Major leather exporter and footwear company, Khadim’s India, has shut down its Bhowanipore store in Kolkata, after incurring a loss of Rs 7 crore due to dwindling sales and high rentals. The company had invested close to Rs 20 crore in the Egaro venture and had inaugurated ‘Egaro’ in Bhowanipore in Kolkata and in Howrah towards the end of 2007.
Khadim’s India’s president Suman Ray Burman, told Business Standard, “Due to the slowdown, we have been incurring losses continuously. We even announced a 75 per cent clearance sale at the store for over four months, but sales still did not pick up. So we had to shut it down.”
“We had also tried to find a partner or an investor to arrange funds, but failed. The company lost over Rs 7 crore in this venture,” Burman added.
While the Bhowanipore outlet has been shut down, the Howrah outlet is also likely to be closed soon. “The large format retail business was not doing good at all,” Burman said. However, Khadim’s store for the middle class, christened ‘Khadim Khazana’ in Kachhrapara, West Bengal, would continue to be operational, Burman said.
The two Egaro outlets in Bhowanipore and Howrah, were of 28,000 sq ft and 20,000 sq ft, respectively, and was promoted as a one-stop shopping destination selling apparels, footwear, cosmetics, jewellery, homecare products and grocery.
In 2007, Khadim had announced plans of creating a retail space of 75,000 sq ft with expansion in Asansol, Burdwan and Sodepur. The company had also announced plans to invest Rs 50 crore till 2010 to expand the Egaro retail chain by raising resources through a public offer. But due to falling sales, the plans never materialised.
As of now, the brand Egaro will continue to be owned by Khadim’s India.
According to Burman, the company is firm on its footwear retail expansion plans.
“Currently, we have close to 320 Khadims stores after considering both owned and franchisee stores. Our turnover at the end of 2008-09 is Rs 200 crore and in the current year we hope to grow by 15-20 per cent,” Burman added.
Currently, other bleeding retailers in the city include Westside (out of three operational stores, two are in wrong locations), Nik Nish (lack of funds), and Toy Story (lack of funds). These brands are willing to continue with their existing stores and cancel the rest.
Retail expansion in Kolkata has slowed down by 25 per cent, while rentals have dropped by a maximum 10 per cent in Kolkata, compared to a national average of 30-40 per cent, according to Jones Lang LaSalle Meghraj. Several malls in Kolkata are also being converted into office spaces. Many projects are on hold, primarily because the developers are now thinking of reducing their retail components and introducing more commercially viable residential and office components. Also, there is a serious lack of funding.
According to Jones Lang LaSalle Meghraj, to be viable in business terms, rentals in Kolkata should be in the range of 25-30 per cent or 4 per cent of net sales for discount formats. For mid-segment formats in Kolkata, rentals should not exceed Rs 70 - 80 per sq ft, while for premium and luxury formats rentals should be in the range of Rs 90 - 120 per sq ft. Currently, rentals in Kolkata are 10-15 per cent higher compared to the viable proposition, depending on malls and their accessibility. Retail rentals started in Kolkata at Rs 40-50 per sq ft and are now up to Rs 150-200 per cent sq ft. In 2007, retail rentals went up to 300 per sq ft.
