<div>Despite all the talk of e-tailers and e-commerce, pricing out High Street stores and brick and mortar (B&M) chains, the data seems to be pointing to consumers continuing to rely on the ‘touch and feel’ experience. High Street chains have not only continued to get loyal footfalls, but have also recorded brisk growth figures. Brick and mortar chains have also changed strategy by combining high street sales with digital marketing, known as the ‘omni’ channel route. </div><div> </div><div>An analysis by CRISIL of the performance of 24 large organised brick & mortar (B&M) retailers shows that in the last five fiscals, their revenue has risen at a strong 24 per cent compounded annual growth rate (CAGR) to about Rs 70,000 crore, while profitability metrics too have improved steadily. </div><div> </div><div>This is not to say the High Street sales are at the expense of e-tailers, whose gross merchandise value (GMV) surged at a dizzying 60 per cent to about Rs 40,000 crore. The e-tail segment has been driven by aggressive promotions and increasing trust in – and convenience of – online shopping; but according to CRISIL revenues of organised B&M retailers too rising at a respectable 13-15 per cent over the medium term.</div><div> </div><div>A CRISIL press release said “the resilience of large, organised B&M retailers will depend on their presence across product categories. Those in the standard format – selling books, music and consumer durables – will be impacted considerably more, so their like-to-like growth will be significantly moderated. On the other hand, those into apparel and food & grocery -- where the product is either a high involvement purchase or requires substantial investment in supply chain -- are expected to be more resilient. </div><div> </div><div>As a business, the food & grocery segment offers ample opportunity given its massive size (64 per cent of overall retail market) and extremely low penetration of organised retail (2.6 percent). </div><div> </div><div>Anuj Sethi, Director, CRISIL Ratings, said, “Organised B&M retailers have been countering the online onslaught of the last five years by repurposing themselves using a four-pronged strategy: by going for an ‘omni-channel’ model (offering an online experience to complement physical stores), expanding away from metros and Tier I to Tier II and III cities (to tap an expanding middle class and rising purchasing power), pushing private labels (to meet consumer demand for affordable products and to protect margins) and through consolidation (which has afforded scale, geographical reach and efficiencies).” </div><div> </div><div>Sethi said what is significant is that these retailers have been able to improve the quality of their private labels by investing in building design capabilities. Today, private labels contribute almost 20 per cent to total revenues, in the last five years. </div><div> </div><div>Amit Bhave, Director, CRISIL Ratings, said, “Focus on initiatives such as reorienting store profiles and well-thought out expansions have enabled organised B&M retailers to reduce gestation losses and generate store-level profits faster. </div><div> </div><div>As for credit profiles, CRISIL Ratings said High Street chains, after their debt-funded expansion phase ended in fiscal 2012, had focused on profitability, which has led to a sustainable improvement in their credit quality. This is reflected in the rating actions for CRISIL’s retail portfolio, where upgrades have outnumbered downgrades for the past three years.</div><div> </div>
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