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It’s e-commerce that’s Trendin at Madura

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.)

Tata Group’s new hybrid online retail venture to tap best of online and offline

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.)

FSSAI can hold retailers responsible if found selling unapproved products

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.)

Myntra sales may have fallen after going app-only

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.)

BigBasket, LocalBanya expect contribution from private labels to rise up to 50% through staples and FMCG

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.)

The lesser-known Wipro sibling

Debojyoti Ghosh, Forbes India

Bengaluru, 26 June 2015

Wipro enjoys instant recognition as an information technology behemoth, but hidden behind the name—an acronym for Western India Vegetable Products Limited—and the company’s sunflower logo are traces of its humble origins as a manufacturer of edible vegetable oil.

Founded in 1945 by MH Hasham Premji, father of current promoter-chairman Azim Premji, Wipro began as a fledgling business riding the wave of an imminent Indian Independence. The company grew quietly from strength to strength, single-minded in its consumer care focus as a vanaspati manufacturer. Later, it would diversify into toilet soaps and toiletries.

In 1981, Wipro shifted gears and rode the IT boom that would create fortunes for many. It pioneered the marketing of indigenously made personal computers in the mid-’80s, which was a money spinner for the company.

Today, at $7.5 billion, the IT business is the younger yet bigger sibling. However, despite living in its shadow, the consumer care entity is no minnow either. Wipro Consumer Care & Lighting (WCCL), though yet to cross a billion dollars in business, grows alongside, a silent behemoth in the making.

Over the past 30 years, the Azim Premji-led, and now privately-held WCCL has been building a business that is estimated to be close to a billion dollars in revenue for FY15. It is now present in over 40 countries and is the first homegrown consumer care products firm to report 53 percent of its revenue from overseas markets in FY14. For the same period, Godrej Consumer Products garnered 47 percent of its revenue from its international business followed by Dabur at 32.4 percent, while Marico International contributed about 25 percent to Marico’s overall turnover.

WCCL, as a separate entity, germinated from Wipro’s decision to segregate the IT business in December 2012. The move was aimed at creating better shareholder value for its software services enterprise. The hive-off created a separate unlisted entity (Wipro Enterprises Limited) which included two main businesses: WCCL—to cater to consumer care, lighting and office furniture—and Wipro Infrastructure Engineering that manufactures hydraulic cylinders and other high-precision components for the aerospace and defence sectors. Around the same time, the company also severed its links with its origins when it sold its oldest brand, Sunflower Vanaspati, to US-based food processing company Cargill Inc for an undisclosed amount.

Wipro’s decision to diversify its consumer care portfolio (from vegetable oil to toilet soaps and toiletries) can be traced to the early ’80s. “In the 1980s, the Indian economy was still under licence raj. Growth could have come through acquisitions or extensions to a new line of business. To expand capacity in the vanaspati unit, we made acquisitions in Gujarat and Karnataka. And this was when we moved into our current product portfolio—toilet soaps and toiletries,” says Suresh Senapaty, former CFO, Wipro Ltd, who joined the company in 1980. During his over-three-decade stint with the company, Senapaty also served as CFO of Wipro Consumer Care in 1982, when it was the biggest business for the group.

The metamorphosis into a manufacturer of toiletries was a logical step given the background in edible oils. Wipro invested in its own manufacturing capabilities, which was uncommon for companies in the sector at the time. But the transition had its own share of initial missteps.

When Wipro first launched its toilet soap brand Santoor in the home market of Bengaluru in 1985, it sank without a trace. Weak distribution and a sluggish marketing strategy were the chief culprits. This, however, didn’t deter the fledgling Rs 95 crore-Wipro consumer care business from doing the seemingly foolhardy. The brand was re-launched a year later, nationally this time, and without a single change to the product.

“Failure was simply not an option. At the time, all toilet soap brands were manufactured by third parties. The barrier to exit the business was low for most, given the low investments, but not for us. We had invested in our own manufacturing capabilities, given our background in edible oils. We went ahead despite the naysayers, confident in the product and ourselves. This, I think, was the start of our transformation,” says Vineet Agrawal, chief executive officer, WCCL.

In 1980, about 90 percent of the consumer division’s revenue came from Sunflower Vanaspati, largely from Maharashtra and Madhya Pradesh. Today, WCCL’s Santoor brand contributes over 30 percent of its overall business. It is the third-largest brand in the toilet soap category in India, with a market share of 9.5 percent, behind Hindustan Unilever’s Lifebuoy and Lux.

According to market intelligence firm Euromonitor International, the Indian beauty and personal care market was estimated to be around Rs 65,000 crore in 2014 and is expected to cross Rs 1,20,000 crore by 2019. Santoor is a significant player in this market, leading the toilet soaps category in key states such as Andhra Pradesh (the biggest market for Santoor in India where it enjoys a 41.2 percent market share), Karnataka, Maharashtra and Gujarat.

However, brand experts feel that despite a varied mix of products in its portfolio, most of WCCL’s brands are strong only in the southern and western pockets of the country and are yet to establish their dominance in the northern and eastern markets. “At the same time, Santoor is the third largest toilet soap brand in the country despite the fact that its presence is largely regional. Wipro needs to push ahead in its under-penetrated markets,” says Harish Bijoor, brand strategy specialist and CEO, Harish Bijoor Consults Inc, a Bengaluru-based brand consulting firm.

A Mahendran, chairman and managing director of Global Consumer Products Private Limited, points out that for WCCL, the ‘jewel in the basket’ is Santoor. “But, unfortunately, the soap brand is localised and strong only in certain markets. The brand is yet to penetrate deeply across the country. But, I think, now Vineet’s plan is to take Santoor across all states,” adds Mahendran, who is also the former managing director of Godrej Consumer Products Limited (GCPL). The challenge for WCCL will be its ability to put together a power portfolio of offerings in different consumer care segments. “It is not enough to have one killer offering in the form of Santoor. It needs other big beach-head brands with distinct identities of their own to offset the dependence on Santoor and its numerous brand extensions,” says Bijoor.

Even as the industry weighs in on the future of the business, in the last four years (2010-2014), WCCL has grown at a compound annual growth rate (CAGR) of 21 percent clocking a revenue of Rs 5,025 crore (about $837 million) for the fiscal year ended March 2014; EBIT during the period stood at Rs 575 crore. The company has to record a revenue of around Rs 6,300 crore for FY 2014-15 to cross the billion-dollar threshold, which will be a 26 percent growth over the previous year. CEO Agrawal, however, shies away from disclosing how far the company is from this milestone as well as the financials for the recently concluded fiscal. WCCL is expected to announce its FY15 earnings during its board meeting scheduled to be held in the early part of June.

The top management at WCCL says there has been no significant change in functioning post the 2013 demerger of the IT business. “Everyone runs independently, whether it is the infrastructure and engineering division, us or IT services. So when we split, there was no pain. The ability to take risk increases with being unlisted,” says Agrawal. Agrees Mahendran: “WCCL, as an independent, unlisted company, should become more aggressive. And in the next three to five years, it should perform well under Vineet’s leadership as it does not have the constraints of being part of a listed company anymore.”

WCCL’s healthy balance sheet and a strong annual cash flow has ensured a buffer from currency volatility and allowed the company freedom of operation. The organisation generates a cash flow of close to Rs 400-500 crore a year. At the time of the demerger, the WCCL business had around Rs 1,700 crore in cash reserves.

“It’s always easier for an unlisted company to undertake acquisitions, as no investor buy-in is required. However, as an organisation, the board keeps checks and balances in place. We have not acquired any company since the demerger, which I think highlights the risk approach we take to growth,” says Agrawal, who is also executive director at Wipro Enterprises Ltd. Thus far, WCCL has made eight acquisitions across the personal care and lighting space in India and in overseas markets. The Singapore-based Unza Holdings buyout in 2007 for $246 million in the personal care category has been its largest deal till date.

It wasn’t all smooth sailing. “We had to work very hard to build our credibility as a brand in international markets. In some countries, being taken over by an Indian company is looked down upon. They would rather be acquired by a European or US company,” says Agrawal.

At a time when ‘brand India’ wasn’t fully appreciated, Wipro had to work doubly hard to prove itself as a leader with world-class products and a vision in the consumer care space.

To seal its foreign acquisitions, WCCL had to demonstrate its long-term intent, that it was not a mere ‘fly-by-night’ operator. During its Unza takeover, the management flew down the top 100 employees of the Singapore-based company for a five-day induction programme to Bengaluru. On the agenda was one thing—India. The delegation was immersed into all things Indian—culture, heritage and traditions. Trips were made to showcase the wealth of Indian history, including the Taj Mahal in Agra and the Amba Vilas Palace in Mysore, the seat of the Wodeyar kings. For people who had never seen India, this initiative was an eye-opener and, also, helped cement Wipro’s equity as a global leader.

Experts point out that for WCCL, all its buyouts worked out well and fulfilled its objective of a strong overseas foothold, even with large deals such as Unza and Singapore-based FMCG company LD Waxson Group, which was acquired for $144 million in 2012. The firm has managed to cement its presence in emerging markets such as Malaysia, China, Indonesia, Vietnam and Singapore with its string of acquisitions.

For WCCL, India constitutes about 47 percent of its total sales and Malaysia is close to 25 percent, making it the second-largest market for the firm in terms of overall sales.

It has also expanded its base in mature markets by acquiring Yardley’s UK and Europe business (excluding Germany and Austria) and the UK-based heritage personal care brand Woods of Windsor. It also grew its Indian portfolio by acquiring brands like Glucovita, Chandrika, Aramusk and North-West Switches.

“Acquisitions, more than exports, have driven the business outside India for WCCL. In recent years, it has moved to buying significantly larger-sized businesses (like Unza and LD Waxson) that already have a wide international footprint, giving further momentum to the growing share of overseas markets in the company’s overall sales,” says Devangshu Dutta, chief executive, Third Eyesight, a New Delhi-based retail and consumer products consultancy firm.

“The overseas acquisitions are of those businesses that have an emphasis on emerging rather than mature markets. Many of these emerging markets are under-penetrated and have possibly helped Wipro to buffer any potential growth slowdown over the last 2-3 years in the highly competitive domestic market,” says Dutta.

Wipro became the second-largest personal care company in Malaysia two years ago, ahead of global giant Procter & Gamble (P&G). At present, Unilever leads the market in Malaysia. In Vietnam, Wipro is the third-largest player just behind Unilever and P&G, while in Singapore, it is the second-biggest player in facial skincare with a 14 percent market share and leads the facial cleansers category with 15 percent.

“If we have to grow faster, we have to set a target higher than the industry growth rate. The India and Saarc market has grown from Rs 270 crore in FY04 to Rs 1,565 crore in FY14, a 19-20 percent CAGR over the ten-year period. During the same period, the FMCG industry in India, has grown in the range of 10-12 percent,” says Anil Chugh, chief executive, (consumer care business), WCCL.

Chugh, who heads the consumer care and Yardley business for India, Bangladesh, Nepal and Sri Lanka, says the growth has been both organic and inorganic across markets.

“When we acquired the energy drink brand Glucovita in 2003, it was an approximately Rs 4-4.5-crore brand in terms of revenue; today it clocks over Rs 40 crore. We acquired such under-utilised brands and have grown them significantly,” he says.

While Santoor is the current cash cow for the business, WCCL also operates other fast-growing categories. Its lighting and furniture businesses garnered revenues of around Rs 703 crore in FY14, which is 14 percent of the company’s overall revenues.

The company first ventured into the commercial lighting space in 1992. The institutional lighting division began three years later.

“Liberalisation helped us grow the lighting business. The software industry was booming, large office spaces were opened and the demand for lighting skyrocketed. We focussed on the offices rather than outdoor lighting,” says Agrawal. In the last three years, Wipro’s consumer lighting business has grown at a CAGR of 20 percent.

In 2004, WCCL branched out into the office furniture space. It started the business initially by manufacturing furniture for its in-house companies for a year to understand category nuances. “We focus only on the institutional furniture business,” says Parag Kulkarni, senior vice president and business head, commercial lighting, WCCL. “In lighting, about 45 percent is institutional, the rest is domestic. Currently, the growth in the institutional business is fairly strong and this looks set to continue.”

Even as the business keeps its eye on the ball, WCCL has invested strongly in areas critical for success: People, processes, and its sales and distribution muscle.

WCCL has, as its core team members, people who have been part of Wipro for many years—a rare feat. Agrawal himself joined Wipro as a newbie campus recruit after his MBA from Jamnalal Bajaj Institute of Management, Mumbai, in 1985 and has stayed on, moving to lead WCCL in 2002. Chugh has spent 25 years with the business, while Kulkarni has completed two decades with the organisation.

Wipro Enterprises Ltd is led by non-executive chairman Azim Premji, while its board includes Suresh Senapaty, Vineet Agrawal, Pratik Kumar, CEO of Wipro Infrastructure Engineering, and Rishad Premji, elder son of Azim Premji and chief strategy officer, who was recently appointed to the board of Wipro Ltd.

Azim Premji, the 69-year-old billionaire promoter of Wipro Ltd, keeps a day dedicated every quarter for WCCL. He plays an active role in all major decisions of the company such as strategy and operational planning, capital expenditure and acquisitions. His involvement in the business also extends to interactions with some major clients and WCCL’s employees. WCCL has a total staff strength of 8,300 people, of which about 5,600 are stationed outside India.

Research and development (R&D) is another key ingredient for fuelling the company’s growth. As Wipro plans to scale its consumer care business globally, innovation will play a vital role.

“We launched Glucovita Bolts, a first time product with Glucose which can be taken on the go (without water). We struggled with the formulation and packaging because it was the first time that such a product was conceived and made. However, it was worth it as it has been a success. Safi Shayla shampoo in Malaysia is a specially formulated shampoo for hijab-clad women. In the first year itself, it has garnered a seven percent share in Malaysia. Without innovation, one will never become a leader,” says Agrawal.

While the company doesn’t disclose its R&D budgets, it operates R&D centres in India, Malaysia, Vietnam, Indonesia and China. It also has centres of excellence in India and Malaysia.

Debashish Mukherjee, partner, co-head, consumer and retail industries, India and Southeast Asia, AT Kearney, feels the marketing and distribution minds of some of the multinationals have earned them a very high market share. “A strong distribution channel and building brand awareness through a huge advertising budget makes the difference for any brand. That’s where most of the international players score over local peers. There’s not much differentiation in product quality or pricing,” says Mukherjee.

WCCL, to that end, is bolstering its distribution to compete on a national level. It has 30 sales offices spread across state capitals in the country along with a network of branch offices. The company claims to have 4,000 distributors across the country, reaching over 7.5-8 lakh outlets directly and with an indirect reach of 18-20 lakh outlets.

Senapaty, director on the board of Wipro Enterprises, also points to a push towards a stronger online presence. “It is important to not just be present, but there must also be a strategy for emerging sales channels such as ecommerce. With higher mobile phone penetration and newer experimental models of delivery, FMCG companies must have an active online sales strategy.” He says that WCCL is also looking to capitalise on under-penetrated categories like bath and shower products, deodorants and bodycare.

“While per capita consumption in these segments is far lower in India than in other emerging markets, they are growing rapidly and this growth is what the company will capitalise on,” he says.

This growth should be one to watch out for because WCCL must show the same foresight and clarity of thought it has done so far to create another Santoor and expand into other markets.

Otherwise, and this is a cautionary note, the dream of the next billion is likely to remain just that for the older Wipro sibling.

(Published in Forbes India.)

The tail end of retail

Prasad Sangameshwaran, The Hindu-Businessline

Mumbai, 16 July 2015

This was a business book launch that was billed as the big debate between retailers and e-tailers. On one side was Karan Mehrotra, co-founder and CEO of LocalBanya.com. At the other end was Damodar Mall, CEO, value format at Reliance Retail, who was present in his role as the author of Supermarketwala, secrets to winning consumer India. Keeping things from escalating into an exchange of blows was B S Nagesh, Indian organised retail’s original poster boy, who was moderating the book launch-based discussion.

As the debate progressed, Nagesh suggested that the delivery boys had a large role to play in the overall retail experience. Especially, in the case of e-tailers, they were the face of the brand, he said. There were suggestions that companies could work harder at bring in the ‘wow-factor’ at the last mile.

Sitting in the audience amidst CEOs and commoners was Amish Tripathi, the author of the highly successful Shiva Trilogy who was soon going to be launching his next series focused on Lord Rama.

Exactly a week later when Amish’s book launched at the same venue, it seemed like someone was all ears when Nagesh was speaking a few days back. During the deliveries of the book that began from midnight, e-tailing giant Amazon got Amish to personally deliver copies to some of their lucky customers who had pre-ordered the book. “Some came to receive the book in their nightwear and quickly went in to change and come back to take the delivery,” says Tripathi. Ask him whether the idea emerged from the discussion a week back, and Tripathi a former CMO from the financial sector takes no credit for it. “To be honest, it was Amazon’s idea,” he says.

Some laud Amazon’s idea, others are quick to dismiss it as a marketing gimmick. However, there is one thing that cannot be denied. Amazon went to an area where few retailers dare, to create a difference at the point of delivery. Increasingly as e-tailing boils down only to the lowest price, this is one area where many could make a difference in the times to come. As Tripathi points out, “Because of social media customers share such experiences with their friends and it goes viral. It also adds a positive atmosphere to the delivery and the product.”

Delight and customer loyalty

A report titled Insights Into Exemplary Customer Service, by customer loyalty experts AIMIA and TRRAIN (Trust for retailers and retail associates of India) highlights the fact that “in a typical market environment, exceptional levels of customer service are a defining condition for exceptional levels of customer loyalty.”

Still, instances like the Amazon are far and few in between. Ever here, it is difficult for retailers to replicate the experience if the deliveries run into thousands, if not lakhs. Then you just have an army of delivery boys doing the same plain vanilla job. In the AIMIA and TRRAIN report, industry experts like Ajay Kaul, CEO, Jubilant FoodWorks, that manages the Domino’s and Dunkin Donuts franchise in India says, “Our consumer facing staff are literally our soldiers at the front, at the moment of truth. But they also end up being unsung heroes as they tend to get lost in the numbers and hierarchy.”

Retail industry experts like Devangshu Dutta, founder, Third Eyesight, a Delhi-based consultancy point out that given all the constraints that the retail industry faces, due to infrastructure hurdles or otherwise, most companies are merely focusing on making their product or service deliveries friction free. “As of now just achieving friction free deliveries itself is a wow,” he says. Unfortunately that’s a medium goal, but unless that service standard becomes the norm, companies will not push themselves out of the comfort zone and go for the wow. He adds that most companies are now only striving for least-time and least-cost based delivery parameters.

But it is not that retail associates are going to remain unsung heroes for a long time. Nagesh’s TRRAIN has an annual awards to honour excellence at the retail level. Then companies also have their own recognition. Dev Amritesh, president and COO, Dunkin’ Donuts India points out that his chain celebrates birthdays of its store employees every month and every person entering a new role is given a symbolic “key to show that there is a new opportunity waiting to be unlocked”. New employees are treated to lunch by seniors in the first day of their job and so on, he says.

But as Dutta points out, ultimately exceptional levels of service happens out of a delivery boy/girl’s personal willingness to go beyond the call of duty. Certainly, no one will debate that.

(Published in The Hindu-Businessline .)

Cracking the local marketing code

Ankita Rai, Business Standard

New Delhi, 15 Jun 2015

Travel, books, electronics, fashion, classifieds and now local services – e-commerce has disrupted the status quo in almost every sector. With Amazon venturing into grocery (Kirana Now), Snapdeal entering services and Flipkart ready to follow suit, on-demand services appear to be the next frontier for competition in the crowded e-retail space.

Look at what’s in the pipeline. Amazon recently launched Amazon Home Services in the US market. It is expected to launch a similar service in India soon. Online marketplace major Snapdeal has gone a step further with its service platform to include utility payments and a marketplace for financial services besides home services. Given the huge investor interest in the category, a handful of highly localised home services start-ups (such as UrbanClap, LocalOye, Taskbob and UrbanPro) have also thrown their hats in the ring .

This is a big shift, mind you. From being online marketplaces for products you are now moving into services, you are aggregating photographers and tutors and handymen, and organising a highly fragmented but huge market. Look at some numbers. The homecare and installation services market in India is estimated at Rs 90,000 crore; the laundry market at Rs 200,000 crore annually, of which 95 per cent is unorganised.

You can see why e-commerce companies are muscling in, but does it really help the local guy who would like to offer a highly personalised service? Apparently yes, it broadens the prospective client base and gives him a chance to scale up quickly. Experts say an entry in services can also help the large horizontal players trim costs and improve margins. The incremental cost of delivery of services is lower and can potentially give better returns on investment.

Says Devangshu Dutta, chief executive, Third Eyesight, "A search for margin improvement and a desire to be ‘the e-commerce of everything’ are the prime drivers to enter the services aggregation space.

"Merchandise e-commerce has moved from inventory-led models to marketplaces, but once all costs are worked into the equation, even these are margin-negative, if not for the marketplace then for the sellers on the marketplace. Aggregating more services would be a way to generate extra margins and also defray customer-acquisition and retention costs over a wider base of businesses."

For large horizontal players, the ability to cross-sell services can lead to better margins compared to niche players. Also local services can be seen as a differentiator. It allows e-retailers to not just target the retail share of the consumer wallet but the entire consumption basket. "Why would they want to limit themselves to just retail products when there is so much of value-add they can provide through services," asks Pragya Singh, VP, retail & consumer products division, Technopak.

Jabong.com co-founder & MD Praveen Sinha, who has invested in two local services start-ups, Zimmber and Wassup, says, "Local services is the next phase of ecommerce and will see huge growth provided companies are able to execute it well. However, operational complexity is the biggest challenge here."

So what are the challenges an e-commerce marketplace is likely to encounter when it decides to aggregate services? How should it tweak its supply chain network to take advantage of the growing demand for hyper-local services?

The bigger the better

An eretailer can deliver a product to any location from its centralised warehouse through courier partners but the same theory doesn’t work in services. Execution is a challenge as you cannot replicate a successful model in many geographies at the same time.

That said, big horizontal retailers with their established supply chain networks have an advantage over smaller players/start-ups in the category. Consider Snapdeal, which currently offers home/installation services, and financial services through RupeePower. "The home and installation services business is an extension of our home and living category, offering an assortment of 10 lakh products and end-to-end home services that include furniture installation, electrical, plumbing, pest control and professional home cleaning services," says Saurabh Bansal, vice-president, home, Snapdeal.

Online classifieds platform Quikr is also working on a service offering. Pranay Chulet, co-founder and the CEO of Quikr, says, "We are launching a sub-brand called Quikrservices, which will enable better interaction between buyers and sellers. Services is a different ballgame. The availability of buyer and seller at the same time is important. It is not as simple as shipping a product to the consumer’s doorstep."

Experts reckon services can be cracked but only at scale. Simply put, unless you are very large in size you cannot hope to provide customised service. More volume means better customisation and competitive pricing. "Service providers are also able to get more business from a platform, so they can offer better prices," adds Chulet.

But scale can only solve 50 per cent of the problems. Delivering a standardised service experience is a big challenge. Says Debadutta Upadhyaya, co-founder, Timesaverz, a mobile marketplace for services, "Standardisation of processes, skill verification, background checks and soft skill training of service partners are a must." Timesaverz is present in Mumbai, Pune, Bengaluru. It charges a 20 per cent commission from service partners for every transaction and saw 10x revenue growth last year over the previous year.

On its part, Snapdeal has tied-up with service providers such as EasyFix and Hicare with proven capabilities. "We are working to ensure that professionals who perform end-user tasks are trained in customer communication and service delivery," says Bansal.

Most players are making extensive use of technology to connect a customer with a service provider who is best suited to service her unique need. In a way it also makes the local services business more transparent and efficient, says Varun Khiatan, founder, UrbanClap. UrbanClap is an online marketplace that provides services in 20 categories including personal services and events.

However, service is not an easy space to operate in. Aggregation of local services are open not only to ecommerce players, but also to search giant Google on the one hand (through search results and ads) and local aggregators (sector-specific news bulletins in a city like Noida). "Most domestic services, for instance, are more high-involvement than merchandise buys and the last-mile, last-minute connectivity with the customer is where the relationship is made or broken. In such cases local aggregators with a hands-on approach will have a competitive advantage," says Dutta.

Net-net, while search and service aggregation may appear a low-margin game, over time, technology-powered large e-commerce platforms have the potential to leverage the high volumes it offers and organise this highly fragmented market in the process.

Hyper local isn’t easy: Ashvin Vellody, partner, management consulting, KPMG India: At present, Indian service industry consists of 64.8 per cent of the total Indian GDP, of which e-commerce occupies around 4 per cent. As people move across cities, traditional neighbour-hood and referral networks, which connected consumers with local tradesmen, have broken down. Online services marketplaces are quickly filling this space and finding resonance with the digitally-enabled consumer. However, this model is not without its challenges, the largest of which is limited supply of skilled and certified tradesmen, who could deliver quality services. India has a high number of semi-skilled workers but lacks quality due to chronic under investment in the development of such trade-skills and vocational education. Therefore, many marketplaces would have to spend considerable amounts of time, effort and money in building/upgrading tradesmen skills, such as language and customer orientation. Online marketplaces also have to reach out to tradesmen in each city and invest in enhancing their capabilities before registering them on their websites. The ability to scale up across cities quickly, while maintaining uniform quality standards and competitive prices, is going to a key factor determining success or failure.

(Published in Business Standard.)

GAP’s new republic

Raghavendra Kamath, Business Standard

Mumbai, 15 Jun 2015

IN STEP WITH GAP

  • Set up in 1969 by Doris and Donald Fisher
  • Present in 90 countries
  • 3300 company operated stores and 400 franchise stores.
  • Over 100 stores in China
  • In India its franchisee is Arvind Lifestyle and Brands. First store spread over 11,000 square feet set up in New Delhi in May 2015. Plans to open 40 stores in 5 years

As GAP struggles with flailing customer loyalty in markets across the world, it is looking to script a new story in India. It has opened its first store in India in partnership with Arvind Lifestyle, five years after rival Zara did and a few weeks before H&M announced its plans. The combine has said that it will invest Rs 400 crore in 40 stores over the next five years.

Internationally it has been a rough ride for GAP. Its eponymous brand sales fell last year. Sister chain, Banana Republic, had a flat sales line. Only Old Navy, the value brand saw a five per cent jump in sales. GAP has drawn flak from global media and the analysts’ community for diving headlong into an ambitious expansion plan for Asia even as its brands lose their cool quotient back home.

However the company is undeterred. It has 100 stores in China and last month, it opened shop in New Delhi’s Citywalk Mall, right above that of its rival, the Spanish fashion clothier Zara. Oliver Kaye, business head-GAP India, Arvind Lifestyle Brands, says, "We believe that we have a great offering with our core denim category which forms the heart of the brand. Going by what we’ve seen over the last few days from customer’s shopping, this meets our expectations." Under the franchise arrangement that the two have drawn up, Arvind will invest in infrastructure and GAP will provide support in terms of brand name, merchandise, layouts and so on. To begin with, only the Gap line of products will be brought in and a decision on other brands will be taken later.

Apart from denim, "the second category which will be driving sales for us is kids and baby since there’s a lacuna in the marketing for good products at the right prices," says Kaye. Hoping to leap ahead of its competitors, despite a late start, GAP plans to focus on tier one cities in India, at least to begin with. J Suresh, managing director of Arvind Lifestyle Brands, says "GAP will retain its premium positioning in India and a buyer will find the same stuff here as she may get in a New York or London store."

Devangshu Dutta, chief executive of Third Eyesight says brand awareness and brand desirability are the foremost things for a premium brand to be successful in India. Zara, GAP and H&M are the brands which were popular even before they set up shop in India.

GAP hopes to cash in on the latent awareness the Indian buyer has about its brands. The Indian merchandise will be priced on the same lines as the US one which positions GAP as a premium category brand. Suresh says, "Pricing will be similar to home market though slightly lower given the Indian consumer." A GAP shirt will cost between Rs 2400 to Rs 3300 piece as compared to Arrow which costs around Rs 1900.

How does GAP view the Indian market? "There is big appeal for American fashion and lifestyle which is aspirational," says Suresh. The brand is also banking heavily on Bollywood which has shown a penchant for its brands – recently Kangana Ranaut was seen sporting a GAP T-shirt in the recently released Tanu weds Manu and Shah Rukh Khan has been seen wearing the brand in several films. GAP does not pay to be starred in films, however, the company says. "Shahrukh Khan has played a critical role in driving awareness for the brand. This helped us in a way, as we saw customer reactions before the brand launched. So I’d say it does help us though we don’t think we can attribute a number at this stage" Kaye adds

Arvind will source the merchandise from GAP’s global sourcing to which they will have a direct access. It is also planning to launch GAP on Arvind’s e-commerce platform by November this year. "We will not offer discounts. We will compete with e-commerce portals with our brands and merchandise," Suresh says.

GAP’s Spanish rival Zara, which is in joint venture with Tata’s Trent, has grown pretty strong in the country while Swedish retailer H&M is in the process of setting up stores. Another rival Uniqlo of Japan is contemplating its entry into the Indian market. Many believe that one big mistake that luxury clothing brands make in India is pricing.

According to Prashant Agarwal, joint managing director of Wazir Advisors, "If you are only premium, market shrinks. There are people who are ready to pay Rs 2400 to Rs 3300 for a shirt. But it will leave out many shoppers," Agarwal says, citing the example of Zara which has launched products in the price range of Rs 1200 to Rs 3000.

Devangshu Dutta says that if brands such as GAP and Zara and others consider India as a strategic market, they should produce India-specific products. "There is an advantage for GAP in that it has a manufacturing base in and around India," he says. That is a call the company may have to take soon.

(Published in Business Standard.)

Snapdeal seeks 30 per cent rise in margins from vendors for home decor sale

Varun Jain, The Economic Times

New Delhi, 10 Jun 2015

Snapdeal is starting a two week advertising blitz for a home decor sale and has asked vendors for higher margins to fund the ad campaigns.

In an email to its sellers, the online marketplace sought to raise its margins by 30% during the event and has asked them for a margin of 21% during the upcoming sale, "Decor Carnival", against the current margin of 16%. Snapdeal claims it is organising the biggest-ever Decor Carnival from June 15 to June 30.

According to a mail accessed by ET, Snapdeal is planning to spend big on this promotion for the entire fortnight, and the traffic on the site is expected to be higher than previous occasions. Justifying its decision to raise the margin by 30%, Snapdeal told sellers: "To create a new milestone in terms of sales, we would require extra promotion fee on the value of all your home decor orders taken on website during these days."

When contacted, a spokesperson of Snapdeal said: "Any change in commercials for a specific product line is done in a fair manner by involving all sellers. For such promotional days, our sellers have an option to stay out of the promotional period if they wish to. The promotional days provide a great opportunity to our seller base to increase their sales manyfold because of the increased level of marketing and visibility we provide in this period."

Flipkart, eBay and Jabong declined to comment when asked whether they also ask their sellers to increase margins during such activity. An email query sent to Amazon did not elicit any response till the time of going to press.

However, some of Snapdeal’s partners feel that a 30% increase would be huge burden on them. "We work on very thin margins. Participating in this sale for better revenue by giving 30% extra is not making much sense," said a partner who did not wish to be named.

Another home decor supplier on Snapdeal’s platform said if they back out of the sale, they will not be allowed to sell their stuff during the upcoming activity.

Experts ET spoke to, however, said that this could be a one-off instance and they have never come across a situation where an online marketplace has asked suppliers to give them better margins.

Devangshu Dutta, chief executive of retail consultancy firm, Third Eyesight, feels that for ecommerce players operating in India, asking for better margins during promotional event is not "normal".

"It is not a routine exercise because their business model so far has been about acquiring customers and for that they have been spending huge amounts of cash. Their current margin structures are untenable and not sustainable," said Dutta.

Ratul Ghosh, former head of strategy at eBay and an ecommerce industry expert, admits that he has not heard of something like this before. It is somewhat unusual because when a seller signs up, he does with a particular understanding.

"How do you expect the seller to give a better price after giving Snapdeal 30% more?" said Ghosh. In my opinion, this is not seller-friendly. Also, Snapdeal is not guaranteeing higher sales to every participant, he said. Snapdeal has urged its partners to go all out to make this campaign a success. "To ensure that the campaign is a super success, we will need blocked inventories from all our partners," the mail said.

(Published in The Economic Times.)