Shilpa Phadnis, The Times of India
Bangalore, March 9, 2012

Titan Industries, which started as a watch brand in 1984, is taking a fresh gamble-to turn into a full-scale lifestyle company. The firm’s youth brand Fastrack will drive this transformation, an effort partly to ensure that the parent brand Titan is shielded from any risk. Fastrack is already into watches and eyewear, and now it is looking at categories like bicycles, helmets, shoes and apparel.

Titan’s play in the lifestyle category is similar to what US watch and accessory brand Fossil did — diversifying into eyewear, handbags, jewellery, shoes and apparel (in some geographies). Fastrack started as a sub-brand of Titan in 1998 targeting early jobbers, but is now a separate business unit. "Fastrack is the logical vanguard to present a range of lifestyle products since it targets the young — not only is this a large and growing population, they have a propensity to experiment with style, where Titan’s design advantage can be leveraged," said Devangshu Dutta, CEO of retail consultancy Third Eyesight.

Titan has picked categories where the market is fragmented and design is a key differentiator. It is betting on its marketing expertise that has built brands in categories where brands did not exist before, the best example being the Tanishq brand in jewellery. "Over 1 million two-wheelers are bought every month in India. With unorganized players currently driving the helmet business, we see large business potential. We are looking to launch helmets in the next financial year," said Ronnie Talati, VP and business head for Fastrack and New Brands.

Design leads fashion, so Fastrack will do the design and marketing in-house, and outsourcing manufacturing. "We want to source helmets from China. We still have to work out the logistics for bicycles," Talati said. Talati wants to make Fastrack a Rs 3,000 crore brand in the next 5 years.

Priyanka Golikeri , Daily News & Analysis (DNA)

Bangalore, March 7, 2012

There was a time when ready-to-eat and ready-to-make edible products relating to India’s traditional cuisine were available only at neighbourhood provision stores. Now, they are careening their way into ultra-modern supermarkets / hypermarkets across India, as if to give company to Western foods like Dutch Gouda and Edam, and the Italian Parmigiano.

Take the Big Bazaar at Malleswaram in Bangalore for example. Right opposite the entrance, a wheel-cart, emblazoned with the Hinglish term “Banana Mandi”, sells traditional bananas like yalakki (yellow-skinned finger-sized bananas), nendran (big- sized plantains used in making crisps), red banana and poovan (small-sized). This mandi (Hindi for market) is run by the husband-wife couple Baburaj and Jyothi.

Four paces ahead, another kiosk — it is operated by Bhagyalakshmi Butter and Gulkand Store, a popular Bangalore outlet of 1953 vintage — sells bottles of syrupy-sweet gulkand (dried rose petal jam). Next up: a 30-square-feet kiosk run by Murugan Ghee and Butter, another well-known local store of 60 years’ standing,now peddling avakai (spicy mango pickle of Andhra Pradesh), puliogare mix (tamarind-and-lemon-flavoured rice), gongura pacchadi (herbal pickle), bisi bele bhaath (rice savoury) and vangibhaath powders, all stocked in transparent glass jars.

Step out and saunter a few hundred metres across to the Spar Hypermarket. A similar sight greets you. Glass jars laden with murabba and chunda (both mango pickles), pudina (mint) and putani (fried chana dal) chutney powders enliven the food section. Trays full of nipattu (disc shaped crispy snacks), dink (edible gum) laddoos, and sakarpare (flour and sugar snacks) jostle for space.

There is a simple reason why mega-retailers stock traditional Indian food. It expands the customer base and builds loyalty, say retailers. And by absorbing well-known local stores into their fold, retail chains hope to ensure goodwill. Good PR, if you will.

While some neighbourhood vendors open kiosks within retail outlets, others supply their food items to retailers who then display them beside FMCG mainstays like noodles, chocolates and biscuits.

Thus, the outlet becomes a destination for wide-ranging grocery from pickles to international foods, says Venkateshwar Kumar, Big Bazaar’s vice-president in charge of south India operations. Gaurav Gupta, director, Deloitte India, says that local food items act as an additional product category for existing customers while bringing in new customers.

Furthermore, with the growing number of migrants in metros, outlets look to provide a “taste of home”, says Devangshu Dutta, CEO of Third Eyesight, a consulting firm. “This extends market share as new shoppers are targeted,” says Mohit Kampani, chief of merchandising and operations, Spencer’s Retail.

At the Spencer’s outlets, which vary from 2,000-50,000 square feet in size, the food-and-beverages (F&B) section occupies 60% of the floor space. Local fare like mathri (spicy and savory crackers), pinni (sweet dish from wheat flour), tapioca chips and sorpotel (non-vegetarian delicacy) started treading in over a year ago. “This is already making 3% contribution to the overall F&Bbusiness,” says Kampani.

Likewise, at Spar, F&B is a key category covering nearly one-third area in hypermarkets measuring 50,000-60,000 square feet, says Ponnu Subramanian, senior vice-president, merchandising (foods). “Traditional items are stocked on different shelves across the section.”

For local vendors, on the other hand, a presence within modern retail ensures wider reach. Since opening a 120-square-feet kiosk at Spar two years ago, U S Mahendar, managing partner of Hatti Kaapi, a chain serving South Indian filter coffee and snacks like bisi bele bhaathand khara bhaath, has seen a 40% growth in business each year. “Hypermarkets guarantee footfalls,” says Mahendar, adding that their Rs7-8 pricing for a cup is “minuscule” in a mall set-up and helps in pooling people.

Today, the Hatti Kaapi kiosk sells an average 1,500 cups on week days; the count zooms up to 3,000 on weekends.
Jyothinathan, who mans the Murugan Ghee kiosk, says monthly sales always exceed Rs10 lakh, with the average bill per customer exceeding Rs200. “The footfalls are about 500 on week days and double that on weekends.”

It’s not hunky dory all the way. Local vendors say often the rentals at retail chains are exorbitant and prevent their entry into newer malls. Going to every big retailer is not viable, says Mahendar. Why? Some retail chains, he says, demand a 30-40% share in profits “which is impossible for players like us who sell each cup for Rs7-8.”

For retailers, sourcing local food items has its own set of challenges. Traditional food processing industry is highly fragmented, say experts, with 75% of the units belonging to the unorganised sector. Moreover, some units neither have trained manpower nor clean manufacturing facilities to generate quality produce.

“This makes procurement of products tough. We have a team of trained manpower who visit and give guidance on food quality and new product lines,” says Spencer’s Kampani. Kumar says Big Bazaar has tie-ups with specialists in community food from where they source the products. “Most products are sourced locally which helps in keeping costs to a minimum. We also stock products from women entrepreneurs,” says a spokesperson from Bharti Retail which operates Easyday (neighbourhood stores) and Easyday Market (compact hypermarkets).

The Times of India

Bangalore, March 5, 2012

Prepaid cards have become the latest retail tool to keep consumers hooked to brands. They offer convenience and safety, because customers don’t have to carry cash, and they often come with a variety of offers , including discounts.

Brands like Cafe Coffee Day, Pizza Hut, Provogue, Kaya, Fastrack, Gili and a host of others have launched prepaid cards. A prepaid card works like a debit card with a PIN number that can be redeemed at the brands’ outlets. The cards in India are based on the closed loop model – that is, they can be redeemed only at the brand’s stores. "When I have money loaded on the card, the tendency to come to the same place is higher," says K Ramakrishnan, marketing president at Cafe Coffee Day. The brand’s card Cafe Moments , launched this month, offers a 5% bonus on cards with a value of Rs 100 to Rs 499, 7% on Rs 500 to Rs 999 and 10% on Rs 1,000 and above.

A prepaid card obviates the need to pay cash every time, and it also enables faster accumulation of bonus points or other offers . Prepaid cards in India are currently being used more as gift cards. Some brands have used it to launch a promotion or a service. What the prepaid gift card did for Kaya was to generate incremental walk-ins ," says Suvodeep Das, marketing head at Kaya Skin Clinic. In Kaya prepaid cards, currency can be reloaded in multiples of Rs 500 to up to Rs 2 lakh. Kaya sells about 250-300 gift cards a month.

Global Prepaid Exchange recently estimated that the size of the organized prepaid gift card and gift voucher market in India is Rs 2,000 crore and would grow to Rs 8,000 crore by 2015. "The acceptance of gift cards in proportion to vouchers has increased significantly," says Pratap T P, chief marketing officer at QwikCilver Solutions , a provider of prepaid card solutions.

However, Devangshu Dutta, CEO of retail consultancy Third Eyesight, says growth in prepaid cards would be restricted by the fact that they can be used only at a particular brand’s outlets. "Also, a customer cannot claim the minimum residual value in the card. He will have to top it up to redeem it," he says.

Sarah Jacob , The Economic Times

Bangalore, March 2, 2012

Apparel and home products retailer Marks and Spencer’s has appointed Venu Nair as head of its India operations, replacing CEO Martin Jones who is moving back to the parent company.

Nair takes charge as managing director, the London-headquartered company said. Sources said Jones was moving back for personal reasons. Nair was head of sourcing for the £9.7-billion British retailer in South Asia and director of buying operations for India.

M&S operates in India through Marks & Spencer Reliance India, a joint venture with Mukesh Ambani-led Reliance Industries, selling clothes and home decor but not its food products. It has 24 outlets across the country.

"Unlike an expatriate, Nair would have stronger understanding of the Indian market and his being involved directly in sourcing will play to his strength," said a senior executive of a rival firm. M&S has been to work towards sourcing 70% of its merchandise from India and Jones had been driving this change.

"While other international companies look at India as an interesting and emerging market, M&S clearly identifies India as a market of importance," said Devangshu Dutta, chief executive of management consultancy Third Eyesight.

Luxury is dichotomous, conflicted and conflict-creating by its very nature. “Luxuria” is Latin for “Lust”, the first in the list of the Seven Deadly Sins. The British poet Edith Sitwell is quoted as saying, “Good taste is the worst vice ever invented.” Luxuries are not a basic fundamental need to start with, yet to seek them out is innate in our nature.

For the most part, the term luxury has been and continues to be applied to tangible goods whether found naturally, hunted or manufactured, rather than to intangible services. Yet, it is the intangible that differentiates what is luxurious from what is not.

Certainly, the definition of luxury changes with time. There was a time, in today’s advanced markets, when hot water baths were a luxury and available frequently to only a few people. Indian pepper was once more expensive than gold. In fact, a significant part of European exploration of the world during the last millennium was driven by the craze for spices from “the Indies” before morphing into empire-building. Today, most modern Europeans would call neither a hot bath nor spices as a luxury, and many would gladly delegate to someone else their share of global travel.

If we want to understand the shifts in the luxury market and how the emerging markets of luxury such as India and China might evolve in future, we must understand the two most fundamental drivers of price premium: the social esteem achieved and the possessor’s own experience of the product or service.

When viewed together in the Experience-Esteem Price Premium Model (see graphic), we see the relationship of price premium and these two factors zig-zagging in an N-shape for immature or rapidly evolving markets (“New”), whereas in more mature markets the premium would follow more of an S-curve (“Stable”). The term “market” here refers to not just geography but consumer segments, including segments defined by need/use rather than by demographics such as income or age.

In rapidly evolving markets there is a significant premium available on products and services that are conspicuously expensive, whose price (or at least the apparent price level) is known in the buyer’s social circle. It’s a positive feedback loop: high social recognition keeps the price up, which in turn improves the social esteem of the buyer. Expensive cars and gadgets, designer brand apparel and accessories, holidays that would be the envy of others, Big Fat Indian Weddings (for and by Indians) all fit into this category. Beyond social recognition, however, the buyer’s own experience and satisfaction also plays a role in driving the price premium: the better the buyer’s own experience is for a given amount of social recognition, the higher the price premium is likely to be. This gives rise to the familiar pyramid for the luxury market, where the highest price is available for products and services that deliver both high social status and a superlative personal experience. In “New” or evolving markets, more of the premium is attributable to social status; the buyer’s thought process is: “if you’ve spent a million Rupees or Yuan on something and no one knows about it, it’s not that valuable”. In more evolved or “Stable” markets, on the other hand, where tastes have had longer to evolve, personal experience becomes important in driving premium for at least some products: for example, high-fidelity unbranded speakers bought by music aficionados or a vacation in an unknown destination fit the bill. The satisfaction, and the premium, is driven more from the personal high-quality experience, not from receiving recognition or respect from someone else.

Developing taste needs time both at the personal level and for the society. On the other hand, status difference is a factor in all societies, at any given time. The pull between conspicuous and inconspicuous consumption at the higher price end plays out between indulgence and luxury versus opulence. Opulence may or may not enhance the buyer’s experience, but its main function is to make a status-statement, including instances such as millions being spent on “public” spaces to enhance a political leader’s own standing.

The thing with status is this: If others see you as worse off than them it is their problem; if you think you’re worse off than others, it is yours. By and large, the luxury industry, as it has evolved over the last 30-40 years, feeds on this status insecurity that is multiplied and amplified by media.

Luxury used to mean something that was expensive because it was highly desirable but also scarce. Today ubiquity seems to be the driving force of luxury not scarcity. As economic growth has created nouveau riche worldwide, brands (especially logo-bearing ones) have emerged to deliver instant gratification and legitimacy. Distinct, recognisably expensive brands are the accepted currency in the world of cachet. In the final price, the share of marketing spend is often higher than the cost of the core product. In a consumer society that is more conscious of the status that the product offers rather than its utility, it is the recognition and identification that matters most.

This has led to the trickle-down effect with luxury brands becoming increasingly more accessible, not just in terms of physical availability but also in terms of price units through bridge, diffusion and prêt lines, and licensing. A particular consumer may not be able to buy a Chanel dress or Dior gown, but she can surely scrounge enough to buy a perfume that promises at least a whiff of celebrity status!

The vintage of the product or service is an important component of the status or recognition premium, especially when the buyer has newly come into money. This is why the market is dominated by European luxury brands that can claim ancestry of at least a few decades, if not centuries, while there are barely any brands of note from other geographies. This is not conclusive evidence of European tastes being better or more acceptable, just the economic cycles through which societies around the world have been.

So where does India stand for luxury marketers? The Indian operations of most brands that have been launched in the last few years are bleeding, and seem unsustainable. And yet, it is tempting to compare the emerging golden bird of India to the golden dragon of China.

In our work with brands and marketers from around the world, we have to constantly remind people that not all emerging markets are the same. The explosion of luxury and premium brands in China during the last decade or so has been aided by sudden economic growth that came after a long cultural and economic vacuum. When the new money wanted links with the old and when uniform grey-blue suits needed to give way to something more expressive, well-established western premium and luxury brands provided the most convenient bridge. As China evolves further and consumer become more discerning, I believe we will see the emergence of Chinese and smaller new international brands that differentiate themselves on the core product, rather than relying on a long foreign history.

India’s case is slightly different. Discernment may be a new experience to some Indians who have come into money recently, for whom brands can be a valuable guide and “secure” purchase. Globally well-known premium and luxury brands or products that are endorsed by “people in the know” (including works of art) are the first to benefit from this spending.

However, discernment and taste are not new to India and, more importantly, differentiation and self-expression never disappeared even during the darkest years of “socialistic” economics. Therefore, India will see a layered approach to the luxury market and grow in a more fragmented manner, with slower expansion of individual brands. There would be multiple tiers of growth for international as well as Indian luxury products. For international brands customisation and Indianisation will be important, as is already visible in bespoke products by Louis Vuitton and Indian products by brands such as Canali (jackets) and Lladro. And there is a real prospect of luxury Indian brands emerging to respectable size, if they can stay the course and travel the distance.

As the market matures spending by Indian consumers on indulgences will also grow, driven by the need to satisfy themselves rather than for the status they could gain. In fact, another market to watch out for is India itself is a source of indulgences for foreigners – luxurious Indian experiences in which price is not the object but the experience – Big Fat Indian Weddings, ayurvedic treatments and meditation holidays for non-Indians are a case in point.

While on indulgences, in closing, I refer back to the ExEs Price Premium Model. For a limited number of people the price premium curve follows a clockwise-D, starting from Indulgences. For them invisible or inconspicuous products whose only function is to enhance the owner’s or buyer’s own experience are the most prized. In many cases, the fewer people that know about it, the better and more premium it would be.

In fact, perhaps invisibility could be the greatest indulgence of all in a world of hyper-information, self-promotion and instant celebrity. Increasingly we will find that anonymity and invisibility will be treated as luxuries, and service providers will charge a huge premium for taking you down below the radar, making you invisible. We don’t really need to wait to see that emerge. That world of luxurious anonymity is already here, and its most valuable service providers are banks in offshore tax havens!

(Edit: This article appeared in a special issue of the Strategist on March 26, 2012.)

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