Written By Writankar Mukherjee, ET Bureau
The entry of online smartphone brands Xiaomi and Motorola into offline helped Mukesh Ambani’s consumer electronics and smartphone retailing business, Reliance Digital, enter the $2-billion league.
According to two senior industry executives aware of the details, the business grew by 31% to reach Rs 15,100 crore, or about $2.3 billion, in the year ended March 2018 from Rs 11,480 crore in 2016-17.
This performance excludes sales of Reliance Jio connections and recharges, which are done by Reliance Digital and smaller format Jio Stores that are part of the same business.
While Reliance attributed the growth to “focused assortment and bringing online brands offline like Xiaomi and Moto (Motorola)” in an investor presentation of its Q4 earnings announced last Friday, industry analysts said competitive pricing and offers at par with top online marketplaces, Flipkart and Amazon, have driven sales at Reliance Digital.
The company said its electronics retailing business continues to “outpace market growth across key product categories”.
The business has more than 220 large format Reliance Digital stores and over 1,800 smaller format neighbourhood Jio stores, which also sell smartphones and do catalogue sales of television and appliances.
With this, Reliance Digital is more than four times the size of its nearest rival, Croma chain of the Tata Group.
While Croma’s financial performance for FY18 is yet to be declared, the business had clocked Rs 3,268 crore sales in 2016-17 as per latest regulatory filings to the Registrar of Companies. Reliance Digital had raced past Croma in sales in 2014-15.
The earnings release and presentation did not reveal the annualised revenue break-up of the consumer electronics retailing busines
Emailed queries sent to Reliance Retail on Saturday remained unanswered till Monday press time.
An industry executive said Reliance Digital has been able to grow despite the return of deep online discounts in categories like smartphones and television during the last festive season and the introduction of the single levy goods and services tax (GST), which had impacted the industry.
“Reliance Digital has grown not just in smartphones, but also in TVs and appliances, including its private label Reconnect. The revenue also includes the service business, which is currently small with 70 service centres but is poised to become a major driver going forward,” he said.
Devangshu Dutta, CEO at Third Eyesight, a retail and consumer goods consulting company, said while margins are low in consumer electronics and smartphone segment, Reliance Retail is pushing volume sales, which would then make sense of margins in aggregate.“ For Reliance, the consumer electronics retailing business is quite strategic in pushing sales of digital devices like smartphones, connected TVs and appliances which in turn will drive Jio data consumption,” he said.
Reliance Digital had become the largest contributor to Reliance Retail revenues in 2016-17, accounting for 34% of overall business by overtaking the grocery segment. It is also the country’s largest retailer of smartphones, televisions and white goods.
Written By Maulik Vyas
Mumbai: Vama, South Mumbai’s apparel store for the well-heeled, has landed in bankruptcy court, as Italy’s Gas Jeans tries to recover unpaid dues under the Insolvency and Bankruptcy Code (IBC).
In the case originally filed in Bombay high court in 2015, Gas Jeans Pvt. Ltd, the Indian unit of the Italian company, has claimed dues of Rs22 lakh. After the enactment of the Insolvency and Bankruptcy Code, the case was transferred to the National Company Law Tribunal (NCLT).
The 25,000-sq. ft Vama Departmental Store at Cumbala Hill is located in the same complex as Kanchanjunga—one of the city’s landmarks designed by noted architect Charles Correa—and a bungalow ‘Bella Vista’. All three properties are owned by the family of late businessman Parmanand Patel, and are under ownership dispute for over a decade.
The amount may be small, but the state of Vama also points to declining footfalls and loss of sales at South Mumbai’s retail stores to swanky malls in the city’s redeveloped mill areas and suburbs.
“Vama was directed to produce its ledgers in the tribunal (NCLT) but instead of that, they have just mentioned a few details in a simple statement,” Vipul Shukla, counsel for Gas Jeans argued before the tribunal on 8 May. “We have suggested the name for an appointment of interim resolution professional (IRP) as well.”
Suvarna Joshi, counsel representing Vama, claimed that Gas Jeans was seeking to recover around Rs22 lakh, but the actual dues were only Rs6 lakh.
If NCLT admits the petition, an IRP will be appointed and the resolution process will begin, with set deadlines for resolution and liquidation. NCLT presiding officer M.K. Shrawat has reserved the matter for an order.
Email queries to Vama as well as Gas Jeans were not answered till press time.
Much before the malls made their mark and foreign brands entered through joint ventures, Vama was selling brands such as Calvin Klein, GAS and Benetton and products from Indian designers such as J.J. Valaya, making it a sought-after destination for wealthy, brand-conscious shoppers.
Devangshu Dutta, founder and chief executive at consultancy firm Third Eyesight said, “Upwardly mobile population has increased many fold in the last 10 to 15 years, and they often choose shopping malls over standalone department stores.”
“At one point in time, places like Amarsons or Benzer were the go-to place for major brands and people came from even out of Mumbai to shop there. While they are not such exclusive and strong draws anymore, those stores have also evolved and they know their target customers well; so, they managed to stay relevant with changes in the market,” adds Dutta.
In the changing the landscape of the Maximum City, old-world shopping centres are reinventing to stay relevant with new-generation shopping malls and e-commerce sites. One of them is Akbarallys in South Mumbai, which now caters exclusively to men with the launch of ‘Akbarallys Men’. The store, which is around 120-years-old, has gone from being a department store to a multi-brand men’s apparel store in 2015.
“As the city evolved and grew, there was an emergence of multiple micro-cities, each with its own layers of the growth cycle, demographics, and cultural shifts. Plus, infrastructure which includes shopping & retail also has evolved, especially in the newer suburbs that offer better planning, space and convenience that cater well to the evolved buyers & sellers alike,” said Tina Jain Mehta, CEO of boutique branding and design firm Pineapple Consulting, “thus reducing the effort of travelling & creating ‘next door’ opportunities which translate into lesser footfalls and reduced sale in South Mumbai.”
Written By Chaitali Chakravarty & Rasul Bailay, ET Bureau
NEW DELHI: Even after acquiring India’s largest ecommerce company Flipkart, Walmart will stay away from applying to invest in a food-only retailing venture in the immediate future that will allow the US giant to stock and sell groceries directly to consumers through the online platform.
Walmart would rather have a presence in the food products market through third-party retailers on Flipkart and escape the scrutiny and riders associated with foreign direct investment of up to 100% in food-only retailing ventures, according to sources.
“It doesn’t make sense to sell only food either through brick-and-mortar or through online,” said a person familiar with Walmart’s plans. “With all those riders, it is even harder to do it.” Walmart’s strategy is in contrast to arch rival Amazon, which received government approval last year for a fully owned food retailing subsidiary that the Seattle-based ecommerce behemoth is yet to start. Amazon’s plans hit a hurdle after the government asked it to keep separate equipment, machinery and warehouses for the food products business and not to mix or share anything with its flagship marketplace business Amazon.in.
Walmart has always maintained that a food-only brick-and-mortar venture doesn’t make business sense because of the wafer-thin margins.
“Walmart would rather handle the back-end of the food and grocery and that will help it escape the scrutiny and riders associated with food FDI retailing,” the source said.
A spokesperson for Walmart declined to comment.
A company like Walmart is not in a rush because it is in India for the long term, according to Devangshu Dutta , chief executive officer of retail consultant Third Eyesight.
“They are looking at India as a longterm game — if it may not happen now, it will happen two years down the line when the regulations become friendly,” he said. “If you are in for the long haul, you are not in a rush as the window of opportunity is not closing.”
India created the food-retailing segment in 2016, allowing full ownership by overseas companies in ventures that could sell locally produced and packaged food items through offline and online channels. However, it set riders for applicants such as keeping logistics, manpower, accounting and offices, among others, at arm’s length from their existing ecommerce marketplaces. India also permits 100% foreign capital in online marketplaces, which can only be offered as platforms for other vendors and retailers to do business.
The government had banked on global retail giants such as Walmart and Tesco to lap up the new investment opportunity in food retailing, especially after the 2012 policy allowing 51% FDI in multibrand retailing remained a virtual nonstarter due to stiff riders.
While most global bigwigs shied away from investing in the high-profile foodonly retail ventures, Amazon appeared as a saviour in February last year, when it applied to invest $500 million through this route.
Amazon has now sought a clarification from the Department of Industrial Policy and Promotion on whether it can share some of its warehouse staff, entry and exit doors at warehouses, barcode machines, trollies, pallets and other logistical paraphernalia for its food-only venture with the existing infrastructure of Amazon.in, ET reported in April.
It has also asked the department if it can maintain the segregation “virtually.”
A top foreign retail consultant said Walmart would rather wait until India allows such ventures to sell non-food items like soaps, toothpastes and personal care items to make the business viable for store operators.
Written By Sharmila Das
New Delhi: India focused private equity firm Samara Capital plans to buy Aditya Birla Retail’s (ABRL) supermarket chain, More, for about Rs 2,500 crore. The PE firm is in advanced talk to complete the deal; a few industry experts with knowledge of the matter said this today.
As per the experts, primarily the group wants to sell its supermarket chain to reinvest the amount in Aditya Birla Fashion and Retail (ABFRL) to maintain its dominant position in the category. Also, because food and grocery is a low margin business, the group wants to shift focus on fashion category where it has Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle (MFL).
In May 2015, Aditya Birla Fashion and Retail Ltd (ABFRL) consolidated Aditya Birla Group comprising ABNL’S Madura Fashion division and ABNL’s subsidiaries Pantaloons Fashion and Retail (PFRL) along with Madura Fashion & Lifestyle (MFL). After that, PFRL was renamed as Aditya Birla Fashion and Retail Ltd.
“This consolidation will create India’s largest pure-play Fashion and Lifestyle Company with a strong bouquet of leading fashion brands and retail formats. This move brings India’s #1 branded menswear and womenswear players together,” Kumar Mangalam Birla, Chairman, Aditya Birla Group quoted saying then on the consolidation.
In 2007, Aditya Birla entered into food and grocery retail sectors with its acquisition of Trinethra Super Retail and thereafter expanded its presence across the country under the brand ‘More’ with two formats â€• Supermarkets and Hypermarkets. However, as per experts, these acquisitions did not suit the company and hence now it is looking at further consolidation.
“In food and grocery scalability is huge but margins are thin. The Aditya Birla has been looking at selling the food and grocery retail operations for a while – the business had a debt overhanging from the acquisitions (Trinethra+Fabmall initially, and more recently Total), which kept dragging it down. The group’s other retail business, Aditya Birla Fashion and Retail (ABFRL), also is cash-hungry but potentially has better margin prospects, and it is one where the group is a market leader in the country. A divestment of More could free up cash for the group for reinvesting in ABFRL to grow and consolidate its leadership position,’’ said Devangshu Dutta, Chief Executive at consultancy firm Third Eyesight.
According to ET report, the private equity firm has almost completed its due diligence with Aditya Birla Retail.
Email sent to both Aditya Birla Retail and Samara Capital remained unanswered till the time of filing of the report.
Written By Priyanka Golikeri
What makes brands ride on another one?
It takes two to tango. At least in the roller-coaster world of big brands.
Recently, Nestle and Starbucks entered into an alliance where the Swiss food and beverage (F&B) company pledged to pay Starbucks $7.15 billion for exclusive rights to sell the US-based chain’s coffees and teas around the world. This collaboration is just one of the many where two brands have tried to draw in strength from each other’s muscle.
Experts say such retail and distribution alliances are at best symbiotic, where each brand complements the other and stands to gain from the other’s assets and scales. “These collaborations are attempts to plug a weakness in one’s shield,” point out brand experts.
McDonald’s and Coca-Cola were perhaps two of the earliest brands who leveraged each other’s strengths way back in 1955 and have been selling cola packaged with various burger-fries combos.
According to Kaustav Das, CEO of integrated agency Ralph & Das, these are “classic marriages of convenience. They work well when an alliance is able to contain or overcome a threat or a weakness for either. It’s a bit like ‘you scratch my back, I scratch yours’, or ‘our combined expertise would be hands down winner’.”
In India, home-grown brands like Patanjali and the Future Group have attempted to ride on each other’s strengths, with the latter making the former’s fast moving consumer goods (FMCG) products available at its Big Bazaar outlets.
On the other hand, US fast-food chain Carl’s Jr. and Kingfisher have been attempting a cross-continental partnership. They have inked an arrangement to sell beer alongside burgers at Carl’s Jr. outlets in India.
According to Harminder Sahni, founder and managing director, Wazir Advisors, the two brands involved in retail or distribution partnerships stand to gain in terms of enhanced brand image, accelerated presence in different markets and in terms of profits and growth.
In the Nestle-Starbucks case, for example, experts say although Nestle has been dominating coffee with its Nescafe and Nespresso, the brand has not really resonated with millennials, despite its decades-old legacy. On the other hand, Starbucks is perceived as that ‘’cool contemporary brand of premium coffee and beverages’’, and an ‘’uber chic hangout’’, both of which strike a chord with the newer generations, feel experts.
“Add to this the fact that JAB Holding Co with its acquisition of brands like Keurig Green Mountain and Peets has been snapping at Nestlé’s heels,” says Das.
According to Devangshu Dutta from consulting firm Third Eyesight, although coffee consumption has been growing worldwide, Nestle has lost mindshare and market share to competitors, as consumers are keen to look at more premium products and more varied offerings. “So Nestlé’s deal with Starbucks gives it a leg up, particularly in the lucrative US market.”
On the other hand, Starbucks lacks the mass distribution muscle of brands such as Nestle, adds Dutta. “Starbucks gets to reach millions of points of sales that it cannot on its own, or might take years to create those networks. Since Nestle manages the networks quite efficiently, that benefit to comes to Starbucks,” says Sahni.
But alliances between brands in the past have (in)famously been called off.
Experts point out that an earlier deal between Starbucks and Kraft broke since Starbucks accused Kraft of multiple material breaches of contract, including mismanaging the brand. Closer home, alliances like Group Danone and Britannia were cut short over issues pertaining to the intellectual property rights of the Tiger biscuit brand, and Marico and Indo Nissin Foods had parted ways “as Indo Nissin had reached critical turnover mass with Top Ramen (noodles)”, say experts.
“There remains the unpleasant truth that both brands cannot be equal gainers in the long term. And that is when the alliance is questioned by the lesser gainer,” says Das, who feels that such alliances survive if the two brands agree on who will be in the driver’s seat when it comes to the brand and the business’s point of view. “Challenges lie in the culture and belief systems. Like in this recent case, Nestlé is geared for building volume businesses, while Starbucks is more interested in creating a Starbucks culture and lifestyle.” To create successful brand alliances, businesses need to look at the similarity of culture and core essence and not what each gain at a transactional level. “If the two brand cultures do not have a synergy, it is best not to attempt an alliance. Brands should be sure to agree on every milestone right down to the ultimate buyout by either one. Or at what point will the two-part away amicably,” says Das.