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IRCTC earns Rs 20,000 crore from online sales till March; revenue nearly double of Flipkart

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.)

Artisans see fortunes improving as online players like Craftsvilla, Amazon, Flipkart remove need for middlemen

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.)

An Indian yoga guru is building one of the country’s biggest consumer goods companies

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.)

From yogasan to ayurved to noodles, the Patanjali Group’s growing momentum

The Patanjali Group has created an Indian FMCG giant in a very short span of time on the back of a three-pronged strategy:

  1. The enormous brand awareness that can be attributed to the very high visibility of Baba Ramdev, across a variety of media and issues,
  2. Wide and deep market penetration through a large network of outlets and distributors across the country, and
  3. Pricing itself below the benchmark competitor in each product area in which it is competing.

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!

Giant takes a wholesale bite

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.)

Cheer for cos like Apple, Rolex as government eases local procurement guidelines for single-brand retail

Rasul Bailay & Shambhavi Anand, The Economic Times

New Delhi, 11 November 2015

In a major leg-up for global brands such as Apple and Rolex, India has relaxed a mandatory local procurement condition for high-tech companies and allowed mass brands including IKEA to comply with such sourcing norms from the day their first store opens rather than from when the first tranche of investment is made.

The government on Tuesday also allowed foreign single-brand entities to sell products through online channels provided they have permission to sell through brick-and-mortar stores.

The relaxation in foreign direct investment norms is set to cheer companies including Apple, which was earlier expected to source 30 per cent of its products locally. ET had reported earlier this month that Apple had sought relaxation of the sourcing norm to set up stores in India, while IKEA wanted more time to meet the requirement.

"It is seen that in certain high technology segments, it is not possible for retail entity to comply with the sourcing norms. To provide opportunity to such single brand entities, it has been decided that in case of ‘state-of-art’ and ‘cutting-edge technology,’ sourcing norms can be relaxed subject to government approval," according to an official notification on Tuesday.

"To start counting the time to comply with the 30 per cent local sourcing norm from store opening will support brands in building long-term sustainable supply chains that are good for India, good for the businesses and will enable better prices to the Indian customers," an IKEA India spokesperson said in an email. "Today’s decision will allow the Indian IKEA customers to interact with the brand IKEA in the same way as all IKEA’s global customers."

The policy changes will pave the way for single-brand retailers such as Swedish clothing company Hennes & Mauritz to tap India’s growing ecommerce business.

"FDI policy on the SBRT (single brand retail trading) provides that retail trading, in any form, by means of e-commerce, would not be permissible. It has been decided that an entity which has been granted permission to undertake SBRT will be permitted to undertake ecommerce activities," the latest policy paper said.

Proposals of companies including Tommy Hilfiger and Furla were stuck with the Department of Industrial Policy & Promotion for years because they had planned to set up their own stores and sell products through franchisees, which wasn’t allowed. Now, such companies can engage in both wholesale trading – which is needed for sales through franchisees – and retail trading as long as it follows the norms for both segments.

"Fantastic relaxation. Different companies have different business models. For south India, franchisee works and north India, may be you want to own your own stores and eastern side you wanted to do wholesaling because wholesalers were not good. Earlier, you could not do all that. Now the same entity can do all these activities and keep the business arms separate," said Baljit Singh Kalha, a partner with Titus, the law firm that assists IKEA, Furla and H&M.

Indian manufacturers with foreign investment that are controlled by Indians can now sell their products through online channels provided they make 70 per cent of the output and source the remainder from local companies.

This has been a long-standing demand of ethnic products retailer Fabindia, which has FDI and wanted to sell online. Earlier, such companies could sell online only if they manufactured 100 per cent of their products in-house.

"This is a great Diwali gift from the government to the retailers. What they have done is provided a major boost to ‘Make in India’ and also the ministry has recognised the fact that retail will operate across multiple channels. This will be a huge fillip to ‘Make in India’ as companies like ourselves manufacture 70 per cent of the products ourselves," said William Bissell, managing director of Fabindia.

"There are several changes for companies in the retail sector. For instance, the domestic sourcing requirement has to be reckoned from the opening of first store and not from the first day of operations. Technology-oriented products and high-end luxury brands may be able to skip the domestic sourcing norms completely, subject to case-to-case approvals. Another opening is for indigenous brands to receive foreign investments that can enable them to strengthen their operations," said Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.

(Published in The Economic Times.)

Flipkart Internet posts four-fold increase in revenue

Sagar Malviya, The Economic Times
Mumbai, 9 November 2015

Flipkart Internet, which runs the consumer-facing portal of India’s largest ecommerce business, posted a nearly four-time increase in revenue and a 12-fold jump in net worth in fiscal 2015, indicating the unabated growth at the firm and the country’s online retail sector. The company posted revenue of Rs 659 crore in the year ended March 31, compared with Rs 179 crore the previous year, according to a recent filing with the Registrar of Companies. It didn’t disclose the bottom line for fiscal 2014. Flipkart Internet is a part of a complex group of companies held by Singapore-based Flipkart.

It generates revenue from shipping fee, selling commission and advertisements. Online retailers regularly disclose the gross value of goods sold on the portals, which doesn’t offer an actual picture of their financial performance because, often, the sales are at a discount as they try to build market. Flipkart Internet charges a commission of 4% to 25% of the selling price, depending on the category of products, from vendors for using its platform. Its net-worth swelled to Rs 4,819 crore from Rs 415 crore a year earlier. Net worth, in simpler terms, is the value of assets after deducting liabilities and an increase generally indicates better financial health. The filing showed that the company raised nearly Rs 5,500 crore from its Singaporebased parent, Flipkart Marketplaces, during the year. When contacted, a Flipkart spokesperson declined to comment.

"Technically, this should be one of the important companies for Flipkart as it (Flipkart Internet) derives its business out of a marketplace model, which the law currently allows," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight. He wants this Indian unit to have a bigger say in its operations. "The bigger challenge is to become an enabler and not just be a company which participates with less control of the business but to bear the complete onus of the transactions." Online marketplaces, such as the one run by Flipkart Internet, is the only segment of online multi-brand retail where India allows foreign investment. The complex structure of companies that Flipkart has created allows it to stay within the regulations while raising foreign funds.

While Flipkart Internet runs the portal, it has a wholesale arm that books actual sales of goods it gets from vendors. This business, Flipkart India, had posted sales of Rs 2,846 crore in fiscal 2014. There are a few other companies such as Flipkart Logistics, which runs the payment gateway for transactions done on Flipkart.com, and dormant companies Flipkart Digital and Flipkart Online. All these businesses are owned by Singapore-based Flipkart, which has three other subsidiaries registered in Singapore: Flipkart Payment, Flipkart Logistics and Flipkart Marketplaces. While all leading online marketplaces are rushing to add merchants, Flipkart is focused also on growing its new advertising unit, a highmargin, feebased business that it expects could shore up the bottom line.

ET in August reported Flipkart planned to phase out commissions and instead wants sellers to advertise on its platform for a fee, a move aimed at enlisting more vendors and at the same time earning higher advertising fee. Flipkart is also trying to cut dependence on its largest vendor, WS Retail, which accounts for a majority of the sales on the website.

According to a Bank of America Merrill Lynch report, customer acquisition cost is $6 and margin contribution per order is $1, thereby taking company six orders to break even. "We estimate close to 30% of Flipkart’s GMV coming from the marketplace and expect this to move to 80% in the next two years. Currently, we estimate, Snapdeal’s GMV on marketplace is the highest as it had a headstart over others in terms of the marketplace model," the report said.

(Published in The Economic Times.)

Mint Money Festival Special

Rashmi Aich, Kavya Balaji, Tania Kishore Jaleel, Vivina Vishwanathan & Lisa Pallavi Barbora, MINT

New Delhi, 9 November 2015

We are in the midst of the festival season and there has been a barrage of offers across various sectors. Numerous advertisements from both online and offline retailers could be seen as early as September. This time, the e-tailers have tried to one up the brick-and-mortar peers by offering app-only deals. While much of the festival season is left, it has been strong going so far. A recent Nomura Global Markets Research report—Holiday shopping season starts with a bang—said that quarterly expectations for India’s holiday sales are close to $4 billion. Read some of the other findings from the report with the stories. While most of the action seems to be online, offline retailers are trying to keep pace, if not in price then in service and customer experience. Mint Money takes a close look at different types of offers and how one can be a smart shopper. We take a look at popular segments of electronic gadgets, white goods, apparel, jewellery, furniture, and even real estate and gold, and bring to light some of the hidden details.

GADGETS

In today’s world, where technology upgrades at a fast pace, everyone wants to own the latest gadget as soon as it hits the market. The festival season adds fuel to the fire, with buyers spoilt for choice on both online and offline platforms.

This year, e-commerce participants managed to grab the first mover’s advantage and started their festival season sales as early as September-end. Earlier, the biggest sales used to happen closer to the main festivals.

You may have seen many advertisements by online portals in newspapers last month, and these are still continuing. In fact, according to a recent report by Nomura, in the sales by the three top ecommerce marketplaces—Flipkart, Snapdeal and Amazon India—mobile phones were the biggest selling category, followed by apparel.

Mobile phones are also high demand because manufacturers come up with new models almost every other month. Moreover, festival season sales woo customers by giving offers and “best-price” on their favourite gadgets. Among these, Apple’s iPhone has been a hot favourite with Indian customers. Mint compared prices of iPhone 6 16 GB across the mobile apps of the top three online retailers, and brick-and-mortar stores—Croma, Spice Hotspot and Vijay Sales—during the festive season sale on 15 and 16 October.

While physical stores were far behind in the price offering, online stores did offer good discounts. However, the maximum retail price (MRP) had high variations across e-tailers as well, which, in turn, meant big differences in the discounts offered. Even as Snapdeal and Amazon offered the phone at the same price of Rs.37,999, the former showed an MRP of Rs.56,000 and the latter of Rs.52,000, making a difference of around 5 percentage points in the discounts offered by the two.

“The difference in MRP is mostly due to the different prices offered by the sellers on the online retailer’s platform (marketplaces). Also, it is a common practice in retailing to mark up price by a big margin and then sell on a huge discount, keeping the sales margin intact,” said Devangshu Dutta, chief executive officer, Third Eyesight, a retail consulting firm.

Apart from prices, the delivery time and charges also varied across sellers on e-tailers.

While the variation in online prices was high, the selling price quoted by physical retailers had miniscule or no discount on the MRP. Moreover, their prices were much higher than what online stores were offering. For example, for the Apple iPhone mentioned earlier, the difference was at least 19.7%.

However, the benefit of paying the extra money is that you can get the product at once. Also, the process of exchange is simpler as you don’t have to wait for the replacement to be sent as in the case of etailers. This factor is especially relevant if you are buying a product whose online and offline price is the same.

—Rashmi Aich

APPARELS

In October, Vipin Venugopal, a junior executive at a private manpower solutions firm in Mumbai bought a shirt by Pepe Jeans from an e-commerce website for Rs.600. “The price of the same shirt at the showroom was Rs.1,699. It was a steal,” said Venugopal. And seeing such mouthwatering discounts, Venugopal bought more things online for his sister, Vidya. “I bought a total of seven items for my sister during the online discounts. We had scanned showrooms for some kurtas, but online we ended up getting at least 40% discounts,” said Venugopal.

Going online to buy clothes could work in your favour, too.

According to a survey released in October by industry body Assocham, the most popular e-commerce websites—Flipkart, Amazon, Snapdeal, Myntra and Jabong—have been doling out price cuts or discounts on purchase of popular brands of apparel, footwear and electronic goods, coinciding with the festival period. The growing trend is being attributed to the fact that all reputed Indian and international brands have tied up with these websites and their goods are being offered to consumers at much lower prices than in their retail stores.

“For the past couple of years, discounts on websites have been good. The discounts are now coming down but the reality is that consumers are checking out online platforms for apparel. When it comes to clothes, so far, pricing has been the key parameter rather than convenience,” said Saloni Nangia, president, Technopak Advisors Pvt. Ltd, a New Delhi-based retail consulting firm.

Mint did an online and offline survey of major apparel brands and found that select products available on e-commerce websites were cheaper by up to 20% as compared with the same products in a mall.

“Most of the discounts are given by the portals directly for customer acquisition and I don’t see this changing in the next 18-20 months at least,” said Nangia. According to an April report by UBS Securities India Pvt. Ltd, by the end of the calendar year, fashionwear, including apparel and footwear, is expected to be the largest retail category online, with sales of $3.9 billion, bigger than sales of electronics and consumer durables at $3.5 billion.

Retail analysts also believe that as Indians evolve in terms of fashion, buyers will slowly move towards curated merchandising than just looking at discounts.

“You can expect niche businesses to evolve where discounted pricing may not be available,” said Nangia.

What you get

E-commerce websites, too, are evolving. Some of them now provide trend and style guides along with discounts. Flipkart, for instance, has a feature called ‘Image Search’ where you can browse through an assortment of clothing. You can click on a picture and search for similar products on the portal’s mobile app.

Many of us might be doing this: you go to a mall, and if you like a product, immediately go online on your smartphone to check for any price differential. However, before clicking on the ‘Buy Now’ option, do factor in other costs such a delivery charges, if any. Apart from that, since most of the websites now act as a marketplace (products are provided by multiple parties; transactions go through the website), you may want to check the delivery duration when buying from different sellers.

—Vivina Vishwanathan

WHITE GOODS

Earlier, if someone wanted to buy an appliance, she would go to not one shop but many, look at the product, compare prices and only then buy. But today, shoppers are willing to skip the physical inspection and buy the product online if the price is right. In fact, prices for white goods such as televisions, washing machines and refrigerators are usually lesser online than in-store. For instance, the Samsung 32J6300 32 inch Full HD Smart Curved LED TV was available on Flipkart for Rs.42,290 while the price was Rs.49,900 at the Samsung store. The same was the case for an LG 6 Kg fully automatic top loading washing machine. The price was Rs.13,770 on Amazon.in during its festive sale, while offline store Croma was selling it at Rs.16,300. Another advantage of buying online is that you can read reviews of other buyers before you choose a product.

However, while buying online, it is important to compare prices across sites and also look at the delivery and installation details. It would be advisable to go through comments posted by other buyers on social media websites or the portal itself, as sometimes the installation and delivery is delayed or even improper. For instance, Mayank Agarwal from Delhi bought an Onida AC from Flipkart. “It promised free standard installation, but the installation team did not call or turn up even after 11 days. I was getting repeated calls from Onida dealers who were charging Rs.1,500 for standard installation, which was otherwise to be free.” Mint had sent an email to Flipkart seeking a comment regarding the complaint, but the e-tailer did not respond.

Another issue is warranty and customer service. Online buyers of large appliances often don’t receive proper warranty or customer service from the brand. Take the case of Vijay V. from Chennai, who bought an LG refrigerator from Amazon. “LG customer service denied replacement of parts when I encountered a manufacturing defect even though it was under warranty,” said Vijay. In an emailed response to Mint, an Amazon spokesperson said, “If the customer reaches out to us during the return window applicable for that product category, we would initiate returns or replacement of the product. Brands are obligated to honour the warranty for a genuine product irrespective of the sale channel.”

These just might be the reasons why it won’t hurt to spend some time and effort to check out in-store deals as well. Brick-and-mortar stores have some advantages that online portals don’t offer. For example, you can bargain for a better price or ask for better freebies. You can even ask the store if it can reduce the cost of the freebies from the product’s cost. Also, the installation and warranty might be much better as stores have in-house staff for installation and give the warranty upfront along with the bill.

As regards payment, the finance options are almost the same for both. Equated monthly instalment (EMI) options are available with most online and offline retailers. For in-store purchases, you can make a downpayment, take the product and pay the rest as EMI. Online purchases, however, require either full payment or full amount needs to be converted to EMI. Also, in-store finance offers include EMI at 0% interest; online retailers only offer EMI through credit cards where processing fees might be high.

—Kavya Balaji

JEWELLERY

It’s no surprise that you can now buy diamonds online; it is convenient and the choice is immense. At the same time, unlike buying a pressure cooker or even a mobile phone, you have to be very discerning about buying jewellery. It’s not a standardised product; every piece of jewellery is unique. When you deliberate jewellery shopping this festive season, consider your options—online and offline—after evaluating the merits.

According to Neha Kapadia, partner, Design Jewels, a Mumbai-based jewellery store, “Nine out of 10 times, jewellery is purchased from the ‘trusted family jeweller’. This person knows your taste, quality requirements and there is familiarity. Then there are those who buy from bigger shops though this usually turns out to be more expensive. But in buying online, the element of negotiation—be it in price, design or quality—is missing.”

With your family jeweller, there is comfort in showing old pieces, spending time talking about redesigning and creating a more contemporary piece and that hits home. Most people don’t really want to buy jewellery in a hurry.

Moreover, festive and wedding jewellery are large spends. So, one needs to be conscious about quality. While it is simpler to understand the purity levels in gold, with diamond jewellery, there are multiple factors to keep track of. Every stone has a cut, colour, clarity and carat, according to which it is priced. It’s hard enough trying to decipher these on your own through a website, let alone trying to figure out whether pricing matches the specifications. However, jewellery bought online also comes with a certificate, so the quality is assured.

Calvin John, vice-president, offline marketing, CaratLane.com, said, “In case of solitaires, we have certification from only internationally accredited laboratories; for other jewellery, there is Indian certification. As a first step, when a customer makes a purchase, she can view the certification online itself. And the certification is sent with the delivery.”

When it comes to design, though, Internet is your oyster—you can browse through not only traditional Indian designs but also global trends. “People often choose designs online and then come to a store to get it made.

But this isn’t new; earlier, too, designs were chosen from magazines and other places. Only the medium has changed,” said Saurabh Gadgil, chairman and managing director of Maharashtra-based PN Gadgil Jewellers.

The online experience is getting enhanced with mobile apps that help you see how a pair of earrings or a necklace would look on you (use the app to upload your photo and superimpose the chosen pieces on it)—sifting through hundreds of designs becomes a job on the go. But the look and feel can be different on a screen than on your person. For that, many retailers let you call the piece home and try it on before you buy.

John said, “The concept of looking for jewellery online was far fetched till a few years ago. Now people have started buying. The quality of user experience has evolved; we have a 3D virtual app to show how jewellery will look on you.”

While online purchases offer various advantages, convenience is the most important. It’s too tempting; say, you have seen a pair of gold and diamond earrings. They look nice and get delivered right to your doorstep, along with the relevant certificates. You avoid the traffic jams and the nasty look that the sales person at the jewellery store gives after you decide not to buy any of the 30 pairs that she has shown you. Moreover, as geographical mobility increases, people may no longer have access to their family jeweller.

There is also a price advantage while buying online; experts say prices could be cheaper by as much as 20-30% given that online retailers don’t have to keep an inventory of jewellery and have almost no real estate cost to bear.

But the choice between online and offline isn’t always simple. Kapadia said, “Despite certification, most people are not well versed with quality and price specifications. So, most online sales are restricted to smaller pieces, (usually) of lower quality and smaller budgets.”

You may not be ready to spend lakhs on buying diamond sets online, but it’s convenient to try out a pair of contemporary earrings, which will cost a few thousands, or, even buy standard gold coins that you have to gift during the festival season. Many websites offer a good return policy as well and have a try-at-home facility for some of the products. You can leave your details on the website and a counsellor will get in touch and bring you the desired pieces to be tried at home. If you like something, you can immediately make a payment. But if you don’t like any piece, you are not obligated to buy.

There are, however, some basic checks to do such as read the return policy, compare prices based on quality, delivery time, and others. Gadgil believes that the online jewellery platform caters to a new segment and a customer will rely on both channels for an overall experience. For heavy and high-value purchases, however, customer behaviour is likely to remain biased towards the family jeweller or a retail store.

—Lisa Pallavi Barbora

FURNITURE

New furniture also features in people’s festival buying list, and this time around, many online portals are trying to cash in on this. Just before the festive season began, e-tailers Flipkart and Amazon.in started offering furniture on their websites and apps. During its Big Billion Sale, Flipkart had dates dedicated to this category of products. Furniture portal, Pepperfry, has its ongoing Mega Diwali Sale with up to 51% off on products as well as extra 10% cashback for purchases above Rs.40,000.

Offline retailers, too, have hefty discounts. Durian Industries has up to 50% off on its products. Luxury furniture store, Furniturewalla, too, has a similar offer. Even your local shops and markets will have festival offers on.

Since the furniture market is largely unorganised, there isn’t a standard benchmark for prices. As an example, we looked at the prices of a king-size bed with matt finish and storage. At Durian, the post-discount price was Rs.53,000, on Pepperfry it was Rs.43,946, and at Urban Ladder it was Rs.41,799.

E-tailers are able to offer steeper discounts because of the margins they enjoy, said Arvind Singhal, founder and chairman of Delhi-based retail consultancy, Technopak Advisors. “Pricing in this segment is opaque. There is a lack of transparency as to how the pricing has been arrived at. The offline furniture companies usually operate at a 60% margin over the retail price. And online firms, it can be 10-15% above this,” he said.

So, yes, the online prices seem better, but here a few things to keep in mind before you start shopping. For instance, you cannot opt for cash on delivery for more expensive items. At Pepperfry, it is above Rs.3,000, and at Urban Ladder, above Rs.25,000 (no such limits at brick-and-mortar stores). But you can pay via Net banking, e-wallets and even in instalments.

Furniture online portals also offer much more choice, and because of the convenience of being able to browse through many products comfortably, many consumers are now making even big-ticket furniture purchases online, said Kashyap Vadapalli, chief marketing officer, Pepperfry.com.

However, not everyone is comfortable doing so. For example, Manish Ambwani, a human resources professional from Delhi, recently purchased a shelf for the living room from an online furniture portal. “Both, my wife and I work, so we did not have the time to go to different shops to make a decision. But for now, I would still buy bigger products from a store where I can see its quality,” said Ambwani.

The other aspects that make shopping online convenient are quick delivery and return policy. But this can be a cumbersome process with furniture. Delhi-based Reena Singh, founder of Khushi Pediatric Therapy Centre, wanted to buy a green coloured bookshelf to match the colour of her organisation’s sign. Since she usually does most of her shopping (be it clothes, home appliances and gadgets) online, she thought to give furniture a go. But not only did it take a month for the bookshelf to arrive, it was in a different colour (turquoise blue). Though she immediately returned the shelf, it took another month to get the refund.

“Read product details carefully when buying online—size, material, care instructions, warranty, shipping, payment and refund. This will ensure that there is no dissonance when the product actually arrives at the customer’s home,” said Prithvi Raj Tejavath, vice-president, category management, UrbanLadder.

Also, read through customer reviews about products and the service. Try to buy from only the bigger and better known sites, especially if you are buying expensive products. Also, do keep in mind that when buying online, you will not get the delivery immediately, unlike in a physical store, where the product usually gets delivered to your house that very day.

—Tania Kishore Jaleel

(Published in MINT.)

Fashion giants race to dress India’s sari-shunning youth

Emily Ford, South China Morning Post
New Delhi, 6 November 2015

Rifling through sweaters in India’s first Gap store in a glitzy New Delhi mall, 21-year-old Ridhi Goel says her grandmother doesn’t mind how she dresses, as long as it’s not too revealing.

“She’s fine with me wearing Western clothes like a shirt but not jeans and a crop top,” said the journalism student, her grey leggings contrasting sharply with her mother’s colourful kurta.

“All my family wears Indian clothes, but I find them too uncomfortable. I think maybe there is a generational divide.”

Most women in India still wear traditional dress such as saris or salwar kameez – but things are changing, and on city streets, dazzling silks mingle with T-shirts and jeans.

Young people’s appetite for Western clothes has led to a flurry of foreign brands opening up in India in the past few months, including US chain Gap and Sweden’s H&M.

Others are expanding fast, including popular Spanish retailer Zara and British high-street staple Marks & Spencer, which in October opened its 50th shop in India, its biggest market outside the UK.

Urbanisation, a growing middle class, rising disposable incomes and one of the youngest populations in the world make India hard to ignore.

“The time has come for Western wear to have exponential growth,” says J. Suresh, the managing director of textile group Arvind Lifestyle Brands, Gap’s partner in India,.

“If you look at any girl born after 1990 she will be wearing Western wear. That is the generation coming into college, their first job,” he says. “They will be completely in Western wear.”

While women are the biggest shoppers, in India men’s clothing dominates, taking 42 per cent of the US38 billion market in 2014, according to consultancy Technopak. The average customer targeted by Gap in its US stores is 35, but their Indian counterpart is five to 10 years their junior, Suresh says.

Gap had a head start in India thanks to Bollywood star Shah Rukh Khan, whose ubiquitous orange hoodie in 1990s hit Kuch Kuch Hota Hai (Something Happens) gave the brand a ready-made following.

But it is young Indian women, increasingly affluent and joining the workforce in expanding numbers, who are driving change, with data showing sales of womenswear growing faster than men’s. And while Western clothes currently make up only about a quarter of Indian womenswear, their sales are outpacing traditional dress.

A Marks & Spencer spokesperson cites its Indigo denim range and lingerie as two of its best-performing lines in the country, with more than 300,000 bras sold in 2014-15.

“As an increasing number of women move into white collar and blue-collar roles, they are also adopting Western attire,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy in Delhi.

More negatively, media stereotypes of overseas fashion as a proxy for “a modern thought process” and conversely, Indian clothing as “backward or repressive, certainly are an important influencer”, he says.

While Prime Minister Narendra Modi is famous for wearing a short-sleeved kurta, he is in the minority among India’s men. They already dress predominantly in Western clothes, as do children, whose parents see it as a practical choice for school.

For foreign brands, fast-growing India is a welcome change from sluggish markets like Britain, and a loosening of foreign direct investment laws has made it easier to open shops. Yet the retail landscape in India – geographically about as large and diverse as the European Union – is hard to navigate, leading some entrants, including British department store Debenhams, to pull out.

“Tackling the Indian market successfully requires a different mind-set,” Dutta says.

Foreign newcomers also face competition from Indian-owned, Western-style brands such as Allen Solly or Louis Philippe, which are more familiar with the nuances of the market. The successful ones adapt their ranges – Marks & Spencer “stretches” its seasons to cater for the long Indian summer and offers polo shirts in four times as many colours as in Britain. Others aggressively cut prices.

In a country where the average monthly wage is US$215, according to 2012 figures from the International Labour Organisation, brands that are mid-market in Europe or the United States become much higher end in India.

Dressed in a pink polo shirt and jeans in the capital’s new H&M store, airline officer Sunil Bassi, 49, says he is “not fussy” about his clothes and came to shop for his wife.

“Obviously Western fashion is very popular. How many people in here do you see wearing Indian clothes?” he says.

(Published in South China Morning Post.)

Adidas gets single-brand retail nod, to open first store next year

Ashish K Tiwari, DNA (Daily News & Analysis)

Mumbai, 4 November 2015

Adidas Group, the German sports footwear, hardware and apparel maker, is gearing up to launch its own retail format stores in India now that it has been allowed by the Indian government to invest in single brand retail outlets.

While specific timelines were not shared, a senior company executive said the first store could get operational any time in the second half of 2016.

The Adidas management has been aggressively pursuing the 100% foreign direct investment (FDI) option under Single Brand Retail Trade (SBRT) for a while now. An application for this was submitted to the Department of Industrial Policy and Promotion (DIPP) in July 2015. While the top Adidas official confirmed receiving government’s approval, he did not quantify the extent of investment that could come in to the country for setting up own retail stores.

Dave Thomas, managing director, Adidas Group India, said the company has been given go-ahead to introduce own retail format stores in India.

“We strongly believe own retail will enable us to take our market leadership position to an even higher level. It will give us additional flexibility to bring in global concepts across all categories in larger stores, thereby enabling us to further enhance the premium experience for our consumers,” he said, adding that the management is working towards introducing the first own Adidas retail store sometime in second half of next year.

The large format destination stores typically occupy anywhere between 3,000 sq ft to 5,000 sq ft of retail space and are generally located in high footfall locations including high streets. Taking into consideration costs associated with running such stores, retail experts estimate Adidas to invest between Rs 1 crore to Rs 1.5 crore for each store. “Based on this calculation, Adidas could be investing Rs 50-100 crore for setting up 50 to 100 large format stores,” said a retail consultant, adding that the company could also take over strategically located stores already in the franchise network to rebrand and operate them as destination stores.

The footwear company has been primarily operating in the Indian market through a network of 760 franchise retail stores (across Adidas, Adidas Originals and Reebok). While continuing to expand the franchise distribution network, the company will simultaneously work on strengthening the presence with large format stores under the Adidas brand.

“We are confident that the own retail channel plus e-commerce channel complemented by our franchise network will drive growth for our brands and our business in India,” said Thomas, adding that the total count will be taken up to 1,000 retail stores by 2020.

Devangshu Dutta, chief executive, Third Eyesight, a retail consulting firm, said the brand (Adidas) has been in the Indian market for almost two decades now and has seen the ups and downs while continuing to grow and become a leading player. “The decision to bring in FDI is a clear indication of their seriousness and commitment to the Indian market. While their retail footprint is entirely based on the franchise model, with government clearing their 100% FDI proposal now they can have better control on the market/operations,” said Dutta, adding that the company will also work on offering customers a wider assortment of products including the premium and super premium footwear.

FDI in single brand retail trade has been a heavily discussed topic over the last couple of years especially the mandatory requirement of 30% local sourcing which did not go well with the international retailing fraternity. In fact, according to industry experts the 30% local sourcing criteria has been a major hurdle for international brands to look at the 100% foreign direct investment (FDI) option for single brand retail trade in India.

“The local sourcing mandatory requirement has proved to be a huge bottleneck and that’s one key reason for international brands shying away from investing in the Indian retail industry. However, in July 2015, the Indian Government clarified its stand that foreign retailers can undertake single brand retail trading in India through one or more wholly owned subsidiaries or joint ventures in India. This came as a huge relief to many international brands intending to expand,” said Shweta Dwivedi, senior associate, Khaitan & Co.

What is seen as an important development post government nod to Adidas is that so far the FDI policy was not clear whether foreign retailers can have retail entities and franchise arrangements in parallel in India. “Reports indicate that Adidas has received approval for 100% FDI to operate retail outlets in India, and may be allowed to operate through franchise as well as retail entity route in India. If this be the case, I think this development will also motivate a lot of other international players who have been sitting on the fence to take the plunge and bring in FDI for their respective operations in India,” said Dwivedi.

With approval for 100% FDI in retail already in hand, the Adidas management’s primary focus in India will be to grow profitably and consolidate leadership position with an increased focus on the premium segment of the market. “With Adidas Originals, we are moving into the fashion and lifestyle domain, while with Adidas we will continue to look at dominating running, training and football categories. Reebok will continue to focus on the growing base of ‘fit gen’ consumers,” said Thomas.

The company will also work on augmenting the omni-channel retail approach wherein it has equipped around 150 stores with tablets that can be used to buy our products online, which are then delivered to the consumers’ homes. “We will increase the number of stores covered under omni-channel retailing to 200 by the end of this year and to 400 by April 2016,” said Thomas.

(Published in DNA.)