admin
February 18, 2016
Anushree
Bhattacharya, VCCircle
New
Delhi, 18 February 2016
Naina
Singh no longer buys her skincare products from the upscale showrooms
of Greater Kailash in Delhi. This home-maker now prefers to pick
them up from a small store sporting the red banner of Patanjali
Ayurved, from which the picture of patron and de facto owner Baba
Ramdev smiles down benignly.
It was her tryst with Patanjali Kesh Kanti Natural shampoo that made her a convert last summer. “I now buy almost everything that Patanjali makes, from atta to ghee to the creams as well as pulses and the spices,” says Singh.
Patanjali Ayurved Ltd today is not just about amla juice and chyawanprash. It sells around 500 consumer goods, from ayurveda-based products to staples such as clarified butter (ghee), pulses and edible oils to personal products such as toothpaste, hair care and skin cleansers and processed food products such as noodles, biscuits and juices.
Acharya Balkrishna, managing director, Patanjali Ayurved, and Baba Ramdev’s most loyal disciple, gives credit to the yoga guru for all this. “The vision has been very simple. Whether medicines or food products, people of this country should have the best at the lowest possible price,” he says. He claims the company will hit the Rs 5000 crore turnover mark in FY16 – almost at par with the domestic revenue of consumer goods makers Dabur India, Marico or Godrej Consumer Products.
In FY15, the company registered a turnover of Rs 2000 crore. The firm now expects to enter the billion dollar league in terms of revenues in the coming financial year. Its estimated profit for the twelve months ending March 31, 2016, benchmarked against large industry peers should already make it a $2-3 billion company by market value, purely by price to earnings ratio, as per VCCircle estimates.
To be sure, even as it gives a scare to the biggies of India’s FMCG industry strong competition, it is doubtful whether Patanjali, which swears by its ayurveda-inspired products, will be able to maintain the scorching pace it has set.
As it gears up to become possibly the biggest homegrown seller of consumer goods it will face new challenges.
Indeed, Patanjali’s projected growth defies the slowdown in the FMCG industry at large. To be sure, it has grown almost five times between FY12 and FY15 when top FMCG firms in India such as Hindustan Unilever, Godrej Consumer, Marico, Dabur and Emami grew 30-70 per cent in the same period. Nestle’s sales have actually declined in the same period.
This may look ambitious but add the slew of product launches this fiscal, and key distribution pacts in place, and it may not be too far from its target at the end of next month.
Overflowing aisles
Patanjali’s top selling product is ghee, accounting for 30-35 per cent of the company’s revenue, according to a report by HSBC Research. Then comes toothpaste Dant Kanti (8 per cent), hair cleansers (5 per cent), wheat flour (5 per cent), and honey (4-5 per cent), says the report. Health care products, its mainstay for many years and on which it has built the Patanjali platform, accounts for 20 per cent of the revenue.
“Pricing itself cheaper than the market leader in each product area is the reason for its popularity,” says Devangshu Dutta, chief executive, Third Eyesight, a retail and consumer management consultancy.
As per the HSBC report, Patanjali had 20 per cent share in the Rs 1240 crore ayurveda-based toothpaste market in FY15, while Dabur had 65 per cent share. By FY20 Patanjali’s Dant Kanti toothpaste will have 50 per cent share, while Dabur’s market share will drop to 40 per cent in the ayurveda toothpaste category, it says.
Dabur, which has Babool, one of the oldest ayurveda-based toothpaste brands in the country, however, scoffs at the idea. “While a lot of companies today offer herbal or ayurvedic products, Dabur enjoys the consumer’s trust because of its ayurvedic heritage,” says Lalit Malik, chief financial officer, Dabur India. The company says it is close to introducing a range of products in the value-added and premium category, which will help improve its market share.
A report by IIFL Institutional Equities projects Patanjali’s annual turnover at Rs 20,000 crore by FY20. The report says it can expect to have a big share of the market in categories including honey, ayurveda-based medicines and ghee. In fact, by FY20, eight categories are expected to have a turnover of Rs 1000 crore each.
Balkrishna, however, says Patanjali has a much loftier goal than toppling any rival brand. “Unlike other companies, which have commercial interest at the heart of everything, our aim is to make products for the welfare of people,” he says.
For the people
That purportedly is the reason why Patanjali is launching an orange juice brand in the next one to two months, which it claims will be “real” orange juice.
“One of the reasons why companies do not sell real orange juice is because it is tangier in taste and not thick in density,” says Balkrishna.
Dabur sells its juices under the ‘Real Active’ brand.
Patanjali also plans to enter the baby care segment with cream, lotion, soap and shampoo apart from introducing Power Vita, a malt-based health drink brand. All this, the company plans to roll out in the market by early next month.
The aim is to enter categories where consumers are unhappy with quality or price, says Balkrishna. “The decision to enter a new category is triggered by a controversy or when Baba Ramdev is approached by people,” he says, alluding to the launch of its instant noodles brand.
That, however, hasn’t stopped it from downplaying the fact that Patanjali Atta Noodles is actually a 50:50 blend of atta (wheat flour) and maida (refined flour made from wheat flour).
Patanjali launched its Atta Noodles last November, almost at the same time when Nestle India Ltd’s Maggi returned to stores, five months after the multinational’s noodles brand was pulled out over safety concerns.
Nestle, its biggest competitor in the instant noodle category, remains unperturbed. “Every brand seeks to define its competitiveness given its intrinsic strengths, its appeal and the price-value relationship it seeks to define,” says the Nestle India spokesperson.
Dabur and Nestle aren’t the only two companies watching Patanjali’s every move. Hindustan Unilever Ltd (HUL), India’s largest FMCG company, is also building its arsenal. It recently revived its herbal brand Ayush, introducing a range of new products across haircare, skin care and pain balms. The acquisition of Kerala-based hair oil brand Indulekha Bringha hair oil late last year also needs to be seen in the same light.
Speed test
Market analysts say the back-to-back product launches by Patanjali is an area of concern. A major food products company such as ITC Ltd or HUL takes one to one-and-a-half year to launch a new product. Even then, the product is first launched in select markets. Another three-four months later, depending on the consumer feedback, it is gradually rolled out across the country. Similarly, skin care products need to go through a battery of tests before these can be launched.
“Launching a regular cream may take only six months to one year, but for an anti-wrinkle cream, or age-specific cream, it is a much longer journey,” says Rajat Wahi, partner and head, consumer markets, KPMG in India, an audit firm.
But this doesn’t bother Balkrishna, who says the firm maintains high standards of quality. Last month there was much discussion on social media on the quality of its ghee, he says. “But the Food Safety and Standards Authority of India (FSSAI) cleared our product.”
Rather, according to him, inability to meet the spiraling demand for its products is the biggest concern. Atta, juices, rice, and other food products are processed at its Haridwar plant, Patanjali Food and Herbal Park. This factory also makes skin and hair care products. Its other factory in West Bengal rolls out 400-500 tonnes of biscuits every day.
Hence, expansion is the next big task. Patanjali plans to spend close to Rs 1000 crore in FY17 to ramp up its manufacturing capacity. The money will come as loans from public sector banks. It is looking at starting three new plants. “We are looking at different states including Andhra Pradesh, Maharashtra, West Bengal and Madhya Pradesh. We plan to acquire 400-500 acres of land in each state, to build state-of-the-art facilities,” says Balkrishna.
Patanjali created its own shelves
It’s a tiny shop with no fancy lights or glass panels. Iron shelves lined against the walls hold cartons, bottles and plastic canisters. In a corner, sits a man with a long register, the wooden table in front of him laden with small packages. The cash goes into the little drawer under the desk.
You may feel you have stepped back into the eighties but that’s the ideal Patanjali Chikitsalay store. Tucked away in a corner of a busy marketplace or in the bylanes of a residential colony, such stores are the lifeline of Baba Ramdev’s brainchild, Patanjali Ayurved Ltd.
These stores, spread across the country, numbering nearly 10,000 accounted for the bulk of Patanjali’s Rs 2000 crore turnover in FY15.
“They were the best medium when it came to spreading awareness about our products through word-of-mouth,” says Acharya Balkrishna, managing director, Patanjali Ayurved.
Run by franchisees, the Patanjali stores can be classified into three formats. Typically 100-150 sq feet in size, the first two sell processed foods and ayurvedic medicines, respectively. The third format, a tad big at 200-250 sq feet, sells medicines, pulses, rice, detergents, hair care and skin care products.
Not the first choice
These stores weren’t exactly the first choice for Patanjali.
Around 2010, when it started its big push into consumer goods, Patanjali found retail outlets unwilling to keep its products because of the low margin it gave to retailers.
Unlike other FMCG companies, which apart from giving a standard discount to retailers allow further discounting to be able to sell their products, Patanjali could not afford to sell at discounted rates, nor give any special discount to retailers. It also did not give goods on credit.
“Moreover, we want our products to be placed at the front aisle, so that people get to see them,” says Balkrishna.
While large FMCG companies including Hindustan Unilever Ltd (HUL), ITC Ltd and others pay 19-20 per cent margin to modern retailers and 12-15 per cent to mom-and-pop/kirana shops, Patanjali pays 12.5 per cent margin to modern retailers and 8-9 per cent margin to kirana shops.
It was the same story when Patanjali tried to place its products in modern retail stores.
Aditya Pittie, CEO, Pittie Group, Patanjali’s sole distributor for modern retail and e-commerce, says a pilot programme it ran for the firm’s oral care brand Dant Kanti, helped the homegrown company crack modern retail.
Though Patanjali paid 10 per cent margin against a rival brand’s 20 per cent, the modern retailer was able to sell Rs 3 lakh worth of Dant Kanti toothpastes against Rs 1 lakh worth of toothpastes of the latter, says Pittie. That clinched the deal and Patanjali got a foothold in modern retail.
“With retailers realising that despite getting lower margin they get to earn more on Patanjali products, they are eager to give shelves to the company,” adds Pittie.
It was only last October that Future Group opened the doors of Big Bazaar for Patanjali. Before this, in January the company piloted its products in five Reliance Retail stores in Mumbai, following which Patanjali took its products to 45 stores in the city.
Balkrishna points out that its decision to go for its own stores played a big role in establishing its credentials. “The no-frills store with the store owner actually advising customers on products built a level of trust and popularity which helped in our modern retail foray,” he says.
Today, Patanjali products are available across key Future Group retail chains- Big Bazaar, KB’s Fairprice, Aadhaar and Nilgiri’s. Patanjali claims it has recently increased the margin for modern retailers to 16 per cent, though it declined to reveal the share of sales contributed by modern retail versus kirana shops and its own stores.
Kishore Biyani, founder and chief executive, Future Group says
he is satisfied with the margin offered by Patanjali.
“Margin is a combination of various factors such as sourcing
of goods, supply chain, etc. Moreover, the aim was to allow a
homegrown company, a ‘swadeshi brand’ to flourish,” says
Biyani.
Making a statement
500-3000 sq ft in size and will house all products under one big roof. It plans to have 100-150 such stores by end of this year. “Two such stores have been launched in Lucknow and Nagpur. Delhi, Mumbai and Pune are next on our list,” says Balkrishna.
Pittie, too, is joining hands with Patanjali to start four mega-stores. Two will be in Mumbai, and one each in Delhi and Bangalore. “Baba Ramdev himself is screening all the applications received,” says Pittie.
Going online
The opportunities in e-commerce haven’t escaped the notice of Patanjali. According to a person close to the company, Baba Ramdev, along with top executives from Patanjali, is busy devising an e-commerce plan.
At present, Patanjali sells its products on patanjaliayurved.net. Moreover, its products are sold by vendors on online marketplaces such as Flipkart, Amazon, Snapdeal and Grofers besides inventory-based grocery e-tailer Big Basket. It has also tied up with Pluss, an on-demand medicine and healthcare products delivery service to deliver its products in Delhi.
“One of the reasons as to why we haven’t been able to make a mark online is that we are not able to give very high margin to e-commerce companies,” says Balkrishna.
According to industry estimates, an e-commerce company’s target is to earn a margin of 15-20 per cent on each transaction. However, with almost everyone offering steep discounts, the actual margin earned is 8-10 per cent and at times, even as less as five per cent.
To be sure, grocery e-commerce is not all about margins. “Grocery e-commerce is more of a local play than national. While one can still parcel a large packet, grocery is all about fulfilling daily needs for which a relevant local network is essential,” says Rajat Wahi, partner and head, consumer markets, KPMG in India, an audit firm.
For Balkrishna, the first step towards making Patanjali a national brand has been taken. “With more and more people joining the swadeshi movement, it’s just a matter of time before almost all the small as well as large stores sell our products,” he says.
Decoding Patanjali’s popularity
A premium product but an economical price tag. That is what yoga guru Baba Ramdev-backed brand Patanjali Ayurved promises customers. That strategy has worked, with Patanjali Ayurved Ltd, which flaunts its ‘Make in India’ roots, set to touch the Rs 5000 turnover mark in FY16.
Keeping prices low has been the cornerstone of Patanjali’s marketing strategy. For instance, a 250 gm bottle of honey from Patanjali Ayurved Ltd comes for Rs 70. In contrast, market leader Dabur India sells the same pack size at Rs 120. Similarly, chyawanprash, one of the first products from the Haridwar-based company, is priced at Rs 250 for a 1000 gm jar. A 900 gm jar of chyawanprash from Dabur comes with a Rs 300 price tag.
“We arrive at the price by calculating the cost of raw material, administration, processing cost and a bit of margin for sustenance,” says Acharya Balkrishna, managing director, Patanjali Ayurved, and Baba Ramdev’s close confidant.
While its pricing strategy isn’t anything new, it has helped in attracting eyeballs, especially in a price-sensitive market like India. “Any newcomer who enters the market tries to make a dent by crashing the price. Patanjali has also followed the same strategy,” explains Rajat Wahi, partner and head, consumer markets, KPMG in India, an audit firm.
However, Wahi says the big question is how long the company will be able to sustain its low pricing strategy.
Price platform
Going by the latest IIFL Institutional Equities report, it seems Patanajali is already revising its strategy. The report states that there has been an increase in prices of popular products such as toothpastes and shampoos over the past few years. A 100 gm tube of Dant Kanti toothpaste, one of its top-selling products now sells for Rs 40 against Rs 28 earlier. Similarly, shampoo, a category which it entered much later has also witnessed price revisions. The price of a 200 ml bottle of Kesh Kanti Natural shampoo has gone up from Rs 68 to Rs 75. The company has also increased the price of its anti-dandruff shampoo from Rs 85 to Rs 95 (200 ml).
Ghee is one product where Patanjali has followed a different strategy. Marketed as a premium product, a 1000 gm jar of Patanjali Ghee comes for Rs 450 compared to a 1000 gm jar of Amul Ghee which sells for Rs 390.
The IIFL Institutional Equities states that by FY20, Patanjali is expected to have double-digit market share in 10 of the 25 categories including ghee (33 per cent), and chyawanprash (30 per cent). It projects a revenue of Rs 3,100 crore from the sale of its ghee by FY20.
Balkrishna says that as a company Patanjali is not competing against anyone. “Each one of us is trying to do a good job, so that eventually people benefit from it,” he explains.
Yet, even as the firm has increased the price for some of its products, the low price points have helped in sampling of its products, ultimately resulting in in high sales. “In India, people do not mind testing a new product if it does not pinch their pockets,” says N Chandramouli, CEO, Trust Research Advisory (TRA), a brand intelligence and data insights company.
To be sure, the low pricing strategy does not impress everyone. “Low price points always raise questions about product quality. If other companies have been charging a certain rate for the same kind of products, how is Patanjali able to sell it at a much lower price,” asks Anil Verma, a resident of upscale Defence Colony in Delhi.
Patanjali has also been adopting the marketing tactics of its competitors, which could alienate customers who trust the brand’s promise of purity. Its instant noodles brand, launched just before one-time market leader Maggi returned to store shelves, was named Atta Noodles, thus downplaying the fact that it was actually a 50:50 blend of atta and maida.
Last December, a quality test was done on Patanjali’s Ghee by the Food Safety and Standards Authority of India (FSSAI) after much debate on social media on its perceived quality.
Brand building
That is where Baba Ramdev’s charisma comes in. With a cult following, a television channel, and his yoga shows round the country, Patanjali’s brand campaign is already at the halfway mark before it has even started.
This has also helped the brand keep a tight leash on its advertising spend.
Contrary to media reports that the company spent a whopping Rs 200-300 crore in advertising in FY15, Patanjali claims to have spent only 1-1.5 per cent of its total turnover. Hence in FY15, the company spent Rs 20-30 crore in advertising and marketing. Similarly, the company is expected to spend Rs 50-60 crore on advertising in FY16.
As Balkrishna unabashedly admits, Patajali has bought media inventory at a discounted rate, which has helped the company in controlling the ad spend.
The company wants simple ads just to disseminate information about its brands, says Balkrishna. “We don’t make any false promises in our ads. The ads are more like infomercials,” he adds.
For DDB Mudra Group which handles the creative duties for Patanjali Ghee, Atta and Dant Kanti, the creative brief was to inject the communication with a brand proposition.
“The ads for Patanjali talk about the product and its promise to consumers. The idea was to make interesting ads but not boring ones,” says Vandana Das, president, North, DDB Mudra Group.
Infomercial or not, brand evangelists say that the simple ads by Patanjali have helped in winning consumers’ confidence. “While the whole world is creating theme based ads, here is one company which has stayed away from all the razzle dazzle. Straight talk, with no fluff, has helped in creating the trust factor,” says Harish Bijoor, brand strategy expert and CEO, Harish Bijoor Consults Inc, a consulting firm which specialises in brand and business strategy.
According to Bijoor, 32 per cent of the ads released by brands are tagged by consumers as ‘false’.
Even as the company is riding on its charitable trust tag, Bijoor says it cannot continue doing so forever. “It will be forced to behave like any other FMCG company soon, even in case of its communication,” he explains.
The meteoric rise of the company, parallel to the ascendancy of the Bharatiya Janata Party (BJP) to power, has also raised many eyebrows. Baba Ramdev is seen to be close to the BJP and its affiliates, sharing similar views on several subjects.
Balkrishna, however, dismisses talk of any such linkages and
says all the talk about Patanjali has actually helped it grow.
“We have never had the government’s backing. In fact, we
have openly protested against some of the ideas of the BJP-led
government. As for the quality of our products, the FSSAI test
results on Patanjali Ghee say it all,” he says.
(Published in VCCircle)
admin
February 12, 2016
Tarush Bhalla, Your Story
New Delhi, 12 February 2016
Aditya
Agarwal, 25, lived in a nuclear family in Varanasi. When it was
time for him to leave for his higher studies in Allahabad, he
had one concern: "Once I went for my higher education, I
was always concerned, what if someone in my family got sick, who
would take care of their health needs? Back then I didn’t
have a solution."
His anxiety grew when he moved further away to Delhi in July
2012 to study for his MBA. But, it was there that he was hit by
the e-commerce bug, prompting him to find a solution to deliver
medicines to people’s homes.
While the idea of starting up was successfully seeded, he roped
in his school friend Arpit Sarin, 25, who was already working
on a few social entrepreneurship ideas, to work with him. Aditya
says, “Back then we were job seekers. We didn’t know
we could build a company. So it was a very big opportunity for
us.”
But real inspiration struck in December, that same year, when Aditya and Arpit went on Jagriti Yatra, a train ride across India to shape the entrepreneurs of tomorrow. "We came across all those people who had their own startups and were just like us. They were young with no money and experience, but they did start working on their idea and they ‘did it’. This gave us the confidence. We just knew one thing; there exists a problem that needs to be solved."
From knocking on doors…
The duo launched their product in 2013; today, their platform, Dawailelo, aims to be a complete healthcare solution where medicines are delivered to the doorstep of needy customers. The platform also lists doctors’ details and connects customers to pathology labs to get samples collected and reports delivered conveniently to their homes.
Aditya still remembers the hot summer afternoons when he and Arpit wandered the streets of Varanasi to survey 2,000 households and understand the real problems surrounding the regular supply of medicines.
Today, the platform has served 1,100 unique customers in Varanasi alone, while catering to 500 orders every month from the city, 60 per cent of whom are repeat customers.
Last month, they expanded their operations to Panipat in Haryana. In their first week of operations, they already had 35 unique customers; completing more than 40 deliveries at stretch.
In the next six to eight months, the startup aims to set up shop across six cities in Haryana including Kurukshetra, Karnal, Sonipat, and Haryana.
According to the founders, their main focus is on patients with chronic diseases (diabetes and arthritis), who comprise 85 per cent of their consumer base. These clients have regular prescriptions and require medicines throughout the month.
When asked, the founders say that customers with acute medical conditions (like common cold or diarrhea) don’t form a big chunk of their consumers since their requirement is limited, and they avail Dawailelo’s services only once or twice. Moreover, it is easy for them to source these medicines at a local pharmacy; for chronic patients in Tier II cities, medication isn’t always available in local pharmacies.
Aditya believes that stickiness and loyalty are big factors in their venture’s success in Tier II cities.
…to avenues opening
The firm states that they strictly work on physical prescriptions where the delivery-in-charge will pick up the prescription from the customer and deliver the medicines by the next morning or the same day.
There is also an automated feature built in to the app, which allows customers to get medicines delivered without having to go through the whole process again.
As of now, all transactions are made in cash as it is easier in Tier II cities. Moreover, the firm is also working on the ‘digitalisation of healthcare’ and a ‘cashless’ programme where the requests would either be taken directly from doctors or verified by doctors before delivery, reducing delivery time and giving the option to make payments online.
Although the firm claims that bookings can be made through their app, website or through calling their helpline, the website is not yet functional and is undergoing some final checks before being rolled out.
Further, the firm has a partner pharmacy in every successive 10 km radius, to facilitate better deliveries. When asked why they don’t want to make the platform a marketplace, the co-founders tell us that it would be difficult for them to monitor each and every pharmacy leading to a compromise on trust and quality of the products.
On the revenue front, since Dawailelo follows the bulk model, they are allowed some margin from their partner pharmacies, of which 10 per cent is given to customers in the form of discounts, while the other 10-12 per cent goes to the firm. The average ticket size of each order received is Rs 1,000.
In the future, one can also expect the platform to have details
and information on doctors, helping customers make appointments.
In the coming few months, the firm also plans to roll out their
app on iOs along with their website.
The firm has also already raised capital from angel investors
and is actively looking for their next round of funding.
Of learnings and impact
Talking about the journey, the co-founders feel it has been a
roller coaster ride, fraught with perils. They say,
There were times when things were not smooth, but the feeling of working on our own startup has given us the strength to fight every obstacle. We have taken coaching classes, raised funds from our close ones to realise our dreams and have started believing that everything happens for good as they take shape.
The duo tells us that it is overwhelming to see the change solutions bring to the lives of customers.“It is so touching to see how a simple solution changes someone’s world. One of our customers’ husbands is a paralytic, whom she cannot leave behind to buy medicines. Today, she saves herself the embarrassment of asking everyone to get her the medicines. Our starting up seems to find meaning through her story.”
YourStory take
There is no doubt that the startup’s decision to function in Tier II cities is an incredible one. The healthcare services market in these cities is still unorganised, with people going by what their neighbours and relatives say, rather than a doctor’s qualification.
Moreover, according to a report from IBEF, Tier II cities are the next demand source of the future, as 70 per cent of the population lives there. This can also be proved by the fact that for bigger healthcare startups like Practo, 30 per cent of the traffic last year was from Tier II and Tier III cities. While raising $37.5 million in Series B in September 2015, Portea is also making its presence felt in Tier II cities. Companies like Gurgaon-based Pluss are also operating in the similar space of on-demand healthcare and wellness deliveries.
The investor interest is also flaring up, (with $276.5 million invested in startups last year) and bigger players pushing to get into these markets
However, a matter of concern for the company should be scale, considering how bigger players with fuller pockets are ramping up their presence in Tier II cities. Moreover, as Dawailelo is in the hyperlocal delivery space, another trouble brewing on Tier II startups is the lack of sufficient funding.
Shan M Hanif, Co-founder of online grocery store Kada, say that despite being the only player in Kerala with Tier II and III focus, raising Series A has been tough. In another story, Devangshu Dutta, Chief Executive at Third Eyesight management consultancy said that over the last year, investors have become skittish about pouring funds into businesses that have no demonstrable path-to-profit.
This explains why Tier I cities are a top-favorite for most healthcare or hyperlocal startups to show traction and profitability in order to attract investments. With such dynamics brewing, we will have to see whether Dawailelo’s expansion to other Tier II cities will really project a scale to attract investments.
(Published in Your Story )
admin
February 11, 2016
Richa
Maheshwari, The Economic Times
Bengaluru,
11 February 2016
Paytm
is tying up with mobile and large appliance retailers to list
their brick-and-mortar stores on its ecommerce platform as part
of its omni-channel strategy.
"We will help these retailers create brand stores on Paytm and enable their offline channel to come online," said Amit Bagaria, associate vice president and mobile and electronics head at the payment wallet to ecommerce company.
With this, shoppers will get to choose the offline store from where they want their product. They will also have the option of either picking up their purchase from the shop or have it delivered.
The Alibaba-backed Paytm has tied up with close to 5,500 stores, including 4,000 brand exclusive mobile stores and 1,500 stores of large appliance retailers. These stores can list their products and selling price on Paytm platform.
"We are first working on the electronics segment since there are a fixed set of SKUs. Soon we will be rolling it out in other categories," said Bagaria.
Rival marketplace Snapdeal is also looking at giving an option to its consumers to buy on the platform and get the item delivered from neighbourhood store or buy it directly from the store through online guidance.
While deep discounting was once a vital ingredient for ecommerce companies to increase footfalls, now they seem to be looking at differentiating themselves with new consumer experiences besides exclusive products and services.
Recently, Flipkart-owned fashion portal Myntra revamped its app interface and made it more Facebook-like wherein brands have their own page, create their own content and can engage with customers.
According to industry experts, brands are struggling to stand out as the online market is flooded with hundreds of options.
Bagaria said many marketers want to use analytics and numbers and accordingly launch newer products. "Hence we will provide them with the data based on their virtual brand store where they can create content and talk about the brand," he said, adding that the company is moving away from flash-sale-model and will work on helping brands connect with their potential customers.
As per a joint report by Boston Consulting Group and Retailers Association of India, more than 400 million customers could potentially be digitally influenced by 2020, accounting for about 25% of total retail spend. Digitally influenced spenders research products and pricing online while purchasing them either offline or online, it said.
Devangshu Dutta, CEO at retail consultancy Third Eyesight
said, "The hybrid model (offline to online) helps ecommerce
companies to co-participate in the business opportunity. The benefit
of having offline retailers on board helps them have distributed
inventory and thereby improve their flexibility of doing business."
(Published in The Economic Times)
admin
February 10, 2016
Richa Maheshwari, The Economic
Times
Bengaluru, 10 February 2016
Snapdeal
has integrated Redbus, Zomato and Cleartrip inventory in its mobile
application as a pilot that will help customers book bus tickets,
flight tickets, hotel tickets and food directly from the application.
This
association gives Cleartrip, Zomato and RedBus access to Snapdeal’s
user base. In return, Snapdeal will earn a commission for each booking
made through its platform. Air ticket is a large gross merchandise
value (GMV) category, while food ordering is a high frequency category.
“Horizontals are looking at monetising their user base with a
focus on GMV and repeat use cases. As funding environment becomes
tougher, growth in these metrics will stand out,” said a Snapdeal
investor requesting anonymity. When contacted, Snapdeal declined
comment.
Last year, CEO Kunal Bahl had told ET that the
company will surpass Flipkart in terms of GMV by March, 2016. “Whatever
their (Flipkart’s) numbers are, we will be ahead of them by March
(2016),” he had said.
Recently, the company tied up with real
estate developers such as TVS Emerald, Provident Housing and Runwal
Group to launch real estate and financial services on its website,
which boosts the company’s GMV. The commission received on such
transactions is not clear. GMV is the overall sales by merchants on an
ecommerce platform, without factoring discounts, out of which an
etailer gets 5-20% as margin on an average. Cleartrip, Zomato and
Redbus refused comment on queries sent by ET.
According
to experts, ecommerce players are now experimenting ways to monetise
traffic through non-inventory based models. “These are service oriented
offerings, which won’t take up any extra cost in terms of physical
space and, hence, these players will make better margin out of it,”
said Devangshu Dutta, CEO at retail consultancy firm Third Eyesight.
Snapdeal
rival, Paytm, is also building a travel marketplace on its platform.
The Alibaba-backed company had started selling hotel and bus tickets on
the platform a few months back. “To provide everything on their
platform, ecommerce players are now encroaching ideas,” said an
investor.
“Flipkart, Snapdeal and Amazon are going the Paytm
way of launching wallets and two years back, Paytm, a payments company,
started tapping the ecommerce space.”
(Published in The Economic Times)
admin
February 5, 2016
Athira
A. Nair, Yourstory
Bengaluru,
5 February 2016
Till
a couple of years ago, the idea of hyperlocal services in Tier
II cities would have been unthinkable. The whole point of hyperlocal
services is instant gratification. A comparatively slower pace
of life, poor Internet penetration, and a reluctance to adapt
technology were expected to be roadblocks for such services. But
the startup boom that India has witnessed over the past few years
has ensured that some daring entrepreneurs have ventured into
these untapped markets beyond the metros.
Of course, this does not mean that they have had a smooth ride.
The biggies who entered Tier II cities have had to remodel themselves,
while local startups are struggling to find funding for scaling.
Then, there were other setbacks. Online grocery app Grofers pulled
out of nine cities– Ludhiana, Bhopal, Kochi, Coimbatore,
Vishakapataman, Mysore, Bhubaneshwar, Nashik, and Rajkot –
in January 2016 due to lower-than-expected uptake. A few weeks
ago, restaurant discovery and food ordering platform Zomato also
shut down its online ordering service in four Tier II cities –
Lucknow, Kochi, Coimbatore, and Indore – owing to the small
market there. Understanding the market and devising strategies
for each city have proved essential for the survival of these
players – whether it is in online groceries, or logistics,
or tech-based service providers.
Tier II has its own advantages…
An undeniable advantage in Tier II cities is that the market
is unorganised compared to Tier I cities. But B2B logistics will
grow regardless of who runs the consumer-facing show. Puneet Chauhan,
Business Development Manager at Bangalore-based logistics startup
Parcelled, says: “The Tier II market is untapped except for
in FMCG. Of course, logistics is always in demand in metros and
Tier II cities, but customers are very loyal in Tier II cities.”
Parcelled gets about 10,000 orders via B2B and B2C logistics services
from the four Tier II cities they serve in. They provide intercity
and intra-city services for their clients, which include e-commerce
majors like Flipkart, Jabong, Zivame, Lenskart, and Paytm.
However, in the B2C business, the one factor that boosts hyper
local services in Tier II cities is the growth of the city, bringing
in a more urbane tech savvy population. Kerala’s capital
city Thiruvananthapuram had the first IT park in the country,
yet it has no shopping malls. Shan M Hanif, Co-founder of online
grocery store Kada, says: “The techie population must feel
a bit lazy after a hectic week at work; but since there are not
a lot of options for outings, they do grocery shopping on some
weekends. However, they prefer ordering online on weekdays.”
Coincidentally, Hubli – a Tier II city and the largest after
Bangalore in Karnataka – has also seen hyperlocal startups
mushrooming. The city is awaiting an international airport; yet
labour is 70 per cent cheaper than Bangalore. Three-month old
startup Freshboxx – which delivers organic fruits and vegetables
to the customers’ doorstep – has had the advantage of
a cheaper labour force too. Founder Rohan Kulkarni says: “We
could move to metro cities too, but there are many hyperlocal
startups already. I first want to move to other Tier II cities
– namely Belgaum, Dharwad and Karwar – and then Goa,
where nothing is really cultivated.”
…and disadvantages
Despite the growth in industry and economy, startups in Tier
II cities still face basic problems. Devangshu Dutta, Chief Executive
at Third Eyesight management consultancy, says: “Smaller
cities often lack the demand concentration that is needed to create
a critical mass, which can over time provide the foundation to
build a profitable business. It’s a long runway of growth
(rather than a rocket-launch), as consumer demand grows across
the country over the next decade, and online transactions become
more common.”
According to Saurabh Kumar, Co-founder of online grocer Grofers,
although Tier II cities have potential, it will take time to grow
to accommodate multiple players. “Currently, it is in a nascent
stage as people still prefer to go shopping themselves. We might
go back [to Tier II cities] after some time; but even then, it
is not likely that the customer behaviour will change to shop
only online or only go out,” he says. Incidentally, Zomato
had also said that they would re-launch in the cities where they
have shut down “when the time is right.” He added that
the assortment of products is important in getting the customers’
attention. Grofers is now standardising their inventory, with
their merchants ensuring separate stock in every city.
The key to the success of these services, of course, is customers
being willing to shop online. Tanutejas Saraswat, CEO and Co-founder
at ShopKirana, Indore’s first e-grocery portal, says: “The
change of behaviour among customers was difficult to bring about.
But since expenses are generally low here, we are able to provide
lower prices with no losses.” Curiously, Fresboxx gets orders
on their website with payments made in Bangalore for delivery
in Hubli. “People who live in metros get it done for their
family in Hubli. About 250 orders out of 600 in a month comes
in this category,” says Rohan.
But for long-term success, Devangshu says hyperlocal web platforms
need to rapidly build critical mass, not only on the consumer
side but also in terms of merchant-recruitment. “Both these
are expensive and resource-intensive, which few companies can
manage together, while also building fulfilment capabilities that
are cost-efficient,” he adds.
Marketing strategies: to each one’s own
In hyperlocal services, marketing strategies depends on each city’s
consumer behaviour. According to Big Basket Co-founder Hari Menon,
it is a matter of convenience vs assortment. He says: “In
Tier II cities, people are looking forward to going out –
including grocery shopping. The convenience factor does not work
there. So what can drive online grocery service is a range of
items that they have to go outside the city to buy.” Hari
believes that Tier II residents are quite aspirational, and money
is not a constraint for them. Big Basket’s express delivery
service, which delivers in an hour in Tier I cities, is not available
in Tier II cities. Their best performing Tier II city –Mysore-
gets 150 orders daily.
Additionally, while the primary mode of marketing in metros is
newspaper ads and hoardings, direct interaction with customers
would work better in Tier II cities, says Saurabh. For making
even the lower income classes comfortable with the idea of buying
online, vernacular content will help. In fact, Freshboxx is now
building its app, which will be available in Kannada, Hindi, and
English.
However, e-commerce’s major attraction –discounts-
may not work in grocery and food tech. For instance, in Kerala,
customers seldom care about discounts. Shan of Kada says: “They
look for the best quality and customer service. Localisation is
essential here as the online buzz is not as great as it is in
metros.”
For logistics player Parcelled, marketing is not a headache.
Puneet says: “Our customers are not comfortable with apps;
so our marketing channel is the good old telephone. In addition,
we let them choose a convenient time for last mile deliveries
and reverse pick up – even on Sundays – in Tier I and
Tier II cities.” The best performance among its Tier II cities
is in Surat, which boasts of large-scale textile industry.
Funding troubles
The one big trouble bothering all the hyper local startups focused
on Tier II cities is the lack of sufficient funding. Kada aims
to focus on Tier-II and Tier-III cities, with an initial plan
to expand in Kollam, Kochi, Thrissur and Calicut – since
these cities require lesser investment and personnel, and then
other South Indian states. But despite being the only player in
the sector in Kerala, raising series A has been a hard task for
them. Shan says: “They need more traction; so we are launching
some new deals by March, and building on our tech-side too. Hopefully,
they will see the potential then. We already get about 1,800 orders
a month.”
Rohan of Freshboxx also says that they are now struggling in a
non-responsive market, and hence are outsourcing each order for
cost cutting. “We need serious funding to scale up in Tier
II and Tier III cities,” he says. Being a pioneer in the
field, Rohan hopes, will give them an advantage. “We are
the only player here providing fresh, germ-free fruits and vegetables.
We have even educated our farmers on this,” he says. He claims
that cost of customer acquisition is zero, and 90 per cent are
repeat customers.
It is a classic tale of survival of the best, it seems. “Over the last year or so, investors have turned skittish about pouring in funds into businesses that have no demonstrable path-to-profit,” says Devangshu. He adds that most of the current hyperlocal providers won’t survive, unless they change their business models. Customer re-acquisition also cost a lot, he says. “Discounts may not get loyalty – quick, reliable delivery will.”
(Published in Yourstory)
