admin
October 6, 2014
Avinash
Bhat, The New Indian Express
Bangalore,
6 October 2014
As Diwali approaches, brick-and-mortar retailers are scrambling
to compete with online websites offering hefty discounts to woo
shoppers.
Offers like one-plus-one and 50% discounts are becoming the norm across shops.
This week, major online retailers like Snapdeal, Flipkart, Jabong and Amazon announced campaigns to target festival shoppers. Realising the need to compete, physical retailers are also offering huge discounts.
The online market in India has been growing at a dizzying pace, and attracting huge investments. In 2014 alone, Flipkart raised $1 billion in funds while Amazon announced plans to invest $2 billion in business expansion. Snapdeal, another online retailer, attracted a sizeable investment by industry magnate Ratan Tata, who has put in an undisclosed amount into the Delhi-based company.
According to a study by research firm Crisil in February this year, the online retail sector is estimated to grow at 50-55% for the next three years. Revenues have already touched Rs. 13,900 crore in 2012-13, and are likely to grow further as the online market share in the overall retail space still remains small.
This growth has not escaped the attention of brick-and-mortar sellers, who are being compelled to ramp up their online presence. Trader associations have vowed not to supply goods to online retailers who sell below the market price. This has led to online retailers saying that they are mere marketplaces where the prices are decided by other sellers.
As murky as the situation might be, consumers are the clear winners in the entire deal.
“I have been buying products online for a long time now. They offer door delivery and in case I do not like the product, I can get it returned without having to go to a store and wait in line. This is much simpler,” says Arvind T, an HR professional in the city.
“The offers are sometimes better or at least as good as the stores when you factor in the delivery and the ease of shopping online,” says Siddharth R, an IT professional.
It is this ease of shopping online that is adversely affecting the more traditional methods of shopping, feels Devangshu Dutta, CEO of Third Eyesight, a retail consultancy.
“Offline retailers have been investing in infrastructure since 2000, and there is high capital involved. As long as they are able to respond to these (online) offers, they do not have to match the discounts as they have a very large segment of touch and feel buyers,” he says.
However, the writing on the wall is clear for physical stores, Dutta feels.
“They need to match the service offered by the online sites. With assured service backup with online retailers, customers will go for the lowest priced products and a difference of even `200-400 could be a deal breaker for some,” he says.
Diwali sales under way
(Published in New Indian Express.)
admin
October 2, 2014
Reghu
Balakrishnan, Business Standard
Mumbai,
2 October 2014
The Indian private equity (PE) sector has, of late, been witnessing
a churn at the top. In the past two months alone, at least six
top executives have quit leading PE firms, citing reasons such
as starting their own funds, a lack of performance by the existing
funds, and entering the e-commerce space, which has recently witnessed
a lot of action.
Among the notable exits is that of Kanwaljit Singh, co-founder and senior managing director of leading venture capital (VC) fund Helion. Singh quit two weeks ago to pursue his interest in the fast-moving consumer goods (FMCG) space, according to a Helion statement.
Singh serves on the boards of Attano, Fashionara, Hurix, HummingBird, LifeCell, Mast Kalandar, Qwikcilver, Yepme and YLG Salons. He has also worked with FMCG giant Hindustan Unilever.
Vikram Utamsingh, managing director, Alvarez & Marsal India, said: “In a few situations, the senior PE executives have had success with their funds and have developed a good track record, and now feel it is the right time to become entrepreneurs and raise a fund on the back of their track record.”
Another noteworthy exit is that of KKR India’s PE head Heramb Hajarnavis, who quit this month to set up his own venture. Before joining KKR in 2010, Heramb was the managing director of Goldman Sachs’ principal investment unit.
“We have also seen a couple of PE professionals wanting to move from PE firms that do large-size deals to those that do small- and mid-size deals, as the volume of mid-size deals is quite high. This is because the carry fee that PE executives earn depends on the deals they do and the returns they make on those deals,” said Utamsingh.
According to Sunit Mehra of executive search firm Hunt Partners, the disputes among founders is one of the major reasons for such a churn. “Most of these firms are partnerships driven by first-generation entrepreneurs. Over the past four years, this industry has seen tremendous stress. Inevitably, this phase has had (and will continue to have) an impact on business fundamentals of several of these ventures, and, in addition, has tested relationship between the founders.”
However, a few have joined the e-commerce bandwagon, which attracts a major chunk of talent from India Inc nowadays. Last month, Nishant Verman, vice-president of venture capital firm Canaan Partners, had quit the firm to join India’s largest e-commerce platform Flipkart to take care of mergers and acquisitions. Abhijeet Muzumdar, former vice-president at Bessemer Venture Partners, joined Amazon India to get involved in investments and acquisitions in India. Abhishek Kumar, head of investments at Palaash Ventures, joined Snapdeal with a similar role.
“A mid-level manager in a PE or VC fund is specifically looking at companies that can be invested in or acquired for further growth with a relatively short span of time. Well-funded e-commerce companies that are in a rush to gain both growth and margin are also looking for acquisitions or partnerships that can provide them an inorganic boost. So, there are certainly overlaps in the skill sets needed,” said Devangshu Dutta of Third Eyesight.
Recently, Rahul Khanna, managing director of Canaan Partners, launched a Rs 300-crore ($50 million) debt fund. Khanna is reportedly quitting Canaan and getting involved with the new venture by the next year.
(Published in Business Standard.)
admin
September 28, 2014
Arpita Mukherjee, Business Today
Mumbai, 28 September 2014
About
a decade ago, Suresh Goklaney, visited his sister in Daytona Beach,
US. There, the Executive Vice Chairman of Eureka Forbes happened
to meet Fred Tepper, Founder and President of Argonide Corporation,
which makes nanotechnology-based water purifiers. The company
then adopted this technology to launch a portable water purifier,
Aquaguard On The Go, in 2014.
Seven years ago, a Eureka Forbes salesperson, also called a Eurochamp,
pointed out to Goklaney that the quality of water supplied to
Indian homes varied through the day. The company subsequently
launched a water purification device, Aquaguard Sensa, in 2008.
The device, automatically detects impurities, senses the water
quality and adjusts itself to the level of purification required.
More recently, in July the company took an initiative to use
refrigeration techniques that condense water from atmospheric
air in Mumbai. The technique can generate 120 litres or 500 glasses
of drinking water every day.
The above examples illustrate that there has been change and
development at the three-decade old company over the years. Indeed,
the Shapoorji Pallonji Group company, credited for bringing in
the concept of water purification into the country and known to
scale up cautiously, has been making an effort to retain and grow
its market share in an intensely competitive environment, particularly
in its core water purifier business.
Still, experts feel that the company has been slow to change given the rapidly changing market dynamics. Harminder Sahni of Wazir Advisors, a Gurgaon-based retail consultancy, suggests that the company, known for its signature water purifiers and vacuum cleaners, has to evolve rapidly to keep its nose ahead of competition. "Whatever Eureka Forces is attempting had to be done because as a company you cannot stop trying things," he says.
The water purifier business accounted for about 50 per cent of
the company’s revenues in fiscal 2012/13, the latest period for
which figures are available. It is a leader in the Rs 3,400-crore
market. The company has more than 70 per cent share in the ultraviolet
(UV) purifier market but is facing stiff competition in the fast
growing reverse osmosis (RO) segment from Kent RO Systems. Kent
claims it is the leader in the RO market with 40 to 45 per cent
share.
Eureka Forbes says it has a 36 per cent market share. Meanwhile,
several other players have emerged as a threat to Eureka Forbes
including Hindustan Unilever (HUL), Nasaka, and Ion Exchange.
"In recent years, while the market has grown enormously,
intense competition has significantly impacted the lead and advantage
that Eureka Forbes had. Both new business as well as repeat revenues
from existing customers have been hit," says Devangshu Dutta,
CEO of consulting firm Third Eyesight.
An issue for Eureka Forbes has been its reliance on direct sales.
Its salespersons (Eurochamps) go from door-to-door conducting
product demonstrations and convincing people that their appliances
are the best. Eureka Forbes has an army of more than 8,000 Eurochamps.
However, with the emergence of gated communities, cold calling
as a strategy has not been as effective.
It has forced the company to seek new ways of reaching out to
customers. "The challenge in the environment is how I get
you to open the door with gated communities," says Goklaney,
adding that the company would never look at disbanding its army
of salespeople. "My core is my eurochamps who have built
the brand over the years."
To tackle the problem, the company has moved over to digital
marketing to persuade customers to ask for demos. The company
today is strongly visible on the digital platform, and also in
some newspapers ads, flashing numbers for customers to call. Retail
sales is still not a big focus area for the company. Sahni of
Wazir Advisors suggests that the company’s dependence on direct
sales, ignoring retail, is a handicap for Eureka Forbes.
Companies such as Kent, HUL and several others are not just innovating but are also retailing their products aggressively. Kent, for instance, has not just roped in a celebrity (cine star Hema Malini) to endorse the brand, but has also unveiled new products. It recently launched a water purification product, Kent Tap Guard that cleans tap water and makes it safe for household use such as washing fruits and vegetables. "The company is expanding into various categories in a small way but is focused on the RO segment," says Mahesh Gupta, Chairman, Kent RO Systems.
‘In recent years, while the market has grown enormously, intense
competition has signifi cantly impacted the lead and advantage
that Eureka Forbes had. Both new business as well as repeat revenues
from existing customers have been hit,’ says Devangshu Dutta,
CEO, Third Eyesight.
Water purification products from the likes of HUL and Kent are
far more visible at retail counters than Eureka Forbes but the
company is undeterred. "We believe that direct sales is our
core and we would persist with the strategy," says Goklaney.
Eureka Forbes appears to have fallen behind in one key emerging
business segment – gravity-based water filters that can work without
electricity. In 2009, Kent launched this product in India, seizing
the first-mover advantage – Eureka Forbes has yet to establish
its foothold in the market. The market potential for gravity-based
water filters is huge given the crippling power shortage in most
parts of India, say industry executives. While about 92 per cent
of urban areas are electrified, rural electrification is just
55 per cent. "People use gravity-based water purifiers in
regions that have poor or no electricity supply," says Sasidhar
Chidanamarri, Associate Director, Environment & Building Technologies
Practice at Frost & Sullivan, a consulting firm.
In the vacuum cleaner market, Eureka Forbes’ "Euroclean"
range of products have a market share of around 90 per cent. But
there has been a dip in revenues from vacuum cleaners recently
along with a marginal decline in market share. The segment accounted
for about 16 per cent of the company’s revenue in 2012/13.
Meanwhile, the company plans to scale up its international business. It already accounts for 40 per cent of its revenues with the acquisition of Lux International and going forward is expected to constitute about half of the topline. With the expansion, the company plans to launch a range of new home appliances products internationally. Indeed, the Lux buyout gives Eureka Forbes access to markets in 40 countries across Europe, Africa and Latin America.
The company has also been getting into new segments such as air
purifiers, fire extinguishers and security systems as an alternate
strategy – markets that are still fairly niche and also where
the company does not have a first mover advantage. The air purifier
market in India was estimated to be valued at $12.65 million in
2013, while the fire and safety equipment market was estimated
to be about $3.16 billion in 2013, according to research firm
TechSci Research.
However, despite the various challenges and competition for Eureka Forbes, Goklaney is confident that the company is on the right track. So is Shashank Sinha, the company’s Senior General Manager – Marketing, who says the company is now seeing traction in the air purification market as well. "It is just that we are not shouting from the rooftops about our growing business," he says.
And, for a company that depends heavily on its sales force and
franchise, the company realises the imperative of creating a leadership
pipeline. People like Shashank Sinha and Marzin R. Shroff, CEO
– Direct Sales, and Senior Vice President, Marketing, are being
groomed to eventually take over from Goklaney. "I am here
right now as a night watchman and they are here as opening bats
and ready to take on," he says.
But analysts feel that Eureka Forbes needs to take drastic steps
to take on competition. "Incremental things won’t help,"
says Sahni. "It’s our actions and deeds that tells you whether
we’re aggressive or not. But, we’re doing things at our pace.
We don’t want to push things to an extent that people stop enjoying
their work," says Goklaney.
(Published in Business Today.)
admin
September 27, 2014
Alys
Francis, Nikkei Asian Review
New
Delhi, 27 September 2014
A few months ago, a group of wealthy industrialists and other
businessmen gathered in a plush Mumbai hotel suite to pore over
a selection of John Lobb handmade welted shoes that cost up to
$12,000 a pair.
It may just be a temporary “pop-up” store, but Thomas Collette, John Lobb’s commercial director for India, was excited. He said that a local agent for the bespoke shoemaker would start taking orders by appointment only. “This is a big step for us and a big step as well for the country,” he said.
Although international luxury brands have opened flagship stores all over developing Asia, they have hardly touched the Indian market. This may be about to change.
After all, many people in the population of 1.3 billion are steadily getting wealthier. According to the Associated Chambers of Commerce and Industry of India, luxury spending will reach $14 billion a year by 2016 compared with $8.5 billion in 2013.
But foreign luxury brands have had a tough time in the country, partly due to restrictions on investment.
Many major brands, such as Prada and Versace, only entered after 2006 when the government began to allow foreign investors in single-brand retail operations. Prior to that, foreign companies were only allowed to operate wholesale “cash-and-carry” outlets.
While companies welcomed the chance to open in India — albeit
with the requirement that a local partner owned at least 49% of
the business — they struggled with the lack of suitable retail
space and trained staff, bad supply chains, and a raft of customs
taxes and duties, as well as a long wait to turn a profit because
there was only a nascent market for their goods.
Since 2006, Prada and Gucci have been among the 50-odd brands that have either left India, restructured or quit soured partnerships, according to a 2012 report by retail consultant Third Eyesight.
In 2012, India started allowing full foreign ownership of single-brand retailers but included restrictions such as the need to source at least 30% of products from local small and midsize enterprises. That is virtually impossible for most luxury labels since their brand integrity often rests on the craftsmanship of products made in their home country. Unsurprisingly, the new rules did not trigger an influx of foreign brands.
Jones Lang LaSalle, the real estate company, in August ranked New Delhi and Mumbai near the bottom of its list of 30 major Asia-Pacific cities in terms of the presence of top luxury brands.
Indians optimistic
Some foreign brands, like John Lobb, have decided that franchise and distribution deals are a better way to establish their presence in a difficult market.
John Lobb’s local partner is Regalia Luxury, which spent a year wooing the Hermes-owned brand before securing a deal to sell John Lobb’s “By Request” line of shoes that are custom-made for each client.
Regalia Luxury is one of a number of Indian companies eyeing the rising number of style-conscious local shoppers who are hungry for Western luxury brands but are wary of entering the market on their own.
“From a longer-term perspective, there’s immense opportunity if you do it the right way,” said Regalia Luxury founder Pratik Dalmia, who clinched a franchise for bespoke Italian suitmaker Kiton in 2013 and expects to sign up two more brands by year-end.
But he admits that the market boom has yet to start and that operators will have to “run a tight ship” for the next couple of years.
Indian companies that represent foreign luxury brands need to have a long-term view and keep a close eye on what the younger generation likes — these are the customers with the most potential, since they are more exposed to overseas fashion trends.
“India is all about the customer of tomorrow,” said Darshan Mehta, CEO of Reliance Brands, a subsidiary of Reliance Industries that was set up in 2007 to bring foreign luxury fashion to India.
Mehta often sits in a cafe at DLF Emporio, New Delhi’s first luxury mall which opened in 2008, and watches shoppers. He said many people shop at Zara but they walk into Gucci and Zegna just to have a look. “That is what makes markets like India so promising: the aspirational consumer,” he said.
Unlike China, where a lot of luxury retailers are now at a consolidation stage after years of rapid expansion, brands are still struggling to find space in India for their first shops.
Even in Mumbai, the Emporio is the “only true luxury mall,” according to Mehta.
It may take some time before India’s luxury market takes off, but the market has been boosted by a stream of well-off Indian professionals and students returning after working and studying abroad, including many bankers who left Wall Street and London after the global financial crisis.
Luxury players are also expecting a boost from the introduction of a Goods and Services Tax, which was promised by India’s new government and would get rid of complex multi-level taxes that are hampering the sector.
Reliance Brands, which also represents Reiss and BCBG Max Azria, expects to add three more brands to the company’s stable of 16 foreign brands by year-end.
A few pioneers are even setting up boutiques in smaller cities. Bangalore firm Fervour, which has licenses to sell Nina Ricci and Christian Lacroix, is planning to expand to Chennai and Hyderabad.
But most don’t see these cities as viable markets just yet.
“There is no sustained luxury market outside of Bombay and Delhi,” Mehta said. He expects luxury demand outside the two main cities to take another three years to reach critical mass.
Sanjay Kapoor, the founder of distributor Genesis Luxury, said India’s luxury market is not yet at the point where China was 10 years ago, even if the potential for growth is immense.
Kapoor founded Genesis Luxury in 2008 to sell foreign luxury brands in India and has deals with Jimmy Choo and Armani, among others.
“As awareness and retail space spread, demand will accelerate in smaller cities in the interior of India,” Kapoor predicted.
Tight ships
Amid the shortage of high-quality retail space, one option is to use the “shop in shop” model.
R&B International rents small spaces in other retailers’ stores to sell Australian luxury label Easton Pearson. The manufacturing firm supplied embroidery to the brand for years before nabbing a distribution agreement in India in June.
Dalmia also said he is in no hurry to open flagship stores for John Lobb and Kiton before 2016.
Instead he is targeting ultra-rich customers who want the pampering that comes with exclusive, by-appointment-only services. Clients are shown samples of Kiton’s made-to-measure suits and John Lobb shoes, and then measured by a trained team at a place and time that suits them, often at home in the late evening.
Collette said he’s been pleasantly surprised by how well the brand has been received in India. While the brand has wholly-owned stores in Japan and the U.S., Collette said it would have been impossible for it to enter India alone.
(Published in Nikkei Asian Review.)
admin
September 25, 2014
Nayantara
Narayanan, Scroll.in
Bangalore,
25 September 2014
As Prime Minister Narendra Modi made his way to Tumkur near Bangalore on Wednesday morning, several newspapers carried full-page ads announcing that he was “inaugurating the era of food prosperity; to share the joy of food with farmers entrepreneurs and consumers”.
Modi was opening an integrated food park, established and run by the Kishore Biyani-led Future Group. The 110-acre facility has been established under a scheme of the Ministry of Food Processing and is Biyani’s giant step towards becoming a leader in the fast moving consumer goods business.
People in India are working longer hours, commuting longer distances and cooking less. The demand for ready-to-eat food is rising and with it the business of food processing. Kishore Biyani, the founder of the Big Bazaar supermarket chain, is looking to tap into this food processing potential at the India Food Park, in which he plans 50 units for food processing and facilities to make Indian savories and snacks, frozen food products, chutneys, pasta, dry fruits and nuts, chocolates, and more.
Giant rasoi
Biyani sees the food park as a giant “rasoi” for Future Group’s branded food business. What the park will essentially do is cut out the middle-men, give the company control over the quality of its food products and improve it profit margins.
The company estimates that as much as Rs 1,000 crore will be invested in the park in the next three to five years. It has already invested Rs 250 crore into the facility, having received assistance of Rs 50 crore from the ministry.
The park is set up to collect produce, especially fruit and vegetables, from agricultural cooperatives in the region. A manufacturing centre in the park will play host to other companies that want to set up food processing units. The park will provide the infrastructure – energy, water and sewage facilities, office space and so on. It will also have multiple cold storage facilities to keep food fresh.
“What a facility like this does is take away some of the friction of doing business in India,” said Devangshu Dutta, chief executive of the consumer goods consultancy Third Eyesight.
Food centres
The government’s food park scheme started in 2008, the first mega food park built in Andhra Pradesh in 2012 and several others set up after that. So what makes the Tumkur park special? Unlike other mega food parks that are food-manufacturing centres, this one has better access to the market. “If you have the ready market, you can concentrate on productivity and give it your best shot,” said Prashant Agarwal, joint managing director of consulting firm Wazir. “The advantage of companies like Future Group coming up in processing parks is so that they can bring in investments and then marketing is not a problem.”
While India Food Park will share the joy of food with entrepreneurs, whether farmers and consumers will feel that same joy remains uncertain. “Ultimately both the consumer and manufacturer will benefit but by how much not one can say,” Agarwal said.
Said Dutta, “I don’t think it necessarily translates into benefits for the farmers or, for that matter, the customers. It definitely benefits the companies and it depends on them whether they will pass some of that upstream or downstream.”
(Published in Scroll.in.)
