admin
September 9, 2015
Richa Maheshwari, The Economic Times
Bengaluru, 9 September 2015
Textiles major Arvind Ltd has created a new value department chain branded ‘Unlimited’ by converting large stores of its existing chain Megamart that has been struggling to shed its ‘discount format’ image.
The Ahmedabad-based firm has rebranded nearly 25 Megamart outlets of more than 10,000 square feet each as Unlimited and plans to have 125 stores under the new format in five years.
"We realised that even though we have sort of changed our proposition, still people associate the name (Megamart) with discounts," said J Suresh, managing director and CEO of Arvind Lifestyle.
Arvind will sell premium brands such as Arrow and US Polo at Unlimited stores but will focus more on mass-priced franchise brands such as Geoffrey Beene and Cherokee.
The stores will mostly stock full priced merchandise with an added focus on women and kids wear. "Space for women and kids will nearly double at our new stores compared to earlier which was mainly focussed on men’s range," Suresh said.
Megamart started as a discount outlet to liquidate old stocks in 1995. Arvind transitioned the Rs 600-crore Megamart chain into a value retailer three years ago and started optimising it to improve profitability. As a result, its store count has come down from 216 in in FY12 to about 130 at present, but it could not really get rid of the discount format tag.
Industry analysts point out that the online players have almost completely wooed away discount hunters across the country.
"If you look at the market, the whole discounting trend is owned by ecommerce sites now," said Devangshu Dutta, chief executive at retail consulting firm Third Eyesight. "For any physical retailer if there is an opportunity to review its real estate, then it’s better to look at something with better prices and better margins," he said.
Arvind now plans to halt expansion of smaller Megamart stores as they earn just 1.5% EBIDTA margins and have been a drag in sales too with 2% growth last fiscal.
Instead, the company will only open large format stores that operate with 8% margin. The existing Unlimited stores contributed nearly Rs 300 crore in annual revenues.
In India, the value department store chain format is less crowded with only three large players — Tatas’ Westside, Reliance Trendz and Landmark Group’s Max — currently operating in the segment.
"If you look at the value space, I think it is the largest market and quite unorganised today," said Suresh of Arvind Lifestyle. "But as we go forward, it will get organised," said the man who steers the traditional textile group’s efforts to shift its business focus away from ‘commoditised’ clothes business to brands and retail. Besides having its own brand such as Flying Machine and Excalibur, Arvind also partners nearly two dozen international fashion brands, including US Polo, Gap, Elle and Ed Hardy, in the country.
Market analysts are positive about the company’s potential. "Attractive revenue growth driven by the scope for growth for large brands in India, improving margins driven by the ‘power brands’ and optimisation of Megamart operations, better working capital, and asset turns higher than the company average should all fuel its financials," a recent Credit Suisse report said.
(Published in The Economic Times.)
admin
September 8, 2015
Devina
Joshi, Financial Express
Mumbai,
8 September 2015
Recently,
there was news of restaurant reservation site EazyDiner expanding
operations to Mumbai from the National Capital Region, having
secured Series A funding worth $3 million led by existing investor
DSG Consumer Partners, and Saamna Capital.
As per a PwC analyst, investors have pumped more than $150 million
into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy,
Zimmber and HolaChef, among others. Judging by the patronage showered
upon them by customers and investors alike, it would appear that
hyperlocal start-ups are all set to create the next big boom in
the Indian retail sector. But is it really all that rosy? Probably
not, as can be amply witnessed by acquisitions taking place in
the nascent yet already overcrowded market.
Between November 2014 and February 2015, the Rocket Internet-backed
Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured
to be in acquisition mode with TinyOwl. Restaurant search app
Zomato, which recently got into the food ordering space, is also
reportedly looking to acquire minority stakes in food-ordering
firms.
While investors are attracted to hyperlocal start-ups, controlling
logistics well is key to sustained growth for these businesses
— all of these will definitely go through a constraint in
the supply of delivery boys, for example. In India, organising
fragmented labour is a challenge and, hence, a services-based
hyperlocal needs to figure out the mechanics of human capital
even more than a traditional, product-based e-commerce firm.
For services, another challenge is customer stickiness. If a
user uses an app to obtain the services of a plumber, for example,
he may not go through the app to contact the plumber next time
if his services are found satisfactory. Discounting can induce
trials, but just like in any other business, prove fatal in the
long run. Like what led to the end of HomeJoy in the US —
excessive discounts to dissuade direct contact between servicemen
and customers.
Even for product-based start-ups, maintaining data quality is
a big hurdle as stock and prices may not be updated by retailers
in real time, making it difficult to track offline sales.
Since the game is hyperlocal, you need to be physically present
in the city to bring retailers aboard. For that, you need a city
team. Other challenges include retailer verification and assessment,
given that hyperlocals deal with small city retailers.
Stickiness is needed on both sides, and each locality will certainly evolve into having a market leader and a follower, with other players falling far behind. “So the critical success factor for a hyperlocal is being able to rapidly create a viable model in each location it targets, and then—to build overall scale and continued attractiveness for investors—quickly move on to replicate the model in another location, and then another,” says retail consultant Devangshu Dutta of Third Eyesight. As they do that, they will become potential acquisition targets for larger ecommerce companies, which could use acquisition to not only take out potential competition but also to imbibe the learning and capabilities needed to deal with microcosms of consumer demand.
(Published in Financial Express.)
admin
September 8, 2015
Devina
Joshi, Financial Express
Mumbai,
8 September 2015
E-commerce,
as we know it, is old news. Hyperlocal is the hot new buzzword
in retail hallways, going by the recent spate of well-funded launches
in this space. There is already a wide range of services on offer,
from grocery delivery to home, office and personal care services.
Hyperlocals, services-based or inventory-based, are largely an
urban India phenomenon. Services are hyperlocal by their very
nature, driven by locality or communities. When moving into a
new city, for example, people would like to stabilise as quickly
as possible and here, such services step in.
To put the whole picture in context, the Indian retail industry
is worth $500-600 billion. Of this, grocery items account for
about 67% of the revenue. However, in case of fast moving consume
goods (FMCG) and grocery, modern retail formats account for less
than 10% of the total sale. E-commerce or hyperlocals are obviously
a tiny part of the pie just yet. Most companies, therefore, are
still at a stage where they have to prove their business models
and change consumer behaviour.
While on-demand grocery delivery—the model that players
such as Grofers ride on—has immense potential in this space,
other high potential categories include delivery of services (such
as supplying peons/delivery boys, specialised laundry services,
plumbers or electricians), price comparisons, food ordering apps,
etc.
Hyperlocal startups in India
It is a no-brainer that an aggregation model, since it is asset-light,
is less capital-intensive than the inventory-led one. Moreover,
it is easier to scale up such a model. The new generation of hyperlocal
start-ups is coupling aggregation with logistics/delivery, thus
controlling even the last mile.
Take Zopper, a product-based hyperlocal which started off as
a price comparison website for electronics but now is a platform
for purchasing products from offline stores. It counts on faster
delivery through tie-ups with local shops near a buyer. “City
by city, we need to bring more merchants on board, and all they
have to do is download an app and their product can be listed
on Zopper,” says Neeraj Jain, CEO, Zopper. The company’s
margins vary from 2-8%.
Home services start-up Taskbob, founded by Aseem Khare, charges
a 20% commission from its servicemen. Product price comparison
website MySmartPrice works on commission too, while providing
a free six-month on-board period to offline sellers, where they
can use the platform for gaining traction. The revenue model of
BookMeIn, another home services company, includes a monthly subscription
fee for a SaaS-backed system given to service providers to manage
their business. Further, it gets revenues on leads/bookings done
by customers on the website, along with revenues through ads of
service providers. So what’s working in their favour?
A fertile environment
Indian retail is still dominated by brick-and-mortar stores, which,
oddly, is an opportunity in disguise for hyperlocal players. Unlike
non-hyperlocal e-commerce, these start-ups are not really competing
with offline retailers, but are partnering them instead.
Hyperlocal business models spell instant, on-demand delivery as
they cater to needs of a more immediate nature. The gratification
is far more accelerated – the entire transaction can be completed
in an hour sometimes. Customers also tend to trust hyperlocals
more than non-hyperlocal e-commerce websites, as the stores they
buy from through online platforms have a physical presence, making
it possible to attend to any grievances quickly. Further, the
start-up can tap into existing infrastructure, acting as a bridge
between existing retailers and the consumer.
“Due to the convenience factor, by being able to tap
into consumption opportunities that might have otherwise been
missed, the aggregator can actually drive new demand to the retailer
in the short term,” says retail consultant Devangshu Dutta,
chief executive, Third Eyesight.
Within hyperlocals, services have higher margins of around 20%
as opposed to product based models which earn 2-10% margins or
even non-hyperlocal e-commerce companies, which operate on 3-7%
margins, depending on the category.
This is because there is virtually no warehousing, inventory management or logistics involved in a services hyperlocal. Within services, food-ordering apps have an added advantage of the frequency of purchase as opposed to, say, e-commerce products. “The category is a high-repeat one as opposed to home repair for example,” says Saurabh Kochhar, co-founder and CEO, India, and chief business officer, global, Foodpanda.
A word of caution
While it ensures higher margins, replication of a services model
is much more difficult. Training of people in services is very
difficult as each individual has to be available wherever the
customer is located. “Second, when a product delivery happens,
I need local people to deliver it but if a person is coming to
give a service, he represents your brand and should know how to
handle a customer,” says Alagu Balaraman, partner and MD,
Indian operations, CGN Global India, a supply chain management
consulting firm.
Third, as the services industry is rather fragmented, it is difficult
to form partnerships with associations or groups of such service
providers, as specialists are spread out across the country. Fourth,
creating a need for services might be difficult as people may
already have their own local set-up in place. “But that mindset
is changing, with a large group of urban people who don’t
have the time or patience and need professional services,”
he says.
The biggest learning will be the capability to scale. A hyperlocal that focuses on a single ‘locality’ will find it difficult to get the scale needed to create an economically viable model. Being able to identify a widespread but local need, and having a model that adapts to each new market will be crucial.
(Published in Financial Express.)
admin
September 7, 2015
Deepti
Chaudhary, Forbes India
Bengaluru,
7 September 2015
One
look at Dilip Kapur and you will know he wears his brand proudly
on his sleeve: Or, in his case, carries it on his arm. “It’s
like carrying a story, an emotional bond,” says the 67-year-old,
pointing to his Hidesign handbag which, he tells us, is at least
20 years old.
The promoter’s sentiment also speaks of the Rs 160-crore company’s ultimate goal—to emerge as a lifestyle brand that touches all aspects of a customer’s life. And its efforts over nearly four decades have been trained towards that. The last two years have been particularly busy as it delivered several ‘firsts’. For instance, the Puducherry-based leather firm unveiled its footwear collection for men and women; it launched sunglasses and also started offering discounts for the first time ever.
It has also set in place plans for the next five years, says Kapur, the effervescent founder of Hidesign, adding that the brand has to go beyond bags, the product group with which it is most closely associated. “We realise that the biggest hurdle in the development of a brand is to get stuck on one product. Gucci, Louis Vuitton… they all went beyond bags. I don’t want Hidesign to be just a bag brand, it has to extend into a lifestyle brand,” he says. Over the next two years, the footwear line is expected to contribute 12-15 percent of the company’s turnover. Hidesign clocked revenues of over Rs 160 crore in FY2015. It has also posted year-on-year revenue growth of 20-30 percent over the last four years. At over 60 percent, bags are the biggest contributor to its revenues.
This growth spurt, perhaps, is linked to the involvement of Louis Vuitton (LV) with the company. In 2007, the French luxury giant chose Hidesign to tap into the leather products space in India and acquired a five percent stake in the firm. While LV does not generally speak to the media about its investments, in 2007 it told Financial Times that “it liked the homegrown nature of the brand”. LV has been advising Hidesign on branding, marketing and training.
Hidesign’s products are currently offered across over 60 exclusive retail stores; it has a distribution network in more than 20 countries. Its leather collection includes handbags, clutches, briefcases, laptop cases, wallets and belts. Apart from the flagship brand, Hidesign launched Holii, a brand aimed at bringing distinct Indian design aesthetics to bags and accessories along with high production standards, in 2009, in a joint venture with the Kishore Biyani-led Future Group. The Hidesign group also runs two hotels in Puducherry: The Promenade and Le Dupleix. In 2012, Hidesign forayed into the luxury segment and launched its range of ‘Ciaschini’ bags named after Italian designer Alberto Ciaschini who joined Hidesign as lead designer in 2004.
The person behind it
For Kapur, it all started in 1978 as a hobby from a thatched shed in Puducherry. He had just returned to India from the US after earning a PhD in international affairs from the University of Denver. He seed-funded his ‘hobby’—designing bags—with Rs 25,000, using the money to buy a sewing machine and leather.
Since then, an adherence to quality has defined Kapur’s approach to the retail business. And his persistence seems to have paid off. For instance, Hidesign is the only firm in the country in which Louis Vuitton has invested directly and not through its PE arm, L Capital. But that’s not enough for Kapur, for he has another milestone to cross. “An IPO will happen for sure, but not right now. We will consider it when we have a top line of Rs 400 crore,” he says. In any case, Hidesign is in for the long haul, he adds.
Why it is a gem
Hidesign’s aesthetic focus has been on a classic contemporary look, catering to the educated and sophisticated urban professional. The company has three design teams based in Milan, London and Puducherry that work together to create two new collections a year. Besides its seasonal collections, Hidesign has a classic range of products that have seen minimal change for thirty years and continue to garner customer appreciation.
Also, the company has been able to hold its own in what is a very competitive handbags market, comprising organised and unorganised players. Over the last few years, brands like Lavie, Da Milano, Baggit, Caprese, Lino Perros and Esbeda have come up and are dominating the space. Not only are these brands cheaper than Hidesign (which plays in the Rs 3,000-8,000 price range), they also offer huge discounts, sometimes as much as 50-60 percent, during the sales season. Kapur is not overly concerned about the competition though, saying the Indian handbag story is a game of Chinese imports and Hidesign is not that.
Though a price war is not a part of Hidesign’s plans, staying affordable is. For the first time, Hidesign has started offering discounts. Kapur says it’s a market “compulsion”. “We would be the only shop in the malls not to offer sales and our staff would complain,” he says, chuckling. “But our discounts are not like others. They are small, only for handbags and are never more than 25 percent. The sales are never on classics.”
Instead of going through distribution channels, the company is now working on a direct presence in overseas markets and is in the process of setting up its US business in California; Kapur’s son Vikas is overseeing that. Experts say the biggest USP of Hidesign is its product. “It’s not a mass product, it’s not a copy of others and it’s not a me-too product,” says Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy.
And finally, Kapur’s openness to adapt and change helps. “We believe beauty comes naturally… it is in cotton and linen, not synthetic or nylon. Are we getting into clothing? No brand can survive without getting into that,” says Kapur. “Apparel is a bit too early for us but we will get there in five years. Apparel is the final step. Typically brands get into apparel late.”
Why it was hidden
Despite operating in the retail space, Hidesign isn’t quite an over-exposed name yet. Its premium positioning and pricing has restricted it from becoming a mass brand in the leather products category. Shying away from regular print and television advertisements, Hidesign’s promotional push is comparatively niche and targeted predominantly at an aspirational urban clientele.
The leather goods manufacturer has also stayed away from celebrity endorsements, a common trend in the retail and lifestyle business.
Further, the Hidesign brand is synonymous with the handbag business and very few are aware of its footwear line, its ecommerce portal or its presence in the hospitality space.
Risks & challenges
One of the variables that this business faces is that its products are made from cow leather. With tanneries shutting down in cities like Kolkata and Kanpur, procuring leather has been a challenge. There are, of course, also the global protests regarding the ethics of using leather.
Then, there is the expert view that Hidesign needs to spend more time in India before it gets into brand extension. “Globally, it is the second or the third generation that goes for brand extension,” says Harish Bijoor, chief executive at Harish Bijoor Consults Inc, a brand consulting firm, adding that creating too many categories can affect the company’s focus.
Dutta of Third Eyesight says brand extension can be undertaken by a company only if it is confident of maintaining the consistency of its product quality. He adds that it is imperative for companies to understand that brand extension works well in adjacent categories. “It should not devalue the brand,” he says. Especially not one that the promoter himself likes to wear like a badge of honour.
(Published in Forbes India .)
admin
September 3, 2015
Writankar
Mukherjee, The Economic Times
Kolkata,
3 September 2015
Mahindra
Retail will rename its maternity and childcare stores as ‘Babyoye
by Mahindra’, dropping the name ‘Mom & Me’ in favour of shopping
website Babyoye. com, which it acquired earlier this year.
This is the first time that an Indian retailer is adopting the name of an online entity for its brick and mortar stores, indicating the bigger pull of e-commerce in certain segments. The retail arm of Mahindra & Mahindra had been operating its 115 maternity and childcare stores under the name ‘Mom & Me’ for six years.
The company said it wants a single unified brand presence across channels and that ‘Babyoye’ has a larger recall, is more youthful, and resonates better with younger parents who would interact simultaneously with online and offline.
"The Babyoye brand brings with it a connect due to its big online presence and we also wanted to capitalise on the Mahindra brand, which is our parentage and has its own legacy," said Mahindra Retail chief executive officer Prakash Wakankar. "Sufficient evaluation was done where both Mom & Me and Babyoye brands stood, and we decided to go for the latter not because it was superior, but since it’s more vibrant and a reflection of current consumer trend," Wakankar said. Wakankar said Mahindra Retail will completely integrate operations between the online and offline entity as part of the company’s omni-channel strategy.
"While Babyoye online would offer a wider range, consumers would eventually be able to order from the store any product sold online, pick it up from the store and even return it to the store," he said. Mahindra Retail had earlier shut down its Mom & Me online store and integrated it with Babyoye.com.
Analysts said it makes sense to put muscle behind one brand rather than two, if the segments targeted are identical.
"The pros and cons of picking one over the other depend on which one is more visible and has higher weight with the consumer. Also, since Mom & Me has been targeted at a broader age range, with Babyoye being selected as the operating brand the merchandise mix in the stores will also be significantly refocused and narrowed down," said Devangshu Dutta, chief executive at consultancy Third Eyesight.
Last fiscal, Mahindra Retail had revenue of Rs 210.5 crore and incurred net loss of Rs 118.9 crore, according to Mahindra & Mahindra’s annual report.
Wakankar said that with more than 92 company-owned stores, breakeven
is still a couple of years away, but the retailer has undertaken
several initiatives to increase per sq feet revenue which will
ultimately deliver results.
(Published in The Economic Times.)
