Year: 2013

Shopping Malls – Start-Off on the Right Foot

Devangshu Dutta

August 19, 2013

Do a thorough recce of the catchment: Ask questions like “can the catchment support the development in terms of consumer footfall and spending?”, “Is there a connect between the needs of the immediate catchment and the occupants of the mall?”, “Are there too many malls in the catchment area?”

Offer a good occupant mix: You cannot have mall occupants who have little relevance for the target consumer. Also, the retailers must complement each other in a healthy way rather than cannibalise customers and sales from each other.

Ensure good access: Accessibility and connectivity to get the traffic smoothly in and out of the mall is a must; ensure there is adequate parking space.

Avoid undersizing: A small-sized is a straight handicap because it will lack variety, and you run the risk of getting dwarfed by the next big mall that throws its hat into the ring. [However, the specific size can vary depending on the state of development of your own catchment.]

Focus on design: This involves making the mall brands ‘visible’, ensuring appropriate ‘zoning’ in terms of entertainment, multiplexes, kids’ areas, food courts etc. This will result in better customer flow management. Bad design and poor customer flow management within the mall leaves large parts of mall “invisible” to visiting consumers, or improper zoning that confuses customers and breaks up the traffic.

Finally, remember, it’s not so much about the “square feet”, as about the feet that will occupy it! Focus on the consumers that you want visiting the mall and why they should return again and again.

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Spilling the beans

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August 16, 2013

Meghna Maiti, Financial Chronicle

Mumbai, August 16, 2013

On the evening of July 13, an Apna Bazaar store, opened by the Maharashtra government in the Mumbai suburb of Andheri, ran out of vegetables in two hours flat. Ditto was the case with 100 similar outlets set up by the state government to sell vegetables at prices a third lower than the market.

Around the same time, in the Inorbit mall in nearby Malad, a supermarket was buzzing with shoppers. The aisles selling fancy imported foodstuff were busy but those selling fresh produce were nearly empty.

The contrasting scenes succinctly capture how futile organised retail’s attempts to sell daily needs like fruit and vegetables has been. Most organised retail ventures have none of the three pillars of the fresh produce business: direct procurement from farms, transport to outlets and cheap prices (at least cheap enough to draw in volumes).

For most, the back-end of the supply chain go no farther than local mandi or wholesale market. That’s why government-run outlets set up across Maharashtra, Kerala and Tamil Nadu to sell fresh produce at cheap rates are doing roaring business where organised retailers have failed — though both source produce from wholesalers such as the state-run agricultural produce market committees (APMCs).

Farm-to-fork is a strategy much vaunted but not practiced. Even farmers prefer to sell to wholesalers and in mandis where they get better prices. Mandis get business from organised retailers by offering them discounts.

Sanjay Pansare, director of Maharashtra APMC, says wholesalers offer organised retailers reasonable credit terms.

In states where the APMC Act is not in force, organised retailers are free to buy from farmers. But as Devangshu Dutta, CEO of Third Eyesight, another Delhi-based consultancy, says, the organised retailers buy from the mandis.

In western markets, produce is engineered for a long shelf life and transported in controlled temperature. Indian retail chains have yet to scale up so as to do this. “Modern Indian retailers sell highly perishable vegetables and fruits that may have been badly handled in the farm-to-store chain,” he adds.

Very few Indian retailers have successfully managed the farm-to-fork chain, according to Thomas Varghese, former CEO and MD of Aditya Birla Retail, and now head of the group’s textile business. Mother Dairy’s Safal is one of them. Organised retailers find it difficult to match the streetside vendor’s flexibility in terms of pricing, credit, he says.

The traditional farm-to-fork model is fraught with redundancies and inefficiencies. The market environment is hyper- competitive.

The local small retailer is no pushover, says Amitabh Mall, partner and director in Boston Consulting Group. This results in losses for the retailer, low price realisation for the producer and fluctuating prices for the consumer. “For the small farmer, the problems get compounded in absence of finance and technical knowhow, which limit him from growing his business,” argues Mall.

Experts say big retailers like Reliance Retail, HyperCity and Aditya Birla rely on middlemen after having failed to establish direct links with farmers. This despite the fact that Reliance Retail has set up three process centres in Hyderabad, Ahmedabad and Pataudi which cater to markets in the north, west and the east.

A Reliance Retail official, however, claimed that where the APMC Act is in force the company buys directly from farmers. Elsewhere, it is problematic. So is the farmer’s commitment. When market prices are low, they want to sell to the company but when prices are high, they sell in the mandis.

Plus, setting up collection centres close to the farms is not easy for lack of electricity and IT connectivity. “Then there is political pressure, vested interests, villagers campaigning against us and spreading rumours,” said the official who chose to remain anonymous.

Even with all this hassles, Reliance Retail, if this anonymous official is to be believed, has a fresh produce business contributing 20 per cent of its total revenue. In absence of official comment from the company, how truly the anonymous official’s claims reflect the reality is anybody’s guess.

Clearly, the grand hope expressed in the economic survey for logistics with forward and backward linkages to develop modern retail, agro-processing and cold chains has not materialized.

In Aditya Birla Retail too the farm-to-fork strategy has hit a roadblock. The company had decided to use the network of the Birla Shaktiman Krishi Seva Kendras and network of fertiliser outlets to source produce.

Part of the plan was to supply seeds and nutrients to farmers so that they could get better prices by selling produce in the company’s retail outlets or directly to their supermarket chain More. Well, things are not going the expected way.

“Back-end, logistics need huge investments. It takes time to make money (in this business),” rues Pranab Barua, business director for apparel and retail of the goup.

Back-end is where success lies. Walmart, the immensely successful American chain, is still in the process of investing in the back-end in India. To begin with, it is trying to make back-end supply chain management efficient so as to, in companyspeak, ‘maximise value for farmers, retailers, and consumers.’

The accent is on reducing waste in the supply chain, so that the benefit of lower prices can benefit our customers, says Arti Singh, Walmart India’s senior vice president for corporate affairs. The idea of what the company calls ‘direct farm programme’ is similar to what the Aditya Birla company intends to do, i.e, develop a supply chain, link farmers directly to consumers and introduce best farming practices.

The programme now includes over 12,500 farmers in Punjab, Uttar Pradedh, Delhi NCR, Haryana, Karnataka, Maharashtra, Himachal Pradesh, Andhra Pradesh and Rajasthan. They are all small or marginal farmers and supply up to 20variteies of fruit and vegetables. By 2015, the number of participants will go up to 35,000, says Singh.

Walmart has tied up with a logistics company in north India to transport fresh produce to its stores by refrigerated trucks. Fresh produce accounts for nearly 30 per cent of Walmart’s sales in India.

But a consumer consultant based in Delhi thinks Walmart’s farm- to- fork strategy has failed because it has been spreading out to too many random locations too fast.

Bharti Walmart, the Indian joint venture with the Bharti Group, is into wholesale cash- and- carry business, not a front-end retail operation. It has 20 stores in eight Indian states. Fresh fruit and vegetables is critical to its business, claims Singh.

Pradipta Kumar Sahoo, horticulture business head of Mother Dairy, agrees that most retailers buy from wholesalers. Mother Dairy has been in the business of selling fruit and vegetables and partnering with farmers for long a time. It has sired 110 farmers associations in 15 cities and a huge distribution centre around Delhi.

Metro cash & carry has local fruit and vegetable collection centres in Malur in Karnataka, Vontimamidi in Andhra Pradesh, Malerkotla in Punjab, Manchar in Maharashtra and Barasat in West Bengal (Barasat). But, according to a company spokesperson, imparting collection and waste education to farmers is still a challenge.

The Future Group and Spencers of the RPG group declined comment.

Logistics is a big headache for organised retail. Both warehousing and cold chains, where they exist do so not in a chain but spurts, bedevil the supply chains of all retailers. The quality of warehouses is poor. So wastage is inevitable,” says Arvind Singhal, CEO of Technopak Advisors. Big food retailers must investment more in cold chains. Also needed are specialised third- party agencies which could also invest in the back end, he suggests.

Back-end infrastructure typically includes warehouses, processing plants, cold chains and logistical support.

The government allows organized retail to buy directly from farmers to remove the middleman and to create infrastructure. A study of the Indian Council for Research on International Economic Relations in 2008 said farmers get 25 per cent higher prices for their produce when sold to organised retail. The thrust of the five- year plans has been on creating regulated markets, warehouses and cold storages, grading facilities, processing units and collating market intelligence – but all this mainly in the cooperative sector.

Retailers who Financial Chronicle spoke to said off the record that they are forced to sell vegetables at subsidised rates. If they didn’t do that, they risked cancellation of their direct marketing licences.

“We do not have any choice but to sell at low prices. This does not increase our margins or footfalls. So vegetables earn very little revenue and almost no profit,” says a Mumbai-based retailer.

Organised retail find it an enormous task to ensure quality and maintain freshness. Equally difficult is to expose the customer to innovative technologies.

Add to that location and space, says Sushmita Paul, marketing head of Star Bazaar. Indians don’t travel big distances to do their daily shopping, preferring the nearby store or vendor.

What of kind of back-end Star Bazaar has is something she refused to share. But she did say Star Bazaar looks at buyer behaviour before laying out stores.

Nothing unique about that: every organised retailer worth his/her salt claims to do exactly that – but still ends up looking sorry.

Here’s a consumer perspective: Sohini Sengupta, 34, a software person in Kolkata, does not buy fruit and vegetables from supermarkets because they are not always fresh. Even pricewise, they are not attractive.

“Instead, it is more convenient to buy from the roadside vendors. In the evening you can actually get a better bargain,” she points out.

Piyush K Sinha, professor of marketing at IIM Ahmedabad, speaks of the shoddy way fresh fruit and vegetables arte stocked in organized chains. “Inconsistent supplies often mean stockouts are common, irritating the customer.”

Govind Shrikhande, CEO of Shoppers Stop, agrees. In the fresh produce business demand outstrips supply and gives less than 20 per cent of the revenue of HyperCity, the supermarket chain of the Raheja group.

Problems identified by Mark Ashman, CEO of HyperCity, are: getting consistent quality, getting imported quality stuff and dealing with perishable products. Getting profits too is not easy, for HyperCity, it seems. It was in a loss in April-June last year; and in a bigger loss the same quarter this year.

For all their warts, retail chains remain upbeat about the fresh produce business. Why? Barua answers: “Fresh fruits and vegetables are a key for footfalls, frequency of purchase and the image of freshness and quality a store can convey.”

For Walmart too fresh produce is critical. Its ‘best price’ modern wholesale stores have significant membership in the fruit and vegetable category from business- members such as hotels, restaurants, caterers, institutions and small resellers. “We offer them better prices too,” claims the Bharti Walmart spokesperson.

Senthil Natarajan, MD of Kovai Pazhamudir Nilayam in Chennai, is not worried about government stores selling cheap. “Our target customer is different. We cater to the middle and upper middle classes who want a variety in what they eat. The government stores sell just essential stuff,” he exults.

May be that’s the way to go. The retail supply chain needs to add variety in terms of niche products which would bring in committed customers.

(With inputs from Trushna Udgirkar in Hyderabad, Sangeetha G in Chennai, Vikas Srivastav in Mumbai, Michael Gonsalves in Pune)

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Id — a marketing idea yet to arrive

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August 10, 2013

Priyanka Pani , The Hindu Businessline

Mumbai, August 10, 2013

Ishaq Rawuther was very disappointed with his ‘Id’ shopping.

The malls and supermarkets, which were doling out usual offers during the month-long fasting festival as part of their regular sale period, hardly had any merchandise or product to offer that was related to the festival.

“I could not find a nice pair of pathan suit at any of the malls. Finally, I got it stitched,” said Rawuther, a resident of Kalamboli in Navi Mumbai.

Ramzan, the holy fasting month of the Muslim community, has somehow failed to attract the attention of retailers and consumer goods companies.

A few retailers such as Kishore Biyani-owned Future Group, a pioneer in driving occasion- and festival-led sales, have not missed this opportunity. Some malls conduct events such as ‘qawali nights’ or ‘sufi evenings’ to attract shoppers from this community. Devendra Chawla, President, Food Bazaar, the supermarket division of Future Group, says the company has always believed in every festival and Id is no different.

But many retailers, including Shoppers Stop, refused to comment on why there were no special offers for Id.

Traditionally, the beginning of the holy month sees a jump in the sales of food items, garments, footwear, accessories, electronics and gold jewellery. But most of the offers are from unorganised retailers.

Dev Jyotula, Centre Manager at Mumbai-based Korum Mall, says, “Id falls under the regular sale period and hence it can be a reason why retailers don’t promote it as Id sales. However, it is a good idea. We have started celebrating this festival in malls from last year and it has contributed to higher sales.”

Several marketers and research firms feel that a festival is always an opportunity but retailers have limited themselves to a few occasions such as Diwali and Christmas. About 83 per cent of the population is Hindu. And Christmas leads up to New Year celebrations.

SHIFT IN STRATEGY

“Marketers go by numbers and not sentiments. However, with the new generation, this opportunity (Id) can be tapped into,” says independent marketing consultant Harish Bijoor. Citing an example from the US market, Bijoor says that retailers in that market are evolving and shifting their strategy of celebrating holidays and not religious occasions. “India should also follow the same.”

Devangshu Dutta of marketing research firm Third Eyesight says many retailers do have offers in markets with higher concentration of Muslims like Kerala, Hyderabad or Lucknow.

“Many paint India as a religious country, but actually it is a pragmatic country. It goes by numbers.”

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Retailers go omni-channel for clicks and footfalls

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August 8, 2013

Priyanka Pani , The Hindu Businessline

Mumbai, August 8, 2013

Department store chain Shoppers Stop is charting out plans to evolve as an omni-channel retailer in a bid to provide seamless access to consumers in physical stores as well as online. They expect this to make customers buy more — at least 15 to 30 per cent more — as some research studies have shown.

With consumers increasingly turning to online shopping, brick-and-mortar retailers are devising ways to stay ahead by offering incentives to walk-in customers. The omni-channel strategy is one such initiative.

Shoppers Stop Managing Director Govind Srikhande said, “Globally, several departmental stores, such as Macy’s, John Lewis or Sacks have come back strongly through omni-channel retailing. About 9-20 per cent of their overall sales come through this channel.” He said this trend would slowly catch up with Indian retailers, too. The Mumbai-based retailer that got into e-commerce three years ago recently revamped its online channel.

Other retailers, such as Future Group, Lifestyle, Tata’s Croma Retail, too, have similar plans.

Online platform

Rajan Malhotra, President (retail strategy) at Future Group, the country’s largest retail company, said the firm doesn’t want to be a pure play e-commerce or physical store but an omni-channel retailer.

The group’s consumer durables and electronics business, eZone launched an online platform three months ago and has witnessed a 50-60 per cent jump in sales sequentially, he added. “The plan now is to integrate both offline and online in a flawless manner,” Malhotra said, adding that eZone’s online business will fetch over Rs 200 crore within a year from just Rs 1 crore at present.

The Landmark group’s value retail arm, Max Lifestyle, is also planning a similar strategy in the next four-five months. However, the company refused to divulge any details fearing competition.

Devangshu Dutta, founder of a marketing and retail research firm, Third Eyesight, wondered whether retailers had the necessary expertise to meet customer demands.

“They have to invest heavily in creating and integrating all the channels and technology systems to act as one,” Dutta said.

Retailers will have to add quick pick-up counters for online purchasers, train their staff to handle instant check-out though a smartphone or tablet and gather data to personalise the shopping experience, he added.

(This article appeared in The Hindu Businessline on 8 August 2013.)

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Color Plus sketches out a makeover plan

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August 7, 2013

Sharleen D’Souza, Business Standard
Mumbai, August 7, 2013

The influx of apparel brands has taken the count to 200 for consumers to choose from. ColorPlus was one of the earliest entrants, 20 years back. Raymonds bought it out from a Chennai-based company in 2002. It is now Raymond’s casual wear brand for men but analysts worry that it might have lost its appeal without anything new to offer over the years. Raymonds has now put in place a plan for overhauling the brand.
An analyst in the know but who did not want to be quoted says, "When it launched it was India’s strongest homegrown apparel brand. It used to have an amazing quality product offering but this is not the case today and it has lost its share to other brands."

The new look planned to rejuvenate the brand will see its exclusive stores concentrate on entire looks for its consumers rather than individual items of clothing. The stores will themselves wear a look to highlight its theme of ‘Colourful Life’. There will be a system of wardrobes based on collections at the store.

"We earlier tested this format in the south and we have received encouraging response. We have now opened seven to eight stores and by the end of this fiscal plan on opening 25 more stores," says Hetal Kotak, COO of ColorPlus. A feature wall at the ColorPlus stores will have spools of yarn, tying the colorful visual merchandising theme with product-linked props.

The brand has trained its staff to guide customers as style consultants, a model Raymond has tried in its namesake Made-to-Measure stores. "Our representatives will help customers to put a whole look together. They will also give the customer space so that they can look and feel the fabrics and enjoy the experience," explains Kotak.

Stressing on an orchestrated look rather than piecemeal garments, will allow the brand to push its accessories as well, in an effort to increase sales. For now, accessories form a small part of its revenue.

Shoes were launched six months ago and leather bags will be launched at Diwali this year. The bags will be priced upwards of Rs 2,495 and shoes from Rs 4,495. ColorPlus shoes, after being piloted in 30-40 stores, will now be launched across India. The brand also plans on launching eyewear in the near future. It had also tested a sports line six months back and plans to introduce that as well.

"Consumers have responded to the change very well and we are seeing buoyant response. This is showing in the number of order that we have got for our autumn-winter collection and it is at an all-time high which shows that despite tough market conditions we are doing well," Kotak adds.

The change would breathe some freshness to the brand which analysts say has lost its relevance with time. In its heydays, ColorPlus was known for wrinkle-free shirts and chinos which established it as a premium brand and gave it a loyal fan following.

"It did help increase Raymond’s revenue as it was already an established brand when taken over. But it lost its level of intimacy and momentum. Also, market conditions changed since we moved from a market with about 40 international brands or so to some 200 international brands offering competing products," says Devangshu Dutta, CEO of the retail and consumer consultancy Third Eyesight.

Competition such as Madura Fashion and Lifestyle too has proved tough for Raymond’s apparel business, especially its brands such as ColorPlus. Some analysts point out that the brand has also suffered from surplus inventory due to which its summer collection is carried over to the autumn and winter seasons affecting the product offering.

However, its makeover could help matters.

This year Raymond hopes to see a 25 per cent increase in ColorPlus’ revenue owing to the change in store format, as well as its extension into accessories. According to sources, the brand’s turnover was around Rs 200 crore last fiscal.

Raymond claims that after the trials, customer walk-ins, word-of-mouth and conversions increased, fuelled by the imagery of a refreshed premium brand. How far ColorPlus is able to grant all its exclusive brand outlets on which it depends for majority of its revenue a new retail identity will determine its success.