admin
June 11, 2014
Pia
Heikkila, for the International Bar Association
Mumbai,
June 11, 2014
The
unprecedented victory by Narendra Modi in the world’s biggest
democratic elections in India has created what can only be described
as a wave of optimism, with many hoping that the country’s
economic and business climate will now take a similarly dramatic
turn for the better.
Foreign investors are watching closely in the hope that the country’s new Prime Minister is able to move swiftly to implement much needed change.
This optimism isn’t without foundation: there have already been promises to make India more investor friendly and resolve ongoing issues plaguing several foreign companies.
Core supporters were amongst the business and enterprise classes, thanks to the visible changes achieved in the state of Gujarat where Modi was the Chief Minister for the last 12 years.
Akil Hirani, managing partner of Indian law firm Majmudar and Partners and Vice-Chair of the IBA Asia Pacific Regional Forum, said the Modi has already shown potential for turning the country back onto a growth path. ‘Changes were achieved in Gujarat in terms of better roads, greater electricity connectivity and foreign investment. With a resounding majority, the government is well poised to bring about the same changes nationwide,’ Hirani says.
The ‘Modi Wave’ was born out of widespread frustration at corruption scandals and India’s inability to sustain growth. To show that Asia’s third-largest economy is open for business and on the right track, action is needed quickly. ‘Steps such as making the tax environment more friendly, working towards a time bound implementation of the Goods and Services Tax, cleaning up the balance sheets of state-owned banks, are needed initially,’ says Hirani.
But there needs to be more than words and promises: movement in a consistent direction over a long period is vital for the country’s economic success.
‘Modi has specifically mentioned that governance needs to build further on what has already been built so far. Sustained economic progress is not feasible if inconsistent or even mutually opposing policies are adopted […] Momentum for equitable development takes a long time to build in a country the size of India,’ says Devangshu Dutta, the Chief Executive of Indian management consultancy company Third Eyesight.
India’s tax battles against foreign companies have been attracting headlines and raising concerns with potential investors for some time: uncertainty about taxes and regulation in India has discouraged companies from expanding into the country. There are a considerable number of examples. Vodafone has been fighting a multi-billion tax bill through courts in connection with its 2007 purchase of the Hong Kong based Hutchinson Whampoa’s India operations. Nokia is another well-known case: the Finnish company is alleged to have wrongly claimed exemptions for software imports and is taking its legal challenge against a judgment of the Delhi High Court to India’s Supreme Court.
The list goes on: Royal Dutch Shell, General Electric and Microsoft are just few of the household names that are fighting tax cases in India.
Companies have now begun seeking assistance from bilateral pacts and pursuing international arbitration. But help may be on its way as Subramanian Swamy, widely expected to take a key policy role in the new government, announced recently that his top priority will be to change tax regulation, which experts agree could aid India’s return to economic growth.
‘They should repeal the retrospective amendment that was introduced after the Vodafone decision,’ says Vivek Kathpalia, partner at the Mumbai-based law firm Nishith Desai Associates and a member of the IBA Asia Pacific Regional Forum. ‘This will send a very positive message to the world that India is open for business and that there exists regulatory certainty.’
Kathpalia added: ‘The other is the introduction of the Goods & Services Tax. The government has said that they will try and build a consensus for this amongst all the states of India. Once implemented, this alone will add around two per cent to India’s GDP.’
India’s new Government has promised it will try to create a level playing field for all investors by limiting bureaucracy. ‘Modi’s aim is to have more governance and less government, and to this end, he has reduced the number of ministries and ministers in his government. In addition, he seeks accountability, responsiveness and results from his team members, which will benefit everyone,’ says Hirani.
India also needs more foreign direct investment (FDI). The previous government did introduce a slew of economical reforms, such as changes in the banking and retail sectors that were hailed as successes. But, in order to achieve a steady flow of FDI, the government needs to implement further reforms, and not just focus on the stock market performance. ‘They have understood that for India to creep back to a growth rate of 8–10 per cent, development is the only solution,’ says Kathpalia.
The new government’s upcoming budget will be closely watched and may give indications of what’s to come. ‘The stock markets, though not a perfect barometer of real change, have displayed positive market sentiment,’ says Kathpalia.
(Published on IBAnet.)
admin
June 9, 2014
Mayu Saini, Women’s Wear Daily (WWD)
New Delhi, June 9, 2014
In
another fillip for onlinefashion retail in India, FashionandYou,
one of the pioneers in the online fashion retail space, has raised
$10 million in funding, the company said Monday.
The etailer, which got a boost from its early partnership with
Lakme Fashion Week is known for its focus on designers and its
flash sales model.
Aasheesh Mediratta, chief executive of FashionandYou.com, said
that the additional investment would help "acquire more customers
to bolster our flash sale dominance and build a more cohesive
brand."
Competition in the fashion retail segment has intensified over the last few months, especially with the acquisition of fashion portal Myntra by Flipkart last month. After the acquisition, Flipkart said that it would invest $100 million to further the growth of Myntra.
"Fundamentally, nothing has changed in the market," Devangshu Dutta, an analyst and chief executive officer of Third Eyesight, observed. "E-commerce platforms still need a path-to-profit; their business models have so far been driven mainly by discounts and promotions in a race to the bottom that no one is winning. Customer acquisition costs have dropped in recent months, as competition has thinned, but remain high. What is most worrying is low customer retention and the lack of differentiation – these are the foremost challenges to be addressed."
Snapdeal, Koovs, Jabong, and several other online apparel retailers
are trying hard to keep up in the race for the Indian customer’s
online wallet, and competition continues to intensify.
(Published in Women’s Wear Daily (WWD).)
admin
June 7, 2014
Meghna
Maiti, Financial Chronicle
Mumbai,
7 June 2012
Even
at a time when the economy has put in its worst performance in
nine years, Mukesh Ambani, chairman of Reliance Industries, continues
to be overtly optimistic about the conglomerate’s retail business.
Ambani expects Reliance Retail to increase its revenues by around five-six times to Rs 40,000-50,000 crore in the next three-four years. At present, unlisted Reliance Retail has a turnover of approximately Rs 7,600 crore.
“We are investing aggressively in this business (Reliance Retail) to consolidate and strengthen our leadership position in this sector. With scale, supply chain integration and continuous learning, we expect this business to be profitable within three to four years and achieve a satisfactory return on capital,” Ambani told Reliance Industries’ shareholders at its annual general meeting (AGM) in Mumbai.
“Reliance Retail will be one of our important growth engines in the next few years and will have amongst the highest growth rates and earnings potential,” added Ambani.
To achieve this feat, the company aims to treble its customer base from about 30 lakh people visiting its retail stores every week now to over one crore in the next three-four years. This over three-fold expansion in customer base would thus power the growth in sales.
Devangshu Dutta, chief executive of Third Eyesight, a specialist consulting firm for the retail sector, said the plans of India’s richest individual reiterates the promises and prospects of India’s retail story. “A long-term growth story is unfolding in India, which would support the growth strategies of any retail company,” said Dutta. “The total size of India’s consumption market is around $550 billion. Whereas GDP growth has shrunk to 5.3 per cent, retail spending has only increased. Considering the situation, Reliance Retail’s promises do not look daunting,” said Arvind K Singhal, chairman at Technopak Advisors.
“Our consumer businesses are going to provide a second dimension to our growth strategy. We will build on our position as the leading retailer in India. The execution of this business plan will benefit the India’s kisans and consumers and create new value for our stakeholders,” said Ambani.
RIL claims the retail business, which is still losing money, has grown strongly in the past five years and now spans across 1,300 stores and has a leadership position in three verticals. Reliance Retail has provided new employment for 50,000 people, including 25,000 people directly by Reliance. “We have built a sustainable growth model for our retail business,” said Ambani.
Reliance has used an expat management team and has partnered with experts around the globe to cement its position in India’s nascent organised retail market. "We have strengthened our portfolio of global brands through partnerships…We will continue to invest in partnerships with consumers, brands and producers. Consumer businesses will form a significant part our business in less than a decade," said Ambani.
Reliance Retail, through its newest format Reliance Markets, is partnering with kirana stores and small retailers to supply them products at low prices. "We aim to be a supplier of choice for kiranas and small retailers. We will grow in retail in partnerships with small retailers," he added. It claims to have tripled the number of its digital stores and expanded product offerings.
“We engage with 70 lakh farmers and procure fresh produce and milk from them. In apparel retailing we have established the largest chain of stores in the country,” said Ambani in his AGM speech.
admin
June 2, 2014
Ankita
Rai, Business Standard
New
Delhi, June 2, 2014
Gurgaon-based online home furnishing and furniture retailer FabFurnish,
which operates both online and offline stores, has found its niche
in smart expandable and collapsible furniture. Translated, this
means it creates flat-pack products that are assembled at the
customer’s home. Why is this insistence on flat-pack and in-home
assembly? Simple: Cost reduction. DIY (do it yourself) products
reduce logistics cost, damages and storage costs, ensuring phenomenal
efficiencies at the backend.
But hold the applause. The whole idea is borrowed: the e-retailer has been inspired by global furniture behemoth IKEA. "Flat-pack furniture can help reduce the total cost by 20 per cent for smaller products like wall shelves and in the case of heavy furniture like of sofas or wardrobes, the total cost can go down by 50 per cent. DIY is also more scalable," says Vikram Chopra, co-founder and CEO, FabFurnish.com. "Our focus is affordable yet inspirational products. This is precisely what IKEA does."
FabFurnish isn’t alone. Many organised furniture e-retailers in India have followed the success story of IKEA keenly, borrowing and tweaking some of its strategies and applying them in their own ventures to drive scale.
Says Devangshu Dutta, chief executive, Third Eyesight, "The IKEA model presents significant learnings for India’s online home and furnishing e-tailers in terms of product standardisation. Standardisation can bring credibility into the online business given the lack of the touch-and-feel factor."
Globally, IKEA derives its competitive advantage from low cost and smart ‘concept-led’ design, in turn leading to low prices – a lethal combination that makes IKEA a formidable brand. So what are those inspirational moves of the Swedish furniture maker, and is it possible to replicate them in India? More importantly, will the Indian players following in IKEA’s footsteps be able to deliver equally enviable results?
Before we proceed, let us look at the home decor and furnishing market in India. The market is pegged at $20 billion (Rs 1.2 lakh crore), half of which is furniture. About 90 per cent of the market is unorganised. Modern home furnishing and furniture retailers working offline have not been able to scale up fast because the footprint and inventory requirement is quite large. Such stores typically need at least 15,000-plus square feet of space. And if you are hoping to set up shop on the high street then the costs can really go through the roof.
This makes online an interesting medium to go to. "Compared to a physical retailer who has to spend about a third of his revenues only on premises and manpower, prices for online furniture can be 15 to 20 per cent less," says Paritosh Bindra, chief operating officer, Home Needs Online. "The segment is still untapped unlike categories such as fashion, consumer electronics, books etc. There is scope for niche and label businesses to organise this market using web/mobile technology."
That said the biggest challenge in the online furniture market is the high logistics cost. Says Bindra, "While margins in the business are in the range of 40 to 50 per cent, logistics cost make up 10 per cent of the overall cost." What can also make or break is raw material, which is the single biggest investment for a furniture manufacturer. Major e-retailers are working on making their supply chain cost-efficient with one common focus: make it lean like IKEA.
Building a frugal supply chain
Broadly, two kinds of raw materials go into two different kinds of furniture in India. While the hardwood required for furniture is sourced locally, particleboards or medium-density fibreboard (MDF) are sourced from China, Malaysia, Taiwan etc. The price difference between an MDF-made product and a hardwood product can be as much as 25-40 per cent after covering the cost of imports. Unlike hardwood furniture, MDF furniture is assembled from knocked down parts. This makes handling, logistics and transportation easier. "However, this involves working closely with vendors to enable them to change their traditional manufacturing processes," says Chopra of FabFurnish, which sources its products from Malaysia, Brazil and Indonesia, apart from certain pockets within the country.
Another major organised player, Style Spa Furniture, part of Saroj Poddar’s Adventz Group, also makes knock-down furniture. The company, which recently introduced an e-commerce platform to complement its brick and mortar retail stores, offers consumers the services of dedicated Style Spa furniture assemblers free of cost. It uses MDF boards, mostly imported from Europe. "It is not so much about MDFs being cheaper than solid woods. It is about design and manufacturing quality. Raw materials would be 60 per cent of the total cost of a product. So design is the key consideration," says DK Jairath, deputy managing director, Style Spa Furniture.
Mumbai-based online marketplace, Pepperfry is also looking at flat-pack design for the fast selling SKUs of its private label brand Mudra, which is 60 per cent of its total merchandise; the rest is branded, knock-down furniture. Says Ashish Shah, co-founder & COO, Pepperfry.com, "There is a lot to be learnt from IKEA: How to design a product that can be shipped at minimum cost."
Bangalore-based curated marketplace Urban Ladder is also inspired by IKEA’s frugal approach to business. "Product design at IKEA is such that the consumer wants to buy every single piece. The second is the scale at which it operates. The idea is to squeeze out inefficiencies and ensure that the product reaches the consumer at the right price," says Rajiv Srivatsa, co-founder and COO of Urban Ladder.
Delhi-based Snapdeal’s line-up comprises 60 per cent home decor and 40 per cent furniture. It sells both solid wood and MDF furniture. "Because of the ease of movement and scalability, many in the industry are moving towards easy-to-modify, acrylic-based furniture. This is a trend big retailers abroad have capitalised on already," says Amit Maheshwari, vice-president, fashion merchandising, Snapdeal.com.
Serving the last mile
More than one-fourth of furniture sold in India constitutes bulky products, such as bed, wardrobes, tables etc, which makes the task of delivery and installation cumbersome. Says Jairath of Style Spa, "I do not see DIY picking up in India. India will always have the services component attached to the offering," he adds, saying, "How efficiently one can manage the last mile can prove to be a game-changer."
FabFurnish is closest to IKEA when it comes to managing distribution. While the company manages the last mile itself, it charges a nominal fee of Rs 300 for assembling services. Even product shipping is not free.
Style Spa undertakes last mile delivery by itself. For its e-commerce platform, Style Spa plans to use its existing brick and mortar stores in 65 cities as fulfilment centres. Its physical infrastructure includes 28 warehouse and 115 physical stores. All online orders are transferred to the store closest to the customer location for execution.
In the same way, FabFurnish’s hybrid model allows consumers to touch and feel its products first-hand. It has four brick and mortar franchised stores – one each in Faridabad and Gurgaon (near Delhi) and two in Bangalore. Says Chopra, "FabFurnish is built on three pillars: Price and design differentiation, access and trust. To build trust and credibility, having partner stores is a must." The average delivery time is five days.
Chopra thinks that India is not ready for a marketplace in furniture. Vendors are small and fragmented. So managing inventory in a cost-effective manner is crucial. "Our inventory levels are never more than eight weeks," he adds.
By September this year, the portal expects to notch up annual sales of Rs 200 crore and hopes to close 2014 with a revenue of Rs 180-220 crore.
If Chopra is sceptical about the potential of the marketplace model, Snapdeal is a believer. It markets semi-knocked-down products. While the transportation is handled by a third party, the firm keeps a hawk eye on packaging, lead time, quality and installation. Currently, it is the only player in the category that dropships even bulky furniture.
Taking inspiration from IKEA’s way of conceptualising design, most of the products at Urban Ladder are designed in-house and outsourced to manufacturers handpicked from places such as Rajasthan, Bangalore, Mumbai and Delhi. It doesn’t customise but allows free shipping, free installation and cash on delivery (COD). "We have to make it easy for a customer to purchase high-ticket items. We have made discovery simple with our clutter-free website and the purchase process easy by offering COD on even expensive items," says Srivatsa of Urban Ladder.
Urban Ladder is present in six cities – Pune, Chennai, Hyderabad, Bangalore, Delhi and Mumbai – and has warehouses in each of these cities, besides one in Jodhpur. It only sells products made of solid wood. It uses external logistics partners for inter-city shipment. Last mile and assembling services are provided by the company.
On its part, marketplace Pepperfry has brought down shipping costs to nearly a third. It has reduced the shipping timeline to three-eight days (from a fortnight earlier) by building its own last mile delivery programme. It has hubs in cities like Delhi, Jodhpur, Bangalore, Mumbai, Kolkata, Pune and Chennai, which also serve as sourcing and distribution centres.
Another key learning from IKEA has been that in a category like furniture it is not such a great idea to just sell a product. The accent should be on selling a concept. So that the customer can visualise how the furniture will look in a particular corner in her house. Lately, IKEA’s online catalogue has attempted to simplify the shopping experience with its augmented reality app. Customers can virtually place items from its 2014 catalogue anywhere in their homes and see if they are of the right size, fit, colour and style, before committing to purchase.
So whether one talks of inexpensive design, the use of technology, a frugal supply chain or rich customer experience, IKEA seems to be the first port of call for Indian e-retailers in the space. The Swedish retailer’s value proposition is based on simplicity which in turn makes it clear to consumers how IKEA is like no other furniture retailer. Sounds easy but replicating its model of simplicity is more difficult than it seems. E-retailers in India have the inspiration. Now they have to get the execution right.
IKEA makes low prices the high point of its strategy: Denise
Lee Yohn
Denise Lee Yohn
Enlightened businesses usually avoid low price strategies because they tend to commoditise their offerings and squeeze margins. But home furnishings retailer IKEA uses low prices to fulfil its brand mission, cultivate loyal customers, and sustain profitable growth. The company is designed and operated "to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them."
Following are the key pillars of IKEA’s business model:
IKEA uses its brand as a management tool that fuels, aligns, and guides everything the company does. This is why IKEA has thrived, while so many other big box retailers have failed.
This is what great brands do.
Denise Lee Yohn
Brand-building expert & author of What Great Brands Do
(Sourced from Business Standard.)
admin
May 31, 2014
Raghavendra
Kamath, Business Standard
Mumbai,
May 31, 2014
Almost
eight years after its launch, Mukesh Ambani’s Reliance Retail
is ready to launch a multi-channel retail operation, which would
integrate its physical stores with an e-commerce portal.
The Reliance Retail team is working on the model and the company is looking to launch it this year, said sources in the know.
While Reliance has e-commerce portals in some of its international fashion brands and a website for its consumer electronics, it is for the first time that the company is exploring e-commerce in value business, digital and fashion, which accounted for nearly 90 per cent of its revenues in FY 2014.
"Since they have a large network of stores, they will enable shoppers to place orders anywhere and get it delivered anywhere they like," the sources said.
Reliance Retail is the largest retailer by revenues and runs 1,691 stores spread across a 11.7 million sq ft space in 146 cities. In FY 2014, the retailer made revenues of Rs 14,496 crore and profit-after-tax of Rs 180 crore.
Reliance’s e-commerce plans come at a time when e-commerce portal Flipkart has hit the $1 billion (Rs 6,000 crore) mark in gross merchandise value and Snapdeal is looking to achieve the target this year. Moreover, the world’s largest online retailer Amazon has already become the largest in India too, in terms of the number of products on the site.
Reliance Industries’ annual report for FY14 clearly indicated the plan. "The business is poised to launch multi-channel shopping in the coming year. The potential of e-commerce, combined with the network of physical store locations will offer tremendous choice and convenience at a great value to the consumer," the company said in the annual report.
Devangshu Dutta, chief executive of retail consultancy ‘Third Eyesight’ believes that offline retailers such as Reliance have an edge in e-commerce given that they have already established a customer connect.
However, he added that e-commerce will not help boost Reliance Retail’s revenues significantly in the short term as it is still in its nascent stages in India.
In 2012, Mukesh Ambani had said the company was expecting Reliance Retail to clock Rs 40,000-50,000 crore in the three-four years.
"Customer acquisition and repeat customers is a big issue for e-commerce ventures. But physical retailers have an edge as they already have a connect with customers," Dutta added.
Dutta says retailers going online should have different strategies in marketing communication, supply chain and merchandising for both the formats as customer mindsets are different in both.
While Kishore Biyani’s Future group has an e-commerce venture called Futurebazaar.com, the group is focusing on its new venture Bigbazaar Direct, where franchisees armed with tablets provided by the company take orders and sell the best deals of Big Bazaar.
Asked why Reliance took so long to launch an e-commerce-led strategy, the sources said: "It is a question of what they will do and when they will do. They cannot do it for the sake of doing it or because others are doing it."
In the report, Reliance had said the expansion of Digital express Mini and its cash-and-carry format Reliance Market would be key priorities for the company.
(Sourced from Business Standard.)
