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September 29, 2016
Saritha Rai, Business Standard
Walmart, the world’s largest retailer, would take a
minority stake in Flipkart under the proposed agreement, the person
said, asking not to be identified because the matter is private. Final
terms of the deal have not been worked out and negotiations are still
underway, the person said.
Flipkart’s most recent valuation was
about $16 billion (Rs 1.06 lakh crore), according to research firm CB
Insights. It is the largest online retailer in India, but its lead has
been under assault as Amazon steps up investments in the country. Chief
Executive Officer Jeff Bezos said in June he plans to spend another $3
billion (Rs 19,936 crore) in India to gain customers in the
fast-growing market.
A deal with Walmart would give Flipkart
additional capital to fight back and more expertise in battling the
e-commerce pioneer. “If the deal goes through, the competitive
intensity between Flipkart and Amazon will shoot up,” said Gautam
Chhaochharia, the Mumbai-based head of India research at UBS AG.
The
deal has potential benefits for Walmart too. Beyond any eventual
financial return on its investment, Walmart would gain exposure to
India’s expanding e-commerce market and have the opportunity to
challenge Amazon on more equal footing than the US.
A
spokeswoman for Walmart said she could not immediately provide comment.
A Flipkart spokesman said, “It is our policy not to comment on rumours
or speculations.”
India is the next big potential retail prize
after the US and China, where foreign players have made little progress
against Alibaba Group Holding.
India’s online market will expand
at an average of 45 per cent annually in the next four years and reach
$28 billion (Rs 1.86 lakh crore) by 2020, according to estimates from
Kotak Institutional Equities.
Walmart had earlier established a
retail joint venture in India with Bharti Group, which runs the
country’s largest telecommunications operator Bharti Airtel. But the
business failed to take off and Wal-Mart eventually sold its stake to
its partner. If a Flipkart deal materialises, Walmart would be able to
support its new ally with money and its decades of retail experience.
“With
its main competitor Amazon getting aggressive, Flipkart needs a solid
partner to bolster its operations with not just capital but also
branding, logistics, sourcing and other retail experience, they won’t
be able to pull it off with small partners,” said Devangshu Dutta,
chief executive officer of the Gurgaon-based retail consultancy Third
Eyesight.
Amazon has been gaining with major investments
in infrastructure and partnership. The company has committed a total of
$5 billion (33,227 crore) to the India market, including the latest
pledge from Bezos. “They know how to work against competitor Walmart,
they will know what to expect,” Chhaochharia said.
Walmart has
been renewing its efforts to battle Amazon online. In August, it agreed
to buy Jet.com for about $3.3 billion and put founder Marc Lore in
charge of the combined company’s online operations.
A tie up
with Flipkart may prompt moves from other competitors in India. Alibaba
has been funding Snapdeal.com, the third-largest competitor in Indian
e-commerce, and has long considered the country a prime expansion
opportunity as it seeks to generate half its revenue from outside
China. But with Amazon and Walmart both stepping up investments,
Alibaba may have to consider doing the same, either with Snapdeal or on
its own.
In Alibaba’s most recent post-earnings conference call,
Vice Chairman Joseph Tsai told analysts that India was a prized market
where his company has investment in Snapdeal as well as an online
payments service and mobile browser. “We’re very well strategically
positioned in these emerging markets, and that’s the start of our
international activity,” he said at the time.
(Published in Business Standard)
admin
September 27, 2016
The Economic Times
New Delhi, 27 September 2014
Two big deals in July changed the landscape for the nation’s
online retail industry, while also offering more business to providers
of support services ranging from website development and payment
services to logistics.
Flipkart in late July said it raised $1 billion in fresh funding,
valuing India’s top e-commerce company at $7 billion. A day after,
Amazon, the global No.1, pledged $2 billion of investment in India.
While these announcements reiterated the faith global investors
have on ecommerce in India, they also led to a rush of investors
and entrepreneurs to get a piece of the fastgrowing online retail
market.
"We have seen a tremendous increase in the orders coming
from the e-commerce industry," said Rajiv Kumar, founder
of Manusis Technologies. "Today we are working on 500 clients
every month and this has happened mostly after July and August."
The company has since July doubled staff count to 50 to meet new demand, and has rented additional office space.
A bulk of the new entrants into the e-commerce space is small entrepreneurs. One of them, Pooja Parikh, who launched her online jewellery business Azira jewels three months ago, says she wanted to do something of her own. "After the e-commerce giants raised such huge amounts of money, I got a boost and I took the plunge."
Online retail is still a tiny spot in India’s retail market of about $500 billion a year, but is growing at a quick pace. A study by retail consultancy Technopak predicts India’s e-tailing market will reach $32 billion by 2020 from $2.3 billion in 2014.
People want to sell all kinds of stuff online, says Ramesh Khemka, founder of Mumbaibased website developer Digi Shop. "Starting from plants to wall stickers to lamps, everything has buyers and seller in the virtual world." Digi Shop gets about 70 queries every month. Murali K of Eworld, a Chennai website developer, says he too has seen a jump in demand since July.
Ethnic Indian clothes and casual wear are favourite products but unusual products- such as pets – too are being offered online.
Payment gateway, PayU saw the number of its clients swelling 30% post-July to 11,500-odd merchants now. "Online buyers are increasing in numbers, who then want to buy more online which in turn leads to increased sellers," said Nitin Gupta, chief executive of PayU India.
Delhivery, which provides logistics services to the e-commerce industry, agrees. "Our clients have doubled since July of the previous year. And the queries for new business have doubled as compared to January this year," said co-founder Sahil Barua. The Gurgaonbased company recently raised $35 million to expand its network, fulfilment space and technology portfolio. Times Internet, part of The Times Group which publishes The Economic Times, is an investor in Delhivery.
Domain name registration is another area that has seen increased activity in recent times. BigRock, a company which helps businesses register their websites, however only partly credits the e-commerce sector for this. "While we have seen 10-15% growth in domain name registrations in July-August as compared to January-February this year, it would be difficult to attribute the growth entirely to the Flipkart and Amazon announcements," said Shashank Mehrotra, business head at BigRock.
Rajiv Sodhi, managing director and vice president of the local unit of Internet domain registrar and Web-hosting company GoDaddy, says ,"We only expect this to grow as a new generation of startups, entrepreneurs and e-commerce players build their businesses online."
With the huge growth that ecommerce has witnessed in recent times, analysts like Devangshu Dutta, chief executive of consultancy firm Third Eyesight, say there is scope for more players to come in.
But some also warn about the risks the space is fraught with, as only a few may have chances of making it big. They also see consolidation in the sector going forward.
(Published in The Economic Times.)
admin
September 25, 2016
How long will it take for India to create a luxury
high-street like Madison Avenue and Fifth Avenue in New York? It is
definitely a distant dream at the moment. Arvind Singhal, Chairman of
management consulting firm Technopak, says that India doesn’t have the
culture of luxury brands on high streets because of safety and security
issues. That’s the reason why most luxury brands in India are housed in
the shopping arcades of five-star hotels. The monthly rent of these
outlets would be Rs 600 to Rs 1,000 per sq. ft, say industry sources.
With Indians increasingly travelling abroad, their
awareness about luxury brands is on the rise. So, luxury shopping
logically should happen at least in the metros. This means that luxury
malls as a concept should work. So, why does India have just two luxury
malls? “The luxury consumers are frequent overseas flyers and they
really don’t care about buying here,” points out Rajneesh Mahajan,
Executive Director, Inorbit Malls. Indians do indulge in luxury
shopping, but it’s mostly overseas as it’s 30-40 per cent cheaper,
largely because the import duties on luxury items are very high.
Moreover, luxury shopping in India until recently
was fuelled by black money. Sales were affected after the government
started monitoring expensive transactions, says Singhal of Technopak.
In fact, a bulk of the luxury shoppers, according to a senior luxury
branding consultant, prefers shopping for luxury brands in the comfort
of their homes in order to avoid paying taxes.
However, considering the country’s projected GDP
growth and rise in disposable incomes, mall developers are hopeful that
the luxury market will also evolve. Retail industry consultants say
that the Mukesh Ambani-controlled Reliance Industries plans to enter
the luxury mall space either in Mumbai or Delhi. There were also
reports that Mumbai-based Oberoi Realty and Maker Group were looking to
build luxury malls in the city. But there is no clarity on when these
will happen, if ever.
With growth of legitimate wealth in the country,
Singhal of Technopak is optimistic about a robust luxury mall culture
in the country. Still, setting up luxury malls isn’t going to be easy
in an emerging economy like India. The cost of construction of a luxury
mall is almost three times more than a regular mall, and while the
returns are also higher, the fact remains that most Indians prefer
doing luxury shopping abroad. It takes three to five years to build a
luxury mall and the average cost for overall development (excluding the
land cost) in Mumbai and Delhi is in the range of Rs 7,000-9,000 per
sq. ft, compared with Rs 4,000-5,000 a sq. ft for a normal mall, say
real estate developers. The rental for a luxury mall ranges from Rs 500
to Rs 1,500 a sq. ft per month, while regular malls charge much lower.
Devangshu Dutta,
CEO of Third Eyesight, says that developers have to ensure a holistic
experience for customers at luxury malls. “The collections should be
the latest and the service should be ultra-premium. Pricing should be
competitive, considering the higher import duty on luxury products.”
The difficulty is in finding real estate at an ultra-posh locality for
building the mall, he adds.
Today, most luxury stores in a mall like Palladium in Mumbai often look deserted. Clearly, given the challenges, developers will definitely think twice before launching luxury malls.
(Published in Business Today)
admin
September 25, 2016
Ankita Rai, Financial Express
New Delhi, 25 September 2016
No wonder that the
launch of Amazon Prime in July saw similar competitive offerings from
both Flipkart and Snapdeal, aimed at improving customer stickiness and
reducing re-acquisition costs for lapsed customers. But remember that
Flipkart First was the first mover in India in the premium loyalty
services space, which didn’t find many takers.
By launching
Amazon Prime ahead of the festive season, with a free 60-day trial,
Amazon is looking to convince shoppers to try its premium membership
programme. The reason: Customers who choose to subscribe to Prime at
the end of the trial period will stay with the retailer beyond the
Diwali sale. Also, it generates valuable customer data, which it can
use to attract customers back. Industry experts think what works for
Amazon in the US and other markets may not be true for India, at least
for now, as Indians are still used to the idea of free shipping.
“For
discount hunters, subscription doesn’t work. However, over the last two
years, a premium segment of online shoppers has emerged, which
appreciates good experiences and is ready to pay for them,” says
Mrigank Gutgutia, engagement manager, RedSeer Consulting. “The premium
one-day and two-day deliveries are around 5-10% of the total orders in
e-commerce and a subscription service like Amazon Prime is likely to be
restricted to this small subset of online shoppers — possibly only the
top 5%.”
However, there is a catch here. “In
India, the number of customers who subscribe to such services will be
small, but the value per customer will be high,” points out Devangshu
Dutta, chief executive, Third Eyesight.
Globally,
subscription-based e-commerce services offer the customer increased
value in one or multiple forms such as faster deliveries, assured
availability, free content, etc, and charge the customer a fixed annual
fee for the same. But Flipkart Assured and Snapdeal Gold are offering
such services for free, with no aim of monetising them later. “Customer
acquisition is expensive. Hence, a business needs to retain its
existing customers to drive profitability,” says Pankaj Gupta, senior
practice head, consumer and retail, Tata Strategic Management Group.
However,
no matter how attractive the proposition of ‘free and fast’ shipping,
it is not sustainable in the long run. As of now, customers see it as a
freebie. “The free and fast shipping proposition seems more of a
reaction to competitive pressure. At the end of the day, you also have
to make sure the consumer stays with you,” says Pragya Singh,
vice-president at retail consultancy Technopak.
(Published in Financial Express)
admin
September 21, 2016
Richa Maheshwari, The Economic Times
Bengaluru, 21 September 2016
The man who helped stoke this appetite for the Italian staple is Ajay
Kaul.
In
2005, 52-year-old Kaul became the chief executive of Jubilant
Foodworks, which owns the franchise rights for Domino’s in India,
Nepal, Bangladesh, and Sri Lanka. From then on, he expanded the chain
from just 93 outlets to over 1,062 stores across the country, making
India the largest market outside the US for the American brand.
On
Sept. 19, after over a decade at the helm, Kaul announced his
departure. The precise reasons for the exit aren’t clear; in a
statement, the company only said that Kaul wants to “evaluate and
pursue opportunities” elsewhere. Kaul’s exit comes after a management
rejig at the company was announced earlier this year.
Nonetheless,
the move comes at a challenging time for Domino’s. The pizza chain is
struggling to boost same-store sales (a measure of sales at stores open
for at least a year) amid growing competition from stand-alone
restaurants. After the news broke, Jubilant’s stock price plunged by
over 8% on the Bombay Stock Exchange. Kaul will continue in his current
role till March 2017.
Making pizzas
mass
When
Kaul, an Indian Institute of Technology-Delhi alumnus, took over
Jubilant Foodworks, Indians had already been introduced to pizzas and
burgers, thanks to local chains such as Nirula’s, apart from Domino’s,
McDonald’s, and Pizza Hut.
But they still weren’t spending
big on eating out or ordering in. In the early 2000s, Domino’s was
still considered an expensive brand, especially among middle-income
consumers.
Soon after, Kaul, who attended Xavier School of
Management (XLRI) in Jamshedpur in 1989, realised that Domino’s needed
to change the game by selling inexpensive pizzas.
In a 2006
interview with the DNA newspaper, Kaul said that while Domino’s was
well-accepted among the higher-income and upper middle-income groups,
its penetration was below satisfaction in the middle and lower-middle
strata.
That’s why, between 2006 and 2008, Domino’s introduced
the Fun-Meal pizza range at Rs. 45, and later the Rs. 35 Pizza Mania
campaign that brought the price of a single serving of pizza (i.e for
one person) down to less than a dollar. These campaigns “dramatically
expanded the pizza category in India,” according to Kaul, outdoing
Pizza Hut’s attempts at lowering prices.
Indeed, the rock-bottom
prices paved the way for Jubilant to expand beyond metro cities to
smaller towns like Bhopal, Madurai, and Belgaum. Gradually, it also
expanded its India menu, adding cheese-burst pizzas, pastas, and
desserts.
Kaul, who spent a decade working in logistics firm
TNT Indonesia before coming to Jubilant, also bolstered Domino’s
delivery service, promoting its “30 minutes or free” campaign.
The
efforts paid off big time. In 2012, the chain hit 500 outlets across
India and has doubled since. Today, Domino’s is much bigger in terms of
number stores than McDonald’s or KFC. Pizza Hut, its biggest direct
competitor, has only 450 outlets in the country.
“While
pizza was already part of the fast-food mix, over the last 10 years or
so, Domino’s India brought it to the forefront through its systematic
and aggressive growth. Ensuring a flavour mix attuned to the Indian
palate, penetrating into locations that were not previously serviced,
adding dine-in to a brand that essentially had delivery-based DNA, were
all part of this growth,” said Devangshu Dutta, CEO at consulting firm
Third Eyesight.
Kaul also pulled off a successful
Rs329-crore initial public offering (IPO) in 2010 and spearheaded the
India entry of coffee and donut chain Dunkin’ Donuts through franchised
rights in 2012.
For the year ended March 31, Jubilant Foodworks
registered a turnover of Rs. 2,410 crore (US$362.2 million) and a net
profit of Rs. 114.56 crore (US$17 million). That’s 33 times more than
the Rs. 73 crore (US$11 million) clocked in 2005 when Kaul took over.
With
Kaul’s impending exit, though, Domino’s finds itself in a spot of
bother. Fast-food chains have been struggling lately as competition
from newer brands and a general gloom in consumer sentiment hinder
growth. Analysts reckon that the company will need solid leadership in
an environment where the fast-food model is undergoing transition.
“In
the last 3-4 years, consumer sentiment has been more muted. While
inflation has been pushing costs and prices up, the consumer doesn’t
have the same appetite for spending on eating out,” said Third
Eyesight’s Dutta. “All QSRs are facing the impact but, clearly,
Domino’s as a market leader is bound to show the effects of slowing
growth more visibly.”
(Published in Quartz)