Priyanka Pani, The Hindu Businessline

Mumbai, January 17, 2014

Retailers and mall owners are throwing open malls at eight in the morning and doling out offers and discounts to boost slackening sales. Experts have attributed this trend to high inflation, slowing economy, competition among retailers and emergence of online players. They believe too much discount is detrimental to the sector.

Infinity and Growels mall in suburban Mumbai decided to remain open for shoppers from 8 a.m. till midnight for a day on January 17. Korum mall in Thane and Oberoi in Goregaon were running flat 50 per cent discount across 90 well-known brands until midnight on January 11.

Additionally, there were prizes every hour from cars to diamond jewellery and international holidays. DLF mall in Delhi has similar schemes for 27 days starting January 10. Retailers are spending more during the sale period for customer acquisition. But are these campaigns translating into sales?

According to Devangshu Dutta of retail consultant Third Eyesight, the demand has certainly been subdued due to macroeconomic sluggishness and damp consumer sentiment. “I don’t think the current discount sales are attracting heavy footfalls. In fact, discounts were being offered within the season, too, which would have taken some of the possible ‘sale’ footfalls into the core season as well,” he added.

Mukesh Kumar, Vice-President, Infinity Mall, said that while the economy was playing spoilsport, there has been an increase in the number of sale seasons and prolonged sale period as fewer people were coming to the malls. Kumar said while the topline for most retailers has jumped 30 per cent year on year, the margins have been impacted.

Margins have been hit by 30-40 per cent, an official at a premium brand said.

“Everyone seems to be part of the race to the bottom and most brands and retailers are losing out in the discount game by sacrificing both short-term margin as well as long-term brand equity,” said Dutta of Third Eyesight.

The emergence of e-commerce players, which are playing the cards of convenience and reasonable pricing, are also posing threat to the brick-and-mortar sales mostly in small towns where there are not too many brands and malls.

(Sourced from The Hindu – Businessline.)

Sonali Chowdhury, Moneycontrol.com
New Delhi, January 15, 2014

But let’s get back to the good news. “The B2C space will see lots of entrants because of a limited retail footprint in India, especially in Tier 2 & 3 cities, which will start shopping online looking for products,” predicts Rajat Wahi, Partner FMCG & Retail, KPMG in India. Here are a few tips you should consider while taking the plunge.

1. Establish Differentiation: The e-commerce space has evolved to becoming a market crowded with players. It is important to build a unique proposition or core differentiation in your offering. It could be customisation of a product, an experience no one else is offering. “It is no longer as simple as displaying a product or selling it online. Chances are, you will encounter a price war and those with deep pockets will have an edge. So the key is to offer something very different,” says Peyush Bansal, CEO & Founder, Lenskart.com.

Does that mean a niche offering will leave you better placed? “I would agree, to some extent, like focusing on a particular area and developing special expertise. But that does not mean offering a niche product or service in a category that is still very simple for someone else to copy is a good enough differentiation. You need to keep working on your USP even in the long run,” adds Bansal.

Even if you have a truly unique idea, once you launch it, the idea is open for others to copy. “So think carefully about what will keep you in the game and ahead of the pack,” advises Devangshu Dutta, Third Eyesight, a consulting firm focused on the retail and consumer products ecosystem.

2. Choose The Right Revenue Model: You have to find a gap in the market or geography you are trying to address. The gap could be the absence of players or that existing players are unable to serve the market well. Then decide what kind of model to follow — inventory-led or marketplace — because each one has its own complexities.

“Determining the right model will eventually dictate how you make money, the revenue stream and whether can scale up your business and sustain. It will also help you determine the complexity of managing the businesses or ecosystem partners you need to bring on board, from payment, to search companies, to logistics,” points out Deepa Thomas, evangelist at Ebay India.

3. Driving Offers: One of the many key challenges for e-tail ventures is to drive traffic and acquire customers. To attract maximum eyeballs, you will be forced to follow strategies like offering coupons, discounts, cashbacks, cash-on-delivery and try-and-buy. “It is always a challenge for new players to attract new customer and retain them. That’s where the big cost lies,” says Wahi.

You should be able to justify your cost of operations and remain price competitive but if you go on a discounting spiral, at the end of the day, even your suppliers will shy away and your brand will be perceived as a discounted brand. “Discounts are a necessary evil for acquiring a first-time customer but price cannot be the sole point of differentiation and it is not sustainable,” says Pragya Singh, Associate Vice-President, Retail,Technopak. You should be carefully driving discounts and offers. “A negative, or even zero, profit margin due to the use of discounts and cash backs cannot translate to profits, even at scale,” says Ravi Narayan, Director, Microsoft Ventures India.

4. Get Tech-Savvy: Technology is at the core of an e-commerce business, whether front end or back end. It is therefore imperative that your online business is backed up with strong technology. You cannot survive if you don’t build an efficient process at all levels, from the front-end on the website, to customer support to ERP (Enterprise Resource Planning) system. “It is better not to outsource the technology and have an in-house team or someone in the core team who is conversant with technology,” says Bansal.

5. Make Sure You Can Scale Up: “Every business is not a potential Amazon, Facebook, Google or EBay. Or, for that matter a Reliance, Tata or Wal-Mart. Figure out the potential scale of your business and then build your business accordingly,” advises Dutta. There is nothing wrong with having an online business that pays the bills and gives you a comfortable lifestyle, without giving you a multi-billion dollar market cap, he adds. When planning to scale up, you will inevitably require external or internal funding, and whether this funding comes or not will depend on you’re your business stands for.

“A lot of venture funding dried up in 2013 and, in smaller categories, most of it goes either to large players or leading players. New players have to think of propositions which could get good ROI to inspire funding in the long run,” opines Singh.

6. Get A Grip On Numbers: You need to have a command over your numbers like sales, margins, last order placed, number of products or services sold, money spent and lost on each product, apart from analysing the pattern of users navigating your website. As a new entrant you should be able to balance ‘cross sale’ and ‘up sale’ between categories of products, which will eventually help you manage discounts, cash backs, promotions etc. Analysing demography, size of population and geography will help in marketing to target the right audience.

“You have to be able to balance between organic (directly bringing the customer online) and inorganic (through ads) traffic to keep down the cost of marketing,” says Priyesh Jain, Founder and Director, Shopuli.com. Adds Dutta, “Most importantly, make sure you’re not setting up your venture as a victim of CPA or cost per acquisition.” You need to employ a marketing mix of public relations, email campaigns, blogs, pay-per-click advertising, and targeted content marketing such as search engine optimization. Even the use of aggressive marketing tactics by companies would be of no use if there isn’t fundamental demand for the product, and use of such tactics is an indicator of a lack of demand. “Assuming demand is not an issue for a company, ideally, marketing should account for no more than 20% of spending costs,” says Narayan.

7. Master The Execution Process: The Internet does not level the playing field for execution because e-commerce is not only about the Internet. “To make your business work, you need to think about product, branding, marketing, sourcing and supply chain, and finance — all the back-of-house, ‘boring’ things that offline businesses have to deal with,” underlines Dutta.

Underestimating costs and difficulties relating to delivery, including shipping, returns or undelivered items and cash-collection are some other mistake you would do well to avoid. If you don’t have a clear path-to-profitability per transaction, it would be such a shame.

“Through right process (quality control checks/packaging) and policies (limited no. of days/ mishandling, etc) you can make products/categories profitable even when customer returns for genuine reason,” says Praveen Sinha, Co-founder, Jabong.com.

8. Be Patient: E-commerce is a retail business, where you spend money setting up your store, getting ready to serve customers, beating your drum about the market. Then wait. And wait. Traffic will only build over time as customers walk in one at a time, make their purchase decisions one at a time, and may come back if they’re happy. “Have the patience and the cash to last till your business starts generating momentum and cash to meet current and future needs,” advises Dutta.

(Sourced from Moneycontrol.com.)

Financial Express
New Delhi, January 14, 2014

The government’s policy allowing overseas retail firms to pick up to a 51% stake in multi-brand retail firms in partnership with Indian players requires the nod of state governments. The previous Delhi government under Congress party’s Sheila Dikshit had given its assent to foreign retailers setting up shop in the capital. With Delhi opting out, the number of states that have agreed to allow FDI in retail stands reduced to nine. So far, Congress/allies-ruled states of Maharashtra, Haryana, Manipur, Karnataka, Himachal Pradesh, Assam, Uttarakhand, Jammu and Kashmir and Andhra Pradesh have given their assent.

Since the government threw open the multi-brand retail to FDI in September, 2012, just one global player, the UK-based Tesco, has said it wants to do business in India — it plans to buy a 50% stake in the Tata Group’s Trent. A senior executive of Tesco said such changes were anticipated and didn’t “come across as a surprise”. Tesco plans to set up its first set of stores in Maharashtra and Karnataka.

“Not allowing FDI in multi-brand retail in Delhi has a dampening effect and reinforces the risk factor; foreign retailers will wait until the general elections for further decisions,” says Devangshu Dutta, CEO of Third Eyesight, who points out that even after the Tesco announcement, other retailers haven’t rushed in. Dutta adds that this move may result in more stores in Gurgaon and Noida that can absorb some of Delhi-NCR’s consumption demand.

“The Delhi government’s stance on FDI in multi-brand retail is not too positive but nothing changes as permitting FDI in multi-brand retail was always a state subject. Although Delhi is a huge market, modern retail penetration has traditionally not been too high in the city,” says Mohit Kampani, CEO, Spencer’s Retail.

“This does not affect us as we are not seeking fresh foreign capital,” Kampani said, adding that while Delhi is a big market, the bigger chunk lies in the neighbouring suburbs of Gurgaon (Haryana) and Noida (Uttar Pradesh). Cities like Bangalore and Hyderabad have the highest penetration of modern retail at close to 30%.

“We have not seen much momentum in foreign companies entering India through FDI in multi-brand retail so far; so, the announcement is not of importance,” Kishore Biyani, founder of Future Group, said.

“Aam Aadmi Party strictly opposes FDI in retail because if it enters into the retail sector, then crores of small-scale Indian businessmen will come on the road, as they will lose their business and their livelihoods. The Walmart experience shows that farmers in the US were not benefitted, but deprived besides being a very bad employer,” Arvind Kejriwal had told Delhi traders in 2012.

“FDI in retail should have been decided through a referendum. The way the parties had behaved in Parliament was very unfortunate,” Kejriwal had earlier said.

An AAP insider, however, said that the party has made its position on FDI in retail clear, but in case traders feel that they need to re-look into it, they could do a referendum through SMS, Internet polls and public meetings on the issue.

(Sourced from Financial Express .)

Raghavendra Kamath, Business Standard

Mumbai, January 6, 2014

Disha Maru, a 47-year-old resident of south Mumbai, says she is hooked on to Zara: She shops at the Spanish fast fastion brand’s store at a luxury mall in Lower Parel at least once a month. “I also shop at Mango, Vero Moda but I prefer Zara for its styles and pricing,” Maru says. The store had been abuzz with shoppers such as Maru ahead of the brand’s day of discounted sale on January 2. On the day of the sale, there were serpentine queues of customers at the billing counters.

Devangshu Dutta, chief executive of retail consultant Third Eyesight, says that even before Zara launched its first store in 2010 in India, the web traffic from India was one of its highest in the world. “It is highly possible that Zara shoppers buy once in five-six weeks, if not once in two weeks as they do in western markets. Most of the other brands would be lucky if they got the same shopper once in two months,” Dutta adds.
Real estate industry sources say Zara follows a revenue-sharing model with malls rather than fixed rent. “We have seen developers bending backwards to accommodate the brand. It acts as a status symbol and crowd-puller for them,” says a top realty consultant who did not wish to be quoted. Inditex, the brand’s parent, did not respond to an email.

High on profits

Zara has not only been a draw among consumers but has managed to become profitable in a short time. Incorporated in 2009-10, Inditex Trent Retail India, the operational entity running

Zara in India and the joint venture between Inditex and Tata-run Trent, has made profits in the second year of operations and has been profitable since then. For the financial year 2013, Inditex Trent made net profits of Rs 45.19 crore on sales of Rs 411.19 crore. The Italian brand Benetton, on the other hand, which has been in India for close to a decade, posted a much smaller net profit of Rs 4.73 crore on higher sales of Rs 521.27 crore in 2012-13.

“I do not think there is any brand which has been this successful as quickly besides Zara. Levis, Benetton could be some of the biggest brands but they took long time to get there,” Dutta says.

Zara has 13 stores in Mumbai, Delhi and Bangalore, including those in Phoenix Mills malls in Pune, Chennai and Bangalore besides Mumbai. Globally, it has 1,808 stores in 86 countries.

More per square

In terms of per square-foot (sq-ft) sales, Zara is clocking the highest in the industry,say retail industry sources. While leading departmental stores such as Shoppers Stop or Pantaloons record sales per sq-ft of around Rs 8,000-9,000, Zara, with stores measuring 15,000 to 20,000 sq-ft, has sales of Rs 50,000 per sq-ft.

Says Rajendra Kalkar, senior centre director, west region, for Phoenix Mills, a Mumbai developer: “Zara is a trendy brand and retails collections of affordable clothes. It should create a flutter in the country.” At the company’s Palladium mall,where 2 million customers walk in every month, Zara alone draws in a crowd of over 100,000. Experts say that the brand’s choice of locations has played a key role in ensuring footfalls convert to sales.

Churn is good

The biggest draw for Zara’s clientele is its frequent refreshing of merchandise. Zara is believed to bring in a fresh collection once every fortnight in India, relegating older products to sale-time – either at marked-down prices or for end-of-season. In Europe, it updates its merchandise twice a week. In comparison, most fashion brands, both international and national, follow a season-based approach to bringing in new merchandise.

Zara has also tweaked its pricing. An affordable high-street brand worldwide, it has had a premium positioning in India. But today, it retails products in lower, mid and premium categories in womenswear, rather than just mid to premium as it did a couple of years ago.

Its prices are at least 20 per cent lower than its main competition Mango and Vero Moda in some categories, say consultants.

Direct competiton awaits

But Zara will have to work to maintain its dream run, now that many international brands are set to enter India. Says Kalkar of Phoenix Mills, “Today it does not have direct competition. When Gap and H&M enter India, there will be real competition.” Some say the business model will be in trouble if customers do not change their wardrobe frequently, owing to the slowdown that has also spurred preference for discounted merchandise. “Zara’s business model is built on the premise that customers will look for newness,” reminds Third Eyesight’s Dutta.

Dutta adds that when customers look for the best deal, it does not matter whether the products are fresh or not.

(Sourced from Business Standard.)