Shuchi Bansal, Abhilasha Ojha & Gouri Shah
New Delhi/Mumbai, November 30, 2011
Indians who can afford the good things in life may soon be able to browse for exclusive labels without having to leave the country following recent changes in investment rules.
The controversy that’s been touched off by retail reforms
has been focused on the key decision to allow 51% overseas investment
in multi-brand retailing. The move to increase the 51% limit on
foreign direct investment (FDI) in single-brand retail to 100%
hasn’t attracted as much attention, but could see a change
in existing relationships plus lead to a transformation of the
Indian high street, such as it exists in upscale malls and shopping
Other labels that aren’t visible in India but may be persuaded
by the rule change are UK-based Arcadia Group Ltd’s brands
such as Topshop, Dorothy Perkins, Miss Selfridge and Burton, besides
labels from GAP Inc. that include Banana Republic, GAP, Piperlime,
Athleta and Old Navy.
Experts say that most luxury brands would want 100% ownership
. That’s because the earlier 51% rule, which dates to 2006,
didn’t enthuse those who prefer to go solo in order to preserve
There are many labels wanting to enter the market with their
own operations, said Ankur Bhatia, executive director, Bird Group
Pvt. Ltd, a Delhi-based company with interests in aviation services,
retail, travel and technology.
“Many premium brands have global mandates that they don’t
want to work through a franchise agreement and be in the country,”
he said. Brands such as GAP and Prada, have been waiting for this,
wanting to see if the environment is right for them, he said.
Prada’s international office in Milan refused to comment
on the story. GAP and Arcadia Group did not respond to queries.
Swedish fashion retailer Hennes and Mauritz said that while India
was an interesting market, it was too early to comment on stores
in the country.
“There are no concrete plans for if, and in that case when,
we would open stores there,” said a company spokesperson.
The rule change could lead to existing partnerships, which were
mandated by the old rule, breaking up as foreign brands seek to
control operations and strategize in accordance with global directives.
International brands such as Louis Vuitton, Christian Dior, Bottega Veneta, Canali, and Jimmy Choo are among those that have entered India through local subsidiaries, joint ventures and franchisees. Some brands may have already begun the groundwork to understand the market better. Ashok Goel, luxury brand consultant to many high-end watch companies and distributor for the likes of Hublot, Breitling and Gucci in India, has been asked to prepare a plan for independent stores. The upscale watch brand also wants Goel’s company to manage the stores.
“Basically, I have told them to wait till there is more
clarity on the FDI policy,” Goel said.
The government is currently in the middle of defending its decision
against the political storm that has been set off by the reform
move. Although the FDI policy is designed for the “mass market”
and not “luxury brands”, given that multi-brand retail
essentially relates to supermarkets, Goel said it has opened a
forum of sorts for the sector. The most recent ventures include
one between fashion designer Suneet Varma’s company Unique
Eye Luxury Apparel Pvt. Ltd and Giorgio Armani to bring Armani
Junior to India next year. The franchisee will open three stores,
the first of them early next year at DLF Emporio.
Luxury brands prefer to control every aspect of their operations
and style of functioning, said Kalyani Saha Chawla, vice-president,
marketing and communications, Christian Dior Couture, the French
company owned by Christian Dior SA.
“The sector—being niche— requires tremendous discipline,
so its brand philosophy can be replicated across countries, wherever
the brand is present,” said Chawla.
Christian Dior Couture entered India in 2006 through Christian
Dior Trading India Pvt. Ltd. Goel agreed that most luxury brands
would want 100% ownership.
“In single-brand retail, the brand is supreme. They want
to put the right face forward,” he said. “Whether brands
will come on their own or with a partner will depend on how hungry
the brand is. If it is very hungry, it will be 100% independent.
If it is testing waters, it may partner somebody.”
Overseas labels want to control operations because they’re
more about brands than stores, said Pinakiranjan Mishra, partner
and national leader, retail and consumer products, Ernst &
Young India Pvt. Ltd.
“The decision of the single-brand retailers who are already
in India to be in the country on their own minus their partners
will depend on the kind of agreements they have with their Indian
partners—whether they have the flexibility to exit the partnership,”
Those in the trade feel the real action will be in the already
existing brands, and that some brands could pay their partners
to exit, he said.
Markets such as India pose a challenge in terms of luxury segment
“It is mostly a struggle to align views in terms of (brand)
experience and training,” said Radha Chadha, a marketing
and consumer insights expert who runs Chadha Strategy Consulting,
also co-author of The Cult Of The Luxury Brand: Inside Asia’s
Love Affair With Luxury. When it comes to big luxury brands with
deep pockets and vision, they would want control and ownership
of their India operations, she said. Smaller boutique brands will
be happy to go with local partners, she said.
While reputed international luxury brands will get more serious about investments in the country, local partnerships can add value, said Tikka Shatrujit Singh, adviser, Louis Vuitton, India, a division of French holding company, Louis Vuitton Moet Hennessy.
“India is a unique market,” he said. “A cut-and-paste
business model cannot be replicated here.”
In India, Louis Vuitton operates through a joint venture, said
Damien Vernet, general manager, Middle East and India, Louis Vuitton.
“Everywhere we are present, we are always keen on maintaining
a full control over our operations, thereby ensuring to our clients
the benefits of an integrated structure, which include consistently
high level of service and the guarantee of authenticity,”
Local partners will be welcomed provided they add value, whether
in terms of their existing footprint, knowledge of the consumer
or supply chain management, said Devangshu Dutta, chief executive,
Third Eyesight, a specialist management consulting firm focused
Such partnerships cut down the learning curve and hasten the
process. This also depends on the company’s operational philosophy
For instance, “Ikea has always maintained that it sees
very limited value in bringing on a local partner,” said
Ikea president and chief executive officer Mikael Ohlsson was
in the country recently to study the retail investment changes.
“The Ikea Group has decided to take some more time to plan
the next action in regard to its entry strategy into India. We
look forward to present more information about our expansion plans
shortly,” said an Ikea spokesperson.
The single-brand retailing decision is unlikely to lead to an
immediate flood of international premium brands into the country,
said Arvind Singhal, founder, Technopak Advisors Pvt. Ltd.
“Some of the brands will be careful as they are currently
facing problems in their own markets in the US and the UK. Yet
others may want the dust to settle as the situation is politically
volatile,” he said.
Dutta of Third Eyesight said those present in India may take
“more control of their operations and buy out local partners
or strengthen their presence here.”
Shipper, November 28, 2011
The Indian government last week opened its doors to multinational retailers through a relaxing of foreign direct investment regulations.
The government has proposed allowing single-brand retailers (such
as the furniture giant IKEA) to wholly own stores in India, while
multi-brand retailers (like Wal-Mart and Carrefour) can own a
51 percent stake. Previously foreign single-brand retailers could
only own a 51 percent stake in a joint venture with a domestic
company, and multi-brand retailers could not hold any stake in
front-end retail operations.
The moves, which have yet to be formalized, could greatly impact
the supply chain landscape in this country of nearly 1.2 billion
people. It could also rearrange the retail pecking order in India’s
urban centers, with the country overwhelmingly relying on local
“mom-and-pop” shops for its retails needs since gaining
independence in 1948.
Bear in mind, the proposed new FDI rules would be subject to
state approval, meaning individual states could limit, or even
block, the entrance of foreign wholly- or majority-owned retail
outlets. Indeed, one particularly hardline state politician has
already threatened to burn down any foreign hypermarket that opens
in the country.
The new FDI rules have the potential to bring more efficiency
to the nation’s retail supply chains, through development
of better transport infrastructure, and foreign best practices
in logistics. But the looming threat of major global retailers
entering India’s largely insular retail market has prompted
cries of protectionism.
The argument goes that large-format outlets would quickly put
small corner shops out of business by beating them on price, thanks
to economies of scale and negotiating leverage that the private
shops can’t match.
It’s been speculated that the big winners, if the rules are indeed adopted, would be the nascent group of domestic organized retailers. They would see the country’s supply chain landscape made more efficient, and they would be in a great position to partner, consult, or sell to foreign retailers looking for local knowledge.
Devangshu Dutta, chief executive of Third Eyesight, a retail
consulting firm based in the New Delhi area, wrote Saturday in
the Financial Express that he doesn’t see the local mom-and-pop
shop culture disappearing anytime soon. He also said it’s
naïve to think that Wal-Mart and the like will blast their
way across the Indian landscape without any hurdles.
He said there will likely be intense blowback from local government,
and noted that China’s acceptance of foreign retailers has
been gradual and not without its own setbacks.
“If efficiency is simply a matter of scale, and if building
up scale is simply a function of having deeper pockets from which
to invest, it is obvious that the largest global retailers will
squeeze their smaller Indian counterparts out of business, one
way or the other,” he wrote. “However, retail is not
a global business or even a ‘national’ business: it
is an intensely local business. Sheer financial muscle can be
used to bulldoze competitors, but the consumer chooses to shop
at a particular retailer for several reasons, many of which are
not influenced by the size of the retailer’s balance sheet.
So, local retailers have more than a fighting chance. Walmart,
Carrefour and Tesco are the only three foreign retailers in China’s
top 10, although two of them have been there for more than 15
Dutta said the group most likely to hurt by the development
of the foreign retail sector is India’s huge wholesale sector.
“The losers will include simple intermediaries and low-value
wholesalers who have a diminishing role in a better-connected
economy,” he wrote. “Large suppliers, including multinationals,
will gradually find power slipping from their hands.”
He also said not to expect an immediate improvement in Indian
supply chain, adding that the new FDI rules were no “panacea.”
“Where India as a whole can potentially derive the biggest
benefit from foreign retailers is in developing agricultural practices
and supply chains that comply with global requirements,”
he wrote. “If channelled well, this can create tremendous
export possibilities (‘agricultural produce outsourcing’),
and help to propel rural incomes upwards, creating a wider economic
impact. However, I think the critical things that have been debated
most hotly will also be the slowest to be impacted: foreign retailers
contributing to bringing prices down, and on the other hand, potentially
damaging local competitors.”
Dutta also warned that the presence of foreign retailers won’t,
in and of itself, drive supply chain efficiency.
“The growth of modern retail is an outcome of the development
of the economy and a better supply chain, and a working population
that is seeking food in more convenient and safe forms; it doesn’t
necessarily drive supply chain improvements itself,” he wrote.
“Indeed, in India, during the last decade, modern retailers
have deployed money and management more on opening stores in a
drive to capture market share, than actually in supply chain improvements
and operational efficiencies. However, without investments in
the supply chain, neither can the quality of products be significantly
improved nor their cost significantly reduced.”
Finally, Dutta argued that the government can’t absolve
itself of future economic development responsibility and merely
let the private sector drive supply chain investment.
“We also cannot run 21st century supply chains on dirt
roads, with unpowered storage and a poorly educated workforce,”
he wrote. “The benefits of FDI in retail will remain largely
unrealized for the nation overall if there is no simultaneous
investment by the government in three key areas: transport infrastructure,
electricity and education. The Indian government must be a ‘co-investor’
and active partner in developing and maintaining these aspects
much more aggressively.
(This piece appeared in the Financial Express on November 26, 2011.)
The debate on allowing more foreign investment in retail reminds me of an incandescent bulb: producing more heat than light. With a variety of agendas at play, the heat has been generated by both sides, for and against foreign investment in retail. Conflicting views have emerged not just outside but from within the government and the civil services as well.
Much time has been spent, multiple studies and consultations carried out, even as behind-the-scenes negotiations have gone on.
We can now all let out our collective breaths. The Indian Cabinet has, with some caveats, approved foreign investment up to 100% in single-brand retail operations and up to 51% in multi-brand businesses.
However, the Cabinet “yes” to 51% foreign investment in multibrand retail and 100% in single brand retail doesn’t quite mean an all-clear to accelerated development of modern retail in the country. The debate is not really over—how can it be when it remains still alive and kicking in some of the most consolidated markets in the West? The states retain the power to allow or disallow foreign-owned retail businesses from operating within their boundaries, and local and regional political parties would certainly have an impact on retailers’ expansion strategies. It also remains to be seen whether this will only affect new stores, or affect investment into existing businesses, too.
Opposition to the expansion of Big Retail is not unique to India. There are enough places within the US where the American giant Walmart has faced opposition, not just in small towns but including large cities such as Boston. Similarly, Tesco has been opposed in several locations within the UK. In fact, there was a huge uproar in the UK in the late-1990s when Walmart entered the country with its acquisition of Asda. The details of such opposition vary from location to location, but the canvas of fears is similar: predatory pricing by large retailers, depressed wages, net loss of jobs in the medium to long term with closure of local businesses, as well as low sensitivity to local social issues when operational and financial decisions are driven from distant headquarters.
Though India is labelled a slow-coach when compared to China, it is worth remembering that China took over 12 years to liberalise its FDI regime, and in stages with reversals as well. It first allowed foreign direct investment in retail in 1992 at 26%, took another 10 years to raise the limit to 49%, and allowed full foreign ownership in 2004, but only in certain cities. It even revoked some previously granted approvals, to reduce the foreign retailers’ footprint.
Anyway, the “policy flywheel” in India has finally moved and is now rolling. Certainly there will be winners and losers in its path.
The losers will include simple intermediaries and low-value wholesalers who have a diminishing role in a better-connected economy. Large suppliers, including multinationals, will gradually find power slipping from their hands. However, the fact is that most of them would anyway be losing in absolute or relative terms to the large Indian retailers over the course of the next few years; it would be naive, even dishonest, to suggest otherwise. And I suspect also that landlords who may be rejoicing the FDI decision could be tearing their hair out when they sit down to negotiate rents with the big boys.
In the other corner, the beneficiaries obviously include the foreign retailers themselves. With a direct relationship to the consumer, retail operations are the most economically valuable link in a supply chain. Foreign retailers can now have access to this with a controlling stake in one of the fastest growing markets.
The second set of winners is the large Indian retailers. In a capital-hungry business, large Indian retailers can use foreign equity and cheaper foreign debt to reduce high-interest domestic debt, and infuse more funds into growing the store footprint. For some, this also allows a potential exit from the business, whether immediate (for instance from the current 51:49 single-brand ventures) or in the future.
There would be winners among suppliers as well, including packaged and processed foods for which modern retail is a great platform to reach the “income-rich, time-poor” urban consumers, technology companies and service providers including the larger logistics companies, as well as foreign suppliers who would benefit from the trust that they enjoy with the international retailers in other markets.
The government can certainly benefit in terms of indirect and direct tax collection, from these more structured, “on-the-books” businesses.
And the consumer would be at the receiving end of a much better product choice and better shopping environments.
Where India as a whole can potentially derive the biggest benefit from foreign retailers is in developing agricultural practices and supply chains that comply with global requirements. If channelled well, this can create tremendous export possibilities (‘agricultural produce outsourcing’), and help to propel rural incomes upwards, creating a wider economic impact.
However, I think the critical things that have been debated most hotly will also be the slowest to be impacted: foreign retailers contributing to bringing prices down, and on the other hand, potentially damaging local competitors.
If the efficiency is simply a matter of scale, and if building up scale is simply a function of having deeper pockets from which to invest, it is obvious that the largest global retailers will squeeze their smaller Indian counterparts out of business, one way or the other. However, retail is not a global business or even a ‘national’ business: it is an intensely local business. Sheer financial muscle can be used to bulldoze competitors, but the consumer chooses to shop at a particular retailer for several reasons, many of which are not influenced by the size of the retailer’s balance sheet. So, local retailers have more than a fighting chance. Walmart, Carrefour and Tesco are the only three foreign retailers in China’s top-10, although two of them have been there for more than 15 years.
The growth of modern retail is an outcome of the development of the economy and a better supply chain, and a working population that is seeking food in more convenient and safe forms; it doesn’t necessarily drive supply chain improvements itself. Indeed, in India, during the last decade, modern retailers have deployed money and management more on opening stores in a drive to capture market share, than actually in supply chain improvements and operational efficiencies.
However, without investments in the supply chain, neither can the quality of products be significantly improved nor their cost significantly reduced. The new FDI policy partly addresses this issue, as it requires a minimum investment of $50 million in the ‘back-end, which cannot include land, rentals or front-end storage. While the final notification should be clearer on the exact implications, for now one can assume that this investment is envisioned in the storage, processing and transportation infrastructure. However, the impact this can have on a $450 billion retail market will be too small to be immediately meaningful.
Clearly, FDI in retail is not a panacea for growth and efficiency. There is much the government itself still needs to do.
The modernisation of retail doesn’t just lead to consolidation of sales turnover, but also enormous concentration of economic power. Therefore, a tilt towards modern retail must be accompanied by the government taking on the active role of a competition oversight body that can maintain an environment of fair competition. So far, the government has played this role mainly in consolidated industries; retail will require it to play this role in a fragmented market as well, and between buyers and suppliers also rather than only between direct competitors.
We also cannot run 21st century supply chains on dirt roads, with unpowered storage and a poorly educated workforce. The benefits of FDI in retail will remain largely unrealised for the nation overall if there is no simultaneous investment by the government in three key areas: transport infrastructure, electricity and education. The Indian government must be a ‘co-investor’ and active partner in developing and maintaining these aspects much more aggressively.
Lastly, several other regulatory changes are needed to unfetter domestic businesses, too. These include, among others, land and real estate reforms so that we are not constantly living with a mindset of scarcity and ridiculous real estate prices, rationalisation of tax structures, and simplifying the certifications and approvals needed to run business on a day-to-day basis.
Unless these aspects of governance are managed actively and consciously, Indian businesses — small or large — will not be completely free to grow and to complete effectively, and FDI could well turn out to be a Faustian bargain for India.
Purvita Chatterjee, The Hindu Businessline
November 25, 2011
Mr Kishore Biyani, Chairman of the Future Group, is holidaying in Brussels right now. But he may well extend his trip from Belgium to the neighbouring country to renegotiate with French retailer Carrefour, after foreign direct investment in multi-brand retail was approved by the Government yesterday.
Looking forward to fresh infusion of funds into his debt-laden retail company (Pantaloon Retail and its fully-owned subsidiaries), India’s Sam Walton had been lobbying hard for FDI to come in and was elated when it was finally declared.
Speaking from Brussels on the night FDI was announced, Mr Biyani said, “It is a win- win-win situation for us. There will be better infrastructure especially at the farm side of the business, create new job opportunities and bring in capital. More retailers will create more choices for consumers. There will be $8 -10 billion of fresh investments coming into the country over the next 5 to 10 years.”
In fact, capital infusion is the need of the hour for Mr Biyani as he is saddled with debt of nearly Rs 4,000 crore, and has been seeking partners for most of the formats the group has such as Big Bazaar, Ezone, KB’s Fair Price and Home Town. Recently, Biyani negotiated with Japan’s convenience store chain Lawson to pick up a 49 per cent for food sourcing and manufacturing. But Future Group officials say debt in its Rs 11,500 crore retail business is not at an uncomfortable level. They claim that the debt amount of Rs 4,000 crore on a huge turnover of Rs 11,500 crore is negligible and that cash flows can lead to normal debt equity ratios.
Meanwhile, industry observers are of the opinion that FDI in retail can certainly take care of the debt issues for most retailers. According to Mr Devangshu Dutta of Third Eyesight, a retail consultancy, “With FDI, the cost of capital will be lower and companies will be able to roll over their debt to the foreign partner who could have access to cheaper funds. With FDI Indian retailers will be in position to have better balance sheets.”
Biyani’s hopes of partnering with French retailer Carrefour may finally come true. After all the other top international retailers like Tesco (with Tatas) and Wal-Mart (with Bharti) have already found their partners in India. Officials at Future Group said, “Mr Biyani was keen to forge a similar arrangement to Wal-Mart Bharti but now with FDI in retail, he might take it forward.”
But whether Carrefour would choose Mr Biyani’s debt-laden company at this stage is an open question. As Mr Dutta observes, “While foreign retailers may get the benefit of a footprint in the country with big retailers like the Future Group, they may like to have a passive partner who is not that big in retail but has access to real estate and funds.”
Purvita Chatterjee, The Hindu Businessline
November 18, 2011
It is the kirana stores and smaller traders that seem to be patronising Metro Cash & Carry’s wholesale stores rather than the big-format retailers. In spite of providing supply chain efficiencies, it is inadequate scale in the cash-and-carry operations which is making the latter stay away from the cash-and-carry wholesale formats such as Metro Cash & Carry.
According to Mr Rajeev Bakshi, Managing Director, Metro Cash & Carry, “Large, modern trade outlets continue to source directly from the manufacturers as it gives them better margins. We have mainly smaller traders, hotels and the general trade as our members. Outlets of Big Bazaar are not our members as they continue to stock less of fresh produce at their stores.”
The largest retailer in the country, the Future group, which owns the Big Bazaar outlets, is unlikely to register itself as a member of Metro Cash & Carry. “We will continue to have our own supply chain and will directly source from the manufacturers. The eight Metro Cash & Carry outlets cannot meet the demands of our 159 Big Bazaar stores across the country. It simply cannot match our scale as their operations are still small,” says Mr Rajan Malhotra, President – Retail Strategy, the Future Group.
Big, modern trade chains would rather stay away from cash-and-carry outlets. “Cash-and-carry is meant to service small businesses. Big retailers would always like to own their supply chains as it is core to their business. They would ideally like to continue with their independent sourcing and not bring in more distribution layers which would lower their margins,” says Mr Devanshu Dutta, Third Eyesight, a retail consultancy.
Metro Cash & Carry is doing its bit to help the farmers who are its members. The B2B company is also engaging in training programmes and has set up collection centres from them. With nearly 100 farmers as registered members, it claims to give them guaranteed prices and volumes unlike the mandis which have fluctuating rates. As Mr Bakshi said, “In our case farmers get the benefit guaranteed price and quantity which is informed in advance to them, which is not possible in the mandis. We have cashless transactions with farmers and deposit the money directly into their bank accounts which makes their recoveries much faster. They can also get credit from their banks based on such transactions. ”
After going slow in expanding its outlets, Metro Cash & Carry is now stepping up investments with nearly Rs 480 crore assigned to setting up new outlets in cities such as Ludhiana and Delhi. “We have planned to set up 8-10 stores in the next year with an investment of Rs 60 crore for each store. However, the investments are always higher in bigger cities such as Mumbai,” said Mr Bakshi. Recently it launched its second wholesale distribution in Mumbai with an investment of Rs 120 crore.
However, unlike the rest of the cash-and-carry players, Metro is not looking at finding a partner. It has also decided to stay away from the B2C business. In fact, even in markets such as China where FDI has been allowed in retail, Metro continues with its B2B cash-and-carry model. “Considering the volumes are different in the B2B and B2C businesses, we are getting our margins based on the greater volumes and there is a bigger opportunity in the B2B segment,” said Mr Bakshi.
National , November 13, 2011
It is Saturday afternoon at Mumbai’s posh Phoenix Mills mall and the place is buzzing.
Giggling girls sit by the central courtyard sipping cold drinks, taking a breather. International labels such as Zara, Mango and French Connection adorn their shopping bags.
Very soon a new brand could tempt these marathon shoppers. Kenneth Cole – the US apparel retailer – has entered into a deal with India’s Reliance Brands to launch retail and wholesale operations in India.
Analysts say Kenneth Cole’s market entry comes at an opportune time.
"The timing is right for them because this is a market segment which is expected to grow fast. India has a young population which wants to spend on clothes, the increased urbanisation trend and growing disposable income are also contributors," says Amit Gugnani, the vice president for apparel operations at Technopak research house.
The market is expected to grow from US$65 billion (Dh238.7bn) to $200bn by 2020, according to Technopak. The sector’s value has more than trebled since 2005 and it is expected to grow a steady 25 to 30 per cent annually, it said.
One of the shoppers Kenneth Cole may want to target is Supriya, 24, a television executive who spent 5,500 rupees (Dh404) on an outfit from the Spanish fashion house Zara. "I would definitely visit Kenneth Cole,’ she says. "I know the brand from my visit to the States and like their stuff."
The American company wants to attract the young, brand-aware sector – shoppers with plenty of cash to splash. The US group’s plan is to open 25 stores across the country over the next five years.
The appetite for western-style clothing is growing and the market looks promising, says Devangshu Dutta, the chief executive of Third Eyesight.
"In the last four to five years over 100 brands have been launched that are all targeting this space, whether across genders or for any single gender," he says. "Typically these brands would be targeted at consumers in households that have annual income of 1 million rupees or more, and the income and spend levels are also growing rapidly in this segment. Therefore, I would say that the market is far from saturation, despite the competition."
Apparel is the country’s second-largest sector, behind food and beverages. And its size has not gone unnoticed from overseas players who have been lining up to land on India’s shores. Brands such as Diesel, Vero Moda, Tie Rack, Promod, s.Oliver, French Connection, Guess, Next and Calvin Kleinhave been present in most of India’s big cities for several years now, luring the middle-class rupee.
But it has not always been like this. Shoppers can thank India’s decision to join World Trade Organization (WTO) in 1995, which meant a reduction in import duties on clothes. The government’s decision to allow foreign direct investment of 51 per cent in single-brand stores in January 2006 has also helped the big brands to establish a presence.
Foreign companies were allowed to set up shop in the country, provided they had found a local partner. And more recently, the government has said it is considering raising the 51 per cent cap, which would mean a choice of even more foreign brands for Supriya and her friends.
Not all foreign ventures have been roaring successes.
Take the UK’s high street retailer Marks & Spencer (M&S). When it launched in India in 2002 M&S positioned itself as a premium brand despite being a mid-market brand in Britain. But middle-class consumers did not flock to its Indian shops, turned off by the high prices, nor did the wealthy consumers, because they knew the brand was a middle-class phenomenon from their trips abroad.
M&S tills did not sing to the tune of the sitar and a few years later the company admitted defeat and decided to turn its ship around. It reduced its prices and made its stores more middle-class friendly. Today the group is working hard to attract the mid-to-premium shoppers in India and sales are rising steadily.
For Kenneth Cole India is still a blank canvas.
Analysts say its success will be based on how it positions its brand. "It depends upon the brand-product value offer that is designed for the Indian market and how well can the international brand differentiate itself from the competition in terms of the product width and depth and the customer’s experience at the various touch-points," says Mr Dutta. "In addition, the product sourcing and supply-chain strategy will greatly impact the brand’s responsiveness and the margins."
Pricing can be a problem for mid-market brands, he adds, because the mid-market segment in India is very different from mid-market in Europe. Income and spending habits vary greatly.
"A brand has two choices: either to be consistent in its pricing, or to change its merchandise and shift pricing downwards to fit into the very different Indian mid-market."
If pricing is kept consistent with European markets, then direct translation of European pricing into Indian rupees immediately places all mid-market brands into the premium segment.
"On top of that, import duties ensure that there is less margin to manoeuvre on the retail price," says Mr Dutta.
Reliance knows this because it is an old hand at handling foreign brands. Its stable has some of the most well-known global brands such as Ermenegildo Zegna, Diesel, Timberland, Quiksilver, Roxy and Steve Madden.
So to make it in India, Kenneth Cole’s marketing, advertising and product people will need to be able to appeal directly to people such as Supriya and her friends.
"India’s consumer base can be read as ‘many countries in one’, and the key to the success of any international brand in India at the outset is to be clear about its target customer," says Mr Dutta.
"Both Indian consumers and the business environment are demanding, which reduces the margin for error and increases the time to break even dramatically."
No financial details of the agreement between Kenneth Cole and Reliance Brands were revealed and neither company responded to queries from The National.
(This article appeared in The National on 13 November 2011.)
Business Today , November 7, 2011
While on a vacation in Delhi in the summer of 2006, New York-based investment banker Neetu Bhatia was dismayed to find that the facility for booking tickets for shows online practically did not exist in India. In the United States, she would book all such tickets through global online ticketing agents like ticketmaster.com. "Soon after I returned to New York, my brother in Delhi called me asking what I thought about setting up an Indian ticketmaster," she says. She was game. Thus, in April 2007, after spending a year on preliminary spadework, Bhatia, her brother Akash and a common friend Arpita Majumdar, launched the site Kya Zoonga.
Starting with movies, Kya Zoonga has since sold online tickets for shows of singers Bryan Adams and Akon when they toured India earlier this year, as well as for all the recent top sporting events: the ICC Cricket World Cup 2011, the Indian Premier League matches and the Formula 1. It now sells around 2,50,000 to 3,00,000 tickets a month.
"India may have been a bit late in waking up to online ticketing, but in terms of technology and features, we are at par or even better than most overseas websites," says Bhatia.
Kya Zoonga has had a relatively smooth run so far. Not so the site BookmyShow, at present the biggest online ticketing site, selling around a million tickets a month. First started way back in 1999 by three friends, Ashish Hemrajani, Parikshit Dar and Rajesh Balpande, it struggled to survive till the dotcom bust of 2001 finally put it out of its misery.
"Internet connectivity was poor and we were way ahead of our times," says Dar, while co-founder Hemrajani adds: "The ecosystem had not yet been built."
BookmyShow kept itself going in a different avatar, providing the software for backend operations relating to box office collections to movie theatres. Online ticketing was revived only in 2007.
But in its second coming, the service has been a runaway success – selling around one million tickets a month, expanding at a compounded annual growth rate of 40 per cent for the past four years – more so after media and entertainment company Network 18 bought a majority stake in the company – the exact holding is not being disclosed – putting it on a firmer financial footing.
"As connectivity improved, banks started encouraging credit card transactions which worked in our favour," says Hemrajani. "It also helped that we also got an all India serial number which enabled us to control all our operations through a single call centre in Mumbai, unlike before when we had to run call centres in different cities."
Paid a commission of Rs 15 or above for each ticket sold, online ticketing companies now comprise a Rs 650 to 700 crore market. "The numbers should double in the next few years," says Dar.
Predictably, they have made greater inroads in South India – with its higher Internet penetration and vast number of cinemas – than in the North. A host of smaller companies like No More Queue, Films N Tickets and Limata have arisen, with their operations confined mainly to South Indian towns. (No More Queue has limited operations in parts of North India as well.)
"The action is in South India," says Rama Raju, CEO of No More Queue. "The film industry here has big stars who command a fanatical fan following. The fans want to watch their favourite stars’ movies at any cost."
Starting with tickets for two of India’s biggest obsessions – Bollywood films and cricket matches – these companies have now diversified into other events too.
BookmyShow sold tickets worth Rs 80 crore for the recently held Grand Prix in Greater Noida, handled bookings for FIFA’s friendly match between Argentina and Venezuela in Kolkata, as well as the Sunburn music festival in Goa.
Movie business now comprises just 25 per cent of Kya Zoonga’s revenue, with cricket and other sports event cornering about 50 per cent, and other live events, the remaining 25 per cent.
"Visits to ticketing sites have grown with more live events coming to India including the IPL. People find it convenient to buy tickets online," says Kedar Gavane, Director of the internet marketing research company comScore in India.
While the public response has been enthusiastic, ticketing companies have worked overtime to ensure it increases. Both Kya Zoonga and BookmyShow, for instance, team up with select retail outlets to sell tickets at all their outlets.
"We are not dependent solely on our website," says Bhatia. "We have a centralised system by which we can supply tickets anywhere, anytime. If a customer walks into any of our partner stores, he can buy either printed tickets or e-vouchers depending on the regulatory environment in that location."
BookmyShow also have ticket booking applications on Android, BlackBerry, iPhone and Symbian mobile operating systems. It also has a Facebook page, Ticket Buddy, through which it sells tickets. "Ticket Buddy has over half a million fans, and it allows people to see which shows and events their friends have booked, so that they can buy tickets for those events too," says Dar.
Many of the multiplexes, like PVR Cinemas, Fast Cinemas and Inox Movies, have their own ticketing websites as well. PVR Cinemas revamped its decade-old website last July, providing much more information on it than before: details of the films being currently shown, and the ones that will follow, with the facility of pre-booking; even a list of the snacks available along with the option of pre-ordering them at a discount along with the tickets. "There has been a 25 to 30 per cent growth in traffic on the site since the revamp," says Jitender Verma, Chief Information Officer at PVR.
But there are challenges too, chief among them being the Internet’s limited reach in India. "More broadband networks need to be built and cost of 3G telephony needs to come down," says Hemrajani.
Arbitrary policies of some state governments – like that of Andhra Pradesh which has decreed that online ticketing companies need permits to operate in the state, but has provided such permits to just two favoured companies – are also a dampener. Again, these companies have been saddled with many more responsibilities than their counterparts in the West.
"Unlike overseas, where organisers manage the infrastructure for ticketing, in India, ticketing companies have to manage everything – from printing the tickets to selling them online as well as at the venue and at retail outlets, to home deliveries," says Hemrajani.
With the rise of online ticketing, event organisers are also relying much more on ticket sales than they used to. Earlier such ticket sales were somewhat haphazard and organisers relied much more on sponsorships to recover their investment than on revenue from tickets. "Formerly, 90 per cent of the money earned came from sponsorships," says Bhatia. "But now, with ticket sales much more organised, they comprise 60 to 70 per cent of the revenue from these events."
Users, however, claim their experience has been mixed. "Some sites have plenty of options and a fairly standard procedure which I’m used to, but some don’t," says Delhi-based Rohit Balakrishnan, a cricket buff, who regularly buys tickets for cricket matches online.
There remains scope for improvement. "Enriching the content and community interaction to engage consumers is vital for future growth of online websites," says Devangshu Dutta, Chief Executive of retail consultancy firm, Third Eyesight.