Ateeq Shaikh, DNA (Daily News & Analysis)

Mumbai, 30 June 2016

The e-commerce sector is likely to benefit from the implementation of the Seventh Pay Commission, but not immediately.

“If the entire amount of arrears is paid it will boost consumption in a relatively shorter span,” said Harish H V, Partner, Grant Thornton India LLP.

But if the payment is staggered, it may take time for increase in sales through e-commerce platforms.

Devangshu Dutta, managing director of Third Eyesight, a retail consultancy firm, said, “The increase in consumption would be over a period of time. In the short term, the increase would be in durables and lifestyle oriented purchases.”

“E-commerce is only a channel and not a different business. It is just a fraction of overall market,” he said.

There also has been reduction in overall discounts and discount-led promotions offered by e-commerce players in the last 12 months, bringing the prices of products nearly at par with brick and mortar outlets.

“There would be promotional pushes, but the same will also be followed by retailers (not having exposure online),” said Dutta.

On Wednesday, the government announced that the Seventh Pay Commission award will cost the public exchequer Rs 1.14 lakh crore during 2016-17. The revised salaries of central government employees are likely to be paid from July 1, 2016. The employees will get arrears for salary from January 1, 2016, but allowances will be paid only from July 1, 2016.

(Published in Daily News & Analysis (DNA))

Sagar Malviya & Richa Maheshwari, The Economic Times

Mumbai/Bengaluru, 22 June 2016

Apparel brand US Polo crossed the Rs 1,000-crore sales mark in India in the fiscal ending March 31, less than five years after it entered the country, according to a top executive of the company. US Polo’s fastpaced sales puts it in the same league as Zara, which became the biggest apparel brand in India within four years of setting up shop.

Zara now clocks over Rs 1,000 crore in retail sales here. In comparison, brands such as Louis Phillipe, Van Heusen and Benetton had taken nearly a decade to reach this mark.

“We caught the consumer trend with a fashionable but highly affordable brand,” said J Suresh, managing director of Arvind Retail, which holds licence to sell the brand. “The iconic logo with two polo players on horses helped too. India is possibly fastest growing market by sales and stores addition.”

Arvind Retail opened the first US Polo store in India in 2011 and has since added nearly 230 more. The 750-sq ft store at Select City Walk in Delhi on average rakes in Rs 225 per sq ft a day. Zara, on the other hand, makes on average Rs 150 per sq ft each day from the same mall, although from a bigger store.

According to Suresh, the company plans to open one US Polo store every week over the next few years as part of Arvind’s broader push to grow its retail business. 

“Two factors have worked: they are more casual driven and less about fashion and second, they are a value international brand and well positioned on price, which appeals to wider audience,” said Devangshu Dutta, CEO at Third Eyesight.

(Published in The Economic Times)

AFP/The Hindustan Times
New Delhi, 22 June 2016

But on Monday New Delhi relaxed the rules, just weeks after Apple chief Tim Cook toured India on a breathless charm offensive where he was pictured using Prime Minister Narendra Modi’s gold iPhone to launch the premier’s own app.

Companies making state-of-the-art technology — understood to include Apple — now have up to eight years to meet the sourcing requirements under a waiver, part of a push by India’s pro-business government to attract foreign investment and create jobs.

For Apple, which saw iPhone sales dip for the first time ever in the second quarter due to slowing demand in China and the United States, India is a tantalising prospect.

While analysts say it currently accounts for only around one percent of global iPhone sales, its giant population and low number of smartphone owners relative to its size mean it is a huge potential market.

“Apple has not really seen India as an important enough market in the past, but somewhere, the penny has dropped,” Devangshu Dutta, chief executive of retail consultancy Third Eyesight, told AFP.

Apple’s vast, hands-on stores are designed to become destinations in their own right, analysts say, luring potential customers with the promise they can play without buying.

“The store is not just a place to do business — it acts as a live billboard for the brand,” Dutta said.

‘Cost-conscious market’

Browsing mobile accessories in FutureWorld, a technology retailer in New Delhi’s Connaught Place, Aryamaan Chauhan said he would “definitely” visit an Apple store if one opened in the city.

The 19-year-old IT student owns an Android smartphone, bought for about 20,000 rupees ($295), but is considering switching loyalties.

“Money is what’s stopping me. My budget is low, I can’t afford it,” Chauhan said.

“Now, I think most Indian people prefer Android but they are shifting. After graduation I will buy an iPhone.”

With a basic iPhone starting at almost $600 — more than in many countries, thanks to India’s high taxes — they are wildly unaffordable for most in a nation where average incomes are less than $1,600 a year.

Handsets costing under $100 dominate the market, many of them made by Chinese manufacturers such as Xiaomi or Huawei.

“It won’t become mass-market, (Apple) will always be a niche player. This is a very cost-conscious market,” Vishal Tripathi, research director at Gartner, a technology research firm, told AFP.

“But there is a growing number of consumers who like Apple.”

By pricing itself exclusively at the luxury end, Apple has distinguished its brand from arch-rival Samsung which has both low-cost and high-end phones.

“Indian consumers are always under the notion that more expensive means better and consider carrying an iPhone as more of a status symbol than anything,” said Bhasker Canagaradjou, the head of Ipsos Business Consulting in India.

“The brand enjoys a very strong aspiration value, especially among the young population.”

‘Make in India’

For now, Apple has given no indication when or if it plans to open its own stores. But if it does, it will eventually have to meet strict sourcing rules as the government exhorts companies to manufacture in India.

The company will require factories that can produce its exacting, cutting-edge products — something India largely lacks.

“To create a local supply chain, it takes time. They will be able to operate stores and benefit from stores in the meantime,” said Dutta.

Foxconn, the major Taiwanese Apple supplier which also assembles products for Sony and Dell, is spending billions of dollars setting up factories in India.

The iPhone is not yet on the production line, but Canagaradjou says he believes Apple could start manufacturing in India “in the next one or two years”.

However, while its stores may arrive in India soon, analysts don’t expect to see legions of Apple superfans camping out to buy new releases as they do in other countries any time soon.

“If someone is expecting a replication of how it is in other markets, people queueing up outside the stores from 3:00 am, I don’t think that’s going to happen,” said Tripathi of Gartner. “In India, people prefer to sleep until late.”

(Published in Hindustan Times)

Sapna Agarwal, Mint

Mumbai, 20 June 2016

Swedish fashion retailer Hennes and Mauritz (H&M) on Monday said it will double the number of its stores in the country from six to 12 by year-end. The Indian unit of Hennes & Mauritz AB, which entered India in October and currently operates stores in Delhi, Punjab and Bengaluru, will expand to Mumbai, Pune and Chennai.

Two new stores in Mumbai will come up at Phoenix Mills in Lower Parel and Phoenix Market City in Kurla. Chennai will have its first H&M Store of over 34,500 sq.ft at Express Avenue Mall. Additionally, two locations have been confirmed for stores in Pune at Phoenix Marketcity (33,000 sq.ft) and Westend Mall (23,000 sq.ft) and a third location for Mumbai at Inorbit Mall, Malad, a suburb in Mumbai.

“H&M is having a great first year in India, the fantastic response from our consumers, to adopt international trends in their wardrobes, and a stronger economy have encouraged us to explore new markets in metros and beyond. All our new locations will be full concept stores, offering the latest in women’s, men’s and children’s fashion,” said Janne Einola, country manager, H&M, while sharing that the company plans to maintain the strategy of opening new stores in the market.

Globally, H&M had 3,970 stores as of 29 February and plans to open 425 more by November, The Wall Street Journal reported on 6 April. The company is the world’s second biggest clothing retailer by sales after Zara’s parent Inditex SA from Spain.

Inditex SA, the world’s largest clothing retailer which owns Zara, has been in India since 2010 in a joint venture—Inditex Trent Retail India Pvt. Ltd—with the Tata group’s hypermarket and department stores retail company Trent Ltd and has opened 16 stores in five years, according to its annual report for fiscal 2015.

Zara is one of the fastest growing apparel and lifestyle brands in India to have crossed $100 million in revenue within five years of operations. However, H&M looks like it could cross the $100 million mark in a much shorter time period. Despite its late entry in the country, H&M is getting prime locations as mall developers are making space for it, taking away the advantage of location for Zara. For instance, at Select City Walk in New Delhi, H&M has come in place of Pantaloons. Likewise, in Mumbai at Phoenix Mills and Inorbit Mall, its new stores will replace stores of existing retailers.

“Sales per sq. ft of Zara and H&M in India are roughly comparable adjusted for location and size. If H&M builds scale faster in a shorter time, it will manage to cross $100 million in revenues even faster than Zara,” said Devangshu Dutta, chief executive officer, Third Eyesight, a retail consultancy firm.

India is the second-most attractive market for global retailers to expand after China, according to The 2016 Global Retail Development Index by consultancy AT Kearney. According to the firm, India has in the past couple of years improved the ease of doing business. Clarity on foreign direct investment (FDI) regulations too have helped.

To be sure, challenges remain. India continues to be a complex market for foreign retailers, where understanding dynamics at the state level is important as the country’s 29 states have the power to opt in or out of FDI reforms. Also, infrastructure bottlenecks, including archaic labour laws, complex regulations, high attrition rates, and limited high-quality retail space, remain important areas of concern for retailers, said the AT Kearney report, adding that still, the potential is vast as the country presents a $1 trillion retail market.

In the past year, several foreign retailers have entered India. In fashion, A�ropostale, The Gap, and The Children’s Place entered in partnership with Arvind Lifestyle Brands. Topshop and Topman entered via e-commerce through Jabong.com, while H&M became the first international fashion retailer to enter alone after the government approved 100% FDI in single-brand retail.

Other sectors that saw multiple entrants include sports (Sonae, under the Sport Zone banner), restaurants (Wendy’s, Jamie’s Italian, Jamie’s Pizzeria, Barcelos and Carl’s Jr.) and convenience stores (UAE-based Fmart). Among existing international retailers, Marks & Spencer, Burger King, Dunkin’ Donuts, Starbucks and Nando’s have initiated significant expansion programmes.

(Published in Mint)

Saritha Rai, Bloomberg
Bengaluru, 20 June 2016

Apple is pushing to increase its share of the world’s fastest-growing major smartphone market as device sales slow elsewhere. Chief Executive Officer Tim Cook visited the country for the first time in May and met with Prime Minister Narendra Modi to outline his ambitions for the burgeoning arena.

Under the new regime unveiled Monday, single-brand retailers have a three-year grace period in which they can operate stores, before they have to comply with the local sourcing requirement. Companies that can show they are selling state of the art or cutting edge technology can benefit from a relaxed local sourcing regime for “another five years.”

The government hasn’t ruled on whether Apple meets the cutting edge criteria. Apple didn’t respond to an e-mail seeking comment on the government’s decision.

Apple will now have to apply anew for permission to open its first stores in India, Commerce Minister Nirmala Sitharaman told reporters Monday. The Cupertino, California-based company has used flagship stores in New York, Tokyo and Shanghai to promote its products and boost sales, but in India it sells through partners such as Redington India Ltd. as well as the retail units of Indian conglomerates Tata Group and Reliance Industries Ltd.

“The relaxed rules give Apple a window to build up a credible brand and gives the company a chance to build up internal capability and familiarity with the supply base,” said Devangshu Dutta, chief executive officer of Third Eyesight. “For branding, a certain consistency is critical and this can be done by having retail control.”

India is a challenging market because of the iPhone’s premium pricing. It now has less than 2 percent of an Indian market in which four-fifths of phones cost less than $150. The iPhone maker had sought permission to become the first company allowed to import and sell cheaper refurbished phones into the country, but was said to have been rejected.

Still, Apple’s sales there jumped 56 percent in the March quarter, indicating that demand for the brand is growing. Cook called out the country’s “incredibly exciting” prospects during his last earnings conference and said his company will devote more energy to that market. Apple’s stores have always played a key-role in attempts a convey a unique image and feel for its products.

“It gives Apple more branding and positioning strength. Having a direct presence will help it gain more mindshare,” said Vishal Tripathi, an analyst at research firm Gartner. “It can help create a well-fashioned brand in the Indian market.”

(Published in Bloomberg)