Contact

Meru, TaxiForSure plan overseas drive

Nikita Garia, Mint

Bangalore, 25 July 2014

Meru Cabs, India’s largest taxi fleet operator, plans to start services outside India by the next financial year and is evaluating entering countries such as Malaysia, Vietnam, Myanmar, Nepal, Bangladesh and Sri Lanka.

“There are many countries around India which face similar problems related to taxi service—a huge consumer need and gaps in services,” chief executive officer Siddhartha Pahwa said on Thursday. “We have the capability to address these.”

Meru Cabs is not the only one planning an overseas foray. Rival TaxiForSure is also firming up plans to start operations abroad.

“We are looking at launching overseas early next year,” said Raghunandan G., founder and director at TaxiForSure. He declined to elaborate as the plans are in a preliminary stage.

However, Raghunandan said it makes more sense for TaxiForSure to go abroad as the company works on a so-called asset-light model and does not own cars, unlike Meru Cabs. “With our existing model, we would be better positioned to tackle the international market,” he said.

Companies such as Olacabs and TaxiForSure do not own vehicles but work as aggregators.

Meru Cabs, which started operations in 2006 by creating its own fleet of cars, has been trying to move to an aggregator model since 2012.

Currently, Meru Cabs is evaluating the kind of model it would follow abroad and the capital investment that would be required to operate internationally.

“It will be a significant investment,” said Pahwa, without disclosing the amount as the company is still working on details such as whether it would have to open call centres abroad or operate completely via a mobile app, acquire taxis in those countries or aggregate those already run by other operators.

The move to go international comes at a time when competition in the Indian taxi industry is intensifying, with local firms attracting investor interest on one hand, and international companies eyeing the Indian market on the other.

In recent months, Olacabs and TaxiForSure have raised funds.

In contrast, Meru’s growth has been almost entirely been funded by equity capital. Private equity firm India Value Fund owns 85% in Meru. San Francisco-based Uber had launched its India operations in August last year with its luxury car service UberBLACK and introduced the lower-priced service UberX last month.

Meru’s plans to launch elsewhere are afoot even as it looks to expand in more cities across India. It is present in eight cities including Hyderabad, Bangalore, Mumbai and Delhi and is planning to expand operations to 20 cities within the next 12-18 months. It had recorded a positive profit after tax for 2013-14 and expects to post Rs. 650 crore revenue this fiscal year compared to Rs. 395 crore a year ago.

TaxiForSure is also looking to expand its footprint in India as it looks to enter 22 cities by end of this year, said Raghunandan. It now operates in Ahmedabad, Bangalore, Chennai, Delhi and Hyderabad.

Olacabs is not looking to expand outside India as it deems India to be a large enough market at this point. “India is a sizeable market and there is a genuine taxi problem to be solved here before we can think of moving elsewhere,” said Anand Subramanian, director of corporate communications at Olacabs. Olacabs has so far covered nine cities with the launch of its operations in Chandigarh on Thursday.

Analysts say establishing a successful operation outside India won’t be easy as taxi is a very local business.

“The companies will have to deal with the complexities of managing new markets and invest on marketing and technology,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight.

(Published in Mint.)

Package Deal

Rashmi Pratap, The Hindu Businessline
Mumbai, 18 July 2014

Amit Sarda is just beginning to discover India. After selling organic handmade bath salts, essential oils and soaps in the cities for over 13 years, he has suddenly realised that a whole other world exists beyond them. Orders for his company Soulflower’s products have started coming in from Tinsukia, Dibiyapur, Bidar, Sundargarh, Mansa and many more small towns, throwing open markets Sarda hitherto had no inkling of. And his ally in conquering the many nooks and corners of the country is the $75-billion American giant Amazon, which entered India last year.

In Mumbai, Beta Dave, marketing and e-business development manager at Sia Jewels, is elated by her company’s partnership with Amazon, which has tripled its online sales within a year. The jewellery is sent to Amazon, which takes care of warehousing, packaging, delivery and after-sales service, freeing up Sia to focus on new designs. Moreover, the big-town brand now finds additional customers in Tier II and III cities.

“The kind of brand recall Amazon has in rural India is amazing. People know it delivers the world over, and that helps,” says Sarda, who co-founded Soulflower with Natasha Tuli in 2001.

What has allowed Amazon to deliver anywhere from Dibiyapur in Uttar Pradesh to Mansa in Punjab is its tie-up with India Post. This masterstroke has given the e-commerce major access to nearly 20,000 pin codes across India. This is the core of Amazon’s India strategy — retrofitting to suit local conditions, rather than replicating its hugely successful global model in the $2.3 billion Indian e-commerce space, which is expected to grow to $32 billion by 2020 (Technopak Advisors). “Our global mission is to build the earth’s most customer-centric company. While Amazon’s vision and mission are global, we have localised our execution,” says Amazon’s country chief, Amit Agarwal

Globally, the giant is currently caught in catfights. For the past month, Amazon has been in a much-watched wrangle with publishing major Hachette. As the online retailer is the largest seller of books, Amazon asked Hachette to cough up more money on e-book sales. Hachette refused and, so far, the book industry has been split down the middle. Some big authors have sided with their publishers but a large number of authors who have found success through Amazon — it is now also a publisher — have aligned themselves to it. Amazon, by discounting books heavily, bled the brick-and-mortar bookstores, eventually leading to major chains like Barnes & Nobles shutting down outlets and Borders winding up business altogether. In order to protect its bookstores, in January this year, the French government passed a bill which banned online bookstores from offering free delivery. In the Gallic world, which does not believe in mincing words, this ban is called the Amazon tax. On the tails of these troubles — minor and major — India is a market that is now primed for the company. And Agarwal is here to make sure that as more Indians begin to shop online, their first site of call is Amazon.

Tailing Bezos

Agarwal learned from the best. For two years, 2007-09, he was the shadow to Amazon founder Jeff Bezos — a role that involved travelling with the top boss, attending all his meetings and taking the minutes, and conferring with him at the end of each day.

Fifteen months before Amazon India went live, Agarwal set up junglee.com, a website that allows buyers to compare offerings and choose before directing them to the seller’s website. This non-profit venture has given Amazon truckloads of analytics — handy ammunition for its India battle.

In e-commerce, analytics is as crucial as R&D is for a product company. It identifies what buyers are searching for, what they choose from, where they buy, at what price and why. That helps companies not only customise offerings for potential buyers but also ensures that their preferred products pop up every time they log on to the internet.

Junglee has also familiarised the company with sellers, facilitating a rapid expansion of product categories at Amazon. “Amazon had customers in India even before it launched here. It has built an analytical understanding of the Indian customer base through many years. Junglee, again, is a rich source of data and learning,” says Devangshu Dutta, chief executive at consulting firm Third Eyesight.

From the way Amazon sources products from sellers to how it reaches out to buyers, the company has retrofitted multiple processes. It has the mechanisms to offer over 17 million products across 28 categories in a country as diverse as India — all within a year of starting operations.

While tailing Bezos, Agarwal learned that customers care about three things — a large selection to choose from, value pricing and convenient delivery options. And over the past few years in India, he has focused on creating a differentiating factor in all three. And that, in turn, led to local innovation.

Ideas for India

In India, Amazon offered the cash-on-delivery option, something it doesn’t do elsewhere. (The company is now considering extending the concept to China and Japan.)

Its Easy Ship facility was created exclusively for India and benefits smaller sellers who don’t want to send products to the fulfilment centres. Amazon picks up the packages from the seller and delivers to customers. “We inject in the last-mile delivery,” says Agarwal. This concept, too, is likely to be exported to other countries.

In the second, and more successful, part of Amazon’s strategy, the ‘Fulfilment by Amazon’ offering allows sellers to stock their inventory at its warehouses in Mumbai and Bangalore. Amazon ships the products for them and charges on a per unit basis, irrespective of the numbers sold.

“They have taken the stress of packaging and shipping off my head. I just focus on creating the best products,” says Tuli of Soulflower. Apart from stress, sellers are also spared the costs of warehousing, maintenance, packaging, delivery and even after-sales service. Such expenses vanish from the seller’s profit-and-loss account, to be replaced by a simple variable cost per unit, says Agarwal, terming it as ‘cloud computing’ for sellers.

“The warehousing cost for five items is different from that for five million, and the prediction for that capital investment is often wrong. Amazon essentially absolves sellers of all that risk,” he adds. This offering is a hit with small and medium enterprises that are hungry to go national but lack working capital. It’s also a service that no other e-commerce player has been able to replicate so far.

Analysts estimate that sellers save 30-40 per cent of their cost. And this, says Agarwal, allows Amazon to offer discounts to end-users. “We look at the cost structure of every seller, reduce the costs and allow them to keep a larger share for themselves. So they can pass it on to customers at low prices,” he says.

Home run

While it costs Amazon to offer such services, Agarwal says it is compensated by the growth in volume. “The cost per unit goes down… Good customer experience drives traffic, which attracts sellers and helps us bring in more selection. This, in turn, improves customer experience. This flywheel is spinning fast for Amazon,” he explains.

And the results are showing. Munendra Singh, working with a private bank in Mumbai, says he can pick up his parcels, ordered through Amazon, from a nearby store. “That’s a big convenience, as my wife and I both work and nobody is at home to take deliveries during the day,” he says. Amazon has tied up with Bharat Petroleum Corporation Limited to use its In & Out stores in Mumbai, Delhi, Bangalore, Ahmedabad and Manipal to make deliveries to customers.

Its same-day delivery is a huge hit too. Shreya Krishnan ordered three kurtas from Myntra on June 14 and was disappointed to learn about the cancellation of the order on June 25. “I got a mail from Myntra about the cancellation, without any reason for it. Since I had to leave for a holiday at the month-end, I ordered from Amazon. And got the delivery the same day,” she says.

Competition kill

“Amazon has certainly forced its competitors to re-think their strategy. Flipkart, the home-grown e-commerce company founded by former Amazon employees, is hard at work to outdo the US giant. Within days of Amazon launching same-day delivery, Flipkart replicated it; however, it’s unlikely to match Amazon’s reach in the hinterland anytime soon.

More importantly, Amazon India is backed by a strong parent, which reported revenues of nearly $75 billion in 2013 and is expected to touch $100 billion by the end of this year.

“Amazon has been an outlier in every country. It is the first pure-play e-tailer to emerge the world over. It is focused on execution and will be a competition to the existing players. More so because it doesn’t have capital issues,” says Ankur Bisen, senior vice-president of retail and consumer products at Technopak.

In contrast, Flipkart is backed by private equity funds, which invest only to look for an exit through an IPO or sale to another player. Flipkart is said to be in talks again for raising $500 million from a clutch of investors in a deal that could value the company at $5 billion, or ?30,000 crore. But valuation on its own doesn’t mean much.

A classic case is that of Indian telecom operators and tower companies, which commanded billion-dollar valuations around 2006-07. Foreign investors entered with cash. Today, however, only a handful of them are profitable. A majority are making losses and looking to sell. Similarly, continuing losses and limited finances will only make the going tough for Flipkart.

Until now, the bigger e-commerce firms have entered India through acquisition — ebay bought Baazee.com, while Monster.com acquired Jobsahead.com. Amazon was expected to do the same with Flipkart, but that did not happen. It wasn’t for lack of trying though. Flipkart was expensive and with the kind of capital and analytics at its disposal, it made better sense for Amazon to invest in own operations than pay big bucks for it.

This has unsurprisingly created a flutter in the Indian e-commerce space. In an industry where most businesses were built to sell, Indian companies have missed the biggest opportunity to exit. “Now they have to do something to stay in the business, and stay relevant,” says Dutta.

Repackaging business

Already, some large e-commerce businesses have shut down due to a cash crunch or were acquired by bigger players. Flipkart bought Myntra in May while Allschoolstuff.com and Indiaplaza.com closed after failing to raise another round of funding, as did Chhotu.in, Hushbabies.com, Miraistore.com and Koolkart.com, among others.

“Investors can’t run companies for long if they don’t have enough cash for operations. Amazon has stayed ahead of the cash-raising curve. Unless Indian businesses do that, they will run out of cash,” says Dutta.

This has forced Indian companies to relook their business model. Flipkart discontinued sale of consumer electronics like TVs, audio systems and white goods (air-conditioners, washing machines, refrigerators) within days of Amazon launching in India. It also cut down on the massive discounts it once offered on mobiles, tablets and their accessories. Its focus now is on high-margin and high-volume segments like apparel, as borne out by its Myntra acquisition.

Bisen points to two kinds of players in the e-commerce space — companies such as Flipkart, Jabong and Snapdeal, which have built brand equity, achieved some scale and demonstrated a viable future growth model; and the second-rung companies, which are pursuing differentiation but are struggling to progress beyond the initial round of funding. As long as the economy is growing, both of these will exist, along with the millions of brick-and-mortar retailers. Eventually, something will have to give. If its history in other countries is an indicator, Amazon is likely to be the one taking us into this post-apocalyptic world.

The fine print
———————

Hottest sellers: Books, consumer electronics, baby products, shoes and watches

Shop on the go: 35 per cent of traffic comes from mobile devices

Pincode search: It delivers to the pin code 790002, which is for a remote village called Balemu in the West Kameng District of Arunachal Pradesh

Instant gratification: 3,00,000-plus products are available for next-day delivery

(Published in The Hindu Businessline.)

Good days yet to come for malls as vacancies rise

Ashish K. Tiwari, DNA (Daily News & Analysis)

Mumbai, 18 July 2014

The retail real estate segment saw a significant rise in vacancies in April-June quarter of 2014 over the January-March levels as supply increased and tenants exited under performing centres.

According to a report by property research firm DTZ, the Delhi-NCR market witnessed highest increase in shopping mall vacancy at 3.5% followed by Pune at 2.6% and Mumbai at 2.3%, respectively.

"In the case of Delhi-NCR, the vacancy level stood at 19.5%, up from 16% during the previous quarter due to the addition of new space. Occupiers continue to prefer malls offering quality space, good mall design and a strong tenant mix. In contrast, lower grade malls continue to witness higher vacancy levels," Rohit Kumar, head of India Research, DTZ, said in the report.

While the Delhi-NCR market, witnessed new supply of 2.3 million sq ft during Q2, about 7% completed in Q4 2013 entered the market in second quarter due to regulatory issues. Additional 2 million sq ft of mall space is expected to be completed in second half 2014, but given the extent of project delays, some of this is likely shift to 2015.

Vacancy levels in Pune increased sharply quarter on quarter from 27.5% in Q1 2014 to 30.1% in Q2, and with over 2 million sq ft of retail space under construction, vacancy levels are expected to remain high over the next few years.

Contributing significantly to vacancy levels in Mumbai were malls located in micro-markets of Andheri, Bhandup-Mulund and Navi Mumbai. "However, with no new supply expected over the next year, the vacancy level is expected to decline in the coming months," said Kumar.

Though new supply certainly has led to the increase in vacancy levels across malls in these cities, retail industry experts said, additional factors like tight market conditions, experimenting with new malls and aggressive evaluation of sites by retailers also were equally responsible.

As per Devangshu Dutta, chief executive, Third Eyesight, retailers these days are very practical about their stores and have no hesitation in shutting down the non-performing outlets. "A lot of focus is on performance potential of newly opened or, for that matter, existing stores. Besides, given the current market conditions, it is pragmatic to discontinue sites that do not justify the cost of operations," he said.

International property consultant Cushman & Wakefield, however, differs on vacancy levels. While total vacancy in Q1 2014 was recorded at 14.5% there has been very little supply in Q2 2014 and limited churn in occupants, it said. As a result, there not been any significant movement in vacancy.

Sanjay Dutt, executive managing director, C&W in South Asia, said, "This scenario has also resulted in stable rentals across mall locations in key cities of India. At best, the Indian retail market can be described as stable; however, going forward, retailers may been looking at a more robust plan of expansion in line with increase in disposable income of the end-user / purchasers as granted in the union budget."

Meantime, mall operators feel vacancy rates differ from operators to markets. Also, the business model adopted by the mall owner/operator plays a big role in defining the success of the shopping destination.

Kishore Bhatija, MD & CEO, Inorbit Malls, said, "While vacancy levels could be seen as indicators of the overall business scenario to some extent, it’s certainly not something that one should be reading too much into. Besides, the market dynamics are such that well-managed malls with a good tenant mix will always have an edge over others."

(Published in DNA.)

Fashionara plans to triple sales

Mihir Dalal, Nikita Garia, MINT
Bangalore, 17 July 2014

Online fashion retailer Fashionara.com has raised $7-8 million (around Rs.42-48 crore) from its existing investors Helion Venture Partners and Lightspeed Venture Partners and plans to increase its sales by three times to Rs.100 crore this fiscal year by expanding into new cities and increasing its product range.

Fashionara, a specialist online apparel retailer founded by former Madura Garments and Reliance Trends executive Arun Sirdeshmukh and e-commerce specialist Darpan Munjal, raised the money earlier this year, two people aware of the matter said. The company has now received roughly $15 million since it started out in 2012.

“We don’t play the discount game as aggressively as Myntra and Jabong but even then we are doubling sales every second quarter,” chief executive Sirdeshmukh said. “Unlike other sites, we’re not trying to convert people to online shopping; most of our customers, primarily women, are those who are already online but are looking for high quality fashion. We are focusing on personalized service, offering the latest fashion as well as convenience in shopping by boosting product discovery features on our site.”

Sirdeshmukh confirmed that the company had raised funds but declined to comment on the specifics.

Fashionara, which typically offers lower discounts than rivals such as Myntra and Jabong, is adding men’s footwear and accessories to its product assortment. Women account for a majority of Fashionara’s sales—up to 75%.

Investors have started showing an interest in e-commerce firms that cater to women shoppers, who are expected to significantly increase their online spending over the next few years. LimeRoad.com, another women-focused online retailer, raised $15 million from Tiger Global and others in May. Sites such as Myntra, now owned by Flipkart, are also trying to increase products for women.

Fashionara is expanding its delivery network to three new cities including Hyderabad, and will launch its mobile app within the next three months, Sirdeshmukh said.

The company is also managing the online businesses of some offline clothing brands and is selling their products and its own products on sites such as Flipkart, Amazon and Snapdeal, he said.

“We ourselves are building technology to allow third-party sellers to host their products on our site, which will happen some time this year,” he said.

Analysts said that smaller companies that capture “sizable” niche markets in online apparel retail may become acquisition targets for bigger firms such as Flipkart.

“Companies that have a differentiating factor, say they cater to a specific market segment or have a different product or a branding ability that the acquirer does not have, are good takeover targets,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight. “If you as a smaller firm are looking at scaling up, then the big players that are well-funded would definitely eye the smaller ones that have a differentiating factor.”

(Published in MINT.)

Do private equity funds make bad chefs?

The Economic Times

Mumbai, 15 July 2014

When global private equity (PE) fund New Silk Route paid Rs 100 crore to buy 80 per cent of Vasudev Adiga’s in April 2012, the idea was to take the Bangalore-based food chain national. Instead, this May, NSR and Vasudeva Adiga, the original promoter and a significant minority shareholder, ended up in Company Law Board.

Vasudeva Adiga alleges NSR was illegally trying to remove him as managing director, while NSR says the promoters were hurting the company by overstepping their operational brief and undermining the professional CEO. The Company Law Board has, for now, appointed an independent administrator to run the business.

An uneasy calm also prevails at Sagar Ratna Restaurants, the south-Indian food chain based in New Delhi. Here, too, the original promoters and a PE fund are locked in a conflict whose ingredients are similar to the Adiga’s-NSR spat. And, before Adiga’s and Sagar Ratna, there was Nirula’s, which was once the sole symbol of fast-food in Delhi, and PE fund Navis Capital.

These three failures to cook up a good deal in the restaurant business beg the larger question: do PE investors make bad chefs? The answer is both ‘yes’ and ‘no’. It’s a dichotomy that is rooted in the nature of the restaurant business and the players involved, and it flavours every aspect of that engagement.

ORGANISING THE UNORGANISED

PE has invested $500 million (about Rs 3,000 crore) via about 25 deals: for example, CX Partners in Barbeque Nation; TVS Capital in Om Pizza (Papa John’s) and Indian Cookery (Yellow Chilli restaurants); Sequoia Capital in Faaso’s; ICICI Venture in Devyani International (Pizza Hut, Costa Coffee and KFC chains); and Aditya Birla PE in Olive Bar & Kitchen.

Prudent investment metrics back PE’s thinking in grabbing pieces of the Rs 1,00,000 crore Indian restaurant industry. The industry is growing at a brisk 20 per cent a year. But, only about one-seventh of the industry is organised, says Technopak Advisors. And even some of that suffers from a hangover of its unorganised past, where cash deals were the norm, where contracts were a matter of spoken word and where much pivoted around the promoter.

It was in this complex concoction that restaurant promoters and PE shook hands. Promoters wanted PE capital to grow. And PE came in with the understanding that the path to that growth flowed through processes, standardisation and corporatisation — essentially, organising the unorganised. A critical factor in this transition is promoter buying.

"The promoters should continue to run the business and help ‘institutionalise’ it, from a promoterdriven company to a process-driven one," says Ashish Bharadia, senior consultant at Mahajan & Aibara Consulting, a management consultancy specialising in hospitality and real estate. "The F&B (food and beverages) business is highly prone to leakages and wastages.

Therefore, in the absence of ‘promoter at the cash counter’, adequate systems need to be in place." At both Sagar Ratna and Adiga’s, even as PE started improving systems, their relations with the minority promoters began to deteriorate. Officials of both sides in those two conflicts declined to participate in this story.

Both those deals have seen happier days. It was in 2010 that India Equity Partners (IEP) paid Rs 180 crore to buy 75 per cent in Sagar Ratna. The charges and counter charges followed.

Roshan Banan, who belongs to the original promoter group, says IEP is incompetent at running the business. "We have been observing that the business has been receding on many counts, including quality, customer satisfaction, franchisee satisfaction, profitability and growth of the business," he wrote in a letter to IEP and its investors in August 2013. Further, he asked IEP to sell the business back to the promoters.

IEP alleges the promoters are violating a non-compete agreement and harming the Sagar Ratna business from the inside. Both sides have filed police complaints and are also fighting in court. The spat aside, according to a former official of Sagar Ratna who did not want to be identified, IEP under-estimated the unorganised nature of the business. "They could not manage the vendors and the suppliers," he says. Then, he goes on to outline a challenge for every player. "A sizeable portion of the busi ..

GROWING IN A SLOWDOWN

Growth and value, the two outcomes that PE funds chase, have been the casualties. It’s making them anxious, more so since many of them entered when the economy was motoring along at 7-9 per cent growth and valuations were high.

According to Bharadia, timing is the main reason why PE has not made money. "Due to recession, eating out spends were the first to be cut, while key costs such as food, staff, rent and energy kept rising," he says. "It proved to be a double whammy for the industry."

Navis Capital picked up a controlling stake in Nirula’s for Rs 100 crore in 2006. The capital infusion saw the company turn profitable. But soon after, it started missing expansion targets, straining relations between promoter Samir Kuckreja and Navis.

"Till the time the business was turning around and the plans were in place, the PE fund was a happy investor," says a former senior official of Nirula’s, on the condition of anonymity. "However, when the company missed targets, boardroom fights became common." Navis forced Kuckreja out, bought out the remaining stake and, in 2013, sold the business to A2Z Excursions for an undisclosed amount.

Simultaneously, it also rushed to standardise food and processes, and corporatise contracts. "Expansion at a break-neck speed, bringing in a professional chief executive, did not work," says a person with knowledge of the issue. Two years on, Adiga’s has 24 outlets, of which 21 are in Bangalore.

Devangshu Dutta, chief executive of Third Eyesight, a consulting firm focused on retail and consumer products, points out the dichotomy in play for quick-service restaurants (QSRs). They need standardisation of products and services to deliver a consistent consumer experience and to scale up. They also need an entrepreneurial hand. "For a PE fund, a minority stake model in QSRs can work well where a committed entrepreneur is already in place, and the fund can provide adequate capital and other support," he says.

With investor interest in restaurant, fine dining and QSR companies remaining brisk as ever, this is an engagement that will define many of these deals.

(Published in The Economic Times.)

Macro Consumer Trends: Implications for the Events Industry – (2014 March, Devangshu Dutta)

B2B event companies don’t often think about consumer spending as something directly relevant to their business. However, consumer trends can allow industry event and exhibition organizers to get an advance view of where the opportunities can lie in the future. In this Keynote address at UFI’s Asia Open Seminar in Bangalore, Devangshu Dutta shares his views about the key consumer trends in India, and the implications for the events and exhibitions industry.

(This presentation was delivered on 6 March 2014 in Bangalore, India.)

 

Don’t read much into Carrefour’s India exit

Arpita Mukherjee, Business Today
New Delhi, 8 July 2014

A day after world’s second-largest retailer Carrefour SA said that it will exit India by September end after shutting its cash-and-carry stores, RPG Enterprises Chairman Harsh Goenka tweeted that "the French can never understand India".

However, analysts say that too much should not be read into the company’s exit from India.

"Most global retail giants have struggled to successfully export their business model to new continents," says Arvind Singhal, chairman, Technopak Advisors.

He said the issue has nothing to do with the scope of the sector in the country and it is not a failure of government policy. The other global players in the sector are Germany’s Metro, American chain Wal-Mart and local players such as RIL’s Reliance Market.

Carrefour, since its entry in 2010, was not able to find a partner to expand its business beyond five stores.

"It has had a difficult time engaging with India over the last seven to eight years and could develop only a small cash-and-carry footprint without a partner," says Devangshu Dutta, Chief Executive, Third Eyesight. "We can debate on whether it was because they could not find any Indian partner whose motivations and profile matched Carrefour’s requirements or whether it was the operating conditions that it found difficult," he says.

Singhal adds the retailer, which operates more than 10,000 stores in 30-plus countries, has exited from several other countries in recent years, much like its peers Tesco and Wal-Mart. The French firm had moved out of markets such as Singapore, Greece and Malaysia.

The cash-and-carry, or the wholesale business in India is not easy to operate. Add to that the rules on local sourcing and state-wise restrictions on the operations, companies such as Carrefour are likely to struggle.

"It is important to remember that unlike Metro or even Wal-Mart, cash-and-carry is a very small part of the business for Carrefour globally," says Dutta. "Carrefour may have felt that it was ‘logical’ to disengage from India and instead focus on their other larger markets such as Europe since there are significant management challenges even in those geographies," says Dutta.

(Published in Business Today.)

Branding with a cause

Shipra Srivastava, Retailer
New Delhi, Issue dated July, 2014

It’s an industry which is not just based on creating a ‘hype’ for a product or service and senior advertising executives are also increasingly focusing on spreading awareness for a brand via a campaign based on a social cause. And, while this strategy has been effectively leveraged by a leading tea brand, but the awareness created amongst the target audience from this strategy has also led players like Coca Cola, Hindustan Unilever (HUL) and Tata Chemicals to adopt a similar strategy for products / brands in their portfolio.

As a result, Coca-Cola India recently launched a campaign Sahi Daam to educate consumers not to pay more than the maximum retail price (MRP) printed on its bottles, in a bid to curb this unlawful practice.

Marketing consultants also pointed out that consumers in tier-II and-III towns are very price sensitive, and with the emphasis on ensuring product availability at the correct price, it would help to enhance sales growth in this segment.

Striking a similar view, a Coca-Cola India spokesperson, said, “We are attempting to ensure the customer gets a fair deal.”

Similarly, Lifebuoy, which is a leading brand of HUL, had the ‘Jump Pump’ campaign in 1,500 government-run schools in Uttar Pradesh and Maharashtra that are part of the mid-day meal scheme, and it enabled water pumps to be easily operated. The FMCG major was attempting to improve hygiene standards amongst students before their meal.

Koshy George, General Manager – skin cleansing, HUL, said, “We have attempted to improve hygiene standards amongst children.”

Tata Salt, too, attempted to emphasise the health-related aspects for consumers via free blood pressure check-up camps organised in several cities.

A relevant message

Advertising experts stressed that a brand leveraging a social cause in its campaign needs to ensure that the message is relevant and at the same time ‘connected’ to its core attributes.

In addition, such campaigns also help to break the ‘clutter’, which has plagued the communication strategy of several consumer-related categories.

Suvadip Ghosh Mazumdar, VP at Leo Burnett, said, “A socially relevant message goes beyond a simple sales ‘pitch’ and if the campaign connects with the target audience, brands can gain considerably.”

Similarly, Devangshu Dutta of the consultancy Third Eyesight, stressed that a campaign should ensure a direct link between a brand and its ability to solve a particular problem facing society.

Clearly, helping society can also pay big dividends for brands.

(Published in Retailer – July 2014 print issue.)