Last week, the business of retail saw its operators discussing some ‘weak points’ that are holding back the growth of modern retail formats. Indiaretailing re-read its own sections and found industry experts speaking about various obstacles and problems in the context. Other than real estate prices, the subjects of inflation, problems in joint-venture deals, government’s policies and some unavoidable subsidies were marked out as ‘impediments to growth’ by the experts.
Kishore Biyani, group CEO of Future Group, in his interview with the UK daily Financial Times, had squarely blamed the rising real estate prices for being the major impediments in the growth of the retail sector in the country. “Rising steel and cement prices have boosted construction costs of shopping malls in India by as much as 40 per cent over the past two years,” Biyani said. “At current property prices, you cannot exist in the modern retail business. Either productivity has to increase significantly or rent has to come down.”
On the same note, Manjula Tiwari, chief operating officer and brand head of Esprit, while announcing the brand’s expansions, said, “Space constraint is the main reason behind Esprit’s limited expansion. However, the expected mall boom in India will now let the company expand throughout the country.”
Demanding a change in the policies that regulate the retail sector in India, the chief minister of Kerala, VS Achuthanandan, said that the central government, through its flawed farm and retail market policies, is adding to the aggravation of market fluctuations. In his view, the Centre should try and work out options to impose more regulations on this sector. The Kerala government, to keep prices under control through effective market intervention, has planned to develop hypermarkets in the state.
Addressing a similar issue, industry experts speaking at the panel discussion on ‘Impact of organised retailing on the unorganised sector’, held by the Birla Institute of Management Technology (BIMTECH) in New Delhi, opined that the organised retail market in India has to be regulated to avoid extinction of the traditional retail segment and loss of employment to many small retailers, in a manner that ensures coexistence.
The panellists, who came from different verticals of the society, approved the view that there should be de-politicisation of the entire issue to arrive at a pragmatic policy framework on retailing.
Inflation, cost and subsidies:
India’s inflation accelerated to a 13-year high after record crude oil costs forced the government to raise retail fuel prices. Stocks and bonds fell, and the Reserve Bank of India will probably have to raise interest rates again.
Following its policies to hike diesel prices in Sri Lanka, Lanka Indian Oil Corporation (LIOC), the Sri Lankan arm of Indian Oil Corporation, has been warned by the Sri Lankan government to either lower the prices or sell the business to the government. Consequently, oil retail companies in Sri Lanka are being compelled to sell diesel at a loss despite increase in global oil prices.
In order to mitigate losses, India’s leading denim and apparel maker Arvind Mills Ltd had called off its joint venture with Diesel BV. According to Arvind Mills, the deal restricted the future expansion plans of both companies.
The Italian denim giant had entered into a partnership with Arvind in April 2007 for branding and distribution of its products and had planned to roll out major expansions this fiscal.
– Ranjan Kaplish and Satrajit Sen