Mumbai, Dec 6 () : India’s big retail chains are closing down their shops in many regions in the country due to losses and nil profits.
Pune, a city next to Mumbai in terms of population and economic growth in Maharashtra had nine Spencer Retail shops. Today it has not even one shop. It is not only Spencer, others like Aditya Birla Retail closed its outlets across Mumbai, Jaipur and Coimbatore earlier this year and Future Group’s eZone, a one stop store for electronic goods has exited from several cities including Delhi, Indore, Surat and Ahmedabad.
Consumer spending has come down and no more they can command big margins as small players are offering lesser rates. Seeing this trend going on for some time, the retailers are now moving out from regions where they are making losses and instead concentrating on cities where they are making money.
Big retailers are now moving towards potential growth markets where there is not much competition. Most of the cities are saturated with departmental stores and too many retailers fighting for customers.
The new buzz word from the top marketing gurus is to see whether the store works for them in a reasonable time frame or exit the city. If the brand clicks, then go on to expansion.
eZone is open only in Mumbai, Pune, Kolkata, Bangalore,Chennai and parts of the National Capital Region. By this move, the management is able to focus on these stores only and increase the efficiency. No more are these retailers interested in a pan-Indian presence.
Spencer Retail has two supermarkets in Mumbai and Baroda in the whole of Western India. West Bengal, Andhra Pradesh, Tamil Nadu, eastern Uttar Pradesh and NCR are the only States that Spencer has its outlets.
Focussing on growth potential markets means efficient supply chain, especially when many Indian retailers are still trying to concoct a winning business model. Managing costs is another big reason driving retailers to exit certain regions. Aditya Birla Retail, for example, left Mumbai bag and baggage because of high rentals.
With fewer stores, the supply chain is more efficient and they now go in only if the rent is within the limit since earlier these retailers paid fancy prices which often comes to 20% of the turnover.
Aditya Birla Retail that deals in apparel, closed 25 stores in Mumbai, 10 in Jaipur and 20 outlets in Coimbatore in one go.
Retailers are exiting from metros due to high rentals and smaller cities due to poor patronage of expensive and luxury goods.
Videocon products marketed through their store -Next Retail too is facing this problem. Closing down stores put the retailer down by Rs 25 lakhs per store. The interiors and changes in the infrastructure as well as settling employees wages and other liquidation charges add up to the bill.