Retail penetration in India has a lot of catch-up to do, according to Cushman & Wakefield analysis

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October 31, 2022

Written By Faizan Haidar, ET Bureau

Synopsis
“Physical spaces are built to encourage lifestyle-oriented consumption, moving away from hard sales push. Hence, given the current retail real estate supply, there is a strong likelihood that retail spaces where experiences can be curated will be in short supply even in large cities,” said Anshul Jain, managing director, India and Southeast Asia.

India’s top three cities will need 9 million square feet of retail space every year till 2027 to reach the level of organised retail area available in a country to match cities of a small country like Vietnam’s retail space per capita (RSPC), according to an analysis by Cushman & Wakefield. Currently India adds about 3.8 million sq ft of retail area every year with developers mostly focusing on office and residential assets.

Source: economictimes

Walmart and Ikea continue to bleed in India as losses widen

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October 29, 2022

By Pranav Balakrishnan & Writankar Mukherjee

Global retail giants Walmart and Ikea continued to bleed in India as their losses widened in 2021-22, despite a surge in sales, as per the latest regulatory filings.

Three of Walmart entities in the country – Flipkart Internet, which operates the namesake e-commerce marketplace, Myntra and Walmart India, which operates Flipkart Wholesale stores (formerly known as Best Price) that sells goods to mom-and-pop stores, all expanded losses by 40-50% largely due to higher spending on delivering orders, advertisement and promotions, while their revenues grew by up to 45%.

Ikea India’s net loss too went up by 12%, while revenue jumped by 77% in FY22, filings made to the Registrar of Companies and sourced from business intelligence platform Tofler showed.

“Walmart and Ikea are currently in a market acquisition mode in India to establish a dominant position and may sacrifice profit in the short term,” said Devangshu Dutta, chief executive of consulting firm Third Eyesight. “But in the long term, these companies will definitely chase profit in India. Also, the market environment has been tough last fiscal due to increased competition despite a bounceback post-Covid,” he said.

Walmart is yet to publish the FY22 results of Flipkart India Private Ltd, which is a business-to-business entity which supplies goods to online sellers and also Flipkart’s online B2B business. The entity posted a revenue of Rs 7,840 crore in FY21.
Furniture and home décor store Ikea India reported revenue from operations at Rs 1,076 crore in 2021-22, while the net loss was Rs 902 crore.

In the filings, the company said it continued to work on its plans towards positioning, growth and profitability of the omni-channel business in India. It said expansion plans and operations were impacted due to Covid-19 in FY22, but the management is optimistic about future prospects.

Of the Walmart arms in India, Flipkart Internet, posted a 33% rise in operating revenue of Rs 10,476 crore in the year ended March 31, 2022, while its loss widened to Rs 4,361 crore from Rs 2881 crore in FY21. The filings showed the company spent Rs 5,045 crore in delivering orders, which was 46% higher compared with the year before, while advertisement and promotional expenses almost doubled to Rs 1,945 crore from Rs 1,073 crore.

The company’s revenue comes from multiple sources, including platform fees collected from sellers, and services such as shipping and carrying advertisements. Revenue from marketplace services remained largely flat at Rs 2,823 crore while that from advertisements increased 50% to Rs 2,083 crore. The Indian company is the top contributor to parent Walmart’s ad revenue globally. Revenue from logistics services grew 57% to Rs 3,848 crore.

Meanwhile, Walmart India – which owns and operates 28 cash and carry wholesale stores – posted 6% jump in revenue at Rs 5362 crore in FY22, while net loss went up by 49% at Rs 299 crore as compared to the year ago.

Myntra Design, the Walmart entity which owns the fashion marketplace Myntra, reported a 45% jump in revenue from operations to Rs 3,501 crore while losses widened 40% to Rs 597 crore in FY22. Revenues of Myntra Design come from commission and service charge collected from brands and sellers on the platform.

Revenue from marketplace service increased 18% to Rs 1,610 crore, while income from logistics services almost doubled to Rs 1,498 crore and revenue from advertisement jumped 76% to Rs 344 crore.

ET reported on September 13 that Amazon Seller Services, which runs the Amazon India marketplace, reported a 32% jump in overall revenue to Rs 21,633 crore on a standalone basis in FY22.The local unit of Seattle-based Amazon had also cut losses by almost 23% to Rs 3,649 crore in FY22.

Source : economictimes

How Sprite entered the billion-dollar club

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October 28, 2022

Christina Moniz
Mumbai, October 28, 2022

Earlier this week, global soft drinks major Coca-Cola Company announced that its Iemon and lime flavoured carbonated drink, Sprite, had become a billion-dollar brand in the Indian market. While Chairman and CEO James Quincey attributed much of Sprite’s India success to “locally adapted, occasion-based global marketing campaigns and screen time,” industry experts outline a few other factors such as consumer preferences that have also worked in the brand’s favour.

Lemon and lime drinks are not new to the Indian consumer’s palate, which provides a large baseline demand for brands such as Sprite, remarks Devangshu Dutta, CEO, Third Eyesight. “Some consumers also perceive clear lemon-based and non-caffeinated drinks to be more natural and healthier than colas, even if the actual ingredients may be far from healthy,” he says.

This set of consumers is seemingly quite large as according to a syndicated study by Kantar, Sprite has a household penetration of 11%, which is the highest for a beverage brand.

What have helped are the lingering doubts over cola beverages after the pesticide controversy in the early 2000s, giving brands like Sprite a leg up. While the pesticide allegations are no longer a talking point, Naresh Gupta, cofounder and chief strategy officer, Bang In The Middle, points out that social media and unsubstantiated Whatsapp forwards continue to create concern around the consumption of colas.

“Although cola brands dominate the aerated drinks market, brands like Sprite carry the imagery of being a safer drink and so a large section of consumers see it as an alternative. Credit also goes to Sprite’s communication, which has made it a cooler, friendlier brand. Contrast this with the colas, which have a more hard-core imagery attached to them,” explains Gupta.

Keeping It Clear

In 1999, Sprite was launched in India with the tagline, ‘Sprite bujhaye only pyaas, baki all bakwaas, positioning itself as a basic thirst quencher. Since then, it has continued with the same positioning although its taglines changed regularly- from ‘seedhi baat, no bakwaas, clear hai!’ in 2008 to its current tagline ‘thandrakh’.

Ajay Gahlaut, group chief creative officer, Dentsu Creative, who worked on Sprite’s advertising between 2007 and 2018, takes great pride in its billion dollar success in the country. Gahlaut, who was at Ogilvy India when working on the brand, explains that the ‘clear hai’ message was a key part of the brand’s communication, one that also cleverly played on the drink’s clear appearance. “Sprite was always a counter-culture brand, went against the grain and for the most part, stayed away from celebrity endorsements. Working on the brand was sometimes a challenge because we had to think of taglines that were slightly provocative, but which still resonate with the younger consumers,” he explains. With each tagline, the focus was on keeping the communication no-nonsense and upfront, and the brand’s consistent tone of voice paid off well, Gahlaut points out.

Over the years, Sprite has been able to create a distinct brand persona that sets it apart from other beverage brands in the market, notes Nisha Sampath, managing partner, Bright Angles Consulting. She states, “Taglines, endorsers and stories may change with time and generations, but the brand’s persona has not changed, nor has its connect with the youth. The ‘clear hai’ line encapsulates Sprite’s marketing and communication strategy, and it is a classic example of how strong positioning is timeless.”

Other Trends At Play

The non-alcoholic beverages category in India is expected to reach Rs. 1.47 trillion by 2030, with a CAGR of 8.7% according to an ICRIER report. While colas continue to dominate the market, lemon and other flavoured drinks are not far behind. Ankur Bisen, senior partner and head, retail, consumer products and food, Technopak Advisors believes there are multiple niche trends that are supporting the growth of the non-cola aerated beverage category. One such trend is that clear carbonated drinks like Sprite are popular alcohol mixers, making them a natural extension to alcohol as a market.

He observes, “The brand has also got the right SKU (stock keeping unit) sizes – from small 250ml bottles to the big packs. Beyond its advertising, the brand has got its retail placement absolutely right, and that is where half the battle is won. Additionally, both 7UP and Limca are also seeing muted growth, and that has helped Sprite become the leader in this category.”

Gupta too notes that Pepsi could have done more to build the 7UP brand, but its lost opportunity has allowed Sprite to gain ground. He adds that Sprite continues to stay relevant and visible, through its advertising and distribution, which is why it has captured the lemon based drinks segment.

(With inputs from Akanksha Nagar)

Can Reliance’s Azorte give stiff competition to Zara, H&M, Mango?

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October 12, 2022

Spearheaded by Isha Ambani, the venture seems to be an attempt to consolidate the brand’s consumer retail offering.

Reliance Retail has launched a premium fashion and lifestyle brand, called ‘Azorte’. It is a consolidation of brands from Reliance’s stables, and has both an offline store at Bengaluru as well as an online presence on azorte.ajio.com. The store stocks products such as clothing, personal care products, home decor, jewellery, and footwear. Most of the brands stocked at Azorte are Reliance’s in-house brands.

Brands part of Azorte's collection

Brands part of Azorte’s collection

Reliance Retail also caters to consumers online through its website, ajio.com. With JioMart, it offers a hyperlocal retail solution that makes full use of Reliance Retail’s wide range of grocery stores and supply chain infrastructure.

According to a CNBC-TV18 report, the company is just getting started with Azorte. The report quotes Akhilesh Prasad, CEO, fashion and lifestyle – Reliance Retail, as saying that the next store is all set to open in Hyderabad.

Prasad adds that within the next nine months, the company is looking at opening 35-40 new stores in 16 different locations – metro cities, mini metro cities and state capitals – across the country.

A press release quotes Prasad as saying that the mid-premium fashion segment is one of the fastest-growing consumer segments, as millennials and Gen Z are increasingly demanding the latest international and contemporary styles.

A mid-premium fashion brand is one that still has aspirational value, while continuing to be affordable. Other examples of mid-premium fashion brands include H&M, Mango, Vero Moda, etc.

This is not Reliance Retail’s first foray into different value sets of products. According to its website, Reliance has a portfolio of fashion and lifestyle brands that spans across value, mid, premium and luxury segments. The company operates brands such as Trends, Trends Footwear, Avantra by Trends, Reliance Jewels, and more.

What kind of products does Azorte stock?

What kind of products does Azorte stock?

In addition to this, Reliance also operates a portfolio of international brands, such as Armani, Diesel, Burberry, Marks & Spencer, Superdry, and others in India. The website also mentions that Reliance Retail reported a turnover of close to Rs 2 lakh crore for the financial year 2020-21. Reliance Retail operates 15,196 stores across 7,000 cities.

Devangshu Dutta, chief executive at Third Eyesight, points out that a part of Reliance’s strategy is to be larger than life – to be as big as possible and present in as many segments as possible.

He points out that Reliance already has a presence in the high-end retail brand market, with its international brands portfolio. Now, it is targeting the segment below that; which is growing, as the segment of people with disposable incomes increases.

“If you look at the brands that take up space on the ground floor of shopping malls – they are mostly international and luxury brands. India should have more homegrown luxury brands to compete with. We have a large young population and a strong manufacturing base. The number of brands we have, in comparison to these two factors, is actually minuscule,” Dutta adds.

Samit Sinha, founder and managing partner, Alchemist Brand Consulting, explains that one of the frontiers that Reliance has been unable to conquer, is retail. That is why it is looking to aggressively expand.

“Reliance Retail wants to have a comprehensive presence across categories and segments – both online and offline, with Azorte. It makes sense that Reliance Retail is creating a space for its brand, since e-commerce retailers, like Amazon, have their own brands,” says Sinha.

What sets Azorte apart from other retailers?

What sets Azorte apart from other retailers?

Dutta says that another aspect of competition that exists between international brands and homegrown brands – like the ones Reliance is stocking at Azorte – is aspiration.

“Brands like Zara have been around since 1975. Even before its India launch, Zara used to have many visitors from India on its online website. The aspirational aspect certainly exists.”

Reliance Retail has aggressive expansion plans for Azorte. Dutta says that a mix of both online and offline is important for brand building. “Reliance has the resources to create a footprint for the brand, and that’s half of the battle won.”

Sinha agrees that offline presence for the brand – especially in the mid-premium luxury segment, is important in building up ‘brand Azorte’ in the minds of consumers, since brand building is not as strong when the brand just has an online presence.

Dutta argues that an offline presence is as important as an online one, since most consumers may experience the brand offline, even though they may browse its products online or on various apps.