Monday, April 30, 2007

The real face of organized retailing

Bharti Retail has been crying itself hoarse that its tie up with Wal Mart to launch a slew of retail stores in India will not affect mom-and-pop stores—a euphemism for small time neighbourbood retails shops. Not so, it seems. A report in BusinessWeek looks at what Wal Mart's "calculated decision to break the $1,000 barrier for flat-panel TVs" in the US did to retail outlets there:

...triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months. The fallout is evident: After closing 70 stores in February, Circuit City Stores (CC) on Mar. 28 laid off 3,400 employees and put its 800 Canadian stores on the block. Tweeter Home Entertainment Group (TWTR), the high-end home entertainment store, is shuttering 49 of its 153 stores and dismissed 650 workers. Dallas-based CompUSA is closing 126 of its 229 stores, and regional retailer Rex Stores (RSC) is boarding up dozens of outlets, as well as selling 94 of its 211 stores. "The tube business and big-screen business just dropped off a cliff," says Stuart Rose, chief executive officer of Dayton-based Rex Stores. "We expected a dropoff, but nowhere near the decline that we had." Clearly, these retailers are taking such drastic measures because they don't see any respite in sight.

Bharti says that their model will encourage small retailers to lease their space to the new entity and will therefore be beneficial to them. But this looks more like an entry level bonus than a long term strategy for the sector. Small operators may be in for a rude surprise once the corporate entity spreads its tentacles to the heartland.

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