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Slowdown-hit DollarStore shuts 41 stores

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US-based deep discount retailer MyDollarStore Inc., founded by an American of Indian origin, is the latest casualty of the economic slowdown in India that has forced organized retailers to apply the brakes on ambitious expansion plans.

The chain, which entered the country in 2004 selling products including imported shampoos and shaving lotions at a price of Rs99 each, has shuttered three-fourths of its 55 stores in the past few months, the company said. It now has 14 stores in the country.

MyDollarStore was founded by Rex Mehta, an Indian-American based in California, who came to India with the ambition of opening 400 stores across the country in three years, offering products including Doritos chips and Kellogg’s Pop-Tarts, according to the chain’s website.

Mehta had bet that the chain and its stock of inexpensive but quality merchandise would match the Indian concept of paisa vasool (value for money).

Organized retailers have experienced a tough infancy in India, confronting soaring real estate prices and other costs during the years of an economic boom, followed by the slowdown that set in last year and dampened consumer demand.

The country’s largest discount-store chain, Subhiksha Trading Services Ltd, suspended its operations after it failed to raise cash either through the stock market or from banks. Other retailers including Pantaloon Retail (India) Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd have closed stores and pruned expansion plans.

At least four employees at MyDollarStore interviewed by Mint said they had not been paid salaries for three months. Some employees said the chain was understating the number of stores that had been closed. These employees didn’t want to be named.

“There may be some disgruntled employees here and there and somebody is selling a sob story across to you,” said Soumitra Ghatak, chief executive of Sankalp Retail Value Store, which is the master franchisee for MyDollarStore in India. “Those who are on our payroll have been paid; those who are on notice period or on settlements—those (employees) will take some time and that’s it.”

Ghatak did not say how many people are currently on the company’s payroll and how many had been laid off.

Meanwhile, a person named Imran Sheikh has filed a petition against Sankalp Retail in the Bombay high court under sections 433, 434 and 439 of the Companies Act, according to the court’s website. The sections are related to a company unable to pay its debts, but it’s unclear why Sheikh had filed the case. Mint was unable to contact him or his lawyer.

“It’s just a filing of petition (and) we are unaware of the content and since no notice has been served as yet and without seeing the copy of the petition and content we are unable to respond,” Ghatak said.

When asked if the company is withholding payments to vendors and suppliers, he said it was the case with almost all retailers.

“Vendors payments are usually in a cycle and can get delayed in a cash crunch and those are normal things,” he said.

The company said the 14 stores still operating in India include three in Mumbai and one in Noida, a suburb of New Delhi.

Employees at the Centre One Mall in Navi Mumbai said the My Dollarstore there has been shut since February, although Ghatak said the store was open.

The store in Metro Junction Mall in Mumbai’s Kalyan neighbourhood has been “closed for renovation,” according to Ghatak. However, a person familiar with the situation who didn’t want to be named said the MyDollarStore there had been shut since early this year.

Empty racks greet customers at the Noida store.

Ghatak said the company is focusing on the “store-in-store” format, opening sales outlets on the premises of “big retailers” that he declined to name. “We have recast our business model and we want to get into smaller formats with smaller footprints and that’s all work-in-progress.”

The company plans to open as many as 80 such sales outlets in the next 12-18 months.

“Work-in-progress always looks dirtier than what it was originally.” Ghatak said.

Source: Mint

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