Mihir Dalal, MINT
Bengaluru, 9 May 2015

Because India doesn’t allow foreign direct investment in online retail, Amazon works as a marketplace, connecting customers with third-party sellers on its platform. The company has roughly 25,000 sellers currently and is adding a few thousand sellers every month.

“The intention is to expand this (global shipping for Indian sellers) to other markets. We did a pilot first and we found that this was very attractive for sellers, manufacturers and entrepreneurs. There are areas where there’s friction for sellers such as logistics, product compliance and tax because regulation is different in different countries. We are developing a network of third parties to provide these services to sellers,” Deshpande said.

Since its launch in June 2013, Amazon India has established itself as the biggest threat to local rivals Flipkart and Snapdeal. Until now, Indian companies haven’t ventured abroad, primarily because the size of the Indian market is large. E-commerce sales may exceed $50 billion (around Rs.3.2 trillion today) by 2020 from $4.47 billion last year, financial services firm UBS said in an April report.

Currently it’s unclear if international sales will become a large business for Amazon India. Paytm, another marketplace, is also exploring ways of cross-selling with China’s Alibaba, one of whose affiliates bought a minority stake in Paytm earlier this year.

“This service will help Amazon differentiate itself from local rivals because it offers sellers access to a much larger customer base,” said Devangshu Dutta, chief executive at consulting firm Third Eyesight. “Another advantage is that when you’re selling internationally there’s no margin pressure, compared with selling in India, where competition is intense. Sellers have pricing power and flexibility, and this obviously increases profitability. For Amazon, it’ll depend on whether they can scale this business up to a meaningful level.”

US-based Amazon, the world’s largest online retailer, already offers the global selling service to sellers in its international markets. Such cross-border selling accounts for about a fifth of its overall third-party sales.

Amazon India executives are working with their counterparts in the US and UK to make product recommendations to sellers and help them improve product visibility on the Amazon site. Apart from connecting merchants with third-party logistics providers, Amazon logistics services will also be available for sellers, said Deshpande.

“We think this is a huge opportunity. There are 25 million Indians outside India. And then there are other customers who want to buy stuff from India. Some of the early categories that we’ve identified are apparel, shoes, jewellery, health and beauty products, home furnishing and cricket bats, but the goal is to expand it to the full category set,” he said.

(Published in MINT.)

Purvita Chatterjee, The Hindu Businessline
Mumbai, 4 May 2015

With FDI in retail stuck in regulatory hurdles and e-commerce players snapping at their heels, brick and mortar retailers are looking for consolidation to get better margins and profits.
At a time when consumer demand has not exactly been upbeat, the two back-to-back deals among the biggest offline retailers over the last two days signals that more mergers and acquisitions could be in the offing.
While the merger of Pantaloon and Madura Garments was about restructuring the retail business of Aditya Birla Group to help Pantaloon reduce debt and get profitable, in the case of Future Retail and Bharti Retail, the merger signifies the latter’s decision to offload the retail business to drive scale and synergies with a bigger retailer.
In October 2013, Bharti Retail had called off its retail joint venture with US giant Walmart.

Govind Shrikhande, Managing Director, Shoppers Stop, said: “It has been a great move on the part of Aditya Birla Group as Pantaloon had always been challenged to make money. But in the case of Bharti Retail, it was possibly looking for a way to exit the retail business with its decision to merge with Future Retail.”

In fact, unlike the Future Group, retail had never been a core business for the Bharti Group since it had to spend heavily behind its telecom business. “The senior management of Bharti would have realised that it needs to focus on its core telecom business. It had been spending heavily on spectrum auctions. Besides, consolidation has been on the cards for brick and mortar retailers in areas like fashion where discounts in e-commerce had been affecting their profitability,” says Devangshu Dutta, CEO, Third Eyesight, a retail consultancy.

Besides, with FDI getting almost ruled out and foreign investors not exactly evincing interest, it was a matter of time before a series of domestic consolidation started in the retail industry.

“Aditya Birla Group wanted to get bigger and stronger through the merger of its two companies and in the case of Bharti and Future retail, the merger was all about getting scale and synergies when international investors were no longer interested in forging joint ventures due to several clauses related to multi brand retail,” observes Mohit Bahl, Partner, Retail Practice, KPMG.

Domestic players like Bharti Retail and Future Group can now ride on each other’s strengths. As Rachna Lath, Leader –Retail & Consumer, PwC India, added: “With the FDI in multi-brand retail still not a reality, a consolidation among the Indian players has long been on the anvil.

“This transaction gives both the players synergy and scale both in terms of geographical access and supply chain to manage the back end.”

(Published in The Hindu Businessline.)

Sharleen D’Souza, Financial Express
Mumbai, 3 May 2015

Having spent the past few years on customer acquisition, e-commerce players are now moving into the next phase of growth, with profitability as the aim.
Not only are the discounts tapering off, bigger players like Flipkart and Amazon have started levying delivery charges on certain products, irrespective of the price.
ecommerce
Till last year, e-commerce players only focused on creating a customer base by offering a higher level of discounts than brick and mortar stores. With that in place, now they are looking to reap the profits. For example, Myntra, a fashion and lifestyle retailer, hopes to see an increase of 300% growth based purely on the customers it has acquired over the last few years.
“Bigger e-commerce players are now focusing on moving towards profitability after burning cash all this while in an effort to acquire consumers. Many have started to decrease the level of discounts offered on various categories and have also started to charge for delivery, which is a way for players to generate revenue,” said Devangshu Dutta, chief executive at Third Eyesight, a retail consultancy firm.

A Snapdeal spokesperson said ultimately all businesses will look at profitability, but growth will not take a backseat. “Profitability is the ultimate goal for every business. However, currently our focus is on growth. Our vision is to build the largest digital commerce ecosystem in the country. The company has grown 600%, or seven times, in the past 12 months. We will continue to work towards not just maintaining, but bettering the growth momentum this year as well. Fashion, electronics and home categories will be the largest contributors to this growth,” said the spokesperson.

Some players have also started their own in-house brands and are witnessing higher margins from them. Private labels tend to give at least 20% higher gross margins than main brands. Main brands gross margins are at 40-45%, but private lables give e-commerce players an advantage, as they yield around 65% gross margins.

“Approximately one-fourth of our business is currently driven by Myntra’s in-house fashion brands. Some brands like Roadster, Dressberry and Mast & Harbour have grown significantly and are already category leaders on the website. Leveraging this opportunity, we are now building them as standalone brands that can grow beyond the Myntra platform,” said Abhishek Verma, head, Myntra fashion.

“E-commerce players are now tactfully reducing and offering select discounts,” agreed Arvind Singhal, founder and chairman of Technopak Advisors.

While Flipkart has started including delivery charges while displaying the price of the product, Amazon, which offered free delivery even on items costing less than Rs 100, now levies a delivery charge on a total bill of less than Rs 499.

All these years, sales may have been increasing for e-commerce players, but their losses have just widened. Flipkart India’s net sales rose to Rs 2,846.13 crore compared to Rs 1,180.07 crore in FY 13.

“The Indian e-commerce space is still at a very nascent stage with significant potential for innovation and growth. As a company, we are focused for the long term. We firmly believe that customers will continue to shop with us as long as they don’t find a better shopping experience elsewhere. We are, therefore, focused on ensuring that our flywheel that impacts customer experience keeps spinning. Our strategy is that you start with the customer experience and work backwards from it,” said an Amazon India spokesperson.

(Published in Financial Express.)

Ratna Bhushan, The Economic Times
New Delhi, 2 May 2015

In an unprecedented move, beverage maker Coca-Cola is sponsoring Reliance Retail’s ongoing five-day ‘Big Jackpot’ sale across its 600-plus food and grocery stores and has ended up promoting rival PepsiCo’s products.
The sale across categories includes foods, beverages, shampoos, detergents and fruits and vegetables. The ad-sharing, co-promotion deal, being run nationally across Reliance Retail stores, is a rare example of a large brand sponsoring a sale at a retailer, including a rival’s products.
"When a brand sponsors a big sale, which would run across as many as five days on a long weekend, in normal circumstances it would be rival-exclusive. That’s the purist approach," said Harish Bijoor, founder of consultancy Harish Bijoor Consults Inc.

"When a brand and retailer are expecting to create big buzz, the brand would normally be very careful not to include competition in the same basket."

Emails to Reliance Retail seeking details of the association with Coca-Cola elicited no response till the time of going to press. Coca-Cola and Reliance Retail will be tying up for future co-promotions as well, according to two people with knowledge of the matter.

"The deal factors in a larger contractual arrangement between the two companies and would involve the brand supplying the retailer at big discounts in return for high-decibel branding in ads and upfront placement of products and visibility across all its stores," one of the people said.

The April-June quarter is peak season for beverage makers, contributing 40 per cent to annual soft-drink sales, and the companies spend aggressively on marketing and trade promotions. Although they are trying to achieve uniform sales levels across seasons, both Coca-Cola and PepsiCo depend heavily on this quarter to drive volumes.

"While we are unable to comment on the specifics of our partnership terms with Reliance Retail, we do value our long-standing association with Reliance Retail and are always mutually exploring opportunities that are to the advantage of the consumers," a Coca-Cola spokesperson said. "We hope that consumers will exercise choice and opt for the best deals and discounts at the Big Jackpot sale." The spokesperson did not comment when asked why Coke is sponsoring the sale that clearly shows rival PepsiCo’s products in the basket of items.

"Generally, such tie-ups would be drive footfalls for the retailer and in-store visibility for the brand. It’s a market-share game and shelfspace game," said Devangshu Dutta, chief executive at retail and consumer products consultancy, Third Eyesight. Unlike restaurants and hotels, which associate with either of the beverage partners exclusively, there is no such product or brand restriction in modern trade stores.

Almost all big retailers including Big Bazaar and Spencer are running discount sales to cash in on the current extended weekend, though these are not sponsored. Retailers have been banking on ‘big days’ such as long weekends and Republic Day to increase sales as online rivals Flipkart, Snapdeal and Amazon widen their heavily discounted offerings across categories including apparel and home accessories.

Reliance Retail operates 616 value food and grocery stores across formats such as Reliance Fresh, Reliance Super and Reliance Mart. Revenue at India’s largest retailer increased 21 per cent to Rs 17,640 crore in the year ended March 31.

Big Bazaar, which pioneered the ‘big days’ concept, has previously partnered with Axis Bankand others for co-promotions, mostly linked to cash-back offers or additional discounts on payments through specific credit or debit cards.

(Published in The Economic Times.)