Retail Sees A Revival

After

remaining low-profile for the past couple of years, IT retailing is on a revival

mode. Zenith Computers made news in Mumbai recently when it carried a full page

ad on the high-premium op-ed page in the leading daily announcing the opening of

four retail outlets in a single day.

The four new stores in a single day was the climax to Zenith’s efforts to

establish 120 outlets across the country in six months. Besides Zenith, there

are several others too who are going aggressively on their retail plans.

For instance, Vintron has already established 60 stores within a short span

and has plans to go up to 150 outlets in the coming few months. Agrani, on the

other hand, has 20 stores to its credit already and aims at adding 30 more in

the near future.

Then there is the old warhorse of retail, Compaq, which has been slowly and

steadily building up its retail chain and today boasts of 350 outlets. HCL,

which made a splash with Frontline stores some years ago, now runs six of them.

But in the meanwhile, 160 HCL Stores have come up across the country.

Local players like Compunics with 10 stores to its credit in Maharashtra, has

its own success story to tell. But how should one measure the success in

retailing? Is it by the number of stores or is it by profitability?

Undoubtedly, profitability should be the number one parameter to judge the

success in retailing. But one cannot say that retailing has brought in decent

profits to those who have indulged in it. In fact, profitability has been a

major issue with retailing all these years.

Retailing has failed to see major profits mainly because heavy investments

are required to be made on real estate, manpower and support infrastructure. In

the wake of margins taking a severe beating, these investments did not bring in

required returns. The result? Retailing took a knock and became low-profile.

So, what gives confidence to the likes of Zeniths, Vintrons and Agranis of

the world today that they will make a success of retailing? The confidence

emerges because of two reasons: one, today finance is available at much lower

interest rates.

Second, availability of liquid cash. When the entire market runs on credit,

it is retailing that brings in ready cash, a precious commodity in business

today. Even though margins are still wafer-thin, liquid cash helps retailers to

turn around and maintain a good cash-flow.

Of course, volumes are still low. But when they do happen, profitability

would go up. To the benefit of retailers, today finance companies are willing to

provide funds at attractive interest rates to end-users as well.

With PC penetration at very low levels among households, retailers have a

promising business ahead of them if they have the sustaining power and an

efficient support infrastructure.

sylvesterl@cmil.com