Raghavendra Kamath, Business Standard
Mumbai, July 28, 2013
Reliance Digital, the consumer durables and infotech (CDIT) retail chain of Reliance Industries, is becoming a challenger to Croma, run by Tata Sons-owned Infinity Retail.
Though Croma is the "first large specialist retail chain for electronics and durables" (as it calls itself) for electronics and durables with its Croma mega stores, small version Zip stores, kiosks and online vertical www.cromaretail.com, Reliance Digital seems to be doing everything to catch up with the pioneer.
While Croma, which set up its first store in 2006 in Mumbai, has 90 stores, Reliance Digital, which debuted a year later in Ghaziabad in the National Capital Region, has about 151 stores which includes 19 iStore in tie-up with Apple Inc.
Reliance opened nearly 46 stores in FY 2013 and 12 stores in Q1 of FY 2014 while Croma’s numbers are not known. It is looking to open 15 stores this financial year.
Retail experts say the renewed focus of Reliance on its digital formats has been prompted by the fact that this business has been the first to break even among all its formats. For the financial year 2013, Reliance Digital made a profit after tax of Rs 64 lakh on a turnover of Rs 2,166.38 crore. In FY 2012, it made a loss of Rs 55.13 crore on a turnover of Rs 1,234.04 crore. The digital vertical contributed 19 per cent to Reliance Retail’s Q1 FY 2014 turnover at Rs 3,474 crore and had a like-to-like growth of 17 per cent during the quarter.
In comparison, Croma, whose revenues were around Rs 2,500 crore in the last financial year, is looking at a 30 per cent growth this year. The retail chain saw break-even at the profit before depreciation, interest and tax level in FY 2013 and is looking at a net profit this year.
Retail experts say organised chains such as Reliance and Croma are eyeing the huge organised opportunity in the CDIT market, which is pegged at around Rs 125,000 crore, and organised trade is just 10 per cent of that. The total market is expected to double by 2016.
"There is no surprise that Reliance is looking at this segment so seriously. At their revenue target of Rs 40,000 crore- Rs 50,000 crore, CDIT will be the second biggest area after food," said Arvind Singhal, chairman of Technopak Advisors, a retail consultant. "The market opportunity is so much that there is room for more players." Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group (TSMG), said,"The bigger competition is between organised and unorganised players."
Croma entered the segment and tied up with Australian retailer Woolworths for sourcing and backend support. Subsequently, Croma bought the India wholesale arm of Woolworths. This partnership gave Croma a strong footing in sourcing, offering a wide variety of products and price advantage vis-à-vis others, and also helped them in private label development, said consultants.
Croma sells over 6,000 products and has 200 private labels in niche categories. The chain is looking at 7-10 per cent of its turnover to come from private labels.
Since the beginning, Croma followed a deeper penetration strategy in cities such as Mumbai and Bangalore where it is present. The early mover advantage gave Croma access to prime properties, strong partnership with vendors and good customer recall among others, retail consultants said.
Beginning with large format stores, Croma rolled out Zip stores and kiosks at airports, hypermarkets and so on and launched its e-commerce venture.
Reliance Digital, on the other hand, hired services of retail consultants and domain experts for the retail rollout and took care of its backend operations itself. For Reliance, forging a tieup with Apple for iStore was one of the plus points, though it also started focusing on smaller Digital Express stores later. These stores mostly stock high- tech connectivity and entertainment products Here, it brings in the services of ResQ, its multi-product service, to explain and inform about high-technology products.
However, Reliance insiders say unlike Croma, the company is not focusing much on the e-commerce. Croma, on the other hand, is expecting a Rs 2,000-crore turnover within two years from its e-commerce venture.
Reliance also launched durable and electronics private labels under the Reconnect brand which contributes five per cent of Digital’s revenues. The products are 20-30 per cent cheaper than national and overseas brands.
Reliance Digital says ResQ is its biggest differentiator, as no other retail chain has such a multi-product, multi brand and multi-location service network.
Though retailers such as Vivek’s in Chennai has tried out multi-brand service centres in the past, some consultants, however, say such ventures are challenging given the lower margins in the business, price sensitivity and fickle mindedness of consumers. "Service does not help you attract customers unless you get them through word of mouth," said Devangshu Dutta, CEO of Third Eyesight.
On its part, Croma has a 24-hour call centre support besides the Croma Care Centre for its private label products.
Anshul Dhamija, The Times of India
Bangalore, July 22, 2013
International retail brands will increase prices in the upcoming Autumn-Winter season, with the rupee depreciation having raised costs for them.
The rupee has depreciated by 12% against the dollar since February.
The new season for shoppers, which would begin in the second week of August, is expected to see most international brands raise prices by at least 10%.
German sports lifestyle brand Puma has seen costs escalate by 30% since January this year. "So far, we haven’t passed on the burden to consumers, but this Autumn-Winter season we will increase prices by about 10%," said Rajiv Mehta, MD, Puma India.
He said if the company passed on the entire cost increase to consumers, sales would take a beating. Puma’s India business has been growing at a cumulative annual growth rate of 37% over the last six years.
International apparel and accessories brands such as Tommy Hilfiger, Mango, Promod and Zara are expected to revise prices as their high percentage of imported content does not allow them to absorb the costs entirely.
Mukesh Ambani’s fashion business Reliance Brands, which has franchise agreements with premium to luxury brands Kenneth Cole, Paul & Shark, Diesel and Ermenegildo Zegna, among others, is also said to be looking at a price revision for the upcoming full-price fashion season.
On the other hand, Daniel Hechter and Manchester United, part of Kishore Biyani’s Future Group-owned Indus League Clothing, which have a 10% exposure to imports, are unlikely to increase prices. Benetton and M&S are the other international brands that won’t be impacted by the dollar due to a high percentage of local sourcing.
Pinakiranjan Mishra, partner and national leader (retail and consumer products) at consulting firm Ernst & Young, says that since brands are already offering huge discounts, any steep price hike in the next season could dampen consumer spending. "It will be difficult for consumers to accept anything above a 15% price increase," said Mishra
For franchises of ultra-luxury international brands, the problem could be particularly acute. Genesis Luxury – which markets and distributes labels such as Armani, Jimmy Choo and Paul Smith – has been advertising large discounts to revive waning sentiments of luxury shoppers. And this elite segment has the option to buy at neighbouring shopping hubs such as Dubai and Singapore.
"International brands that operate on a franchise model in India, where the local franchisee has a high exposure to currency fluctuations through imports, will definitely have to go in for a price increase," said Devangshu Dutta, CEO of retail consultancy Third Eyesight. He added that international brands that have set up JVs in India might look to absorb the increase in costs, with a view that the situation is a short-term phenomenon.
At present, both domestic and international brands are riding high on the year-end sale season, as consumers are lapping up discounts ranging between 30% and 50%. These are expected to further deepen to as high as 70% with the sale season entering its final leg. Dubai-based Landmark Group’s multibrand retail store Lifestyle has already reported 50-60% growth in sales over last year’s end-of-season sale.
Farah Bookwala, CNBC-TV18 / Moneycontrol.com
Mumbai, July 17, 2013
The government is making yet another push to attract FDI in retail.
The Prime Minister on Tuesday relaxed norms by allowing 49 percent FDI in single-brand retail under the automatic route.
While this may improve sentiment in an industry marred by regulatory hurdles, CNBC-TV18’s Farah Bookwala reports that analysts call for measures more powerful than the hike in FDI limits to boost overseas retail investment.
The government may have eased single-brand FDI norms on Tuesday, but not too many are left impressed. Prior to the Prime Minister’s meeting held on Tuesday evening, every single-brand retail proposal had to be ratified by the FIPB. Now, the government will allow foreign retailers to make an equity investment of upto 49 percent in a single-brand venture through the automatic route without requiring the FIPB’s nod.
But analysts say this alone is unlikely to convince foreign retailers who have refused to jump into the fray so far.
Devangshu Dutta, chief executive, Third Eyesight, says, "I doubt it will make significant difference to plans of foreign retailers. From a foreign retailer’s point of view, anything above 26 percent and below 51 percent means the same thing from the point of view of control."
Others add that while it is now easier to step into the Indian market without the FIPB’s nod, seeking its approval was never really a concern for global retailers.
Pinaki Ranjan Mishra, national leader — retail, EY India says, "The assumption that seeking an FIPB nod is a negative thing is wrong. I haven’t heard of anyone saying going to government and seeking approval is bad. But that’s not the real problem for foreign retailers. What they want is relaxation of norms that are not practical to business. So though attempts are being made to address the issue, the real problem lies elsewhere."
Most analysts reckon that foreign participants who are serious about entering India will eventually find a way to get here in the next couple of years. But if the government wants to attract mega bucks , it has to not only simplify norms for multi-brand retail, but also do away with the distinction between single and multi-brand retail.
Sayantani Kar, Business Standard
Mumbai, July 16, 2013
A few weeks ago, taxis painted with familiar multicoloured stripes waited at toll booths at entries to the city of Thane to ferry passengers for free to a newly-launched hypermarket. HyperCity, the Shoppers Stop-promoted grocery chain, had opened shop in a new mall. It had even advertised waiving of toll tickets for shoppers who did not take the cabs.
Not just shoppers in Thane, it was clearly gunning for ones in locations beyond it, which are in no way underserviced. Hypercity itself has another outlet in close proximity.
Driving footfalls is indispensable now with rising grocery bills. Hypermarkets are battling consumers looking to cut consumption. But playing on price by offering lower rates might not be the way out. Devangshu Dutta, CEO of the retail consultancy, Third Eyesight, says "Retailers want not to bring down the grocery bill but to drive more footfalls and increase the total basket size of the consumer. When consumers cut discretionary spending, retail brands have to ensure a mix of merchandise that will be high on items consumers don’t downtrade on or cut."
Ashutosh Chakradeo, chief merchandising officer at HyperCity Retail says, "For the last three months, every Friday we have gone in for our ‘Blockbuster’ promotions of one or the other kind. We are aware of the customers feeling the pinch, hence, we have stepped up our promotions that help us retain the footfalls. We see around 25-35 per cent growth in footfalls due to our Friday promotions."
"Individual promotions by the retailers can save anywhere between 10-30 per cent on the consumer’s bill. But physical combo-baskets that retailers offer (combining various household groceries for a all-in-one offer) actually make the consumer increase her basket size with products she might not have intended to buy," says Dutta. He points out that pricing power is also limited for the retailer because of maximum retail price on most branded products that users buy. It does not allow pricing flexibility as seen in the US, and neither does the APMC markets, which don’t allow retailers to go the farm-to-fork way in fresh groceries. "But these are loss leaders, segments where retailers anyway take a hit because they drive footfalls. Retailers can then increase the basket size of the consumers who walk in with other products of higher margins using visual merchandising, promotions and shop layouts," explains Dutta.
"Spencers has not seen much of a slowdown because we still enjoyed 16 per cent same store sale growth last year and clocked 14 per cent growth in April-June, this year," says Mohit Kampani, president and CEO at Spencer’s Retail, RPSG’s retail business, when same store sales of some players have been in the single digits. Kampani mentions its ‘price architecture’ model that ensures a store also stocks the lowest-priced variety available in the catchment area. That leads to Spencer’s storing 22-25 per cent more SKUs (stock keeping units or varieties of a product) than others, claims Kampani. "But then our sales per square-feet are high and hence it does not lead to large inventory. Most hypermarkets play the price game so we have to spend more to discount for the consumers too," says Kampani. He says that it had increased discounting from 0.7 per cent to 0.8 per cent over the last year.
Potent merchandising mix
Kampani mentions Spencer’s wants to sharpen its focus on food, with a decent balance of non-food groceries. "Not only do we have more than the usual 12,000-15,000 SKUs in food but we have been rolling out our experiential counters at all our hypermarkets. These include a delicatessen, bakery, gourmet spice and dry fruits counters," says Kampani. Merchandising is done inhouse, unlike some players who outsource such sections. It has tied up with trainee sommeliers to advise consumers in the liquor section and trained staff to interact with shoppers in the bakery. Such measures increase the confidence of the shopper, especially when she is looking to add items that are new to her basket.
A lot of hypermarkets are incorporating similar strategies with a focus on food, despite lower margins than merchandise like durables and apparels.
Ankur Bisen, vice-president (retail and consumer products), Technopak says, "Brands have moved away from larger formats and the higher margins in non-food are being traded-off by some retailers for food which is inflation- and recession-proof." Kampani says that food and groceries have not seen downtrading but premiumisation has suffered. But even then, items in personal care categories have felt no such pressures.
However, for some, an equal focus on non-food is working out. Bisen also says that retailers are increasing their categories that are brand agnostic but command high margins such as plasticware, tableware, and apparel like plain t-shirts and innerwear. Hypercity, which is yet to break even at a company level, claims they have achieved operational profitability at an overall store level through such a mix. Chakradeo says, "We are focusing on high margin categories such as apparels and home, which are seeing upfront placements in our stores, investments and also new products. For the last seven quarters (since 2011), we have been profitable at the overall store level. Our target is to achieve company-level profitability now."
Cutting down to size
Right-sizing the stores are also seeing hypermarkets unlock greater profitability. Bisen says, "Retailers have been rationalising the space in their hypermarkets, as we would see empty aisles in big box formats earlier."
Chakradeo says, "We are aiming for profitability through leaner and compact stores." HyperCity may have started with big box stores seen in the US (huge areas with a vast merchandise mix) but it is now focusing on smaller stores. "Apart from the big box model comprising 50,000-60,000 square-feet space, we have our penetration stores, measuring not more than 30,000 square-feet. These are to grow in cities we are already present in." In fact, hypermarkets are increasingly exploring cities they are already present in to make the most of economies of scale. "Overall, there are huge cost savings – in advertising promotions, and supply chain. Why spread across 10 cities for Rs 1,000 crore in revenue, when you can get the same from just five?" asks Chakradeo.
Kampani of Spencer’s says, "We wanted to get rid of artificial space dedicated to non-food. The larger call for us is to go for compact hypermarkets. Because, organised players cannot beat traditional markets in non-food items because they are already strong. So, we have chosen to complement them rather than compete with them."
Just as Hypercity went all out to bring traffic in for the new mall, malls too are extending additional support to their potential anchor stores. One of the players point out that new malls in cities like Bhopal and Ranchi are customising research to explain the catchment area better, waiving leases for the first few months to ensure profitability of the hypermarkets, opting for rent payments after the store turns profitable.
Shefalee Vasudev, Mint (A Wall Street Journal Partner)
New Delhi, July 11, 2013
when the word “boom” has begun to sound believable in
the context of India’s fashion industry, the soaring success
of Zara, the world’s biggest symbol of industrial fashion,
proves how polarized India is as a shopping republic. It turns
the competitive game of ready-to-wear retail into a foxing ball
game. Every retail brand here is pushing at the exclusivity factor
through brand presence, sponsorships and advertising. Yet what’s
really selling is commonality, with every 12th person having the
same satin pyjamas, oversized bags, Oriental print shirts and
On the big scale there is little or no difference between us
and the mass shopper in Denmark, Venezuela, China or Canada. That’s
what the latest annual report of Inditex Trent, the joint venture
between Zara brand owner Inditex, a Spanish company, and the Tata
group’s retail arm Trent, indicates.
Zara recorded 56% sales growth, an annual sales turnover of Rs.405
crore through nine existing stores in India, in the 2012-13 financial
year. This puts it not just ahead of the country’s top apparel
brands but ready-to-wear prêt made by fashion designers.
This story has echoed earlier in other parts of the world, where
Zara beat giant fashion chains like H&M and Topshop, but with
apparel brands in India like Shoppers Stop, Westside, Louis Philippe,
Allen Solly or ColorPlus barely managing a grip on the tightrope,
its success raises new questions on retail competitiveness. Set
to stock ready-to-wear by the handloom-loving designer Aneeth
Arora (Pero), who won the first Vogue Fashion Fund award, from
next month, Wills Lifestyle, which also sells creations by other
Indian designers (usually insipid mini collections), may have
to do a lot of process work to compete with Zara. As will those
like Ritu Kumar’s sub-brand Label, which offers good price
competitiveness in the ready-to-wear segment.
“I don’t remember the last time I went to a Wills Lifestyle
or Allen Solly store and yes, I prefer Zara to any other Indian
fashion brand,” says 27-year Raashi Sikka, a television professional
who till recently worked with event management company Wizcraft
International. A self-confessed shopaholic who wears Zara at least
five times a week and goes to Zara stores about thrice a month,
she says she finds the brand stylish, comfortable and buzzing
with new stock. Sikka adds that for a single working woman, Zara
is worth the money, even if durability is not among the brand’s
Girlie gush pours out of Zara fans. Like 23-year-old Ankita Grover,
who works for e-commerce website Jaypore as a merchandising assistant.
“I insist on Zara gift vouchers for my birthday and other
occasions,” says Grover, adding that while her usual budget
is Rs.2,000-3,000, if she had Rs.20,000 in a certain week she
would still spend it at Zara—she visits the store every week
to look around, if not buy. She even got Zara vouchers for her
parents on their wedding anniversary, knowing all too well that
they would be passed down to her.
Confessions that make 24-year-old Neha Varma smile. She is from
the same flock, describing Zara as her PMS pill. “I have
never felt the heady rush as I did when Zara first opened in India.
I go very often and save carefully for the expensive items,”
she says. Varma too prefers Zara over Western prêt made
by Indian designers.
Fast, funky, stylish, trendy and exciting, with something new
to offer every week, stocking everything from separates to casual
basics, jackets to layering options—this vocabulary has exhausted
and enlivened Zara buffs the world over ever since the brand from
Inditex SA first launched in 1975. The subject of numerous business
case studies globally, Zara thrives in the midst of global fashion
by being trendy but never original; yet it always puts out its
reproductions before the international catwalk collections make
it to the stores. It is now bought voraciously in more than 80
countries in the world, through about 1,800 stores. Eighteen more
stores will be added in India this year.
“Amancio Ortega Gaona, the founder of Inditex, thought
that consumers will regard clothes as a perishable community just
like yogurt, bread or fish, to be consumed quickly rather than
stored in cupboards, and he has gone about building a retail business
that makes freshly baked clothes,” wrote Devangshu Dutta
in “retail @ the speed of fashion”, a case study on
Zara for Third Eyesight, a specialist consulting firm on consumer
products and the retail sector.
Many experts have tried to analyse the secret of Zara’s
success. It all boils down to the brand’s ingenious utilization
of store staff everywhere in the world to share customer feedback
instantly, helping it cater to fast-selling trends in a short
time and simultaneously create a lovable problem of plenty for
the buyer. About 1,200 styles in 26 collections swim out to Zara
stores every year. “Their formula of success lies in production,
it is based on the fastness of DHL couriers, to use a metaphor,
and McDonald’s taste and tango all at once,” says designer
Hemant Sagar of the duo Lecoanet Hemant. Even as the top design
houses in the world now invest in research and development to
create products that would be difficult for Zara to match, Sagar
says Zara’s retail model makes India’s “cultural
hand-me-down mentality” worth reflecting upon. “India’s
identity crisis in designing, dressing and shopping that reflects
in retail is a long way from getting resolved,” he says,
adding that no big name will come out of India until designers
begin investing in technology as a priority.
Zara suppliers too swear by its incredibly fast response time.
“Zara outsources most orders to India between August and
April and their teams work rapidly from one stage to another,
from fabric sample to product and clearance in a matter of weeks,
if not days,” says Shriram Goyal, managing director of Dhruv
Global, a knitting apparel company, one of Zara’s many manufacturing
suppliers from India. Zara’s trendiest items are made closest
to home in Spain, so that the production process takes only two-three
weeks. The rest is done in other markets. Goyal explains how Inditex
outsources manufacturing to countries based on market strength,
like beaded and embellished work to India, polyester and other
prints to China and tailored stuff to Bangladesh, where labour
Industry veterean Alpana Prasad, director of ESSquare, an Indian
buying agency which supplies to a classic, ready-to-wear brand
from the UK and competes with Zara in world markets, agrees. “Zara’s
inter-departmental linkages are excellent and their designers
are constantly on their toes. They invest in technology and fabric
development, offering about 500 colours across different styles
every year,” says Prasad.
Inditex founder Ortega, now retired, has famously never given
an interview, nor has he paid any star to endorse his brand. The
brand keeps the media at arm’s length, allowing only select
spokespersons to make occasional comments. Yet fashion websites
all over the world and magazines feature celebrities in Zara alongside
the globe’s top trendsetters swathed in luxury brands, elevating
its value. Indian fashion blogs like High Heel Confidential regularly
show celebs in Zara, the most recent being actor Madhuri Dixit
in a printed shirt arriving at the International Indian Film Academy
awards (IIFA) festival at Macau on 7 July.
It makes it a deep pool for Indian brands and designers to swim
in. The former may need completely reinvented platforms of display,
retail and sale to come anywhere near creating a fast-fashion
brand and the latter may just have to accept that their creations
will remain a niche aspect of fashion buying even in their own
Nandita Bose, Reuters
Mumbai, July 7, 2013
Wal-Mart’s India expansion is stalled.
When India announced last September that it would allow foreign
supermarket chains to take majority ownership of their Indian
operations, it marked a victory for Wal-Mart Stores Inc, which
had spearheaded efforts to open the market and said its first
retail store would open within two years.
Now, two sources within the Bentonville, Arkansas-based company’s
Indian unit say it is unlikely to apply for its first retail store
license before March 2015. The company has said it needs a further
12 to 18 months after winning government approval to open each
store, which means its first retail outlet in the country would
open in 2016 at the earliest.
Meanwhile, Bharti Enterprises, its local partner in an existing
wholesale business, is reconsidering its commitment to their joint
venture given the heavy investment requirement and distant prospects
for returns, four sources with direct knowledge of the matter
Bharti denied that it is looking to exit the tie-up and said
it remains fully committed to the joint venture, and a Wal-Mart
spokeswoman declined to comment on what she called speculation.
The latest developments stem from an ongoing internal bribery
probe relating to its Indian operations, still-evolving rules
governing foreign participation in India’s retail sector, and
national elections due by May 2014 that could result in the controversial
retail reform being reversed – and any newly opened supermarkets
being shut – the sources said.
The delay and faltering partnership mean Wal-Mart may miss out
on the "first-mover" advantage in a country considered
the last great frontier for global retailers.
If Bharti pulled out, Wal-Mart would be forced to find a new
partner from a tiny pool of large Indian retailers to meet the
requirement that a local firm owns 49 percent of the business.
On June 26, Wal-Mart announced that Raj Jain, who led its India
push for the past six years, had left the company.
The world’s biggest retailer named Ramnik Narsey, who recently
joined the company after heading the Indian operations of Australia’s
Woolworths Ltd, as interim India chief, without explaining the
change. Jain did not answer repeated calls to his mobile phone
and the company declined to make Narsey available for comment.
Narsey headed the consumer electronics wholesale business of
Woolworths in India for fifteen months, before it was sold to
the Tata Group, offering little insight into what his appointment
might mean for Wal-Mart’s India rollout.
"It will take lot more than a management change to fix
things," said Devangshu Dutta, who heads retail consultancy
Third Eyesight. "Wal-Mart is being investigated for breaking
entry rules, bribery and these are problems that are much larger
than any individual or the changes he can quickly bring about,"
he said. Wal-Mart has said it is in compliance with India’s
foreign direct investment guidelines.
The U.S. retailer is currently investigating bribery allegations
in its Indian operations.
With 1.2 billion people and 90 percent of its $500 billion in
retail trade done at mom-and-pop shops, India is potentially lucrative
for retailers such as Wal-Mart, Carrefour SA and Tesco Plc. But
no global supermarket chain has applied to enter because of regulatory
Wal-Mart’s local joint venture partner Bharti, one of the few
large-scale retailers in India, is getting cold feet because of
the additional investment required to run retail operations.
Bharti, controlled by billionaire Sunil Mittal, wants to consolidate
its balance sheet and sharpen its focus on Bharti Airtel LtdIndia’s
biggest telecoms operator, which has $12 billion in debt, sources
"The JV is under review. Bharti is taking a closer look
at it because it wants to move out," said a senior official
at Bharti Wal-Mart Pvt Ltd, declining to be identified.
With high costs and narrow margins, most big retailers in India
lose money. The Bharti Walmart wholesale joint venture lost 2.77
billion rupees ($48 million) on sales of 18.8 billion rupees in
2011, according to the most recent regulatory filing.
"Bharti will continue to look at divestiture," said
another source with direct knowledge of the matter. "The
plan is to make it a focused business rather than the hands and
legs going in all directions."
There is no certainty that Bharti will exit the wholesale joint
venture after the review, the sources said.
Wal-Mart’s internal crackdown on bribe-paying has also slowed
expansion plans in a country where paying bribes is seen as a
standard cost of doing business, according to Indian retailers
and industry officials. Reuters reported in May that retailers
in India often pay so-called "speed money" to smooth
the process of obtaining dozens of permits.
The U.S. Foreign Corrupt Practices Act forbids American firms
from paying bribes. Wal-Mart launched a global review of corruption
last year after a New York Times report on bribery at the company’s
Mexico operations. Its lawyers flagged India among the countries
with the highest corruption risk.
In November, Bharti Walmart, the company’s India joint venture,
suspended employees including the chief financial officer as part
of an internal investigation into bribery allegations in India.
More than 15 attorneys from U.S. law firm Greenberg Traurig are
now working with the Indian business to help strengthen compliance,
a Wal-Mart spokeswoman said.
Wal-Mart, which has run wholesale stores in India since 2009,
has not opened a new one since October despite its stated plans
to open eight in 2013. It has 20 such stores in India.
In response to questions from Reuters, Wal-Mart said its India
wholesale store rollout had encountered delays but did not say
how many it will open in 2013.
"We are in the process of implementing additional controls
for our new store permit and licensing program to ensure the process
is handled appropriately and in full compliance with all laws
and regulations," the Wal-Mart India spokeswoman said.
"As we develop and implement enhanced procedures for obtaining
licenses, there have been some temporary delays in store openings,"
she said in an e-mailed statement.
At its Rajahmundry wholesale store in the southern state of Andhra
Pradesh, Wal-Mart has not sold fresh fruits and vegetables since
October as it has been unable to acquire a license from the state
Agricultural Produce Marketing Committee, according to a company
source. APMC officials declined comment.
In the same state, Wal-Mart’s wholesale store in Hyderabad is
only open six days a week because it has been unable to secure
a 365-day operating license, the person said.
In both cases, according to the company source, the license has
been held up because Wal-Mart won’t pay a bribe.
"If you do not pay a bribe, who will do your work in this country? Have all the government officials in India become honest overnight? Nothing has changed," the company executive told Reuters, on condition of anonymity.
The Andhra Pradesh APMC and municipal officials declined comment.
(Additional reporting by Sumeet Chatterjee in Mumbai; Editing by Tony Munroe and Emily Kaiser)
Priyanka Pani, The Hindu Businessline
Mumbai, July 16, 2013
It is definitely a slowdown when marketers desperately woo shoppers with deep discounts.
And things are definitely heading towards an economic slump when they cut down on advertisements, especially hoardings and billboards. A drive from Nariman Point in South Mumbai towards the suburbs on the expressway says it all.
At least four out of six billboards on this stretch have gone blank, waiting for advertisers. Clearly, advertising and promotional spends are shrinking even as the supply of such ad space outstrips demand in the metros.
Prices for some billboards are down 30-40 per cent this year, say industry sources. The current rate for a billboard on Marine Drive or Western Express Highway is Rs 2-8 lakh a month, depending on the size. Last year, it was Rs 8-12 lakh. In the last three years, advertisers have cut outdoor ad spends by 30-40 per cent, according to media buyers. Roshan Publicity, Selvel, Alkah, Laqshya, Zenith and Hansa are among the big players in billboard advertising.
“There has been a dip in bookings and prices. Monsoon is a lean season. That apart, there is a general slump in the industry as well,” said Rushabh Mehtalia, Brand Manager at Bright Outdoor.
New media such as advertising in airports, and on buses and trains is witnessing rapid growth and taking a larger share of the pie, according to KPMG.
The business has also been affected by telecom and financial services companies cutting ad budgets. However, luxury real estate, entertainment, automobiles, consumer durables and jewellery are regular advertisers. Of late, educational institutions, too, are using this medium, though it is a seasonal phenomenon.
Brand consultant Harish Bijoor says lack of innovation is making advertisers shun the out-of-home (OOH) segment. “In today’s highly cluttered marketing economy with myriad channels and publications, OOH needs to do different to stand out,” he says.
Devangshu Dutta, founder of marketing research firm Third Eyesight, says that regulatory issues such as heavy licence fees and taxes, and the lack of a unified common measurement platform, have hit the hoarding business.