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SME Retailers Restructuring Operations

Published by | June 25th 2009 | Views:

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The global downturn dealt a severe blow to the Indian retail sector in the past financial year. Besides retail giants, the unorganised retail segment, comprising mostly small and mid-sized companies, also suffered a major setback as footfalls declined and revenue growth plunged to an all-time low.

With customers steering clear of big-ticket purchases, business volumes of retail stores have fallen drastically over the past few months, thereby raising concerns among small retailers, who operate on slim margins.

However, retailers have begun taking the restructuring route to streamline their operations and drive down losses. An increasing number of SMEs are reviewing their strategies and evaluating various aspects of their administration including financial options, risks, marketing strategy and resource management.

Course correction to beat downturn

In view of the current market dynamics, retailers are focusing on introducing value-retail and less capital-intensive formats that would help them nullify the adverse effects of the global economic deceleration. Some SME retailers are also planning to adopt more effective business models such as specialty retail stores to draw consumers and revive sales.

“Given the challenging times that the retail sector is going through, it has become imperative for small and mid-sized retail companies to restructure their businesses. These cash-starved players need to reformat their outlets and explore alternative funding options to draw more customers,” said G Asrani, Director, Rajdeep Foams, a mid-sized retail company in Ahmedabad.

Companies are shifting to formats which require less investment and have high business potential to boost their flagging sales. Most small retailers are opting for a shop-in-shop business structure, which not only facilitates enhanced revenue but also allows optimum space utilisation.

“Small department store owners are refurbishing their outlets and reducing the shelf space for those products which are not doing well. Besides, some of them have also started offering freebies and discounts to augment their sales,” said P Khaitan, an executive at C3, a supermarket chain in Kolkata.

In addition to offering discounts and restructuring business operations, it is recommended that SME retailers take adequate measures to improve their supply chain management and distribution networks and revamp their service offerings to ride out the slowdown.

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