Arpita Mukherjee, Business Today
Mumbai, 28 September 2014
a decade ago, Suresh Goklaney, visited his sister in Daytona Beach,
US. There, the Executive Vice Chairman of Eureka Forbes happened
to meet Fred Tepper, Founder and President of Argonide Corporation,
which makes nanotechnology-based water purifiers. The company
then adopted this technology to launch a portable water purifier,
Aquaguard On The Go, in 2014.
Seven years ago, a Eureka Forbes salesperson, also called a Eurochamp, pointed out to Goklaney that the quality of water supplied to Indian homes varied through the day. The company subsequently launched a water purification device, Aquaguard Sensa, in 2008. The device, automatically detects impurities, senses the water quality and adjusts itself to the level of purification required.
More recently, in July the company took an initiative to use refrigeration techniques that condense water from atmospheric air in Mumbai. The technique can generate 120 litres or 500 glasses of drinking water every day.
The above examples illustrate that there has been change and development at the three-decade old company over the years. Indeed, the Shapoorji Pallonji Group company, credited for bringing in the concept of water purification into the country and known to scale up cautiously, has been making an effort to retain and grow its market share in an intensely competitive environment, particularly in its core water purifier business.
Still, experts feel that the company has been slow to change given the rapidly changing market dynamics. Harminder Sahni of Wazir Advisors, a Gurgaon-based retail consultancy, suggests that the company, known for its signature water purifiers and vacuum cleaners, has to evolve rapidly to keep its nose ahead of competition. "Whatever Eureka Forces is attempting had to be done because as a company you cannot stop trying things," he says.
The water purifier business accounted for about 50 per cent of
the company’s revenues in fiscal 2012/13, the latest period for
which figures are available. It is a leader in the Rs 3,400-crore
market. The company has more than 70 per cent share in the ultraviolet
(UV) purifier market but is facing stiff competition in the fast
growing reverse osmosis (RO) segment from Kent RO Systems. Kent
claims it is the leader in the RO market with 40 to 45 per cent
Eureka Forbes says it has a 36 per cent market share. Meanwhile,
several other players have emerged as a threat to Eureka Forbes
including Hindustan Unilever (HUL), Nasaka, and Ion Exchange.
"In recent years, while the market has grown enormously,
intense competition has significantly impacted the lead and advantage
that Eureka Forbes had. Both new business as well as repeat revenues
from existing customers have been hit," says Devangshu Dutta,
CEO of consulting firm Third Eyesight.
An issue for Eureka Forbes has been its reliance on direct sales.
Its salespersons (Eurochamps) go from door-to-door conducting
product demonstrations and convincing people that their appliances
are the best. Eureka Forbes has an army of more than 8,000 Eurochamps.
However, with the emergence of gated communities, cold calling
as a strategy has not been as effective.
It has forced the company to seek new ways of reaching out to
customers. "The challenge in the environment is how I get
you to open the door with gated communities," says Goklaney,
adding that the company would never look at disbanding its army
of salespeople. "My core is my eurochamps who have built
the brand over the years."
To tackle the problem, the company has moved over to digital
marketing to persuade customers to ask for demos. The company
today is strongly visible on the digital platform, and also in
some newspapers ads, flashing numbers for customers to call. Retail
sales is still not a big focus area for the company. Sahni of
Wazir Advisors suggests that the company’s dependence on direct
sales, ignoring retail, is a handicap for Eureka Forbes.
Companies such as Kent, HUL and several others are not just innovating but are also retailing their products aggressively. Kent, for instance, has not just roped in a celebrity (cine star Hema Malini) to endorse the brand, but has also unveiled new products. It recently launched a water purification product, Kent Tap Guard that cleans tap water and makes it safe for household use such as washing fruits and vegetables. "The company is expanding into various categories in a small way but is focused on the RO segment," says Mahesh Gupta, Chairman, Kent RO Systems.
‘In recent years, while the market has grown enormously, intense
competition has signifi cantly impacted the lead and advantage
that Eureka Forbes had. Both new business as well as repeat revenues
from existing customers have been hit,’ says Devangshu Dutta,
CEO, Third Eyesight.
Water purification products from the likes of HUL and Kent are
far more visible at retail counters than Eureka Forbes but the
company is undeterred. "We believe that direct sales is our
core and we would persist with the strategy," says Goklaney.
Eureka Forbes appears to have fallen behind in one key emerging
business segment – gravity-based water filters that can work without
electricity. In 2009, Kent launched this product in India, seizing
the first-mover advantage – Eureka Forbes has yet to establish
its foothold in the market. The market potential for gravity-based
water filters is huge given the crippling power shortage in most
parts of India, say industry executives. While about 92 per cent
of urban areas are electrified, rural electrification is just
55 per cent. "People use gravity-based water purifiers in
regions that have poor or no electricity supply," says Sasidhar
Chidanamarri, Associate Director, Environment & Building Technologies
Practice at Frost & Sullivan, a consulting firm.
In the vacuum cleaner market, Eureka Forbes’ "Euroclean"
range of products have a market share of around 90 per cent. But
there has been a dip in revenues from vacuum cleaners recently
along with a marginal decline in market share. The segment accounted
for about 16 per cent of the company’s revenue in 2012/13.
Meanwhile, the company plans to scale up its international business. It already accounts for 40 per cent of its revenues with the acquisition of Lux International and going forward is expected to constitute about half of the topline. With the expansion, the company plans to launch a range of new home appliances products internationally. Indeed, the Lux buyout gives Eureka Forbes access to markets in 40 countries across Europe, Africa and Latin America.
The company has also been getting into new segments such as air
purifiers, fire extinguishers and security systems as an alternate
strategy – markets that are still fairly niche and also where
the company does not have a first mover advantage. The air purifier
market in India was estimated to be valued at $12.65 million in
2013, while the fire and safety equipment market was estimated
to be about $3.16 billion in 2013, according to research firm
However, despite the various challenges and competition for Eureka Forbes, Goklaney is confident that the company is on the right track. So is Shashank Sinha, the company’s Senior General Manager – Marketing, who says the company is now seeing traction in the air purification market as well. "It is just that we are not shouting from the rooftops about our growing business," he says.
And, for a company that depends heavily on its sales force and
franchise, the company realises the imperative of creating a leadership
pipeline. People like Shashank Sinha and Marzin R. Shroff, CEO
– Direct Sales, and Senior Vice President, Marketing, are being
groomed to eventually take over from Goklaney. "I am here
right now as a night watchman and they are here as opening bats
and ready to take on," he says.
But analysts feel that Eureka Forbes needs to take drastic steps
to take on competition. "Incremental things won’t help,"
says Sahni. "It’s our actions and deeds that tells you whether
we’re aggressive or not. But, we’re doing things at our pace.
We don’t want to push things to an extent that people stop enjoying
their work," says Goklaney.
(Published in Business Today.)
Alys Francis, Nikkei Asian Review
New Delhi, 27 September 2014
A few months ago, a group of wealthy industrialists and other businessmen gathered in a plush Mumbai hotel suite to pore over a selection of John Lobb handmade welted shoes that cost up to $12,000 a pair.
It may just be a temporary "pop-up" store, but Thomas Collette, John Lobb’s commercial director for India, was excited. He said that a local agent for the bespoke shoemaker would start taking orders by appointment only. "This is a big step for us and a big step as well for the country," he said.
Although international luxury brands have opened flagship stores all over developing Asia, they have hardly touched the Indian market. This may be about to change.
After all, many people in the population of 1.3 billion are steadily getting wealthier. According to the Associated Chambers of Commerce and Industry of India, luxury spending will reach $14 billion a year by 2016 compared with $8.5 billion in 2013.
But foreign luxury brands have had a tough time in the country, partly due to restrictions on investment.
Many major brands, such as Prada and Versace, only entered after 2006 when the government began to allow foreign investors in single-brand retail operations. Prior to that, foreign companies were only allowed to operate wholesale "cash-and-carry" outlets.
While companies welcomed the chance to open in India — albeit
with the requirement that a local partner owned at least 49% of
the business — they struggled with the lack of suitable retail
space and trained staff, bad supply chains, and a raft of customs
taxes and duties, as well as a long wait to turn a profit because
there was only a nascent market for their goods.
Since 2006, Prada and Gucci have been among the 50-odd brands that have either left India, restructured or quit soured partnerships, according to a 2012 report by retail consultant Third Eyesight.
In 2012, India started allowing full foreign ownership of single-brand retailers but included restrictions such as the need to source at least 30% of products from local small and midsize enterprises. That is virtually impossible for most luxury labels since their brand integrity often rests on the craftsmanship of products made in their home country. Unsurprisingly, the new rules did not trigger an influx of foreign brands.
Jones Lang LaSalle, the real estate company, in August ranked New Delhi and Mumbai near the bottom of its list of 30 major Asia-Pacific cities in terms of the presence of top luxury brands.
Some foreign brands, like John Lobb, have decided that franchise and distribution deals are a better way to establish their presence in a difficult market.
John Lobb’s local partner is Regalia Luxury, which spent a year wooing the Hermes-owned brand before securing a deal to sell John Lobb’s "By Request" line of shoes that are custom-made for each client.
Regalia Luxury is one of a number of Indian companies eyeing the rising number of style-conscious local shoppers who are hungry for Western luxury brands but are wary of entering the market on their own.
"From a longer-term perspective, there’s immense opportunity if you do it the right way," said Regalia Luxury founder Pratik Dalmia, who clinched a franchise for bespoke Italian suitmaker Kiton in 2013 and expects to sign up two more brands by year-end.
But he admits that the market boom has yet to start and that operators will have to "run a tight ship" for the next couple of years.
Indian companies that represent foreign luxury brands need to have a long-term view and keep a close eye on what the younger generation likes — these are the customers with the most potential, since they are more exposed to overseas fashion trends.
"India is all about the customer of tomorrow," said Darshan Mehta, CEO of Reliance Brands, a subsidiary of Reliance Industries that was set up in 2007 to bring foreign luxury fashion to India.
Mehta often sits in a cafe at DLF Emporio, New Delhi’s first luxury mall which opened in 2008, and watches shoppers. He said many people shop at Zara but they walk into Gucci and Zegna just to have a look. "That is what makes markets like India so promising: the aspirational consumer," he said.
Unlike China, where a lot of luxury retailers are now at a consolidation stage after years of rapid expansion, brands are still struggling to find space in India for their first shops.
Even in Mumbai, the Emporio is the "only true luxury mall," according to Mehta.
It may take some time before India’s luxury market takes off, but the market has been boosted by a stream of well-off Indian professionals and students returning after working and studying abroad, including many bankers who left Wall Street and London after the global financial crisis.
Luxury players are also expecting a boost from the introduction of a Goods and Services Tax, which was promised by India’s new government and would get rid of complex multi-level taxes that are hampering the sector.
Reliance Brands, which also represents Reiss and BCBG Max Azria, expects to add three more brands to the company’s stable of 16 foreign brands by year-end.
A few pioneers are even setting up boutiques in smaller cities. Bangalore firm Fervour, which has licenses to sell Nina Ricci and Christian Lacroix, is planning to expand to Chennai and Hyderabad.
But most don’t see these cities as viable markets just yet.
"There is no sustained luxury market outside of Bombay and Delhi," Mehta said. He expects luxury demand outside the two main cities to take another three years to reach critical mass.
Sanjay Kapoor, the founder of distributor Genesis Luxury, said India’s luxury market is not yet at the point where China was 10 years ago, even if the potential for growth is immense.
Kapoor founded Genesis Luxury in 2008 to sell foreign luxury brands in India and has deals with Jimmy Choo and Armani, among others.
"As awareness and retail space spread, demand will accelerate in smaller cities in the interior of India," Kapoor predicted.
Amid the shortage of high-quality retail space, one option is to use the "shop in shop" model.
R&B International rents small spaces in other retailers’ stores to sell Australian luxury label Easton Pearson. The manufacturing firm supplied embroidery to the brand for years before nabbing a distribution agreement in India in June.
Dalmia also said he is in no hurry to open flagship stores for John Lobb and Kiton before 2016.
Instead he is targeting ultra-rich customers who want the pampering that comes with exclusive, by-appointment-only services. Clients are shown samples of Kiton’s made-to-measure suits and John Lobb shoes, and then measured by a trained team at a place and time that suits them, often at home in the late evening.
Collette said he’s been pleasantly surprised by how well the brand has been received in India. While the brand has wholly-owned stores in Japan and the U.S., Collette said it would have been impossible for it to enter India alone.
(Published in Nikkei Asian Review.)
Nayantara Narayanan, Scroll.in
Bangalore, 25 September 2014
As Prime Minister Narendra Modi made his way to Tumkur near Bangalore on Wednesday morning, several newspapers carried full-page ads announcing that he was “inaugurating the era of food prosperity; to share the joy of food with farmers entrepreneurs and consumers”.
Modi was opening an integrated food park, established and run by the Kishore Biyani-led Future Group. The 110-acre facility has been established under a scheme of the Ministry of Food Processing and is Biyani’s giant step towards becoming a leader in the fast moving consumer goods business.
People in India are working longer hours, commuting longer distances and cooking less. The demand for ready-to-eat food is rising and with it the business of food processing. Kishore Biyani, the founder of the Big Bazaar supermarket chain, is looking to tap into this food processing potential at the India Food Park, in which he plans 50 units for food processing and facilities to make Indian savories and snacks, frozen food products, chutneys, pasta, dry fruits and nuts, chocolates, and more.
Biyani sees the food park as a giant “rasoi” for Future Group’s branded food business. What the park will essentially do is cut out the middle-men, give the company control over the quality of its food products and improve it profit margins.
The company estimates that as much as Rs 1,000 crore will be invested in the park in the next three to five years. It has already invested Rs 250 crore into the facility, having received assistance of Rs 50 crore from the ministry.
The park is set up to collect produce, especially fruit and vegetables, from agricultural cooperatives in the region. A manufacturing centre in the park will play host to other companies that want to set up food processing units. The park will provide the infrastructure – energy, water and sewage facilities, office space and so on. It will also have multiple cold storage facilities to keep food fresh.
“What a facility like this does is take away some of the friction of doing business in India,” said Devangshu Dutta, chief executive of the consumer goods consultancy Third Eyesight.
The government’s food park scheme started in 2008, the first mega food park built in Andhra Pradesh in 2012 and several others set up after that. So what makes the Tumkur park special? Unlike other mega food parks that are food-manufacturing centres, this one has better access to the market. “If you have the ready market, you can concentrate on productivity and give it your best shot,” said Prashant Agarwal, joint managing director of consulting firm Wazir. “The advantage of companies like Future Group coming up in processing parks is so that they can bring in investments and then marketing is not a problem.”
While India Food Park will share the joy of food with entrepreneurs, whether farmers and consumers will feel that same joy remains uncertain. “Ultimately both the consumer and manufacturer will benefit but by how much not one can say,” Agarwal said.
Said Dutta, “I don’t think it necessarily translates into benefits for the farmers or, for that matter, the customers. It definitely benefits the companies and it depends on them whether they will pass some of that upstream or downstream.”
(Published in Scroll.in.)
Ankita Rai, Business Standard
New Delhi, 22 September 2014
* Future Group plans to invest Rs 100 crore over next 18 months to provide consumers a ‘single view’ of its many brands across physical and digital channels. It is targeting 30 per cent increase in business once its omni-channel platform becomes operational.
* Infiniti Retail, which operates a national chain of multi-brand electronics stores under the brand name Croma, has started delivering orders placed online the same day in 16 cities where it has its stores. The number of daily clicks on Cromaretail.com stands at 2,10,000.
* Textile manufacturer and the flagship company of the Lalbhai Group, Arvind Ltd, recently launched its online custom clothing brand, Creyate, on the back of which it hopes to build a Rs 1,000 crore business in the e-commerce space over the next three years.
* Trendin.com, the e-commerce website of Aditya Birla Nuvo-run Madura Fashion & Lifestyle, has witnessed 200 per cent growth in its online orders since its launch in 2013 and is planning to launch store pick-up and return services. Trendin.com showcases merchandise for men, women and kids and houses brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England and People.
Get the drift? Most traditional retailers are moving towards omni-channel marketing. As consumers move seamlessly between digital and physical channels, even during the same shopping trip, the lines between online and in-store shopping is getting blurred, and reaching out to consumers through all possible shopping points is becoming imperative.
"When we see the world through the eyes of our consumers, we make better marketing decisions," says Kit Yarrow, professor of Marketing and Psychology, Golden Gate University, San Francisco. "A big adjustment that businesses need to make is to understand that their shoppers do not see the world as online versus in-store. It is fully integrated in their minds and lives. But until very recently, most businesses were set up with an online division that often competed with their brick-and-mortar division. That’s just going to confuse consumers, and it is not leveraging insights across teams for the betterment of the company," Yarrow says, adding, "Omni-channel retailers need to get out of silo thinking and integrate various functions."
Indeed, the survival of traditional retail depends on it. How? According to the latest AT Kearney report on omni-channel, shoppers who jump in and out of platforms are more loyal and spend more than single-channel shoppers. It also showed that brand loyalty is directly related with retail channel usage. Such consumers are 15 per cent more likely than single-channel consumers to recommend a retailer and that the average spend of three-channel consumers is more than twice that of single-channel shoppers. "It is about staying relevant. With the way the retail ecosystem is evolving, technology will change the way a customer experiences retail," says Ankur Bisen, senior vice-president, retail and consumer products, Technopak Advisors.
Think of it this way: traditional retailers are in a unique position to reap the rewards of a well-laid out omni-channel strategy. As Kumar Rajagopalan, chief executive officer, Retailer Association of India (RAI), points out, "These players already have a trusted brand. An extension of the brand offerings over other channels helps in creating better customer-centricity."
The biggest challenge physical stores face is being able to showcase all the stock they have under the roof. High real estate and distribution costs also stand in the way of rapid expansion. According to a Technopak report, ‘E-tailing in India’, 56 per cent of the total organised retail is in the top 24 cities, which includes metros, and Tier-I cities. This is where the learnings from their peers in developed markets – namely, Walmart and Best Buy – can come handy. To counter the challenge posed by the likes of Amazon, most big box retailers in the US have gone online and are also opening smaller standalone stores. That’s the idea behind endless aisles, which implies that consumers have access to not just product held by the high-street outlets, but smaller stores or even online. The in-store computer terminals and kiosks allow customers to shop and purchase from a retailer’s entire inventory. Says Kumar of RAI, "Offline retailers in India can use multichannel capabilities to bring to life the concept of endless aisles, which means they would offer things that are not necessarily restricted to the physical location or capacity of the store. "
Now look at how Indian retailers are building their omni-channel capabilities. Tata Group’s retail arm Infiniti Retail advertises a shop-online-pick-up-in-store service on its online portal. Consumers can also return or exchange the products bought online in the stores. It also plans kiosks at places like airports where people can surf and place orders. Ajit Joshi, CEO and MD, Infiniti Retail, explains the benefits, "The ‘store pickup’ concept, which allows customers to order online and pick it up later from store, is popular in electronics as consumers need a little bit of handholding in terms of personalising the product being purchased."
Future Group is targeting 30 per cent increase in business once its omni-channel platform becomes functional. It recently announced a tie-up with Hybris Technology to roll out its omni-channel platform. "By next year, consumers will have the option of shopping online from our stores. We plan to first implement it in Ezone, followed by Planet Sports and Big Bazaar. We will offer services like cash on delivery; we will set up kiosks manned by franchises who will deliver at your doorstep; you can order online and pick from the store. We want to reach the customer whom we can’t reach through physical stores," says Kishore Biyani, CEO, Future Group.
"We will leverage our modern warehouses, the distribution centres and the huge customer data that we have to offer a seamless experience," adds Biyani.
Shoppers Stop, which also operates an e-commerce portal, is confident that its omni-channel approach will start showing results within the next 24 months. Says Govind Shrikhande, customer care associate and managing director, Shoppers Stop, "Our omni-channel retail approach aims to create a seamless and convenient shopping experience for customers. A customer can shop at the neighbourhood Shoppers Stop store, shop online (www.shoppersstop.com), browse through the latest trends on our six million-plus-strong Facebook page, view a fashion tutorial on our YouTube channel and buy merchandise, shop at our airport stores… you name it. Customers can shop online and exchange products at our physical stores."
Aditya Birla Group-led Madura Garments, which owns brands like Louis Philippe and Van Heusen, unveiled its shopping portal TrendIn.com last year and goes as far as to offer an in-store alteration facility for orders placed online. Says Shivanandan Pare, head of e-commerce, Trendin.com, Madura Fashion & Lifestyle, "We launched Trendin.com to cater to the changing consumer. The idea was if the consumer is going online, the brand should be there. The same thinking led us to launch exclusive branded outlets 10-15 years back." The brand also has a responsive mobile optimised site. The experience is similar to an app browsing screen.
Eyewear retail chain GKB Opticals launched its e-commerce portal in 2012. While eyewear can be a difficult category to market online, the 50-year-old retailer hopes to leverage the learnings from its 60-plus retail outlets to power its online stores. The website has a ‘try on mirror’ and a ‘face shape’ guide to help customers try-out products sitting at home. Consumers can also return, exchange and get the frames they purchased online serviced at all of its retail outlets. Dhruv Gupta, CEO, GKB Online, says, "Having an online presence has also increased traffic and engagement at stores."
For its part, Arvind’s Creyate allows consumers to create a garment on a three-dimensional (3D) visualisation engine. Customers can touch and feel apparel material and sit at the store’s iMacs to design their clothes. A 3D visualisation engine allows them to see how their final garments would look. The store also has a magic mirror that can be operated through hand gestures and consumers can use it to virtually try on garments. "As the Indian e-commerce market evolves, customers will become more discerning and come to the internet for things other than discounts and wide offerings. For the apparel category, experiential e-commerce will become more relevant," says Kulin Lalbhai, executive director, Arvind Ltd.
"For brick-and-mortar retailers to successfully move into other channels needs radical rethinking in terms of the service ("always open"), speed ("right now"), scale ("everywhere")," says Devangshu Dutta , chief executive, Third Eyesight.
An effective omni-channel strategy really needs to embrace every touch-point as one unified whole. "Studies have shown that physical retailers who simply try to mimic pure-play online retailers are not taking advantage of their legacy," says Nikhil Prasad Ojha, partner & head, India’s Strategy Practice, Bain & Company. "Firms must integrate both the channels if only to avoid duplicity of efforts." Agrees Vivek Mathur, CEO, Giftease Technologies, "Given that many of these are older, larger businesses, silos are often too hard to break, unless driven from the top."
In contrast, in the more developed Western markets, physical stores have played an instrumental role in the growth of omni-channel retailing. According to a recent Forrestor study, ‘Minding the Omni-Channel Commerce Gap’, such synergy has many benefits – physical stores can cut merchandising costs and improve customer satisfaction when they move online. By delivering products from local stores, online players can cut delivery cost and time. "Brands need to use their distribution network when going online. Instead of fulfilling an order from a central warehouse brands can use their nearest stores to fulfil orders," says Sushant Kashyap, who heads fulfillment and omni-channel services at Delhivery, an e-commerce-focused logistics service provider, which also offers omni-channel services to retailers to help them integrate their myriad channels.
Gupta of GKBOptical.com says that the biggest challenge is to ensure that the product is shipped on time. "Leveraging inventory across channels and geographies becomes difficult when you take into account various state tax laws," he adds. Infiniti Retail’s Joshi says, "We are working with our suppliers so that we can track each other real time. For instance, if we are pushing a sale, they should be in a position to transfer stock to the nearest distribution centre. We are also trying to minimise the time taken for a supplier to reach our local warehouse by improving our logistics intelligence."
Croma is leveraging its distribution muscle to deliver orders the same day in 16 cities where it has its stores. "If a consumer orders before 2:00 pm, a Croma employee will deliver it the same day. He will brief the consumer in case she wants product demonstration and help with data transfer for mobile phones. This is a key differentiator because everybody else is using a courier service," says Joshi, adding, "Currently, Croma has 97 stores and it has distribution centres in Bangalore, Delhi, Mumbai, Chennai Hyderabad and one in Gujarat. With this network we are currently servicing more than 300 cities and towns."
On its part, Madura leverages its central warehouse backbone to ship products. "Earlier the warehouses were shipping bulk orders. But once we went online, we had to build capability to ship individual customer orders. This required huge investment in technology and employee training to equip them to handle single shipments," says Pare.
(Published in Business Standard .)
Purvita Chatterjee/M. Somasekhar, The Hindu Businessline
Mumbai/Hyderabad, 21 September 2014
At a time when Swedish retailer Ikea is making big plans to enter India, the country’s largest retailer Reliance Retail is winding up its furniture format under Reliance Living.
All the stores under Reliance Living are now being shut down across cities such as Bangalore, Delhi and Hyderabad.
“We had 12 Reliance Living outlets across the country and most of them have shut down as furniture is no longer a focus area for the company,” said an official from Reliance Retail.
Reliance Living stores occupied large space across these metros stocking furniture, furnishing, home ware and kitchen items. Even other organised players such as Future Group’s Home Town and Lifestyle Group’s Home Centre have been struggling to make money from their respective formats.
In the case of the Future Group, it had to merge its Home Town stores with its durable format under e-zone to help it break even.
According to Devangshu Dutta, Managing Director, Third Eyesight, a retail consultancy, “The slow stock turn is the biggest issue for furniture retailers as the inventory and retail space get locked up unlike in the case of fast moving categories such as apparel, food and grocery.
“Besides, competitiveness of the fragmented unorganised retailers is too strong for the organised players to make money easily. Indian furniture retailers have yet to discover a model which works for them.”
Apart from furniture, last year, the multi-format retailer shut down its books and music format — Reliance Time Out — and even its non-vegetarian offerings under Delight. “Almost 40-odd stores under Reliance Time Out were shut since categories such as books and music have moved to the digital platform. We are constantly rationalising our formats depending on what works for us,” the official added.
However, other specialty retail formats such as Reliance Digital and Reliance Jewellery are helping boost margins and profitability for the company.
Today, it is the value formats (Reliance Fresh, Super & Mart) which are the biggest growth drivers for Reliance Retail. Value retailing now accounts for 55 per cent of the company’s ?14,500-crore turnover.
It is in the process of expanding its value formats and e-commerce will be a major part of these. Damodar Mall, CEO – Value Format of Reliance Retail, said: “We are already doing a pilot among our employees for e-commerce.”
Meanwhile, its ‘cash and carry’ format under Reliance Market has established leadership position in the category with 32 operational stores and 1.2 million registered members.
(Published in The Hindu Businessline.)
Nikita Garia, MINT
Bangalore, 17 September 2014
booking service TaxForSure, which recently raised $35 million
in funding, has cut rates sharply, joining a fare battle with
rivals Olacabs and Uber to grab a bigger share of a rapidly growing
Although TaxiForSure had earlier said it would resist price cuts,
the company, controlled by Serendipity Infolabs Pvt. Ltd, announced
a 25% price cut for booking through its app; a week earlier, it
cut prices by half for rides booked between 10am and 4pm via its
TaxiForSure was under pressure to cut prices, as rivals OlaCabs
and Uber have seen a significant jump in demand after they slashed
prices over the past two months.
“We are running the discount to promote booking through
the app while our usual prices remain the same. We don’t
plan to change our price model,” said Aprameya Radhakrishna,
co-founder of TaxiForSure. The company plans to run these discounts
“for at least more than a month.”
Radhakrishna said the company was giving discounts to encourage
users to book rides through its app and that the price cuts were
not influenced by competitors.
“If the booking comes through our call centre, on an average
we have to incur a cost of Rs.30 per transaction, considering
into account the rental costs and salaries of the staff. So giving
the customer discount for using the app or our website in the
short term will eventually be good for us as we would be spending
less on our call centre later,” said Radhakrishna, adding
that at present it receives 50% of bookings through call centres,
35% through the app and the rest from its website.
“The move will help us get more transactions done by employing
the same number of people in the call centre.”
This week Uber, which raised a mammoth $1.2 billion in June from
the likes of Google Inc., Goldman Sachs and others, slashed the
price of its higher-end service UberBLACK by 25% in New Delhi.
In August the company cut prices on all its rides by 25% in Bangalore.
The San Francisco-based mobile app is also offering discounts
of 50% on airport rides in Bangalore. Olacabs, which received
Rs.250 crore from investors in July, reduced fares by 25% last
Olacabs and Uber say they have seen a spike in demand since they
announced price cuts over the past two months. “There has
been a significant rise in demand after the price cuts,”
said Anand Subramanian, director of corporate communications at
Olacabs, adding that the “earnings of drivers has gone up
by upto 40% as the drivers are now doing more trips.”
Uber, too, has seen a jump in demand after it cut prices by 25%
on all its rides in Bangalore, the largest market for cab companies.
Both Olacabs and Uber say that they have reduced prices because
they are squeezing out more rides from each driver and also adding
hundreds of new cars.
While Olacabs has announced permanent fare changes, Uber like
TaxiForSure is running promotional offers.
“There is no time line on how long we will continue with
the reduced price offers. We are continuously analysing data on
driver earnings and customer demand, both of which have gone up
after the price cuts. So we may either hold on to these prices
or may further reduce them,” said Bhavik Rathod, general
manager at Uber in Bangalore.
Raghunandan G., co-founder at TaxiForSure, had told Mint in an
earlier interview that discounts put pressure on the earnings
of companies. “When we ran a discount last time, we had to
pay the extra money to the drivers from our pocket. The other
players are losing money on each ride because of these price cuts.
If they continue with these low prices, how will they earn money?”
he had said.
Analysts cautioned that cutting prices and losing money at the
cost of gaining share wouldn’t work over the long term.
“These businesses have raised money in the recent past,
but they need to balance out their operating costs. A loss making,
market share gaining strategy can be managed for a short while
but it won’t work in the long term.” said Devangshu
Dutta, chief executive at Third Eyesight, a consultancy.
(Published in MINT.)
Reghu Balakrishnan, Business Standard
Mumbai, 11 September 2014
Indian private equity (PE) investors are gearing up to participate in the e-commerce growth story. In recent past, back-end logistic players have been on radar of PE players. India’s e-commerce market, which is expected to reach $20 billion by 2020, has seen the presence of five-six large organised specialised logistics players.
Devangshu Dutta, CEO of Third Eyesight, a retail consultancy, said: "While building a retail and consumer brand carries a potentially high reward, they are also high risk as shown by the attrition among e-commerce companies. On the other hand, no matter which specific front-end companies survive, back-end services and vendors will be needed by most of them."
Logistics services company Delhivery has raised Rs 212 crore led by Multiples Alternate Asset Management in series C fund-raising, with the participation of existing investor Nexus Venture Partners.
Another Delhi-based e-commerce logistics solutions provider, Ecom Express, raised Rs 100 crore ($16.5 million) from Peepul Capital earlier this week.
Srini Vudayagiri, investment director at Peepul Capital Advisors, said: "Any business, which is part of the e-commerce space, will also see a significant momentum in future. Logistics, which contributes 9-10 per cent of the overall e-commerce market, will have a huge potential when e-commerce will touch $20 billion in a few years."
According to him, specialised e-commerce logistics providers have an upper hand over the other normal business-to-business logistics players, because collection of cash (in case of cash-on-delivery), returned items and delivery need special attention compared with general logistics.
According to a recent report by Accel Partners, online shopping of physical goods will increase from $2 billion in 2013 to $8.5 billion 2016, while online shoppers will double to 40 million in 2016 from 20 million in 2013.
To tap the fast-growing market, logistics players are all set to grow rapidly with the latest round of PE funding. T A Krishnan, co-founder and CEO of Ecom Express, said, "From handling five million packages in FY14, we plan to grow to 20 million packages by FY15." The company will increase the number of employees from 3,000 to 10,000 in the next five years. It will also expand into 500 cities over the next two years from 100 cities at the moment.
Recently, Delhi-based Holisol Logistics, a provider of back-end logistics services to e-commerce companies, received $1.5 million in venture funding. Holisol’s customers include Fab Furnish, FreeCultr, Jabong and OfficeYes, Pepperfry and Urban Ladder.
"One of the factors in favour of back-end companies is modest valuation multiples compared to emerging retail or e-commerce companies, and a back-end vendor with a reasonably diversified customer portfolio is a lower risk investment over the mid-to-long term," Dutta added.
However, competition will get tough for specialised players as major logistics players such as DTDC Courier, Gati (Gati Connect), Blue Dart and Aramex are already in the e-commerce business with their new divisions. Last year, DTDC Courier & Cargo set up DotZot, a separate unit for providing logistics support to online retail service providers. Similarly, eKart, the in-house logistics arm of Flipkart, had also extended its services to other sellers.
(Published in Business Standard.)