Google+ Consumer Psyche: Organised retail in recession


Thursday, December 24, 2009

Organised retail in recession

India's retail industry boom gave way to despair in 2009 as consumers held back big spending, forcing some companies to restructure finances, while recession-battered western retail chains would have felt glad they were not allowed to set shop.

Although the UPA government returned to power, minus the push and pulls of Left parties, it decided to keep western multi-brand retail chains off from the country's USD 450-billion retail market. But nobody was complaining, as the recession-battered global majors were busy securing existing operations elsewhere.

One estimate suggests that nearly 5,700 retail stores would close down this year in the US alone. That slowdown had got to the domestic retail trade became evident when one of the earliest players, budget-retail chain Subhiksha, went bust. Not long after, north Indian chain Vishal Retail went for corporate debt restructuring. Others such as Mukesh Ambani-run Reliance Retail and Kishore Biyani-led Pantaloon went slow on expansion or even downsized operations.

Though the last quarter saw a bit of marketplace confidence returning, overall, the year remained challenging. There were no estimates, however, of how mom & pop stores fared through the year.

While Indian companies tread cautiously, the world's largest furniture maker Ikea scrapped plans to enter the country, citing government's restrictions on FDI. The Swedish retailer was planning to enter the single-brand retail segment, where 51 per cent FDI is allowed but it wanted further relaxation of the rules.

The last quarter, around the festive season, saw a bit of consumer confidence returning, with some retailers player announcing expansion plans for the coming year. The year started with Chennai-based retailer Subhiksha Trading Services Ltd going bankrupt and downing the shutters of all its 1,600 odd stores across the country due to severe liquidity crunch.

With its lenders running for the company's skin and over 5,000 employees on the street, Subhiksha sought a corporate debt restructuring (CDR) exercise. But, that remains inconclusive and the firm now faces a slew of cases by its suppliers in the Madras High Court on winding up petitions. Reeling under Rs 730-crore debt, Delhi-based supermarket chain Vishal Retail also went in for a CDR in November. Earlier in the year, it had already halted all expansion. Even the country's largest retailer, Kishore Biyani-promoted Future Group, faced crunch and went in for restructuring of its operations and merging them under six verticals.

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