Retail - Time for shakeout or not yet?

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Topic: Retail - Time for shakeout or not yet?

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deveshkayal
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Posted: 09/Dec/2007 at 7:47pm

here

"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett

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Ajith
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Posted: 09/Dec/2007 at 8:36pm

PRIL-Multibagger hereon ,I meant.The opportunity for PRIL is tremendous but Shankar Sharma did not like it some time back.
I am biased against it(sour grapes) because I was forced to sell out(at around 300) due to circumstances beyond control after having identified it at around(10 paid-up) 250!!

Edited by Ajith - 09/Dec/2007 at 9:23pm

Ajith

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omshivaya
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Posted: 09/Dec/2007 at 8:50pm

Originally posted by Ajith

...but Shankar Sharma did not like it some time back.

He changes views every few months, so take SS as just that...SSSSzzzz...

The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it

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xbox
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Posted: 09/Dec/2007 at 7:06am

Walmart, Carrefour which were present in one large Asian country, recently exited. Don't know the reason (will they openly say so ?) but I feel they could not fine tune their model to local conditions. This gives advantage to local retails in India. One of the best retail company in that Asian economy is JV between local with TESCO. I don' know what these people did vs carrefour & walmart.

With this back ground I can feel that making money from retail is very difficult. Being big names in UK/USA is not enough to do so. This gives inherent advantage to PRIL. Let's see what indiabulls does in this space. I am not bullish in the space hence not bullish on this takeover as well but mcap game will continue without stop as retail is long way to go. Few will survive, most will be doomed.

Don't bet on pig after all bull & bear in circle.

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nitin_jagtap
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Posted: 25/Feb/2008 at 9:49am

Small stores and big, organized retail can co-exist for now

To ensure traditional retailers don’t lose out in modern retail at once, they need to be included either by co-opting them or helping them find alternative jobs

Mumbai: Small stores, also called kirana stores, will continue to grow alongside organized retail, albeit at a slower rate, and it might be a decade before such store owners lose business to the big retailers, providing an ample window for India to help make the smaller players part of the transition in retailing, say the authors of a report that will now become part of another, government-funded report on the impact of organized retail.

Bleak%20future:%20The%20report%20says%20when%20the%20share%20of%20organized%20retail%20in%20food%20reaches%2030%,%20small%20retailers%20will%20be%20hit. That%20may%20be%20in%20one-two%20decades.

Bleak future: The report says when the share of organized retail in food reaches 30%, small retailers will be hit. That may be in one-two decades.

The report also says that consumers and farmers will be the early beneficiaries of modern retail, and that to ensure that traditional retailers don’t lose out at once, they need to be included either by co-opting them or helping them find alternative jobs.

The report, by Thomas Reardon of Michigan State University and Ashok Gulati of the International Food Policy Research Institute, will become part of a Union government-commissioned study by the Indian Council for Research on International Economic Relations (Icrier) on the impact of the growth of organized retail on unorganized retail. The paper, which has been submitted to Icrier for inclusion in its study that has still not been made public, is called “The Rise of Supermarkets and Their Development Implications” and it draws on experiences from the growth of organised retail in other developing countries to suggest what the impact of organized retail will be on consumers, farmers and smaller retailers in India. Although the Icrier study has been ready for a few months, it is yet to be presented to the government.

Mint had previously reported that the Icrier study showed that 50% of small retailers surveyed reported lower sales and 61% of all retailers pointed to competition from organized retail as reason for their declining financial health. The study surveyed 1,598 small retailers, of which 793 were located close to large retailers and 835 were in neighbourhoods without large retailers.

Those in head to head competition said that sales were down 16% and those in safe neighbourhoods where there were no big retail outlets said that sales were up 2%, suggesting that organised retail had affected the business of small retailers.

Reardon and Gulati’s paper says that experiences in China and Indonesia suggest that both kirana stores and organized retail outlets can coexist, although they will grow at varying rates. “However, structural changes in retail will surely start affecting large numbers of small retailers at some stage, be it after one or two decades, especially when the overall share of organised retail in food reaches about 25-30%,” says the report.

Until then, organized retail could grow at 20-40%. Kirana could grow at 2-5%.

While just 1% of all food and grocery sold in the country is through organized retail stores, the business is growing at a rate of around 30%, according to a report by Man Financial, a Mumbai based brokerage. Several large retailers, including Wal-Mart Stores Inc, Reliance Industries Ltd and the Aditya Birla Group have big plans for selling everything from food items to furniture here. Meanwhile, there have been increasingly strident protests against big retail. India has more than 12 million small retail outlets making it hard for the government to ignore any threat to the livelihood of this large base.

However, traditional retail is typically in need of modernization and the Indian government needs to invest in this the way governments in Singapore, Hong Kong and Taiwan have done to overhaul the system, say in the case of modern wet markets, according to Reardon’s report. It also says that organized retail is a growing source of taxes to the government, which can be ploughed back to modernize traditional retail and build infrastructure to modernize the food supply chain.

Source : http://www.livemint.com/2008/02/25232427/Small-stores-and-big-organize.html

Warm REgards
Nitin Jagtap

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investor
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Posted: 16/May/2008 at 12:07pm

Very good story - Did you know that Landmark bookstore was first started by a woman in Chennai with just 12 lacs as Capital?

Read about her inspiring story here
http://www.rediff.com/money/2008/may/16land1.htm

(go through all the slides from there for the full story and interview)

She has now sold out completely to Tata's Trent.

She has some very interesting things to say about organized retail in India. I think coming from her, they need to be considered seriously.

some excerpts:

------------------------------------

Retail sector in India

I feel the retail sector in India is overrated, hyped and very euphoric and it has to correct. The retail euphoria in India has gone mad. I feel the media is creating the hype.

People are just jumping into retail, opening stores and losing money left, right and centre. There is too much of hype surrounding retail in India and the legendary Indian middle class. Where are the 300 million Indian middle class? They are not there; they are certainly not buying at the stores. Every retailer is bleeding. If four locations are successful, 10 are unsuccessful.

A bestseller in the US sells 150,000 copies but a bestseller in India sells 5,000 copies. And we are a billion people.

As a consultant, I will be honest enough to say if the business plan doesn't look good, don't burn your fingers. What is going to not work is much more obvious than what is going to work.

Overheads are very high. The first correction has to be in real estate. Then, labour cost which is unreal.

Where is the retail sector heading?

It will lead to more companies going bust. There will have to be a correction in the retail sector. The bubble will burst soon. Only the players with deep pockets can sustain the losses. It has already started. A lot of stores are shutting down which you never saw three years ago.

The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!

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basant
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Posted: 16/May/2008 at 12:12pm

Had she said this before the stake sale I doubt if Trent would have bought her out. She is negative on Retail that is why she sold out!Even retail has 10 verticals with 10 players in each vertical. So such a classification is debatable.

'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

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investor
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Posted: 16/May/2008 at 12:18pm

I dont think that is the main reason. If you read the whole story, her
brother sold out his 76% stake in 2003 itself, so she has been running it
as a minority partner. And as she rightly says, there was no way she could
run it they way she wanted to after that happened. And her being a first generation entrepreneur, it is easy to understand how she would've struggled.

While her view on retail sector is definitely debatable, she does raise
some valid concerns as well, which i feel all organized retail people must
be already having in their minds.

Originally posted by basant

The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!

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