Shambhavi Anand & Rasul Bailay, The Economic Times
New Delhi, 3 August 2015

The 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.)

KNN Bureau
New Delhi, 1 August 2015

Minister of Industry, Health and Power Government of NCT of Delhi Satyender Jain said Delhi need to have specialised retail shopping zones for different products to enhance the overall shopping experience in the city.

Inaugurating the CII Delhi Retail Summit here on Friday, Jain urged the retailers in Delhi to be more competitive in terms of pricing, which will in turn increase sales for them.

He further stated that the retail in Delhi has a lot of potential, which needs attention in terms of customer satisfaction.

Retail sector in Delhi has potential to grow up to three times even though there is tough competition from the online segment. The city has tremendous scope for growth in the area of health, education and retail sector, he said.

The minister also informed that the state government is planning for infrastructural development to provide competitive price on rental space compared to the neighbouring states to promote retail sector in Delhi.

On the occasion, Past Chairman, CII Delhi State Council, and Executive Director, The Bird Group, Ankur Bhatia said with increase in urban population and changing consumer behaviour, Delhi has a lot to look forward in terms of retailing in the city.

He added that the retail development in the city has largely been scattered with numerous small shopping zones mushrooming all across the city which need to be organized through single ownership for better management and experience. He also emphasized the need for organising an annual Delhi Retail Festival.

He also said that retailing continues to be a good business model across the country and also stressed on the need for single ownership of malls for better management.

The summit also witnessed various leading retailers and institutions coming together for a day, including Head, Ambience Mall, Deepti Goel; Managing Director, STARCENTRES, Pranay Sinha; Managing Director and CEO, Bharti Reality, S K Sayal; Chief Executive Officer of Third Eyesight, Devangshu Dutta; Head of Retail, Unitech Group, Munish Baldev; Chief Executive Officer, Select City Walk, Yogeshwar Sharma; Senior Vice President, DLF Luxury Retail & DLF Promenade, Dinaz Madhukar and Chief Executive Officer, The Beer Café, Rahul Singh were among other eminent speakers at the summit.

(Source: KNN Bureau .)

Much has been written recently, with more than a touch of surprise, about ecommerce companies opening physical retail stores. Whether it is Amazon, Birchbox and Bonobos in the US, Spartoo in France, Astley Clarke in the UK or FirstCry and Flipkart in India, young tech-based ecommerce businesses are adopting the ways of the dinosaur retailers that they were apparently going to drive into extinction.

Perhaps, the seeds of the surprise lie in the perception that the ecommerce companies themselves built for their investors, the media and the public, that it was only a matter of time that the traditional retail model would be dead.

Or perhaps we should pin it on their investors for keeping the companies on the “pure-play” path so far – venture funds that have invested in ecommerce have largely taken the view that the more “asset-light” the business, the better it is; so they’re far happier spending on technology development, marketing, salaries, and even rent, than on stores and inventory.

After a bloody discounting and marketing battle, in a few short years, there are now a handful of ecommerce businesses left standing in a field littered with dead ecommerce bodies, surrounded by many seriously wounded physical retailers who are trying to pick up unfamiliar technology weapons. And their worlds are merging.

Which is a Stronger Building Material – Bricks or Clicks?

Online business models offer some clear strengths. Etailers have a reach that is unlimited by time and geography – the web store is always up and available wherever the etailer chooses to deliver its products.

An ecommerce brand’s inventory is potentially more optimised, because it is held in one location or a few locations, rather than being spread out in retail stores all across the market including in those stores where it may not be needed.

However, we forget that consumers don’t really care to have their choices and shopping behaviour dictated by the business plans of ecommerce companies or their investors. The fact is that physical retail environments do have distinct advantages, as etailers are now discovering.

Firstly, shopping is as much an experiential occasion as it is a transaction comprising of products and money. In fact, the word “theatre” has been used often in the retail business. For products that have a touch-feel element, the physical retail environment continues to be preferred by the customer. Of course, there are products that could be picked off a website with little consideration to the retail environment. For standard products such as diapers or a pair of basic headphones, online convenience may win over the need for a physical experience. However, non-standard products such as apparel or jewellery lend themselves to experiential buying, where a physical retail store definitely has an edge.

Shopping in a physical retail environment is also a social and participative activity. We take our friends or family along, we ask for their opinion and get it real-time. The physical retail environment lends itself to the consumer being immersed in multiple sensory experiences at the same time. These aspects are not replicable even remotely to the same degree by online social sharing of browsed products, wish-lists and purchases, nor by virtual smell and touch (at least not yet!).

In a market that is dominated by advertising noise, a physical store also helps to create a more direct and stronger connect for the consumer with the brand than any website or app can. An offline presence creates credibility for a brand, especially in an environment where online sales are dominated by discounts and deals, and many brands have risen and fallen online in the customer’s eyes during the last 3-4 years.

As a matter of fact, every store acts as a powerful walk-in billboard for the brand. If used well, the store conveys brand messages more powerfully than pure advertisements in any form. This reality has been embraced by retailers for decades, as they have created concept stores and flagship stores in locations with rents and operating costs that are otherwise unviable, except when you see it as a marketing investment.

Showrooming vs. Webrooming

As ecommerce has grown and brands have become available across channels, offline and online, the retail sector has been faced with a new challenge: customers browsing through products in the store, but placing orders with ecommerce sites that offered them the best deal. This obviously meant that retailers were, in a sense, running expensive showrooms (without compensation) on behalf of the ecommerce companies! The industry adopted the term “showrooming” to describe the phenomenon.

However, ecommerce businesses are now getting a taste of their own medicine as retailers are benefitting from a reverse traffic.

Consumers have now started using websites to conveniently do comparative shopping without leaving the comfort of their homes, and collect information on product features and prices but, once the product choice has been narrowed down, the final decision and the actual purchase takes place in a physical store.

This is described with a slightly unwieldy term, “webrooming”. This is one among the reasons that lead to consumers abandoning browsing sessions and carts when they’re online.

Bricks AND Clicks

The wide split between offline and online channels is mainly because traditional offline retailers have been slow to adopt online and mobile shopping environments.

Most physical retailers around the world have approached ecommerce as an after-thought, with a “we also do this” kind of an approach. Ecommerce has typically been a small part of their business, and not typically a focus area for top management. So, in most cases the consumer’s attitude has also reflected these retailers’ own indifference to their ecommerce presence. However, due to the accelerating penetration of mobiles, tablets and other digital devices, a serious online transactional presence is now vital for any retailer that wants to remain top of the consumer’s list.

On the other hand, ecommerce companies, as mentioned earlier, have so far mainly stuck to “pure-play” online presence due to their own reasons. However, with passage of time there is bound to be a convergence and eventually a fusion between channels.

The Journey to Omnichannel

Omnichannel today, in my opinion, is still more a buzzword today than a reality. Being truly omnichannel requires the brand or retailer to offer a seamless experience to the customer where the customer never feels disconnected from the brand, regardless of the channel being used during the information seeking, purchase and delivery process. For instance, a customer might seek initial comparative information online, step into a department store to try a product, pay for it online, have the product delivered at home, and be provided after-sales support by a service franchisee of the brand.

Very few companies can claim to offer a true omnichannel experience, due to internal informational and management barriers. However, having an effective multi-channel presence is the first step to creating this, since operating across different channels needs a completely different management mind-set from the original single-channel business. Having a presence across different channel means that a retailer will need to juggle the diverse needs. Capabilities, processes and systems that are fine-tuned for one channel, may not be fully optimal for another channel. This requires the retailer to restructure its organisation, systems and processes to handle the different service requirements of the various channels.

For instance, brick-and-mortar retailers moving online need to rethink in terms of the service (“always open”), speed (“right now”), and scale (“everywhere”). A traditional retail organisation is seldom agile enough to work well with the new technology-enabled channels as well.

An etailer opening physical stores, on the other hand, needs to embrace product ranging and merchandising skills to allocate appropriate inventory to various locations, as well as the ability to create and maintain a credible, distinctive store environment – in essence, inculcating old-world skills and overheads that they thought they would never need.

The retail business is not divided black-or-white between old-world physical retailers and the upstart online kids – at least the consumer doesn’t think so.

Retailers need to and will see themselves logically serving customers across multiple channels that are appropriate for their product mix. They need to mould their business models until they achieve balance, proficiency and excellence across channels, and eventually become truly omnichannel businesses. It doesn’t matter from which side of the digital divide they began.

Ravi Teja Sharma & Rasul Bailay, The Economic Times
New Delhi , 29 July 2015

Riding on the back of humongous investments and rising valuations, ecommerce companies and technology startups outpaced IT/ITeS firms for the first time as the biggest office space taker in the country in the first half of the year.
Companies in this segment leased more than 6 million square feet of office space, or over 35% of the total, according to property research firm Knight Frank. Flipkart leased 3 million sq. ft. in Bengaluru with Embassy Office Parks, Amazon took 1.3 million sq. ft. in Bengaluru, Snapdeal 5 lakh sq. ft. in Gurgaon, Housing.com 1.5 lakh sq. ft. in Mumbai and Zomato recently leased 1.2 lakh sq. ft. in Gurgaon.
"The difference between startups of 1999-2000 dotcom boom and now is that this time these startups have raised large sums and business is actually happening. This is propping up the commercial office space market in India at the moment," said Viral Desai, national director – office agency at Knight Frank India.

The ecommerce industry has attracted large amounts of funding over the past few years. Funding in the sector increased to $4.3 billion in 2014 from $800 million in 2013. In the January-June 2015 period, investors have already put in $1.8 billion in ecommerce companies.

Flipkart has so far raised $3.4 billion in the eight years since it was formed, with the latest $700 million infusion valuing it at $15 billion. Amazon is readying a $5 billion war chest for its Indian operations.

Desai said Bengaluru and Gurgaon are where the most action is from these ecommerce and tech startups.

The money raised by ecommerce companies has been deployed essentially in two places, marketing and backend infrastructure, which includes people, said Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.

"A lot of them have widened their product portfolio and deepened the markets access and their businesses have grown tremendously. So while we may say it is a technology-based business, the execution of the business is dependent on people to a large extent, in terms of product sourcing and in terms of vendor management, supply chain, customer support, etc. With that growth in the team, it is very natural, and it is also an indication of what they expect in terms of future growth," he said.

(Published in The Economic Times.)