Sonali Chowdhury, Business Standard

New Delhi, 8 Jun 2015

Did you know that Indians spend 8 per cent of their daily consumption on gold, only marginally behind medical expenses and education? This statistic revealed by the World Gold Council in a report highlights the popularity of the yellow metal in India. Gold jewellery makes up for 80 per cent of the Rs 3,00,000-crore gems and jewellery market in the country. The organised segment accounts for a small share of 22 per cent, while the unorganised space, comprising local and independent stores, hog an overwhelming 78 per cent of the market.

This means two things – one, most of the time the consumer is not sure of the quality of the gold jewellery she purchases; so there is a certain degree of "helplessness” associated with every purchase; and two, since she has no means of knowing what she is actually getting for the money she is doling out, she relies a lot on the recommendation of the jewellery shop owner. In most cases, one finds that Indian households have a family jeweller, who serves them over generations, and who is mostly sought out during family occasions.

Evidently, the relationship is not exactly transparent and in the absence of a better method, transactions are undertaken on faith than anything else. And that for Titan Company’s jewellery division, Tanishq, is an opportunity – an opportunity to showcase the systems and processes the jewellery retailer has put in place over the years and what the resultant professionalisation of its services means for its customers.

ADVERTISING

To this end, the company has launched a television campaign comprising four commercials conceptualised by Lowe Lintas & Partners. Each of the films features a member of the sales staff from the brand’s outlets in Bengaluru, Delhi, Kolkata and Jaipur, who narrates what is billed as a real life customer experience to highlight the value proposition offered by Tanishq. These include the promise of great value (that accrues from the low making charges starting at 8 per cent), the promise of best exchange value, the promise of transparency and the promise of purity (almost all Tanishq showrooms across the country use the karat meter, non-destructive means of testing the purity of gold). "A jewellery brand has to be multifaceted. One of the facets of the brand is the retail officers’ relationship with the customers. This campaign is about why the brand is so special to its customers and the revelations at the moment of truth. This campaign is also in line with what we have been doing so far – celebrating relationships," says Deepika Tewari, general manager, marketing, jewellery division, Titan Co.

Indeed, most of Tanishq’s advertising so far has focussed on relationships – be it between a husband and his wife or parents and their daughter/son etc. Even when it has launched a tactical campaign – say, promoting discounts on diamond jewellery – it had tied in a catchline that said lekin pyaar mein koi kami nahi (but there is no less love). Its 2011 ad, designed to create awareness and to demystify diamonds as a jewellery category, revolved around a husband-wife story played out by Hindi movie actors Amitabh and Jaya Bachchan. Another recent campaign, ‘Pehla Heera’, has focused on customers buying diamond for the first time and the emotional roller-coaster they go through during what they perceive to be a ‘high-value’ purchase.

But with consumers evolving in their tastes and preferences, Tanishq feels the need to broadbase the appeal.

"So far, by focusing on relationships, Tanishq has managed to attract young buyers and differentiate itself from the competition. But in the long-term it has to win over prospective customers who have not stepped into its stores and this must be achieved fast," says Devangshu Dutta, chief executive, consulting firm Third Eyesight.

While the brand is admired for its quality, design intricacy, compelling campaigns and superior retail experience for over 19 years now, not many people are aware of the level of sophistication it has brought into the retail part of the business. "The practices followed at Tanishq stores are of a certain standard and matters a lot to customers. But there was a perception that the brand is beyond the reach of most people. It is high time we communicated the plus points through the experiences of our staff, in a more interesting way," says Rajesh Ramaswamy, group creative director, Lowe Lintas. Tanishq, currently, has 174 stores exclusively for jewellery sales and it plans to add 30 more stores (mostly franchises) in FY16. During FY15, the jewellery segment of Titan grew 9.2 per cent to Rs 9,430 crore. During the fourth quarter ended March 2015, jewellery sales declined 15.3 per cent to Rs 1,827 crore.

Of course, this is not the first time that a brand has touched on these aspects of jewellery marketing. In 2012, Kalyan Jewellers attempted to bring transparency with detailed price tags mentioning making and wastage charges. This helped the brand to create a loyal base of customers who knew what they were paying for. "Tanishq may be reacting to the heightened noise levels from other jewellery makers about making charges, purity testing and gold versus stones, but you must give them full marks for retaining the brand’s confident tone of voice," says Kiran Khalap, co-founder of brand consultancy, chlorophyll.

(Published in Business Standard .)

Bureau, Financial Express

Mumbai, 6 Jun 2015

In a belated attempt to salvage its reputation, Swiss FMCG major Nestle on Friday decided to recall its Maggi instant noodles from the market to end the ensuing confusion in the minds of consumers, which it said did not provide a conducive environment for the product to be in the market at this point of time.

The company’s group CEO Paul Bulcke flew down to India and addressed a crowded press conference to reiterate that its products are safe to consume and that it applies the same quality standards and the same food safety and quality assurance system everywhere in the world. “We felt unfounded reasons resulted in confusion and the trust of consumers was shaken,” Bulcke said.

Though sales of Maggi in India account for roughly 0.005% of Nestle’s global revenue of almost 92 billion Swiss francs ($98.6 billion), Bulcke acknowledged that the recent developments had damaged its brand and the company was in for a long haul. “If you have confusion there is something wrong with communications. That’s why we are sitting here,” he said.

However, the company’s troubles do not seem to end. Even as Bulcke’s press conference was on, the food safety regulator, Food Safety and Standards Authority of India (FSSAI), ordered the company to recall all nine approved variants of the instant noodles from the market, terming them “unsafe and hazardous” for human consumption. It ordered it to stop further production, processing, import, distribution and sale of the product with immediate effect. It even said that Nestle launched the Maggi Oats Masala Noodles without approval and, therefore, ordered its recall as the company did not undertake a risk and safety assessment for the product. The regulator also said that Nestle violated labelling regulations on taste enhancer MSG and ordered the company to submit compliance report on its orders within three days.

After reports of presence of mono-sodium glutamate and lead in excess content in some samples surfaced in Uttar Pradesh around two weeks ago, till Thursday five states — Delhi, Gujarat, Tamil Nadu, Jammu and Kashmir and Uttarakhand — had banned its sale pending tests in government laboratories. Major retails chains as well as small eateries had also withdrawn the products from their stores and menu. However, with the FSSAI’s order on Friday the company’s woes are expected to increase and the crisis may get prolonged.

Referring to the reports of high lead content in tests by certain government laboratories, the Nestle global CEO said that the company needed to find out the methodology adopted by the government’s test centres. Denying that the company added MSG in Maggi, Bulcke said that MSG was found in the product because of natural ingredients like groundnut oil, onion powder and wheat flour which contain glutamate naturally. However, to remove any confusion the company has decided to remove from now on the “Contains no MSG” labelling.

While analysts welcomed the recall of Maggi by Nestle, they questioned the delay in doing so and even clashing with the regulator and denying the problem for weeks. “If you ask me, everything that Nestle has done is wrong. In this day and age of social media, you cannot question the government and consumers,” said Arvind Singhal, chairman of retail consultancy Technopak.

“Nestle India should have given higher priority to the interest of the consumer and should have done a nationwide recall right at the beginning instead of confronting the situation. In this case they have managed to lose trust of their consumers. Nestle India needs to understand that a brand lives on the trust of the consumer,” Devangshu Dutta, chief executive at Third Eyesight said.

(With inputs from Sharleen D’Souza in Mumbai.)

(Published in Financial Express.)

Saritha Rai, Forbes Asia
Bengaluru, 4 Jun 2015

“Is it big? Check. Can we add significant customer value? Check. Can we generate significant cash flow? Check. India ticks all the boxes for Amazon,” Agarwal explains in conversation. Yet the man described by colleagues as a detail-oriented machine knows his work is cut out for him. “Everything is nascent in India–the seller ecosystem, the logistics, the payments … . We have to connect the dots on a massive scale that involves hundreds of cities, thousands of sellers and millions of products.”

After two years the irrepressible global retailer has made noteworthy progress. It has partnered with 25,000 merchants of all hues, down to home entrepreneurs in little-known towns hawking fragrances and pet food. On its platform it offers 22 million products in thousands of categories ranging from gourmet foods to organic gardening supplies and minor coffee brands.

In its Indian home base, Bangalore, it is pioneering ties with select neighborhood stores, or kirana as they are called, to deliver everyday items like sodas, spices and shampoo within four hours. This has won over shoppers like Sudeepta Banerjee, a businesswoman in the Whitefield suburb, who buys everything from art supplies for her daughter to curtains for her home on the platform. “The variety is good and the customer service is great; I am not going elsewhere in a hurry,” she says.

Yet, despite the loyalty of such buyers, India at not yet $2 billion in yearly gross volume is still tiny for Amazon compared with its home U.S. market. “The country cannot contribute significant revenues to the parent for at least five more years,” said Gautam Chhaochharia, head of research in India at UBS and lead author of the recent report, “Is India in an e-commerce bubble?” The report says India’s e-commerce sales could exceed $50 billion by 2020 from $4.5 billion in 2014.

By contrast, analysts put China’s online retail trade at $460 billion but reportedly find Amazon, even with a dozen warehouse hubs and thousands of employees, to have only 2%. The market is dominated by domestic giants, Alibaba’s Tmall and JD.com.

India’s potential is too large to be ignored, and Amazon has a fighting chance despite domestic rivals having some years’ head start. It is distinguishing itself as a huge repository even as rivals focus on discounting, says Devangshu Dutta, chief executive of retail consultancy Third Eyesight. “Their recent mesmerizing ‘aur dikhao’ [show me more options] marketing campaign portrays a limitless store to match Indians’ compulsive aur dikhao buying behavior,” says Dutta.

Its rivals, however, shoot holes in Amazon’s customer-focused strategy. “We believe that focusing on sellers yields higher rewards and creates better value for both sellers and buyers,” said Rohit Bansal, COO of Snapdeal, which has 150,000 merchants selling 12 million products, including items produced by entrepreneurs in one of the world’s largest slums, the Dharavi neighborhood in Mumbai.

Amazon will not comment on its competitors. But it is trying to crush them with a three-pillared strategy–low prices, wide selection and fast delivery, says David Abikzir, chairman of Nymex Consulting in Bangalore. “In two years it has done what its competitors took seven years to do.” What none of them has done is make a profit.

The heart of Amazon India’s operations is within a high-rise called World Trade Centre in the obscure Yeshwanthpur neighborhood in northwest Bangalore. Out of his 19th-floor office there, Agarwal and his core team plot moves to tame homegrown rivals like Snapdeal, backed by SoftBank, and Alibaba’s Alipay-backed Paytm.

But the global retailer’s biggest challenge in the cutthroat market is Flipkart, launched seven years ago by two Amazon alums and dubbed, then, the Amazon of India. Flipkart’s backers, a who’s who of sector investors like New York’s Tiger Global, South Africa’s Naspers, the Qatar Investment Authority and Yuri Milner’s DST Global, are keeping it well-funded to chase furious expansion.

Last year, though, while on a visit to India, Bezos trumped a $1 billion Flipkart funding announcement. Decked in Indian wedding gear, he swung Bollywood hero-style from a festooned truck, posed for cameras and handed a $2 billion check to the India unit.

India had “surpassed” his expectations by hurtling past the $1 billion sales mark within 12 months of launch, the fastest billion anywhere in the world for Amazon, said Bezos. “We’ve never seen anything like this.”

There are two takeoff points for Indian e-commerce. First, in a landline-starved country, a dramatic smartphone price drop is making Indians take to their devices at a frenetic pace. This is enabling online transactions like never before, connecting traders in southern India to customers in Kashmir 2,000 miles away and the other way around.

Meanwhile, with branded brick-and-mortar retail only accounting for a minuscule 7% of total sales, online platforms are filling a breach. “In a country that, by its very nature, is entrepreneurial, if you take away the friction from the system, magical things can happen,” says Agarwal.

“There was virtually no e-commerce in India even six years ago, but it has now reached a tipping point,” says Rajan Anandan, managing director of Google India. “For many people outside India’s eight big cities, e-commerce will offer the first access to a truly wide range of products and brands,” he predicted. Sure enough, during Amazon’s Great Indian Summer Sale in early May, smartphone-toting buyers in unheard-of places ordered lacy nightwear, foreign makeup brands and gourmet Mexican and Thai ingredients. “India is an aspirational market, but would a Godrej Nature’s Basket [the country’s biggest retailer of gourmet foods] have the courage to open outside the biggest cities?” asks Agarwal. Orders quintupled, and many small merchants catapulted into the million-dollar (in revenues) club. “Our vast selection of products is our biggest differentiator,” says Amit Deshpande, Amazon India’s director of seller services.

Despite India’s rudimentary logistics chain, the international e-tailer offers timed deliveries for appliances and overnight, same-day and even Sunday deliveries in 100 Indian cities. Agarwal recounts that Diego Piacentini, a Seattle-based boss of global consumer business, ribs him, “You can’t even estimate the time it takes to get from the airport to the office and you’re offering guaranteed delivery to customers!”

At the delivery end each big online retailer in India innovates in remarkable ways. Flipkart has tied up with Mumbai’s hoary lunch carriers, the dabbawallas, for last-mile delivery. It is contemplating experimenting with delivery drones in rural India. Amazon won’t be left behind; it’s using postmen, gas stations and local shopkeepers.

The parent’s financial heft may ease some of the pressure on Amazon India, and Agarwal has his own know-how from years of directing international operations in Seattle: “My team worked to bring sellers on to the Amazon platform–there was no notion of a marketplace back then; my team invented the ‘marketplace’ to be a single, seamless experience for sellers.”

In India, Amazon has 2.5 million cubic feet of warehouse space in 11 “fulfillment centers” across nine Indian states, where 700,000 SKUs, or distinct items from books to plants, are stored. Agarwal says, “We look at this operation in a manufacturing sort of way–traders bring in the ‘raw material’ while we manage the variables both on the supply and the demand side.”

But this is India and the items could arrive on bicycle, by foot or by truck. Defect-checking, storing items in dusty, humid or extremely hot conditions, handling movement among India’s 29 states–all make for what Agarwal calls a “mind-boggling operation.” Technology helps: For instance, when sellers sign up, algorithms chart their risk profile.

Regulatory and tax issues are uniform vexations. In the southern state of Karnataka, where Bangalore is the capital, Amazon is threatening to shut down its hub after the government slapped several of its vendors with a $9 million tax arrears notice. Brick-and-mortar retailers, like Kishore Biyani of Future Group, are asking how e-commerce’s “platforms,” which they say are only different in name, are allowed foreign investment when foreign direct investment in retail is otherwise very tightly regulated.

Amazon is famously willing to endure red ink as long as there is consistent growth in the market. It has $2 billion in capital to run through in India in the next few years. “The bulldozer has deep pockets and has forced its competitors to raise further rounds of overseas funds,” says consultant Abikzir.

None of the market stress is showing on Agarwal’s boyish face yet, not even the undoubtedly irksome fact that the biggest fight is with Flipkart, set up by the former Amazon pair. Instead, the executive points to Amazon’s customer-centric flywheel: Great customer experience leads to more traffic, in turn attracting more sellers and leading to a better selection, which then leads back to happy customers. “It is all about transforming the way India buys and the way India sells,” offers Agarwal. Bezos wouldn’t say it less grandly.

(Published in Forbes Asia.)

Shambhavi Anand & Richa Maheshwari, The Economic Times

New Delhi, 2 Jun 2015

Puma, which made its India debut in 2006, said it posted sales of Rs 766.75 crore in the 2014 calendar year, inching closer to companies such as Adidas and Nike that entered the country earlier.

The company has built on the advantage it took of a gap in the market when Reebok India took time out to deal with an alleged fraud in 2012 "I would not deny that the competition’s weakness was an opportunity that we grabbed," said Abhishek Ganguly, managing director of the German company’s local unit, in an interview. Among the measures it took was stepping up engagement with Reebok’s biggest vendor, Rishabh Sports Station. Around 300 of Reebok’s 900 stores were shut by parent Adidas as it sought to take stock and relaunch the brand.

This allowed Puma to fill the gap in the market created by Reebok’s absence. It also won the trust of Reebok’s vendors by utilising their capacity.

"Puma reacted to the vacuum that was created suddenly by Reebok’s misfortune. They were able to win over some of the vendors whose capacities were lying unutilised," said an executive at one of the suppliers that works with both Puma and Reebok. Reebok franchisees that approached Puma for a possible tieup were carefully evaluated. Puma was conservative with its store opening strategy.

"We did not convert… stores (where) we already had a store in that market or they were at undesirable locations," said Ganguly.

"In terms of franchisee management, we focussed on long-term sustenance of our stores and never opened multiple stores in the same location. We have always believed in quality distribution and not in over distribution. In some ways, we had the late-mover’s advantage and we learnt what not to do. So while others focussed on just opening stores, we put our energies in improving our customers’ experience in our stores."

"They’ve focussed on product design, and the brand is clearly at a premium position through its pricing. They’ve been able to connect well with the younger consumer on the desirability plank," said retail analyst Devangshu Dutta of Third Eyesight.

The Bangalore-based company also created open sandals and flipflops exclusively for the Indian market. "We sell over 5 million pairs of these every year," said Ganguly.

Among the competition, Nike India posted a loss of Rs 47 crore for the year ended March 2014, according to a filing with the Registrar of Companies (RoC). The company entered India two decades ago. Despite its troubles, Reebok posted a net profit of Rs 14.5 crore, while Adidas made a profit of Rs 136.9 crore.

According to internal numbers, Puma made a profit of Rs 29.09 crore in calendar 2014.

"We have grown over 13% in 2014 as compared to 2013 in terms of same-store sales," Ganguly said. Puma has 340 stores, of which 40 are run by the company. Product prices range from Rs 1,599 to Rs 15,000.

The entry level price has come down substantially in the last few years and so have discounts. Puma will boost its online presence in the coming months. It will also act as a market place for its franchisees. They are currently barred from selling on marketplaces such as Flipkart, Amazon and Snapdeal in a bid to curb any heavy online discounts. The company currently conducts business on those marketplaces directly.

(Published in The Economic Times.)