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November 18, 2011
Purvita
Chatterjee, The Hindu Businessline
Mumbai,
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.
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November 13, 2011
Pia
Heikkila
The
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.)
admin
November 7, 2011
Anumeha Chaturvedi
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.
Tarang Gautam Saxena
October 30, 2011
The operating environment for the fashion retailers in India is only moving towards a more challenging and competitive direction even though the market is yet to mature. The market has grown over the last two decades on account of brand proliferation and developing retail network and more recently due to new product category creations. High consumer awareness and exposure to international trends has cut the product life cycles short. Topping this up, the last 12-18 months has witnessed the growth of the online platform offering an alternate, convenient and cost effective shopping option for consumers.
It is necessary that fashion retailers manage their operations efficiently both in terms of managing a complex and responsive supply chain at the back end and delighting the customers at the store with great product offers and customer service. Adopting lean practices can help fashion retailers to achieve significant improvements in store profitability and customer satisfaction, making their retail business sustainable through a positive impact on bottom-line.
The concept of lean philosophy, pioneered by Toyota, is built on the premise that inventory hides problems. The basic tenet of this philosophy is that keeping the inventory low will highlight the problems that can be dealt with and fixed immediately instead of maintaining inventory in anticipation of any bottlenecks.
“Lean retailing” is an emerging concept and has already been adopted by retail organisations in the Western countries using technology such as barcodes, RFID (across the product value chain from raw material sourcing through production through final delivery at the retail store) and item-level inventory management and network architectures.
In an ideal scenario a retail organization would be lean at both the store and the distribution center. The organization would leverage technology such as RFID to uniquely identify the movement of its inventory accurately and use fulfillment logic as per the store’s merchandizing principle to have replenishments in tune with customer demand.
Some international retailers that have adopted lean retailing techniques include Wal-Mart, Macy’s, Bloomingdale’s, The Gap and J. C. Penny. Applying lean philosophy to fashion retail in India may sound like an avante garde concept as of now. However, there are some leading large retailers in India such as the Future Group who are early adopters and have already adopted lean practices in their retail supply chain.
An understanding of what lean retailing is and some of its principles can help in appreciating how this concept can make the apparel retail business more sustainable. Lean retailing aims to continuously eliminate “waste” from the retail value chain, waste being defined as any activity/process that is not of “value” to the customer. A fundamental principle of lean retail is to identify customers and define the “value” as those elements of products or service that the customer believes he should be paying for, not necessarily those that add value to the product. Further the value should be delivered to the customer “first-time right every time” so that waste is minimized.
Lean retailing requires simplifying the workflow design in delivering products to customer. Given that the connotation of value is customer-centric, simplifying the workflow design requires streamlining the core and associated processes so that any kind of waste is eliminated. Further pull-system drives replenishment at the stores (and the shelf) based on what customers want “just-in-time” (neither before nor after the time customer demands). This results in a value flow as pulled by the customer.
Those practising lean retail have invested in information technology that allows the stores to share sales data in real time with their suppliers. New orders for a given product maybe automatically placed with the supplier as soon as an item is scanned at the check-out counter (subject to minimum order size criteria). Smaller stores may use visual systems wherein the sales staff can gauge through the empty shelf space the products that have been sold and that need to be re-ordered.
Removing bottlenecks throughout the supply chain is another principle driving lean retail. It entails redesigning processes to eliminate activities that prevent the free flow of products to the customer. Further, lean retail requires following a culture of continuous improvement. Continuous improvement (or “Kaizen”) focuses on small improvements across the value chain that rolls up into significant improvements at an overall level. Kaizens not only can lead to elimination of wasted effort, time, materials, and motion but also focus on bringing in innovations that lead to things being done faster, better, cheaper and easier. Involvement of staff at the lowest levels is very important in Kaizen activities and that means that companies must invest in training, up-skilling their talent pool in Lean Principles.
In the context of apparel retail business, lean retail can help in improving organisational responsiveness to customer needs, the speed with which the products are delivered to them and meet their expectations as per the latest trends. Systematic application of lean principles translates in increased throughput (Sales), with lower Work in Process (Investments) and as per customer requirements of Quality, Design, Trends and Time. Improved information visibility across the chain leads to reduced instances of out of stock and excess inventory at the same time, minimising inventory control costs and reducing shrinkage. At the front-end lean retail may lead to redesigned in-store processes and systems for consistency in frontline behaviors to provide standard customer experience.
With the focus on training and involvement of the workforce, Lean principles have resulted in improving employee satisfaction without increasing labour costs that in turn positively impacts revenues and profitability. Some retailers in the West have reported reducing their store labour costs by 10-20 percent, inventory costs by 10-30 percent, and costs associated with stock outs by 20-75 percent on account of lean retail.
In addition to top-line and bottom-line impact, lean retailing by enhancing the enthusiasm and motivation of the frontline staff creates distinctive shopping experiences for customers.
Inditex, the world’s largest clothing retailer with Zara as its flagship brand, has successfully achieved supply chain excellence following lean principles. It targets fashion conscious young women and is able to spot trends as they emerge and deliver new products to stores quickly thereby establishing its position as the leading fast fashion retailer. The product development processes is based on customer pull-system. Its design team reviews the sales and inventory reports on a daily basis to identify what is selling and what is not. Additionally, regular visits to the field provide insights into the customers’ perceptions that can never be captured in the sales and inventory reports. Critical information about customer feedback is widely shared by store managers, buyers, merchandisers, designers and the production team in an open plan office at the company’s headquarters. Frequent, real time discussions and interactions within the team help them to understand the market situation and identify trends and opportunities.
Further, Zara manufactures the products in small lots and many styles are typically not repeated. Style cues for replenishments are derived from real time customer demand. At the back end, Zara holds inventory of raw materials and unfinished goods with its supply partners which may be local or offshore manufacturers. Typically, the fashion merchandise is produced at the local manufacturing base and quickly delivered while the staple low-variation range is produced offshore at cheaper costs.
Following lean retail practices implies a higher stock turn and frequent replenishments by the suppliers based on real-time sales. Building and maintaining reliable and responsive suppliers through win-win partnerships, is imperative to realize the success of lean retail implementation as high stock turns and frequent replenishments involves the commitment and involvement of the entire supplier base.
Like in any transformational effort, change management plays a critical role in reaping the benefits of lean retail. The whole philosophy requires paradigm shift in attitudes, behaviors and mind sets of those involved upstream and downstream across the value chain. Training, communicating and inspiring the front end staff is thus an important aspect in the overall success and companies need to device a compelling vision that is shared by employees across functions and hierarchy across the entire chain.
admin
October 27, 2011
Subir
Ghosh
Asian
Correspodent , 27 October 2011
Indian retailers suffered the highest loss of stocks to theft in the world for the fifth year in a row in 2011. Half of this loss was attributed to shoplifting by customers. The silver lining here was that India is the world’s only country where the shrink rate (loss of stocks because of thefts by customer, employees and supplier) came down in 2011, according to the Global Retail Theft Barometer 2011.
The shrink rate as a percentage of sales was 2.38 per cent, costing local retailers Rs 3,470 crore, according to the annual survey conducted by the Centre for Retail Research in Nottingham, UK, and underwritten through an independent grant from Checkpoint Systems. The study was conducted across 43 countries between July 2010 and June 2011. In India, it covered 100 retailers, of which 60 were part of modern chains and 40 were from the unorganised sector.
Shoplifting, employee or supplier fraud, organised retail crime and administrative errors cost the retail industry US$119 billion in 2011 or 1.45 per cent of sales. This global shrink rate is 6.6 per cent (0.8 per cent in Asia-Pacific) higher than the previous year. Dishonest employees were responsible for US$41.65 billion or 35 per cent of shrink. In Asia-Pacific, a majority of retailers perceive dishonest customers as the single most important source of loss, responsible for US$9.7billion of losses or 53.3 per cent. However, the average amount admitted stolen by employees was more than four times the average stolen by shoplifters.
“Shrinkage reported by most retailers is due to multiple causes, not only outright theft. This includes factors such as supply chain and storage losses, quasi-shrinkage due to poor data integrity, and due to causes that lie outside the store rather than in-store,” pointed out Devangshu Dutta, Chief Executive of Third Eyesight, a New Delhi-based consulting firm which focuses on the retail and consumer products ecosystem. Third Eyesight works with retailers (including e-tailers), brands and manufacturers, as well as service organisations and suppliers to the retail sector and the consumer goods supply chain.
“Although there are commentators who view retail crime as a harmless or intriguing social phenomenon or simply as cost of doing business, this ignores the impact of criminal gangs, growing levels of violence against employees and customers, and the links between retail crime and drugs, fraud and extortion,” said Professor Joshua Bamfield, Director of the Centre for Retail Research and author of the study. “Moreover, retail crime on average cost families in the 43 countries surveyed an extra US$200 on their shopping bill, up from US$186 last year. In the U.S., that figure was US$115 in Asia-Pacific.”
The 2011 study also found that while retailers increased their spending on loss prevention and security by 5.6 per cent over 2010 to US$28.3 billion globally, loss prevention equipment’s share of total loss prevention expenditures actually declined slightly. This may be why fewer thieves were apprehended globally. The region with the sharpest decline in loss prevention equipment’s share of expenditures was Europe, down 6.25 per cent. Notably, shrink in Europe increased 7.8 per cent, topping the global average.
“Of the top 50 global retailers who responded to the survey, the ones which reported a decline in shrink from the previous year did not construe loss prevention merely as a matter of theft, but worked across their operations to systematically combat shoplifting, employee theft, vendor loss and administrative errors. Ninety-six percent of these retailers’ stores used audit programmes to monitor the use of loss prevention policies and above all, the retailers increased their loss prevention spending almost twice as much as the global average,” said Bamfield.
In Asia-Pacific, shrinkage was highest among categories like cosmetics, perfumes, health and beauty, and pharmacy; apparel and accessories; and video, music and gaming. The most-stolen items from the cosmetics category globally included shaving products, perfumes, lipsticks, scissors, nail clippers, and tweezers. High quality seafood, alcohol and fresh meat made up the top three most-stolen grocery ‘high-risk’ product lines.
So, where does this place India? Is there more than meets the CCTV eye?
Said Dutta: “The articles that I have read about the study do not provide a comparison of modern retail stores in India and their counterparts in the west. It would be useful to look at a like-for-like comparison, rather than comparing unlike retail formats, or taking an ‘industry’ average, when the research samples in different countries are so varied. Smaller stores lack sophisticated information systems to capture and transmit data as accurately as the large stores, as well as storage and handling processes are also less sophisticated. This increases the shrinkage due to non-theft factors, which would also reflect in the ‘total shrinkage’. Having a higher proportion of traditional retail outlets in a study sample can compound this inaccuracy.”
