admin
December 12, 2014
Vijaya
Rathore, The Economic Times
New
Delhi, 12 December 2014
Brioni, a luxury menswear brand from Italy, is currently looking for the "perfect" location in a south Delhi upscale mall to open a store, almost after a year it shut down its earlier store located inside a five-star hotel.
Store location is not the only change that Brioni has initiated in the country. It has found a new partner to sell its jackets, ties and shirts in India.
Another luxury brand, Etro, is holding talks with a number of retailers in India to make a comeback, after it split ways with Genesis Luxury and all the India stores were shut last year.
A host of popular brands, including Ferrari, Bang & Olufsen, Montblanc, Etro, Brioni and Bulgari are revisiting their India business plans by tweaking one of the most important factors – the local partner. Reasons differ. It could either be inefficiency of the existing partner to infuse new energy and money in the business, or the desire to take control of the operations by choosing someone docile.
Iconic jewellery brand Bulgari has formed a joint venture with a new "silent partner" with an aim to have better control over its operations in this market.
"Our ambition in India is much higher than before," Bulgari chief executive office Jean Christophe Babin told ET on his recent visit to India. The decision to make direct investments in this market, instead of simply relying on a franchise partner is like "pressing the reboot button". Bulgari had ended its seven-year relationship with Mumbai-based Dia Group’s Lifestyle Tradelinks India in 2011. Likewise, Ferrari has hooked up with Yadur Kapur, a dealer of luxury cars for the Delhi market and Navnit Motors in Mumbai, splitting with Delhibased Shreyans Group.
Kapur, who is working on a plan to open a new showroom, sales and service centre for Ferrari in Delhi, says, "The brand will now be represented in the right way in the country." One of his focus areas would also be to make sure that the company sent enough cars to India to match demand and that the buyers don’t have to wait too long.
Experts point out that the change in partnerships was partly due to the natural lifecycle of a relationship between the two parties, apart from other factors. "Many pacts were originally signed for a limited period, and when that time passes, people move on," says said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
Also, as brands become more serious about the market, they revisit everything in order to infuse a fresh lease of life into the business.
"When international brands realise the importance of India and sense that the existing partner may not have the capacity, interest or potential to address the same, they move on," adds Dutta.
Etro, for example, is one of the brands looking for a new partner to conduct business in India. "We have had a meeting with them," said a senior executive of one of the top luxury retailers in India who did not wish to be identified.
Some separations are bitter. Former cricketer and businessman Dilip Doshi and Montblanc are fighting a legal battle amid allegations of fraud and deceit. Doshi claims that Montblanc pulled out of a possible joint venture at the last minute and terminated its distribution and franchise agreements in March this year.
Earlier this year, Montblanc announced a 51:49 joint venture to setup single-brand retail stores with Titan Industries, a Tata Group company.
Similarly, Brioni and Badasaab Designs (retailer of Brioni in India) went to court against each other and the legal tussle went on for some time. "A mutual settlement has been reached between the two," said a person aware of the development. Brioni is understood to have finalised OSL Luxury, which sells Corneliani menswear in India, as its new partner. OSL executives, however, did not comment on the development.
New Partners, New Plans
To begin with, most brands are working on re-establishing a retail presence besides enhancing brand visibility and "consumer experience."
Denmark-based high-end entertainment systems maker Bang & Olufsen (B&O) for instance has just opened a single-brand store in Delhi, and so has Bulgari. Ferrari and Brioni are doing the same. "We also have access to outside investment to expand B&O’s business in India," said Gaganmeet Singh, director of BeoWorld.
For the Bulgari CEO, it was important to take control of India’s operations."Though we have a partner here, we are behind the driving wheel," Babin said.
It’s not the first time brands are shuffling their relationships. In 2009, Gucci parted ways with its old franchisee Vijay Murjani and moved to a franchise agreement with investment banker Ashok Wadhwa’s Luxury Goods Retail.
Versace, is now with Infinite Luxury, but was earlier retailed by Blues Clothing Company in India. In 2012, Giorgio Armani ended its joint venture with DLF Brands to get into a deal with Genesis Luxury, run by Sanjay Kapoor.
A recent Euromonitor report said that India was the fastest-growing emerging market for luxury goods. The country’s luxury market will grow 86 per cent in constant value terms between 2013 and 2018, while China, Malaysia and Indonesia are expected to grow 74 per cent, 62 per cent and 59 per cent, respectively, over the period. India’s luxury market was expected to reach $14.73 billion by 2015 from an estimated $8.21 billion last year, with about 30 per cent of the customers coming from smaller cities.
(Published in The Economic Times)
admin
December 12, 2014
Rashmi
Pratap, The Hindu Businessline
Mumbai,
12 December 2014
Vinay
Singh does not own a debit or credit card, nor does anyone in
his family, which has lived for four generations in Bihar’s
Gaya district. Yet, they regularly shop online from Homeshop18
and Naaptol. Even their holiday hotel bookings are done online,
again without internet banking or cards. Singh instead has a mobile
wallet from Paytm, which allows him to load cash on his mobile
phone through a nearby mobile retailer or ATM and use it for all
his online transactions.
In the recent case where a customer of Uber’s car-sharing service was allegedly raped by the driver, Paytm helped Delhi Police close in on the accused. As Uber riders can only pay through Paytm under RBI guidelines for credit card use, the police downloaded the Uber app and Paytm wallet, booked a cab and directed the driver to take them to Uber’s office in Gurgaon. This was a neat ploy to track down the office, whose physical address remained unknown until then.
This new world of mobile wallets is expected to become a $20.4-billion business by the end of the year, according to a joint study by the Internet and Mobile Association of India, Payments Council of India and IMRB.
Besides loading cash, users can also sync their credit or debit card with Paytm’s mobile wallet and avoid having to punch in confidential card details during an online transaction. Several companies including PayU, CCAvenue, among others offer mobile payment services, but Paytm is different as it has its own mobile marketplace, which brings it into the league of Snapdeal and Shopclues.
Card-free shopping
“When smartphones came, people wanted to shop online and operator wallet (payment through mobile operator) was not allowed. We saw that gap and created Paytm in 2011 to build an online payment option for the masses,” says Vijay Shekhar Sharma, founder and CEO of Paytm. Short for ‘pay through mobile’, Paytm is the consumer brand of mobile internet company One97 Communications, whose investors include SAIF Partners, Intel Capital and SAP Ventures, among others.
Paytm began by offering payment services for utility bills and mobile recharges. It has expanded through tie-ups with companies since January this year, after the RBI gave its nod for mobile wallets. Shoppers can store cash on mobile phones for payments to a whole lot of retailers from Myntra to Zovi and Fabfurnish to Yepme.
“If you are on an online shopping site, Paytm gets your card details pre-filled and you just have to add your CVV number. The card details are only with us and not with any of the merchants,” says Sharma.
Paytm also takes care of any reversal of transaction. And if any merchant fails to fulfil obligations, Paytm blocks the merchant and the payment. Over 22 million have used Paytm since January, making it one of the largest mobile commerce companies.
Customers love it
Online furniture retailer Fabfurnish has witnessed this growth first-hand. “Paytm offers buyers incentives like cash-back and additional discounts. It also makes payment much more convenient. Tying with them leads to greater sales for merchants like us,” says Reeju Dutta, CRM manager of Fabfurnish.
At Fabfurnish, the number of transactions through Paytm has increased 10 times in the last six months. “Paytm drives a certain number of sales and revenues. Even though the order value may not be too high, the number of transactions through Paytm is relatively higher, making it very important for us,” Dutta explains.
Ditto for Homeshop18. Vikrant Khanna, its COO – TV Business, says: “Within a month of our partnership, 10 per cent of our online paying customers adopted this wallet service. It also gave us access to over 10 million Paytm customers and saw referral traffic.”
Currently, 12 per cent of Homeshop18’s online paying customers uses Paytm. “We are looking at launching Paytm option on all our mobile platforms next year and expect to grow by 50 per cent every month after that,” Khanna adds.
Paytm users can load their mobile wallets with cash from banks, retailers and ATMs. “We are in talks with some large nationalised banks for tie-ups. And on the retail front, we want to see that any place where a phone can be charged can also load money into a Paytm wallet,” says Sharma. He expects one million such outlets in the next three years.
Already, 16 million Paytm wallets have been created since January and the company has seen a Rs. 3,500-crore annual run rate of transactions. “Consumers have accepted us wholeheartedly. Our wallet users are growing at more than 40 per cent every month, while transactions are growing at more than 20 per cent,” he adds.
Forget cash-on-delivery
This growth for Paytm is driven by online services such as food delivery, cinema ticket bookings, travel bookings and so on. “These services typically don’t accept cash on delivery, but users want to book with assurance. We are an answer for businesses that don’t accept cash during delivery. We are an alternative to cash-on-delivery,” says Sharma. India’s e-commerce boom was primarily driven by cash-on-delivery, but Sharma believes the next wave of services including taxis and medical appointments will grow with mobile e-commerce. “But unlike e-commerce, we don’t require logistics.”
According to a study by Accel India, the number of cash-on-delivery transactions in India will drop from 60 per cent in 2013 to 50 per cent by 2016. And the share of third-party wallets such as Paytm will rise 7 per cent. Third-party wallets, despite being a new phenomenon, have a strong value proposition and will become popular quickly, just like in China. They will become a significant alternative to cash-on-delivery, the study says.
Khanna says additional factors such as greater adoption of mobile payment technology, high penetration of mobile internet and a strong demographic dividend will see young India increasingly favouring quicker, safer and convenient payment options.
Gateway to the market
Encouraged by the growing number of merchants and customers opting for Paytm, the company set up its marketplace in February. This is basically a common platform where customers and merchants can discover each other. “We are like the checkout aisle where you can pick up things on the way out,” says Sharma, adding, “we were getting traffic as we were sorting payments. So we began offering an opportunity to merchants to have their catalogue discovered.”
Globally, too, payment gateways and marketplaces have been linked — eBay and Paypal, and Alibaba with Taobao, for instance. “All marketplaces in the world are successful as they control payment to the merchant. Otherwise, you are an inventory owner and can’t control the experience of the customer and you can’t create trust. This is our fundamental understanding,” Sharma adds.
Paytm currently features a staggering 3.5 million products and over 10,000 merchants in its marketplace. “We will be the fastest to reach a million merchants in the next two years,” says Sharma.
As a marketplace, Paytm does not hold inventory. In contrast, the e-tailer owns the products in inventory-led models. “We don’t store goods but offer logistics to merchants through our cloud service,” says Sharma. Instead of big courier companies, Paytm has tied up with multiple smaller players in every location, allowing it to deliver to 20,000 pin codes across the country.
Double business
With nearly $30 million invested so far, Paytm is currently raising more money. “No other e-commerce company is using our model. There are independent payment companies such as CCAvenue and Airtel Money, while the marketplace model has Shopclues and Snapdeal. But nobody has this combination of payment+marketplace,” says Sharma.
This model, however, is not an easy one. Flipkart would know. It launched the payment gateway PayZippy in July 2013 only to shut it down a year later for want of traffic. Flipkart then tied up with payment gateway ngpay.
Devangshu Dutta, chief executive at consultancy firm Third Eyesight, says a payment gateway-cum-marketplace eases two pain points for merchants — acquiring customers and handling the payment transactions. “And, in theory, that’s something which can be delivered by the same company. But in practice, the skill sets and mindsets required are different.”
In the payment space, any company’s aim is to drive down the transaction cost, while the marketplace seeks to acquire customers, drive sales volume, drive conversion (visitors into buyers) and increase transaction value as well, he explains.
“There is nothing to say that the same company cannot execute it. But given that the marketplace model is undergoing significant changes and seeing a lot of action and competition (Amazon and Snapdeal are investing billions of dollars), it does need phenomenal execution ability to compete in that space,” Dutta adds.
Considering its dream run so far, Paytm will be hoping to ride the two boats simultaneously and successfully.
(Published in The Hindu Businessline)
admin
December 11, 2014
Sagar
Malviya, The Economic Times
Mumbai,
11 December 2014
Just
three years… and the fashion retail industry may be at the threshold
of a revolution. Jabong and Myntra, India’s biggest e-tailers
of fashion, are clocking up impressive top line numbers and, more
importantly, red hot 3-digit and 4-digit growth figures that signal
a tipping point in how urban Indians will dress themselves —
they will likely move most of their clothes shopping to e-commerce.
Consider the numbers. In three years of operations (2012-2014), Jabong and Myntra’s combined top line has hit Rs 1,000 crore for the year ended March 2014. Growth has been more than blistering.
Jabong sales in 2013-14 jumped to Rs 527 crore, from a mere Rs 4.6 crore in 2011-12 — that’s an eye-popping 11,357% growth in sales. Myntra’s Rs 441-crore top line in 2013-14 was an only slightly less staggering 558% jump from 2011-12’s Rs 67.1 crore. And in these three years, Jabong’s and Myntra’s top lines have outperformed those of brick-and-mortar fashion biggies, Zara, Levis and Marks & Spencers, which have been in business in India for between 5 and 10 years.
Plus, growth in the big brickand-mortar chains, Shoppers Stop and Future Lifestyle Fashion, which have been in operations for two decades or more, has really slowed down in comparison, over the same period.
As Amazon chief Jeff Bezos had said, the big success of fashion etailing is the biggest learning he’s taken away from India. And market analysts and fashion-conscious urban middle and upper middle classes are saying the same thing differently.
Analysts say a tipping point has been reached in e-tailing fashion. Consumers say the sheer convenience of browsing through thousands of big label options from the comfort of one’s home or office and the ease of returning clothes that don’t fit are the reasons they will stay with buying a dress through a mouse click.
"Where will I get international brands such as Dorothy Perkins, Mango, FCUK, and not-so-highpriced Harpa and Femella all in one place? I won’t ever get to browse 5,000 designs at stores and I can’t go there every day braving the traffic. But I can go to the virtual store every single day and if I don’t like what I have shopped, I can just return, all from the comfort of my chair," said Ruchi Sally, director at retail consultancy Elargir Solutions and an online shopper explaining the growth of online fashion retailers.
"Online retail has passed the inflection point as customers have stopped questioning its viability and authenticity," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
Fashion e-tailers attribute their success to multiplier effect from good customer experience and some serious brand-building efforts.
"Apart from the acceptance of e-commerce at a macro-level, we have, over time, built our reputation through customer experience. This will now translate into higher sales as we laid a strong foundation," said Praveen Sinha, co-founder of Jabong.com. "There has been a lot of focus on branding and investment to build fashion properties and technology which will help in the long run even as though it impacts profitability now."
Jabong and Myntra also attribute their growth to an increase in its product portfolio and exclusive tie-ups, especially with international brands.
The Indian online retail market is estimated to grow over 4-fold to touch $14.5 billion (over Rs 88,000 crore) by 2018 on account of rapid expansion of e-commerce in the country, according to research and consultancy firm RNCOS that projects compound annual growth rate of 4045 % during 2014-18. The current market size of the online retail sector has been pegged at $3.5 billion (over Rs 21,000 crore).
Fashion e-tailing, say market watchers, is poised to become the top category in the near future. RNCOS says while online sales account for nearly 4% of the overall apparel market, as compared to 15% for smartphones and between 5-10% for flat panel televisions, digital cameras and personal care gadgets, the hierarchy is set to change.
"It is likely that few years down the line, apparel and accessories will take over the top slot from electronic gadgets," the RNCOS report said.
Fashion e-tailing in India, say pundits, is going through the classic e-commerce growth pattern at a quick pace. In a very short time, the likes of Jabong and Myntra have crossed the first two stages — attracting the first enthusiasts and seducing a wider set with product promotions. The third, really defining stage will come when clicking for a dress becomes an even wider habit.
"Initial growth came mostly because of early adopters. The second set has come because of variety, good deals and promotions as part of customer acquisition strategy, triggering high growth. This two categories itself represent a large market opportunity. The big-bang change will be when a majority of consumers start buying fashion online, just as the first two categories are doing," said Gaurav Gupta, Deloitte’s senior director, retail.
The twist in the fashion e-tailing thread is the same as that for all e-commerce — the red-hot growth phase that’s bulking up losses. Jabong’s losses climbed from Rs 16 lakh to Rs 16 crore between 2012-14 and 2013-14. Myntra’s went up from Rs 134 crore to Rs 173 crore in the same period. In fact, the combined losses of e-commerce’s leading lights — Flipkart, Amazon, Snapdeal, Jabong and Myntra — is Rs 1,200 crore. But pundits say losses in the big growth phase is a pain all e-commerce firms have to bear and investors look at future market grab potential. On that count, analysts give a thumbs-up to the likes of Jabong and Myntra.
Fashion e-taliers are not carefree about their losses, though. Myntra, which has a more unfavourable revenue loss metric had told ET last week that it is working on cutting costs, improving back-end supply chain efficiencies, seeking more margins from brands and boosting private brand business. All this in a bid to break even in the next 15-18 months.
Analysts also say the next test for e-tailers is to keep customers happy even while reducing discounting sales. But a significant inflection point will be when a bulk of the sales will be on non-discounted products: Third Eyesight’s Dutta makes the point that Jabong and Myntra should now prepare for life with non-discounted sales, since that’s where sustainable success lies.
But while, like most other etailers, Jabong and Myntra must turn their losses to profits at some point of time, they have received validation of their business model from most the unlikely sources — their bitter business rivals in brick and mortar.
E-tailers’ customer acquisition strategies has produced sharp reactions from brick and mortar chains. But physical stores are now allying with e-tailers to expand their market share, including in apparel. Future Group is with Amazon and Fabindia is in alliance with Myntra.
Even brick and mortar, it would seem, has seen the future.
(Published in The Economic Times)
