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If we get the money, will spend

Meghna Maiti, Financial Chronicle

Mumbai, December 31, 2012

In the year gone by, high inflation left consumers with lower disposable incomes. Analysts said in 2012, consumers were worried about their jobs, volatility in the stock market and soaring real estate prices.

More importantly, the grim outlook on fresh hiring, muted forecasts on wage hikes and lack of any spectacular bonuses created a sentiment of caution. Consumers are now awaiting the finalisation of budgets in the New Year to decide whether they should live it up or save for the rainy day.

While recent reports on the economy have been mixed, several indicators suggest the turnaround in the economy is yet to come. A recent research report by Crisil said as the current industrial slowdown is both well entrenched and broadbased, it will take a while for industrial growth to recover.

Retail giant Reliance Retail hopes the spurt in reforms in the last quarter along with the renewed resolve of the government to drive growth and the possible change in the bleak European macroeconomic climate will steer the Indian economy. “While not much is expected in this first quarter of 2013, hopefully after the Union budget 2013, we should see a spurt in economic growth and an improvement in domestic consumption. Consumers will come back to the stores and footfalls will increase,” said Bijou Kurien, president and chief executive for lifestyle at Reliance Retail.

Kurien said 2012 belied the expectations that retailers and FMCG companies had. “Obviously, the global economic headwinds coupled with lack of any domestic stimulus, failed to catalyse consumption. Growth was lacklustre and profit performance of companies was muted. The impact was bigger in discretionary spend categories, while categories driven by basic needs such as food appeared unaffected,” he added.

P Ganesh, executive vice-president (finance & commercial) and company secretary of Godrej Consumer Products (GCPL), said: “We have not seen any downturn in 2012. In the New Year, nothing will radically change in terms of consumer behaviour. Having said that, we can still expect renewed optimism and confidence in the market with the government turning focus on reforms,” said Ganesh.

Over the next year, the success and failure for consumer goods and retail companies will be determined by the speed and thoroughness with which they are able to adapt to changes at all levels, said industry experts. Given the dynamic developments, global as well as local, affecting sentiments, this will separate successful firms from also-rans. Consumer companies will have to constantly innovate, optimise supply chains, and drive brand value and sales through greater engagement with the consumer, added industry experts.

Chaitanya Deshpande, executive vice-president & head of investor relations and M&A at Marico, said on an overall basis, 2012 was a good year for the FMCG sector. “Although there has been a slowdown in the GDP growth, yet there was no significant impact on items of daily consumption. We have continued our investment on brand building and expanding our distribution reach. Having said that, a deceleration in growth was seen for items of discretionary spends and packaged foods,” said Deshpande.

While lower order flow through the CSD channel affected most companies, a sustained lower macroeconomic growth could ultimately have an adverse impact on the items of daily consumption as well, he added.

Devangshu Dutta, chief executive of Third Eyesight, a consulting firm based in New Delhi, said the previous year was challenging both on cost and demand side. “While cost inflation has happened for most players, real estate prices also went up. There was loss of confidence on the part of consumers. Now the challenge is for firms to survive in the short term to remain a player for the long term,” added Dutta. However, he said retail and FMCG players are more aggressive than ever and young consumers are entering the market.

Amitabh Mall, partner and director at Boston Consulting Group, said the growth rate has definitely come down for most consumer goods companies. “While consumer sentiment is clearly down compared with the previous years, it is not really a concern for retailers. Flat sales indicate things have stopped getting worse,” added Mall.

T D Mohan, joint managing director of CavinKare, said demand has slowed down and the volatile dollar and rupee are affecting production costs. There are concerns over rural consumption. “On the macroeconomic front, interest rates and higher financial costs are matters of concern. FMCG companies will not be able to maintain the 15-18 per cent growth rate they were seeing earlier. When the raw material costs go up it has to be passed on to the consumer at some point. For manufacturers, it will further reduce demand and volume growth. Price hike will also contribute to higher inflation. The government has to work on its monetary policy to bring back demand, create investment climate and fuel employment opportunities,” added Mohan.

(With inputs from Sangeetha G)

Levi’s struggles to be a regular fit for GeNext

Sagar Malviya, The Economic Times

Mumbai, December 25, 2012

Teenager Aniruddha Aggarwal keeps nearly a dozen pairs of jeans stacked up in his cupboard. The brands range from international labels such as Wrangler and Lee to local ones like Killer and Flying Machine.

But one brand that is barely visible in Aniruddha’s closest is Levi Strauss. Reason? Aniruddha’s father swears by the denim brand that sports the leather tag with the iconic two-horse design – virtually every denim in his wardrobe has the Levi’s stamp on it. "Levi’s is a good brand, but it’s what my father and his generation wears. I like to wear jeans that are fashionable and trendy rather than going purely by brand value of the past," says Aniruddha, who owns just one pair of Levi’s jeans.

The divergence in the father-son’s sartorial preferences succinctly portrays the 160-year-old denim maker’s predicament in India. After dominating the organised denim market – estimated to be worth about Rs 2,200 crore – over the past decade, courtesy its historical leadership status worldwide, competition from other global brands as well as a rash of local labels have resulted in its disconnect with the youth.

After being in India for 18 years, Levi’s is the country’s largest denim brand with revenues of Rs 741 crore in fiscal year 2012, as per recent filings with the Registrar of Companies. Sales grew 23% in the last fiscal year through its network of over 400 stores, adding over Rs 250 crore to its top line since 2010.

That’s the good news. The not-so-good part is that the Indian operation is losing money, with accumulated losses of some Rs 127 crore.

What is more, rival jeans brands seem to be on a faster growth track. US Polo, which opened its first store just last year with India partner Arvind Brands, has already reached the Rs 200-crore sales mark. "We will cross Rs 250 crore by end of this fiscal year, making US Polo the fastest-growing retail brand in the country," claims J Suresh, managing director & CEO, Arvind Lifestyle Brands, which has over 100 US Polo stores and plans to add 40 shops each year. A year ago, Arvind sold off its entire stake in the joint venture that sells Lee and Wrangler apparel brands to partner VF Mauritius.

Then there’s Italian fashion brand Benetton, which almost two years ago changed its India strategy and became a pure-play wholesale trading entity; franchisee owners have taken the store count to over 600 now. The gambit has worked nicely: Benetton, which entered the country around the time Levi’s did, has doubled sales from two years ago by adding Rs 300 crore since then. "Like a true Italian fashion brand, Benetton always appealed to the younger lot by having hip and trendy styles. This, along with faster store expansion, added to the revenues," said a senior official at Benetton India who didn’t wish to be quoted.

More agile competitors are just one half of the problem. Levi’s has also suffered because of shift in strategy at the San Francisco headquarters – from chasing market share till a few years ago, Levi’s has now chosen to boost profit margins across global markets.

In India, this meant cutting brands such as Dockers, Sykes, Signature and, two months ago, mass brand Denizen, which had been adding substantially to the company’s top line. "Levi’s globally is acting more like an FMCG company than a fashion or retail firm. Even their top management comprises veterans from the consumer goods space with very little experience in retail," said a senior official of a rival firm who did not wish to be quoted.

He is referring to Levi’s global president & CEO Chip Bergh, who spent over 28 years with Procter & Gamble, as well as its India head Sanjay Purohit, who spent more than a decade with Cadbury. "That’s why you see the company shedding non-profitable brands, a move which generally an FMCG company would make," he added.

The rationalisation, however, has done little to contribute to the Indian operation’s profitability. The Indian company attributes the piled-up loss partly to a higher royalty payment to its parent company. "India is a very important market for Levi Strauss & Co and we believe in the long-term potential of the Indian market," said a Levi Strauss spokesperson for Asia-Pacific. "We are focused on growing the Levi’s brand in India by driving innovation, service and the brand experience. We are working to elevate the consumer’s experience through a globally designed line of clothing that has the right amount of localisation for the Indian consumer."

The problem, though, is Levi’s may not be the only denim marketer doing all this. "What has changed in the last two years is that many international brands have entered or become aggressive in the market. While Levi’s has been maintaining a price differential compared to its local rivals till now, global brands have come with a similar positioning," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said. "There is also a novelty factor for the newer brands."

Levi’s plays on premium positioning and sells at an average price of Rs 2,200 a pair. That may help boost its margins, but doesn’t help in the market place when rivals US Polo and Benetton have priced their wares Rs 300-500 cheaper, making them more accessible to the youth. At the premium end, labels from Calvin Klein and Tommy Hilfiger have been able to establish a sense of fashion excitement in the past two years, justifying their higher average price tag of Rs 4,000.

Meantime, local brands such as Flying Machine from Arvind Brands and Kewal Kiran’s Killer jeans could benefit from Denizen going off the shelves. "The biggest challenge for any jeans maker in the country is at what price to sell. We have been primarily focusing on smaller towns, which has helped us get volume and economies of scale," said Kewalchand Jain, chairman, Kewal Kiran Clothing.

Rentals go through the roof on high street

Raghavendra Kamath & Sharleen D’Souza, Business Standard

Mumbai, December 22, 2012

Quality space and high street seem to sell even in a slow economy.

While many malls in the country are going vacant and space supply surpassing demand in many cities, shortage of quality space and heavy demand from retailers for high-footfall areas have pushed up high-street rents by 58 per cent this year.

Vittal Mallya Road in Bangalore, Colaba Causeway in Mumbai and Camac Street in Kolkata have seen a rise in rents of 58 per cent, 56 per cent and 33 per cent respectively, said a study from global property consultant Cushman & Wakefield.

“There are no good malls that are expected to come up in the next one or two years and hence demand for high street has gone up,” said Rajesh Jain, director and chief executive of fashion brand Lacoste, which has a store in Colaba Causeway. “Also, mall rentals are already very high and there is no room for rents to go up further.”

Sohel Kamdar, vice-president of Metro Shoes, said: “Footfalls are very high at high streets and productivity of our store in Colaba is twice as that of our other stores. Also, high streets have a ready customer base”

Retailers are opting for standalone stores on high streets rather than malls due to high maintenance charges, consultants said. Lower space-efficiency has also led to high demand for high-street spaces.

An executive with Tata-owned Trent said common area maintenance charges in malls have risen to Rs 40 a sq ft, against the Rs 10-12 a sq ft considered viable for department stores such as Westside. “Malls in cities such as Mumbai are now asking for a rent of Rs 400 per sq ft a month. A couple of years earlier, this stood at Rs 120 per sq ft. Office rents have moved in the reverse direction. Nothing explains the increase in mall rents,” the executive said.

Of the two dozen outlets Tata-run Trent planned for Westside this financial year, about two thirds would be standalone properties in high-footfall areas. Croma, Tata-owned chain of electronics and durables stores, planned to open a dozen of the 18 stores this year in standalone properties.

According to the Cushman report, over 58 per cent of the mall supply — around 4.8 million sq ft — had been deferred to 2013 by real estate developers due to low demand, poor liquidity conditions and hopes that they will get lot more brands next year as the government has allowed foreign direct investment in retail.

Khan Market in Delhi remained the most expensive retail location with rental values at Rs 1,250 per sq ft. It registered a rent rise of approximately four per cent over last year.

However, some high-streets saw rents stabilising or dropping in 2012. Brigade Road, Sampige Road, Kamanahalli Main Road and Commercial Street in Bangalore and North Usman Road, Anna Nagar Second Avenue in Chennai witnessed year-on-year drop in rentals, the report added.

According to Devangshu Dutta, chief executive of retail consultancy Third Eyesight, high-street stores also help brands establish their identity and build brands.

“Many retailers are finding it better to not be in a mall if they want to be a destination store. In a mall, you are among many other brands and do not have control over look and feel and customer experience,” he said.

McDonald’s to go in for makeover

Yassir A Pitalwalla, Meghna Maiti, Financial Chronicle

Mumbai, December 10, 2012

Amit Jatia, Hardcastle Restaurants, Westlife Development, McDonald'sMcDonald’s outlets in south and west India are going for a changeover as Hardcastle Restaurants (HRPL), the master franchisee for west and south India operations is preparing for a reverse merger with its parent Westlife Development (WDL). With the changeover, HRPL aims to connect better with older customers and increase sales.

“Fashions too change over time. To keep ourselves relevant we are reimaging the look of our restaurants by going in for softer lighting, more use of wood and more apt graphics. This whole new design has already been implemented in some of our newer outlets in Navi Mumbai and at a few locations in Mumbai city itself,” Amit Jatia, vice chairman of HRPL, told Financial Chronicle.

The re-imaging is part of a billion dollar plus worldwide drive by the maker of Happy Meals to revitalise the look and feel of its stores to make it a cool place to hang out, marking the biggest makeover in its 56-year-old history. Hardcastle Restaurants hopes that the makeover will help it increase same store sales and sell more of its higher priced items replicating the experience in US post makeover. McDonald’s had earlier this year said that by the end if 2012 it hopes to have completed the interior renovations at about half of its worldwide restaurants.

Harish Bijoor, CEO of Harish Bijoor Consults, said it is important for McDonald’s to perk up their image to stay relevant and competitive. “The company has to compete with players such as, Subway, Starbucks among others.”

“We have got good feedback from customers. Some of our customers are now much older than when we first started out in India over a decade ago. The re-imaging ensures that we will not lose our connection with our older customers and we stay relevant to our current consumers,” said Jatia.

In the US, the fast food chain is moving to seating zones, slow zones for coffee sippers enjoying the wifi, fast zones at high bar tables for single diners wolfing down a sandwich, and family zones with booths for parents to lock their children on the inside to prevent them from wandering. “We plan to upgrade all our old restaurants to the new look in the course of the next two to three years while all new outlets will sport the new look from day one itself,” said Jatia.

McDonald’s has been trying to capture a larger share of sales by extending its offerings via home delivery and also by setting up dessert kiosks within the vicinity of its existing outlets. “Our ice-creams are very popular so we try to set up dessert kiosks selling our Sundaes and McFlurry’s among others in high street areas or the atrium of a mall where footfalls are very heavy,” said Jatia.

Devangshu Dutta, chief executive of consultancy Third Eyesight, said most players in the quick service restaurant space are trying to attract more profitable customers and focusing on outlet profitability. “The consumers would come more frequently. Also, people who come there could feel better about the product,” said Dutta.

Jatia hopes that the remodelling and the menu changes such as the extra value meal, spicy range and breakfast menu will help the quick service restaurant, reposition itself in the minds of consumers from a snacking occasion to a meal occasion. “We want people to consume meals in the lunch and dinner day parts. It’s about scale and volumes for our supply chain as we are in a high volume, low margin business. As our volumes increase operating leverage will continue to grow,” added Jatia.

Hardcastle, which is in the midst of Rs 500 crore capex to double its network to 250 restaurants, is following the principle of setting up where the customer wants them to be. “The marketplace has tremendous opportunities and we want customers of all levels of society such as section B and C too not just section A to frequent our stores,” said Jatia.

Alpana Parida, president of DMA Works, said, “In India, McDonalds is symbolic of America.”

Biyani’s next big thing: Central & Brand Factory

Raghavendra Kamath, Business Standard
Mumbai, November 19, 2012

His rivals and analysts may not agree, but Future group Founder and CEO Kishore Biyani insists that his mall concept, Central and discount chain Brand Factory, have become “the largest department store network” in the country.

Central and Brand Factory, whose financials are integrated, posted a turnover of Rs 2,200 crore in FY 2012, while Raheja-owned department store chain Shoppers Stop posted sales of Rs 2,167 crore and Westside, the department store of Tata-owned Trent, posted a turnover of Rs 770 crore.

“Both the formats are bigger in sales than all other fashion retailers and we feel they have the potential to touch the billion-dollar mark in the next couple of years,” Biyani said.

Early this year, he had sold a majority stake in department store chain Pantaloons to the Aditya Birla Group for Rs 1,600 crore to reduce the burgeoning debt of the group.

“Central plus Brand Factory is bigger than Big Bazaar and Pantaloons put together in cities such as Hyderabad and Bangalore. But in cities such as Mumbai, we are constrained as Central requires large spaces,” Biyani says.

With a turnover of Rs 270 crore and Rs 200 crore in Hyderabad and Bangalore respectively, stores in those cities are one of the largest among all retailers in the country, he claims.

Rivals beg to differ. “Everyone seems to be claiming that his is the largest department store chains even when he is not running any department stores. You should have a certain yardstick for calling yourself a department store,” says a top executive at Shoppers Stop.

Adds Abneesh Roy, associate director, institutional equities-Research at Edelweiss Securities: “You can’t compare Central and Brand Factory with others. Both Westside and Shoppers Stop are far bigger brands than Central. I think it is not proper to combine both Central and Brand Factory.”

But a Pantaloon executive says Central can be easily transformed into a department store format given its average size of 100,000 sq ft and over 500 retail brands.

Biyani also has grand plans for these formats. He wants to double the business of these two formats in the next three years. Currently both of them have a total retail area of three million square feet and Biyani plans to double that count in the next two to three years.

After covering big cities, Biyani says he wants to take them to tier II cities such as Pune, Ahmedabad, Nagpur, Mysore among others and expand the footprint of Brand Factory which competes with discount chains such as Megamart, Promart among others.

From a 22-store network, Central will become 38 stores during the next two-three years and Biyani is planning same number of stores by 2015.

Some like Edelweiss’s Roy say it is a challenging task. “It is fragmented and a me-too market. It is a tough task for anybody to double the business in the next two to three years,” says he.

“I think it is a fairly aggressive growth target though not impossible,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultant.

Besides expanding network, Central is also doing customer activations and getting exclusive ranges and collections from fashion brands to get more shoppers into its stores.

Central is doing ‘Trouser festivals’, ‘Partywear collection,’ and Ethnic wear festival’ with brand such as Van Heusen, Arrow, AND, Biba, 109 and others where brands launch new collection and range during those events.

During such events, Central creates something called ‘switch areas’ where additional spaces are created to highlight the categories and visual merchandise.

“When you organise such events, the depth and width of the category increases and we have seen 100 to 200 per cent jump in sales during such festivals,” says Rajesh Seth, vice president, sales at Central.

Central has also added new categories such as novelties and gifting under ‘OMG’, dollar store style offering under ‘Top Buys’ and baby products under ‘Baby World’. The chain has completely revamped home category and launched Home at Central at its stores.

Seth says the chain has recently launched exclusive western wear brand ‘Oxygen’ in partnership with apparel brand 109 and looks to launch two to three more brands.

However, other chains such as Shoppers Stop are also doing such activities to boost sales. Shoppers Stop recently did ‘Makeover marathon’ in association with leading cosmetic brands. It also did event around watches and ladies western wear.

“The key point is that you have to able to differentiate yourself to different customer segments. Your whole communication and offering has to be tailored in a way to tap that segment,” Third Eyesight’s Dutta said.

This festival season was the worst in 4 years, say retailers

Priyanka Pani, The Hindu Businessline
Mumbai, November 16, 2012

Mahesh Patel, owner of a departmental store in suburban Lokhandwala in Mumbai, is disappointed with the festival sales this year. Patel, who also trades in crackers, said there was a 20 per cent decline in sales this time.
Several big box retailers such as Shoppers Stop, Pantaloons and Croma, which form some 6 per cent of the retail market (according to retail advisory firm Technopak), were reported to have witnessed a bumper sale. The rest 94 per cent feel that this festival season was the worst in the last four years.

The only segment that grew was personal gadgets such as mobiles and tablets, said Nilesh Gupta, MD, Vijay Sales, a consumer durable retailer.

He said this year there was 8-10 per cent growth compared with 15-18 per cent last year.

Girdhar Bagari, an apparel retailer in Angul, a tier III town in Orissa, said his three-floor store used to remain open till late in the night during festival time. However, this Durga Puja he had to shut shop by 10 p.m.

“Diwali sales were the only respite this time as people bought several traditional wears and sarees but overall there was a 25 per cent slump in sales compared to last year,” Bagari said.

Mahesh Agarwal, a retail commission agent in Raipur, said that there was less demand for branded/premium apparels this season from Orissa, Chattisgarh, Jharkhand, Bihar and Madhya Pradesh. “The sales for high-end (Rs 1,500 and above) was down by 30-40 per cent,” he added, while saying the demand dropped drastically in West Bengal.

However, a few markets in Andhra Pradesh fared well during the Vijaya Dashami celebrations. Om Prakash, owner of Kanak Durga Silks in Warangal saw sales worth Rs 40 lakh per day. While Delhi and other northern markets had a subdued Durga Puja celebrations, Diwali wasn’t able to add any sparkle to the overall business as the prices of crackers and sweets doubled over last year.

“The decline in sales could be due to the extended sale/discount period this year. High value items were impacted and clothing. The economy is slow and companies are looking conservative,” said Devangshu Dutta of marketing research firm Third Eyesight.

Meanwhile, Arvind Singhal of Technopak Advisory said that the economic slowdown in the last 12-18 months has led to a low volume growth for almost all consumer firms. “Most of the companies grew in single digit from 10-15 per cent last year even as consumers restrained themselves from discretionary spends on back of high inflation of 8-10 per cent. If this continues, we expect this to decline further to 5-6 per cent in the next few months,” he added.

E-tailers woo customers with gifts this festive season

Raghavendra Kamath & Shivani Shinde, Business Standard
Mumbai, October 29, 2012

E-commerce sites are giving out home makeovers, wardrobe offers and free gift deliveries during the ongoing festive season to woo customers. Most of the sites offer additional products, other than discounts, to lure customers.

For instance, ‘members only’ site fashionandyou.com will launch a 15-day ‘home makeover’ campaign, wherein three highest shoppers will get home improvement products costing between Rs 10,000 and Rs 50,000.

The e-commerce site is running a month-long promotion called “Festival of indulgence” from October 16 to November 16, wherein the highest shopper can win a designer gold necklace worth over Rs 3 lakh.

Private label-focused site Zovi.com is running a ‘wardrobe offer’, wherein the buyer gets accessories worth Rs 399 for free on purchases worth Rs 1,500 and above.

“We do not believe in discounts. We thought by giving free accessories, we can engage with them better and strike a personal chord,” said Kavindra Mishra, founder-member and vice-president, sales at Zovi.com.

Zovi is also looking to launch the kidswear segment on its site and add a range of winterwear next month to its offering. Another site, Jabong.com, is launching exclusive international products on its site and has started free delivery of gifts.

“Free delivery of gifts requires a lot of effort and processes. We thought the festival period is ideal to launch this service,” said Praveen Sinha, co-founder and managing director at Jabong.com.

Online market place eBay, too, has been promising goodies during the festive period. For purchases made between October 5 and October 15 for up to and above Rs 5,000, gifts such as branded headphones, iPod shuffle, mobiles, iPads and laptops were given out. During October 16-31, buyers need to make purchases only for Rs 2,500 to get gifts.

Besides, eBay has come out with an offer for purchases worth Rs 20,000 to Rs 4 lakh between October 19 and 31. On such buys, customers get gifts such as LED televisions and laptops.

Another player, Snapdeal, is also offering special Diwali offers around home products, consumer durables and others. According to consultants, the strategy of e-commerce sites will not only push sales of products, but also increase margins and positioning in the minds of customers.

“There are two ways of giving offers. Either you can give a discount of 50 per cent on a Rs 500 product, or you can offer the product for Rs 400 and give an additional product,” says Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy firm.

According to Dutta, this (the additional product) would push up the implied value of the product in the minds of customers.

Retailers not bullish on this festive season

Dipti Jain, The Times of India

New Delhi, October 25, 2012

After a sluggish start for retailers this year, even the festival season might not be a mood-lifter. With consumer spending still not encouraging, retailers are not as ambitious on their prospects this festive period as compared to the previous years even as they expect a pick up in sales.

While most retailers that TOI spoke to said this quarter (October-December) sales would definitely be higher than the rest of the year, not many expect the increase to be same as during a typical October-December period. According to industry estimates, the retail sector has been reeling under the impact of steep price increases and a significant depreciation of the rupee.

Growth in the industry has nearly halved between 2010-11 and 2011-12 , causing most retailers to aim for even lower growth targets this financial year, analysts said. While the luxury sector has performed relatively better, it is the mid to premium range of brands that have been worst hit. "Festival quarter has always been good but there is still a fair bit of slowness in the economy. Retailers will push very hard to revive some optimism ," said Mohit Bahl, partner , transaction services at KPMG India.

Madura Garments-owned Louis Philippe, said while it was expecting around 20% growth this quarter, it is significantly lower than previous years. The brand, which is currently witnessing a 15% annual growth, said growth has declined from 50% in 2010-11 . Even last year, sales growth was in the range of 20%-25 %. "Raw material prices have gone up. Plus excise duties have increased and so imports are costlier . Even hiring is low in the industry so the sentiments are poor," said Jacob John, brand head, Louis Philippe.

Having taken multiple price hikes in last one year, retailers said any further increase would not be possible either as it would further dent purchasing sentiment. The industry has seen a 20%-30 % increase in prices in the last one year.

"Retailers are cautiously optimistic and are focusing on improving footfalls through promotions as well as margins by promoting higher priced and higher margin products. Expansion plans are more realistic ," said Devangshu Dutta, CEO, Third Eyesight, a specialist consulting firm.

With the festival season setting in late this year, the window for raking in huge profits for retailers is smaller too. DLF Brands, which has the franchise rights for international brands like Claire’s , Alcott, Boggi, Sunglass Hut, said it has significantly ramped up its marketing and promotion activities this year to increase footfalls. "The reform measures announced by the government in the last few weeks will take time to show its benefits. So people are more cautious. Brands which have come up new might perform well, but those existing already will continue to feel the pinch," said Pradeep Bhanot, senior vice president (accessories), DLF Brands.

Offering heavy discounts is not on the cards for most brands but retailers are looking at adding new range of low-priced products to increase footfalls. Adventure sports brand Woodland is planning to come up with "well-priced" products apart from offers for its loyal customers. The brand, which grew 30% last year, is expecting a 12-15 % same store growth for this quarter. "These three to four months are very important for us. We are tying up with a lot of advertisers to increase sales this season," Woodland India MD, Harkirat Singh said.

At Horniman Circle opener, Starbucks sets premium tone

Nupur Anand & Ashish K Tiwari, DNA (Daily News & Analysis)

Mumbai, October 20, 2012

The Seattle, US-headquartered Starbucks on Friday opened its first store in India, kickstarting what could be a sedate rollout, going ahead.

Yet, if the 4,500 sq ft store in the historic Elphinstone Building in South Mumbai’s Horniman Circle — with an upscale brand Hermes at sniffing distance — is any indication, the company has positioned itself at the premium end, about 50-60% costlier than Café Coffee Day.

The experience is akin to “walking into a shrine of Starbucks coffee”, Howard Schultz, chairman, president and CEO, Starbucks Coffee Company, said of the flagship store, which sports tastefully done up, wood-and-leather interiors.

Two more stores are slated to open in the city next week — in the Taj Mahal Palace Annexe (Gateway of India) and the Oberoi Mall in Goregaon East — before the coffee chain hits Delhi and elsewhere with another 3 stores in the next 6 months.

Beyond that, officials of Tata Starbucks Ltd, an equal joint venture (JV) between New York Stock Exchange-listed Starbucks Coffee Company and BSE-listed Tata Global Beverages Ltd, were tight-lipped, underscoring a circumspect debut.

The bigger question, say experts, is whether Starbucks can really crack the India code, coming in now?

Schultz appeared gung-ho. “The size of the market is very large. If you look at other countries where we have stores — 700 in mainland China, 800 in the UK, 1,000 in Japan, 8,000 in the US — this is a very large opportunity and putting an overall number for stores here will not be possible at this stage. But with Tata’s help and the size and scale of this market, we believe this is where we will grow significantly and make investments over the near future,” he said.

Experts feel the brand name, too, will work its magic — at least initially.

“It is a very successful brand. They have been able to establish themselves in other Asian markets such as China, which is predominantly a tea drinking country. In fact, they are believed to have created the demand for coffee in the Chinese market and have met with roaring success. Therefore, India may not be difficult either,” said Arvind Singhal, chairman of retail consultancy Technopak Advisors.

Technopak expects India’s cafe market to touch $410 million by 2017, up from $230 million now, with the number of cafes rising from 1,950 to 2,900.

Others feel Starbucks will benefit from localisation, as it has in other markets. For instance, in China, it worked with ingredients like green tea.

Something similar will work just fine here, said Gaurav Sharma, assistant vice president, Technova.

Schultz appeared to concur. “Though we will be importing coffee beans, for the first time in our history, we will be sourcing and roasting coffee locally,” he said.

“This apart, we will also offer a host of localised food items sourced from Tata’s food and beverage operations. So, you will see items like elaichi mawa croissant, murg tikka panini, tandoori paneer roll among others,” said Avani Saglani Davda, CEO, Tata Starbucks Ltd.

But will this be enough, given that competition is rife, with several players in the fray?

Singhal of Technopak feels it would take a herculean effort to upstage the market leader, Café Coffee Day. But of course, the positioning of two brands is different and so a clone war is not impending, he is quick to add.

Some analysts believe that in order to succeed Starbucks will have to focus on the location and quality.

To be sure, the café chain is not a leader in all the markets that it is present in, Devangshu Dutta, chief executive, Third Eyesight retail points out. According to him, pricing, product offering and location will decide its success.

Yet others feel the company will do well to focus on smaller sizes and cheaper beverages.

The world’s largest coffee chain will need options that are priced as much as 33% lower than its US offerings to succeed in the Indian market, said Saloni Nangia, president at Technopak Advisors.

For example, Café Coffee Day, the nation’s biggest chain with 1,360 stores across the country, sells a regular cup of cappuccino for Rs61 in Mumbai, while its closest competitor Barista, with 318 stores, sells for Rs69. This, in a nation where the World Bank says about two-thirds of the people live on less than $2 (around Rs108 as at Friday’s conversion) a day.

That may prompt Starbucks to sell its drinks for about $2-2.50 a cup, Nangia said, compared with about $4 in Beijing and $3.50 in the US.

But it may well choose not to do that and remain a premium player, said Larry Miller, an Atlanta-based analyst at RBC Capital Markets Corp. “I wouldn’t be surprised to see similar levels to other markets around the world, which would be a pretty expensive proposition for the Indian consumer,” he said. “In China, their products are just as expensive as they are in the US.”

With Bloomberg

How to get the best deal for your old car

Prashant Mahesh, The Economic Times
Mumbai, October 19, 2012

"Bring the old and take a new one." Manufacturers and dealers of white goods and cars come up with exchange offers during the festive season. With Navratri and Diwali around the corner, you are likely to see many such offers in the coming days. For example, car companies are offering Rs 20,000 to Rs 1 lakh as exchange bonus this festive season, depending on the model you choose. Similarly, you could get Rs 2,000 to Rs 8,000 for your old refrigerator depending on its condition.

"In the case of consumer durables and white goods, there is no organised resale market. Given the hassles involved in locating a buyer for your old product and the time and energy it will consume, it makes sense to go with an exchange offer," says Devangshu Dutta, CEO of Third Eyesight, a consulting firm on retail and consumer durables. However, the rule doesn’t apply to cars.

"If you upgrade your car to the same brand, it makes sense to opt for an exchange offer. However, if you are changing your brand, it may be better to sell the car in the second-hand market and buy a new one," says Roshun Povaiah of Cartoq, an automobile website.

THE TROUBLE WITH RESALE

There is an active resale market for cars, but there is no such market for white goods or consumer durables. Your neighbourhood scrap dealer won’t offer you more than Rs 1,000-1,500 for a fridge or a washing machine in perfect working condition. You could advertise on some websites, but getting a buyer and the right price depend a lot on your luck.

Even if you are lucky to find a buyer, transportation cost would be another issue. Also, going through the drill may consume a lot of energy. That is why many people prefer to give it away to friends, relatives or domestic helps than selling these dirt cheap.

"In most cases it may make sense to dispose of your old appliance to the dealer itself," says Devangshu Dutta. However, check with at least two to three dealers to get a fair idea of the resale price before taking the final decision.

CARS ARE DIFFERENT

If you are looking to sell your old car and buy a new one, zero down on the model first. If you are upgrading to the same brand, the manufacturer or dealer may offer you a loyalty bonus. This could be crucial in your decision making.

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For example, if you plan to sell your old Maruti Alto and upgrade to another Maruti car, say Maruti Swift, you may get a loyalty for staying with the same manufacturer. The loyalty bonus could vary depending on the model. It is typically around Rs 15,000 to Rs 25,000.

"Chances are when the loyalty bonus is added, the resale amount you are getting could be higher than what you may get by selling your car in the second-hand market. Also, since it’s the same dealer, the total amount is adjusted easily and helps you make a down-payment for your new car," says Roshun Povaiah.

However, if you plan to shift to another brand, things won’t be the same. For example , if you wish to sell your Maruti car and shift to a Toyota make, you may not get any loyalty bonus.

"In this case it would work better if you independently sell your old car, than giving it to the dealer in an exchange offer," says Banwari Lal Sharma AVP (marketing), Carwale, Automotive Exchange.

Since cars enjoy an active second-hand market, you do some research to estimate what kind of price you can get for your old car. Manufacturers have their used-car buying arms also.

For example, Maruti True Value, Mahindra First Choice and Hyundai Advantage are some manufacturer secondhand dealers. Added to this, there are websites, local used-car dealers and even garage mechanics who double up as car agents. They too can help sell your car. Get an estimate from a couple of dealers on what they are ready to pay for your car. Compare that with what the new car dealer is ready to pay, and go with whoever is paying you more.