Written By Aditya Kalra & Abhirup Roy
MUMBAI, March 6 (Reuters) – At a large Future Retail (FRTL.NS) supermarket in Mumbai last week, workers were unloading hundreds of bright blue grocery crates belonging to India’s biggest retailer Reliance.
Prospective customers were turned back by security, disappointed at the closed state of the store that still carries the signage of Future’s biggest brand, Big Bazaar, but which will likely soon be rebranded as a Reliance outlet.
Across India, similar scenes are being played out as Reliance Industries (RELI.NS), India’s biggest conglomerate run by Mukesh Ambani, the country’s richest man, presses ahead with a shock de facto takeover of prized retail real estate that Amazon.com Inc has been keen to take part-ownership of.
The high-profile bitter dispute between corporate titans in which Amazon has sought to block Reliance’s planned $3.4 billion purchase of Future Group’s retail assets is currently before India’s Supreme Court.
Reliance’s takeover began with utmost stealth on the night of Feb. 25 when its staff began arriving at Future stores. Many in Future’s management were in the dark about the plans as store employees from all over the country frantically began to call, according to people with direct knowledge of the matter.
“It was tense, everybody was panicking. We didn’t know who they were. They wanted access and seniors didn’t know about it,” a New Delhi Big Bazaar store employee said, describing what happened around 8 p.m. that day.
At a Future store in Sonipat town in northern Haryana state, announcements were made asking customers to leave as Reliance seized control, one source said. In Vadodara in western Gujarat, Future employees arriving for work the next morning were asked to go back home with no explanation, said another source.
Citing unpaid payments by Future, Reliance has taken control of operations of some 200 Big Bazaar stores and has plans to seize another 250 of Future’s retail outlets. Combined, they represent the crown jewels of Future’s retail network and around a third of all Future outlets. read more
Although Reliance had not played a large public role in the legal dispute, it had, according to sources, for some months assumed many of the leases held by cash-strapped Future, India’s No. 2 retailer and Amazon’s estranged business partner.
Reliance’s sudden possession of the stores appears to have landed what some analysts are calling a coup de grace that spoils Amazon’s chances of untangling the transfer of Future’s assets to Reliance. That’s despite a series of legal battles won by the U.S. e-commerce giant to date blocking the 2020 deal announced between the two Indian companies.
“What will Amazon fight for now?” said a source close to the U.S. company with knowledge of the legal dispute. “The shops are gone.”
Representatives for Reliance, Amazon and Future did not respond to Reuters queries for this article. Sources asked not to be identified due to the sensitive nature of the dispute.
AFTER THE TAKEOVER, TALKS
Future Retail said on Feb. 26 it was “scaling down its operations” to cut losses although it made no mention of Reliance in its statement. Future Group as a whole has more than $4 billion in debt.
Reliance plans to retain Future’s employees at the stores it takes over, sources have said.
Amazon, which has a stake in a separate Future Group unit that it argues prevents Future from selling retail assets without its permission, has called the supermarkets and other stores an “irreplaceable” network in a sector worth $900 billion in revenues annually.
The legal wrangles had over time become increasingly high-stakes and marked by ugly rhetoric. At one point, Amazon sought for Future Chief Executive Kishore Biyani to be detained in prison for disobeying a legal order. And Future once likened Amazon to Alexander the Great and his “ruthless ambition to scorch the earth”.
But on Thursday, six days after Reliance’s move, Amazon at a Supreme Court hearing unexpectedly called for cordial talks to end the dispute – a proposal Future agreed to.
“People have taken over shops … let’s at least have a conversation,” Amazon’s lawyer Gopal Subramanium said.
Discussions are expected to begin soon. read more
Whatever the outcome of the talks, analysts say Amazon had gravely underestimated Reliance.
“If anybody should have seen this coming, it should have been Amazon and they should have prepared against it,” said Devangshu Dutta of retail consultancy Third Eyesight.
“Clearly, they didn’t.”
Written By Christina Moniz
D2C brands take the offline route to widen reach
Direct-to-consumer (D2C) brands are fluffing up the Indian mattress category with promises of lower prices, mattress-in-a-box convenience, 10-year warranty and 100-day trials. In a market that is predominantly unorganised, startups such as Wakefit, The Sleep Company, SleepyCat and Flo are aspiring to establish themselves as better alternatives to legacy brands such as Kurlon and Sleepwell, with most of them looking at the offline retail route too, to boost sales.
According to a Research and Markets report, while India’s overall mattress market has grown at a CAGR of over 11% in the last five years, the organised industry has grown at 17%. The mattress category in India is worth `12,000-13,000 crore; of this the organised segment commands 40% share.
New-age mattress brands are able to deliver products at lower price points by taking control of the entire consumer journey – from product discovery to post-sales support. Therefore, these D2C brands save big on distributor and retail margins, says Devangshu Dutta, CEO, Third Eyesight. These savings go towards compensating for higher customer acquisition costs and logistics, he observes. The elimination of the middlemen means that customers get their products at 30-35% less than what traditional players offer.
However, these digital-native companies are aware that they operate in a touch-and-feel category, which is why many offer a 100-day trial period. Priyanka Salot, co-founder, The Sleep Company, says that the product return rate is only 2-3%, and the returned mattresses are donated to charities but never resold. The Sleep Company, which entered the market a little over two years ago, is eyeing a turnover of `1,000 crore in the next five years, and has plans to launch its first offline store in a few months.
Online players also save on logistics, says Chaitanya Ramalingegowda, co-founder and director at Wakefit. “We implemented the roll-pack technology that allows the mattress to fit into a compact box. This lets us ship more products at a time,” he says. Wakefit has only two factories—one in north India and the other in south India—as opposed to older players with 10-12 factories across the country, he points out. The company hopes to close FY22 with a turnover of 630 crore, up from197 crore in FY20. It has one offline experience centre in Bengaluru, with plans to launch 10 more across five cities soon; these centres will not only be experiential, but also double up as booking/ retail sales outlets.
Rajat Wahi, partner, Deloitte India, points out that these new-age mattress brands must establish deeper offline distribution to expand reach. “After all, more than 90% of retail is offline in India,” he notes.
This is why D2C brands are not only taking the offline route, but also foraying into other segments like furniture and sleepwear. Kabir Siddiq, founder and CEO of SleepyCat, says the brand has plans to launch around four experience centres, and aims to become a one-stop shop for all sleep and comfort solutions, offering comforters, pillows and even bedding for pets.
Is the proliferation of D2C players giving legacy brands sleepless nights? Mohanraj J, CEO, Duroflex, says it has been akin to a “wake-up call”. He says the company has poured in investments into the D2C segment in the past few years, and now even has a completely online brand called Sleepyhead, catering to the millennial consumers. “Until recently, about 10% of our company’s growth was from online sales, but we expect that number to change to 30-35% this year,” he adds.
Despite the influx of new-age players, he maintains that Duroflex has doubled its growth in the past two years, with traditional retail registering 25-30% annual growth.
Written By Ratna Bhushan , ET Bureau
Online spring festive discounts are making a comeback after two pandemic-hit seasons across apparel, fashion, household decor and appliances, and executives said discounts are higher as companies liquidate stocks and push sales amid reviving consumption sentiment.
The first festive season of the year starts next week with Navratri and spring festivals Ugadi, Gudi Padwa and Bihu falling in April.