Retail carpetbaggers come to town
Banks wake up to post-VRS recast call
Robots out to rob jobs

 
 
RETAIL CARPETBAGGERS COME TO TOWN 
 
 
BY SHASHWATI GHOSH
 
Calcutta, June 10: 
The swank shopping malls are going into the hinterland. Large chains like Shoppers’ Stop, Westside, ITC Wills and Lifestyle are snapping up retail space in cities like Calcutta, Pune, Hyderabad, Chandigarh, Ludhiana, Coimbatore, Cochin, Ranchi, Aurangabad and Bhubaneswar as they strive to whip up a retail spending storm all over the country.

The so-called slowdown hasn’t deterred the high-rollers of the retail market; if anything they have been able to snap up space at almost “bargain basement” prices in cities like Calcutta which, analysts reckon, is one of the hottest destinations for the shopping plazas.

“In any retail venture, the highest cost component is the acquisition of real estate. Rentals almost form 50-60 per cent of the operating expenses for any retail outlet. An increase of even Rs 10 in the rental rate will decrease the net profit as a percentage of sales by close to 2 per cent,” says Sanjay Verma, director of Cushman & Wakefield, a top-level real estate consultancy.

Verma says the retail invasion into these cities is in one sense a national progression. “The trend should have been observed long before. Infrastructural hurdles like power and roads stopped the trickle down. At the moment, the real estate prices in these cities are pretty low. But if the retail boom catches on, land prices will catch fire,” he adds.

While ITC Wills plans to open two showrooms in Calcutta and Bhubaneswar by the end of this year, Shoppers’ Stop has already leased 60,000 square feet in Forum, a huge 2 lakh square feet mall which is being built on Elgin Road.

“When retail chains move into small areas they have to factor in the prevailing culture of the cities into their strategic plans. So even when they want to give their customers an international shopping experience, they have to ensure there are regional touches. For example, Music World kept a separate space for ‘Rabindra Sangeet’ and Oxford Bookshop had a ‘Cha Bar’. Any construction has to keep these cultural differences in mind,” says Verma.

Realtors reckon that Calcutta will be a shoppers’ delight in two years’ time — no picking your way through the slush on Gariahat or the narrow warrens of the tacky New Market.

Some major projects are already under implementation while others are still in the drawing board. Charnock City, which has a retail outlet in Salt Lake and Tollygunge, will be setting up its third outlet at Kasba. Big Bizz has bought 12,500 square feet of space for its retail outlet, while Pantaloons will also be opening its second outlet for which it has acquired 50,000 square feet of space. Bengal Ambuja has already been granted 6 acres of space in Salt Lake for the mega shopping arcade-cum-residential project in collaboration with the state government.

However there’s a downside risk in real estate investment by retailing ventures.

Says Pranay Sinha, head, retail and leisure at Jones Lang LaSalle, another real estate consultancy: “Space for retail projects mean 10 times more transaction than official space. Each store will at the most rent 800-1,000 sq ft while offices require a minimum area of 10,000 sq ft. Thus, the multiplicity of occupiers makes it more demand-supply dependent.”

Sinha adds, “In these towns, demand is not MNC-driven but franchise-driven. So percolation to the secondary level is very low. Though retails are going there and it means business for us, I will not be very hopeful because professional retailers with high front ends will not go there. Depending on space, they will have to pay up 6-15 per cent of their total budgets.”

Pune has seen two major developments recently: Crossroads set up its outlet spread over 51,000 sq ft and Food World has made retailing an experience for the shoppers.

Delhi’s retail giant Ebony went to Chandigarh first before going to Chennai. Kanpur is to have its first multiplex ‘Rave’ while Hyderabad already boasts of three big stores—Shoppers’ Stop (over 70,000 sq ft), Life Style and Westside.

Manish Kashyap from CB Richard Ellis, said: “Retailing depends too much on the type of product that is sold. In the case of Dominos’ Pizza, which depends primarily on phone-in orders, they will need very small carpet space. But for a merchandise retail, converting footfalls to business is very tricky.”

According to Kashyap, real estate prices in smaller towns will depend on the number of businessmen willing to move there. If space supply is low and demand for retail space is high, prices will definitely look up. But this process will take a little time.

“In India itself, the idea of retailing is very new. Even mall systems have not developed in big cities properly. Everything will depend on the capacity that the market is willing to absorb,” he added.

Meanwhile, ITC Wills is confident of the market. Krishnan Chatterjee, marketing services manager, ITC Ltd says, “We plan to penetrate a population of 10 lakh through our chains. Apart from Calcutta and Bhubaneswar, we have plans for Aurangabad, Bareilly, Ranchi, Coimbatore, Trivandrum, Calicut and other smaller towns. Organised retailing in India is only 2 per cent, we want to see how people react in smaller places.”

None of the plans of ITC Wills mean less than 1,000 sq ft area. Chatterjee said: “Sales depend on the location of the shop. We are doing our own real estate negotiations to cut down that expenditure. But for every shop 15-20 per cent budget goes to real estate.”

Verma said: “A. T. Kearney studies say India will have only 20 per cent of organised retail by 2005. At present, 10 per cent of our business comes from retail. India still has to see a retail boom with discount stores and perishable goods. But even then we are looking at the retail market to give us a foothold in these smaller towns.”

   

 
 
BANKS WAKE UP TO POST-VRS RECAST CALL 
 
 
FROM VIVEK NAIR
 
Mumbai, June 10: 
Fresh from trimming excess flab through golden handshakes, nationalised banks are now waking up to the need to make over their organisational structure, as an alternative to cost-cutting and redeployment of existing staff.

While the restructuring will largely mean fewer layers, some banks are also considering winding up loss-making branches or merging some of them. The annual savings expected through this route are in the region of Rs 50-100 crore.

Banking circles here said, as of now around five to six public sector banks, including Bank of India, Bank of Baroda and Punjab National Bank, have jumped on to the restructuring bandwagon.

Senior BoI officials told The Telegraph that the bank plans to introduce a three-tier structure, comprising the head office, zonal office and branches, instead of the existing four-tier one, by eliminating some regional offices in the country. That means, post-restructuring, the bank will have 44 zonal offices, instead of the 63 regional and 16 zonal offices now. Officials added BoI, which has a network of over 2,500 branches, will also re-organise its branch network, and is likely to merge around 10 branches this year. At present, it has around 100 loss-making branches, of which 50 branches are unviable.

BoB on the other hand, plans to merge or close down around one-fifth of its loss-making or stagnant business branches, most of which are in the rural areas. Further, it has also planned out a three-tier structure, with the zonal offices likely to be eliminated.

Others believed to have been seriously weighing the option include Central Bank of India, Oriental Bank and Corporation Bank. However, officials from these banks were not available for comments.

Analysts said while the banks had considered such restructuring programmes earlier, the present move gathered momentum only after the voluntary retirement packages unveiled by 26 of the 27 nationalised banks.

According to recent estimates, around 13-14 per cent of the total workforce in a nationalised bank is involved in administrative duties. “Now, with the focus on technology and the post-VRS shortage, banks are feeling that the staff should be redeployed productively in branches. Therefore, the urgency in restructuring of the organisation,’’ an ex-chief of a nationalised bank observed.

However, banking behemoth State Bank of India (SBI), with a network of 9,000 branches, does not have any such plans for now, chairman and managing director Janki Ballabh said.

Ballabh revealed that SBI is now focussing on “systematically redeploying’’ its staff following the VRS programme. The bank is now evaluating manpower requirements across different branches, for which it has sought the assistance of the National Institute of Bank Management.

However, sources said even if the bank does not restructure its organisational set-up, it may be forced to weigh the option of merger or closure of certain branches.

   

 
 
ROBOTS OUT TO ROB JOBS 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, June 10: 
Slash manpower — that’s the new mantra for belt-tightening companies struggling to come to terms with the heat of competition in a market that’s seeing demand shrivel up. Samtel, the country’s first colour picture tube manufacturer, is going one better: it’s increasingly switching to robots to do the job. The benefit: no more headaches over low productivity from a truculent workforce.

Samtel is now opening a third line of production that will use robots to make super flat colour picture tubes — the first of its kind in India. The plant will have the capacity to make 2.2 million computer digital terminals (CDTs) in the 15-inch category and 21-inch super flat CPTs.

The third plant, which is currently under construction, has a high level of automation and will probably need only 350 workers. The automation is cost-effective for Samtel because the software is developed by the firm in-house. Compare that with the first production line which needs around 1000 people to work with the robots. The second line with a capacity of churning out 1.8 million 14-inch CPTs uses just 500 workers.

But that’s not all. The company plans to open a fourth production line — to manufacture colour picture tubes for 29-inch televisions — sometime in 2003 that will have only robots and no workers on the shop floor. But even the robots need minding, so the plant will have about 200-250 managers, supervisors and technical personnel.

“To compete with the international prices, management and infrastructure, robots will have to be introduced in the production process,” says Sandeep Tandan, deputy general manager of the company. “It is easier for us because the technology is developed by our in-house research and development team. The hardware can be imported very cheaply. Last year, we spent Rs 6 crore to expand the R&D laboratory. There will be a 12-15 per cent hike in this expenditure this year.”

At present, Samtel has a 40 per cent market share for domestic colour picture tubes. It is also expanding its range of products and will make computer monitors and panels for colour televisions.

“Within two years, we will be expanding our production to the front glasses of the televisions also. Currently we have a joint venture on glass shell and funnel production with Samsung Corning of Korea, but will develop the technology ourselves very soon,” said Tandan.

Samtel supplies around 60 per cent of its colour digital tubes for computers to the multinationals like LG, Samsung and others. It also has a capacity to produce half a million avionics, medical and industrial tubes for medical and security purposes but only for the export market. It is also looking at the possibility of taking its automatic and internationally accepted technology abroad and could set up a production plant outside India.

   
 

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