Over the past
few years, organized retailing has burgeoned
in India with new vigour. Although organized
retail is reported to be around 2% of overall
retail sales, it is apparent that an inflection
point has passed and acceleration is all too
evident. If demand for commercial property
from retail is an indication, then the trend
towards organized retailing is on an irreversible
path of growth.
IVF concluded a transaction in the grocery
retail area late in 2004 - the acquisitions
and then merger of Trinethra and |
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Fabmall. This
is the largest private equity transaction
reported in the organized grocery retailing
space. The challenges in the business are
not in the area of growth; if capital is not
a constrain, growth is easily addressed. The
key challenge is of human resources; given
the lack of depth in organized retailing with
a low margin structure.
As organized retail grows and volumes consolidate
the first steps towards category management
emerge from both the retailer and the manufacturer.
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The dynamics of
the relationship between the two get more
complex. Efficiency in operations is crucial.
The retail supply chain and working capital
are in focus; inventory turns the currency
for measuring efficiency. Therefore,
while the visible facia of retailing in India
is the burgeoning mall and upgraded grocery
supermarket, the real action takes shape in
the invisible back-end. It is this that presents
new vistas for private equity investors. |
