Showing posts with label Hypercity. Show all posts
Showing posts with label Hypercity. Show all posts

11 April, 2017

H for Hyperlocal Retailing

One of the most used and abused words for the past 3-4 years in E-Commerce in India and all over the world is “Hyperlocal”. What exactly is Hyperlocal retailing? How does it help customers? What value addition does it provide to Retailers? Is it a viable business option? Let’s explore.

The Indian Retail Industry is estimated at $500 billion with over 1.30 billion people in the country. Out of this less than 12-15% is Organized while the rest remains with traditional businesses such as Kirana Stores, Mom & Pop stores, road side vendors, etc. While Retail has seen a CAGR of over 15% over the past decade, it is E-commerce that has grown leaps and bounds in the recent decade, thanks to Wall Street Funded companies who morphed themselves from being mere technology companies to retail behemoths that they are today. Within the E-Commerce Retail Startups as well as a few established ones, Hyperlocal Players are the buzz of the day, what with a new one commencing operations every day for another that shuts down almost every day.

So what is Hyperlocal?

The term has been coined to connect offline retailers in a locality to customers in the same locality, but through digital means. This is nothing new, honestly. Through the late 90s (in India) when we witnessed the highest landline telephone penetration, it was common for customers to call a nearby Retail store and request them to deliver products for immediate use. During the early & mid-2000s, it was the mobile phone boom where household maids, servicemen like Plumbers, Electricians, Carpenters and many more were available over a call. The world seem to be lot more connected and we all loved it.


It was early 2014 and we saw a slew of technology companies building websites and mobile apps that connected customers to shops and service providers over a click of the button. Honestly, this was nothing new compared to what “Just Dial” and “Yellow Pages” were already doing. Even neighborhood newspapers were in a way Hyperlocal, connecting local services and people to customers in a particular locality especially for finding rental accomodations.

It is quite amazing to see that Hyperlocal has suddenly become a billion dollar opportunity with a lot of Investors throwing money at such start-ups. Most of the large Hyperlocal companies that took heavy funding have left the space, notable among them being “Ask Me” which had not only shut down a few months back but also headed in to legal troubles with outstanding payments.

Hyperlocal is a very simple business idea that has been complicated a lot with too much of technology being pushed on to the customers. A mere signage at the
Retail stores (the ones Zomato put up initially) bring a lot of visibility and access to customers. The startups pick from the nearest store and deliver to customers in the shortest possible time thereby increasing merchandise offtake for Retailers. Sometime, it is the simplest task that is complicated the most. Hyperlocal Retail is one such example.

How does Hyperlocal Apps work?

Hyperlocal Apps connect nearby stores and service providers on their app and act as an aggregator. When a customer looks for a product or service, the offering in the neighborhood shows up usually with a cost / time attached to it. For example, if a user is looking for a carpenter, the app shows how much time it would take for the Carpenter to arrive and also the cost per hour / relevant charges. Similarly, when a customer is looking to order tomatoes or rice bags, vegetables or household articles, the app would show up the product, their prices and estimated time of delivery and convenience charges, etc. It is a presumption while building a Business Plan for a Hyperlocal App that such customers will continue to order from the app regularly while also adding new customers everyday. And over time, the App keeps adding more and more retail partners and service providers while also expanding the geographies served.


Is Hyperlocal viable?

Trust me, it is viable. I have done the maths and it is actually possible to make money with a Hyperlocal App. They key here is not the idea or the strategy but the execution. With my own Hyperlocal app Oyethere, I have experimented various means through which we reach out to existing and prospective customers. While both are tough (meaning retaining & adding customers), it is quite possible to get the business going through innovative ways of sales outreach. For this, we need the unstinted support of the Retail Store, which is the key in making a Hyperlocal App successful. Most times, we have seen Hyperlocal App companies splurge on mainstream media and attract a lot of PR while the business remains in the lurch due to execution issues. At a unit level, the app makes a margin from the Retailer, so while the volumes increase, there is a business break-even. The only challenge here is how much to “invest” in acquiring and retaining the customer and controlling overall marketing spends.

Are Offline Retailers ready for Hyperlocal?

At the face of it, Retailers do not support Hyperlocal Apps because they believe the proposed digital marketplace is lethal and could do a lot of harm to their businesses. But it is not. When a customer looks up a product on the app, they would merely choose the one that suits their need – Brand / Retailer-connect, Time of Delivery, cost of the products and convenience. If the Retailer doesn’t stand up to all these measures and based on a permutation by the customer, the choice of Retailer varies and there are chances that a few non-performing ones may get pushed back. Indeed, it is quite interesting that a few Retailers are experimenting Hyperlocal. Food Bazaar and Hypercity work closely with Amazon Now; Heritage Fresh and Spencers have their own Apps which is being tested in a few markets. However, aggregating Kirans remains the biggest opportunity here while the greater challenge is that they do not make enough margins to be shared with the App aggregator. The same applies for Service Providers on apps like Urban Clap.

The market is ready, just waiting for Retailers to catch-up on them. Let’s hope.

21 March, 2014

Reliance wins handsdown

The first store for Reliance came up in Hyderabad. It was a grocery retail format and many skeptics wrote off the idea, citing intense competition in this segment. Gross Margins are low, two-digits and net margins, if any are a mere 4-6%. So, how would the company ever make money? Further, there were already established players in this segment, especially in the South (of India) such as Foodworld, Spencers, Food Bazaar, Nilgiris, FabMall, Trinetra (now together More), Fresh @ from Heritage Foods – the list could go on! But patience and perseverance has helped the company in the long term. According to a report in the most respected Hindustan Times newspaper, the company would become the largest Retailer in India by Sales in 2013-2014. The company is expected to close the year with $2 Billion in Sales, approx. INR 12,000 Crores. And it made a meagre INR 78 Crores last year and has made INR 278 Crores in 2013-14. That’s not bad at all. The company has been able to achieve scale over the past 7 years and its many Chief Executives of respective businesses have built the business brick by brick, sweating and toiling between Board Rooms and Store fronts.

Take a quick look at how the numbers stack up;

Reliance Retail

It’s a commendable achievement for Reliance Retail to achieve this position. Those who know me well would now agree what I have been saying ever since Reliance joined the fray in the Retail sector. I predicted right in the beginning that they are here for the long term. With a cash pile of INR 90,000 Crores and managing the largest Oil refinery in the world, Reliance has real deep pockets. And its Chairman Mukesh Ambani is not someone to open and shut businesses. Its not in their blood. Dirubhai Ambani, the patron founder of the group tht every household in India should have a Reliance product in some form or the other. The group created a furore in 2002 when the Reliance Mobile network was launched with an exciting Rs. 501/- package making it the most affordable mobile phone of its times. Similarly, they forayed into various other businesses and turned around all of them, albeit patiently.

One of the biggest reasons why Reliance has been able to reach where they are is also because of steadfast focus in the formats that they have opened and operated. They just have one Hypermarket, One Digital Electronics Format, three formats in Fashion, one in Jewelry and half a dozen international brand tie-ups. Makes it easy to focus on scaling up each vertical constantly. Reliance operates small supermarkets which compete with Kiran Stores and other organized players such as Spencers, Foodworld, Food Bazaar, etc. Reliance hyper directly competes with Metro AG, Best Price (Bharti Retail), Hypercity (K Raheja Group), Total (Jubilant  Retail), Big Bazaar (Future Group) nd other local wholesale markets and APMC operated mandis. In the fashion segment, Reliance Trends is positioned against Lifestyle (Dubai based Landmark Group), Shoppers Stop (India’s largest Department store Chain) and Pantaloon (now owned by Aditya Birla Group). Reliance Footprints has a unique positioning and doesn’t have major names for competition except Metro and Mochi who have a pan-India presence. Reliance Jewels competes with the local jewelry stores in each micro market. Reliance Brands such as Diesel, Quicksilver, etc. compete with their international competitive brands.

This is just the beginning. Look how Reliance is going to grow leaps and bounds in times to come. I am still sure that they wouldn’t have a JV with the global biggies such as Wal-Mart, Carrefour, etc. They would rather grow organically in times to come.

The game gets more interesting.

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!

04 July, 2012

Malls and Anchors – the inseparable cousins!

A year after Borders Group collapsed, a survey by Colliers International shows that one-third of 205 bookstores shut down by the company are still vacant, according to the Wall Street Journal. Stores that replaced Borders in U.S. malls and shopping centers are leasing at rates an average of 30% lower than Borders paid. In at least one case, tenants demanded rent decreases to make up for Borders' absence. Bizarre, as it may sound, that’s the real power of anchor tenants. Anchors are those Retailers who attract the most number of shoppers walking into a mall. They could be of different formats such as Hypermarkets, Supermarkets, Specialty Retailers, Book Stores, Leisure Stores, Factory Outlets. Cinemas and Multiplexes and even Cafes and Restaurants.

DSC00061

While planning and zoning a Mall, the developers provide a lot of importance to the placement of Anchors. As the name suggests, they literally hold the ship (the mall) on their shoulders. They usually have a road-facing presence, mostly on the ground and upper floors and on either sides of the Mall if the Mall has two entrances or more. Anchors are also the first to be signed up by the Mall Developers because it is easier to attract smaller tenants basis the power of footfall attraction of the Anchors.

Let us look at some of the most common Mall tenants;

Hypermarkets

Retailers such as Big Bazaar, Hypercity, Spar, etc. qualify under this category. Hypermarkets are usually located in the lower ground as this is an area that is otherwise difficult to lease. Hypers however have the ability to pull footfalls due to their pricing and promotion strategies. Due to their low cost of operation, Hypermarkets command a very low rental structure, which is usually expected to be maintained at 6-8% of their Turnover. Malls usually provide a separate entry / exit for Hypers if they are in the lower basement with large escalators and elevators and pathways for customers with trolleys to move comfortably and safely. To have established Hypers in the Mall is a sure shot way to ensure continued heavy footfalls through the week.

DSC00099

Department Stores

Shoppers Stop, Lifestyle, Reliance Trends, Westside to name a few have been the Mall developers first choice to sign up in their premises. Inorbit Mall at Malad, a suburban area in Mumbai was one of the first malls to have two Department stores within. Needless to say, it attracts one of the highest footfalls for any Mall in India. Department Stores are good tenants, from a return per sft point of view to the Mall Developers. They peg their rentals at 10-15% of their Turnover and can hence pay a slight premium compared to Hypers. Also, they attract a superior set of customers which benefits the Mall overall. Premium customers also means more amenities, such as large car-parking areas, valet parking services, premium architecture, more elevators and escalators, etc.

Specialty Retailers

Brands such as Tommy Hilfiger, Aldo, Zara Calvin Klein, Mont Blanc, Apple, Electronic and Consumer Durables Retailers such as Croma and Ezone, home improvement retailers such as Home Stop, Home Town, Home Centre etc. are considered Specialty Retailers who stock premium merchandise. These Retailers are extremely choosy in terms of their choice of location, sometimes no more than 2 or 3 per city. Specialty Retailers pay premium charges for high-profile locations within the Mall, usually road-facing two-tier stores or atrium-facing outlets. Since they are available sparingly, customers flock to their stores and hence the brands maintain their exclusivity.

DSC00046

Books and Leisure

Crossword, Odyssey, Landmark, to name a few are chains of books and leisure stores commonly found in Malls in India. They usually do not occupy the ground floors – mainly due to compelling rents. Instead, they prefer higher floors and have a strong pull of customers who are more of impulse shoppers. Their rent-to-sales ratio is no more than 20% and also operate with heavy staffing, mainly due to pilferage issues. E-Commerce has threatened the existence of many book stores and it’s a common sight these days to either see many of them empty even during peak hours and weekends or a few of them shutting their shutters for want of business.

Factory Outlets

Suburban Malls, usually located outside the city have tenants such as Mega Mart, Brand Factory, Loot, Coupon, etc. who are deep discounters. These stores sell merchandise that belong to the previous seasons and hence at a discount. India has over 500 million people under the age of 30, and hence there is a huge opportunity to sell to a third of customers in this bracket who are aspirational, yet price-sensitive customers. They pay not more than 12-15% of their sales as rent and hence maintain a lean-mean operation. Most of their stores are non-air-conditioned and staff strength is minimal.

Cafes, Restaurants and Foodcourts

Café Coffee Day, India’s leading café chain with over 1,300 cafes across the country is among the trusted tenants to double up as anchors. Being a youth brand, it attracts the right target group for malls. Restaurant & Bar chains such as McDonalds, KFC, Geoffrey's, TGIF, Hard Rock Café, etc. are sure-shot crowd pullers mainly due to their limited presence in the cities. Also many boutique restaurants, usually high-end also are considered as anchors in some way. They are unique in their offering and are usually entrepreneur driven, which means superior service, great food and a superb ambience, consistently and all through the year. Cafes and Restaurants can stretch upto 25% of their Turnover as Rents, to gain maximum visibility.

DSC00031

Multiplexes

The boom began around 2006 when the country’s first chain of cinemas PVR began rapid expansion in Delhi and surrounding National Capital Region (NCR) and later followed by the Northern, Western and Southern Markets. And then came others such as INOX, Big Cinemas, Fame Cinemas, Fun Cinemas and the most recent being the world’s largest exhibitor, Cinepolis. The movie screening business is considered to be one of the most lucrative ones in India, given the fact that India produces over 2,000 movies every year across several genres in over 15 languages. Although it is a high investment business, the returns are equally exciting.

Going back to the opening statement, sadly there is not a single retailer in India who commands the respect and power as the one that Borders does. Not yet. Developers and Retailers are always at logger heads due to high rentals charged and low / sometimes poor maintenance of the Malls. Mall Developers and Retailers are constantly in a love-hate relationship. Both need each other and cannot do without one another. Yet, there are very few successful stories of collaboration between the two, maybe countable with both hands. Thanks to the ongoing opening up of FDI in Retail and with more and more International Retailers coming in, this is one area that would only get better. And hopefully, I would get a chance to chronicle a few of them.

29 June, 2012

Another New store Opening?!?

Retailers in India seem to be continuing their efforts to open new stores, despite a slowing economy, higher import values, a falling rupee, increasing inflation and a weak consumer sentiment. This has been evident in the Retail Sales over the last two Quarters of this calendar year especially in high-value items such as A/Cs, Refrigerators, LCD TVs, automobiles including two-wheelers and four-wheelers. On one side, Retailers are offering huge discounts to lure customers – in India, Q1 & Q4 (for Financial Year starting April onwards) are essentially the most difficult times for clearing inventories and it is relatively easier in Q2 & Q3 due to the impending Festival and Marriage seasons. The above mentioned macro-economic factors haven’t helped them either. And Product ECommerce (excluding Ticketing services which account for over USD 8.5 Billion) which is estimated at over USD 2 Billion (approx. Rs. 11,500 Crores) is the biggest competition today for many Brick & Mortar Retailers, at least in the metros and mini-metros where Consumers have a reasonably quick and safe internet connectivity. And on the other side, large stores are being inaugurated in the hope that consumers would still like to visit and shop. We truly live in two contrasting worlds, to say the least. India's largest retailer, Future Group, which runs Central Malls, Pantaloon Fashions – a Department store chain, Big Bazaar Hypermarkets and FoodBazaar supermarkets among various other formats and models has scaled back its expansion from 2.5 million to 2 million square feet this fiscal year due to an economy growing at its weakest in nine years. The growth rate was 5.3 percent on an annual basis in the March quarter.

Viveks

To drive footfalls to the store, continuously and consistently is one of the key challenges for Retailers anywhere in the world. That the population in India is huge is a bonus factor. However, conversions are miniscule. In the apparel and lifestyle formats, conversions range from 8-15% (those who buy as against those who enter the stores) while in consumer durables and brown goods, it is even lower. For Malls, which are destinations and are expected to attract significant footfalls, the conversions range from 3-5% and maybe lower in some cases (on a lower base of footfalls, usually). Given this fact, Retailers are in a frenzy opening newer stores within existing cities as well as in newer cities. One such example is Viveks, one of the oldest Consumer Durable Retailers in South India which was also the first one to start an EMI option in the early 90s when the Indian Economy was just opening up. It is rather surprising that the Retailer chose to remain a regional player, unlike its later counterparts such as EZone (part of Future Group) and Croma (from the house of Tatas) who quickly increased scale and went national with their presence. EZone is having operational challenges but that is not because of expansion but rather due to internal issues. To add to the woes of Consumer Durable Retailers, Hypermarket Chains such as Hypercity, Big Bazaar, Star Bazaar, etc. also stock Electronic Goods.

Challenges for Consumer Durable Retailers

Footfalls

To expect continuous footfalls all through the week is rather not practical. Instead, Retailers focus on weekend shopping festivals, usually for short durations. This is the time when Shoppers visit Retail stores and chances of conversion are higher!

Service

Superior Customer Service is something everyone talks about but is not generally followed all the time. And Customer Service is not just a gentle staff doing some smooth-talking and smart selling. It includes all the moments of truth – from hygiene factors such as lighting, A/c, Parking, etc. as well as product knowledge and friendly staff.

Differentiation

Multiple Retailers sell the same Brands and products. So why should a customer actually shop with one Retailer and not with another? Honestly, there is no clear answer. Consumers do not buy products, they buy Brands. And this includes the Retailer’s Brand Value as well, on which they should be focusing on.

Ecommerce

Showrooming – a prevalent concept in the West where shoppers visit Retail stores to check out products and prices but ended up ordering on Amazon.com or other ECommerce portals is brewing in India too. So, the difficulty of touch-and feel is negated. Another challenge is paying by Cash which is also something that ECommerce players have started over the recent months. Lastly, the convenience of getting the product on hand immediately – something that ECommerce players are finding it difficult to deliver but are successfully meeting customers’ requirements within 2-3 days in general.

With so many challenges, I wonder at times whether Retailing is worth the effort at all. For some, it’s a question of growth, for many it’s a matter of survival. With the opening of FDI in Retail sooner than later, the Big boys with boat loads of cash are going to lap up market share easily and faster. Interesting times ahead.

11 December, 2011

Retail Employees Day! Thank you folks!

No matter how popular or old a retail brand is, they will not be able to reach out to their customers without the continued and trusted efforts of their employees. Retailers across the country have come forward to support an initiative called "Retail Employees Day" to be celebrated on the 12 December every year. An organization by the name TRRAIN is behind this idea. TRRAIN is the brainchild of the most respected Mr. BS Nagesh, the Vice-Chairman of K Raheja Retail which manages various retail formats such as Shoppers Stop (Department Store), Crossword (Book Store), Hypercity (Hypermarkets), Home Stop (Home & Living) and InOrbit Malls. Nagesh has been part of the Retail industry over for over 20 years and is seen as an icon among the retail professionals young and old, a kind of role model that every retail manager wants to become! He has been through the industry's ups and downs and has always been there to support the various ideas and initiatives of the Retail Industry. 

Retail staffing in India has come a long way since the 1980s. The old-fashioned “showroom salesman or salesgirl” is now referred as “Customer Care Associates”, thanks to the proliferation of modern and organized retail formats. Even stand-alone traditional retailers have embraced this well and provide respectable employability to their front-end staff, who can make or break the business. The final “conversion” of a potential customer into a real one is in the hands of the CCA and hence, a lot of importance to their well-being is being provided. In the good old days, they were paid a lumpsum as salary but things have changed today. They are covered under Minimum Wages Act, are to be provided PF, Gratuity and ESI and needless to say, additional income options such as performance bonus and variable increments. CCAs undergo a fortnight, if not more of classroom training before they enter their dream world of employment at the swanky retail stores. Within two years of commencing their first job, many smart ones move up the hierarchy as floor managers, department managers, etc. There are even classic examples of front-line staff making it to senior positions and more are in the making. The dedication of some of the staff is exemplary, to say the least. I personally know a few who have gone out of the way, beyond their call of duty at many times. 


I have been personally involved in training the front-end staff right from the beginning of my career. A fellow colleague, who used to sell DVDs and Video Games at Musicworld Kolkata ten years ago has now grown to the rank of a Regional Manager at one of the most reputed music companies in the world! I was also a certified trainer at RPG Institute of Retail Management, an inhouse training agency of RPG Retail which was created to focus continued training and development to the front-end staff. I have trained over 2,000 staff members ahead of the opening of Central Malls at Bangalore, Hyderbad and Pune during 2003-04. They stand all day, greet customers with a smile, make your shopping and dining experience a great one and at the end of day, deserve more than their salaries.
On this day, I salute these heroes – without whom the Organized Retailers cannot grow the way they aspire to! My heartiest thanks to each one of them for making us proud; Cheers guys! 

27 November, 2011

FDI in Retail–the saga continues!

image

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.

image

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!

DSC00886

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.

21 November, 2011

What Retailers can learn from Kingfisher Airlines

The past few weeks would have been one of the most tumultuous for India’s five star Airline, Kingfisher! The Airline and its promoter Dr. Vijay Mallya were in the news (and continue to be) for all the wrong reasons. The India Media which I personally respect a lot were making some scathing remarks and reports all of a sudden about the airline’s business health although it knew about it for many years now being a public limited company. With a debt exceeding Rs. 7,000 Crores (USD 1.80 Billion), Cash-and-carry of Fuel at airports and a few flights grounded for reconfiguration of seats, the Airline was abused by one and all including those who otherwise held it in high esteem. It was common to see many passengers at airport lounges discussing their wisdom and advising how the Airline should be run and how the promoter and the Management can do better. These were some of those who earlier yearned to be seen in the Kingfisher Lounges at airports! In fact, some subscribed for the Kingfisher-Amex credit card so they would get free and immediate access to these Lounges (obviously not for Kingfisher parties which were for the most elite). And some would go any length to get a Kingfisher calendar (in the same lines of a Pirelli calendar). Serious. No Kidding. Anybody who is somebody had a word of advice for the airline. They should do this; they shouldn’t have done that and so on. Naturally (sic).

I am not an Aviation Expert or one who shares Management Consulting for free. I have my own thoughts about the airline, and those are my views. Running a USD 2 Billion empire and being the second largest liquor company in the world (UB is expected to reach the number one position sometime in 2012), I believe Mr. Mallya and Co. knows their business best despite the unconventional ways of how entrepreneurs run their business (rare to see them plunge in Horse & Car Racing or hosting the most enviable parties at Monaco & Monte Carlo). The airline is going through some turbulence and I am sure they would come out of it sooner than later. Whether someone picks up a stake in the airline or if the Banks bail them out is one thing, but the exemplary five-star service which Kingfisher introduced is something that is worth living for. As eminent scholar Swaminathan Anklesaria Aiyar said in his recent article, “Kingfisher is worth saving!”

There are some interesting learning that our Retail Industry could take from the state of affairs of Kingfisher, which I have listed as below;

Scale-Up but at what cost

The airline was founded six years ago and has hence scaled up reasonably well, in fact started flying international since 2009 after acquiring Air Deccan (which was seen as the main reason for buying out). However, some of the routes it was operating were just not profitable. A Few were as per govt. Regulations such as flying to the North East of India, but there were some routes that could have been avoided. I guess this applies to Retailers as well. In a quest to expand their presence some Retailers like those in the F&B business such as cafes, speciality restaurants, etc. enter new cities and towns although they would just not be profitable ever! For Ex., the number of staff who are required to manage an outlet, a region & a territory would just not make sense unless the number of stores are reasonably big.

Being Everything for Everybody

At the India Retail Forum in 2010, Mr. Kishore Biyani of The Future Group made a statement which many of us in the industry vouched for – “A Retailer cannot be everything for everybody!”. Such powerful words. And makes so much sense. This applies a lot especially for Luxury Retailers. One thing that Kingfisher did was to position itself for the fashionable few with all its flamboyance and exclusivity. Later, when it bought out Air Deccan, it created a platform in the low-cost segment with “Kingfisher Red” which was recently scrapped off. In the meanwhile, Kingfisher was offering differential service patterns across its flights – some were served hot food on the house while some had to pay exorbitant prices for cold sandwiches!

Price Matters – Discounts don’t work all the time

In tune with many other airlines offering everyday low fares, Kingfisher was also pricing its fares accordingly. This, I believe was one of the earliest and biggest mistakes the airline did although it had an option not to do so. Many Retailers, to gain easy and quick market share especially Hypermarkets and Supermarkets work aggressively on their pricing and create hundreds of loss-leaders. That way, they attract footfalls in the initial stages although they would never be able to lift prices in future. This is a dangerous strategy that Retailers should keep monitoring constantly. Although it is fine to change the market positioning once in a while, one has to be careful in the long-term.

image

Competition – Creating a Niche for oneself

Over time, Competition will increase, irrespective of which business one is operating in. For Kingfisher, it was initially the low cost Indian counterparts and over time, International airlines were also competing for market share. This applies to Retailers such as those in the Fashion segment. It is but natural that international brands would enter India eventually, given the potential the 10 million plus affluent households we have which is their main target segment. This should be part of the Strategy and not a knee-jerk reaction.

Managing the Media

Most importantly, Media should be well-managed – always. To say the least, lesser the better. Kingfisher has been the darling of the Media, with all the red short skirts, the sexy parties and those PYTs who are partying. Every move of the airline has been well covered and captured right from the first page, the Page 3 as well as in the last pages of the newspapers (the sports pages, usually). TV Channels have never missed covering its important times, and there is even a channel dedicated to the Good Times! Most Retailers fail to engage the Media well – either they are over exposed or under-exposed. Well, its worth discussing the business priorities and problems from time to time to- and with the media, rather than bringing it all at once. The recent discussions and view points on allowing FDI in Retail is a great example. Many Retailers, who were initially reluctant on the subject have now done a volte-face because they are cash-strapped by agreeing to bring in foreign retailers in to the fray! This stance will affect them sooner than later, with the media as well as their consumers.

Life’s lessons come from various quarters all the while and this time it is in the form of Kingfisher airlines. It is up to us to make good use of wisdom, irrespective where it comes from.

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.

DSC00014

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!

20 September, 2011

Alcohol and Consumers

According to a recent report by World Health Organization, alcohol use results in the death of 2.5 million people annually. Nearly 4% of all deaths are related to alcohol. Most alcohol-related deaths are caused by injuries, cancer, cardiovascular diseases and liver cirrhosis. Globally, 6.2% of all male deaths are related to alcohol, compared to 1.1% of female deaths. Worldwide, 3.2 lakh young people aged 15-29 years die annually from alcohol-related causes, resulting in 9% of all deaths in that age group. Alcohol raises the risk of as many as 60 different diseases, according to a recent study in the medical journal `Lancet'. Nearly 62.5 million people in India drink alcohol with per capita consumption being around four litres per adult per year. For every six men, one woman drinks alcohol in India. Over 40% of road crashes occur in India during the night, with one-third of them being due to drunk driving. It observes that India saw a robust increase in recorded adult per capita consumption of alcohol. When it came to only drinkers, the average per capita consumption of pure alcohol of a 15-year-old and above in India between 2003-05 was 22.25 litres (23.93 litres among men and 10.35 litres among women). Nearly 62.5 million people in India drink alcohol with per capita consumption being around four litres per adult per year. For every six men, one woman drinks alcohol in India. Over 40% of road crashes occur in India during the night, with one-third of them being due to drunk driving.

Actor Imran Khan had recently announced to file a Public Interest Litigation (PIL) at the Bombay High Court challenging the State Government’s proposal to ban “alcohol consumption” under the age of 25 years according to a recent news article in Times of India. The co-petitioner is his brother-in-law Vedant Malik, 22, who wants to "espouse the cause on behalf of youth below the age of 25 years", says the PIL. The respondents are the Maharashtra government, the secretary of the department of social justice and state excise commissioner. The PIL states that the government "seeks to impinge on the right of equality and personal liberty" of the youth, who are otherwise vested with the right to vote, marry, serve in the military, drive vehicles and enter into legal contracts. The PIL informs that legal drinking ages worldwide are usually 18 to 21. Incidentally, Maharashtra's and Delhi's drinking age limit of 25 is among the highest in the world, except for Maharashtra's Wardha district, where it is 30. The PIL states that the petitioners were surprised to find that the 25 drinking age limit was actually in force since September 26, 2005, but was not being implemented. "The petitioners were therefore under the bonafide belief that the age limit to apply for a liquor permit was 21 years and not 25 years,'' the PIL says. The petitioners then read news articles saying that the Maharashtra cabinet on June 1, 2011 introduced a de-addiction policy that said the legal drinking age for hard liquor was 25 and mild beer 21. They decided to challenge the higher drinking age and asked the department of social justice and empowerment and excise commissioner for the policy. They learnt that the policy was "only at a nascent stage of discussion and yet to be implemented.

I would say this is indeed a noble move had it been done by any other person than the said actor who played the role of an urban youth in his recent movie “Delhi Belly”, which was produced by his uncle and ace actor Aamir Khan. In the film, the actor and crew have professed and performed some of the most vulgar acts (some really meant only within closed doors) which even couples in their 30s (without their children) couldn’t fathom watching at the cinema! The fraternity and junta laughed off the whole episode, claimed and hailed the actor-uncle duo to have taken Indian cinema to global echelons! Neither the saffron brigade nor any mullah condemned or took them to the roads or to the court; no women’s panel took notice of such derogatory remarks in the film. A song featuring “chaste Delhi / national abuse” was reformulated in the soundtrack which went on to become a Chartbuster. Indeed, there was some criticism, but Aamir Khan himself appeared on Tv to justify this and said it was just a song, just a movie! And Hyundai Motor Corp. whose brand ambassador happens to be Shah Rukh Khan (apparently the two Khans are considered arch rivals and do not see eye-to-eye ) announced that it would sue the movie-makers due to a dialogue spelled in the film, where a modified “Hyundai Santro” is abused with the choicest derogatory words which goes “this looks like the outcome if a donkey had f****d a rickshaw!” The film grossed over INR 20 Crores during the opening weekend and was declared a super-hit at the Box-Office, an important attribute to commercial success!

Look who’s talking about social causes! And in a recent interview in Times of India, the actor says he is supporting the freedom of choice! Well, we live in a democratic set-up and each one of us is free to propose our likings and wishes. But a youth icon such as Imran Khan standing up for a frivolous cause such as this is rather disappointing.

DSC00084

As consumers, we all have the right to choose what we want to buy and consume. In fact retailers like Spencer’s, Hypercity, SPAR, More, Total, star Bazaar and many more have separate sections within their stores that are dedicated to alcohol. At Airports, Duty Free Liquor and Tobacco is one of the fastest selling items. I remember way back in 2001, Spencer's stores in Chennai city would sell alcoholic beverages within a distant corner of the store, or rather abutting the main supermarket. Liquor was not part of monthly shopping baskets earlier, which has changed dramatically over the years. The typical 365 litre refrigerators have given way to larger capacity ones, thanks to the increasing consumption patterns of consumers. Today, there is a specific place allotted for wine, beer, soda and other beverages within the cooling equipment. Consumers have evolved and know what to drink and when to drink. most boutique Restaurants that have opened recently have liquor permits and serve alcohol (no one really checks the age). Even Pizza Hut started serving wine at some of its outlets which was later withdrawn due to poor response. While every one talks about “legal drinking age”, it is not implemented in its spirit.

The issue arises when unwanted propaganda such as this is promulgated. When the Government issued such a notice (in Maharashtra), not a single liquor company or a Retailer came forward with such a PIL. For obvious reasons. No one wants to be known supporting alcoholism. But the way the actor has done this doesn’t merit anyone other than him with some additional publicity which I am sure he could do without. Even if he had filed it as a “consumer”, his agency could have remained silent about it. (I am not even bringing his religion into the picture as this blog is not meant for discussing such purposes).

Consumers today are well aware of their rights with permissible laws (and outside). They are learned, educated and know what is really good for them and their families. Whether the PIL is granted or rejected or not, alcoholism is a peril that will continue to daunt the society unless managed well (by each one of us) with personal and social responsibility.

Cheers to Consumers.

31 May, 2011

Hypermarkets–The latest poster boy of Modern Retail

The first thought that came to my mind was – “Will this store be THE game changer for this Mall?” Not that it had weak anchors otherwise, but somehow this store, I believe would attract most number of footfalls. Time will prove, and I hope my assessment would be correct in this case too. I am referring to HyperCITY from the K Raheja Group which opened a few weeks back at Royal Meenakshi Mall - Hulimavu, a lesser known suburb in South-East Bangalore which houses one of the largest new-age residential settlements of those who are employed in IT, ITES and the BPO Industries, mainly due to the cost effective availability of housing requirements as well as reasonable accessibility in terms of time and distance to their respective workplaces. A maiden attempt by a group of enterprising entrepreneurs, I would say this is another brilliant model for Neighbourhood malls – self sustained with most aspects of modern retail within its precincts. Other anchors include Cineapolis, the Mexico based multiplex chain with its first cinema in South India, CROMA – the electronics store from Tata Retail (TRENT) and many others.

DSC00015

The store is located on the upper ground floor facing the main entrance and the lower ground floor of the mall with direct access to the basement parking areas – a smart move by the Retailer to encourage shoppers to enter the store directly after they park their vehicles.  However, after finishing their shopping from the Upper ground floor, one would have to pass through the lower floor to access their cars – a bit of walking around the store though, which could be inconvenient during peak shopping hours. The store is well laid out – the lower ground floor offers Grocery and other Home needs while the upper ground floor with all other categories including Electronics, Toys, Apparel, Furniture, even Bicycles and many more. My guess is that the lower ground would remain more crowded – for two reasons; one that it has brilliant view from outside and would naturally attract mall visitors, and two that it houses the core categories which shoppers would come looking to save for – grocery, fruits and vegetables and household items. What I liked the most was the “fresh section” – Maybe it was the first day and hence everything looked very nicely displayed but still, the way the categories were planned was commendable. Also, they are located deep within the store, another smart idea to pull customers inside and thereby making them walk through the store. Meat & Poultry located close by could prove to be a disadvantage if the exhausts and HVAC are not maintained well – an issue that many retailers are trying to grope with.

DSC00006

The store interiors are typical of a Hyper – no false roofing, basic tiles on the floor, tube-lights running through the length and breadth of the store and focus lights on merchandise that’s on offer. While it does reduce the Capex to a large extent, it also showcases the store as being simple and straightforward – a stark contrast to the luxury stores at high-end malls that sometimes stink of grandeur and austerity! After all, hypermarkets should also look what they profess – savings, savings and savings. And HyperCITY is indeed very good at it. On the store launch, Mark Ashman, CEO, HyperCity Retail (India) Ltd, told the media, “HyperCity is committed to fulfilling the aspirations of the local people by providing them a world-class shopping experience. Our customers will enjoy the convenience of international shopping from over 44,000 products at great value under one roof.” And all this over a mere 60,000 sft.!

DSC00005

With their continued focus on convenience, experience, quality and savings, there is something that this Retailer has been doing right. Apart from stacking the right merchandise, I guess its the speed at which they have been growing. Often accused (not in a real sense though) of being slow in terms of store expansion and growth, HyperCITY has got its act right. With only 10 stores across the country, the group has managed to understand the business well – they have opened at interesting catchments across cities to ensure that they are not just in the race to grab market share but also to make money at the store level. With an investment of upto INR 2 Crores per store, the Retailer has been cautious about its overall Operational profitability which seems to be getting better by the day. Specific to this Mall, none other than the Hyper is going to be the the main anchor that would attract thousands of shoppers every month! Those who come to shop would indeed pass through the other Retail stores, Food Courts & Restaurants and m\Movies would complete the entertainment bit as well. This store is not an exception, but Hypers would become the Poster boy of Modern Retail and the Darling of Mall Developers soon.

The Popcorn Conundrum

Just realised that I have seen 3 movies over the last 3 weeks at theatres. Two were in top class cinema halls in a Tier 2 town and another w...