Indian Retail Chains Step up Global Sourcingby Udit Jain on June 20, 2007
Global retailers like Wal-Mart and Tesco do it all the time. Now it’s the turn of Indian retail chains, who’re exploring ways to step up global sourcing of merchandise for shoring up margins and offering the best price to consumers.
These days, the likes of Big Bazaar, Ebony, Shoppers’ Stop, Westside or even Subhiksha are looking to source merchandise at the lowest rates globally. Future Group’s Pantaloon Retail India has just set up global sourcing offices in Hong Kong and Mainland China – the first overseas sourcing operation by any domestic retail chain.
“For retail chains across the globe, the world is becoming a single market. We are looking at markets across the world from where one can source merchandise at the lowest price. We have opened our global sourcing offices in Hong Kong and China a few days back,” Future Group’s chief executive officer Kishore Biyani told ET.
Popular merchandise being sourced from across global markets include home decor, fashion accessories, furniture and consumer electronics. But local retailers are still going slow in importing categories like apparel due to high custom duty structure.
Industry circles feel as domestic retailers grow in size, more and more chains will look at the option of setting up overseas global sourcing hubs. “Retailers will be able to achieve economies of scale by setting up overseas sourcing offices,” said Spencer’s Retail president JH Mehta.
Subhiksha, which operates a chain of neighbourhood stores, has a separate team that continuously looks for best prices in groceries across the world, said Subhiksha MD R Subramanian.
Apart from better margins, global sourcing also allows retailers to differentiate their merchandise mix.
“This allows a big opportunity for retail chains to differentiate from competitors. While international sourcing currently accounts for 5% of our total pie, it’s growing at more than 50%,” said Shoppers’ Stop MD B S Nagesh.
Ebony Retail Holdings CEO Lalit Kumar said the markets where Indian chains are focusing for bargains are China, Malaysia, Indonesia, Middle-East and Europe.
“Popular merchandise include home decor, fashion accessories, furniture and consumer electronics. Much of it is also sold as private labels,” added Mr Kumar.
However, retailers are going slow in sourcing certain categories due to high import duties.
“Though retailers are keen to source from low-cost production economies, a major impediment is the high duty structure in certain segments like apparel,” said Landmark COO Himanshu Chakrawarti.