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Reliance Retail to go online

Raghavendra Kamath, Business Standard

Mumbai, May 31, 2014

Almost eight years after its launch, Mukesh Ambani’s Reliance Retail is ready to launch a multi-channel retail operation, which would integrate its physical stores with an e-commerce portal.

The Reliance Retail team is working on the model and the company is looking to launch it this year, said sources in the know.

While Reliance has e-commerce portals in some of its international fashion brands and a website for its consumer electronics, it is for the first time that the company is exploring e-commerce in value business, digital and fashion, which accounted for nearly 90 per cent of its revenues in FY 2014.

"Since they have a large network of stores, they will enable shoppers to place orders anywhere and get it delivered anywhere they like," the sources said.

Reliance Retail is the largest retailer by revenues and runs 1,691 stores spread across a 11.7 million sq ft space in 146 cities. In FY 2014, the retailer made revenues of Rs 14,496 crore and profit-after-tax of Rs 180 crore.

Reliance’s e-commerce plans come at a time when e-commerce portal Flipkart has hit the $1 billion (Rs 6,000 crore) mark in gross merchandise value and Snapdeal is looking to achieve the target this year. Moreover, the world’s largest online retailer Amazon has already become the largest in India too, in terms of the number of products on the site.

Reliance Industries’ annual report for FY14 clearly indicated the plan. "The business is poised to launch multi-channel shopping in the coming year. The potential of e-commerce, combined with the network of physical store locations will offer tremendous choice and convenience at a great value to the consumer," the company said in the annual report.

Devangshu Dutta, chief executive of retail consultancy ‘Third Eyesight’ believes that offline retailers such as Reliance have an edge in e-commerce given that they have already established a customer connect.

However, he added that e-commerce will not help boost Reliance Retail’s revenues significantly in the short term as it is still in its nascent stages in India.

In 2012, Mukesh Ambani had said the company was expecting Reliance Retail to clock Rs 40,000-50,000 crore in the three-four years.

"Customer acquisition and repeat customers is a big issue for e-commerce ventures. But physical retailers have an edge as they already have a connect with customers," Dutta added.

Dutta says retailers going online should have different strategies in marketing communication, supply chain and merchandising for both the formats as customer mindsets are different in both.

While Kishore Biyani’s Future group has an e-commerce venture called Futurebazaar.com, the group is focusing on its new venture Bigbazaar Direct, where franchisees armed with tablets provided by the company take orders and sell the best deals of Big Bazaar.

Asked why Reliance took so long to launch an e-commerce-led strategy, the sources said: "It is a question of what they will do and when they will do. They cannot do it for the sake of doing it or because others are doing it."

In the report, Reliance had said the expansion of Digital express Mini and its cash-and-carry format Reliance Market would be key priorities for the company.

(Sourced from Business Standard.)

Flipkart buys Myntra to quell Amazon thunder

Dhruv Changoiwala, Daily News & Analysis (DNA)
Mumbai, May 23, 2014

Flipkart, India’s largest e-retailer, has acquired online fashion retailer Myntra in a move that is likely to help the two domestic e-retailers face international competition better.

The deal, announced on Thursday, is the biggest e-commerce transaction so far in the country.

While the deal amount was not disclosed, industry officials said the speculated deal size is about $300 million.

Sachin Bansal, CEO, Flipkart, said, "It’s a historic moment for e-commerce business. This first-of-its-kind deal would help us dominate the online fashion segment."

The current $50 million online fashion market is expected to double in next 1-2 years.

"As of today, the combined share of the two companies in the fashion segment stands at around 50%. We want to become the biggest retailer in the next six months," said Mukesh Bansal, Myntra CEO.

The e-commerce industry is expected to see increasing competition from international players like Amazon and Alibaba. Some analysts feel that the bigger domestic players may not face a major threat due to the growing potential of the Indian market.

"These investments showcase the investor confidence within this industry. In books, even Amazon is loss-making. The loss can be attributed to the process of expansion of the logistics and back-end operations. Hence, these long-term investments and the prospects of the industry continue to remain positive," Arvind Singhal, chairman and MD, Technopak, a consulting firm.

The current e-commerce business is estimated at $3 billion, and will grow to $50 billion by 2020, while fashion will contribute about 40% to total sales, according to market estimates. Binny Bansal, COO Flipkart, said, "We want to capture this market, and for this we plan to invest $100 million in Flipkart in the next 12-18 months."

Company officials said the two companies will continue to act as separate entities, managed and handled by different set of teams.

"The main focus will be integration of logistics, with Myntra using Flipkart’s customer reach to expand its operations in the country," said Mukesh Bansal.

According to the company, the talks between the two multi-brand retailers were initiated by Flipkart.

The companies declined to comment on the share-holding pattern but said an IPO is on cards in the longer period.

According to analysts tracking the industry, most players in the online retail space are currently in red. Flipkart reportedly lost Rs 281.7 crore in the year ended March 2013, while Myntra reported loss after tax of Rs 134.7 crore for fiscal 2013.

"Fundamentally, nothing has changed in the market. E-commerce platforms still need to figure out how to make money, because the scale they have achieved so far has been driven mainly by discounts and promotions in a race to the bottom that no one is winning," said Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy.

"Most e-tailers have a low base of repeat customers, so they are constantly having to spend money on getting customers to their websites," he said.

(Sourced from DNA.)

Retailers hope new government will reverse anti-FDI stand

Purivita Chatterjee, The Hindu

Mumbai, May 20, 2014

Indian retailers are hopeful that the new BJP-led Government will do a volte face on its decision to oppose foreign direct investment (FDI) in multi-brand retail.

Once the new Government is formed, it might re-think its strategy as bringing down inflation is going to be of prime concern. FDI is expected to help improve supply chain efficiencies for retailers, thereby bringing down the cost of goods.

Last year, UK-based retailer Tesco became the first foreign player to apply for entering India’s multi-brand retail sector through a proposed equal JV with Trent Hypermarket, a Tata Group company. Considering that Tesco already has a back-end tie-up with the Indian retailer, it was natural to propose a front-end FDI-based deal to open multi-brand retail stores. But getting final approval is in the hands of the new Government.

Tesco’s deal is going to be a test case for other retailers who are waiting in the wings for similar ventures.

“As of now, there is not enough clarity but Tesco is going to be a test case for the retail industry. We could consider an international tie-up for our big box format under HyperCity. FDI in multi-brand is still in theory. We have to wait and see how the new Government views it,” said Govind Shrikhande, Managing Director, Shopper’s Stop.

But such FDI-led JVs may not immediately take off. “While Tesco’s FDI proposal was quickly approved, in this scenario it is doubtful that Tesco would be bringing in the money. The FDI retail policy is still flawed, and is not going to be a priority for the new Government,” said Devangshu Dutta, CEO of Third Eyesight.

In 2011, the UPA Government had taken a Cabinet decision to allow foreign retailers to own 51 per cent in the multi-brand retail. At that point of time, Kishore Biyani, Chairman of the Future Group, had said: “It’s a win-win-win situation for us. There will be better infrastructure, especially at the farm side of the business, create new job opportunities and bring in capital. More retailers will create more choices for consumers. There will be $8-10 billion of fresh investments coming into the country over the next 5 to 10 years.”

But since then, there has been a flip-flop on the FDI policy with many States opposing the policy.

While there may be no short-term benefits for the retail industry, in the long run, the new Government may change its outlook and end the uncertainly surrounding the FDI policy.

“The new Government will weigh the pros and cons of its decision to oppose FDI in retail as it would like to have a progressive face in terms of inviting more international companies to come in. It would look into consumer behavior, spending and investments required in supply chain and realise the benefits of having clear policy measure in retail,” said Saloni Nangia, President, Technopak.

(Sourced from The Hindu Businessline.)

The Business of Government – An 8-point agenda for Growth

(If you’re in a hurry, go to the Slideshare presentation, and bookmark this post for a complete read later.)

These pages usually focus on the consumer and retail sector, its constituents, its problems and the opportunities therein.

The consumer and retail sector is all about choice, and it is worth noting that we’ve just concluded what was possibly the most massive consumer event in the world.  I’m referring, of course, to the Indian elections, where more than 500 “consumers” were bombarded with above-the-line and below-the-line marketing by various organisations pushing their brand, product (candidate) and services (ideology and manifesto).

The sum total of analyses of India’s 2014 election results already exceeds what one sane person can read in a lifetime. The BJP and its allies have won a majority of seats unprecedented among non-Congress alliances, in the first-past-the-post system. While opinions may be fractured, the Parliamentary mandate is clear.

In this context and in this spirit, it is also relevant for us to take the big picture view. Retail is a sector that touches the lives of virtually every citizen of this country on a daily basis. So anything that affects their lives and their aspirations have a direct bearing on the retail business as well.

India’s citizens are creative and entrepreneurial. They are hungry for growth. While they are respectful of heritage, they are also devastated by the decline that has come about over decades, centuries, and are determined to change this situation. What they need is the government to shoulder its responsibilities.

If there is one narrative that can pull diverse, divided strands of opinion together, it is “inclusive growth”.  Throughout his campaign Narendra Modi has repeated the mantra: “Sabka Saath, Sabka Vikas” (literally “all together, development for all”).  In recent weeks, on more than one occasion he has extended this to mean pulling together the efforts of leaders across the political spectrum as well. At the time of this writing, the Prime Minister elect Modi has already set out to manage expectations. He has positioned himself as “mazdoor (labourer) no. 1”,  and is asking the electorate for 10-years, making it amply clear that there is no magic broom to remove the dirt of corruption overnight, nor a magic hand that will conjure out ever-increasing incomes out of bottomless magic pockets.

While there are many problems to be tackled at the macro and the micro-level, I think the “business of government” can be captured broadly in an 8-point agenda, and each of these has a significant bearing on the consumers of this country, and the businesses they transact with:

1. Healthcare: While India’s average life-expectancy has improved steadily since Independence it still hangs in the mid-60s while China’s and Brazil’s is over 73. India offers less than one bed for every thousand of its citizens, while both China and Brazil are well over 2. The United Kingdom, whose National Health Service is constantly lambasted as being “overstretched”, offers about 4 hospital beds per 1000 people, and the average for former British colonies is also around 4. Public healthcare infrastructure in India – from primary to speciality – remains critically under-funded, and the public hospitals that exist are chronically under-equipped and under-staffed.  Where equipment exists, it is underutilised, as commission-seeking individuals refer patients to the burgeoning private clinics and hospitals. Over the last decade or so private healthcare providers have achieved prominence in the media and among investors, and concessional access to public infrastructure and assets such as land, but they have proved to be consistently out of reach of the general public. Livelihoods and family savings are routinely destroyed in the search for better-quality healthcare in the new, profit-maximising business models. Health should be every citizen’s fundamental right, as one of the foundation stones of a strong nation. It is a right that is denied daily to hundreds of millions. Providing health support is the core business of the government, and needs urgent attention and substantial investment dispersed nationally.

2. Power:  India’s power consumption average is about one-third of the Chinese average and less than a tenth of the USA, and this is not only because Indians have smaller homes or live more frugally, but because hundreds of millions of Indians spend most of their days and nights without electricity. If you think you can get a sense of the deprivation from a household that gets power a few hours a day, you actually have to visit one where power availability has improved due to grid power or micro or off-grid availability through solar or biomass units – the enormous impact that the improved power availability has on the lifestyle, livelihood and quality of life can only be truly gauged then. Across the nation, private participation has been invited into the power sector at different times, but the execution has been mixed.  Private companies would also like to serve those areas where population concentration and decent financials allow the private provider to create a profitable business. Large swathes of the Indian population lie outside of such areas, and the onus is upon the government to provide the required electricity for households to live a fuller life, for students to complete their lessons, for healthcare and administrative facilities to run effectively, for small entrepreneurs to be able to grow their businesses.

3. Clean water: Imagine one train crash every day of the year, each killing all passengers on board. Sounds catastrophic, doesn’t it? Wouldn’t that get some serious attention? Well, it is estimated that around 1600 deaths are caused every day by diarrhoea alone (higher than the train wreck fatalities), and that 21% of communicable diseases in India are related to unsafe water. The problem is not only in far flung villages, but acute even in the largest cities of the country. Both those numbers are shamefully high for a nation that wants to see itself as a global superpower. There are no technological gaps for effectively harnessing the existing water resources, and for maintaining cleaning, distribution and recovery systems – only management gaps.

4. Transportation infrastructure: While India has one of the largest rail networks in the world, at about 20 kilometres per 1,000 sq km of land area it compares unfavourably to highly industrialised European countries (Germany: 115 km per thousand sq. km., UK: 65, France: 53) or even the large less densely populated USA (26 km per thousand sq. km.). On road development India’s picture has improved in the last 15 years, but it still trails world-leading economies in terms of length as well as quality.  Poor transportation systems cut people off from economic opportunities, and force them to migrate to already overloaded cities, perpetuating problems in both urban and rural areas. Historically, all strong nations, democratic or otherwise, have flourished due to extensive, superior transportation networks.  Where people and goods can move quickly and freely, both trade and culture flourish, and build the strongest ties that bind people together.

5. Education: This is another area which has systematically been under-invested in by the government.  From pre-schools to universities, the growth of educational institutions for the last 30-40 years has predominantly been in private hands, where affordability is not the prime driver.  The number of seats in government-run institutions has not grown in proportion with the population, let alone in correlation with the demand. Access remains a problem, as does the quality. There is no reason why government-run educational institutions need to be bad – there are enough examples around the country within government schools and colleges, where organisational systems and individual intent produces excellence. Without immediate and adequate government focus on education, the massive young population of India will go waste, at worst it would be a ticking time-bomb of under-skilled frustrated underachievers.

6. Environment: This might seem like a strange inclusion in this “development-oriented” list. However, it is essential that the environment should be on a list of core items that the government needs to manage well. The government is usually in the news for either not doing enough (such as not monitoring the systematic encroachment in and destruction of the Aravalli Hills) or, at the other extreme, getting in the way by holding back environmental approvals to development projects. Another term for the environment is “the commons”, reflecting that the natural resources belong to the people, together. The commons need not just protection, but regeneration, resurgence. Defence and political experts around the world list climate change and clashes over natural resources as among the highest conflict risks in coming years, and the evidence is frequently visible. When “growth” is measured only by those activities that extract and deplete the common resources, support and encouragement is provided for those individuals and companies that do this the “best”.  It is short-termism and selfishness of the worst sort.  Evidence of large scale climate-related changes and the debilitating impact on civilisations exists around the world and across the span of history; the closest might be the Ganga-Saraswati civilisation that is said to have dispersed due to the depletion of one of its greatest rivers. We don’t even need to forecast huge impacts far into the future.  Millions of Indians increasingly are born and live with chronic diseases that are related to deteriorating air quality, depleted water resources, polluted soils and disappearing vegetation. Indigenous natural species of plants and animals are declining, mostly invisible to the nation at large. A comprehensive, evolving framework is needed that goes beyond short-term planning and management by knee-jerk reactions.

7. Competition: This is an area which requires little investment, relative to the other items on this list, but a huge amount of intent and follow-through.  No economic system is perfect and, indeed, it is the imperfections and discontinuities that provide business opportunities.  When the imperfections are exploited by many, competitive forces balance each other out.  The need to diversify is well-understood by people who care to think about risks.  Concentration of efforts, resources, power behind a few initiatives or organisations can bring about disproportionately good results, but also creates the risk of wipeout.  Diversity is a challenge because it creates fragmentation, but it is also an essential source of innovation, combating not just present risks but future threats as well. Self-moderation is too much to expect from even the most enlightened of large business leaders and even the most progressive of industries. Anti-competitive and customer protection frameworks have improved in recent years, but are still understaffed and underequipped. As the economy grows, so does the need to provide oversight against unethical behaviour by large organisations.

8. Accountability: None of the above can truly happen without transparency in governance, and productivity in public service i.e. respect for schedules, budgets and commitments.  Measures such as Right to Information (RTI) have moved the country several steps up the transparency ladder, but accountability to “service deliverables” is still missing in a vast number of people employed in government departments. Entry into “government service” is seen as a ticket to a reasonably comfortable employment if you are inclined to not rock the boat. The idea is to not question the status quo as far as possible, and to ensure that the outcomes for the “overclass” are taken care of. This attitude needs to change. In fact a small start could be made by replacing the phrase “government service” with “public service” – the business of government is to serve the public at large, and this needs to be recognised and acknowledged by everyone involved in it. Efforts in all the other areas will fall flat if accountability and productivity are not embedded into the money and efforts invested. (Imagine if we could sign SLAs – service level agreements – with each and every individual hired for public service roles!) The roles that accountability brings with it include “upholding the law” and “enabling an environment where each citizen has a fair chance of success”.

Someone else might come up with a slightly different list – this is mine, the seven pillars and the overarching beam. I’ve not listed the areas in any specific order of priority. Some of them need more government intervention, some need less private intervention, a few (such as education) need both.  These are all areas that are the foundation on which everything else is built.  These are the areas which, to a very large extent, determine the levels of dignity with which a country’s citizens lead their lives.

In this day and age, the government is not needed to run steel mills, airlines or even handicraft retail stores.  But without high quality and high availability ensured by the government in the above areas, even the most capable individual will find it easier to build a life and even the best private enterprise will find it more profitable to do business elsewhere in the world.

A much-followed new-generation business leader recently rhetorically asked in a social media post that, if we have an economy swinging towards services with a large chunk of it being technology, “Why do we need government?”

The reasons above, my friend, are why and where we need government, because business is not delivering on these areas in an equitable manner, and these are areas where technology will not necessarily provide all the answers.  We have years of evidence of this, in some cases decades, and it is time we choose to move.

By and large, most people would rather choose to move something, than move somewhere (else). And the retail business will be one of the first to benefit.

Click here

 

Leveraging Opportunities in Food & Beverage Sector

“Ingredients for Speed & Innovation” Conference 2014 gathered together senior delegates (CEOs/ CXOs) of the food & beverage Industry, on 7 May 2014 in Delhi. The event was organised by Third Eyesight in association with Infor India Pvt. Ltd. & Nagarro Software Pvt. Ltd.

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Devangshu Dutta, CEO, Third Eyesight

The conference was focused on the emerging opportunities for the companies in food and beverage sector amidst the challenging business environment. In his opening presentation, Devangshu Dutta, CEO, Third Eyesight reflected on the current macro-economic environment and the dichotomous changes in the consumer mindset. Dutta highlighted the need for companies to invest in developing advance insights, and to not only anticipate change but to seed ideas and invest in creating industry segments. Manish Gupta, VP Business Development, Nagarro provided insights on various technological solutions that have been engaged by companies that could enable companies achieve faster and better visibility into the data.

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Manish Gupta, VP Business Development, Nagarro

A panel discussion that followed discussed industry leaders’ experiences related to challenges faced with respect to demand fluctuations, demand fragmentation, complex supply chains for products with low shelf life, lack of homogeneity in food ingredients sourced through diverse geographic locations within India, as well as high levels of personnel attrition.

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Devangshu Dutta, Manish Agarwal, Arshad Siddiqui, Tarang Gautam Saxena, Manish Gupta

Manish Agarwal, Director, Bikanervala mentioned that while consumers are including other cuisines in their diet, they still prefer to have Indian food on a regular basis. Standing firm on its positioning of being a leader in Indian traditional snacks and QSR has helped his company to sustain business in these challenging times.

Arshad Siddiqui of Rasna Beverages shared the challenges related to diversity in India not only of the demand base but even the supply base. He highlighted how flavours of the same fruit vary across different geographic regions within India and adds to the complexity of maintaining consistency in the product range.

The conference was received well by the delegates who found immense value in exchanging thoughts on some highly relevant business issues.

Van Heusen Woman steps up

Sharleen D’souza, Business Standard

Mumbai, May 4, 2014

Van Heusen’s renewed focus on womenswear has led to it contributing a higher percentage than the average of the parent brand. Van Heusen Woman brings in eight-nine per cent of its revenue (latest financial year), higher than the five per cent that womenswear returns for Madura Fashion and Lifestyle, on an average.

Even though Van Heusen had entered womenswear in 2007, it had not scaled up before. Van Heusen started to launch exclusive womenswear outlets in the past one year. It has nine stores and plans to add another nine-10 this financial year. The expansion plan is on the heels of Aditya Birla Nuvo’s (of which Madura is a part) acquisition of Pantaloons. At the time of acquisition, Rakesh Jain, MD of Aditya Birla Nuvo had said, "The reason we acquired Pantaloons was to fill the gaps, especially in womenswear, kidswear and ethnicwear in which Madura does not have a presence."

Earlier Van Heusen Woman took up only a small section in around 100 Van Heusen stores (with the lion’s share of shelf space taken up by the men’s collection) and 200 shops-in-shop. "The space was very limited in the menswear section and didn’t do justice to the shopping experience," says Vinay Bhopatkar, brand head of Van Heusen.

The chain plans to increase the contribution of womenswear by another five per cent in the next three to four years with stores that measure around 500-600 square-feet, situated mostly in malls.

The Van Heusen Woman stores have already broken even, according to Bhopatkar. "We have received good response so far and even the limited edition which we launched with Deepika Padukone has been doing well for the brand," he says. The limited edition also had the actor not just act as the brand ambassador, but also sit with the designers to approve the designs , according to the company. The collection was priced higher than the average product of the brand, starting at Rs 4,000 while the regular range starts from Rs 2,000.

While women’s formalwear has seen an expected traction in cities with brands from Zara to Fabindia catering to the buyer, Van Heusen is also keen on tapping the demand from smaller cities and towns, something that multi-brand e-tailers have pursued so far.

"We have seen interest coming in for Van Heusen Woman from Tier-II and III cities through online sales," says Bhopatkar about the demand seen on its own e-commerce portal.

"Brands which offer formalwear in India need to get the fit right to gain a good customer base. The scope of the market is large and capable of good growth, as the number of women working in urban areas is increasing and mindsets are changing. If Van Heusen Woman gets the fit right, then there is a good potential to grow," says Devangshu Dutta, CEO of Third Eyesight.

Madura also has Allen Solly (with a limited women’s range) and Louis Philippe that are still predominantly menswear brands. But buying the majority stake in Future Retail & Lifestyle’s Pantaloons two years back is expected to fuel a shift away from such single-minded focus and Van Heusen’s plan for womenswear is the first step.

Experts say Madura has to get its womenswear merchandise right, because it already has a strong sourcing and distribution set-up, to make a mark in this space – where Pantaloons can help it with enough insights. "Very few brands are available in western-wear besides the likes of Zara and Mango. If Van Heusen gets the merchandising right, it can succeed as a brand," says Arvind Singhal, chairman of Technopak Advisors. Around 60 per cent of branded apparel is womenswear of which western-wear is the fastest-growing segment, clocking a growth, faster than ethnicwear, of around 20-22 per cent on a base of Rs 10,000 crore, according to market experts.

Van Heusen Woman has also launched accessories like bags, shoes, belts and scarves. However, contribution of accessories to the brand is minuscule. Van Heusen has one exclusive accessories store in Kerala and plans to add another two or three this financial year.

(Sourced from Business Standard.)