Rashmi Pratap, The Hindu Businessline
Mumbai, 28 August 2015
online shopping grows more popular by the day, Kishore Biyani,
the man who catapulted brick-and-mortar retail to new heights
in India, found himself scouting for the next big idea. The founder
and chief executive officer of Future Group has now identified
a new frontier to conquer — customers at Rajasthan’s
public distribution system (PDS) outlets. This group of buyers
includes those below poverty line and beneficiaries of various
food programmes of the state government. All of them get a monthly
quota of sugar, wheat and kerosene at subsidised rates. Biyani
wants to sell them deodorants, mosquito repellents and floor cleaners,
besides fairness creams and noodles, at the hundreds of PDS outlets
across the state.
“Consumer aspirations are rising and they want to try new products. You can sell a lot more through fair price shops,” says Biyani, explaining the potential inherent in the Annapurna Bhandar Yojna, a public-private partnership (PPP) scheme between the Rajasthan State Food and Civil Supplies Corporation and Future Consumer Enterprise (FCEL).
Rajasthan has nearly 25,000 fair price shops. As much as 67 per cent of the state’s 6.8-crore population, about 4.5 crore, visit PDS outlets at least twice a month.
That presents a huge business opportunity for Biyani’s Future Group.
To begin with, the company will tie up with 5,000 PDS store owners, turning them into entrepreneurs. Currently, these stores operate not more than six to seven days a month, and remain closed after the monthly ration has been distributed. After the tie-up with Future, the store owners will have an incentive to remain open longer and sell more.
“It is an experiment, but the results so far have been encouraging,” says Biyani, referring to the five stores that have been launched in Jaipur on a pilot basis.
“This is a different market. (The products) in these stores will be limited to just 250 SKUs (stock keeping units),” he adds.
So rather than every kind of household item, the shops will initially stock grocery, personal healthcare and homecare products.
Although other brands will be available too, a majority of the products will belong to the group’s own brands, as that will allow it to offer competitive pricing and drive volumes.
Margins on private label goods are, on average, about 10 per cent higher than those on similar branded products. Retailers pass on the benefit of higher margins to customers in the form of lower prices. So those using Rajasthan’s PDS services will now have access to a wider range of products at prices that are lower than those of national brands.
“It is a good opportunity for both Future Group and the customers, who get much more variety on the shelves. Mr Biyani is an experienced retail entrepreneur and he would be able to select the right merchandise for this segment,” says Arvind Singhal, chairman at consultancy firm Technopak.
Devangshu Dutta, chief executive at retail consultancy Third Eyesight, says the tie-up gives the company a phenomenally stronger presence through the additional outlets. “They get a vast geographic reach through these stores,” he says.
The second advantage is the access to a different segment of customers. “The customers coming into PDS shops are different from the people visiting the modern retail outlets that the Future group has. It gives the group a better critical mass and can help it grow the business more efficiently and profitably,” he adds.
The group is also ready with the supply chain for the backend, as it is present in Rajasthan through its Big Bazaar and Food Bazaar formats. “We have the backend operations already in place,” says Biyani
This new experiment, for Biyani, is an attempt to ride the storm of competition whipped up by e-commerce players and corporate giants such as Reliance and AV Birla group in the retail sector. If it succeeds, the Rajasthan government might invite bids to bring more PDS stores under the ambit of the tie-up. Eventually, other state governments are likely to follow suit.
“That is what we want — to replicate this model in other states,” Biyani says.
And when that happens, the Indian retail sector will get to chase a new and bigger opportunity — this time, right at the bottom of the pyramid.
(Published in The Hindu Businessline.)
New Delhi, 27 August 2015
Joining the league of e-tailers with offline presence, furniture e-tailer Pepperfry has taken on lease 1,800 sq ft of retail space on a Mumbai high street, property consultant JLL said in a recent report.
"Pepperfry has joined the list of e-tailers going ‘hybrid’ by recently leasing a 1,800 sq ft space at Linking Road, Santacruz," JLL India Chairman and Country Head Anuj Puri said.
The trend of ecommerce players foraying into physical retail is fairly new to India. However, in the past few years, a slew of pure-play e-tailing companies, including Lenskart, Healthkart, Fabfurnish and Caratlane, among others, have already opened physical stores to directly connect with customers.
In the current retail scenario, where developing an omnichannel identity is a must-do for most brick-and-mortar retailers, the rationale for the reverse strategy can be to either boost online sales or to deliver a more real, ‘five-senses’ experience for customers.
"For products that have a touch-feel element, the physical retail environment continues to be attractive for the customer. Also, an offline store can help to create more credibility and a more direct customer connect, especially in an environment where online sales are dominated by discounts and deals," Devangshu Dutta, CEO of retail and market analyst firm Third Eyesight, explains.
According to market sources, in 2014, over 70 per cent of ecommerce website-based transactions came from the top 10 cities of India. This means that a vast majority of transactions, particularly in cities within tier-II and beyond, happen in physical stores.
"There are more offline consumers today than online ones," Harminder Sahni of Wazir Advisors, asserts.
"While retailers can choose to be exclusively online or offline, the consumers aren’t going to get classified like that. Consumers will shop across offline as well as online. Thus retailers will have to have a mix of both and find their own profitable balance," Sahni adds.
Paytm, an online payment solutions company, has also installed over 50,000 kiosks for customers to be able to load their e-wallets. By being offline, the company is building trust with customers who would otherwise have felt lost in the already-crowded online space.
"So strong is the urge to move offline globally that for the time ever, Amazon US has opened a physical store in the US in early 2015, and it plans to open more such stores by mid-2015," Puri says.
"As more and more brands and retailers move online, there is bound to be a convergence between channels. Retailers need to — and will — see themselves logically serving customers across multiple channels that are appropriate for their product mix as omnichannel evolves from being a buzzword, to being a reality," Dutta observes.
(Published in Indiaretailing.com.)
New Delhi, 21 August 2015
On Thursday, the Rajasthan government signed an agreement with Kishore Biyani’s Future Group, best known for its retail chains Pantaloons and Big Bazaar, to launch the new Annapurna Bhandar Yojana. Chief minister Vasundhara Raje described the scheme aimed at an upgrade of ration shops as the beginning of a “new era of public private partnership in the public distribution system.” Raje had earlier in July announced that public schools and health centres will be handed over to private players under a PPP model.
Ration or fair price shops provide wheat, rice, sugar, kerosene, and, in some states, edible oil and pulses to beneficiaries at subsidised prices. On Thursday, Raje said the tie-up with the retail giant will improve the lives of villages as the “upgraded ration shop in villages will mean that beneficiaries can buy all goods at one store, like a shopping mall.”
While the government is yet to make the Memorandum of Understanding public, this is how the new scheme will work on the ground.
Will the ration shops be replaced?
No. The agreement does not mean ration or fair price shops in Rajasthan will be replaced by rural and peri-urban versions of Big Bazaar, or that the Future Group will now own or its staff manage ration shops in villages.
Subodh Agarwal, principal secretary, food and civil supplies department in Rajasthan, said that under the agreement, Future Consumer Enterprise Limited, a Future Group company, will be able to sell multi-brand consumer goods at ration shops. In the first phase of this experiment, Biyani’s company will supply processed food items, home care and hygiene products to one-fifth, or 5,000, of Rajasthan’s 25,000 ration shops in cities and villages. Ration shops will continue to be managed by existing ration dealers, Agarwal said. He added that the 5,000 shops had been selected on the basis of their existing capacity. In the next phase, more may be brought under this scheme.
Currently, 4.5 crore of the total 6.8 crore or 67% population buys subsidised wheat at Rs 2 per kg, sugar at Rs 13.5 per kg, and subsidised kerosene from ration shops. They will continue to get these at the same rates, while new products will be made available. It will be the Future Group’s responsibility to stock and procure these through its own network, separate from the existing public distribution network, said officials.
What’s in it for beneficiaries?
More availability and choice in consumer goods, at discounts.
As per the agreement signed on Thursday, Future Group will make available 146 items in 48 categories at the new Annapurna Bhandar or the selected ration shops at discounted prices. As per a government statement, the products that will be added to the ration shops will include oil, ghee, pulses, jaggery, spices, flour, other processed food such as noodles, wafers, biscuits, chocolate, “personal care products such as hair oil, shampoo, toothbrushes”, “home care products such as toilet cleaners, detergent bars, mosquito repellent”, and stationery such as pens and notebooks. The company will be required to stock products of multiple brands instead of only procuring their own products, as per the agreement.
What will it do to retailers?
The entry of a large retailer with big pockets is expected to hit the existing small retailers. In several villages, farmers with small and medium size landholdings supplement their livelihood with self employment by running neighbourhood grocery stores or selling such items as soap and shampoo in small quantities. Their businesses may be affected, if not immediately, then over a period of three to five years.
Retail experts say the entry of Biyani’s group may also have an effect on suppliers as any large retailer will prefer to transact with fewer large suppliers, rather than a high number of small suppliers.
Officials said that though the government had been in talks with several companies – including Reliance, Sahara and Metro – before the launch of this scheme, when an expression of interest was invited in January, only Future Group applied.
Retail experts said the move may open up a new market segment for the group. “By doing this, Biyani will be able to have critical mass in the market, build an understanding of the segment of the consumer serviced by this platform in Rajasthan, and potentially use this as a springboard for building a new company,” said Devangshu Dutta, the Chief Executive of Third Eyesight, a retail and management consultancy.
A retail expert working with a rival company, who did not wish to be named, said the experiment may or not work for Biyani since rural consumers prefer to buy in very small quantities, in the form of pouches, for instance, which is different from the Future Group’s current consumer base. This may require the company to re-engineer its processes to a significant extent.
Is this a first?
NC Saxena, a retired Indian Administrative Service officer, said Kerala and Gujarat had already experimented with providing more consumer items at ration shops.
Ashok Khandelwal, an activist with the Right to Food Campaign in Rajasthan, cited the case of Punjab, which provides 18 consumer items such as candles and low price cloth through ration shops, to demand that Rajasthan also provide more items at controlled prices to consumers. “Between 2011 and 2013, 21 items were offered at a few ration shops run by ration dealers who procured and sold them,” Khandelwal said. “Some items such as tea and salt worked fine, and were made available to beneficiaries at lower prices, but in the case of pulses, there were problems. The prices of pulses at ration shops went up higher than market prices because of irregularities in procurement.”
At present, local entrepreneurs apply to get the dealership of running ration shops. In some villages, the Gram Sewa Sahkari Samiti, or village level cooperatives, manage the ration shops. This new scheme, Annapurna Bhandar Yojana, was started on a pilot basis last August in six ration shops. Biyani’s company got the contract to run five ration shops in Jaipur, while the local cooperative Gram Sewa Sahkari Samiti has been operating one upgraded Annapurna Bhandar ration shop successfully in Udaipur.
Khandelwal argued that the government could have worked on smoothening the procurement and allowed existing local entrepreneurs, ration dealers, village cooperatives to procure and sell more items at the upgraded ration shops.
Amra Ram, a former MLA of the Communist Party of India (Marxist), said there was a risk that while the government might tightly control the prices of goods in the initial years, it will stop doing so later. “There is nothing to stop private players from charging higher prices in subsequent years to make more profits. The same pattern is visible in private hospitals and schools run on cheap land from the state,” Amra Ram said.
(Published in Scroll.in.)
Jain , The Economic Times
New Delhi, 11 August 2015
increasingly app-only online marketplaces are promising richer
shopping experience when 4G, the mobile telecom technology that
offers quick data downloads, gains more traction. Flipkart, Snapdeal
and Myntra will load streaming video content and visual search
feature to help shoppers select products, said top executives
at these companies. Flipkart, in fact, already launched a visual
Fourth-generation, or 4G, telecom technology allows downloads several times faster than 3G and 2G, the more common technologies. Bharti Airtel, which recently launched 4G in nearly 300 towns, says its service allows users to download a movie in three minutes. For ecommerce companies, this means they can offer richer features, for instance the video of a model doing the ramp showcasing the latest fashion collections, on their website to entice buyers.
With Reliance Jio Infocomm, the telecom unit of Reliance Industries, set to launch 4G later this year and others like Vodafone India, Idea Cellular and Aircel also expected to jump into the bandwagon, adoption of 4G is expected to see a spike.
“4G is ridiculously faster than what is available now. The kind of experience you can deliver on 4G will be amazingly better than what one could experience on a Wi-Fi or a desktop today,” said Shamik Sharma, chief technology and product officer at fashion retailer Myntra. “And, if you can envision that world and you can build for it, you can delight your customers.”
Punit Soni, chief product officer at Flipkart, said once 4G is adopted at a mass level, there will be a lot of evolution on visual search and video will start playing an important role. “When we know we are in a 4G-like environment, we would probably start exposing our users to a lot more video streaming and video based experience,” he said.
Flipkart recently launched a visual search feature. If you like the dress or footwear that someone is wearing, you can take a photo and upload it on the site. The visual search feature will do the search and come up with similar products on offer.
Anand Chandrasekaran, a former Airtel executive who is now chief product officer at Snapdeal, expects videos playing an extremely important role in shopping in the 4G scenario. “If you take a model like Exclusively.com, looking at a luxury dress designed by a world-class designer, I would probably want to see a video of a super model walking down the ramp wearing those. So I think there are a lot of use cases where video can start playing an important role once 4G gets a nationwide presence,” he said.
Devangshu Dutta, chief executive at retail consultancy firm
Third Eyesight, said when it comes to browsing and enriching the
view of the product, especially like 3D imaging and virtual draping
of fashion products, there is a need for significantly better
connectivity than what we have today. 4G can help solve this issue.
(Published in The Economic Times.)
Shambhavi Anand & Rasul Bailay, The Economic Times
New Delhi, 3 August 2015
stage is set for the next big fight in the online world as new
CEOs take the helm at the top fashion ecommerce companies amid
mounting challenges of getting customers to buy clothes and accessories
without deep discounting.
Over the past few quarters, sales at online fashion companies have slowed as they tried to cut the millions of dollars that went into subsidising products to lure customers with heavy discounting. The change of guard now becomes even more pertinent for growth, analysts said.
Two weeks ago, Flipkart-owned fashion portal Myntra said it hired Ananth Narayanan, a McKinsey India director, as its new chief executive officer to replace Mukesh Bansal, who was named last year as the head of commerce at the country’s largest ecommerce company.
German investor Rocket Internet is preparing management changes at Jabong.com in a bid to lift the performance of the country’s secondlargest online fashion retailer, ET had reported on July 22. CEO Arun Chandra Mohan and managing director Praveen Sinha are likely to be replaced.
"Now, conversations within ecommerce companies are shifting towards making more margins rather than being purely about market acquisition," said Devangshu Dutta, CEO of retail consultancy Third Eyesight. "This will also drive strategies and organisational behaviour that may cause shuffling among senior roles and people."
Reliance Retail recruited Sanjay Mehra, a veteran of 25 years with stints in Gap and Nike, as the chief executive for its fashion and lifestyle ecommerce business. The company is working to bring a host of relatively lesser-known international brands from Europe for its online venture, which will be quite different from its brick-and-mortar fashion business. The Tata Group last year hired Sarvesh Dwivedi as head of lifestyle for its upcoming ecommerce marketplace.
Even though it is a late entrant, Amazon is aggressively ramping up the fashion and lifestyle business. Vikas Purohit, the head of fashion at Amazon.in, has put in place a team, including Vikram Raizada, former CEO of Tara Jewels, and Manish Saksena, ex-chief osperating officer at Tommy Hilfiger India. Fashion designer Narendra Kumar also came on board in 2103 as a creative director to boost Amazon’s portfolio.
The boom in the online fashion segment is such that the Seattle-based ecommerce giant is creating its own private label in the fashion and lifestyle segment, perhaps making India the first country where Amazon has its own private fashion labels.
"Initially ecommerce — in fashion as well — revolved around building the market and was more transaction-based," said Nitin Chhabra, chief executive of Ace Turtle, which has the mandate to bring dozens of foreign brands to sell on Myntra. "As there are too many me-too models currently, the time has come to have differentiating aspects and fashion ecommerce companies will move toward more personalisation and enhance the experience part of it."
Indians bought fashion products worth $559 million online in 2013, according to an April report by venture capital firm Accel Partners, an investor in Flipkart.
Snapdeal has said it is targeting to sell $2 billion worth of fashion and lifestyle products this year through its flagship platform and Exclusively.com, which the New Delhi-based company acquired in February.
In a bid to reach its goal, Snapdeal picked Amit Maheshwari, vice president of its fashion division, as the new chief executive of Exclusively. com, which sells labels from designers, including Rohit Bal, Manish Malhotra and Tarun Tahilani.
Reliance Industries and Tata Group, India’s biggest conglomerates, also want a share of India’s burgeoning online fashion market.
Reliance Retail is planning a big push in the ecommerce segment this year through the rollout of an online fashion store, chairman Mukesh Ambani announced at the Reliance annual general meeting last month.
The Tata Group is seeking to make a mark by enlisting global fashion brands as part of its portfolio, which is expected to debut in the springsummer season next year, according to people familiar with Tata’s plans.
Tata is trying to convince Spain’s Inditex, a partner with Trent, to sell its highly successful Zara brand on its marketplace. Zara is sold only on its own site and not through third-party websites. So if that happens, it would be a first for the Spanish brand.
(Published in The Economic Times.)