Chain Reaction

The Happy Supplier Organised retail boom is not just about business for a handful of retailers and mall developers. Perhaps, the biggest, and the most prominent beneficiary of the retail story is the huge number of suppliers involved in the process. Worldwide, retailers source entire range of products from boutique suppliers and sell them by extending their private labels (retailer’s brand) to them. Internationally, the major chunk of margins for chains such as Wal-Mart, Tesco and Carrefour come from private labels. Indian retailers, including Reliance and Pantaloon, are already bullish about the concept of private labels and are sourcing heavily from small and mid-sized manufacturers, across categories such as food and grocery, personnel care and apparel. Says Deepak Seth, chairman, House of Pearl Fashions, a Gurgaon-based textile manufacturer, “Obviously, with the ongoing retail boom, a huge opportunity awaits the manufacturing sector domestically. The growing demand has many add-on benefits as well. In the process, many employment avenues will be generated, in the skilled as well as unskilled areas. At the same time, people with larger capacities like us, will also look for simultaneous opportunities in brands and retail.” Mr Seth’s company, which got listed recently, is exploring options in retail as well and has plans to set up a chain of 50-odd exclusive apparel stores in the next couple of years. Nikhil Nanda, the young promoter of Delhi based JHS, a manufacturer and supplier of dental care products to some leading FMCG and retail companies, has built the entire foundation of his business on the anticipation of an impending retail boom. Already a supplier to some big names in the global retailing arena, Mr Nanda is now equally bullish on the prospects of the retail boom in India. There’s, however, a flip side to the supplier story, and not every manufacturer is keen on the prospects domestic retail may have on offer. “Payment cycles are really weird and at times retailers even squeeze you with margins,” says P K Saxena, chairman of a Gurgaon-based small-cap Craftos. Why Not Your Own Brand? Perhaps, this is why the retail saga does not excite some of the bigger names in the manufacturing world. Says Orient Craft managing director Sudhir Dhingra, “In the near future, the export market will continue to remain our focus. On the domestic front, our priority will be on consolidating our own brand through various multi-brand retail outlets or even exclusive stores. Contract manufacturing for a private label is not on the radar yet.”