Amazon, Walmart Struggle to Cope as India Enters Lockdown


March 25, 2020

Written By Saritha Rai

India’s largest online retailers including Inc., Walmart Inc.-owned Flipkart and Alibaba-backed fresh grocery delivery service BigBasket are facing severe disruptions and shutdowns, after authorities announced some of the strictest coronavirus-related restrictions in the world.

The country’s 1.3 billion people are in a three-week lockdown, sending many to scour the web for food and daily essentials. But unlike in China, where online fresh grocery services offered a lifeline during its Covid-19 outbreak, Indian authorities are stopping food trucks on highways, and shutting down warehouses and rice mills. They’re also preventing delivery and supply-chain workers from doing their jobs, sometimes through use of force.

Source: bloomberg

From V-Mart to V-Bazaar, Citykart – how retailers are testing the waters in tier 4 markets


March 23, 2020

These value fashion retailer, however, must tackle pricing as well as infrastructure hurdles

Written By Devika Singh

The value retail market in India is estimated to be worth Rs 400 crore, according to industry experts

Having established a strong foothold in the tier II and III markets — which contribute over 75% to their revenues — value retailers such as V-Mart, V-Bazaar, 1-India Family Mart and Citykart are testing the waters in tier IV markets. According to industry experts, the value retail market in India is estimated to be worth Rs 400 crore, with organised players commanding merely 12.5% share. However, these players have seen robust growth in recent years on the back of their rapid expansion. V-Mart, for instance, grew its store presence from 108 in FY15 to 214 in FY19.

Value retail chains target customers at the bottom of the pyramid — typically those with monthly incomes in the Rs 10,000-25,000 range. The average bill size recorded by these players is Rs 750, while that of players such as Pantaloons and FBB is around Rs 1,800.

Tier IV towns are defined as towns with a population of 10,000-19,999. V-Mart has 40 stores in tier IV markets, 1-India Family Mart has 23, while V-Bazaar has eight stores. These players have set aside 20-25% of their new store budgets for tier IV towns for the next financial year. But these new markets have proven to be tough to crack so far.

Tailored for the market

To establish a presence in these newer markets, value retail chains have been altering their strategies. Citykart, for example, has cut down the size of its stores here. “Although the footfall is not low in these towns, the average bill size is lesser. Therefore, we opt for smaller-size stores and keep 20-25% lesser inventory here, compared to the tier II and III stores,” says Sudhanshu Agarwal, director, Citykart.

Meanwhile, 1-India Family Mart and V-Mart are customising their inventories for smaller towns to make products of lower ticket size, which see more traction, available. “We usually sell t-shirts priced at Rs 99-599, with 10 options in each category. In a smaller town, however, t-shirts costing Rs 599 don’t sell as much, so we keep limited options in that price range and offer more in the Rs 299 range,” says JP Shukla, CEO and co-founder, 1-India Family Mart.

V-Mart also plans its inventory for these towns keeping in mind the local festivals. The company keeps more ethnic wear products in these towns, compared to the larger markets, shares Lalit Agarwal, CMD, V-Mart Retail.

Since the reach of print media is limited in these towns, value retail chains usually engage in BTL activities. “We organise store-level activities like drawing, singing, dancing and fashion shows to develop direct contact with the customers,” says Hemant Agarwal, CMD, V-Bazaar Retail.

Some like 1-India Family Mart make use of small commercial vehicles, like Tata Ace, to organise fashion shows and dance performances, or to make announcements. “We also display our brand on e-rickshaws and tie up with small shop owners for co-branding, as these towns don’t have proper hoardings,” Shukla adds.

Teething troubles

Pricing is not the only challenge for these players in tier IV towns, experts say. According to Devangshu Dutta, chief executive officer, Third Eyesight, concentration of demand could remain a problem for retailers in these towns, since the population and their disposable incomes are lower.

“Managing these stores which are located deeper in the country is also a challenge. Keeping management and operations costs lean is fundamental to their success. The more they spread across smaller towns, the more difficult it becomes to keep it lean and efficient,” Dutta adds.

He suggests that following a cluster-based approach for expansion could help retailers target a similar set of consumers and keep costs low.

The lack of suitable real estate could throw a spanner in the works, cautions Rajat Wahi, partner at Deloitte India, as these players try to expand their presence here. “There are no malls or high streets in these towns; the companies have trouble finding good space and have to negotiate separate deals with property owners, set up parking spaces, etc. Therefore, cost could shoot up,” he adds.

Besides, experts say, the proliferation of e-commerce in this part of the country could be a real threat for these players in future.

Source: financialexpress

India’s Tea Cafes Have Made A Good Start. But The Real Test Begins Now


March 21, 2020

Chaayos and Chai Monk are selling more than 3.5 lakh cups every day between them. Still, it isn’t an easy market to crack.

Written By Nishant Sharma

The moment a customer places an order at a Chaayos outlet, an IoT-enabled brewer starts preparing chai that can be made to order in 80,000 different ways.

Called Chai Monk, the robot has reduced the time taken to make a cup by nearly a third to 2.25 minutes, Nitin Saluja, co-founder of the tea café chain, told BloombergQuint. “This not only helps maintain a consistent taste of the tea consistent, but also reduces waste and manpower.”

Reducing costs is crucial for the company as it competes in a nation of tea drinkers where for most people, chai outside home means sipping a milky and spiced black tea concoction at a roadside shop. Along with Chai Point, Chaayos has been trying to create a culture of tea cafes.

The bet was the size of tea market in India. According to the National Sample Survey Office data, Indians drink 17 cups of tea for every single cup of coffee. Tea Board’s data show nearly 80 percent of 1.35 billion kilograms of tea produced in India is consumed locally. And the tea retail, according to Euromonitor International, stands at Rs 18,000 crore, nearly 2.5 times that for coffee.

That’s only one part of the problem. Profitability is difficult even after scaling up as the fortunes of established coffee chains Café Coffee Day, Costa Coffee and Barista show.

The store count of Coffee Day Enterprises Ltd.’s Coffee Day, India’s largest café chain, fell by nearly a fourth over the previous year to 1,469 in the quarter ended September, with same-store sales declining nearly 4 percent. While the company’s debt burden led to the tragic suicide of the founder, profitability at the store level has remained elusive.

When CCDs and Baristas started, they were pushed as places of social gathering, according Arvind Singhal, managing director at the retail consultant Technopak Advisors. “The amount people spend (there) isn’t enough to be profitable,” he said. “There’s a reason food accounts for 50 percent of the revenue of cafes, which shows that there’s nothing like a coffee culture or tea culture here.”

How The Beverages Stack Up

Figures in Rs

Metric Tea Cafes Coffee Joints
Average Bill150-250250+
Price Per cup 65+100+

That hasn’t deterred investors and entrepreneurs. The initial success of tea cafes has helped birth more than a dozen tea startups. Even salt-to-software conglomerate Tata Group launched Tata-Cha, a café-styled outlets that also deliver tea, in 2018—it’s second attempt at the format. And investors have ploughed nearly $150 million in them so far, according to data shared by Tracxn and BloombergQuint’s calculations.

For Chai Point, average bill ranges between Rs 150 and Rs 200, rising annually 15-18 percent, according to Amuleek Singh Bijral, who co-founded the company in 2010. Outside the outlets, it has created a delivery-oriented demand. “Opening huge stores cannot be the only strategy.”

Chai Point tied up with nearly 2,000 companies to introduce, an Android-based IoT-enabled automatic tea and filter coffee dispenser. This is one of the company’s fastest-growing arms in less than three years, raking in more than a third of its revenue.

Bijral said 40 percent of their revenue comes from in-store sales, and the remaining from delivery. But that doesn’t mean it’s not scaling up. The company intends to add 70 stores to its count of 175 in 2020-21. The company is experiment with smaller store formats

And it’s looking at food for increasing revenue. Chai Point plans to become an all-day breakfast brand and is working on offering a croissant burger and egg parantha, apart from a menu that already offers poha, upma, samosa and sandwiches. While the company said that its foods segment contributes 18 percent to overall revenue, in-stores sales account for 35 percent.

Chai Point’s average monthly store sales stands at Rs 9-10 lakh, with average same-store sales growing 15-20 percent, according to Bijral. “Average sales per square foot is Rs 24,000-25,000,” he said. “These are all signs that shows business is here to stay.”

“Money to be made is real and devil is in the execution,” Bijral said, adding that the company is on track to report full-year operating profit in FY21.

Chai Point Keeps Lid On Expenses

Figures in Rs crore

Created with Raphaël 2.1.2


Chaayos is betting the neo-café model, like Luckin Coffee of China—a unicorn that focuses on fast delivery, technology-driven retail and convenience.

Besides the automated brewer, it also gives users the option to use facial recognition to speed up ordering time. But the move has drawn flak over privacy concerns. Still, Saluja said, technology and data is helping the firm manage its inventory and reduce wastage to about 1.5 percent of sales from 4 percent.

The startup is also betting on food which Saluja said is prepared fresh at its 81 outlets. Customers have reposed confidence, he said, citing number. About 96 percent of transactions on the platform have a validated number, according to Saluja, and a repeat customer comes to Chaayos 3.8 times a month.

The average purchase ticket size of Rs 250 and while that may be less than CCD’s Rs 320 or Starbucks’s Rs 550, but the repeat is much higher, he said.

Chaayos’ Revenue Rises

Rs crore

Created with Raphaël 2.1.2

Unlike coffee, tea isn’t a socially driven business, he said, citing that Chaayos clocks a fifth of its day’s sales by 11 a.m. “No one comes for social interaction early in the morning, people are coming because we’re able to replace the ‘Tapriwala’ (roadside vendor) or home tea.”

Chaayos is profitable at the store level, Saluja said, without sharing numbers. The same-store sales grew by nearly a fourth last year, he said. The tea startup aims to reach a store count of 100 by the end of fiscal and aims to open 300-400 in three to four years.

Saluja, summed up the opportunity saying that his outlets may not be the first choice for a meeting or a date. “But we’re going to be the second place where you’re comfortable and are going to come more often than once.”

Still, Devangshu Dutta, chief executive officer of retail and consumer consultancy Third Eyesight, isn’t that optimistic. “The business looks very profitable from outside because cost of goods is very small, but the other aspects are killing it, like real estate,” he told BloombergQuint over the phone. The whole vibe of being a hangout place is embedded in these formats, and the length of time is not in proportion with what people are buying, he said.

According to Dutta, it really comes down to having enough volumes and the portfolio of outlet needs to be looked at periodically. “You need to be ruthless about where they are making money and form what they are making money it to make it a scalable venture.”

Source: bqprime

With discretionary spends in a freeze, retailers catch a cold


March 18, 2020

Written By Alnoor Peermohamed & Rasul Bailay, ETtech

ETtech Illustration: Rahul Awasthi

Sales of smartphones, electronics, apparel, home appliances and furnishing have taken a beating due to the Covid-19 virus outbreak, as Indian consumers stay at home and cut back on discretionary spending in an already sluggish market.?

Several consumer brands, retailers and sector analysts told ET that demand has dropped palpably, except food and grocery sales, which are on the up due to uncertainties around stockouts and store closures as infections spread across the country.

Calling it an “unprecedented” situation, several executives and analysts said that a prolonged shutdown of retail stores would further affect the purchasing power of consumers.

“Right now it’s a lack of sentiment to buy, but if this doesn’t clear up by mid-April, it’s going to be a situation of inability to buy,” said a senior analyst at one of the leading global consultancy firms, who did not want to be named as he is not authorised to speak to the media.

He added that job losses are also likely in these directly affected sectors.

The chief executive of a global fashion retailer offered a gloomy outlook saying fashion companies are forecasting growth to fall 20% in the next fiscal year.

“That means next year we will see our growth go down 10% compared to 2019-20,” he said, requesting anonymity.

Large format brick-and-mortar retailers in the country have seen sales of discretionary items decline, while e-commerce marketplaces Flipkart and Amazon, where non-essential items make up over 70% of sales, are staring at a severe blow in the coming quarters, impacting their growth estimates, several people in the know told ET.

In the United States, most big retailers like Starbucks, Apple, Nike, have announced shutting of stores temporarily to fight the spread of infections.

In India, malls, restaurants, retail stores, and cinema halls, have been either shuttered across metros like Mumbai and Bengaluru, or have seen a drastic reduction in footfalls if currently operational.

“Retail sales are down by almost 50%, as 60% of malls and shopping centres are closed in India with more and more states initiating closure,” said an executive of a leading department store chain.

“At-home consumption would increase and sales of packaged food and staples have been rising already. However, there will be a temporary impact on discretionary products such as apparel,” said Kishore Biyani, founder & CEO, Future group, which runs Big Bazaar and Food Hall stores.

Categories such as fashion could bounce back sooner, several people told ET.

Seasonal purchases made before summer are also feeling the heat. A leading national electronics retailer said business has been minimal in the last few days.

Refrigerator and washing machine maker Godrej Appliances’ business head Kamal Nandi said the challenge is more in urban India due to the inflow of international travellers. “If the situation does not normalise by April, sales will be badly hit even if the summer is harsh,” Nandi said.

A senior executive of Reliance Retail said there was too much uncertainty, which if prolonged could reduce purchasing power of consumers.

Grocery sales spike

Sales of food and staples have, however, seen an uptick.

It is not a clear win for offline retailers that have been traditionally strong in this space, as ET reported on March 16, but online retailers such as Grofers, BigBasket, Amazon and Flipkart have got a leg-up in growing their grocery sales, as consumers jump to purchase items online in the relative safety of their homes.

However, given grocery makes up just 3% of e-commerce sales, an uptick in the category will not see the online sector gain much.

The uncertainty around how long the outbreak will persist has made it harder for analysts to pinpoint when growth could bounce back.

Satish Meena, an analyst with Forrester Research said, keeping in mind conservative estimates, growth in sales of discretionary items would rebound only by October or November.

Meena added that while growth estimates of the still nascent e-commerce industry were being lowered for 2020, the sector would still end up outperforming its previous year sales figures.

Growth in India’s e-commerce market began slowing last year with the market clocking sales of around $31 billion, a growth of around 35% year on year, which was down from almost 60% the previous year, according to analysts.

Even during the festive period in 2019, online sales grew by just 32% in 2019, compared to a 93% growth in 2018, according to Forrester Research.

“It’s a double whammy, because when you were stepping out to watch a movie, you ended up eating out and going to a couple of clothing stores. Now, given the current situation, people are avoiding going to public spaces and that’s hitting discretionary spending,” said Devangshu Dutta, Chief Executive at Third Eyesight, a consulting firm focused on the consumer goods industry.

(With inputs from Writankar Mukherjee in Kolkata)

Source: economictimes

How new age mattress players are trying to capture the market


March 16, 2020

Written by Venkata Susmita Biswas

Active sleep solution companies such as Wakefit, Wink & Nod, SleepyCat, Sunday and Flo have adopted a direct-to-consumer model

The mattress market seems to have been woken up from a long slumber, with a few Indian start-ups attempting to disrupt the business model by bringing the concept of ‘mattress in a box’ to India and selling them online.

The unique selling proposition though is the availability of a branded product at a lower price. Active sleep solution companies such as Wakefit, Wink & Nod, SleepyCat, Sunday and Flo have adopted a direct-to-consumer model, thus cutting out the middlemen and commissions. This allows them to sell products at a far lower cost than established mattress manufacturers in India.

Should legacy mattress brands, the likes of Sleepwell, Kurl On and Duroflex — which command almost 50% of the market share — lose sleep over this?

The cost of sleep

Wakefit’s website explains how the company is able to sell products such as memory foam mattresses at a low price: “Usually, mattresses are priced higher due to brand spends being passed on, retail commissions, sales commissions and wholesalers’ profits. Our mattresses are cheaper compared to others in the market because we cut out the middlemen to sell good quality mattresses directly to our customers at fair and honest prices”.

Since consumers cannot touch and feel the products they buy online, these new-age brands have a 100-day no-questions-asked return policy.

Sandeep Prasad, CEO and founder of Wink & Nod, says that in the traditional distributor model, as much as 40% of the price of the product goes into commissions.

The newer players, which only operate online, have tasted success with their offerings. Wakefit, for instance, has grown from earning Rs 7 crore in revenue three years ago, to making Rs 81 crore in 2019. The company aims to net Rs 250 crore in 2020, says its CEO and founder, Ankit Garg.

Legacy mattress brands, which traditionally use the distributor/ retailer set-up, are now warming up to this business model. Duroflex has launched a direct-to-consumer mattress brand called Sleepyhead. Interestingly, the website of this new brand is critical of the business model followed by its parent brand. “Did you know that a mattress that you buy at a retail store costs up to 60% more than the actual cost of the mattress? And don’t forget the delivery cost!” is how its FAQs section reads.

Sleep and tell

Mathew Chandy, MD, Duroflex, says the direct-to-consumer model is best suited for players entering the mid-level price segment. “For products that are more expensive and premium in nature, the retail experience remains an important part of the purchase journey,” he adds.

In the absence of distributors and retail experience, these new-age brands could begin to plateau very quickly. This is precisely why furniture e-commerce brands like Urban Ladder and Pepperfry had to set up experience centres.

Sleep solutions brands have started investing in experience centres to boost volume growth. “Getting consumers to buy high-value products, like mattresses, purely online could be risky as people may have low trust in the brand/ product. Therefore, consumer behaviour will change at a slow pace for this market,” says Devangshu Dutta, chief executive, Third Eyesight.

Even in the evolved markets where online retail has become a way of life, physical stores continue to exist. Especially in the case of upholstered furniture and mattresses, retailers encourage consumers to try out the product.

The challenge for young brands, hence, is to avoid the distributor model and find more affordable ways for consumers to experience their products. Wink & Nod has tie-ups with real estate companies to display its products. For its entry into the tier II and III markets, where selling mattresses exclusively online could be tough, Wakefit plans to build experience centres.

“The challenge here will be to generate footfall without the support of the traditional models, and therefore a brand will have to go for locations with more visibility,” says Dutta. But this means location cost will go up, so even if a company saves up on the distributor model cost, it could end up spending on managing, supporting and supplying the retail experience.

Source: financialexpress