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November 20, 2014
Rahul Wadke/Rajesh Kurup, The Hindu Businessline
Mumbai, 20 November 2014
Till a couple of months ago, Peshwa Acharya used to call up Shailesh Bhai, owner of a nondescript electronics shop Maruti Infosystem at Lamington Road here to buy mobile phones or laptops.
He would get discounts as high as 12 per cent and home delivery.
But of late, he makes nearly half of his purchases through e-commerce sites; the reason: transparency in pricing, array of choices, convenience of buying and even higher discounts.
“People like me will move over completely to online buying as India is now leapfrogging to e-tailing much faster than expected,” said Acharya, the founder of focused marketing firm ‘Think As Consumer.’
This has already sounded the death knell for traditional electronic retailers in areas such as Lamington Road in Mumbai, Nehru Place in Delhi, Canning Street in Kolkata and Ritchie Street in Chennai.
Plummeting sales
Vendors lamented that their sales have dropped by more than 35-40 per cent during the past three months as online market firms went on a marketing blitz.
“Our bottomline is being hit badly, and sales are dipping by the day. How these companies (online firms) manage to sell below dealer prices is not clear. If this continues, we (retailers) will have to close shop in the next five years,” Chintan Zangda, owner of Computer Section in Mumbai, said.
“Our only recourse is to approach the Competition Commission of India, for violation of the Competition Act,” he added.
There are an estimated one lakh small retailers in the consumer durables, information technology and telecom retail space in India, which is worth Rs. 50,000 crore.
The plight of retailers elsewhere is similar. “I am thinking of quitting this and getting into something else,” Basavraj, a computer trader from Bangalore said, adding his turnover has plummeted to about Rs. 1 crore today from Rs. 5 crore earlier.
Grim scenario
E-commerce firms are flush with cash from multiple rounds of investor funding and are battling for market share. Here, discounted price is the prime differentiator, said Devangshu Dutta, Chief Executive of consulting firm Third Eyesight.
“In our marketplace, products are sold in compliance with the laws of the land. We clearly tell our sellers to sell products in accordance with applicable laws,” a spokesperson for India’s largest online retailer Flipkart said.
“All authorised dealers and middlemen can sell their products on online platforms,” is what Flipkart has to say on the conflict between retailers and online marketers.
For online firms, however, business is not as easy as it seems.
“All the major e-tailers are not just acquiring customers at high costs, there is also a huge customer churn and little loyalty or stickiness,” Dutta added.
All said, e-commerce is a reality that cannot be wished away, at least by retailers.
(Published in The Hindu Businessline)
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November 20, 2014
Hindustan
Times
New
Delhi, 20 November 2014
Multinational retailer Wal-Mart on Thursday refuted the allegations
made by Cobrapost.com of foreign direct investment violation in
India and insisted that it regularly conducts membership audit
internally to keep a tight vigil and continuously improve strict
compliance norms.
Cobrapost, which recorded the entire operation on video, had shared its findings exclusively with HT. Based on that, HT reported on Thursday that Wal-Mart, Metro Cash & Carry and Carrefour, which are allowed to sell goods and merchandise only to wholesale customers in India, are blatantly violating rules and selling to individuals.
Wal-Mart claimed it has deactivated membership of more than 1,50,000 members over the years due to failure to furnish renewed business licenses. “I would like to highlight membership is rejected… terminated… in case it is found that the business license provided by the member is not valid or the member is unable to produce a valid license,” Rajneesh Kumar, vice-president, corporate affairs, Walmart India, in an email response to HT.
On Thursday, Cobrapost.com editor Aniruddha Bahal said: “If a proper investigation is done by the commerce ministry on the membership base, specially focusing on the add-on cards, I am confident there will be a big chunk of people, who would not qualify to be either resellers or institutional investors…”
“Does commerce ministry have a process to monitor what these stores are doing,” Bahal questioned.
Minister of state for commerce and industry Nirmala Sitharaman, when contacted by Hindustan Times, for her response on the issue declined to comment.
“It is not possible for such global firms to violate legal agreements with a sovereign entity…They would have followed all the norms,” said Devangshu Dutta, chairman, Third Eyesight, a retail consulting firm.
However, Wal-Mart refused to respond on how individuals were purchasing from these cash-and-carry stores as shown in the Cobrapost.com video.
“At Wal-Mart, we adhere to very strict compliance processes and have a robust membership process. We are not only fully compliant with the foreign direct investment (FDI) regulations in the country but also remain fully committed to follow the laws of the land,” said Kumar.
Carrefour and Metro had not responded to a detailed questionnaire on the FDI violations at the time of going to print.
(Published in Hindustan Times )
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November 16, 2014
Varun
Sood, The Economic Times
Bengaluru,
11 November 2014
Wipro’s consumer care and lighting business could end this fiscal
year with $1 billion (Rs 6,000 crore) in revenue, as the privately-held
company expects the Narendra Modi-led government’s promised reforms
to start reflecting on the ground, leading to a better second-half
of the year for the company.
Wipro Consumer Care & Lighting, which reported a little more than Rs 5,000 crore in revenue in the year ended March 2014, saw a 25% growth in revenue in the quarter ended September, according to a senior company executive. "We did 11% volume growth (in the second quarter)," said Vineet Agrawal, president, Wipro Consumer Care & Lighting, adding that revenue grew 25% in that period on account of the 10-11% price hikes the company undertook.
This growth will be the envy of some of the goliaths, including Hindustan Unilever that saw a 5% growth in volume and homegrown Dabur that saw volume growing at less than 9% in the July-September period.
Significantly, four states—Karnataka, Andhra Pradesh, Maharashtra and Gujarat—account for over 70% of the company’s topline, while the company generates 53% of business from overseas, including China, Indonesia and Malaysia. Since a large chunk of revenues are accounted from international markets, Agrawal shies away from putting a number because a currency depreciation could prove to be the biggest spanner in the company’s e growth. Nonetheless, he remains optimistic that the Modi government will walk the talk and release money for the pending projects, thereby giving a boost to discretionary spending."The bigger struggle for now is liquidity. The money (is stuck) with our traders and distributors. Earlier, if they paid me in 60 days, now they pay me in 90 days," said Agrawal.
The fast-moving consumer sector growth has halved to 9% in 2013 from 18% in 2012 with some experts pencilling-in a lower growth for this year on account of "uneven demand", hurt by below normal monsoon, higher competition among companies and lower economic growth leading to less increments.
"Multiple reasons (including) Intensification of competition among firms, food inflation, lower monsoon and low increments suggest that growth for the sector as a whole will be lower this year," said Devangshu Dutta founder of Third Eyesight, a Delhi-based consultancy.
"So, against that backdrop, Wipro Consumer story is heartening. A lot of this success is also on account of overseas acquisitions made by the company. Also, in the last few years, the company has tried to reposition itself."
Wipro’s lighting and furniture business accounts for 18-19% of the company’s domestic sales of about Rs. 2,400 crore. It recorded a 14% growth during the second quarter. Although Wipro consumer’s two brands account for a large share of revenues, with Santoor alone bringing in 25% business and Yardley accounting for another 15%, Agrawal dismissed any talks of skating on thin ice.
"It is our strength. I would not like to have seven brands which each have a 5% share. For the simple reason, if you are not big, you cannot be profitable, you cannot defend or be aggressive," he said.
The management also believes that India could soon see a lot of more white goods being sold through ecommerce sites as the smartphone penetration increases. In China, which accounts for about 15% of its Rs. 2,600 crore business from overseas Rs markets, Wipro Consumer generates 9% business from internet users.
In India, like in Indonesia and Malaysia, Wipro Consumer currently
generates less than 1% of overall business from e-commerce sites.
(Published in The Economic Times)
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November 13, 2014
The
Economic Times
Mumbai,
13 November 2014
Several brick-and-mortar retailers are forging exclusive partnerships
with e-commerce marketplaces including Amazon, Flipkart and Snapdeal
to target the growing base of net-savvy consumers, digressing
from their earlier strategy of considering online players as rivals
over deep discounting.
Dubai-based retail major Lifestyle International on Thursday entered into an exclusive partnership with Flipkart to sell goods from its value fashion format, Max Retail. And Max is just one of a clutch of brand that made similar deals – Future Group with Amazon, Tata-owned electronics chain Croma with Snapdeal, Amazon and Ebay, FabIndia’s partnership with Myntra and Viveks with Ebay – have all partnered online companies in the last few months.
"Apart from big sales potential, the biggest reason to go online is to target the millennial customers or those below 22 years old, who would first venture into an online store for shopping before hitting out at physical stores," said Lifestyle International executive director (Max Retail division) Vasanth Kumar. Max is targeting nearly 5-6% of its sales through Flipkart’s collaboration.
Nearly 70-75% of e-commerce transactions are being driven by the online marketplaces like Amazon, Flipkart, Snapdeal and Ebay in India. While online sales accounts for nearly 4% of the overall apparel market, it is as high as 15% for smartphones and between 5-10% for flat panel televisions, digital cameras and personal care gadgets.
Hence, experts feel that there is a need for such ‘co-opetition’ where companies engage in both competition as well as co-operation.
Retail consultancy Third Eyesight’s chief executive Devangshu Dutta said offline retailers have now started to acknowledge that online marketplaces are a part of life and it can add bandwidth to their sales. "For e-commerce companies, they need such brands to add critical mass and be trusted as a marketplace," he said.
At the same time, retailers are also safeguarding that merchandise aren’t deep discounted to en extent where it either erodes brand equity or bottom-line. For instance, Croma and Max Retail has mandated strict pricing norms with the marketplaces with whom it tied up. And despite that, Croma clocked a sizeable Rs 30 crore from online mega sale this Diwali.
"The marketplaces are like virtual mall with huge customer traffic which is a huge opportunity," said Ajit Joshi, MD & CEO at Infiniti Retail, which owns the Croma chain. "We don’t see online as a threat but another channel to reach out to customers," he said.
Joshi said Croma has a preferred relationship with Snapdeal and will partner with companies to launch exclusive models like it recently did with a Karbonn smartphone.
Ditto in the case of Max that has mandated Flipkart not to offer more than 10% discount. Though experts feel that after initial exclusive tie-ups, many brands could explore other marketplaces to magnify sales from online channel. "There is usually an exclusivity period for such deals that doesn’t go beyond many months as retailers seek other avenues," added Dutta.
Some retailers however, feel that their partnership could be stretched beyond just listing their wares on portals.
"The deal is deeper than just transactional involvement
with Amazon. We are exploring several synergies in data sharing,
co-branding, cross-promotion and distribution network sharing
through the partnership," Future Group founder Kishore Biyani
told ET last month.
(Published in The Economic Times)
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November 9, 2014
Ajita
Shashidhar and Arpita Mukherjee, Business Today
New
Delhi , 9 November 2014
During the recent Navaratri festivities, a character in a popular
fiction show on Star Plus, Yeh Hai Mohabbatein, was shown shopping
online for gifts for her family.
She buys a piece of jewellery for her daughter from Amazon, the
online retailer. She goes on to educate her daughter about the
various facets of online shopping – ease of shopping, cash on
delivery and so on. All this was woven into the script of the
show.
Similarly, the contestants of reality show Bigg Boss, on Viacom
18’s general entertainment channel Colors, were seen buying household
items such as refrigerators, microwaves and mattresses on Snapdeal.com’s
Diwali Bumper Sale.
Indeed, as these examples illustrate, e-tailers such as Amazon,
Flipkart and Snapdeal, are spending a fortune on television advertising.
This is a throwback to 1999-2000 when dotcoms had raised a lot
of money from venture capitalists and were spending heavily on
advertising.
The advertising splurge this year is also because it is now a three-way fight to be the dominant e-tailer in the country, and all three – Flipkart, Snapdeal and Amazon India – have deep-pocketed backers who are going all out to win this battle. Broadcasters claim that e-tailers have been one of the largest contributors to their advertising revenue this year.
"From
just four per cent (of total advertising spends on TV) last year,
advertising spends of e-tailers has gone up to 12 per cent this
year, making them the third-largest spenders on television,"
says Rohit Gupta, President, Multi Screen Media (MSM), which runs
the Sony channels. The largest contributors continue to be fast-moving
consumer goods (FMCG) companies with spends in the region of 35
to 40 per cent of the total advertising pie. Telecom and consumer
durable companies contribute around 18 to 20 per cent each.
A 10-second spot on Sony’s game show Kaun Banega Crorepati costs
around Rs 6 lakh and Snapdeal has gone in for an in-show integration.
It has a Snapdeal-branded question on the show for which it would
have to pay a premium of anywhere between 25 to 30 per cent. "E-tailers
are increasingly opting for in-show brand integrations. In Bigg
Boss for instance, we even had the Snapdeal delivery boys coming
into the Bigg Boss house and delivering the merchandise,"
says Simran Hoon, National Sales Head, Colors.
Snapdeal’s marketing spends have shot up in sync with the multi-fold growth of the business. These kind of integrations convey the message that shopping on Snapdeal’s online marketplace is convenient with a wide variety of products available, says Sandeep Komaravelly, Senior Vice President, (Marketing), Snapdeal.
T. Gangadhar, Managing Director of GroupM’s media agency MEC,
says that e-tailers spend on above the line advertising is justified,
especially at a time when they are looking at smaller markets.
"The next wave of growth will come from smaller towns and
television and print platforms are the best way to reach out to
these consumers," he points out.
A typical brick-and-mortar retailer, such as Big Bazaar or Reliance
Trends, advertises aggressively only during festivals. However,
analysts believe that e-tailers, like the FMCG companies, will
continue to advertise round the year. "Advertising becomes
crucial for an e-tailer as that’s the only way it can make its
consumers aware of its products. They are not brick and mortar
stores where one can walk in and touch and feel the products,"
points out Jagat Dave, Managing Director at Ambit Corporate Finance,
an investment bank.
Not all e-tailers are going overboard on advertising. eBay, which
has been around for nine years in India, doesn’t feel the need
to splurge on television. "There was an era where people
needed to be educated about online shopping. But I think we’ve
passed that phase and now it’s more about how you convert people
who are already online and make them online users," says
eBay India’s marketing head, Shivani Dhanda.
In fact, Devangshu Dutta, CEO of retail consultancy, Third
Eyesight, believes these e-tailers are splurging because they
are flush with cash. "They have a lot of capital and they
are trying to grab as much land share as quickly as possible.
So, they are trying all kinds of advertising and are hoping it
works."
How long will the e-tailers be able to sustain their advertising spree? Ambit’s Dave expects ad spends to increase because, he says, investors in e-tailers have also budgeted a huge amount for advertising. But not everyone agrees. Snapdeal is known to have posted a loss of close to Rs 300 crore in the last quarter itself and the financials of the rest of players are supposed to be no better. A lot will depend on whether these companies will continue to get as much funding from venture capital funds and private equity players as they are getting now. Clearly, if they continue to rack up losses, funds are bound to dry up and so will advertising.
(Published in Business Today, issue dated 9 November 2014)
