Conference Call      
          Shoppers Stop
Looking for tie-up in Hypermarket format


Shoppers Stop conducted conference call on 25th November 2011 to discuss the impact of announcement of FDI in Multi-brand retailing and single brand retailing by the government.

Highlights of the call:
The government has cleared the much awaited FDI proposal to allow 51% in the multi-brand retailing and 100% FDI (earlier it was 51%) in the single brand retailing. However, it has come up with the few condition such as minimum USD 100 million investment with 50% to be in the back-end infrastructure excluding the land and rents. Further, it has to source 30% of the merchandise from the SME's. Also, it allowed only in 1 million plus population towns (40+ odd towns).

It believes that Government move is in the right direction. This will help infuse fresh investment in the sector & the latest technologies brought in by the global players will provide further impetus to supply chain management. The sourcing clause will also help ease food inflation to a large extent.    

It further believes that it will not impact the small retailers as globally it has been proven that modern retail & self organized- mom & pop stores can co-exist in a growing economy. The decision also shows the government's commitment towards strong economic reforms and taking bold decisions.

The move is expected to improve the back end infrastructure such as cold storage, warehousing etc. Further, it will improve the commercial farming. The sourcing of the 30% merchandising from the SME's very much possible.

It expects the Government will release the notification in one (or) two weeks which will give the clear picture of the policy.

It believes this will increase the foreign players activity. Further, it believes that the pace of the activity not going to be dramatically different. The industry is much more realistic and cautious compared to 3-4 years ago, where there was gold rush in to the industry. It indicated that the most of the FDI activity expected to happen in Food and Grocery segment. However, the key constraint to the foreign players is the availability of the retail space.

The government allowance of 1 million plus population towns (40+odd cities) will give the most of the consumption markets that the retail players are looking for.

The implications of the opening of 100% FDI in the single brand retailing expected to open-up the non-apparel segment, accessories such as cosmetics and sunglasses.

The major obstacles to the foreign players and to the industry are real estate availability, infrastructure and tax regime.

It indicated that there is not anything on table for tie-ups/JV's with foreign players and will explore all possible options in front of it.

It's mostly looking for the tie-up in the Hypermarket format. The company is exploring every possible option, which balances the expansion point of view and promotional point of view in this format.

The entry of the foreign players will give the learning in both the ways. Indian retail players can learn the best practices in the other parts of the world and also foreign players can learn how to handle the different cultures and different requirements in countries like India.

The foreign players' entry will help the better understanding of the logistic management. Further, It helps in understanding the better warehouse management, inventory management at lower cost, expected to result in better top line.

The departmental stores like to like sales grew by 8-9% during the festive season below its expectations. Further, the Hypercity like to like store sales grew by 9-10% for the festival season.