Retailers ramp up expansion game as sales rebound to pre-COVID levels

Tata’s electronics store chain, Croma, too is lining up plans to open 150 new stores in the next fiscal. However, industry sources say the final number could vary once definitive plans are drawn up. Croma has not yet responded to CNBC-TV18’s queries.

The expansion spree also extends to grocery, lifestyle and fashion retailers, with Avenue Supermarts, which runs DMart, buying a new property in Bengaluru worth Rs 88 crore for a new store of over 60,000 sq ft. DMart is also looking at expanding its presence in the South, West, and Delhi-NCR markets, with stores of around 60,000 sq ft. DMart declined to comment on CNBC-TV18’s queries.

Aditya Birla Fashion said in its earnings call for the July-September quarter that the company plans to open more than 100 new stores of Pantaloons every year for the next few years. This, after the company revamped some of its existing stores.

“The business also relaunched its six iconic stores, four in Kolkata and two in Hyderabad, with a renewed and reinvigorated retail identity which garnered great excitement from its customers. Let me assure you that we are well back on track to at 60 plus stores during this fiscal. In the month of October itself, we set an internal record of sorts by launching 12 Pantaloons stores in 12 consecutive days of the month. As we move forward, our plans are to rapidly accelerate this expansion to more than 100 stores every year for next couple of years,” Jagdish Bajaj, Chief Financial Officer, ABFRL said in the earnings call.

The retailer is also planning to open 100 new stores under its new growth driver -- its ethnic portfolio. “Our ethnic brands have laid down a strong foundation and are now set for accelerated growth plan. We expect to add more than 100 stores next year in our ethnic business portfolio across brands, starting from Q3 of this year,” Bajaj added.

Lifestyle Stores, which saw a 195 percent growth over last year and closed to 100 percent over 2019 levels this festive season, has also signed several new properties and plans to open 4-5 new stores by the end of this fiscal. A similar momentum is expected to continue in the next fiscal as well. However, Devarajan Iyer, CEO of Lifestyle, said it’s difficult to ascertain a specific number of stores since expansion will depend on opening of new malls and the pace of retail real estate development.

Industry players and property developers say currently, there is a huge demand for expansion among retailers, but supply is a challenge right now, especially with several malls slowing down expansion plans. According to Pankaj Renjhen, COO & Joint Managing Director, Anarock Retail, retailers are facing a challenge with respect to availability of spaces both in malls and high streets as well, and only a few, such as Phoenix Mills and DLF Retail Malls, are currently expanding aggressively.

Phoenix Mills has signed deals to open a new mall each in Ahmedabad, Bengaluru, Pune and Kolkata of around one million sq ft each. Typically, malls operated by Phoenix range anywhere between 0.3-1.3 million sq ft.

The confidence of retailers stems mostly from a healthy festive season, when footfalls are at around 70 percent in malls, with sales exceeding pre-COVID levels. These footfalls are coming from serious shoppers with retailers seeing high conversion rates – i.e. how many customers make purchases when they visit a store -- in stores. According to Mukesh Kumar, CEO, Infinity Malls & Chairman, Shopping Centres Association of India (SCAI), even with restrictions in place, the conversion rate in Mumbai is currently 70 percent, which is a strong number. Overall, conversion rates are at around 60-70 percent across the country, he added.

Within malls too, especially in Maharashtra, Kumar said the vacancies have reduced from 5 percent to just about 2-3 percent. In most malls, 98 percent of stores are now open.

The latest data from the Retailers Association of India (RAI) has shown that in October, retail sales surpassed pre-pandemic levels, growing 14 percent over October 2019, and 34 percent over October 2020. While the western region has seen a lag due to delayed easing of restrictions, in October, this region led the recovery with retail sales in the western region growing 23 percent over October 2019 levels. The recovery has been led by food and grocery (31 percent), quick service restaurants (29 percent) and jewellery (24 percent), among others.

Apparel and jewellery sales, which were declining until September, turned positive, with apparel sales growing 6 percent in October 2021, against a decline of 1 percent in September 2021. However, these sale figures do not include Diwali sales, which happened in the month of November.

“In order to understand the complete impact of the festival season on retail sales, it is essential to see the figures of October and November combined. We would await the results for the month of November to draw definitive conclusions. However, all the signs indicate a positive trend,” Kumar Rajagopalan, CEO, RAI, said.