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In other cases too, retailers have either relocated their stores (Big Bazaar has changed the format of one of its stores and relocated another in Ahmedabad), or are pruning and resizing their retail space (Reliance has shed upto 40% of retail space in its hypermarket store at Iskcon Mall in Ahmedabad). Retailers are also in the process of negotiating rentals (primary reason for cutting down on retail space) with the landlords and may even go in for revenue sharing models.
It is true that tough economic conditions have made the retailers realise their folly and amend their mistakes. But given the kind of investment that has already gone into this sector, it may not be possible for all to sustain. As Vedamani puts it, “Retailers who have been in existence for more than five years, or those who have strong capital backing can withstand these conditions, but for others it’s going to be tough.” And indeed, a host of other retailers are left with no option but to pare down on the number of stores they are currently operating. Indiabulls retail has shut down two stores in Ahmedabad, apparel retailers Arvind Brands, Reebok and Raymond too have started pruning their operations.
Certainly Indian retailers seem to have got a good lesson and are now making no two bones to accept that they were wrong in their super fast expansion plans and huge investments within a short span of time. As Goenka says, “In the course of any business, you’ll have decisions which are not always right in terms of location, vendors and demographics. It’s always best that if you’ve made a mistake, correct it.”
Earlier, the focus was only on increasing the square foots and therefore there was a certain level of delegation that happened in selection of areas to open the stores. But now, the retailers have taken the onus on themselves to carry out a proper research on the demographics and demands of consumers in different places. Based on such studies, the retailers are now being extremely careful on where to open their stores. “In future, due diligence will definitely pick up,” concludes Goenka. Well, it better pick up, as only then it will be determined whether the previous mistakes were stepping stones or indeed ‘mistakes’.
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Source :
IIPM Editorial, 2008
An Initiative of
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Malay Chaudhuri and
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Economist).
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