Richa Maheshwari & Sagar Malviya, The Economic Times

Bengaluru/Mumbai, 26 June 2015

A nondescript three storey building at Whitefield — the hotbed of tech companies in Bengaluru — where a team of around 100 people including 35 engineers talk more about cloud technology and analytics than catwalks and advertising, is not a place one would identify with a fashion powerhouse like Madura Fashion & Lifestyle.

Yet this is where the country’s largest apparel retailer has its next big growth driver: Trendin.com, its online division. Within a year of its launch, sales of Trendin have equalled those of 30 branded stores, or close to 1% of Madura’s turnover.

In fact, Kumar Mangalam Birla’s fashion flagship claims that Trendin — run by a completely independent management team and having dedicated warehouses and partnership with many tech startups — is the largest online portal of any brick-and-mortar retailer in the country.

"The engineering team of Trendin has built the platform, which is unlike any other brick-and-mortar company setting up ecommerce," said Shivanandan Pare, head of e-commerce at Madura, which has over half a dozen marquee brands including Louis Philippe, Van Heusen and Allen Solly. He said that unlike its peers Madura’s Trendin has built its technology in house.

"This gives us extreme flexibility and agility." Before joining Madura, Pare, 41, was instrumental in turning around Reliance’s BigAdda by changing the social networking site into a commerce venture five years ago. The stakes are much higher now as there are strong rivals including Flipkart and Amazon in the online space and his merchandise spread is limited to own brands.

"The mandate is clear — Trendin should be Madura consumers’ first choice online. We have the widest range of merchandise available compared to online marketplaces and even our own stores," said Pare, an engineer and management graduate.

After sudden market share gains by online players, strategies of several traditional retailers including Reliance, Tatas and Future Group now revolve around omni-channel retail, which requires IT systems and processes to support customers shopping both in stores and online.

For Birlas, it is no different. Devangshu Dutta, chief executive officer at retail consultancy Third Eyesight, said Trendin’s big challenge is to attract enough customers to its site.

"The online market, in the last there years, was driven by discounting. Such a [blended business] platform has an inherent strength of product mix and service, which is now becoming important," he said.

"Trendin is driving customer acquisition online which can also work vice-versa but the real challenge is whether they can build enough traffic." Trendin is only a fraction of Flipkart or Amazon in terms of sales, but it is also helping Madura’s offline sales by sharing consumer insights.

For instance, search queries on Trendin get shared with Madura’s merchandising team to help forecast demand better. So what’s moving online faster is stocked at stores too.

Just like his daily six-kilometer commute for office on his bicycle, Pare has been hitting the pedals hard on partnerships – from involving startups such as Infinite Analytics and Cloud2scale to roping in FedEx, Ecom Express and India Post for delivery of products. The company’s dedicated 60,000 square feet warehouse comes handy too.

(Published in The Economic Times.)

Writankar Mukherjee & Sagar Malviya, The Economic Times

Kolkata/Mumbai, 19 Jun 2015

The Tata Group will launch the country’s first hybrid online retailing venture, a combination of a portal that will list brands and handle payment transactions and brick-and-mortar stores that will set prices, deliver products and provide customer support.

Group firm Tata Industrial Services, which changed its name to Tata Unistore Ltd, will spearhead the venture that’s likely to be piloted before the Diwali shopping season. The venture’s brand name is yet to be finalised.

The salt-to-software conglomerate is in advanced talks with top brands across categories to complete the integration with their offline stores, with major focus on smartphones, consumer electronics and fashion, which account for 80% of e-commerce sales in India, said five senior executives, two of whom are attached with the group. Even in rural areas, orders will be dispatched by designated offline stores.

"The Tata e-commerce venture will act as a frontline sales hook for offline stores and will play on customer experience, assured aftersales support and wide reach. It is expected to drive sales of high-ticket items whose online sales are still limited," one of the Tata group executives said.

A Tata Group spokesperson said, "Indeed e-commerce is of interest to the Tata Group. We will share more information at the appropriate moment."

Unlike online entities Flipkart and Amazon, which push sales through deep-discounts, Tata’s venture will not indulge in price wars. Discounts will be decided by the brands and won’t vary much from their in-store promotions. Unistore officials have informed brands they should not sell below the price at which they sell to retailers.

"The integration of the brand’s offline stores will mean there will be no conflict among the trade partners at all," the Tata executive said.

"Online with an offline plug does make a difference and their model looks sustainable and legitimate," said Devangshu Dutta, chief executive officer at retail consultancy Third Eyesight. "Discounting isn’t a sustainable model and many players have started to realise the pitfalls of attracting consumers just through pricing."

The venture will ensure complete warranty and after-sales support for categories such as smartphones, televisions and appliances, a stark difference from products sold online that don’t always come with such benefits. For categories like apparel, customers will be able to exchange the product, pick the correct size or return it at the nearest offline store.

While Tata Unistore officials have tried cutting exclusive deals with leading brands such as Apple, Samsung, Sony and LG, it remains iffy. "Instead, the brands are ready to offer exclusive models," an official said.

The country’s e-commerce market is expected to quadruple to $60-70 billion in the next five years, according to the Boston Consulting Group and the Retailers Association of India, boosted by increasing Internet access through affordable smartphones and efforts by online retailers to develop payment channels such as cash on delivery, mobile wallets and streamlined logistics infrastructure.

Brick-and-mortar companies including Future Group, Reliance and the Aditya Birla Group are planning online retail initiatives across product categories to take advantage of the increasing adoption of e-commerce.

Tata’s venture will have a separate section for group brands such as Voltas, Westside and Titan, while the online stores of its companies like Croma will continue as separate entities. As part of the plan, the new venture bought Landmark E-retail Ltd from group company Trent for Rs 14 crore.

(Published in Financial Express.)

Shambhavi Anand, The Economic Times

New Delhi, 18 June 2015

The country’s food regulator plans to soon put the onus on retailers to check for product approvals and could hold them responsible if they are found selling items that have not been approved by it.

The Food Safety and Standards Authority of India (FSSAI), which has been at the centre of the recent crackdown on Nestle’s Maggi noodles and several other brands, is working on an advisory that will make clear the responsibilities of retailers, its head told ET. This will be a drastic move that will make retailers responsible for the products they stock and could render them vulnerable to regulatory and legal action in the event of anything going wrong.

"The retailers should also be responsible for what they are selling to the consumers. They should at least check for food approvals," said Yudhvir Singh Malik, chief executive of FSSAI.

Malik said it was often found that many retailers sold unapproved items for higher margins, but when confronted and challenged by food inspectors, most of them pleaded ignorance. The Maggi case first came to light after a food inspector in Barabanki, Uttar Pradesh picked up random samples of the popular noodle brand from an organised retailer and tests on it showed that it contained high levels of lead and monosodium glutamate. When the authorities sought to hold the retailer responsible, it said the item was not manufactured by it and it could not be held responsible.

While Nestle’s Maggi noodles has been taken off the shelves by almost all retailers following the controversy, many products that do not carry FSSAI approvals and have in fact been banned by it continue to adorn store shelves. The FSSAI banned some 500 products recently which include some 32 products from Tata Starbucks, cereal from Kellogg’s, poultry products from Venky’s, Hindustan Unilever’s Knorr instant noodles and a multivitamin from Ranbaxy.

While retailers declined to comment on the FSSAI’s proposed move saying they wanted to study it before reacting to it, analysts said putting the onus on the retail trade would pose several challenges in a country with nearly 8.8 million stores.

"Until now the burden of compliance lies only with the brand owner or manufacturer. But if the regulator wants to split the responsibility of compliance, execution will be a challenge. While it will not be an issue for modern retailers, who have the resources to read rule books and execute such rules, kirana shops and mom-and-pop stores may not be able to do so," said Devangshu Dutta of Third Eyesight, a retail consulting firm.

The head of a leading supermarket chain said for what the regulator is proposing to work, timely and regular communication from it would be key.

"Removing the product is a simple step but knowing which ones is tricky unless we get regular communication from FSSAI," said this person, requesting anonymity.

In the aftermath of the Maggi controversy, the food regulator has ordered testing of instant noodles, pasta and macaroni brands of seven companies including ITC, GSK Consumer Healthcare (GSKCH) and Nestle India, and declared brands made by all other companies as unapproved.

(Published in The Economic Times.)

Sharleen D’Souza, Financial Express

Mumbai, 18 June 2015

Fashion and lifestyle e-tailer Myntra is understood to have seen a drop in sales after going app-only last month, say market watchers. “Myntra had anticipated some reaction to going app-only and had factored in a drop in sales,” said a source in the know. However, the etailer has no immediate plans to revive the website.

A company spokesperson said: “We have just completed a month since we went app-only and hence are not ready to talk about the overall performance yet. We will however come back to you the moment we have something to share.”

The spokesperson added: “For your understanding, we will not be moving back to the desktop as our focus is 100% on the app. You will also see regular app updates with a lot of social features being introduced.”

Devangshu Dutta, chief executive at Third Eyesight, a retail consultancy firm, said the ease of shopping on a desktop makes a customer buy higher value compared to that on an app. “This could have caused Myntra’s sales to decline so drastically,” Dutta observed.

When the e-commerce fashion retailer decided to go app-only on May 15, it took into account the increase in smartphone sales to 600-700 million by 2020 from 120-140 million in 2014, which will help create a base for creating an inclusive market in the history of fashion shopping. “According to a recent study, 90% of smartphone users in India use apps, which is close to 158 million as of today. The country ranks second only to the US in the usage of shopping apps,” the company had said in a press release.

While going app-only, Myntra had said it saw close to 95% internet traffic from mobile devices and 70% sales from mobile devices. At that point, Myntra had 9 million app downloads and it targeted another 5 million downloads in the next 4-5 months.

(Published in Financial Express.)

Shambhavi Anand, The Economic Times
New Delhi, 17 June 2015

Private labels in daily household, personal care and food products are soon expected to drive nearly half the sales for online grocers, as they aggressively expand their portfolio for higher margins.
Several players including BigBasket, LocalBanya, MeraGrocer and ZopNow have been selling their own brands in fresh fruits and vegetables segments, which account for 10-30% of their total revenue. By entering newer product categories such as staples and FMCG, these companies expect private-label contribution to go up to 40-50% by the end of this year.
"The margins on private labels are two times more than those on any other," said Saurabh Chadha, cofounder of online grocery store MeraGrocer, which plans to extend its private label for staples such as pulses as well as powdered and whole masala within the next two months. By December, it will also launch FMCG products such as jams, ketchup, muesli and cornflakes. Other projects will include a range of cleaners such as floor cleaner and toilet cleaners.

BigBasket sells fresh fruits, vegetables, meat and bread under the brand name Fresho and staples such as pulses and spices under the Popular and Royal brands. These labels contribute 35% to the company’s revenue.

The strategy is similar to that adopted by several brick-and-mortar retailers nearly a decade ago, when they started pushing private labels, hoping to earn higher profit margins than from selling products of national brands. While it worked in favour of a few companies such as Big Bazaar and HyperCity, many retailers exited such categories and consolidated their portfolio after consumer product companies slashed sticker prices that matched some of the retailer pricing. But the online companies expect selling own brands to be still more rewarding.

"We aim to increase the share of the private labels to about 40% as they give us better margins and better quality control," said Vipul Parekh, cofounder of BigBasket, which sells its labels not just through its own platform but has also tied up with grocery stores. In the online segment, fashion retailers have been pushing private labels for a while as purchases are mostly driven by price tags and not necessarily by brands. But grocery retailing on the net is new. Online consumers in India are deal-seeking value hunters, UBS said in an April 2015 research report on India’s consumer sector. But trade margins are already low leaving little room for discounts. "Therefore, convenience and availability of niche products may be the only reasons to buy consumer staples online," the report added.

World’s largest e-commerce retailer Amazon agrees. "Online grocery shopping in India is very nascent and we see potential in it, particularly for emerging segments like gourmet, organic food and speciality products which are not easily available," said an Amazon India spokesperson.

According to a global Nielsen report, there has been a five-fold growth in ecommerce sales in past one year for skin care, baby nursing, make-up, deodorants and cosmetics with ecommerce accounting for 5.2% of global FMCG sales by 2016, up from 3.7%. Asia will be the next major growth market.

"To focus on private labels is a logical step for online grocery manufacturers, one for higher margins," said Devangshu Dutta, chief executive of retail consulting firm Third Eyesight. "Secondly, if we compare it with private labels in fashion where retailers have to focus on getting the products customised, grocers have to focus just on packaging. The major effort is in looking for manufacturers and focus on packaging which is incremental. Keeping that in mind private labels in grocery have potential of making a play."

(Published in The Economic Times.)