Showing posts with label Reliance hyper. Show all posts
Showing posts with label Reliance hyper. Show all posts

13 May, 2013

Shaswat Goenka–Hearlding new frontiers at Spencers Retail

 

Shaswat Goenka

After dabbling with various sectors in the Rs 14,000-crore RP-Sanjiv Goenka group for about a year, Shashwat Goenka, 23, son of group chairman Sanjiv Goenka, has taken charge of Spencer's, the retail chain, from April 1. In an interview with Namrata Acharya & Ishita Ayan Dutt of Business Standard, he talks about his personal mandate and the road map for the Rs 1,400 crore business. Edited excerpts:

What goal have you set for Spencer's?
I assumed the role of sector head from April 1. What is most important at this point in time is profitability; that's where we are all trying to go. That will be the focus for the coming year and the year after. Spencer's is aiming to deliver Ebitda (operating earnings) breakeven at a company level in the third quarter of 2013-14 and be Ebitda-positive on a full year basis in 2014-15. That's the overarching short-term goal.

Spencer's has missed its breakeven deadline quite a few times. What makes you think you would be able to achieve it?
Well, each time we have done better. We have achieved breakeven at store-level but company level is what we want to achieve.

How do you plan to get there?
We want to increase our footprint. We will go up to two million sq ft from 900,000 sq ft currently and will expand in the north, east and south over the next four to five years.
We will achieve it over the next few years. The other important thing, obviously, would be operational efficiency.
In terms of offering, we would look at increasing international foods and regional foods. Value-added fresh is one of the areas we would like to explore.

Doesn't the fresh segment have one of the lowest margins?
We have very good margins in the food business compared to our competitors. Margins in apparel are obviously much higher but our margins in foods are good.

Any new formats for Spencer's on the anvil?
We haven't thought of any. We want to grow in hypermarkets.

Is the rationalisation process for Spencer's over?
Last year was the rationalising and consolidation process. We have exited Pune. In the past two years, we have closed 65 stores. Now, we want to start growing and in the hypermarkets.
Earlier, we had hyper, super, daily and express stores. Now, we have hyper and dailies and a few of the old express stores are still functioning.

Why did you exit Pune?
We wanted to become stronger where we are. So, we wanted to focus on the north, south and east. After we get that strong, we will revisit the west.

Why do you think the response from foreign retailers has been muted, after FDI (foreign direct investment) has been cleared?
I think people are interested. They just want to figure it all out before they come in.

Do you see foreign retailers as a threat to Spencer's?
Walmart and its likes coming in will help us. We can learn a lot from them. Back-end infrastructure will improve. There are basic infrastructure issues in India, like roads. Also, cold chains or dairy chains, for instance, are not very well developed.

A lot of options were being explored at the back-end by retailers. Any progress on that front?
We are open to FDI at the back-end but we haven't been approached by anyone.

Spencer's was exploring the IPO (public share offer) option. When is it likely?
That's something we definitely want to do but right now, the focus is on profitability.

Would you look at getting into the cash and carry format?
We have not looked at it. We want to be profitable and then explore other things.

18 September, 2012

The Retail FDI brouhaha!

 

Best Price Ludhiana

Popular Media is in full force discussing the pros and cons of opening up FDI in multi-brand Retail, announced by the Manmohan Singh led Union Government of India on 14 Sep. 2012. Finally, it happened. Rather, it had to. On 9 Jan 2012, the same Government allowed 100% FDI in Single Brand Retail, acting as a precursor and paving the way for the current policy decision. The UPA Alliance which leads a multi-party coalition Government has finally had the spine to push this through, alienating some of its own partners putting its Government in jeopardy. With the current policy in place, it means that multi-national Retailers such as Wal-Mart, Carrefour, Tesco and their likes can invest in India on their own as well as in Joint Ventures with Indian partners or Business Houses. But, there is a catch. FDI in Retail has been made a State Subject which means that each State has to provide an approval for each partnership that is proposed and to be allowed to be operated within its precincts. This is a bit absurd, to say the least. The policy states that over 30% of input must be locally sourced, which in my opinion is a very good thing for Indian traders and businessmen.

(Suggested Reading: Starbucks in India)

So, lets see what’s in store for consumers with multi-brand FDI in Retail;

Pricing

By allowing FDI in Multi-brand Retail, the end consumer is expected to get better pricing for most products. In case of Agri-products, even the Farmers are expected to command a better pricing since they would be dealing directly with the Retailers. Since these Retailers purchase large quantities of products from FMCG companies directly, they would be able to get better margins and would thereby pass them on to Consumers. This is largely in case of Grocery Retailing. It would be similar in Electronics Retail too. Fashion Retailers who run a chain of stores would be able to procure their merchandise at better rates from manufacturers and would again pass on the benefits to their customers. This is one important area where everyone gains!

Assortment

At the moment, products manufactured / produced in one part of the country are not available in many other places. This is mainly because of Supply Chain Constraints. Multinational Retailers don’t just bring big bucks, but also the knowledge and know-how of how to do things better. This, would be an important part of the proposed Retail expansion of Organized Retail, with traders getting more scope for their products. Customers will get a wider variety and range than before which will throw open new options and opportunities for consumption.

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Generate Employment

Retail trade as a whole employs about 8% of the population in the country, directly and indirectly. These people are paid a fixed amount as compensation and do not benefit with other Government schemes such as Pension Fund, Provident fund, Employee State Insurance, Gratuity, etc. Modern Retail already provides most of these benefits to its staff. With more and more Organized Retail Stores opening up, it is expected to generate higher employment across the country.

(Suggested Reading: Retail Staffing)

Credit availability

One of the popular qualms is that the neighborhood Kirana provides free credit which the Organized players may not be able to and would hence lose out on. This is incorrect. Spending through credit/debit cards has grown over 6 times in the past decade within Modern Retail. Customers are happy to swipe their cards even for smaller transactions, more for ease than anything. Retailers like Shoppers Stop and Big Bazaar have co-branded cards, thus exciting customers with higher reward points for purchases.

Recreational Spaces

Modern Retail is not just about shopping in a comfortable environment but also includes a lot of fun and entertainment for families. These large stores have F&B facilities, gaming zones, etc. where children can unwind while parents are shopping. It is also an excuse for families to go window-shopping and end up buying something or the other!

And here is why a few segments of the people are against it;

Kiranas would shut-shop

The oft-heard uproar is that Kiranas would shut-shop due to the emergence of big-box multi-national Retailers. This is untrue. Kiranas have their basics right, starting with Location, Pricing, Assortment, Credit to Customers, to name a few. Large Retailers take time to crack even some of these points. Having present in India for over a decade, Domestic Retailers such as Foodworld, Spencers, Reliance Fresh, More, etc.  haven’t got their act correct, I would say. If they have a good location, then their pricing is (obviously) not so competitive and even if they attempt to, then they are in the Red. Merchandising is one of the most difficult paradigms of the Retail business coupled with severe Supply Chain constraints in the Indian scenario. Given these, it would be almost impossible for large Retailers to succeed, whether they are of Indian origin or International.

(Suggested Reading: Store Opening )

Secondly, most of the Kirana stores (Mom-and-Pop-Stores) are first generation entrepreneurs in their 40s and 50s who started off their own little corner stores during the 80s and  90s after Liberalization. Some of them include women, who run petty shops in neighborhoods to support their family, sometimes as a main source of income and at times as alternate, additional income. Their children, most of whom are undergoing good education are moving out of the family businesses. Many youngsters aspire to become Diploma holders, Engineers, MBAs, etc. across a wide range of subjects and are hence not looking forward to continue the family’s traditional Kirana business. As it is, many shop owners are not looking at continuing their petty businesses for the coming generations. So I wonder why this hue and cry.

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Many Kiranas have already embraced modern Retail. For example, Metro AG which set shop ten years ago in Bangalore now has half a dozen stores spread across the country. Most of its customers are traders and merchants who buy from Metro and sell to end-users (customers). Wal-Mart set up a JV with the Bharti Group a few years back and runs Cash & Carry Stores in Punjab, Haryana and Rajasthan. Its main focus is on Kiranas and Retailers to whom they sell stuff in tonnes! Even in big cities like Mumbai and Chennai, it is quite common to see Retailers shop at the likes of Reliance Mart and Big Bazaar, given the substantial savings.

Kiranas are a tough lot and represent the well-entrenched Indian Entrepreneurship and cannot be unseated so easily. Long Live Kiranas!

(Suggested Reading: David Vs. Goliath)

21 July, 2012

Why IKEA will do well in India

It has been a regular discussion point in Retail circles about the imminent Indian entry of IKEA, the Swedish Retailer which is also the largest Furniture Retailer in the world with sales over USD 30 Billion. A few years ago, IKEA announced its plans to enter India but later withheld due to the unfriendly FDI policy and other regulations. Most recently, in July 2012, IKEA submitted an application to the Foreign Investment Promotion Board (of India) to allow its Indian subsidiary to operate its business in the country. Although FIPB and FDI norms allow multi-national Retailers only to operate a B-to-B business in India (Wholesale businesses like the ones followed by Bharti Wal-Mart, Carrefour & Metro AG), the much awaited Single-Brand Retail FDI which allows foreign companies to transact directly with end-users and consumers is expected to be announced soon. And IKEA sees merit in it. After all, the Indian market by size is one that cannot be ignored, about INR 100,000 Crores of which the Organized market is a less than 10%. Home grown Retailers such as The Future Group (which operates the Pantaloon Department Store Chain, Big Bazaar Hypermarkets and Central Malls among others), K Raheja Corporation (which also runs the Department store chain Shoppers Stop) and Landmark Group (of Dubai which operates Lifestyle Department Stores and MAX Hypermarkets) dominate the space with their respective ventures Home Town, Home Stop and Home Centre. The price points at which these furniture retailers sell is rather high – and rightfully so since that is exactly what the unorganized market doesn’t offer. Also, the life expectancy of such furniture is manifold compared to the “one time use and throw” offering from the not-so-Organized Retailers. And hence they have been thriving selling premium products.

IKEA is hopefully expected to be a game-changer. Its strength lies in design – easy to use furniture for day-today utility. For any furniture, its form factor and utility are the two most important aspects followed by its cost. “Product developers and designers work directly with suppliers to ensure that creating the low prices starts on the factory floor,” says IKEA Group spokesperson Josefin Thorell. Just one sentence in the IKEA website sums it all up: “We design the price tag first and then develop the product to suit that price”. The furniture powerhouse with 330 stores worldwide obviously doesn’t like to mince words: it’s an out and out price warrior in all the 41 countries (India will be the 42nd) it operates in. At the heart of the strategy is the concept of do-it-yourself (DIY) furniture which means buyers have to assemble different pieces of the product themselves. The ‘flat packs’ design helps the retailer to sell them at lower prices. A customer has to take the delivery of the product and assemble it himself.

IKEA 1

Furniture is used everyday in some form or the other and hence it is most valued for their usage. In the Indian context, furniture, like jewelry is always expected to be passed on down the generations. At my own home, I have a forty year old chair that my grandfather used. And original Burmese Teak wood almirah doors which once adorned the cupboards of his palatial house. And there are millions of them out there like me who maintain their hereditary furniture in India. It is indeed almost a custom. But things are changing, rather evolving. With more and more people moving out of their home towns to larger cities in search of education and employment, the need for simple, usable furniture is on the rise. Also, with transferrable jobs across the country, given the overall market boom, urban dwellers don’t prefer to invest heavily on movable furniture. They would rather buy those which can be easily discarded, usually to their drivers, maids, helpers, etc. And this is where probably IKEA becomes an exciting idea!

The DIY concept is another unique thing about IKEA which would do well with the youngsters – the Indian population has over 65% of them under the age of 35. IKEA sells pre-packed boxes of furniture and not assembled ones, thereby saving precious retail space at their outlets. While the turnover in this business is huge, margins are wafer thin. And real estate costs don’t help either. The DIY kits would hopefully do well among the majority of users who are youngsters. They like adventure and setting up a Dining Table or a Wardrobe would be pretty exciting. Also, to manufacture in the form of flat panels is mammoth effort, which is where IKEA would initially focus their efforts on, which is also their inherent strength.

Apart from bringing down prices substantially, IKEA is expected to bring in great designs with it while entering India. Fancy book shelves, cupboards and many other art forms would be a sure hit among consumers. With their maverick pricing strategy, they would also be taking on the local businesses head-on. However, there seems to be room for atleast half a dozen large players, so the market would respond well to them.

Looking forward to assembling my first IKEA furniture soon!

19 February, 2012

Phoenix Market City–Everything for Everyone!

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Yet another mall opened its doors recently in Bangalore – this time in the far eastern limits of Bangalore, near Whitefield. After a successful launch at Pune and Mumbai, the Mumbai-based Phoenix Mall Management has launched their prestigious project in Bangalore. This is the largest mall in town with an estimated 1.80 million square feet of space – a multi-development concept and one of its kind in the city that also includes a half a million square feet of office space, a 5 Star hotel with 236 rooms, a service apartment with 174 rooms and a multiplex spread over 55,000 sq ft. The external beauty lies in the fact that it is horizontally spread than vertically – all of four floors and a lower ground which connects directly to the most spacious parking lot which is well spread and brightly lit. The construction architecture is minimalistic with no jazz – focus is on the Retail Stores than crazy designs and confusing walkways. This mall also launched for the first time in Bangalore, marquee brands such as Zara, the Spanish fast-fashion retail chain in a JV with the Tatas (Also Read: Starbucks India – a TATA Alliance), Calvin Klein, Gant and California Pizza Kitchen. The main anchors include Big Bazaar, India’s largest Grocery and Homewear Hypermarket chain, MAX Hypermarkets, Reliance Trends, Reliance Digital and Reliance Time-Out. Regular Mall names such as Benetton, Tommy, Fab-India, Titan, Louis Philippe, Arrow are present while a few such as Café Coffee Day, Barista are conspicuously missing!

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The best thing about the mall is that it has everything – for the first time, multiple entrances – from the main entry gate, from the sides (Drop-off area), and from the basement parking area. The Ground Floor (entry level) is rather wide and broad – spacious enough to make it appear like a premium mall. Tommy, Gant and Zara welcome visitors with their bright signages and show-windows. Once inside, the shopper gets to see the wide expanse through well thought out and planned cut-off areas – from one floor, there is ample visibility to other floors.

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The anchors are also well spread. Big Bazaar is closer to the Parking Area so it would be easier for customers to take their shopping trolleys to their vehicles; however one needs to walk almost half a mile to the main road if they don’t have a personal transportation – an area that must have been given thought to. Max Hypermarkets welcome you once the shopper enters from the lower basement. Pantaloon Fashion store is placed in the upper floor while Reliance Digital (the Electronics Store) is in the lower basement too. There is a small gifts shop – all of 400 sq ft which is packed with curious onlookers for all the fancy cheap Chinese imports that the store has. The Foodcourt is as always, on the top floor nearer to the Cinema Halls while the Gloria Jeans coffee shop is sadly placed beneath an escalator with sparsely spread out seats – some wooden and some sofa seating in some random manner! Obviously, the café doesn’t commensurate its great coffee with its ambience. The other coffee shop, Costa is placed on the top floor – some logic I guess!

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I walked for over an hour, before understanding the layouts and placements, familiarizing myself – I scored lesser marks in my own purview although I wonder if shoppers would get to know it even after as many as 3-4 visits. Zoning, which I know personally had taken many months with inputs from some fabulous international consultants is to say the least, sad. Maintenance costs would be sky high I guess – air-conditioning such a wide area with two dozen security guards for over 14 hours a day is not going to be cheap or easy. The escalators – onward and downward are placed next to each other thereby not diverting traffic in various directions. Signages- although we don’t read as much – are scarce.

Overall, this Mall has tried to become everything to everyone – a premium mall in one-fourth of its space and a normal neigbourhood shopping centre with the rest. While Big Bazaar and Max are expected to draw a different set of clientele than, say a Zara or Gant, they are placed far behind – from a real estate point of view, this probably makes sense. But just that. Most people who intend to shop at a Hypermarket would be passing through premium retail stores – not only would they find it out of place but also a bit weird. Also, the Hypermarkets, whose predominant customer base are those who depend on autos and two-wheelers would find it taxing to come and shop here. And btw, Big Bazaar has its store close by – within a 3 km distance to be precise. Other than being a show piece, I wonder if they have any other reason to be here. And for the customers of premium Branded Retail stores – the car parking areas are just too far away. Wonder if that would put them off. Except if they have specifically come to shop at, say the iconic Calvin Klein.

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Firstly, does Bangalore need such a large Mall? With congested roads and consistently heavy traffic not just at the CBD but almost everywhere in the city, what we need are a number of neighbourhood malls – within a 4-5 sq km radius and within a 15-20 minute drive. And this everything under one roof doesn’t work as much. Bangalore, or most Indian cities do not attract a huge tourist population such as Dubai or Singapore. Nor are our prices globally competitive, rather more expensive. The semi-urban crowd that comes to the larger metros and cities rather stick to traditional shopping areas (Read: Downtown shopping centres, predominantly the semi-organized retail stores). The Mall also needs to attract 3-4 times what the best Mall in town attracts today – to support the single-digit conversions at its stores. For a Mall that is located so far off, it is anybody’s guess if the Mall or its tenants would do well in the first few years. Maybe over 3-4 years, the location would attract some traction.

Needless to say, the group has invested significantly and so have the Retailers. Here’s wishing them good luck in times to come.

25 January, 2012

Retail Store Opening Time

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I recently received an email from Reliance Mart that they would opening their stores at 8am! The email newsletter was a bit incomplete in most respects – it doesn’t talk of its existing store timing (including opening and closing) and the list of all stores or a contact number such as a Customer Care number or a Toll Free number. It is anybody’s guess why this particular retailer would want to open so early – given that it is a Hypermarket format. In the footer of the communication, the cities where they operate is mentioned, most of which are non-Metro cities, which I guess could be the main reason for this move. In metro cities, people (Read: consumers) leave to work by 8am and return back around 8pm, hence most of the modern shopping environments including Malls, Supermarkets, Hypermarkets and Specialty Retailers open their stores only by 11am. Also, this is a huge cost-saving for retailers – lower usage of electricity and other utilities; staff can work in a single shift; most importantly, it provides time to set-up the store in the mornings – stock fulfillments, “facings” of products on the shelves and a sound briefing session to the staff.

At Foodworld, (a Supermaket chain part of the erstwhile RPG Retail) when I used to work in Chennai 10 years ago, we experimented opening the store at 7am – really early by Organized Retail standards. But what we realised was that we built a strong loyalty among the local residents and the neighborhood. Customers started coming in early to pick up vegetables that would have landed fresh at the store; and along with bought a packet of bread and some milk. And a few other daily use things too! I remember, we used to interact with regular customers and they would feel happy to be at the store so early! I guess this is one area where Kiranas cleverly take a lead amongst Organized Retailers. A typical kirana store opens by 7am and starts brisk business early. And closes as late as 10.30 or even 11pm at times.

The Government’s rules and regulations are not helping Organized Retailers either. Law states that women employees (who contribute to a significant percentage of the work force in the front-end of Organized Retail in India) cannot work beyond 9pm and should be escorted back home by the employer. Almost no one follows this though, thanks to lax overseeing by the respective agencies and authorities. The retail stores cannot function beyond a certain timeline, which is 8.30pm in Kolkata, 9.30 pm in Chennai and so on. Recently, Star Bazaar, part of TRENT Retail (owned by the TATAs) and Total Hypermarkets, part of Jubilant Retail based out of Bangalore extended their store closing time to 12.00 midnight, a welcome move by regular customers who heaved a sigh of relief since they could comfortably shop during the late hours! Mustafa, a local retail giant in Singapore, for example, is open all night and sees regular customer flow all through! I was told that the contribution of business between 9pm and 8am is almost 20% since tourists hop by after the city closes down.

Mustafa Singapore

With FDI in single brand retail already in place, it is anybody’s guess if more and more Retailers would want to keep the stores open late night or open early since the International Giants might want to pump in more money and experiment if customers walk in late at night. While this may work for certain categories such as grocery, household, furniture, etc. it may be obvious that fashion is not something that could work. After all, that category of customers would we wining, dining and partying late night than shopping! Café chains such as Café Coffee Day, Barista, Costa, etc. keep their outlets open until late in the night while book store chains such as Crossword and Odyssey usually wind up early. The case may be a bit different at Airports, where a majority of International Travel happens during the night and therefore, most of the Retailers are open all through the day and night.

There are a few advantages for Retailers to have extended store opening time;

  • Customer Service – During the lean hours, Retailers can provide better customer service, a typical measure to increase conversions
  • Loyalty – Retailers could offer bonus loyalty points (if they are operating such a program) to those who shop during such a stipulated time
  • Understanding Consumer Behavior – Since customers would be shopping under a more relaxed environment, they may tend to show a better behavioral pattern which may be useful to Retailers
  • Targeted Promotions – Retailers and Brands could run specific promotions during such times to increase penetration of certain SKUs

The drawbacks though, would be;

  • Increased Operating Costs – Retailers would have to shell out additional salaries to staff who work during such extended times as well as incur other overheads
  • Sustenance – Such a move, if it is experimental only for a short while can dent the brand image of the retailer among customers, leaving them confused
  • Managing the network – If the Retailer has stores across multiple cities, then it may be forced to maintain uniformity across all locations

Having said that, I believe there are hardly few Retailers who would want to try this venture. For, success is not something that comes without repeated attempts!

27 November, 2011

FDI in Retail–the saga continues!

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It was a much-awaited, welcome move by the Cabinet of the Indian Parliament to allow 100% FDI in Single Brand Retail and up to 51% FDI in multi-brand retail on 24th Nov. 2011. A surprise announcement, given that the winter session of the Parliament is under progress, which hasn’t been functioning fully due to various issues in the fore. The announcement comes after two decades of reforms that started in 1991 and over 10 years of strong growth by the Organized players of the Retail Industry in India. The Left parties along with the main opposition party in the Parliament, viz., the BJP have been publicly protesting against the decision. One senior member of the party has announced that she will burn the Wal-Mart store if it opens anywhere and she is ready to court arrest for the same! Such has been the tensions on this topic for many years now. Even the general public (read: Consumers) have been left confused due to various approaches proposed by those who are for- and against allowing FDI in retail. The issue has been politicized more than it is, by a section of those who claim that allowing foreign retailers will harm the livelihood of small kiranas (mom and pop retailers) while another view is that it would create millions of jobs and would bring down food inflation.

(Suggested Reading: Kirans and Retailers)

Background of the Indian Retail Industry

India’s largest retailer, The Future Group is close to $3 Billion in Revenues through its various formats such as Big Bazaar (hypermarket), Food Bazaar (supermarket), Pantaloon and Central Malls (lifestyle retailing), EZone (electronics) and Home Town (home improvement) and many other brands that it has created as well as through a license to operate. The $82 Billion TATA Group has been in the consumer lifestyle business through the TITAN watch brand for over 2 decades now while its premium jewellery chain Tanishq is the biggest among its peers. India’s largest company by market capitalisation, The Reliance Industries also operates various formats through its subsidiary Reliance Retail. Shoppers Stop (India’s largest Department store chain) and Hypercity (Hypermarkets) along with Home Stop and the Crossword book store chain is expected to reach a Billion Dollars in Revenue in the next 2-3 years with aggressive expansion and brisk business. UAE based Landmark Group which operates the Lifestyle stores along with SPAR supermarkets and MAX hypermarkets along with a few licensed brands will also be Billion dollar company soon (in its India operations). The world’s largest Retailer Wal-Mart has a JV with Bharti enterprises for operating supermarkets and hypermakets while has its own 100% subsidiary for operating the Cash-&-Carry format; Carrefour from France and Metro AG from Germany have similar models as well. Many other international retailers have been peeping into the Indian economy for want a small share of its vast business potential. And then there are a number of regional players across various geographies focussing in specific verticals who have aggressive expansion plans coupled with ambitious growth plans. Most of their funding has been through internal accruals while some of the large national players are public limited companies.

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FDI – For and Against

While its fair to say that a few kiranas will face the heat due to the presence of large Retailers in their vicinity, I wonder why is the threat perception only against the international players. I would disagree that we need dollar funding for our growth – we have enough money in the economy (white, black, red, whatever) and some of the Indian business houses have more collective intellectual ability than compared with those abroad – the Indian conglomerate buying out a premier automobile company in the UK and turning it around in less than 2 years is a great example. Indian Hypermarkets, all of over 100 in number have been given a tuff fight in turn by the local kiranas, whose biggest advantage is convenience and home delivery coupled with short-term credit. The large retailers have been grappling with the single biggest problem of attrition (of staff) followed by shrinkage (or pilferage – wastages/stolen goods) which is amongst the highest in the world. India has over 12 million retail touch points and growing. While it is fashionable for some rich-kids to venture into retailing, it is indeed the livelihood of many million families that they are highly self-dependent on their own trade. in my view their threat is from anyone who ventures into the same business in their locality, big or small, domestic or international. If any, what we have to learn from International retailers is their strict adherence to processes and procedures which we tend to take easy at times. I remember, during my days at Foodworld a decade back, we used to have check-lists to be filled in my store managers and their deputies every hour to ensure the store is looking perfect at all times. Needless to say, the check-list was drafted by Dairy Farm International – DFI (incidentally, an anagram of FDI) and was shared with its then Indian JV partner, the RPG Spencers Group. Actually, there are many other things including best practices that we could learn a thing or two from International partners.

(Suggested Reading – How Odyssey gained International acclaim)

Inflation

It is a myth that allowing FDI would reduce food inflation. Certainly not in the short-term. What we lack, and very badly at that is the back-end infrastructure including logistics and supply chain. This is one area where international retailers with their vast experience in other markets such as the US, Europe, China and Brazil could bring in their expertise. Factually, it begins with the interaction with the farmer who grows the produce. What is popularly known as Farm-to-Fork. This area needs huge investments and conviction by the humble farmer that his efforts would indeed make a difference to the country, to the end user – the consumer. Let’s agree that this takes time. Maybe five years. Or more. But to convince people that allowing Wal-Mart and its ilk to open new stores would bring down inflation is a story that no one who is in the know will buy!

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Execution – the key to FDI success

The cabinet has clearly indicated a few conditions which make FDI rules difficult for execution. Firstly, it says that the matter is a state subject which means each state can decide whether it wants to allow FDI or not. Secondly, it allows foreign retailers to enter cities only with a million or more population (and we have only 53 cities such as this as of Nov. 2011). In a way it is good, that only evolved, mature markets are open for FDI investment, but in hindsight it is the Tier II & below cities that need more investments. so, these two points make it extremely cumbersome to operate. If an Indian Retailers wants to share its “board” with a foreign retailer, it is only for one of the two reasons – either it wants to reduce its debt by offloading stake (which the banks are not willing to, anymore) or to learn international best practices.

(Also Read: Low-Cost – its all about the perception)

The draft is yet to be tabled in the parliament as this column is being written and some high-voltage drama is expected over the next few days. Whichever way, these are exciting times ahead. For Retailers, its a new ray of hope to perform better for the sake of its shareholders & for itself; For Retail professionals like me, it opens up our employability & professional success; and for Consumers, it means more options & competitive environment between existing retailers and better prices for them.

All summed up in one word – Hope.

03 October, 2011

Dasera – Diwali Dhamaka for Retailers

A former colleague of mine, a Swiss gentleman once quipped that everyday in India is a festival day! Well, he was right in a way, maybe not quite literally though. With so many religions and diverse cultures, indeed every day may have some form of festival in India…

This October month is one of those rare ones – that benefit Grocery Retailers, typically supermarket and hypermarket chains like Food Bazaar, Reliance, Spencer's, More, SPAR, EasyDay and others. Navaratri / Dasera, which commenced on 27th Sep continues into the first week of October and Diwali will be celebrated during the last week of the month. Typically, the monthly Grocery shopping happens once a month, usually in the last week of the month gone by or during the first week of the current month. But in this case, families would have to shop twice, and probably more quantities than usual – roughly 1.5 to 2 times the average quantities. Navaratri is celebrated in different forms and signify different things for people across the country. in Tamil Nadu, Andhra and Karnataka, families set-up dolls at home – popularly known as the “Kolu”. During this period, Goddesses Durga, Lakshmi and Saraswati are prayed and celebrated three days each. Every evening, women folk and children visit houses of neighbours and are fed with “sundal” – the nine grains, one each every day. Now – this category is shopped for extensively before the festival commences which may not be consumed so much otherwise through the year. Also, the visitors are gifted small household articles usually made of plastic and this category also sees an increase in sales during the period. Fruits, which are distributed benevolently, see a surge in price and hence consumers prefer shopping at Supermarkets and Hypermarkets for a better bargain.

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In Gujarat and West Bengal, it is more a societal occasion. While Hindus celebrate it the most, people across all walks of life join into the celebrations. While “Dandiya” – an art form of dance is the most happening one in Gujarat, the Bengalis install huge “Pandals” which showcase Goddess Durga in different forms. People visit Pandals day and night and wear new clothes (in Bengal) while late evening Dandiya sessions are regular during the week. And obviously, new clothes are something that every one looks forward to! Even Western / Foreign brands (like Benetton seen below) join in the festivities by promoting themselves during this period.

Just around the corner is Diwali – the festival of lights and the biggest grosser for Retailers across categories. This festival is also celebrated in its unique way across the country. While families shop for Electronics and Gadgets, Home Furniture, Clothing and Accessories, sweets for distribution and consumption is a big hit too. Retailers and Brands have already started advertising for the ensuing Diwali as well and is expected to step up their promotions starting this weekend.

If there is one category that sees a low, it’s liquor and alcoholic beverages. People generally refrain from visiting bars / consuming such beverages due to the ensuing festivities but things are indeed changing. And hopefully, this category will support Retailers in November which is expected to be one of the lowest months  for business since there are not major festivals (duh) until the Christmas season commences. Anyway, wishing each one of you Seasons’ Greetings and of course, Happy Shopping!

22 August, 2010

Much ado about nothing...

It is quite common to see radically minded political parties create ruckus during cultural celebrations such as Valentine’s Day, Friendship Day, etc. citing them as western concepts which India can do without. Although most of them forget that ours is a Democracy and one is free to live the way they want to, provided they fall within the legal purview of our constitution. Retailers had initially taken advantage of such events, creating a lot of hype around and managing to attract customers. While the trend still continues, many of them have toned down the way it is celebrated and have started focussing on other days of national importance. In Western countries where Organized Retail has evolved much, Mother’s Day, Father’s Day and even Thanksgiving are celebrated with glee and harmony. In India, while we have been celebrating Children’s Day (birthday of former and first Prime Minister, Jawaharlal Nehru), Teacher’s Day (birthday of freedom fighter and academician, Dr. S. Radhakrishnan) and regional festivals like Akshaya Trithiya (most auspicious day to buy gold), Raksha Bandhan (sibling’s day) and Karva Chouth (prayers for the husband) for many decades now, Independence Day and Republic Day are celebrated since 1947 and 1951 respectively, ever after achieving Independence from the British Rule and since becoming a republic country. Although earlier, these days were usually celebrated with national fervour and devotion, they have been converted into social events which also include personal and family celebrations, since they are usually preceded or succeeded by a weekend.


Sensing an opportunity, one of the first retailer in the country to take advantage was The Future Group. Way back in 2004, the company which operates the largest Hypermarket chain under the trade name “Big Bazaar” created a unique concept “Sabse Sasta Teen Din”, which translated into English means “the cheapest three days”. When they first experimented this concept on 26th January, India’s Republic Day which also happens to be a National Holiday, the queue outside the store located at Lower Parel in downtown Mumbai was miles long and the store had to be shut for a few hours to ensure safe exit of those who had already walked into the store! Ever since, there was no looking back. Founder & CEO Kishore Biyani who is known as the pioneer of Organized Modern Retail in India has experimented more and more – a mantra that he and his company lives by. The three days became longer and usually were tagged to the closest weekend and over a period of time, more such events were created. As always, many others in the business followed suit and started following their own trends – creating marketing concepts that suited their respective business models.

2010 was a bit special though. To celebrate the 63rd Independence Day on 15th Aug., almost all the large Retail players in India attempted such a concept in their own way. Newspapers were abuzz with articles, write-ups, advertorials and full-page advertisements. Needless to say, news publishing houses would have cashed in on this opportunity; after all, they have been quite starved over the past two years with minimal ads by Retailers who pulled back their spending after the global recession which impacted Indian consumers more psychologically than financially. The message from players across product categories ranging from apparel to electronics, grocery to home furnishing was loud and clear – discounts ranging from 10-60% over the weekend. The hype was carefully built-up over a period of time and the buzz in the minds of shoppers was clear – visit the stores at the earliest and get the best out of the season. Erstwhile popular but now dormant retailers like Viveks, one of the oldest and trusted electronics dealers with a strong presence in South India bounced back with amazing offers. In fact, this was the very place where my parents purchased our first prized possession, a Crown Colour Tv in 1981 at a nondescript location called Luz Corner in Madras, (now known as Chennai). Over the weekend, my mother went there again, this time to buy a Microwave Oven, a reasonably new gadget in the life of Indian homemakers that promises comfortable yet delicious cooking. Well, she visited the store for just one reason – her trust in the brand “Viveks” continues to remain strong, where almost all our household items have been purchased for the past three decades.


One of the most exciting concepts created this year was again from Big Bazaar, aptly titled “war on inflation” – helping housewives to fight the price rise in the economy. While everyone from the Prime Minister to my car driver have been talking about the rise in prices of essential commodities and the measures that must be taken to curb them, The Future Group was the first one to create an impact. It has been running various campaigns in the media, highlighting the fact how Big Bazaar can together fight with the middle-class households by offering products at lower prices and shoppers can buy large quantities and store them for future usage – a form of hedging, if one could say so. Expectedly, all the stores in the country, numbering over 125 were over flowing with eager shoppers who started thronging the stores since as early as 9 in the morning until 10 in the night.


Somehow, the focus of shopping during the season remained on categories such as Grocery & Household and Electronics & Appliances. E-Zone (another Future Group format) and Croma (from the house of Tatas), both of which operate in the premium consumer durables space and target SEC A & A+ went ballistic about their offering, by providing never before prices coupled with freebies. Most notably, both were offering spot loans from Bajaj Finance, wherein select products could be purchased on EMI – Equated Monthly Instalment after paying a token sum as down payment. The processing of loans was quite simple – in just a few minutes after obtaining some basic documents such as an address proof and an identity proof, loans are sanctioned on the spot if one holds a credit card. I was amazed at the speed at which loans ranging from Rs. 10,000 – Rs. 60,000 was being sanctioned, without any collaterals or scrutiny. It is anyone’s guess what happens if the loan is not paid back or the borrower vanishes once for all.  Reliance Retail which operates multiple formats kept its communication straight – highlighting the number of stores and thereby the inherent foothold it holds in the business. Some traditional local retailers tried their best to match up with their national peers. While they successfully demonstrated their presence in the business and their respective leadership positions among their target customers with full-page ads in national dailies, they also showed that they could offer at prices similar to those offered by national players thereby conforming their positioning – they remain equal if not cheaper compared the newer larger entrants within the business.


One question that came to my mind over the weekend – why so much fuss to offer the best to customers! Do we need special days in a year to pass on the benefit of margins to shoppers? Is it just a trend that’s getting started or would we evolve as we move forward? Many in the Industry already agree that in India, we just can’t rely on Thanksgiving and Christmas Shopping like in the West, since we have more than 300 days of festivals all through the year across six major religions, a dozen national holidays and many more regional excuses for shopping. Isn’t it better to maintain a momentum and build shopping behaviour all through the year rather than just creating hype during a one-off period? Am sure, the answers could be mixed and diverse, just like our Retail environment. Well, that’s the best thing about us. Incredible India. Jai Hind.

15 June, 2010

Low Cost: It’s all about perception!

There is a famous saying doing the rounds in recent times: 19th Century globally was about roadways, 20th century was about railways and the 21st century is all about airways. How true!


Mainline media was abuzz over the past weekend about the most recent development in Indian Aviation – Sun Network owner Kalanidhi Maran had purchased a strategic stake in his personal capacity in Spicejet (IATA Code: SG), the second largest low-cost airline in the country by market share. While the deal has been on the table for over 3-4 months, the timing couldn’t have been better. Passenger and Cargo traffic is at an all time high since late – 2008 after the global recession and the US sub-prime crisis. Major airports such as Delhi IGI, Mumbai CSIA and Bengaluru International Airport are squeezed for space and the check-in / security queues during peak hours could take as high as 30 minutes per person. Spicejet, apart from other low-cost airlines such as Indigo, Go Air, etc. have been in operation for around five years, ever since the first low-cost airline in India, Air Deccan was launched. It has carved a niche for itself with its on-time performance and crew service standards just like its main competitor, Indigo. Jet Airways, India’s premier airline and Kingfisher, the only five-star airline in the country, also have their respective low-cost avatars, Jet Konnect and Kingfisher Red respectively, which directly compete in the same price segment.



















So what’s with a media baron who is the leader in his own right in TV (Sun TV networks), Radio (S FM), DTH (Sun Direct) and many other related businesses got to do with Aviation? His critics slammed saying he lacks experience and exposure in the business to which he replied “CEO needs core competence; Chairman needs foresight”. Well said Mr. Maran. After all, he had purchased an entity which was operating in the low-cost segment. The concept of low-cost and low-fare have been misread in India for some time now. Air Deccan was actually low-cost and low-fare – the airline had minimal usage of resources (human and others) compared with many other scheduled airlines such as Air India and Jet Airways. The in-flight services were minimal and water for drinking was being sold – contrary to an almost Indian way-of-living “Athithi Devo Bhava” (Guests are treated like God). World over, low-cost airlines are the ones who are faring well even during the slowdown. That’s because their business model is like that. Scheduled airlines in India are competing on price but retain many other value-added services, which is what costs them and like how! A quick comparison between various airlines revealed that the fare difference on low-cost and scheduled airlines between Bangalore and Delhi if booked a week in advance is not more than Rs. 800/-. While Spicejet and Indigo offer the ticket at Rs. 5,476, Jetlite at Rs. 5,497/-, Jet Airways at Rs. 5,548/- and Air India at Rs. 6,210/-. 















There is a lot that can be compared between Aviation and Retail. Global experts on Macro-Economics say that for a buoyant economy, Aviation must grow twice the rate of the national GDP. That’s been the case in India since early 2000s, barring a few months of turbulence since mid-2008. The same applies for Retail. Both industries propel consumption and reflect growing consumerism and aspirational affordability; both bring in healthy competition and the uncompetitive are flushed out within a few years; both Industries grow only by scale – larger the number, higher the economies of scale. Both industries are a favourite for international players driving FDI into the country. Both provide direct and indirect employment for thousands of people (although aviation globally is reducing the number of staff per 1,000 pax, this number would continue to remain high in India due to localization issues). And both can work pretty much independently without Government support although policy decisions do affect the functioning of the industries.





























Organized Retail has been growing at over 15% CAGR for leading retailers ever since they came into foray during the last decade. The highest growth has been for retailers nicknamed “Hypermarkets” led by Big Bazaar, a Future Group entity that commenced business in the year 2001 at a nondescript VIP Road, east of Calcutta. And the rest, as they say has been not just history, but historical! The group has managed to open over 140 outlets, over half of which were during the past 4 years. Other players in the same business include Hypercity (by the Rahejas), Star Bazaar (by the Tatas), Reliance Hyper, More (by the Birlas), Spar (by the Landmark Group of Dubai), Total (by the Jubilant Group), Easy Day (by the Bhartis) and many other local and regional players. The idea was simple – lease a big box location; project the business as low-cost, sell atleast 100 items at the lowest price possible and communicate the same en-masse. By attracting thousands of shoppers to visit the store, Retailers look to sell their products in large quantities thereby managing better economies of scale. The business would become profitable over a period of time, but only with more number of outlets selling more SKUs.  Not all the items in a Hyper are always low-cost; At the end of it, it’s all about perception – of Low-Cost. Hypers reinforce the fact that the key household items are below the selling price in the local markets; this acts as a bait to attract shoppers to visit the store. Over a period of time, consumers get hooked to the idea of shopping in a relaxed, convenient, hygienic environment where they could also save some money!

So whether it is a Low-cost airline or a Hyper, its all about perception. And there are many who are trying it hard. Only some will succeed. After all, those who do so will have people at the helm with foresight. It surely helps. 

A Firefly finally takes off

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