admin
November 27, 2015
Sagar
Malviya, The Economic Times
Mumbai,
27 November 2015
Revenue
from online ticketing on Indian Railway Catering and Tourism Corp
crossed the Rs 20,000-crore mark during the year to March 2015,
nearly double the turnover of India’s largest online retailer
Flipkart.
IRCTC generated Rs 20,620 crore, or nearly $3 billion, through online ticket sales in the last financial year, up 34 per cent from a year ago when it sold tickets worth Rs 15,410 crore. But unlike loss-making marketplaces, IRCTC posted profit after tax of Rs 130 crore, up from Rs 72 crore in the previous year.
"Bulk of the sales may be attributed to IRCTC’s rapid growth in e-ticketing which has been due to its interface and setting up of a very robust process. Capacity enhancement was done to book 7,200 tickets per minute as against 2,000 tickets per minute in the existing system," said Sandip Dutta, public relations manager at IRCTC, which set a record in April when it booked 13.4 lakh etickets on a single day. That compares with 27 tickets a day when it began in 2002. In fact, 55 per cent of all rail tickets sold are booked online.
The government-owned portal posted a 19 per cent increase in income at Rs 1,141 crore, which mainly includes service charges on tickets, sales of Rail Neer water, onboard catering services and licence fees from outsourced catering vendors.
This is similar to online marketplaces where sales don’t include actual goods sold but instead count commission from sellers and revenue from advertisements on their ecommerce sites. IRCTC’s combined income from commissions on ticketing, travel and tourism was Rs 670 crore, a tad higher than Flipkart’s turnover of Rs 659 crore earned from shipping fee and selling commission on its ecommerce portal.
By having a monopolistic position, higher web traffic and sales, IRCTC can attract several brands on its portal, feel experts. "A large part of the Indian population trusts IRCTC and brands across consumer, food and tourism can use it to advertise or sell their products on the portal," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
Since IRCTC doesn’t compete with any of the online marketplaces
in India, Amazon has partnered the rail portal for two years with
an annual guarantee of Rs 18 crore a year. India’s ecommerce market
is expected to breach the $100-billion mark by FY20, triggered
by increasing internet usage, discounting and investment by online
retailers, according to Goldman Sachs that has revised its previous
estimate. The majority of an upward revision of 27 per cent is
contributed by the e-tail segment, which is estimated to reach
$69 billion by FY20. 
ET View: Expand the IRCTC Menu
There is a huge potential to capitalise on the large and fast-growing cash-flow. The Railways now need to visualise IRCTC as a major-league online retailer, and not merely for rail tickets. IRCTC needs to be positioned as a huge online market place, bringing together buyers and sellers for myriad goods and services. It needs to leverage its expertise in bringing individually ordered food for passengers to provide doorstep delivery for a wide variety of goods and services. The Railways need to explore stock market listing for IRCTC.
(Published in The Economic Times.)
admin
November 20, 2015
Richa Maheshwari, The Economic Times
Bengaluru, 20 November 2015
Four
years ago, about 500 out of 600 operational handloom silk weavers
in Katoria village of Banka district in Bihar had shut shops amid
a demand slump and dwindling profits. "It was an exceptionally
bad year for us. Many left for Mumbai to look for jobs and youngsters
were not keen on taking forward the legacy," recalls Mohammad
Izzaz, a weaver whose family too had stopped making Banka silk
a year later.
That was then. Today, Izzaz and several other handloom artisans
in his village are back in action, weaving Banka silk sarees and
dress material for the booming ecommerce market. "One and
half years back, on an average, we would earn about Rs 30 per
day. Today it has increased to Rs 300 to Rs 400," says Izzaz,
25, who supplies to Indianroots.com and indianartizans.com.
Currently hundreds of Katoria residents are migrating back to the village and weavers say around 150 otherwise mothballed handlooms have restarted in the last one year.
Similar stories of revival in interest are emerging from traditional handloom clusters across the countrybe it Paithan in Maharashtra or Phulia in West Bengal, both known for their handwoven silk sareeswith ecommerce companies such as Amazon, Flipkart, Snapdeal, Jaypore and Craftsvilla giving them a new lease of life by helping them to reach out to customers all over the country as well as abroad.
Leading ecommerce firms have already tied up with nearly 7,000 weavers to sell their products on their platforms and the number is growing keeping with rising demand.
Amazon India, which launched a craft store before its festive sales last month, has enlisted about 90 weavers and recorded a threefold surge in demand during the festive season, its category leader Mayank Shivam said.
India accounts for 95% of the world’s handwoven fabrics and, according to the textile ministry’s estimates, handloom weaving provides employment to more than 4.3 million weavers and allied workers in the country.
But, with powerlooms and branded products sweeping the consumer markets with cheaper products and newer designs, the handloom industry has been going downhill over the years, forcing many weavers in several traditional handloom hubs to migrate to other regions and professions to earn their livelihood. According to a labour ministry report, employment in the handloom/powerloom sector declined by 11,000 as of March 2015 from a year earlier.
With the entry of ecommerce players, artisans can hope for a revival in their fortunes as they get direct access to consumers around the world and that too without having to deal with middlemen.
In June, Snapdeal partnered with Himachal Pradesh government to launch a ‘special ecommerce zone’ to facilitate sale of local handicraft and other products while Flipkart has launched ‘India Art House’ to push traditional fashion.
Mumbai-based Craftsvilla, which has around 150 artisans supplying art and craft to them, is working towards creating its own private label where base-level weavers and artisans will make products exclusively for them. "A lot of the traditional handwoven designs have become old-fashioned," said Manoj Gupta, founder of Craftsvilla. "We need to contemporise it for our young shoppers. Thus, we are hiring NIFT designers to become the voice of ethnic designs," he said.
The online industry is not only helping weavers expand nationally but they are also proving a window of opportunity to sell their products in the global market. That means the sellers don’t necessarily depend on seasonality.
Rahul Narvekar, CEO of Indianroots.com, said the portal gets most of its orders from abroad, adding that it sold a handwoven stole worth Rs 19 lakh in Malaysia a few months back.
Manish Ramakant, a weaver of Paithani silk sarees, said his business has grown by 40% last year on the back of online orders from abroad. "Demand for Paithani sarees is the highest during the wedding season; rest of the months, we remained unemployed. However, online international orders now ensures work round the clock today," he said.
With the newfound markets and vigour, Ramakant, 39, has now ventured into home decor and has started interacting with buyers and designers through Whatsapp.
Experts point out that ecommerce players help handloom weavers overcome their biggest challenge: easy and quality access to consumers.
At present handloom products are mostly sold through central and state government emporiums. "The emporiums, run by bureaucrats, are not well maintained. Hence, there is hardly any good retail outlet for artisans," said Arvind Singhal, chairman and managing director of consultancy firm Technopak.
Devangshu Dutta, CEO of retail consultancy firm Third Eyesight, said the government should get out of retail business. "Business is not a government’s job. Its job is to run the country," he said. "The supplier, distributor and the consumer make an ecosystem. Hence, this has to be individual and business-led. I think the government should get out of the way."
Also, with most ecommerce players dealing directly with traditional weavers, artisans are earning better margins that would otherwise go to middlemen.
"I was affected by middlemen. Now, for the past one-and-half years I have been working directly with designers and online companies. I have cut down nearly 60% of middlemen," said Asif Ansari who makes Maheshwari sarees. This has helped the weaver from Maheshwar in Madhya Pradesh improve his margin to 35%-40% from earlier 15%-20%.
However, the world of ecommerce is not without any tension for
handloom weavers. Fear of duplication and lack of awareness among
consumers are among the main issues weavers face in the online
retail space. This sometimes force them to cut down their margins.
What is applicable to Katoria’s Banka silk weavers is applicable to any other industry or trade facing challenges of demand. One of the problems facing many quality traditional sectors is the absence of information about such products, especially luxury or niche items as well as non-traditional art and craft. This is where online retail, which doubles as shop and catalogue, can be helpful. If online companies resurrect traditional sari production, they can certainly do the same for artwork and handicrafts that need to find their markets which are probably just waiting ‘to be told’ that they are there to be procured.
(Published in The Economic Times.)
admin
November 18, 2015
Manu
Balachandran & Madhura Karnik, Quartz India
New
Delhi, 18 November 2015
First
he became the face of yoga in India. Now, he is taking on major
global consumer goods companies with products ranging from herbal
tea and fruit juices to toiletries.
Baba Ramdev—born Ramkrishna Yadav—seems poised to give
some of India’s biggest consumer goods makers a run for their
money with his ayurvedic, made in India products. Patanjali Ayurved
Ltd, a company that Ramdev founded in 2006 along with his confidante,
Acharya Bal Krishna, has emerged amongst India’s fastest
growing fast moving consumer goods (FMCG).
And Ramdev is piggybacking on prime minister Narendra Modi’s Make in India campaign to promote his goods. All the products that Patanjali manufactures have a “Made in Bharat” label.
This week, Patanjali launched a noodle brand to compete with
Nestle’s Maggi, which is now back in Indian markets after
a brief ban. While India’s food regulator, FSSAI, maintains
that Patanjali’s noodles don’t have necessary approvals,
the company is all set to start sales in the coming weeks. Ramdev’s
company is also planning to take on global sportswear brands like
Nike and Adidas by introducing a yoga-wear collection.
In January, Aditya Pittie, chairman of the Pittie Group, which
is a distributor for Patanjali’s products, told the Times
of India newspaper that the company was expected to cross the
Rs2,000 crore mark in the 2015 fiscal. If these estimates are
true, the eight-year-old firm has already overtaken brands like
Emami—an old name in India’s FMCG sector.
Quartz was not able to independently verify these figures as India’s Registrar of Companies does not have information for the 2015 financial, yet. Patanjali Ayurved did not respond to an emailed questionnaire from Quartz.
Rocketing revenues
Patanjali’s phenomenal growth trajectory is making big retail
chains in the country sit up.
Although the company has a massive presence across India trough
franchisees—its products are available in over 177,000 retail
stores—it is now tying up with retail behemoths to reach
a wider audience.
In October, Ramdev entered into a partnership with the Kishore
Biyani-owned Future Group for promotion and distribution of its
products. Future Group is one of India’s largest retail groups
with presence in more than 95 cities.
“Our effort is to promote swadeshi and give a tough fight
to MNCs,” Ramdev told reporters after announcing the alliance
with Future Group. The 50-year-old yoga teacher added that Patanjali
will also launch new products like pasta, oats, muesli and juices
to cater to India’s growing middle class that is developing
a taste for western flavours.
For the current fiscal, the firm is looking to target revenue of Rs5,000 crore.
Headquartered in Haridwar, Uttarakhand, Patanjali was found in
2006 with a paid-up capital of Rs41 crore.
“At its own claimed revenues of Rs5,000 crore in this financial year, it will be among the top five FMCG companies in the country. With its recent announcement to enter more product categories—yoga apparel, baby and children’s nutritional foods etc.—it is poised to enter the top three in the next two to three years if its current spectacular growth rate continues,” Arvind Singhal, managing director of Technopak, a management consultancy, told Quartz in an email. “With that size, it will certainly be a formidable competitor to several established brands and companies such as HUL, Nestle, ITC Foods, and GSK to name a few,” he added.
A report from international brokerage, CLSA, in August said that
Patanjali’s core strength is its mass appeal.
“The plans are even more interesting as the company is now looking at ‘traditional’ ways to expand and targets to more than double the top line in coming years,” the report said. “While competition must be keeping its fingers crossed, all we can say is—‘Wish you were listed.’”
Brand Ramdev
The company usually refrains from spending big money on advertising and marketing, which is an important driver for brand creation.
Typically, an FMCG firm in India spends about 10-15% of its revenues
on advertising while Patanjali had negligible spending and “relies
mainly only on endorsement by Baba Ramdev and his disciples and
instructors,” according to CLSA.
Much of the promotions also happen during yoga sessions conducted
by Ramdev. The yoga guru also depends heavily on followers who
are popular celebrities such as wrestling champion, Sushil Kumar,
to endorse products during these yoga programs.
And according to CLSA, Patanjali has the potential to reach out
to more than 200 million who are directly or indirectly linked
to his yoga programme.
This year, as the company looks to take on some of India’s biggest FMCG companies, Patanjali has also roped in advertisingagencies, McCann and Mudra to run a brand new campaign. The company has already roped in one of the country’s biggest film star, Hema Malini, to endorse a maida flour free biscuit.
Challenges persist
Born in 1965 to a poor family of farmers, Ramdev, along with
his friend Acharya Bal Krishna, started taking yoga lessons and
travelling around on bicycles to clients’ homes to perform
religious ceremonies in the late 1990s.
Today, Ramdev’s empire in Haridwar alone spans a hospital,
an ayurveda medical school and research institution, a food park
and a cosmetics manufacturing unit. He also reportedly purchased
an island in Scotland worth £2 million to set up a wellness
centre.
However, there could be some bumps in Ramdev’s smooth ride
in the FMCG sector—especially with his new products such
as noodles.
“In the growing market for ready-to-cook packaged food,
a new entrant would struggle to create visibility and initial
demand,” Devangshu Dutta, CEO of Third Eyesight, a retail
consultancy, told Quartz in an email.
“The other aspect to keep in mind is that while a lot
of food and nutraceutical products resonate easily with the Patanjali
brand, instant noodles seems completely counter-intuitive under
this brand’s umbrella. How much consumers will support this
new launch remains to be seen,” he explained. [See "From
yogasan to ayurved to noodles" for a fuller analysis.]
Meanwhile, before launching the noodles, Ramdev who never tasted them, ate noodles for “several days,” Bal Krishna told the Business Standard newspaper. Patanjali can only hope that its customers take to their product with the same gusto.
(Published in Quartz India.)
Devangshu Dutta
November 17, 2015
The Patanjali Group has created an Indian FMCG giant in a very short span of time on the back of a three-pronged strategy:
Over time, the group has also invested in improving its manufacturing and packaging infrastructure to bring itself on par with well-established competitors.
The group has clearly focussed itself on the mass market, and Patanjali Group’s products become a “go-to” for customers who are more price-sensitive than brand-loyal. This definitely creates pressure on established brands in each of the product segments where the group is now present.
In the growing market for ready-to-cook packaged food, a new entrant would struggle to create visibility and initial demand. However, with the momentum of the Patanjali brand behind it, the group’s new product — instant noodles — has a fighting chance.
I must say, though, that the immediate opportunity would have been bigger had Maggi also not just relaunched in the market. The other aspect to keep in mind is that while a lot of food and nutraceutical products resonate easily with the Patanjali brand, instant noodles seem completely counter-intuitive under this brand’s umbrella. How much consumers will support this new launch remains to be seen.
This 2-4 minute noodles story is still cooking. Keep watching the pot!
admin
November 13, 2015
Rashmi
Pratap, The Hindu Businessline
Mumbai,
13 November 2015
Chetan Sharma, the owner of Raj Rasoi food court in Agra, cannot stop gushing about the one-stop-shop from which he sources nearly everything needed for his restaurant — from the furniture and groceries to decorative pieces and cutlery. Shopping on alternate days, he saves up to ?3 lakh a month at the over 60,000-sqft Best Price, owned by the world’s largest retailer, Walmart.
In Andhra Pradesh, every Sunday evening, Sambasivarao visits the Best Price outlet located about 45 km from Vijayawada. It is here that he buys the home appliances, furniture pieces, confectionary, cereals and a range of other items that he stocks for sale at his Sri Krishna Best Sale supermarket. The advantage: huge savings in transportation costs and a range of products unmatched by the other wholesalers and dealers near him.
After waiting more than seven years for the elusive government nod for foreign direct investment (FDI) in retail, American giant Walmart is now focusing its energies on the likes of Sharma and Sambasivarao. It has found its mooring in the cash-and-carry wholesale format — where FDI up to 100 per cent is permitted.
Walmart’s target clients include kirana or mom-and-pop store owners, small traders, hoteliers and caterers in a wholesale market that is pegged at $300 billion.
Krish Iyer, who took over as President and CEO of Walmart India after the company called off its joint venture with Bharti Enterprises in late 2013, says, “Growth here (in India) is driven by domestic private consumption and not exports. With the current business model of cash-and-carry, where we sell to business members, we believe there is a great potential with the fairly low penetration of modern retail.”
India will buy
Globally, by 2020 the mom-and-pop-store business is expected to grow by $800 billion, of which $140 billion will be in India, according to industry estimates. “It is an attractive market. We have established a good business model and are happy with our current performance. That makes us bullish about investing further in India,” says Iyer.
He had to virtually rebuild Walmart India after the company was involved in a lobbying controversy, followed by massive staff exodus in 2012-13. “I think it wasn’t challenging (to get moving again), but we needed a focused approach… cash-and-carry was the logical choice.”
Efforts to grow the company’s customer base include a strong digital strategy. “I believe that a vast majority of sales even in brick-and-mortar stores is digitally influenced. We have rolled out a B2B (business-to-business) website where members can check the products or place orders on the Web or call us at the store and make enquires while placing an order.”
More interesting is the company’s hand holding strategy for store owners, which seems to be bringing in loyal customers. For Sambasivarao’s store, for instance, Walmart sales executives helped plan the layout, product category sequencing and even trained store employees on standards for display and audit. “Our business development associates go to shops and hotels to sign up new members,” says Iyer. Members are enrolled within a 20/40-km radius of each outlet to ensure that customers do not have to spend more than 30-40 minutes in commuting.
Moreover, small businesses like Sambasivarao’s are saving a lot of money by using Walmart’s transportation services. For each carton of products, Walmart charges ?11 for transportation, including loading and unloading. “Other distributors and wholesalers charge Rs. 35 per box,” says Sambasivarao. All he has to do is go to the Best Price outlet with a list of items. “The staff pack and ready the items in 25 minutes and I am out of the store in less than an hour. Moreover, the pricing is transparent,” he says.
Cost advantage
For hotelier Sharma, the biggest draw at Walmart is the availability of fresh fruits and vegetables at the most reasonable prices in Agra. “The prices are at least 15-35 per cent lower than market rates. Moreover, they have discounts and periodic promotional offers. Overall, I save Rs. 2.5 lakh a month. Plus, I don’t have to roam around Agra in search of quality products,” he says.
So, how is the retail giant able to offer this pricing advantage? By investing in and maintaining a robust supply chain, says Walmart India’s Vice-President and Head of Corporate Affairs, Rajneesh Kumar. “What works for us is the direct-to-store model. All the suppliers we work with, such as Nestle, Coke and even SMEs, supply directly to Walmart outlets. We undertake joint business planning to make sure that the fill rate [inventory’s ability to meet demand] of the product is good.”
Apart from an annual planning exercise, a Walmart team interacts regularly with the companies to iron out issues on a real-time basis. “Our software, Retail Link, provides suppliers with the information they require around replenishment,” says Kumar.
To strengthen its supply chain, Walmart is moving to procure directly from farmers in all the states where it operates. So it stocks apples from Himachal Pradesh, onions from Nashik, sweet lime from Telangana and a range of vegetables from Punjab and Uttar Pradesh.
“We source directly from farmers to get fresh produce at the right price, so that our members can pass on the savings to the end-customer,” Kumar says. In Hapur, Lucknow, Telangana and some areas of Maharashtra, Walmart is working with irrigation companies and introducing best agricultural practices to farmers. Yet, farmers are free to sell to other regions and retailers and Walmart does not enter into any exclusive tie-ups with them.
As it works overtime to get the backend right, Walmart’s store expansion rate has been slow — 21 stores across India. Iyer explains that the company requires about four acres to build a 50,000-60,000-sqft store. “That takes time. Acquiring real estate is a time-consuming activity in terms of legal requirements and due diligence,” he says. Walmart has leased most of its properties, but Iyer says the company is prepared to buy land also, if an opportunity arises.
Battle for every store
Devangshu Dutta, chief executive at consultancy firm Third Eyesight, says Walmart has a model that works, but not necessarily everywhere.
“It requires a certain type of real estate, which is not easily available in metros and big cities.” That perhaps explains why the giant is focusing on tier 2 and tier 3 cities.
“The penetration of mom-and-pop shops and traditional stores continues to be higher in tier 2 and tier 3 cities. They are attractive opportunities and make sense,” says Dutta.
Walmart aims to add at least 50 stores to its portfolio by 2020.
But can a new player compete effectively with the likes of Metro Cash and Carry, which has been around since 2003, or a local giant like Reliance? “Yes,” believes Iyer. “We have our own membership data and we know what a member would want in Punjab or UP or Telangana. By understanding these preferences and basing the decision on this customer data, we are able to meet the specific needs of buyers,” he says.
Dutta agrees: “At the end of it, retail is a very local business. And it is dependent on how well you address the customer segment in a given geography. Just being a large or established retailer nationally or globally is no guarantee for success. It ultimately comes down to fighting each store battle independently.”
And how well-armed Walmart is will become apparent in the next few years.
(Published in The Hindu Businessline.)
