Now, Add To Online Cart: Groceries


September 29, 2012

Vishal Krishna, Businessword

Bangalore, September 29, 2012

It is an early Monday morning and Sandhya Ram is busy preparing a presentation. But at the back of her mind are thoughts about her kitchen supplies, and what to cook for dinner. Sandhya needs provisions in a hurry so she turns to a grocery retailing website — it is convenient and the order comes right to her door. “I am a PhD student, and a mother. My husband is a consultant. We have no time to shop, and shopping for groceries outside takes time and energy,” says Sandhya, who is also a teacher and research assistant at a business school in Bangalore. Sandhya and many others like her are just the kind of customers that online grocery retailers plan to tap. At least 20 such businesses have opened up in the past year, and most of them are based in Bangalore.

But there is many a slip between the cup and the lip. Online grocery retailing has not had a good run in other countries, barring the likes of Tesco and Walmart that have spent years getting their supply chains and technology right. “When it comes to start-ups, the easiest piece to create is the technology involved for a great user interface to attract the customer,” says Devangshu Dutta, CEO of retail industry consultancy Third Eyesight.

There are, however, other challenges in grocery retailing — sourcing, maintaining consistency in service and products, and keeping operational expenses in control. But there are bigger problems.

One, the business needs money to survive in the long run. The scale that many of these businesses have is limited to the top 10 major cities and their affluent populations. Two, a majority of Indian consumers is yet to experience shopping online. Of the 8-10 million Indian women working in the formal sector (according to the National Institute of Public Cooperation), it would be difficult to assume how many of them actually shop online. But the online grocery business’s survival will ultimately depend upon women as decision-makers.

This business may be easy to enter, but longevity is another ball game, and the entrants are still learning the rules.

The Right Direction?

After taking orders online the previous day, the five-member call centre of dispatches the packing order to the delivery team. The next day, 20 trucks leave a 20,000-sq. ft warehouse in Peenya, Bangalore, with cartons of jams, lentils, rice, wheat and pickles from FMCG brands, including ‘Town Essentials’. “I have been running a B2B business for 10 years and that gave me enough experience to dabble in the B2C business with private labels,” says Amar Krishnamurthy, MD of Town Essentials. Thanks to private labels in lentils, jams and pickles, the B2C business gives him higher margins and he also has more control over the working capital cycle. Usually, say analysts, margins in the online retailing business are only as high as 8 per cent, and that too if one manages the supply chain efficiently. But if private labels are the main business, margins can be significantly higher.

“There is enough business within Bangalore and I am improving my website experience to get more orders,” says a confident Krishnamurthy, adding that his B2B business, which supplies to over 200 hotels and restaurants, funds the online arm and manages its delivery too. gets about 45 orders a day. “I do my own sourcing of all the commodities, fruits and vegetables because I believe in maintaining consistent quality if the customer has to come back to shop at the website,” he says.

In another part of Bangalore, 20 Omni vans leave a mandi in Whitefield for a 6,000 sq. ft warehouse, from where takes its products to three hubs across the city and delivers groceries. “The ability to gauge demand is the key to success in this business as you do not want to end up with too much inventory,” says Hari Menon, who co-founded with Vipul Shah. Menon adds that every online grocery retailer has to operate multiple spokes supported by a large hub if this business has to succeed. has 20 trucks and claims to handle over 400 orders a day. To support large orders, it is moving to a 30,000 sq. ft warehouse that will also be its central hub. “In this business you have to meet a 100 per cent fill rate for the customer. If you do not have the product he or she likes, you have lost one customer,” says Menon. The company has raised $10 million from Ascent Capital, and is currently the only business in this segment to have external funding.

Infiniti Retail buys Woolworths India


September 28, 2012

Nupur Anand, Daily News & Analysis (DNA)

Mumbai, September 28, 2012

Infiniti Retail, Tata Sons’ wholly owned subsidiary that runs Croma consumer electronic goods chain, has acquired Australian major Woolworths Wholesale’s Indian arm for around Rs 200 crore.

The acquired company has been a supplier to Infiniti for six years.

Ajit Joshi, CEO of Infiniti Retail, said, “Once the deal is complete, we will merge Woolworths Wholesale India into Infiniti. We will also take their employees under our wing. With this buy, the total funding by Tata Sons in Infiniti has touched Rs 700 crore.”

The acquisition gives Infiniti full control over its back-end operations.

The sale is part of Woolworths’ global restructuring plan.

Ramnik Narsey, chairman of its India unit, said. “With our decision to exit the consumer electronics specialty store sector in Australia and New Zealand, we have decided to sell the wholesale business in India to Infiniti.”

However, experts said there may be other reasons that may have brought about an end to this partnership.

“The partners had been bickering for a long time now and so this exit doesn’t come as a total surprise,” said an industry expert on the conditions of anonymity.

Analysts also believe that armed with the knowledge about the Indian market, Woolworths may consider looking at entering India in the different segment or the front-end at a later stage. Apart from consumer electronics, the company is also present in other categories such asfood & grocery, liquor, petrol and general merchandise.

Analysts said with government opening up the retail sector for foreign direct investment many earlier joint ventures and deals between Indian and foreign players are set to change as foreign companies now have more options.

Devangshu Dutta CEO of retail consultancy firm Third Eyesight, said, “It is likely that in terms of single-brand retail the foreign partner may look at buying out their JV partners. Hectic activity in the retail segment in terms of new partnership and business formats is on the cards.”

Infiniti Retail currently operates 73 Croma and 12 Croma Zip stores in India.

Smaller packs see big interest as spending slows


September 27, 2012

Nupur Anand & Priyanka Golikeri, Daily News & Analysis (DNA)

Mumbai/Bangalore, September 27, 2012

FMCG companies are dusting off their strategy of selling products in small sized packs to prop up falling sales in the discretionary food segment.

Volumes in the discretionary category have dropped 2-7% in the first six months of this year, though sales of essential food items have stayed firm.

As a result, a host of products such as noodles, biscuits, chocolates and other snacks are increasingly being made available by companies in small sized packs, or sub-Rs 10 price points, to lure consumers who have cut spending due to the ongoing economic slowdown.

Smaller packs have been successfully used by FMCG firms to tap the rural and bottom-of-the-pyramid segments.

PepsiCo, Nestle and ITC areamong those which have launched products in the psychological price points of Rs 2, Rs 5 and Rs 10.

Analysts said when volumes are threatened it is a sound strategy to increase the focus on the sub Rs 10 price point.

“In a slowdown, consumers, especially those from the bottom of the pyramid, might not mind spending Rs5 or Rs 10 for a pack of noodles or chips, but will surely feel the pressure if they have to shell out Rs50 for a larger pack,” V Srinivasan, research analyst, Angel Broking, said.

Even premium products such as oats are now available in the quick-to-go Rs 10 pack.

PepsiCo, a major player with Quaker Oats, has products in in different flavours. These smaller packets are not only available in the neighbourhood departmental store but at even big retail chains.

“Sub-Rs 10 is the psychological price point for any product otherwise perceived as expensive. Packs in this category are not just meant for the rural and semi-urban segments but also for the urban consumer. Packs containing say just five biscuits or lesser quantity of chips are often consumed by people while travelling,” said Devangshu Dutta, CEO of retail consultancy firm Third Eyesight

Abneesh Roy, analyst with Edelweiss Securities, said apart from helping in expanding consumer base and footprint, this strategy will help the companies in tweaking grammage.

Companies can reduce weight on products that are priced below Rs 10 and go for non-standard packs, which allows them to defer price hikes, he said. For instance, recently Nestle reduced grammage for Maggi Noodles from 80 gm to 75 gm for a Rs 10 pack, effectively leading to a price hike of 7%.

Rikesh Parikh, vice-president, equities, Motilal Oswal Securities, said that strategy works to their advantage as for the same price, they can sell a slightly lesser quantity of the product.

After the packaging norms kick in from November 1, companies will have to sell products only in standard packs. However, these rules are not applicable on price points below Rs 10.

Viewpoint: Indian retail reform may still stall


September 25, 2012

Writankar Mukherjee, The Economic Times
Kolkata, September 25, 2012

Consumers can look forward to some mouth-watering bargains this festive season as white goods makers and lifestyle retailers ready to dole out freebies and special discounts to prop up demand at a time when sales have slowed down.

Durable makers like Panasonic, Samsung, Whirlpool, Godrej and Videocon are bringing back sales promotion schemes after almost four years as a last-ditch effort to boost sales in a period that typically accounts for up to 40% of annual sales.

These manufacturers have decided to hold onto prices despite a recent appreciation in the price of raw materials.
"Promotional offers are expected to boost consumer sentiment, which has been down so far this year," says Manish Sharma, Panasonic India’s managing director for consumer products. "There was a brief period of jump in sales during May-June when air-conditioner sales spiked due to extended summer, but the market after that has become worse," he adds.
Panasonic plans to invest 70 crore on promotional offers and marketing during the festive period.
As per industry estimates, sales of refrigerator and washing machines have remained flat throughout the year, while growth in air-conditioner sales fell by more than 10%. Sales of flat panel televisions including LCD, LED and plasma televisions grew marginally by 10% as compared to 80-90% growth during the pre-slowdown days, albeit on a lower base.
Arvind Uppal, managing director, Whirlpool India, reckons the weak consumer sentiment is more exaggerated than the ground reality. "We expect demand will pick up during festive season, but we have learnt not to live in hope. We are drawing strategies to outperform the market to grow by 15-20% during this period," he said.

Both Whirlpool and Panasonic have lined up gifts with every purchase, while Korean major Samsung is offering bundled offers with its premium product range such as flat panel televisions and side-by-side refrigerators.

These marketers are also going easy on passing increased costs in raw materials to the consumer. "We are holding onto prices despite input cost pressure," says Mahesh Krishnan, vice president, Samsung India; he expects consumer sentiment to improve and his sales to grow by 25-30% during the festive period.

While the rupee has stabilized against the dollar, durable makers say the pricing pressure on input materials is rising once again. Godrej Appliances COO George Menezes says copper prices have firmed up by 5% in the past one week. However, he adds, the industry has no option but to keep price hikes on hold during the festive season.

"Prices have increased three times this year, making refrigerators dearer by 7-10%, washing machine by 15-18% and air-conditioners by 18-20%; this has played a big role in dampening sentiments," says Menezes.

Godrej Appliances is launching a new range of refrigerators and washing machines during the festive season. It has lined up gifts with every purchase and even a trade promotion whereby dealers can get up to one kg of gold based on their sales realization. "It has to be a three-pronged growth strategy: product, trade and consumers to win in this tough market," says Menezes, who is a eyeing 25-30% growth in sales during festive season.

Analysts say the recent policy initiatives and reform on the policy front are unlikely to work as immediate triggers to boost consumer demand. "Hence companies have to create motivators to move products off the shelves since consumers are resisting any price hike," says Devangshu Dutta, CEO, Third Eyesight, a consulting firm.

Meantime, retailers too have lined up special deals around the festive season. Atul Chand, chief executive of ITC’s premium lifestyle retail format Wills Lifestyle, says it is currently working on a consumer promotion scheme.

Shoppers Stop too plans to offer special discounts or gifts to its loyalty card members, while India’s largest jewellery retailer Gitanjali is offering discounts on certain brands during the Durga Puja festival in the east. Gitanjali has also made few design changes to make the products more affordable.

"For instance, last year if a specific product had 4-5 grams of gold, we have reduced it to 3-4 grams this year to make it more affordable," Gitanjali Gems president Abhishek Gupta said.

(Additional reporting by Sagar Malviya from Mumbai.)

Grocers queue up to be selected as franchisees for Kishore Biyani’s KB’s Fair Price format


September 24, 2012

Sagar Malviya, The Economic Times

New Delhi , September 24, 2012

Last week some 100 grocery shopkeepers gathered in the capital, not to demonstrate against FDI in retail, but in the hope of being selected as franchisees for Kishore Biyani’s neighbourhood store format KB’s Fair Price.

So what gets the average kiranawallah excited about joining the country’s top retailer when opposition leaders are in the streets saying the government’s decision to allow foreign investment in multi-brand retail sounds the death knell for corner shops?

"We don’t have to run around for different purchases. The margins offered by Future Group will be much better compared to existing wholesalers we are dealing with," says Arun Singhal, who runs a kirana store at Khanpur in South Delhi and has now signed for a KB’s Fair Price franchise for the same location.

Last month, Future Group initiated a franchisee movement calling for entrepreneurs to operate KB’s Fair Price stores through a nine-year agreement with a three-year lock-in period by paying a one-time registration fee and initial working capital.

Till now, nearly 170 KB’s Fair Price have been running as company-owned outlets. But starting next month, Future Group will give complete ownership to entrepreneurs planning to open KB’s Fair Price stores in lieu of royalty.

"We have seen our store earning more than double than that of the kirana store at the vicinity because of better sourcing and planning," says Sachin Rokade, who has been running a company-owned KB’s Fair Price since the last six months and now wants to own one as a franchise.

But what’s in store for Future Group? It gets to sell goods to these entrepreneurs as a wholesaler and at the same time enjoy a buying clout with vendors for its other formats such as Big Bazaar and Food Bazaar too.

"Over the years, we have realised that convenience stores is a very attractive format," Damodar Mall, director at Future Group, says. "Kirana stores have to deal with lots of vendors and petty issues that make them inefficient. We know from experience that… single-point sourcing can help them attract more customers and do business profitably."

Mall adds that KB’s Fair Price will also get a branding boost with mushrooming of such neighbourhood stores.

The Confederation of Indian Industry, the National Scheduled Caste Finance and Development Corporation (NSFDC) and the Future Group have recently initiated a public-private partnership to build and develop entrepreneurs from the scheduled caste community.

These entrepreneurs will run retail outlets under the Future Group’s brand ‘Aadhaar’ in rural areas and KB’s Fair Price outlets in semi-urban and urban areas. The project will be supported and financed by the NSFDC through its channelising agencies in different states.

But what really was the trigger to push its smaller store format when the company over the years made a fortune by selling through larger supermarkets and hypermarkets?

Experts feel this will give Future Group an advantage when global convenience store retailers look for partners in India. "Any retailer would look at players who have experience in running similar formats. So apart from scale of business, expertise in small store format would make Future Group a preferred partner," Devangshu Dutta, CEO of retail consultancy Third Eyesight, says.

The need for such initiatives also stems from the fact that ubiquitous neighborhood stores in the country are doing brisk business despite burgeoning of modern retail outlets in the last five years.

Globally, corner shops such as 7-Eleven in Japan, Taiwan and Singapore, Lawson in Japan and Oxxo in Mexico are among the largest retailers in their respective country, reflecting the growing business of small outlets in several countries despite the markets being opened for retail giants. Future Group too is trying to replicate a similar scalable corner shop business in India and plans to add over 900 stores to its 170-odd KB’s Fair Price in the next two years.

Just last week, it acquired Delhi’s convenience store chain Big Apple that operates 65 stores in the National Capital Region for around Rs 62 crore in an all-cash deal. These shops are expected to be rebranded KB’s Fair Price.