Soon, Skyshop to be platform for NTT DoCoMo in India


January 28, 2014

Priyanka Pani, The Hindu Businessline

Mumbai, January 28, 2014

Oak Lawn Marketing, a subsidiary of Japanese telecom company NTT DoCoMo, is set to enter India’s burgeoning virtual retailing space through a tie-up with TVC Skyshop, which operates in the same segment.

Virtual retailing refers to companies selling products through television or print (magazines and newspapers). India’s virtual retailing market is close to ?2,000 crore and includes players such as TVC Skyshop, Indiatimes, Homeshop18, Shraddha Skyshop, Star CJ and the US-based GuthyRenker.

OLM, a $300-million media and branding company in which NTT DoCoMo has a 51 per cent stake, is close to ink the deal with TVC Skyshop in two weeks, after which Indian consumers can get access to “high quality” Japanese products, said people aware of the development. The company primarily focuses on home convenience, health and beauty consumable, fitness and wellness products.

Sources added there will be some major equity infusion by OLM in the coming months. Interestingly, the deal is happening a time when NTT DoCoMo’s investment in India’s telecom space hangs in the balance. The company, which holds a 26 per cent stake in Tata Teleservices, is expected to take a call by March on whether to stay invested or exit Indian venture, according to some reports.

TVC Skyshop Managing Director Vinod Agarwal did not respond to an email sent by Business Line.

TVC Skyshop, which has investments from private equity players such as Samara Capital and Morpheus, currently sells apparels, electronic items and other consumer durables under its own label. After the tie-up, it will sell OLM’s two flagship products – Magic Mattress and Leg Magic.

For the Nagoya-based company, the tie-up will benefit from understanding the market and the consumer mindset. Besides, there are regulatory hurdles in terms of foreign direct investment, said Devangshu Dutta of marketing and consultancy firm Third Eyesight.

“Payment through cards remains a major challenge for the online or virtual retailing industry. Companies like OLM do not have expertise in managing cash on delivery and reverse logistics. Hence, the tie-up will help the company avoid some painful and expensive learning curve that other companies have faced,” he added.

(Sourced from The Hindu Businessline.)

Visual search start-ups are getting vital in e-commerce


January 27, 2014

Sadhana Chathurvedula, MINT

Bengaluru, 27 January 2016

When graduate student Anupama Pasumarthy shops online, she says she is always disappointed by the recommendations.

“It’s tough finding clothes (which are always too large) or shoes (which are too small) in my size, and I don’t find stuff that’s similar. I used to shop online but these days I just go to the store when I want to buy something,” the 22-year-old says.

Tech-savvy millennials like Pasumarthy are the demographic that most fashion retailers target, but the problems she faces are all too familiar for anyone who shops online. To help retailers overcome this, start-ups like Stylumia Intelligence Technology Pvt Ltd, which offer artificial intelligence-based solutions for smart visual recommendations, have started to take off.

There are multiple start-ups globally trying to crack visual search. Visual search start-ups help companies enable their users to discover products online, based on photos of objects in the real world. In India, companies like iLenze (which raised $500,000 in funding last year) and SnapShopr (which raised an undisclosed amount of angel funding) offer visual search platforms.

Chennai-based Mad Street Den, which raised $1.5 million in 2015, also offers visual search, but its most used offering is a visual-recommendation engine, which sifts through catalogue data to show relevant recommendations to users.

With e-commerce booming in India, Singapore-based Visenze, whose visual search offering is used by companies like Flipkart, is setting up operations in India to cater to the demand.

Many visual search companies cater to multiple verticals, and have so far concentrated on consumer applications.

Started by former chief operating officer of Myntra, Ganesh Subramanian, and machine learning scientist Ram Prakash, who developed Quillpad, the first machine learning based language input for Indian languages, Stylumia is different. It focuses only on fashion, and using the same core technology, it is looking to help both consumers and businesses make data-driven decisions.

“We are developing a technology which takes natural images, videos, be it Bollywood videos or TV serials, whatever influences fashion, and decipher and extract fashion elements from that,” says Prakash.

The start-up then hopes to use this derived intelligence in two ways – one, to make smarter recommendations to consumers browsing for products and two, to give suggestions to fashion buyers and retailers what to buy and make, based on real world consumer-purchasing data.

Right now, Prakash says that decisions at fashion companies are made based on some analytics, but intelligence based on visual cues is missing.

“They look at the patterns and say this is doing well because this is a red colour T-shirt with a contrast collar, what they cannot do right now is look at the same red colour T-shirts with contrast collars which are not doing well. They do not have a way to see all the relevant data together. That’s another problem that we are trying to solve,” says Prakash.

Stylumia is set to launch its product in the first week of April. It currently has partnerships with retailers (which they it does not want to disclose before the product launch), says chief executive officer Subramanian. For now, it is using a team of four engineers to capture and label data but hope to automate this process very soon.

“There’s a lot of interest among both online and offline retailers in this space. Our aim is to provide the most accurate prediction of demand and our consistency will improve as we work with more retailers and brands and get more and more data,” says Subramanian.

Despite the progress in technology, unless there is an overhaul on the supply-chain side, real impact is difficult to create, says Devangshu Dutta, chief executive officer, Third Eyesight, a New Delhi-based consulting firm.

“Large retailers today are planning several months in advance and are structured in such a way that by and large it takes them several months to respond to any particular trend. Till you can address that, data is just data,” he said.

(Published in Mint)

Tesco in India: Will every little help?

Devangshu Dutta

January 24, 2014

[This article appeared in the February 2014 print issue of Retailer, under the headline “Implications of the Tata-Tesco JV“]

India is a civilisation that has borne fruit from thousands of year of international cultural exchange, commerce and investment flowing both inwards and out. It is also one that has suffered from military and as well as economic colonisation over the millennia.

For those reasons, foreign investment into the country is bound to have both vociferous opponents as well as staunch supporters, and this debate is possibly most polarised in the retail sector that touches every Indian’s life daily. Over the last few decades, foreign investment into the retail sector has seen flip-flops from successive governments and political parties across the spectrum, being allowed until the late 1990s, then blocked (by Congress-led UPA), then selectively allowed (by BJP-led NDA, and later by Congress-led UPA). And more recently, with pressures, protests and influences from all sides 2011, 2012 and 2013 have certainly been on/off years during the UPA’s second successive term.

In this time Zara’s joint-venture, set up in 2010, has turned out be one of the most successful and profitable in India. More recently, Ikea announced a €1.5 billion plan for the country, followed by H&M’s US$ 115 million proposal, while Marks & Spencer identified India as its second largest potential market outside the UK. However in October 2013, the world’s largest retailer Wal-Mart decided to call off its joint venture amid investigations of its executives having supported or indulged in corruption and accusations that it had violated foreign investment norms. It decided to acquire Bharti’s stake in the cash-and-carry JV and announced that it would not invest in Bharti’s retail business.

It was soon after, as if to compensate for Wal-Mart’s blow, that India’s Tata Group and British retailer Tesco announced that they would be creating a formal joint venture in India, with Tesco investing US$ 110 million. The Congress-led government went on to quickly approve the proposal, as if to visibly shake off accusations of “policy paralysis”.

Tesco’s investment doesn’t look like much for a country the size of India, especially in the context of Ikea’s ambitious proposal or H&M’s fashion retail business that is possibly less complex than Tesco’s multi-product multi-brand format. However, let’s keep in mind that Tesco is facing tough trading conditions in Europe, took a global write-down of US$3.5 billion last year including its exit from the US market, and merged its Chinese business with retail giant China Resources Enterprise to become a minority partner. In view of all that and the unpredictability of Indian politics, US$ 110 million looks like a reasonable if not disruptive commitment. It also does somewhat limit the downside risk for Tesco if the environment turns FDI-unfriendly after the general elections.

Whenever Tesco expanded into new markets, it has tried to adopt a localised or partner-led approach. In India, since 2007, Tesco has had an arrangement to provide support to Tata’s food and general merchandise retail business. The intent underlying the partnership was clearly to look at a joint retail business when allowed by regulations and not just at back-end operations. The existing structure has provided Tesco with an opportunity to learn about the Indian market and operating environment first-hand while working closely with Tata’s retail team. Tata, in turn, has drawn upon Tesco considerable expertise of operating retail businesses in both developed and emerging markets. At the very least, the FDI inflow from Tesco will deepen this arrangement further, benefiting both partners further.

But there are the inevitable twists in the tale. While the Tesco proposal was in the works, the new Aam Aadmi Party formed a government in surprise victory in Delhi state and announced that it would not allow foreign owned retail businesses in the state of Delhi. This strikes off one of the most lucrative metropolitan markets from the geographic target list at least in the short term. (The central government has pushed back saying that while retail is a state-subject, the decision to allow FDI by the previous Congress government cannot be reversed at will by the current AAP government, but the debate goes on.) BJP-led and BJP ally-led state governments have also indicated their unwillingness to allow foreign retailers into their markets.

So should we even attempt to forecast what Tesco and Tata could do in this environment? I would rather not pre-empt and second-guess the future plans of business executives who are trying to read the intent of politicians who are focussed on elections 4 months in the future! However, whatever the plans, the retailers must comply with the regulations such as they are now and utilise the opportunities that exist. So it is likely that the following scenario will play out.

Tata and Tesco have said that the proposed joint-venture looks at “building on the existing portfolio of Star Bazaar stores in Maharashtra and Karnataka”. These are both states where Trent has multiple locations, so a certain critical mass is available. Since current government policy requires the investment to be directed at creating fresh capacity, new stores would also be opened in these states, though the expansion plans look modest, with 3-5 new stores every financial year.

But with the 50 percent investment in back-end also being a regulatory requirement, new procurement, processing and logistics infrastructure which could service stores within these states as well as in other states are is likely to be built. Tesco’s wholesale subsidiary currently supplies merchandise to Star Bazaar stores across states – this relationship is likely to continue as some of Tata’s stores are in states that are not within the FDI ambit. The product mix proposed includes vegetables, fruits, meat, fish, dairy products, tea, coffee, liquor, textiles, footwear, furniture, electronics, jewellery and books.

The norms earlier required FDI proposals to ensure that 30 per cent of product sourcing would be domestic, from small-midsized enterprises. However, in August 2013, the government relaxed this requirement to be applied only at the beginning of the joint-venture operations, and that this requirement would not include fruits and vegetables, an area where Tesco has focussed significant energy. So the immediate focus would be on meeting the domestic sourcing requirements in other categories, and creating a viable business model and scale through an appropriate product mix.

The partners are likely to continue working on improving the performance of the existing Star Bazaar stores which are 40,000-80,000 sq ft in size. However, Tata has also launched a new convenience store format, Star Daily sized at about 2,000 sq ft focussed on fresh foods, groceries and essential items. Retailers with foreign investment are now also permitted to open stores in cities with populations under one million from which they had been prohibited previously, so the new small format can provide significant expansion opportunities and more volume for the back-end operations to reach critical mass quicker.

Would there be a change of name on the store fascia? Unlikely, since Tesco has been operating stores under other brands as well in markets outside the UK and a “Tesco” name appearing on the fascia may not significantly change the consumer’s perception of the store. Other than in lifestyle categories or overtly brand-driven products (such as fashion), most Indian consumers focus on utility, quality, local relevance and price as significantly more important purchase drivers than an international name. In fact, a trusted Indian name like Tata carries as much weight or more weight in many categories than an international brand would. So the stores may carry a joint by-line, but the focus is likely to remain on the existing brand names.

And what of several other retailers who are interested in the Indian market? Will they draw inspiration from Tesco and take their plunge into the market, urged on by the outgoing government eager to demonstrate results during its final months?

Wal-Mart, for one, seems to have returned to the table, having set up a new subsidiary, perhaps preparing the ground for a retail launch with another partner. A European retailer, remaining nameless for now, is being mentioned as being the next proposal in the FDI pipeline.

However, it is likely that most will remain in the wait-and-watch mode until the outcome of the national elections is clear. The real issue is not the regulations themselves as much as the unpredictability of the regulatory environment. Policies are being made, turned around, and twisted over in the name of politics, without a clear thought given to the real impact on the country, the economy and the industry of either the original policy formulation or its reversal.

Until that dust settles down, we should expect no dramatic changes in the near term, no sudden rushes into the market. But then, we could be wrong – policy and politics have taken unexpected twists earlier, and could do so again!

Last mile advantage


January 20, 2014

Ankita Rai, Business Standard

New Delhi, January 20, 2014

Here’s a small quiz on online versus brick and mortar retailers:

  • Which platform offers you the benefit of touch and feel? Brick and mortar, of course.
  • Where do you get a better selection of products? Online.
  • Where would you go if you wish to pick up what you want today? Brick and mmm… wait…

Think about it. For an average consumer, the choice between an offline and an online retailer was a matter of trade-offs. Till now. Even as we write this article many online retailers are moving in to occupy the space that was seen as the exclusive preserve for brick and mortar.

The fact is, e-retailers like Jabong, Myntra and Yebhi have been offering same-day delivery in their home locations for quite some time now. But none of these e-retailers offer a guarantee on such service. So when Amazon shook up the market with its ‘One-Day Delivery’ guarantee for a small additional cost of Rs 99 per order in December 2013, followed by Flipkart’s ‘In-a-Day Guarantee’ at Rs 90 per item, it became clear that the e-commerce battle has moved to last-mile delivery. Just recently, Snapdeal threw its hat into the ring with its ‘Same-Day Express Delivery’ at select locations with Tradus in tow in Delhi/NCR. While Snapdeal offers the service for free, Tradus charges anything between Rs 5 and Rs 25 depending on the distance between the buyer and seller. (For the record, under same-day delivery the product is delivered on the same date. One-day or 24-hour delivery means getting it the next business day.)

Evidently, with increasing competition in e-commerce space, delivery has become an essential factor after price and assortment. That said, charging for services like express delivery, while prevalent in many mature markets, is new in the Indian context. The fact that Amazon and Flipkart are putting a price tag to their delivery promise shows they are confident the service will find takers.

Admittedly, 24-hour-delivery is easier said than done. "The whole promise of e-commerce is convenience and a big part of convenience is fast and reliable delivery," says Amit Agarwal, vice-president and country manager, Amazon India. "The challenge is to provide fast delivery across wide range of stock keeping units across country, not just in select locations," he adds. Here the problem is, to quote Agarwal again, "an e-retailer cannot simply stock all the products as it can lead to redundancy of inventory."

But more of that later; first the disclaimer: In-a-day guarantee on delivery is currently restricted to select products, to the home-locations of the e-tailers and, in most cases, only on products delivered by their in-house logistics arms. The good news is, all these players are working to expand the service with a wide variety of products and by covering as many pincodes as possible.

Sounds ambitious and begs a few questions: How should an e-tailer plan inventory and move it across the pipeline so that it is delivered to the customer within 24 hours of the order being placed? What are the typical bottlenecks in the process? And last but not the least, can smaller online players afford that sort of investment?

Working backwards

To begin with, there are three key stakeholders in the e-commerce ecosystem: the merchants/vendors, the fulfilment centres/warehouses, and finally the logistics/shipment. E-retailers need to fully integrate each of these elements to keep the delivery promise. Now understand that the first two elements – the merchants/vendors and the fulfilment centres/warehouses – are inextricably linked. How you manage one determines your relationship with the other.

To cut the fulfilment time, e-tailers need to have their inventory close to the customer location. Given that a majority of the e-retailers are moving towards an inventory-less model, this is a tough call. So what Amazon, Flipkart or Snapdeal are doing is shipping products from company-fulfilled sellers. A company-fulfilled seller is a merchant who keeps his products in the e-retailer’s warehouse and takes advantage of the latter’s fulfilment services such as quality checks, packaging and logistics services. But that also means someone in the chain is holding the inventory, which adds to the cost. According to various estimates, warehousing and inventory can add about 20 per cent to the e-retailer’s supply chain.

Again, inventory ageing is a critical issue e-tailers have to grapple with. Many e-commerce companies try to reduce their inventory exposure by opting for the sales-on-return or SOR method. Under SOR, an e-commerce company buys an item from a supplier with the understanding that if the product is not sold within a stipulated time, the supplier will take the item back. "To enable express delivery, e-retailers are exploring the opportunity to work on an SOR basis. This is the essence of a just-in-time production strategy that strives to improve a business’ return on investment by reducing in-process inventory and carrying costs," explains Priyesh Jain, founder,, a Mumbai-based multi-retail online store.

To minimise inventory holdings, but at the same time retain control of shipment of products, some e-retailers are also stocking products in the vendors’ warehouses. However, most retailers that follow the inventory-led model buy stock in advance. While this ensures higher margins it can also push the e-tailer into the unsold inventory trap – one reason why many e-tailers have moved to the marketplace model over time.

Moving forward

Whatever the business model-be it a managed marketplace, an inventory-led model, or a mix of both-the fulfilment centre has to be structured in such a way that the product is handled to the courier partners with a few hours of the order.

Flipkart, which moved to marketplace last year, mapped the supply-chain extensively to help the delivery partners and sellers pin down the exact location from where a product is shipped and the amount of time it takes for each item to move from one stage of the order process to the next. "We have worked with merchants, vendors and courier partners on optimisation of these processes to reduce timelines, keeping in mind the reliability and overall lead times," says Ravi Vora, senior vice-president, marketing, Flipkart.

Snapdeal, a managed marketplace, is able to offer same-day delivery in Delhi/NCR by training its merchants on the importance of keeping the right stock. "We have to cut significant time at the merchant and the courier level," says Saurabh Goyal, vice-president, supply chain operations, Snapdeal. "Currently we are able to ship 90 per cent of the products in 24 hours, but that 24 hours had to be cut down to fulfilling orders in two hours to enable same-day delivery. Courier boys also need four hours to deliver. That means cutting 50 per cent time at the courier and merchant partner."

"Fast shipping service in a marketplace requires merchants with deep SKUs, which means tying-up with merchant who stock similar products in large quantities," says Sanjay Sethi, co-founder and CEO of Gurgaon-based online marketplace ShopClues, which currently delivers 10 per cent of the order volume the same day in Delhi and NCR.

Gurgaon-based Jabong, which started same-day delivery in July 2012, is able to deliver the product at its home location the same day if order is placed before noon. For cities like Mumbai and Bangalore the cut-off time is 5:00 pm to get the delivery the next day. The service is only for products serviced by JaVas, its logistics arm, which also services other e-commerce companies. Jabong, which operates two models – marketplace and own-inventory – does not provide express shipping for products sold through its marketplace. "We mention on each product if it is provided by a partner or by Jabong. Though Jabong doesn’t gurantee, 70 per cent of the orders are delivered the same day," says Praveen Sinha, co-founder and managing director, Jabong.

Sinha says the biggest pain point for Jabong was the customer verification process. "We realised it was the most time consuming. It was important to arrest fraudulent transactions. So we worked on a system to enable faster telephone and credit card verification. We are able to do it in 10 minutes of the order placement," he adds.

Tradus, on the other hand, leverages the ready stock at traditional offline retailers to offer same-day delivery. Says Mudit Khosla, CEO, Tradus, "To launch our express service, we went on a drive to enroll real world sellers/retailers who have ready stock. Hundreds of such sellers have been trained to deliver nearly a lakh different products the same day." Orders received by sellers from select markets in New Delhi like Chandni Chowk, Nehru Place etc are picked up by delivery teams by afternoon and delivered to buyers the same day. Tradus has also invested in technology to ascertain the location of the buyer and calculate the distance between each buyer and the seller to arrive at an accurate delivery fee and time required for delivery.

Bangalore-based e-retailer Myntra, which has two warehouses in Bangalore and Delhi, delivers half of its shipment within 24 hours in these cities. To enable this, Myntra uses advanced queuing algorithms, which reduces the time an order comes and the time it goes to the shipment company. It has also invested in remote handheld devices at the warehouse level. "Nobody moves around with papers to pick up goods these days," says Ganesh Subramanian, chief operating officer, Myntra. "Everybody in the warehouse receives orders on their remote handheld devices, which automatically tells the location and the availability of the product in the warehouse. On an average, there is a 50 per cent reduction in fulfilment time at the warehouse and in shipment. So we can process an order in two hours against the average of four hours," he adds.

Many e-commerce-focused logistics players are also offering inventory management and warehousing solutions to enable express shipping. For instance, some merchants and marketplace players use the warehouses of delivery company Delhivery to stock products. The logistics company currently has three fulfilment centres in Delhi, Bangalore and Mumbai. "Delhivery provides a unique solution to clients to enable 24-hour delivery," says Nikhil Agarwal, vice-president, fulfilment at Delhivery. "There is full integration with the seller – the product is already in our warehouse before the customer buys it. We use tablets and mobile apps to help quick pick-up if the stock is not in our warehouses. For cash on delivery we are able to return the cash to the client (the e-tailer) within 24 hours."

Outbound traffic

Inbound and outbound logistics alone can add 40-50 per cent to the e-tailer’s total supply chain cost. So getting it right figures high on their agenda. Most e-retailers offering in-a-day or same-day delivery service – such as, Amazon, Flipkart, Jabong and Myntra – do it through their in-house logistics arms, while some others like Snapdeal and ShopClues have roped in third-party courier partners (3PLs).

Everyone agrees the easiest way to handle this is to have your own logistic arm. Jabong’s same-day deliveries are handled by its logistics arm JaVas. Myntra uses its own logistics arm Vector E-commerce to handle two-thirds of its product shipping. Amazon says it is able to cover slightly less than 50 per cent of the customer demand under its ‘One-Day Delivery’ guarantee because it has been able to replicate its global logistics solutions in India. Marketplace major Snapdeal uses services of 3PLs for all its deliveries, including the same-day ones.

While routine shipments are typically done on a first-in-first-out basis, in the case of urgent shipments e-retailers often have to press additional resources into service. "This additional cost should be seen as a customer acquisition cost," says Devangshu Dutta, CEO, Third Eyesight. "Till year before last, crores of rupees were spent on advertising; if you look at the last six months e-commerce firms haven’t spent very much. Some of that cost is getting shifted to alternative means of customer acquisition like in-a-day delivery," Dutta adds.

As you can see, the advantages are blurring between online and offline retail. Same-day delivery is certainly the Holy Grail, though it involves an awful lot of homework and investments.

To make it a sustainable business strategy and put down the costs, the key point is to invest in robotics and technology. Take the Amazon’s model in the US. In March 2012 Amazon purchased Kiva Systems, a specialised maker of robots that services warehouses. We can already imagine Amazon’s warehouses: robots going from bin to bin picking out and picking up products to the shipping department. This process should bring down Amazon’s cost of shipping in a noticeable way and speed it up as well. By using automation at the e-retailers’ fulfilment centers, you can improve how you pick, pack and stow.

Analysts also say, it is still not viable for the smaller online retailers who probably can’t compete with the big dogs on speed. What should they do? Work on their overall value proposition perhaps and look out for services that can add to the shipping experience. Not easy, but must-do.


To execute same-day-delivery e-retailers need to take a cross-functional approach that involves thoughtful planning, IT investments and close ties with transportation partners.


  • Enhance real-time inventory management: Inventory systems must provide transparency into where every SKU is located.
  • Optimise fulfilment systems: Fulfilment systems should be able to immediately determine which distribution centre can satisfy an order. It requires balancing factors such as proximity to the customer, current inventory levels and staff capacity for selecting the ordered items and packing them.
  • Create a flexible workforce: Staff needs training to use the retailers’ order-taking technology and must learn how to locate, pack and label items for shipment.
  • Develop robust logistics partnerships: Select a transportation partner capable of doing the delivery the same-day.
  • Send a strong marketing message: A large-scale marketing campaign is important in helping e-retailers spread the word about the same-day delivery offering and in articulating the benefits of ordering online.

(Sourced from Business Standard.)

Flying off the shelves


January 19, 2014

Rhik Kundu and Vaishnavi Bala, Financial Express
Mumbai, January 19, 2014

Chung wa tobacco, a favourite among Chinese nationals, always gets frontline display whenever a flight from China lands at the Delhi airport. Chinese literature and price tags replace the English ones, along with salespersons fluent in Mandarin, to cater to customers. The stores then scurry to make more changes to the merchandise once flights from other sectors start landing.

Similarly, when a flight from Japan lands, the literature is changed to Japanese and popular items—Indian destination merchandise like replicas of Taj Mahal, stones, artifacts, souvenirs—occupy the front rows at the retail counters. “Russians prefer hard vodka, so we line them up at the front whenever a Russian flight lands at the airport,” says an official of Delhi International Airport.

This is just one day in the retail arena of the Indira Gandhi International Airport in New Delhi. The hectic pace is common to all airports nationwide and across the globe, making retail at airports a dynamic aspect of airport operations. As Romy Juneja, chief commercial officer (non-aero), Delhi International Airport, says, “We are looking at shifting from a product-centric approach to that of a experience-centric one.”

Airport retail business in the country, which touched about Rs. 5,500 crore during 2013, is set to cross the Rs. 6,000-crore mark during 2014, according to Devangshu Dutta, chief executive at Third Eyesight, a retail consultant.

“The airport retail segment is seeing a year-over-year growth of about 15%, as an increasing number of travellers are shopping at airports,” he says.

The recently inaugurated terminal 2 (T2) at Mumbai is adding to the excitement for retailers, partly because of the added opportunity and partly because of the immense retail space—21,346 sq m—available. The experience of shopping at a swanky terminal is an added plus, and the new terminal is expected to drive growth by more than 15% annually.

Dutta adds that “T2 has a lot more retail space than the existing domestic airport at Santa Cruz. This, coupled with the wide range of merchandise, will definitely drive growth of retail at the Mumbai airport.”

Amit Burman of Lite Bite Foods, a subsidiary of Dabur that operates in the F&B sector and which will operate 32 stalls at T2, is bullish about his sales from T2, especially as the new terminal is expected to handle 40 million passengers yearly.

While the company plans to open 17 stalls by January 15, it will open the remaining 15 by September. At the terminal’s F&B section, apart from Lite Bite, 20 other stalls will be operated by Devyani Food.

Burman, vice-president of Dabur, says currently food stalls at Delhi and Mumbai airports—where the company has a presence—constitute 10% of Lite Bite Food’s overall sales. This is set to touch 35% by the end of this year on the back of T2 operations. He also expects his total sales from the airport businesses to be around Rs. 80-85 crore by September this year.

Switzerland’s Nuance Group, which is a travel retailer, gets about 93% of its total revenues from airports. According to Nuance Group, perfumes and cosmetics constitute 38% of its sales, followed by liquor at 19%.

Delhi Duty Free’s marketing head Abhijit Das says they try and provide “distinctive value” to shoppers in every area, besides initiatives like loyalty programmes, etc.

“Perfume, cosmetics and destination merchandise are the largest-selling items at the departure section of the Delhi airport, while liqour is the largest-selling item in the arrival section,” adds Delhi airport’s Juneja.

But not everything is rosy and retail at airports comes with a big challenge as well. As Kimaya Fashion’s founder Pradeep Hirani says, “Retailing at airports is quite challenging, but, at the same time, has high returns.” Kimaya is a fashion house that retails designer brands. It has a 2,000 sq ft store at Delhi’s international terminal and is soon opening a new store at Mumbai’s T2. The company’s Delhi store saw sales zoom 56% last year, from an increase of 38% a year ago. The company did not divulge absolute numbers.

Hirani also points out that retailers at airports need to be flexible and should be able to turnaround their merchandise quickly. “Most regional flights are clubbed together and depending on the origin of flights, we keep making changes in the store. For example, we rotate the merchandise every two-three hours. If there is a high frequency of flights from Africa, then we keep merchandise and motifs that would be appreciated by locals there,” he says. Also, the profile of passengers differs at each airport. For example, Delhi gets more Japanese tourists than Mumbai, so retailers in Delhi try to have a product mix after studying the trends at the airport, Hirani adds.

Airport stores have 120% higher sales than sales at high-street retail outlets. But high costs are a prevalent factor. Shoppers Stop’s managing director Govind Shrikhande had previously stated that airport retailing has high risks. Shoppers Stop has four stores at domestic airports in Delhi, Bangalore, Hyderabad and Jaiplur, and one duty-free store at Bangalore International Airport that is operated as a JV.

Retailers also point out that costs of operations are higher at airports as stores need to remain open through the day, thereby doubling employee costs. On an average, per square feet rentals at airports are almost double of what retailers pay at high streets. For instance, New Delhi’s South Extension commands rentals of Rs. 725 per sq ft a month,while rentals at the T3 terminal hover upwards of Rs. 1,000 per sq ft.

Similarly, Hyderabad’s Banjara Hills commands rents of Rs. 130 per sq ft a month, while rentals at Hyderabad Airport are way higher at around Rs. 400-500 per sq ft.

Retailers point out that a store’s location at the airport is of utmost significance. Kimaya, for example, has both its stores located right next to the liquor stores, which generally happen to be hotspots at any airport. Of course, this means even higher rentals.

Airport operators at the Delhi and Mumbai airports, however, say they don’t charge rent, but work on a partnership model with outlets/brands. The revenue-sharing arrangement between operators of Delhi airport and the brands present at the retail segment of the airport vary from 15-60% depending on the brands, adds Juneja of Delhi International Airport.

Both GMR and GVK—operators of Delhi and Mumbai airports, respectively—did not comment on the exact footfall of customers to their retail segment, nor on the business figures from their airports’ retail business.

At present, the total number of passengers at airports gives an idea of the average footfall at airports. As per latest figures, during the April-October 2013 period, Mumbai airport saw 18.28 million domestic and international passengers (both arrivals and departures), while Delhi airport saw 27.52 million domestic and international passengers (both arrivals and departures) from January-December 2013.

(Sourced from Financial Express .)