Pantaloon plans major expansion drive even as Reliance goes slow

Tuesday, November 20, 2007

Even as Reliance Industries Ltd’s Reliance Retail venture said it
would have a tough time meeting ambitious targets for expansion,
Pantaloon Retail India Ltd, India’s largest listed retailer, said it will
spend Rs800 crore to have 10-11 million sq. ft space for the year
ending June from the current 6 million sq. ft retail space.

The expansion will help Pantaloon compete with large domestic
and international companies entering the retail space, chief executive
Kishore Biyani had said at the company’s 20th annual shareholders
meeting on Thursday.Those competitors include Reliance Retail,
which has faced mounting protests in several states over its expanding
retail presence.
The company said on Thursday that meeting its target of 100 million
sq. ft of retail space by 2010/11 would be difficult after protests forced
the closure of some stores.
“It’s a tough challenge at this point of time but we certainly think we
would make a good go at it,” said Bijou Kurien, president and chief
executive of the lifestyle segment, referring to a target set last
November. The company currently operates more than 390 stores
in 16 cities, spanning 1.5 million sq. ft.
But in October, Reliance ended the services of about 400 franchisees
for planned operations in West Bengal state and has shelved a roll-out
in neighbouring Orissa because of protests from small traders, who fear
major job losses.
Reliance Retail in September laid off 1,000 staff in northern Uttar
Pradesh after the state shut 10 Reliance Fresh supermarkets following
similar protests. By spending more than $5.5 billion (Rs21,615 crore) on
its retail venture, the firm had planned to open about 500 Reliance
Fresh supermarkets in the Communist-ruled West Bengal and about
150 in Orissa. “2008, 2009 and 2010 would be the three critical years
in terms of property addition so far as we are concerned,” said Kurien
at the launch of the company’s first jewellery store in Bangalore.
Modern retail faces political obstacles in India because of fears millions
of small shopkeepers could lose their jobs in the fragmented but fast-growing
industry that is forecast to double in size by 2015 from an estimated
$350 billion.

India limits foreign multiple-brand retailers to wholesale or franchise
and licence operations. Talk of easing foreign investment rules have
cooled in recent months, prompting Tesco Plc. and Carrefour SA to
cool India plans.
Large Indian firms, including the Tata Group, the Aditya Birla group
and RPG Group have been stepping up investments to tap growing
consumer spending in Asia’s third-largest economy. Kurien said
Reliance Retail plans to open 300 jewellery stores across India in
the next three years.
Meanwhile, asked by several investors how Pantaloon would deal
with competition posed by large companies such as Reliance,
Pantaloon’s Biyani said: “We should not worry about competition
because the market is expanding. We are looking to create a dominant
position in the eight big cities.”

He said the company would seek to set up more stores of the existing
chains and its other brands to the metro cities to get a head start
on competition. “Our first-mover advantage will be big,” Biyani said.
“Retail is a business where you learn doing and others will go through
a learning curve.”
The company’s current 75- store discount hypermarket chain, Big Bazaar,
will get to 100 stores by February and 120 by June, he said. It will also
add four stores to its six Brand Factory stores—its discounted brand
store—and 20 E-Zone stores—its consumer durables and electronics
store chain— to its current seven stores.