Small is still beautiful


August 26, 2019

Neighbourhood kirana owners are sprucing up their stores and joining hands with big retailers to meet India’s insatiable appetite for shopping. And consumers are not complaining.


It is a hot and humid Tuesday afternoon. One would assume there wouldn’t be too many people out shopping. But Delhi is different. Modern Bazaar in the basement of Select Citywalk, one of the city’s busiest malls, is abuzz with activity. The outlet, the grocery chain’s third store, was set up by Kunaal Kumar in 2011. Later he opened the spruced up version in the basement with an investment of ₹5-6 crore. The genesis of the business dates back to 1971 when Kumar’s father set up the store in Delhi’s tony Vasant Vihar neighbourhood. It soon expanded into a four-floor emporium and ran successfully for three decades before it was gutted in a fire in 2004. Kumar, who joined his father in 1991, decided to start afresh; he set up the store again in the same market with a capital of ₹40 lakh—some of which was his own money and the rest was borrowed from friends. “Business was thriving. I was able to pay back my friends within six months,” he says. So what brought about Modern Bazaar’s transformation from a small department store to a modern retail chain? Kumar’s forward-thinking strategy.

Modern Bazaar was never a typical neighbourhood store; it was always fancy with some imported products to tickle the taste buds of Delhi’s elite and moneyed class—Bollywood icon Amitabh Bachchan and former Congress president Sonia Gandhi have been famous patrons. The store is a great example of how modernisation and knowing the pulse of the consumer helped it nurture a single store into a full-fledged chain. It has 10 stores and now competes with biggies from the retail world such as the Future Group’s Big Bazaar and Foodhall, and Nature’s Basket, at least in Delhi and Gurugram.

The secret sauce, experts say, is the way the store is stocked: a good mix of Indian groceries with some amount of imported goodies, enough to satisfy shoppers’ aspirations while giving them their fill of the basics. Kumar says now they also service some 18,000 orders each month online. The company wants to double the number of outlets in the next three years and aims for revenues of ₹500 crore by then. It expects to finish the year with ₹200 crore.

While Modern Bazaar’s story is unique, neighbourhood stores across the country are having a moment of modernisation, led by technology. And like Modern Bazaar, they are trying to keep up with the taste and aspirations of the new Indian shopper. So while the neighbourhood store might sell you a Lifebuoy soap or Aashirvaad flour, it will also have a selection of imported cheese and Ferrero Rochers. Devangshu Dutta, CEO of retail consultancy Third Eyesight, says there has also been a generational change in typically family-owned stores. “The younger generation wants to run a different kind of shop. It needs to be upgraded in look, feel; they want to incorporate the changes they have seen in the market,” he says.

Kunaal Kumar, director, Modern Bazaar.

Modern Bazaar, under Kunaal Kumar, has grown from a small department store to a modern retail chain of 10 outlets.

In Delhi’s Hauz Khas market, for instance, another old neighbourhood store, Narang Marche, got a makeover after the next generation joined the business. The once-cluttered store which stocked everyday needs such as dals and soaps now also stocks more niche products like Davidoff coffee and Raw Pressery juices to keep up with customer demand. It also added a freezer and a meat and eggs section, which it didn’t have earlier. “Rising personal disposable incomes and changing lifestyle of consumers—giving preference to convenience—have led to this trend being adopted in full swing across sectors of consumers, including retail, food and beverage, FMCG, apparel and footwear, consumer durables, and electronics,” Deloitte says in its report, Unravelling the Indian Consumer.

Industry is gung-ho about consumption growth. “Education [level] is rising, the economy is growing at anywhere between 7% and 8% leading to rising incomes, therefore our entire consumption basket has to rise,” Saumya Tyagi, director-marketing, South Asia of Tetra Pak, had told Fortune India in an earlier interview.

Research also supports the optimism. According to a Boston Consulting Group report, India is expected to become the third-largest consumer economy by 2025, reaching $400 billion in consumption. Its per-capita monthly income is estimated to have increased by 10% to ₹10,533.83 in FY19 from ₹9,579.83 in FY18, according to government data. The country also ranked first in the Global Retail Development Index 2017.

In the early 2000s, during the retail revolution in the country, experts had predicted dark times ahead for mom-and-pop stores, and said their share in the Indian retail scenario would fall significantly, Dutta says. The belief was reinforced after the government allowed foreign direct investment (FDI) in retail and e-commerce took off with companies like Flipkart and Amazon spending billions of dollars to attract the Internet-savvy Indian consumer.

The fear was that deep-pocketed global and domestic players, leveraging their partnerships with manufacturers and distributors, would lure customers away from neighbourhood shops through innovative value-added services like customer loyalty programmes, discounts, and deals. “For general trade to survive they have to bring in technology, and they have to bring in the science of retailing,” Sanjiv Mehta, chairman and managing director of Hindustan Unilever (HUL), said in an investor presentation.

He cited space and funds as two major constraints for small shopkeepers across the country, whose number India Brand Equity Foundation (IBEF) data pegs at around 12 million. India is a land of small- and medium-sized businesses. After agriculture, independent businesses are the second-largest source of livelihood for people. Kirana stores account for 90% of retail and FMCG sales, modern retail 8%, and ecommerce 2%, according to reports. Some kirana stores are so popular that generations of a family have been customers. So despite the competition from swanky supermarkets, modern retail, and e-commerce players, the kirana ecosystem has continued to fight back. In the early days of the retail revolution, kirana stores were threatened by big global and domestic players armed with superior technology and deep pockets. However, two decades later, these big players are joining hands with kirana stores to tap more consumers.

A little over 50 years ago, M. Ekambaram opened a small 144- sq. ft. provisions store, M.P. Store, in Bengaluru. The store, like many other kirana stores, stocked daily need items, but no perishables because it did not have a refrigerator. Over the years, Ekambaram, now 68 years old and father to three sons, expanded his store to 900 sq. ft. Customers thronged the shop even though it only added a refrigerator when it modernised the store in January this year. “Our customers can now come in and browse through our 1,600 SKUs [stock-keeping units],” says Ekambaram’s eldest son, Arun Kumar, who joined his father in the business in 2000. “There is also more space for branding,” he says, pointing to four large display units within the store. “Business has grown between 40% and 50% due to better visibility of our products and stocking of more expensive cosmetics.”

Kirana stores will remain evergreen as people in India still rely on their neighbourhood shops for their daily essential needs.

M.P. Store’s renovation into a more upmarket convenience store is an example of how German wholesaler Metro Cash & Carry is helping kirana store owners grow their business manifold. “They guided us all the way and even monetarily helped us in the renovations,” says Kumar.

Metro, through its ‘Kirana Success Center’ programme, provides product management solutions to small traders for more holistic and sustainable growth besides educating them on retail concepts such as planograms and inventory management. As a customer base, kirana stores account for about 40% of Metro’s revenue in India. In FY18, its revenue was €776 million. “Kirana stores will remain evergreen as people in India still rely on their neighbourhood kiranas for their daily essential needs,” says Arvind Mediratta, managing director and CEO of Metro Cash & Carry India. “The local stores do free delivery for a small product pack in less than an hour and also provide a handy credit facility to their regular customers.”

Mediratta says the company has provided these stores with point-of-sale (POS) systems to track their inventory, sales and revenue, run promotions, and track slow and fast-moving items just like any modern retailer. However, he says “the biggest arsenal for kiranas is their business model”. “It is much simpler to set up a kirana shop with fewer stock-keeping units vis-à-vis a retail store with huge capital cost and inventory.”

Retail giants like the Future Group, Reliance Retail, and HUL as well as e-commerce majors Walmart and Amazon are not far behind. They, too, are engaging with small neighbourhood establishments. HUL’s Mehta says the company is experimenting with different business models in collaboration with retail partners. “We help the retailer by upgrading the categories, by getting more return on investment for the cubic feet of space that they have with the science of retailing,” he said during an investor call. “We firmly believe the science of retailing that we have and the way we are customising our assortment, we will be able to customise our assortment for a store based on the locality and the kind of shoppers that exist in the vicinity.”

In 2014, global e-commerce giant Amazon in India launched the ‘I Have Space’ programme (an India-first innovation) under which it partners with local store owners, kirana shops included, to deliver products to customers within a 2-4 km radius of their stores. Amazon trains the store partners on customer management skills to deliver a positive customer experience. Akhil Saxena, vice president, customer fulfillment, Amazon Asia, says that in 2017 they had tied up with close to 17,500 such stores in 225 cities, which increased to 20,000 retail partners in over 350 cities in 2018. “Amazon has successfully unlocked the potential of such store owners, allowing them to supplement their regular income and generate more footfall in their stores,” Saxena says.

Last year, when Walmart bought a 77% stake in Flipkart for $16 billion, it also said it would partner with kirana owners and members to help modernise their retail practices and adopt digital payment technologies. At the annual general meeting of Reliance Industries last year, India’s richest man Mukesh Ambani spoke of a ‘New Commerce’ platform that was a hybrid online-to-offline model. While the model would be created by integrating Reliance Retail’s physical marketplace with Jio’s digital infrastructure and services, Ambani stressed on the importance of kirana stores in taking the model to fruition. “We see merchants and small shop owners as critical customer interaction and fulfilment points, who will share a mutually beneficial win-win relationship with us,” he had said.

Even smaller startups like StoreKing and Razorpay are vying for the attention of kiranas with their technology and offering them credit for modernisation. StoreKing, a technology-enabled retail distribution platform, supports local languages and enables rural retailers to buy and sell products. HUL, P&G, Marico, Samsung, and Xiaomi, among others, use StoreKing’s 50,000-strong retailer network to access consumers in tier 3 markets and beyond. “We are probably the only company to focus on rural India,” says StoreKing’s founder Sridhar Gundaiah. Amazon India, too, is enabling customers in smaller markets to get access to the convenience of online shopping. Through Amazon Easy, it is partnering with the offline retail ecosystem to bridge the trust gap; it trains small offline stores and local entrepreneurs in smaller towns to help customers with online shopping.

But the growth of modern trade, says Deloitte’s Rajat Wahi, will also depend on how much real estate gets created in the form of malls. He expects modern retail to grow to 18-20% of total retail trade in the next 10 years and e-commerce to about 10%, depending on how quickly last-mile delivery, warehousing, and other issues can be sorted out. He says 60-65% will still be general trade, a part of it will possibly be more modern like a supermarket, but still be individually owned or in some cases by a consortium of owners. Globally as well, general trade forms a large part the retail industry. “In all of South Asia, 60-70% of the trade is still general trade. Even in developed countries like Germany, Holland, Italy, mom-and-pop stores are still thriving,” says Wahi.

India, the fifth-largest global destination in the retail space, isn’t the easiest market for multi-brand retailers, as government policy only allows 100% FDI under the automatic route for single-brand retailers. While this policy is seen as helping kirana store owners, it continues to be a sore point among global retail giants operating in the country. “Kirana stores fuel a culture of entrepreneurship and all efforts need to be made to boost entrepreneurship that will create further employment opportunities. Hence, it is essential to empower them, upgrade their traditional methodologies and train the store owner and their staff,” says Mediratta. With huge numbers across India still excluded from the Internet and mall culture, the country has enough room for kirana stores to coexist with modern retail, and thrive.

This was originally published in the August, 2019 issue of the magazine.

Source: fortuneindia

Retail Wasn’t Born Yesterday

Devangshu Dutta

August 17, 2019

Retail is such a pervasive and dynamic a sector of the economy, that it is impossible to identify a single point at which modernisation began. I’ve met countless people who perhaps entered the retail sector during the last 15 years, and who mark the beginnings of modern retail around then. There is no doubt that there has been an explosion of investment in retail chains in the last 2 decades, but we need to acknowledge the foundation on which this development is built. The current titans of the sector are standing on the shoulders of previous giants who have created successes and failures from which we are still learning.

This piece is not an exhaustive history of the evolution of the retail business in India, nor a census of all the brands operating in this sector, but the aim is to capture the flavours of the phases of development. (PDF available here to download.)

Early Years

If we were to trace back the growth of “organised” retail (mind you, I dislike that word!) or modern retail to the first retail chains, we will have to cast our mind back more than a hundred years. While many businesses of that time have disappeared, a few pioneers continue to survive, straddling three eras: the British Raj, the Socialist Raj and the Liberalised Lion economy. The businesses that continue to stand, having been through multiple transformations, include:

  • Higginbotham’s (1844) – beginning from Madras (now Chennai), it spread to Bangalore, and then to other locations and is known around southern India.
  • Spencer’s (1863) – one of the earliest grocery retailers to grow into a chain across undivided India, it moved to Indian ownership in the 1960s and was acquired by the RPG Group in the late 1980s.
  • AH Wheeler (1877) – launched from Allahabad Railway Station, it has been operating from railway stations (along with Higginbotham’s in some locations) – while it lost its monopoly in 2004, it has certainly played a key role in the growth of paperbacks and magazines in the country, keeping passengers company across billions of kilometres of rail travel.
  • Nilgiri’s (1905) – started with a small shop in Tamil Nadu focussed on dairy products and other groceries, it expanded to a large store in Bangalore in 1936 led by the founder’s son, and then spread across the southern states with a well-established reputation in dairy, bakery and poultry products. In recent times it has been acquired by the Future Group.

Fifty Years of Independence

The 1950s and 1960s remained fertile times, post-Independence and before the heavy-handed Socialist Raj truly began squeezing the life out of Indian businesses. Leading textile companies such as DCM, Bombay Dyeing and Raymond, and footwear companies such as Bata and Carona established chains of retail stores including company-operated stores as well as authorised dealers operating under the companies’ banners.

The 1980s brought the Asian Games, colour television, and a new up-to-date car model to India, all marks of a new vibrancy. Over the 1980s, a new retail wave was led by indigenous ventures such as Intershoppe (launched by a fashion exporter), Little Kingdom and The Baby Shop (children’s products), Nirula’s (fast food) and Computer Point (home computers, PCs and accessories). Many of these were certainly ahead of their time: the critical mass of consumers had yet to develop, the business infrastructure was inadequate, and funding norms were unsuitable to the capital-hungry business of retail. Unlike the textile companies that had large manufacturing and trading businesses, these new retailers were like shooting stars, glorious but visible for only a short period of time. This period, unfortunately, also witnessed the degeneration and disappearance of some of the older stalwarts such as DCM and Carona that were beset by labour disputes, management issues and disconnection from the transforming market.

Numero Uno, an indigenous denim brand, was launched in 1987 soon after VF’s American denim brands were launched, and it took nearly a decade for Numero Uno to reach other geographies in India. Nirula’s, one of the oldest fast food restaurant chains based in North India, expanded across the Delhi NCR in the 1980s and 1990s, and also explored other cities, albeit with mixed success.

Future Group, which today has a large retail and consumer brand portfolio, launched trousers under the name Pantaloons in 1987, initially as a distributed brand, and then denimwear under the brand name Bare. Within a few years the company also launched exclusive stores by the same names, to provide focussed visibility to the brands. About a decade of growth later, the group launched its first large format store under the Pantaloons name, but by now covering a much wider range of products, which became its launch pad for achieving scale.

The RPG group that had acquired Spencer & Co. relaunched it in 1991 in a spanking, new format as Spencer’s in Bangalore, and a short few years later rebadged it again as Foodworld in a joint-venture with a foreign partner. It subsequently went on to launch other formats such as Musicworld and Health & Glow.

Also in 1991, the Rahejas converted an old cinema into a department store, Shoppers Stop, aiming to provide an international shopping experience, although initially focussed on menswear. The store added women’s and children’s sections in subsequent years and the second store was launched four years later after the first one. Subsequent large scale retail expansion only came about towards the end of 1990s.

Little Kingdom is a notable example that I would like to dwell on briefly (partly for the purely personal reason that it was my first retail job!). The business was launched in 1987, headed by alumni of the illustrious IIMs around the country, built on processes and IT systems that could have been the envy of many retailers even 25 years later. The company – Mothercare India Limited – was the first purely retail company to start up and launch a public issue in 1991. During the early 1990s, it was the largest retail chain present across the country, in its categories. In 1991, it also attempted to bring the first home computer, Spectrum, to forward-thinking parents through a mix of in-store sales and door-to-door direct-selling. It was admittedly one of the first to expand internationally, opening a franchise store in Dubai in 1992. During its short life, the team launched multiple brands and formats, including Little Kingdom, Ms (a womenswear brand), The Baby Shop, and became a partner to the international giant VF Corporation’s Healthtex children’s brand and Vanity Fair lingerie brand in India. But, by the mid-1990s – financially overstretched between multiple brands and formats, and backward integration into manufacturing – it was gone.

Physical retail was not the only avenue being explored for growth during these decades. An Indian company imagined replicating the success of western catalogue companies, and launched the Burlington’s mail order catalogue retail venture and even became a joint-venture partner of one of the world’s largest catalogue retailers, Otto Versand (Germany). Other models included direct sales business, such as the Eureka Forbes introducing vacuum cleaners through demonstration parties (which was emulated for the Spectrum home computers mentioned above). With the growth of private television channels, products also began being promoted during non-peak hours through infomercials, though serious TV shopping was still a few years away, coming up in the mid-2000s with dedicated teleshopping channels.

The Foreign Hand and Corporate Retailing

The 1980s and 1990s also saw the launch of international brands from global giants such as VF Corporation (Lee, Wrangler, Vanity Fair, Healthtex), Coats Viyella (Louis Phillippe, Van Heusen, Allen Solly), Benetton (UCB and 012), Levi Strauss, Lacoste, Reebok, adidas, Pepe and Nike, grocery retailers such as Nanz (a three-way German-US-Indian partnership) and Dairy Farm International (with RPG Group’s Spencer’s Retail) and Quick Service formats such as Domino’s, McDonald’s, Pizza Hut, Baskin Robbins and KFC.

India was reopening to business, global management consultants were writing glowing reports about the untapped potential of the (mythical) 200 million middle-class customers and global retailers wanted to own part of the action.

Due to the lack of large-format stores and suitable environments, international brands that entered the Indian market during this phase needed to create exclusive stores to ensure that the brand could be communicated holistically to the consumer, in an environment that was more in the brand’s control, and many of them were, in a sense, “forced” to become retailers in India.

However, around 1996, a very senior member of the cabinet is reported to have said, “Do we need foreigners to teach us how to run shops?” It was an unexpected condemnation, coming as it was from a person and a party otherwise seen as champions of an open economy. It slammed the doors shut to foreign investment and, to my mind, the sector is still yet to fully recover from that ban and the policy contortions that have come over the years to allow international brands and retailers to play a more active role in the market.

Internal weaknesses compounded the decline or exit of some of the businesses. Nanz folded due to various operational challenges and lack of adequate experience. British retailer Littlewoods’ wholly-owned subsidiary pulled out of the market due to problems back home, and in 1998 sold the sole store to the Tata Group, which eventually renamed it Westside.

Despite the early hiccups, India continued to attract international players on account of the high growth and changing social norms. Not only was there greater purchasing power available amongst more Indian consumers, there was a shift in consumer attitude from saving to spending. Several brands, including fashion, luxury and quick service formats, entered the market through licensing, franchising, and joint ventures.

During this period the domestic retail market also drew in more corporate houses, attracted by the apparently abundant market opportunity for them to mine alone or to act as a gateway for foreign companies interested in India. Most were significant diversifications from their existing businesses.

Tobacco, paperboards, agri-commodities and hospitality conglomerate ITC ventured into retailing through Wills Lifestyle and as well as its rural initiative e-Choupal in 2000, followed by John Players and Choupal Sagar respectively. Pantaloon Retail launched a partial hypermarket format Big Bazaar in 2001 and went on to Food Bazaar in 2002, Central in 2004, Home Town and Ezone in 2006. Reliance entered in 2006 with multiple stores of Reliance Fresh being opened simultaneously and over the next few years the company expanded through multiple formats such as Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels to name a few. Telecom major Bharti set up a joint-venture with Wal-Mart at the back end, while the Tata group tied the knot with Woolworths and Tesco in two separate businesses supplying its retail stores, even as it expanded its successful watches and jewellery businesses, as well as Westside.

Even a retail operation like Fabindia, born as an export surplus outlet of a handicraft product business found investors to back a rapid expansion spree, becoming more of a corporate retailer than a front-end for producer organisations and craftspeople.

Through the 1990s and beyond, the market remained in ferment. In 1997 Subhiksha, a small modern retail format for food and grocery was launched. Venture-funded Subhiksha expanded rapidly and over the next decade grew to 1,600 outlets. However, in 2009 the business closed down owing to a severe cash crunch, amidst accusations of criminal mismanagement and fraud.

New product areas emerged highlighting the pace of change of lifestyles, cafes prominent among them. Café Coffee Day opened its first store in 1998 in Bangalore and became the largest organised coffee chain in India by far, though it is now living under the shadow of the recent death of its founder. Barista was also launched in 1999 as India’s Starbucks-wannabe, found its footing, scaled up and lost its way, going on to be sold to Tata Coffee and the Sterling Group, who turned it over to the Italian coffee company Lavazza in 2007, who also exited seven years later. Its current owner, the Amtex Group, is itself going through financial troubles in some of its key businesses.

In the last two decades, while some retailers have gone out of business due to unrealistic business plans, mismanagement or lack of funds, most have taken opportunities to rationalise their operations by shutting down unviable or underperforming locations, aligning businesses to market needs, assessing their brand consistency across various touch points, improving organizational capabilities right down to front-line staff, and focusing on unit productivity.

It’s not just Indian retailers that have faced trouble. Foreign brands have had their own share of problems – some have overestimated the market, or their own relevance to the Indian consumer, while others have had misalignment with their Indian franchisees or joint-venture partners. A number of foreign brands and retailers have also churned partners, or exited the market outright, but most remain committed and invested in the market for the long-haul. The last few years have also seen the successful launch and humongous growth of global leaders such as Zara and H&M, even mass-market Chinese retailers like Miniso, as well as the largest investment commitment made by Ikea (about US$2 billion).

Showing on a Screen Near You

The late-1990s also witnessed a dotcom frenzy that led to a plethora of travel sites, and a few product sales businesses such as Fabmall, Rediff and Indiamart.

However, the online market lacked critical mass in the 1990s and early-2000s. Despite apparent advantages of the online business model, success depended on internet penetration (low!), the appearance of value-propositions that were meaningful to Indian consumers (questionable), investments in fulfilment infrastructure (lacking) and the development of payment infrastructure (regulation-bound). Malls and shopping centres – the new temples of retail – seemed to be sucking up all of the consumer traffic, in any case.

By the mid-2000s the business had reached just about Rs 8-9 billion (US$ 180-200 million), despite 25 million Indians being online. Dotcoms became labelled dot-cons, with an estimated 1,000 companies closing down. However, multiple changes took place in the mid-2000s, among them being the price disruption of the telecom market and explosion of mobile connectivity, as well as a renewed funding appetite among venture funds.

This laid the path for growing the second crop of ecommerce in India. Billions of dollars of investment was poured into creating India’s Amazon wannabes, the high streets ran red by ecommerce-fuelled discounts, aggressive advertising budgets (most promoting discounts) and mergers/acquisitions pushed through by venture investors.

After more than a decade of the second coming, India’s ecommerce business accounts for a market share of total retail in the low single digits. India’s Amazon – if one can call it that – is the Flipkart group, now owned by Walmart, bought at an eyepopping $21 billion valuation and still bleeding cash, and the runner-up is relentless Amazon that continues its aggressive push to own what could be one of the three largest markets in years to come. The Chinese internet giants Tencent and Alibaba are also trying to hack piece off the market, having fulfilled their aim of kicking out Western competitors from their home market.

However, the wild card has just been played by the Reliance Group – having moved from textiles to fibre to oil, the group has made its move into telecom and data (didn’t someone say, “data is the new oil”?). It has strategically pushed handsets and cheap data plans into the hands of the consumers and, according to the latest announcement on Jio Fiber, will soon offer High Definition or 4K LED television and a 4K set-top-box for free. The play is to grab as much of the customer’s share of spend on products and services (including entertainment) as possible.

Looking Ahead

Possibly the biggest driver of modern retail in the coming years will be the shift in the demographic structure of the country. The young consumers who are joining the workforce now are a distinctly different set from previous generations. This is a generation that has grown up in the liberalised economy and has been exposed to innumerable choices since their childhood. The most important factor is that these consumers are increasingly located outside the top 10 or 20 cities in the country, and are becoming more accessible as both physical and virtual access improves for them.

A large number of them may have only occasionally, or perhaps never, experienced modern retail first hand while they were growing up, but they have seen this upmarket environment emerge before them and are not shy of spending within it, even if it is only on select special occasions. Most of them are handling mobile phones (even if it is their parents’) while still in school and being socially active online even on the go. Certainly most of them have hardly ever visited tailors, growing from one set of ready-to-wear clothes to another. It is this set of young consumers whose outlook and habits will drive retailing very differently in terms of product categories and services in the future.

There is another significant set of consumers whose number is swelling annually: that of working women. As they add to the discretionary household income available to spend, they gain influence in purchase decisions, and with them the entire household’s lifestyle also undergoes a shift. There is a greater demand of time-saving solutions and convenience products to make their lives easier. Modern retail environments where their various needs can be taken care of under one roof, and convenience pre-packaged products are natural winners in this shift. Ready-to-wear products for women, grooming, beauty and personal care, women-oriented media products, processed foods and eating out get a boost. Another important shift is that, due to busier lifestyles, they are time-crunched and more likely to rely on branded products and services that they can trust. However, given the nascent stage of the market, these brands could just as well be retailers’ own labels, if they are managed well.

In terms of business, significantly greater efficiency needs to be achieved, both at the front-end and in head office and supply chain operations. Process and system-led planning and execution needs to become the norm. With India’s burgeoning population, people are treated as a cheap resource: on the contrary, each extra person can be expensive beyond just their salary cost to the organisation. Each extra person adds some friction to decision making, reducing the responsiveness of the business. Smart business will begin to realise this, and look closely at employee efficiency and effectiveness in the context of the overall business, rather than just in terms of individual costs.

Even as the retail business in India is far from saturation, and fragmented growth continues, the business will also undergo consolidation simultaneously, as large scale retail operations are enormously capital intensive. Mergers will be a strategy that will be explored to improve the viability of many businesses in this sector.

Should you be tempted to think that, squeezed between large corporates, international retailers and ecommerce giants, it’s “Game Over” for smaller domestic retailers and brands, let me say that the India retail story is not only not over yet, but continues to be written and rewritten. As the market grows and matures, retail businesses also need to differentiate themselves, investing more in product selection or even product development through private label growth to help them stand out in the market. A one-size-fits-all strategy doesn’t work in a country as diverse as India. For the size of the market, we have surprisingly few brands, many of them virtually indistinguishable from their competitors. Development on this front, of indigenous brands and product development capabilities, is an absolute must.

The good news is that already there is more talent available than ever before. Most importantly this management pool has experience of the retail sector not just in good times but during (many) downturns as well.

Eventually, what is needed is a mix that will be healthy for India’s ecosystem at large for a long time to come. This will not be delivered by a blind transplantation of international templates or a rapid-fire expansion across the country, nor by fearful protectionism or regional parochialism. It will only be achieved by the evolution of market-appropriate business models and a mature approach that can be make the Indian retailers robust enough to grow not just domestically, but possibly even globally over time.

Scooter rentals give new spin to asset-light model


August 16, 2019

Written By Alnoor Peermohamed, ET Bureau

BENGALURU: Top scooter rental companies — Vogo, Bounce and Drivezy — are increasingly adopting the assetlight business model pioneered by ride-hailing companies Uber and Ola.

These firms have tapped a handful of companies to own the thousands of scooters that run on their platforms, unlike ride hailing where individuals own the cabs. The obvious advantage — assets, scooters in this case, go off-book, even as they still get a reliable supply of vehicles, something that has been a huge problem for Uber and Ola.

Source: economictimes

Flipkart set to take on Amazon with free video streaming service


August 6, 2019

Written By Deepti Chaudhary

(Photo: Pradeep Gaur/Mint)

BENGALURU : Bengaluru: Walmart’s Flipkart unit is set to introduce a free video streaming service to draw new users from small towns and cities in India and take on rival Amazon’s Prime Video service.

Flipkart is eyeing the next 200 million consumers who are coming online. The company believes that most consumers are introduced to the internet through online videos. Hence, video content and entertainment could play a big role in getting consumers to come and buy online.

“We believe that great content, if made available to a wider base of consumers, especially the ones who are new to e-commerce but not internet, can bring them on board on an everyday basis and help take away any anxiety that they may have towards online shopping,” Flipkart group chief executive Kalyan Krishnamurthy said in a statement on Monday at the launch of Flipkart Videos, a curated range of movies, shows and entertainment series. Customers, he added, should not pay extra for premium content.

The video content offering is focused on three primary aspects: it’s free, curated and personalized.

Experts say the content market is still evolving, considering the number of customers paying partly or fully for subscriptions to Netflix, Amazon Prime and Hotstar.

“It’s still a small number. The pricing is too high for a customer base that is accustomed to free or cheap content,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight. “Also, there is a lot of fluidity in terms of the platforms used. In India, content and pricing will be critical.” He added that both Netflix and Amazon Prime are “Indianizing” their content in a big way. Pricing dynamics are being worked out as well.

Amazon India started its Prime video service in December 2016 and has since developed a strong fan base with hit shows such as Made in Heaven and Mirzapur.

The big question is—will people watching the particular content eventually buy the products on the platform? It needs a mental switch—the mindset while shopping is very different from what it is while watching a movie or a series.

According to Krishnamurthy, the focus is on attracting customers, particularly those in the age group of 20-30 and those who consume a lot of user-generated and professionally created content.

“We want to ensure that a user keeps coming to the platform every day. Over time, we will figure out how this ties into the e-commerce ecosystem, but today that’s not the objective. Its just to ensure that the consumer is hooked to Flipkart,” Krishnamurthy said in an interview.

Dutta, however, believes that there may be another reason for Flipkart’s video streaming service. “It may be less expensive or more profitable to service existing customers by expanding the share of wallet than to acquire new customers. Hence, companies try to add as many products or services to the customer relationship as possible,” he said.

According to Dutta, the metrics and operating levers of merchandise and streaming content businesses are very different. “Done well, content may add to a group’s revenues, but operationally it has to be managed with a very different business mindset,” said Dutta.

India’s video streaming industry is set to grow at an annual average pace of 21.8% to reach ₹11,977 crore by 2023, according to a report by global accounting firm PwC.

Subscription-based video-on-demand platforms are projected to grow at an average yearly rate of 23.3% to reach ₹10,712 crore between 2018 and 2023.

The 34 companies present in the cluttered market comprise US platforms such as Netflix and Amazon Prime Video, as well as Indian services such as ZEE5, Voot, Eros Now and ALTBalaji.

In the meantime, Flipkart is launching its service in Hindi with a Hindi-language “audio visual guided navigation” to enable easy on-boarding for new consumers.

It is also redesigning its app, which will allow users to access their preferred language, curated entertainment content and content feeds through the navigation bar at the bottom of the home page.

Source: livemint