Written By Suneera Tandon
In the year ago period, Zara had posted a profit of ₹82.59 crore (Photo: Mint)
New Delhi: Spanish fashion brand Zara posted a 13.4% drop in net profit for the year ended 31 March, 2019 at ₹71.49 crore, amid increasing competition and a general slowdown in consumer demand in the market.
Revenues at the seller of fashion clothing, and accessories were up 17.7% at ₹1,438 crore, its local partner in India, Trent Ltd, said in its annual report on Friday.
Inditex SA—the world’s largest fashion retailer that owns brands such as Zara, Pull & Bear, Massimo Dutti globally—is present in India through two joint ventures with Tata Group’s retail arm Trent Ltd.
Inditex Trent Retail India, a 51:49 joint venture with Trent Ltd runs the Zara business in India.
“During the year under review, the Zara entity recorded revenues of ₹1,437.87 crores and PAT of ₹71.49 crores,” Trent Ltd said in its annual report for financial released on Friday.
In the year ago period (2017-18), Zara had posted a profit of ₹82.59 crore with revenues of ₹1221.67 crores.
In FY19, Zara added two stores in India expanding to 10 cities, including its first store in Kolkata, while also selling its clothing, shoes, and accessories online—sales of which started in India in late 2017. In FY17, Zara had seen a 40% drop in profit in its India business after it took price cuts on its inventory during the financial year.
New store openings for the brand Zara, which first entered India in 2010 and found popularity among the more upmarket, urban Indian shoppers will remain calibrated, the company said. “The incremental store opening program for Zara continues to be calibrated,” said Trent Ltd, which owns home grown lifestyle retail chain Westside, about Zara.
An email query sent to Trent Ltd remained unanswered.
“The numbers could reflect a dip in same store sales growth,” said a retail industry expert on the condition of anonymity. “Also, during the year India saw no major new net mall additions in large cities for a brand such as Zara to open add more stores,” he added.
In its annual report last year, Trent had maintained that while it plans to add more stores for Zara in India over the next three to four years, availability of high quality real estate remained a challenge. “The primary challenge to faster expansion is the availability of high quality retail spaces which can be expected to generate reasonable sales throughput,” Trent Ltd said then.
“There is a general consumer slowdown across sectors,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight. While Zara entered India to a strong reception, over the last few years it has entered markets where demand for its fashion clothing is limited, Dutta added.
Massimo Dutti Private Limited, the second joint venture between Inditex and Trent that runs the more premium Massimo Dutti brand in India posted revenues of ₹63.58 crores for the year up 39% from the year ago period. During the year, the company added no new stores for the brand that has three stores here.
Zara’s drop in numbers come at a time when its rival Swedish brand H&M has been opening stores at a much faster clip in India. The brand, which entered India in 2015, much after Zara, already has over 40 stores in the country— a number it plans to take to 50 by 2020.
Sales at fast fashion retailer Hennes and Mauritz (H&M) India grew 29% to ₹1,108.2 crore in the year ended 30 November, 2018, the company said in its annual earnings earlier this year. During the year the fast fashion retailer known for its cheap and affordable clothing also launched an online sales channel in India. H&M follows a December to November financial year.
Indians spent ₹5.4 lakh crore on buying clothes in 2018, a jump from the ₹1.92 lakh crore they spent in 2010. The market for apparel in India grew at a CAGR of 13.8% in FY18, according to a report on India’s apparel market by CARE ratings.
However, competition in India’s apparel market is growing, especially as more consumers are shopping on discount-fuelled e-commerce websites.
Japanese retailer Uniqlo is set to enter India later in this year,making it more challenging for existing retailers such as GAP, Forever 21, H&M, and Zara to lure shoppers into their stores.
Thailand is a good bridge for modern retail in India, believes Tanit Chearavanont, MD of LOTS Wholesale Solutions
Written By CHITRA NARAYANAN
Balloons and festoons greet shoppers at the three stores of LOTS Wholesale Solutions in the National Capital Region. There are lucky draws, discounts, and a host of exciting offers too.
It is exactly one year since Thailand’s Siam Makro, a part of the $50-billion Charoen Pokphand Group (CPG), launched its first cash and carry store LOTS in India.
It has been a year of learnings for Tanit Chearavanont, the young managing director of LOTS, who was accidentally thrust into the job of leading the Thai group’s charge into India. “I was not the original project leader for LOTS,” he confesses. That person quit and Chearavanont, who is a scion of the family that owns CPG, was made interim MD. Eventually the Hong Kong-schooled, Harvard-educated retailer was told to take charge.
Chearavanont has been in India for over three years, right from the feasibility studies. An additional challenge was that Siam Makro, a well-known name in Asia, could not use its brand in India. The reason, explains Chearavanont, was that Siam Makro, the first modern retail store in Thailand, was formed in 1988 as a JV between CPG and Dutch trading group SHV Holdings. In 1997, when the Asian financial crisis struck, CPG sold its stake to SHV but bought it all back in 2013. However, when it bought it back, the licence to use the Makro name excluded India — it could use it in other parts of South-East Asia.
Brand and retail consultancy Fitch created the name LOTS which was crafted keeping India’s young demographics in mind.
Ask Chearavanont how an Asian retailer will compete against big western players like Metro and Walmart in India and he grins, “Don’t forget Makro has Dutch vibes in its DNA.”
More seriously, he believes that India’s retail journey evolution is quite similar to Thailand’s and this will help LOTS. He points out how, in OECD countries, modern formats are very pervasive, while in Thailand modern retail and kirana have a 50:50 ratio. “India is evolving the same direction as Thailand except for the e-commerce piece, which is bigger here,” he says. He feels the Indian consumer behaviour is also quite similar to Thailand, and trends are same. For instance, Siam Makro had to change its product assortment from apparel to food in Thailand. In just a year, Chearavanont points out how the assortment at the LOTS stores has similarly evolved. The target customers are small and medium-sized retailers, the food service industry, and self-employed professionals.
The last six months, says Chearavanont, LOTS has intensified its focus on understanding its business customer. “I have got our buying merchandising team to meet all our customers to understand what products and what price points are most important to them,” he says. For instance, initially there were 100 sheets of branded paper napkins priced at ₹20 but when that was perceived to be costly, the store started stocking unbranded napkins at lower price points as well.
Despite India’s strong tradition of kirana stores that need wholesale supplies, large-format cash and carry stores have not had an easy journey. Metro, which was the first to open in 2003, took over a decade to turn profitable.
According to Devangshu Dutta, Chief Executive of Third Eyesight, the challenges for the B2B-focused cash and carry formats are to get the location right, get India’s real estate reality (high land costs and rentals) and consumer reality right as well as learn to negotiate with strong local FMCG suppliers. Several cash and carry stores initially opened in far out locations as they needed the space for their big-box formats. But as Dutta points out, “There is a cost to transportation for the kirana store owner who is often the shopper too.” Sourcing is quite disaggregated in India and products are door-delivered to kiranas.
Chearavanont seems cognizant of these realities. He says LOTS took a conscious punt on location — choosing to put their stores in the heart of the city, close to customers, even if it has had an impact on cost. Plus, he says, store formats have been shrunk, averaging 30,000 sq ft.
As for consumer reality, he has been doing the rounds of retailers and restaurateurs. “At many places we found that kirana stores are selling products below MRP,” he exclaims. That set off thinking within the group as to how they could help the kiranas differentiate themselves. One solution was to give them interesting imported products — flavoured nuts and dried fruits, snacks and confectionery sourced from Thai or Japanese producers with a better value proposition.
“If you want to make imported work, it has to be sold at democratised price,” he says. Also, this would differentiate them from other western cash and carry stores. For example, when Indians think about nut snacks they think of Tong Garden – the premium Singapore brand. “But in Thailand we have a brand called Koh Kae. We could get that in,” he says.
Going forward, Chearavanont says there will be focus on imported food products and leveraging its own private labels. This could also reduce LOTS’ dependence on local suppliers, who have a lot of bargaining power. “We want to be more food focused and the non food focused items will also be geared towards HORECA (hotel/restaurant/cafe) customers with a strong assortment of stationery items and disposables”. Over 7,000 active HORECA members shop daily or weekly at the store and their numbers are rising by 10 per cent every month, he says. To get more footfalls, from 7 am to 10 am there are early morning discounts in the food category.
“If a HORECA customer walks into my store, can she find 80 per cent of her basket in my store? If that is so, there is connect happening,” he says, adding the full focus is on that. Right now present in NCR, the plan is 15 stores in three years in cities in UP, Punjab and Rajasthan. Investment of ₹1,000 crore has been set aside for that.
While lots is happening at LOTS, Dutta cautions that there is an over-expectation of modernisation in India. Also, one approach will not work in the whole of India. So, what may work for LOTS in the North may not work in the South or West, when it expands.
Written By Sagar Malviya, ET Bureau
MUMBAI: SoftBank-funded Grofers is converting dozens of grocery stores into its own branded outlets as the online retail firm looks to broaden its distribution and push own label products to earn better margins. It has changed nearly 100 such kirana and supermarket outlets to Grofers discount stores in the Delhi NCR region where it will manage back-end sourcing, inventory management and technology support on a revenue sharing model.
Written By Deepti Chaudhary
Amar Nagaram, head, Myntra-Jabong.
BENGALURU : From battling for the largest product catalogues to the lowest prices, the focus in online retail now seems to be shifting to fastest deliveries, after-sales services such as alterations, and reduction in the number of returns.
A case in point is that of India’s largest online fashion retailer, Myntra, which is set to launch 30 experience centres or kiosks across India by August, where customers can pick the products they ordered when convenient, return merchandise and get alterations done on the spot. Its first such centre in Bengaluru’s Manyata Tech Park, which is home to multinational companies such as Ikea, Philips and Nokia, has seen a reduction of 7% in returns since it was launched as a pilot in December.
“All of this is digitally tracked so we know what happened to the product, how the customer responded to our product delivery. If you take the lens of business view to it, there is an efficiency coming in. We are not doing multiple deliveries because the user was unavailable; our shipments are going to one kiosk and returns are faster,” said Amar Nagaram, head, Myntra-Jabong in an interview.
It is also piloting what it has christened as the “try and buy open box” initiative. While several versions are being tested, Nagaram said under one such initiative, a customer is believed to have ordered three or four products. These products will come in a box for a customer to try them. A delivery agent will later come at a designated time to take away the box and a customer can chose to keep what they liked and return the others.
Industry insiders say fashion is a “touch-and-feel” category unlike books and mobile phones. Hence, it has become critical to provide as many options to customers as possible to make the shopping experience similar to that is offered by physical stores.
“They don’t have a choice. Some products require touch and feel—it’s an intrinsic part of the shopping experience. We cannot digitize everything. Hence, having a physical point is important,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight.
“In e-commerce, from processing order to delivery to returns, there are costs involved,” he said.
In the meantime, Myntra is looking to enter the US market with both ethnic and western wear offerings. “We are looking at not just ethnic wear but also Western wear. We are strong in this category. There is a product market fit that is being studied right now. And we want to address the segment, through Walmart,” said Nagaram.
In the meantime, acquiring new customers continues to be an area of focus for Myntra. The company believes with its sales event, called the End of Reason Sale, over 550,000 customers will shop on Myntra for the first time.
Written By Deepti Chaudhary
A retail consultant says Amazon Flex will help the company handle demand peaks and improve service performance (Photo: Aniruddha Chowdhury/Mint)
Bengaluru: Amazon India is set to offer students, homemakers and retired professionals part-time jobs, thus killing two birds with one stone—ensuring faster deliveries during peak season and creating Uber-style flexible jobs.
Fast and reliable delivery is the most important part of the e-commerce business, along with the right product assortment. Over the years, Amazon India has introduced several ways of offering definitive and faster deliveries, including one-day, two-day and scheduled deliveries. Prime offers assured next-day delivery on certain products and Prime Now provides two-hour delivery for groceries.
Now, with Amazon Flex, as the initiative is called, Amazon India expects to create job opportunities for thousands, giving them the chance to make some extra money during their free time.
The person needs to work for four hours a day and can earn ₹120-140 an hour delivering packages. The “part time delivery partner” will be paid every Wednesday.
“While we continue to scale our existing delivery capabilities across the country, Amazon Flex will enable Amazon to continue growing our capacity to serve more customers and speed up deliveries,” said Akhil Saxena, vice-president (Asia Customer Fulfilment) at Amazon. The company ran a pilot for two weeks before launching it in Bengaluru, Mumbai and Delhi, with more cities planned to be included later this year.
India is the seventh country where Amazon has launched Amazon Flex. It has been operational in North America, Germany, Spain, Japan, Singapore and the UK, where it grew delivery capacity and sped up deliveries for customers.
Amazon entered India in 2013 and delivers to over 99.9% PIN codes. Its catalogue offers nearly 170 million products from over 400,000 sellers. Last year, it boosted its infrastructure (fulfilment centres) by 1.5 times in storage volume to more than 20 million cubic feet over that of 2017.
“There is a stickiness that comes with faster, reliable deliveries. It’s not important that it comes in 1-2 hours (barring groceries and medicines),” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight. “The competition here is (with) malls and shops that give instant gratification. Hence, the earlier the product comes, the better it is. It takes away the desire to check out alternatives.”
According to Dutta, Amazon Flex will help the company handle demand peaks and improve service performance. “In retail, particularly during peak seasons, brands hire part-time workers as there are more transactions and footfalls. Amazon India is doing the same, it’s not seasonal, though. There are days in a week when deliveries are high, which can stress the current network of an e-tailer.”
Since 2013, Amazon has invested nearly $5 billion in India, mostly on innovation, infrastructure and technology.