Vishal Retail, a New Delhi-based supermarket chain, has successfully negotiated rentals of about a third of its stores across the country even as other retailers are bargaining for lower prices.
Vishal has been able to negotiate lower rentals for at least 50 stores across the country helping the retailer to bring down rentals by as much as 35 per cent. “We told the store owners that we will relocate our stores to other places if they don’t bring the rentals down. We managed to get rentals down between 20 and 35 per cent,” said Ambeek Khemka, president, Vishal Retail.
A decelerating economy, coupled with job cuts, has forced several retailers and companies to stall their expansion plans, leaving mall developers and other real estate companies with surplus stock. “Today the market situation is exactly the opposite of what it was a year ago. Supply of retail space far exceeds the demand and we have an upper hand,” Khemka added. Vishal Retail has 178 stores across India and most of them are standalone.
According to Purunendu Kumar, associate vice-president, Tecknopak, “the current market situation is tilted towards retailers and they are having their say while negotiating with the store owners.” The fall in rentals will also help retailers increase their bottom line.
“Fall in rentals in the range of 20-50 per cent will add up to 4 per cent up to the bottom line,” said Kumar. Vishal Retail is working on different strategies to reduce rental costs. The company has decided to open all of its new stores under the franchisee model. Vishal is focusing on small-format stores and it also plans to re-size around 25 of its stores.
The company plans to increase number of stores from 178 to 200 in the next three months.