admin
August 12, 2011
Prashant
Mahesh, The Economic Times
Mumbai,
August 12, 2011
Be it a holiday package, dining at a star restaurant or getting a hair cut at a fancy salon, everyone wants a better deal (read huge discounts) these days. This has led to a mushrooming of internet sites that offers discounts on everything under the sun. There are 20-30 websites like snapdeal, taggle, sosasta, mydala, and so on, offering such deals to customers. "Consumers want to try new products and at the same time save money," says Anisha Singh, founder and CEO, mydala.com.
The way it works
Group-buying sites offer heavy discounts on a range of products and services that are in demand. This is how the economics works: Any organisation broadly has two kinds of costs – fixed and variable. In the case of a restaurant, for example, the fixed cost includes expenses on air conditioning and maintenance, salaries paid to staff, etc. The variable cost is that of food. Now, a new restaurant needs to popularise itself to attract new customers. It may have a 100-seat capacity, but there may be only 50-60 people, on an average, seated at the restaurant. As a marketing exercise to attract more customers, the restaurant gives promotional offers through websites.
"Generally, a discount is given in such a way that the variable cost is covered, which, in the case of a restaurant, is food," says John Kuruvilla, founder and CEO, taggle.com. So if a meal at the restaurant costs 300, it is offered at a discounted rate of 150 to attract customers. This 150 covers the food cost.
This creates a win-win situation for both the customer and the restaurant. A lower price attracts customers to the restaurant to try the service out, which they may otherwise not do. At the same time, it also gives business to the restaurant. The website, in turn, gets a commission for every customer who buys the deal. A customer who wants to buy a deal from a website is given a voucher after the payment is made. So when you buy a service for, say, 500, some websites insist that you pay the entire amount upfront. Some others may allow you to pay 100 for the voucher and pay the balance to the vendor when the service is provided.
The typical group-buying site goes live when a minimum number of customers buy the deal. Generally, websites give a commitment to vendors to get a minimum number of customers. For example, for a dance class deal, the merchant may insist on at least five customers. Once the deal is put up and five customers buy it, the deal goes live (it is on the website). However, some websites do not go by this minimum commitment. Once the deals are uploaded, any number of customers can buy them.
What’s on offer?
Almost all these sites offer deals on restaurants, salons and spas, dental check-ups, car cleaning, pest-control services and so on. Among the products they offer are electronic items and gadgets. Discounts could vary depending on the brand and category. In some cases, the discounts may be as high as 80-90%. As these sites pick up, new and exciting services get added.
[Article continued below…]
admin
August 7, 2011
Vrinda Oberai, Retailer
August 2011
A crucial point which needs to be addressed while referring to the influx of foreign players in India is the customisation of products as per the Indian customer’s preferences. While innovation forms to be a crucial part of today’s marketing strategy of brands, customising as per the market’s requirements is something which holds an important grip over a brand’s experience in a market. What better than taking the MNCs into picture which launch their products across the globe! Companies sure do have to take into account the diverse Indian market in order to take their brand(s) to the next level.
Devangshu Dutta, Chief Executive, Third Eyesight shares his insight on the same and points out that some products are obviously non-starters (for instance, skin tanning lotions may sell in Europe, but there is no significant domestic demand yet in India). Other than that, product customisation needs to cater to the specific needs and nuances of the market segment.
How’s it different from abroad?
Most large markets worldwide are extremely diverse. Dutta
explains by sharing that the US market of 300 million people is
built of multiple segments, many of which need to be addressed
with distinct strategies. Similarly, the 500 million citizens
of the European Union live very differently, offering unique lifestyles
with diverse cultures and languages. Even China has multiple languages
and cultures within its 1.4 billion people. So in that way India
is no different.
Sanjeev Kumar, Brand Manager- Surface Care, Reckitt Benckiser (India) Limited asserts, "Most of the sale happens over the counter with very limited consumer-product interaction unlike in developed markets where Modern Trade (Key Accounts) forms bulk of the business and has higher consumer-product interactions."
Indian audience: Tough to cater?
It all depends on category. Some new categories in FMCG like Hair Gels or Hair Colours won’t be that difficult to introduce. "While food is so local and taste buds are so different, thus, in many categories you need to cater to the Indian palate," points out Devendra Chawla, President (Food & FMCG), Future Group.
The Indian audience is tough to cater primarily because of the
diversity that we have in India, ie, so many languages, religions,
geographical preferences, etc. "This makes the job challenging
for a marketer as the groups are so diverse that we cannot use
a blanket approach pan-India. Besides product offering, communication
also warrants customisation to make inroads across geographies
within the country," comments Kumar.
For instance, before launching any global brand or product in India, extensive researches, both qualitative and quantitative, are carried out in order to understand consumer usage and attitudes. Also, on the basis of this learning, required changes are made in the offering so as to cater to the requirement of the Indian consumers.
Customise as per the Indian taste
In a country where food and tastes change every 200 km, localisation of assortment to suit communities and regions is going to be important. Indian market is highly fragmented with very high contribution coming from traditional trade outlets (mom & pop stores contribute over 90% of the overall business). "We have a large rural as well as urban consumer base, so, again, there are more variables to satisfy due to sheer stage of evolution we are in," says Chawla.
For any segment of a significant size, some customisation
is needed, whether of the core product, or its packaging or promotion,
or the way in which it is sold. "I don’t think that the Indian
market or Indian consumers are any more difficult or any more
demanding than consumers anywhere else in the world. However,
the challenge in India for large international FMCG companies
is achieving economies of scale. The price points here are typically
lower, and both supply chain infrastructure and the retail front
end are fragmented, which erodes margin even further. This makes
it initially more difficult and needs a more strategic commitment
to building the business in India," avers Dutta.
Kumar brings forth a simple logic by sharing that the requirement for customisation clearly stems from the fact that what consumers are expecting from the product, ie, on the functionality front and other aspects like look and feel, value, etc. It is on the basis of these inputs that changes are made in the product offerings so that the consumer expectations are met across parameters.
Indian market: Attracting MNCs
India offers a unique opportunity for the MNCs because of the huge consumer base across the strata (socio economic classification). "On one hand, India is seen as a market with huge consumer base at the bottom and at the same time, because of improvement in the per capita income, there are more than enough consumers at the top of the value chain. This presents a unique opportunity for the MNCs to enter India and launch products/services across the spectrum, ie, top end as well as true value for money offerings," asserts Kumar.
The prime attraction that India offers, despite its initial hurdles,
is that the market here is already significant in size, and also
growing very rapidly. "Any company that establishes a
presence in India today has several decades of growth ahead of
it. So, any sharpening of the product and marketing strategy to
meet India-specific needs can be expected to pay off handsomely,"
adds Dutta.
"At 10 per cent projected growth of economy for the next 10 years, it’s going to be on every consumption driven company’s radar, sooner than later, given that the growth is here," sums up Chawla.
In their endeavour to enlarge their market share , marketers are coming up with more personalised, tailor made products. The focus is to please the customers of all strata, to reach out to a larger customer base. Though this phenomenon is common across the globe, in India this is imperative as diversity is India’s core characteristic.
(This article appeared in the August 2011 issue of RETAILER.)
admin
August 1, 2011
Priyanka
Pani, Businessworld
August
1, 2011
Rising inflation and interest rates have not really impacted the consumer confidence when it comes to grooming and personal care. This can be clearly understood from the fact that the FMCG firms have posted good volume growth in the personal care category, boosting their revenues.
Hindustan Unilever, India’s a largest household product and consumer goods maker witnessed a 20 per cent growth in the skincare and personal care products including soaps and detergents.
Similary, home-grown firms such as ITC, Dabur and Godrej Consumers have witnessed strong revenue growth in the personal care segment at 17 per cent, 19.4 per cent and 19 per cent respectively.
So does this mean that the people are buying more or is the growth
just a result of the price hike that most of the firms took in
the last few quarters to maintain margins?
A few analysts and consultants that we spoke to have different
takes on the strong growth in the personal care category. While
some said the growth came on the back of price hikes, others said
that more product launches across sub-segments such as soaps,
shampoos, conditioners, skin care and shower gels, and penetration
into newer geographies drove the volumes.
"Most of the FMCG firms have further penetrated into new cities and have also acquired more customers in the cities in which they are already present. This has been through more product launches and introduction of new sub-categories also," said Devangshu Dutta, CEO and founder of retail and FMCG consulting firm Third Eyesight.
HUL, the maker of personal care products like Dove, Sunsilk, Lux, Closeup and the largest consumer products firm, caters to only 60 per cent of the entire Indian market and hence there lies a huge opportunity for the company to enter new markets. This is one strategy the company is focusing on seriously and has been able to grow consumption in the new geographies, basically the smaller towns and tier III citties.
"As we look ahead the FMCG market will continue to grow," Dutta said, referring to fast moving consumer goods. "However, input cost inflation will continue to remain high."
Another important factor that led to the growth in revenues was due to reduction in grammage and package, Dutta said adding that value growth is around 12-18 per cent for most of the companies based on this factor.
Commodity inflation continued to remain high and hence the companies were forced to pass on the burden to the consumers to some extent, without impacting the consumption story.
However, hike in pay-packages and compensation of the people in Asia’s third largest economy has also boosted consumption and is likely to only grow further.
However, the sector also witnessed some kind of downtrading with people in rural areas and with low income groups opting for smaller value for money packs, in the personal hygiene segment such as diapers and sanitary napkins, shampoos, hair oil and even tooth pastes, according to Indiabulls Securities’ Vice President, Anand Mour. "Most of the growth this quarter has come from a mix of volume growth and price hikes," he said.
Meanwhile, Dutta said that despite the government’s worries about inflation, consumer confidence levels have not been impacted so far. However, he says that further price hikes could lead to ‘second thoughts’ among consumers.
(This story was published in Businessworld dated 1 August 2011.)
admin
July 26, 2011
MINT,
July 26, 2011
Sapna
Agarwal
Mall developers entering an increasingly crowded market are calling in experts to help them design and run their new projects. One such expert estimates that professional managers will be involved in every four out of five new malls that will open for business in the coming months.
Currently, one out of five malls is run by professionals, according to Sanjay Dutt, chief executive officer of Jones Lang LaSalle Property Consultants (India) Pvt. Ltd, a real estate consultancy services firm.
Quite a few firms, including Beyond Squarefeet Advisory Pvt. Ltd, Pioneer Property Zone Services Pvt. Ltd, Star Shopping Centres Pvt. Ltd and Prop Care, a division of real estate developer Mantri Group, are offering such services.
Even multinationals, including Jones Lang LaSalle Property Consultants, Knight Frank India Pvt. Ltd and CB Richard Ellis, which offer property consultancy, development and management services, are setting up separate divisions to cater to the growing demand of managing malls.
Such companies commit to the developers assured revenue and occupancy. In a builder-operated mall, the space is usually pre-sold to investors and retailers and the mall owners are not involved in driving footfalls.
In the new business model, consultancy fees are typically linked to incentives based on key performance indicators such as occupancy levels and rentals, said Dutt. The change is a result of the mall developers’ realization that the way a mall is managed has a direct impact on revenue and rentals.
“Professional management has a critical role to play to ensure the success of a mall. The combination of tenants and contracts is critical,” said Richard Cuthbertson, research director, Oxford Institute of Retail Management, Said Business School, University of Oxford. He has been conducting research at the International Management Institute, Kolkata on the future of India’s retail business.
“Organized retail is expected to add approximately 10 million sq. ft of new retail space spread across 50 malls in the next two years. About 300 malls now make up the organized retail space in India, spread across 50 million sq. ft,” said Anshuman Magazine, chairman and managing director, CB Richard Ellis.
India’s largest retailer by market value, Kishore Biyani, is also dabbling in this space. His venture capital arm, Future Ventures India Ltd, has invested in Star Shopping Centres, a three-year-old company that manages malls.
Star Shopping Centres signs up a property for 18-24 years and takes the responsibility for the entire asset as a tenant, offering the developer a guaranteed rent. It is working on three projects spread across 2 million sq. ft, has got proposals for 10 million sq. ft of new business but may take up 3 million sq. ft, according to Pranay Sinha, its co-founder.
Running a successful mall is not just about the right location. It includes getting the right tenants, merchandise mix, understanding the competition and marketing. Also, over the lifetime of the mall, it requires managing the facility, monitoring sales, planning events to keep the buzz alive and collection of lease rentals and so on.
“On an average, a mall operator needs to interact with hundreds of people regularly to run a successful mall,” said Susil Dungarwal, founder, Beyond Squarefeet. The developer may not have the bandwidth or know-how to do this and this is where a firm like Beyond Squarefeet steps in.
The rapidly growing sector is also facing a talent crunch. “Hiring a consultancy firm ensures continuity in services,” said A.K. Beri, managing director, West Asia property and asset management, Jones Lang LaSalle.
Organized retail accounts for 8% of the overall retail trade in India.
With competition intensifying, new malls are often being launched in close proximity to existing ones. Since they offer better experience and service, old malls run the risk of losing business. “A mall has to constantly evolve and upgrade service offerings to ensure footfalls and conversions,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight.
“We have got a lot of enquires for providing such services and are now setting up a mall management division for end-to-end services,” said Rituraj Verma, national director, Knight Frank. His colleagues in Singapore are helping to set up the new wing.
To be sure, outsourcing mall management doesn’t work for everyone. For instance, Select City Walk has built up its inhouse capabilities after a failed experiment with an international mall operator. “We are learning as we proceed,” said Arjun Khanna, director, Select City Walk mall, promoted by Select Infrastructure Pvt. Ltd. The international consultant struggled to manage expectations. “There are very few people who can run it with passion the way we do,” said Khanna.
(This story was published in Mint, a partner of the Wall Street Journal.)
Devangshu Dutta
July 22, 2011
The apparel retail sector worldwide thrives on change, on account of fashion as well as season.
In India, for most of the country, weather changes are less extreme, so seasonal change is not a major driver of changeover of wardrobe. Also, more modest incomes reduce the customer’s willingness to buy new clothes frequently.
We believe pricing remains a critical challenge and a barrier to growth. About 5 years ago, Third Eyesight had evaluated the pricing of various brands in the context of the average incomes of their stated target customer group. For a like-to-like comparison with average pricing in Europe, we came to the conclusion that branded merchandise in India should be priced 30-50% lower than it was currently. And this is true not just of international brands that are present in India, but Indian-based companies as well. (In fact, most international brands end up targeting a customer segment in India that is more premium than they would in their home markets.)
Of course, with growing incomes and increasing exposure to fashion trends promoted through various media, larger numbers of Indian consumers are opting to buy more, and more frequently as well. But one only has to look at the share of marked-down product, promotions and end-of-season sales to know that the Indian consumer, by and large, believes that the in-season product is overpriced.
Brands that overestimate the growth possibilities add to the problem by over-ordering – these unjustified expectations are littered across the stores at the end of each season, with big red “Sale” and “Discounted” signs. When it comes to a game of nerves, the Indian consumer has a far stronger ability to hold on to her wallet, than a brand’s ability to hold on to the price line. Most consumers are quite prepared to wait a few extra weeks, rather than buying the product as soon as it hits the shelf.
Part of the problem, at the brands’ end, could be some inflexible costs. The three big productivity issues, in my mind, are: real estate, people and advertising.
Indian retail real estate is definitely among the most expensive in the world, when viewed in the context of sales that can be expected per square foot. Similarly, sales per employee rupee could also be vastly better than they are currently. And lastly, many Indian apparel brands could possibly do better to reallocate at least part of their advertising budget to developing better product and training their sales staff; no amount of loud celebrity endorsement can compensate for disinterested automatons showing bad products at the store.
Technology can certainly be leveraged better at every step of the operation, from design through supply chain, from planogram and merchandise planning to post-sale analytics.
Also, some of the more “modern” operations are, unfortunately, modelled on business processes and merchandise calendars that are more suited to the western retail environment of the 1980s than on best-practice as needed in the Indian retail environment of 2011! The “organised” apparel brands are weighed down by too many reviews, too many batch processes, too little merchant entrepreneurship. There is far too much time and resource wasted at each stage. Decisions are deliberately bottle-necked, under the label of “organisation” and “process-orientation”. The excitement is taken out of fashion; products become “normalised”, safe, boring which the consumer doesn’t really want! Shipments get delayed, missing the peaks of the season. And added cost ends in a price which the customer doesn’t want to pay.
The Indian apparel industry certainly needs a transformation.
Whether this will happen through a rapid shakedown or a more gradual process over the next 10-15 years, whether it will be driven by large international multi-brand retailers when they are allowed to invest directly in the country or by domestic companies, I do believe the industry will see significant shifts in the coming years.
