so retailers say the ‘shocking’ and ‘unbelievably high’ property prices savage their rent-to-revenue ratio, making their business unviable.

On an aggregated basis, Indian retail rentals are considered cheap as some pockets command prices comparable to cities in the US, to Tokyo in Japan and to London in the UK, says Nimisha Jain, principal at The Boston Consulting Group India.

Still, most international retailers are willing to stretch their budgets for a highly lucrative retail market as India. Retail analysts say rentals have climbed to 2007 levels again after dipping in between. Premium malls and high streets like Linking Road in Mumbai command significantly high rentals as every premium brand is practically fighting for the same limited space.

This also impacts their rate of expansion. But the retail industry, experts say, is a cash-guzzling business and takes years to break even. The wait for newer players to make a profitable business thus is usually longer. Brands like Miss Sixty are exiting non-viable properties and looking to shift to multi-brand formats rather than expanding under standalone stores. The brand is shutting down its store at the DLF Place Mall , Delhi, saying it is non-viable due to high rentals. The brand has also been scouting for properties on Mumbai’s high street Linking Road for sometime now.

Even as organised retail is in its infancy in the country, there are fewer options for brands that want to open their stores at proven locations, says Niladri Mazumdar, vice-president, sales and marketing, Seiko Watch India. “Currently, retail rentals are astronomical because there are so few options. It is a business reality, you have to hedge your bets and understand that on some places, you cannot invest and keep bleeding.” If rentals had worked out better, the watch company that plans to have ten exclusive boutiques in a couple of years, would have liked to open at least 20, Mazumdar adds.

Last week, French luxury women’s footwear brand Christian Louboutin opened its first store in India at Delhi’s DLF Emporio, followed by American home and lifestyle chain Steuben that recently started its India operations. In the second half of calendar year 2011, the mall had seen rentals appreciate by 10-11% while Delhi’s neighbour Gurgaon had seen rentals increase by 15%, according to a study by real estate services firm CB Richard Ellis. In the last few months, Gurgaon has also seen international brands like Bebe, Steve Madden and WH Smith open shops.

The study also suggests that key locations in Mumbai saw a 15-20% increase in rentals as retailers’ inquiries have increased significantly since the second half of 2011.

The high rentals are a result of real estate demand as well as the demand-supply mismatch of quality retail space. Since 2008, most retailers have initiated renegotiation of rentals while chalking out various models like revenue sharing with property developers. But revenue share where the retailer pays the property owner a percentage of his revenues or a minimum guarantee pre-decided rental (whichever is higher), has only been adopted by 20% of the market so far.

Gudjon Reynisson, chief executive officer of the world’s largest toy chain Hamleys, says that while its Indian partner Reliance Retail has been handling all rent negotiations and scouting for properties, rentals in cities like Mumbai and Delhi were indeed high — sometimes even higher than many international markets. “Rent is a very important part of the equation that all retailers have to look at and at times when they are high it becomes very challenging.

RIL gets fashion bouquet of 20 global brands via Iconix JV

2012-02-21T21:04:00.003-08:00

Mukesh Ambani-owned Reliance Brands has struck an equal joint venture with Nasdaq-listed Iconix Brand Group acquiring the ownership and management rights of 20 international lifestyle brands for India. These brands-including names like Ed Hardy, Mossimo, London Fog, Ecko and Candie’s-operate mostly in fashion apparel, home decor and electronics with combined retail revenue of $12 billion globally. The deal provides Ambani significant heft in India’s expanding lifestyle retail industry, and this is possibly the biggest investment in fashion by a large Indian corporate after Aditya Birla’s acquisition of Madura Garments more than a decade ago.

Reliance Brands will buy 50% stake in Iconix India, a newly created subsidiary of the US parent founded by Neil Cole, a brother of the American designer Kenneth Cole. Ambani, the richest Indian with an estimated wealth of $27 billion, may use Iconix JV to acquire or invest behind Indian fashion brands. Similarly, Iconix will transfer the Indian ownership of all future global acquisitions to the new JV.

“The India ownership of the brands is vested with the joint venture company for perpetuity. We paid a fairly significant upfront amount to purchase the stake and the rights,” Darshan Mehta, CEO, Reliance Brands, told TOI. Some other prominent brands that are part of the JV include Mudd, Candie’s Rocawear, Rampage, Danskin, Charisma, Sharper Image. Iconix also has joint ownership of seven global brands, including Material Girl (with singer Madonna), which will become part of the JV in due course.

The deal-making with Reliance is part of Iconix Group’s aggressive push into growth markets like India and China, where they forged a JV with fashion tycoon and former owner of Tommy Hilfiger, Silas Chau. Iconix chairman Neil Cole, who built a fashion business through acquisitions, said he was open to brand buyouts in growth markets like India. “We are in talks to buy a brand in Brazil, and could look for similar opportunities in markets like India,” he said from New York over phone.

Iconix India will license the brands to local retailers in return for royalty payments. The JV will keep the brand management, marketing and business development duties for all the brands. “We plan to build exclusive long term licensing deals with local retailers for each of these brands. The retailer will manage the stores, inventory and the operations,” Mehta said.

Mohan Mahajan, partner at consulting firm Mahajan & Aibara, said acquiring rights of well-known global brands is one of the easier ways to build a retail business, as opposed to developing a local brand. Indian conglomerate Aditya Birla acquired Madura Garments, the branded apparel brands of Coats Plc, to enter the fashion business in 1999. More recently, RPG Enterprises bought the brand rights of Ceat from Italian tyre maker Pirelli.

Shoppers Stop to invest Rs 220 crore on expansion

2012-02-17T23:08:00.000-08:00

Shoppers Stop, an Indian large-format department store chain, plans to invest Rs 220 crore for expansion in the next two-and-half years. Majority of the funds would be coming through internal accruals. According to the company officials, the slowdown on the real estate front and the resultant fall in the real estate prices have helped the expansion plans of the chain. Shoppers Stop signs up with real estate developers three to four years before opening a new store.

Talking about the expansion plans, Govind Shrikhande, Customer Care Associate and Managing Director, Shoppers Stop, said: "Our main focus is to expand our department store and hypermarket formats. However, we keep on expanding other formats as well. We are adding eight stores each in the department store format in next two years, Hypercity and Homestop will add two stores every year."

Sharing his expectations from budget, he said that the implementation of goods and service tax (GST), roll back of excise duty on apparel and service tax elimination should be considered in this union budget.

Shoppers Stop has recently launched its second store in Gurgaon at Spaze i-Techpark, Sohna Road. This is the 9th Shoppers Stop store in Delhi-NCR and 51st in the country.

Speaking about the launch of the new store, Shrikhande said: “The continued patronage from our Delhi-NCR customers has greatly encouraged us to expand our presence in this region. We have now extended our bridge-to-luxury experience in Gurgaon with a 2nd store. With spacious interiors and a prolific variety of brands, we are certain that our customers will be delighted to have an additional fashion destination in this city.”

He further added: “We enjoy a large base of our loyalty programme, First Citizen members in Delhi-NCR. This new store will cater as a convenient fashion destination for our loyalty programme members who reside in the catchment.”

Shoppers Stop has 51 stores in 22 cities.

French retailer Auchan eyes joint venture with Landmark group

2012-02-17T22:58:00.000-08:00

French retail giant Auchan, touted as Wal-Mart's most aggressive global rival, has held talks with Micky Jagtiani's Landmark Group for a possible India entry.

The ongoing discussions centered around a potential joint venture but the final agreement will depend on whether India moves ahead with plans for foreign direct investment (FDI) in multi-brand retail, said at least two people familiar with the talks.

Auchan, the second largest French grocer after Carrefour, is fully owned by one of the wealthiest French families- the Mulliez- who also own sporting goods chain Decathlon. Auchan has been a fast mover in emerging markets like China and Russia, where it has performed better than global peers Wal-Mart, Tesco and Carrefour. The big-box retailer Auchan, with a special focus on developing hypermarkets, had last reported turnover of over $70 billion.

"The discussions with Auchan are in an advanced stage and a decision is likely to take place in a month's time," said a person in direct knowledge of the development. The stores which will come up in India, if the agreement is signed between the two groups, may operate with the Auchan brand name although, the finer details are still to be etched out.

India decided to suspend plans to allow 51% FDI in multi-brand retail in December following a lack of political consensus, but could revive it after the crucial elections to state assemblies next month.

Landmark may forge a franchise agreement with the French retailer till the FDI norms are relaxed in multi-brand retail, said one of the sources mentioned earlier. Landmark Group currently runs the Dutch retail chain Spar in India through a licencing agreement signed in 2007 which comes to an end in December this year.

The Spar MD Gordon Campbell who was in India last month had said they were open to engaging with other partners to expand more aggressively here. Spar has 10 stores in India currently.

Sources close to the development told that the Campbell's statements to the media did not go down well with Max Hypermarkets, a part of the Dubai-based Landmark Group, and the partnership with Sparis virtually over.

A detailed email sent to Groupe Auchan remained unanswered while a company spokesperson for the Landmark Group was unavailable for comment.

The Croix, France based- Groupe Auchan SA, operates 581 hypermarkets and 2,384 supermarkets and minimarkets as per the company's published2010 annual report. "We are clear-sighted- the outlook is more positive in emerging countries than in the euro zone where the crisis is not yet over and continues to strongly depress consumer spending.

2011, our 50th year, will see the number of hypermarkets worldwide break through the 600 mark. We also plan to continue developing franchise and partnership agreements," said Vianney Mulliez, chairman of the board of directors, Groupe Auchan in the annual report.
In China, Sun Art Retail group, a joint venture between Groupe Auchan SA and Taiwan based-Ruentex Group, successfully raised $1 billion in a Hong Kong Initial Public Offering last year, the proceeds of which will go in its expansion.

Sun Art operates 197 hypermarkets across mainland China under two brand names, Auchan and RT-Mart. The other big market for Auchan is Russia where it has around 50 hypermarkets.

Auchan info:
The $70 billion Auchan talks to Landmark Group's Max Hypermarket It would prefer JV if India allows multi-brand retail FDI Auchan is the second largest French grocer after Carrefour Privately owned by wealthiest French family Mulliez Auchan called the most aggressive rival to Wal-Mart globally Outperforms global peers like Tesco and Carrefour in emerging markets Auchan China JV raised $1B in Hong Kong IPO

India the next shopaholic nation

2012-02-17T22:44:00.000-08:00

India is going on a shopping spree. Both the size and shape of the consumer market in India are fundamentally changing. While the dramatic growth of the market is known, it is not well understood.

The poorest nation in the big four emerging markets per capita will see consumer spending grow four fold over the next 8 years to $3.6 trillion.

In a report called “The Tiger Roars: Capturing India’s Explosive Growth in Consumer Spending”, The Boston Consulting Group said Thursday that by 2020, the number of affluent consumers in India will be larger than the entire population of Canada.

A caveat, affluence in India is about $18,500 a year.Average household income in India is forecast to triple between 2010 and 2020, but the base remains extremely low

Per capita income in India is under $2,000 a year.

The reason for the stellar growth? India’s baby boom generation coming of age and getting paid

The members of this generation are entering their prime spending years, and they will indelibly and dramatically reorient the market much in the way the U.S. baby boom did.

While inflation and higher interest rates may have momentarily caused consumers to hit the pause button, the long-term trends for consumer spending in India all point north

Such consumer spending has not only made India a shopaholic nation but buoyed it to become the most optimistic market in the world.