Written By Vaishnavi Gupta

The furniture brand’s retail roadmap includes city stores in Delhi, Mumbai and Bengaluru, followed by tier I and II towns

For the Ikea model to succeed, adequate demand-concentration is crucial, which is being currently provided by the bigger cities in India.

After launching two large-format stores in India in a span of three years — one each in Hyderabad and Navi Mumbai — Ikea opened its first small-format store in Worli, Mumbai, to become “more accessible and convenient”. About 90,000 sq ft in size, these ‘city’ stores are already present in markets such as New York, London, Paris, Moscow and Shanghai.

The furniture market in India stood at $17.77 billion in 2020, and is expected to reach $37.72 billion by 2026, growing at a CAGR of 13.37%, according to a Research and Markets report. Godrej Interio, UrbanLadder and Pepperfry are among the big players in this space, all with a significant online presence, too. Godrej Interio has 300 exclusive stores in India, while Pepperfry has more than 110 Studios.

Spread across three floors, Ikea’s first city store has 9,000 products in focus, of which 2,200 are available for takeaway and the rest for home delivery. “We have observed that it is not easy to find large retail locations in cities like Mumbai and Bengaluru. The small store offers convenience and accessibility for consumers to experience Ikea products,” says Per Hornell, area manager and country expansion manager, Ikea India. This launch is in line with the company’s aim to become accessible to 200 million homes in India by 2025, and 500 million homes by 2030.

More launches are being planned: another city store in Mumbai in the spring of 2022 and a large-format store as well as a city store in Bengaluru by the end of 2022. For its retail expansion in Maharashtra, the company plans to invest Rs 6,000 crore by 2030. “We are on track to exceed the investment commitment of Rs 10,500 crore made for India in December last year,” adds Hornell. Delhi, Mumbai and Bengaluru are the three cities on its radar at the moment, which will be followed by tier I and II towns.

Furthermore, Ingka Centres, part of Ingka Group that includes Ikea Retail, is coming up with its first shopping centre in Gurugram (followed by Noida), which will be integrated with an Ikea store.

In India, unlike its organised furniture market competitors, Ikea doesn’t have a pan-India online presence yet. It has been following a “cluster-based expansion strategy” for its online offering, but the company insists this is not a limitation. “At present, 30% of our overall India sales come from online channels,” Hornell informs. Through its e-commerce website and mobile shopping app, the company currently operates in Hyderabad, Mumbai, Pune, Bengaluru, Surat, Ahmedabad and Vadodara.

On the other hand, players like Godrej Interio and Pepperfry have big plans to tap new markets. The former aims to add 50 exclusive stores each year, while Pepperfry aims to achieve the 200 Studios mark by March 2022. In September this year, Pepperfry forayed into the customised furniture segment with the Pepperfry Modular offering, which focusses on modular kitchens, wardrobes and entertainment units.

Good start?

This is a good time for Ikea to establish its presence in the Indian market, says Alagu Balaraman, CEO, Augmented SCM. “Earlier, people used to rely on carpenters for furnishing their homes; now, they prefer to buy ready-made furniture. The market is moving towards acceptability, making plenty of headroom for growth for these companies,” he says.

Ikea’s cautious expansion approach in a market like India where several local dynamics are at play, is tactful, analysts say. Devangshu Dutta, founder, Third Eyesight, says, “In the past, Western businesses have made the mistake of simply copy-pasting formats and strategies in emerging markets from their more developed markets.” He believes there is “nothing wrong” in being incremental while growing footprint. “There’s no sense in carpet-bombing the market with stores, when many may end up being loss-making or sub-optimal,” he adds.

Getting the product mix and pricing right would be key in realising the full potential of this market. Balaraman says Ikea will have to balance its global portfolio with what it is doing locally, and make sure it is profitable.

For the Ikea model to succeed, adequate demand-concentration is crucial, which is being currently provided by the bigger cities in India. Given its global popularity, the furniture giant, analysts say, is poised to see traction in the metros and tier I cities.

Source: financialexpress

Written By Rasul Bailay & Writankar Mukherjee, ET Bureau

Reliance Retail aims to be one of the world’s top retailers, but for the last couple of years, it has been a buyer, not a seller. It has bought a string of retail brands — from online pharmacy Netmeds and online furniture retailer Urban Ladder to digital lingerie seller Zivame, online grocer MilkBasket and haute couture label Ritu Kumar. The latest acquisition was Sri Lankan lingerie brand Amante.

Source: economictimes

Written By Vaishnavi Gupta

D2C brands are taking the traditional retail route to scale up

Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase

While brands across categories made a beeline for e-commerce during the pandemic, physical retail earned prominence among direct-to-consumer (D2C) brands. Melorra, Plum, Pee Safe and Libas, among others, have been building their offline presence over the past year.

The total retail market in India is estimated to be worth Rs 63 lakh crore, of which 95% buying happens through offline formats, according to Devangshu Dutta, founder, Third Eyesight.

Having started as an online-only brand in 2013, Pee Safe launched its first exclusive store in India in February, 2021. The personal hygiene brand currently operates a store each in Gurugram, Bengaluru and Ahmedabad; and plans to launch 50 offline stores in the next 12 months. “There is a strong demand for personal hygiene and wellness products in the offline market. Hence, opening exclusive outlets is a crucial element of our growth strategy,” says Srijana Bagaria, co-founder and director, Pee Safe. These exclusive brand outlets (EBOs) will be launched through the franchise-owned and franchise-operated (FOFO) model.

Online ethnic wear brand Libas, meanwhile, unveiled two brick-and-mortar stores in New Delhi in September, 2021. The brand has an ambitious target of 200 more stores by 2025 in malls and high streets across metro and tier II cities. A click-and-collect facility will be operational soon, says Sidhant Keshwani, managing director, Libas. “We are aiming for our offline market share to be 25% in the coming two years,” he adds.

The brand offers a range of wedding and occasion wear, as well as ready-to-stitch fabrics exclusively in its offline stores. Soon, it also plans to foray into the kidswear and menswear categories, as well as home décor.

Beauty brand Plum, which has been retailing online since 2014, launched its first store in Mumbai in October, 2021. Plum’s founder and CEO, Shankar Prasad, says the goal is to take the store count to 50 by 2023, and for EBOs to contribute “10-20% of our total sales in two-three years”.

Jewellery brand Melorra extended its presence offline back in December, 2020. “We have been growing 200% year-on-year; we expect to post even stronger numbers this year with the addition of offline stores. We are looking to touch $1 billion in revenue in five years,” says the company’s founder and CEO, Saroja Yeramilli.

A good step?

Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase. “D2C players have so far done a great job of owning the consumer journey which is largely online. They now see that for the next wave of growth and penetration, they need good representation in a larger set of touchpoints,” says Rachit Mathur, partner and MD, BCG.

However, online is likely to remain the primary revenue stream for these digital-first brands. “Brands such as Lenskart, Nykaa and FirstCry have done a great job in driving strong retail presence and viable productivity, but continue to have a higher bias of online sales,” Mathur notes.

D2C brands could perhaps try a mix of formats for an offline foray, from EBOs to a presence in departmental stores, or even small SIS (shop-in-shop) counters in shopping centres. But brands would need to be cognisant of the fact that consumers behave differently depending on the shopping environment they are in. Hence, the interface, service offering, and even the product mix may have to be tweaked. “Simply bringing in technology into an offline environment just because you are an online-first brand may do nothing to enhance the consumer experience, and may even detract from it,” Dutta says.

Source: financialexpress

Written By Sandeep Soni

Technology for MSMEs: The nine-member ONDC advisory council includes R.S. Sharma, CEO, National Health Authority; Infosys’ Nandan Nilekani; CAIT’s Praveen Khandelwal; Adil Zainulbhai, Chairman, QCI; Avaana Capital’s Anjali Bansal, Arvind Gupta, Co-founder & Head, Digital India Foundation; NPCI’s Dilip Asbe; Suresh Sethi, MD & CEO, NSDL and RAI’s Kumar Rajagopalan.

DPIIT in July this year, announcing the advisory council, had said that the ONDC is expected to “digitize the entire value chain, standardize operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for consumers.”

Technology for MSMEs: The Modi government’s ambitious Open Network for Digital Commerce (ONDC) project, which seems to replicate what UPI did to banking transactions to commerce now and has been in the works since last year, will be operated and managed by a private non-profit enterprise. In a review meeting for the ONDC project with the commerce minister Piyush Goyal on Tuesday, DPIIT Secretary Anurag Jain and members of the ONDC advisory council suggested setting up of the private entity that would lead the project right and “support SMEs in their digital transformation by developing readymade tools to help existing software applications quickly adapt to the network,” according to a statement by the commerce ministry. Helping small businesses through such tools is, however, one of the roles to be performed by the entity.

“ONDC is essentially a protocol and many technology companies that support or serve MSMEs may need to adopt this protocol. For instance, many traders, retailers, or small businesses might be using a particular billing software from a technology company. Now that billing software provider would need some handholding or tools to get onto the ONDC protocol which is an open network and align their billing software for use on the ONDC protocol. All this will be done by the ONDC team. In short, it will help everybody to get onto the protocol so that smarter digital commerce can happen,” a source privy to the ONDC project told Financial Express Online on anonymity.

The way it might work is that, for example, earlier a small shop owner was using a single software for billing customers at his/her shop but with ONDC, the same software will now be capable of posting whatever stock the shop owner has on the commerce platform, an ERP software provider told Financial Express Online based on the public information on the ONDC project and media reports. “If somebody is making a pickle at his/her house and supplying it to different retailers who have different software, how will the supplier show how much stock they have to fulfill orders at the same time to all retailers? If all of them have the same ONDC protocol then small manufacturers can post what they have to all retailers who can immediately order the product. ONDC will be useful a lot in the business-to-business model as well,” he said.

DPIIT in July this year, announcing the advisory council, had said that the ONDC is expected to “digitize the entire value chain, standardize operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for consumers,” as per the ministry’s statement. Essentially, what this would do is turn e-commerce from its current form into an open digital infrastructure, which is highly scalable for sellers and customers to connect with each other, without the barrier of making an effort of switching between two or more marketplaces for a particular product. The departure from the platform-centric approach to an open-source framework is the mainstay here.

“It is a welcome move and we look forward to the support that it will give to various small retailers, small manufacturers, and suppliers,” Kumar Rajagopalan, CEO, Retailers Association of India told Financial Express Online.

Rajagopalan was one of the nine-member advisory council that also include R.S. Sharma, CEO, National Health Authority; Nandan Nilekani, Non-executive Chairman, Infosys; Praveen Khandelwal, Secretary-General, CAIT; Adil Zainulbhai, Chairman, QCI and Capacity Building Commission; Anjali Bansal, Founder & Chairperson, Avaana Capital; Arvind Gupta, Co-founder & Head, Digital India Foundation; Dilip Asbe, MD & CEO, NPCI; and Suresh Sethi, MD & CEO, NSDL.

Comments sought from DPIIT on Tuesday evening for this story weren’t immediately available.

“Currently, there is no official deadline for establishing the non-profit entity. The point is that everybody in the advisory council is putting their might behind developing ONDC as they have been there, done that, and helped the government on various technology fronts. If small retailers and MSMEs, suppliers, etc., do better business, it is good for all of them as well,” the source told Financial Express Online on setting up of the entity.

The new entity suggested to Goyal will be overall responsible for providing the “startup mindset” for ONDC implementation and a “missionary outlook” for developing it “by adopting and building enabling technology and encouraging wide-scale voluntary participation by ecosystem players,” the Commerce Ministry said. The entity would also have to establish the code of conduct and rules for the network “on principles of consumer protection, fair trade and regulatory conformity” and provide “foundational services for managing the network like digital infrastructure for the network, common registry, certification of participants and certifying agencies, grievance redressal, etc.” Further, the entity will also develop and operate reference applications for buyers, sellers and gateway for market activation and priming the network along with partner entities, the ministry said.

Source: financialexpress

Written By Venkata Susmita Biswas

Why direct selling companies continue to be wary of e-commerce channels

A study by the Indian Direct Selling Association states that the Rs 17,000 crore direct selling industry grew by only 10% in FY21.

The pandemic drove brands across categories to sell on e-commerce platforms and connect with consumers directly. Brands like Cornitos and Bisleri went the D2C way, and carmakers like Hyundai began selling four-wheelers online. From March 2020, direct selling companies enabled individual sellers to accept and fulfill orders online. Modicare, for instance, introduced a chatbot, an instant messaging catalogue, and an online training academy for new sellers. Tupperware created a mechanism through which sellers could share unique links with customers and receive commission on all orders placed using that link. Meanwhile, Amway developed a programme to train direct sellers to create content for social and digital media, and become influencers.

However, these direct selling companies have not yet opened up the e-commerce channel to the end consumer.

A study by the Indian Direct Selling Association states that the Rs 17,000 crore direct selling industry grew by only 10% in FY21. This was a massive drop from 28.2% y-o-y growth in FY20; the industry grew at 12% and 13% in FY19 and FY18, respectively.

The direct selling industry leans heavily on person-to-person interactions and home visits by the seller. It has been attempting to pivot to digital for a couple of years now; this was further accelerated during the pandemic. “Since the pandemic, a majority of lead generation happens virtually. This could be on social media platforms, WhatsApp groups, Facebook Messenger, etc,” informs Frederic Widell, VP and head – South Asia, and MD – India, Oriflame.

Amway India is trying to create an influencer ecosystem through its network of direct sellers. Anshu Budhraja, CEO, Amway India, says these influencers will promote Amway brands to consumers and pave the way for social commerce. The company saw its online sales through individual sellers grow last year — from over 33% before February 2020 to over 70% today, Budhraja says.

Modicare introduced a digital alternative for sellers last year. “My Modicare Shop facilitates our consultants to create microsites on our server to directly engage with their consumers. It allows customers to place direct orders while crediting the business volume directly to the consultants’ account,” informs Samir Modi, founder and MD, Modicare.

No takers for e-commerce

Despite e-commerce adoption growing multifold during the pandemic, direct selling companies are opposed to sellers leveraging e-commerce marketplaces. In 2020, a Delhi High Court judgement allowed e-commerce platforms to list products of direct selling entities, like Amway, Modicare and Oriflame, without any consent before listing the products for sale. Despite this, companies continue to delist sellers who use e-commerce platforms. “We are against this practice and have repeatedly delisted distributors who attempted to unethically sell our products on e-commerce sites,” informs Gautam Bali, MD, Vestige Marketing, and chairman, direct selling council, ASSOCHAM.

Eureka Forbes India, which followed the direct selling model, now retails offline as well as on e-commerce platforms. The company sells everything from vacuum cleaners to air purifiers on e-commerce platforms under its own brand store. Tupperware embraced e-commerce in the second half of 2019, and saw business from these platforms grow more than twofold over the last one year. While 80% of the company’s sales takes place through traditional direct selling, e-commerce now contributes 8% to the company’s overall sales.

These channels don’t have to cannibalise each other, say analysts. “The other retail channels need to be viewed as complementary to the core business,” says Devangshu Dutta, chief executive, Third Eyesight. Brands need to move to channels where their consumers are shopping, say analysts. Younger consumers, especially from the millennial generation, shop on e-commerce platforms and value benefits like 24-hour delivery, no-questions-asked returns, and discounts. “If companies do not follow their shoppers, they will end up losing share of mind,” adds Dutta.

Direct selling companies are wary of e-commerce and D2C channels because they deem direct sellers as “the backbone of the industry”. “Companies do not wish to bypass these seven million individuals by selling to consumers directly,” says Rajat Banerji, VP, Indian Direct Selling Association. Typically, the D2C websites of direct selling companies are used by direct sellers to place orders on behalf of consumers.

Tupperware India MD, Deepak Chhabra, says that the company tackled this conundrum by making its own direct sellers operate on e-commerce platforms and handle the company’s offline exclusive brand stores.

Source: financialexpress