Now, Bharti Retail to shut stores

Source - Moneycontrol

It is not just Subhiksha or Reliance Retail; even Sunil Mittal's Bharti Retail is feeling the pinch. In spite of a slow, staggered launch, the company will also down the shutters on some of its stores. CNBC-TV18's Shereen Bhan reports on the details.

The retail blues have not spared even a relatively new entrant like Bharti Retail, which has been very cautious in its expansion strategy. The company will shut down four-five stores of the 28 it launched as they are not turning in the desired results.

"All of us have to go through that. Pantaloon closed its stores, Reliance closed its stores, we are going to close stores despite having 28. The more you have the bigger the problem you have obviously," Mittal says. While some analysts have found fault with the rapid expansion of Reliance Retail, Bharti Enterprises chairman and managing director Sunil Mittal credits Reliance Retail with creating an entire ecosystem around the retail industry.

Mittal also made it clear the retail business is no child's play. That may well be the reason for Bharti experimenting with its store rollout strategy. "We were very clear that there will be a struggle and we have a struggle. You do these experimentations in a controlled environment. So, we are only in Punjab, a bit in Haryana and that is it. The fact is if we would have opened 500 stores, we would have had to shut half the stores. That would have been very expensive," he says.

Mittal pointed out that Bharti Retail has tested the market through a mix of stores in different sizes. The response has revealed that Bharti store margins are 40-50% better than competition on a per-square-foot basis. "The feedback is we are 40-50% better than competition per square foot," Mittal adds.

Given the slowdown, Bharti Retail continues to adopt a cautious strategy. It is looking to opening a 30,000 square-foot store and is about to complete setting up a big cash-and-carry store in Punjab. "We are looking at opening a few more medium stores, which are 30,000 square feet and expanding our small stores into other markets in Punjab and Haryana. We are waiting for our big cash and carry, which will imminently open up in the next few months, which will be the first best price store coming up in Punjab. So, all this will give us a way to move forward," Mittal says.

So while expansion is on the cards, Mittal's bet on playing slow and steady may give him an edge in a sector hit by the slowdown.