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September 21, 2014
Purvita Chatterjee/M. Somasekhar, The Hindu Businessline
Mumbai/Hyderabad, 21 September 2014
At a time when Swedish retailer Ikea is making big plans to enter India, the country’s largest retailer Reliance Retail is winding up its furniture format under Reliance Living.
All the stores under Reliance Living are now being shut down across cities such as Bangalore, Delhi and Hyderabad.
“We had 12 Reliance Living outlets across the country and most of them have shut down as furniture is no longer a focus area for the company,” said an official from Reliance Retail.
Reliance Living stores occupied large space across these metros stocking furniture, furnishing, home ware and kitchen items. Even other organised players such as Future Group’s Home Town and Lifestyle Group’s Home Centre have been struggling to make money from their respective formats.
In the case of the Future Group, it had to merge its Home Town stores with its durable format under e-zone to help it break even.
Slow churn
According to Devangshu Dutta, Managing Director, Third Eyesight, a retail consultancy, “The slow stock turn is the biggest issue for furniture retailers as the inventory and retail space get locked up unlike in the case of fast moving categories such as apparel, food and grocery.
“Besides, competitiveness of the fragmented unorganised retailers is too strong for the organised players to make money easily. Indian furniture retailers have yet to discover a model which works for them.”
Apart from furniture, last year, the multi-format retailer shut down its books and music format — Reliance Time Out — and even its non-vegetarian offerings under Delight. “Almost 40-odd stores under Reliance Time Out were shut since categories such as books and music have moved to the digital platform. We are constantly rationalising our formats depending on what works for us,” the official added.
Value format
However, other specialty retail formats such as Reliance Digital and Reliance Jewellery are helping boost margins and profitability for the company.
Today, it is the value formats (Reliance Fresh, Super & Mart) which are the biggest growth drivers for Reliance Retail. Value retailing now accounts for 55 per cent of the company’s ?14,500-crore turnover.
It is in the process of expanding its value formats and e-commerce will be a major part of these. Damodar Mall, CEO – Value Format of Reliance Retail, said: “We are already doing a pilot among our employees for e-commerce.”
Meanwhile, its ‘cash and carry’ format under Reliance Market has established leadership position in the category with 32 operational stores and 1.2 million registered members.
(Published in The Hindu Businessline.)
admin
September 17, 2014
Nikita
Garia, MINT
Bangalore,
17 September 2014
Cab
booking service TaxForSure, which recently raised $35 million
in funding, has cut rates sharply, joining a fare battle with
rivals Olacabs and Uber to grab a bigger share of a rapidly growing
market.
Although TaxiForSure had earlier said it would resist price cuts,
the company, controlled by Serendipity Infolabs Pvt. Ltd, announced
a 25% price cut for booking through its app; a week earlier, it
cut prices by half for rides booked between 10am and 4pm via its
app.
TaxiForSure was under pressure to cut prices, as rivals OlaCabs
and Uber have seen a significant jump in demand after they slashed
prices over the past two months.
“We are running the discount to promote booking through
the app while our usual prices remain the same. We don’t
plan to change our price model,” said Aprameya Radhakrishna,
co-founder of TaxiForSure. The company plans to run these discounts
“for at least more than a month.”
Radhakrishna said the company was giving discounts to encourage
users to book rides through its app and that the price cuts were
not influenced by competitors.
“If the booking comes through our call centre, on an average
we have to incur a cost of Rs.30 per transaction, considering
into account the rental costs and salaries of the staff. So giving
the customer discount for using the app or our website in the
short term will eventually be good for us as we would be spending
less on our call centre later,” said Radhakrishna, adding
that at present it receives 50% of bookings through call centres,
35% through the app and the rest from its website.
“The move will help us get more transactions done by employing
the same number of people in the call centre.”
This week Uber, which raised a mammoth $1.2 billion in June from
the likes of Google Inc., Goldman Sachs and others, slashed the
price of its higher-end service UberBLACK by 25% in New Delhi.
In August the company cut prices on all its rides by 25% in Bangalore.
The San Francisco-based mobile app is also offering discounts
of 50% on airport rides in Bangalore. Olacabs, which received
Rs.250 crore from investors in July, reduced fares by 25% last
month.
Olacabs and Uber say they have seen a spike in demand since they
announced price cuts over the past two months. “There has
been a significant rise in demand after the price cuts,”
said Anand Subramanian, director of corporate communications at
Olacabs, adding that the “earnings of drivers has gone up
by upto 40% as the drivers are now doing more trips.”
Uber, too, has seen a jump in demand after it cut prices by 25%
on all its rides in Bangalore, the largest market for cab companies.
Both Olacabs and Uber say that they have reduced prices because
they are squeezing out more rides from each driver and also adding
hundreds of new cars.
While Olacabs has announced permanent fare changes, Uber like
TaxiForSure is running promotional offers.
“There is no time line on how long we will continue with
the reduced price offers. We are continuously analysing data on
driver earnings and customer demand, both of which have gone up
after the price cuts. So we may either hold on to these prices
or may further reduce them,” said Bhavik Rathod, general
manager at Uber in Bangalore.
Raghunandan G., co-founder at TaxiForSure, had told Mint in an
earlier interview that discounts put pressure on the earnings
of companies. “When we ran a discount last time, we had to
pay the extra money to the drivers from our pocket. The other
players are losing money on each ride because of these price cuts.
If they continue with these low prices, how will they earn money?”
he had said.
Analysts cautioned that cutting prices and losing money at the
cost of gaining share wouldn’t work over the long term.
“These businesses have raised money in the recent past,
but they need to balance out their operating costs. A loss making,
market share gaining strategy can be managed for a short while
but it won’t work in the long term.” said Devangshu
Dutta, chief executive at Third Eyesight, a consultancy.
(Published in MINT.)
admin
September 11, 2014
Reghu
Balakrishnan, Business Standard
Mumbai,
11 September 2014
Indian
private equity (PE) investors are gearing up to participate in
the e-commerce growth story. In recent past, back-end logistic
players have been on radar of PE players. India’s e-commerce market,
which is expected to reach $20 billion by 2020, has seen the presence
of five-six large organised specialised logistics players.
Devangshu Dutta, CEO of Third Eyesight, a retail consultancy, said: "While building a retail and consumer brand carries a potentially high reward, they are also high risk as shown by the attrition among e-commerce companies. On the other hand, no matter which specific front-end companies survive, back-end services and vendors will be needed by most of them."
Logistics services company Delhivery has raised Rs 212 crore led by Multiples Alternate Asset Management in series C fund-raising, with the participation of existing investor Nexus Venture Partners.
Another Delhi-based e-commerce logistics solutions provider, Ecom Express, raised Rs 100 crore ($16.5 million) from Peepul Capital earlier this week.
Srini Vudayagiri, investment director at Peepul Capital Advisors, said: "Any business, which is part of the e-commerce space, will also see a significant momentum in future. Logistics, which contributes 9-10 per cent of the overall e-commerce market, will have a huge potential when e-commerce will touch $20 billion in a few years."
According to him, specialised e-commerce logistics providers have an upper hand over the other normal business-to-business logistics players, because collection of cash (in case of cash-on-delivery), returned items and delivery need special attention compared with general logistics.
According to a recent report by Accel Partners, online shopping of physical goods will increase from $2 billion in 2013 to $8.5 billion 2016, while online shoppers will double to 40 million in 2016 from 20 million in 2013.
To tap the fast-growing market, logistics players are all set to grow rapidly with the latest round of PE funding. T A Krishnan, co-founder and CEO of Ecom Express, said, "From handling five million packages in FY14, we plan to grow to 20 million packages by FY15." The company will increase the number of employees from 3,000 to 10,000 in the next five years. It will also expand into 500 cities over the next two years from 100 cities at the moment.
Recently, Delhi-based Holisol Logistics, a provider of back-end logistics services to e-commerce companies, received $1.5 million in venture funding. Holisol’s customers include Fab Furnish, FreeCultr, Jabong and OfficeYes, Pepperfry and Urban Ladder.
"One of the factors in favour of back-end companies is modest valuation multiples compared to emerging retail or e-commerce companies, and a back-end vendor with a reasonably diversified customer portfolio is a lower risk investment over the mid-to-long term," Dutta added.
However, competition will get tough for specialised players as major logistics players such as DTDC Courier, Gati (Gati Connect), Blue Dart and Aramex are already in the e-commerce business with their new divisions. Last year, DTDC Courier & Cargo set up DotZot, a separate unit for providing logistics support to online retail service providers. Similarly, eKart, the in-house logistics arm of Flipkart, had also extended its services to other sellers.
(Published in Business Standard.)
admin
August 30, 2014
Ekta Sharma Verma, Franchise India/Retailer
New Delhi, 30 August 2014
Commencing
a new restaurant biz or an outlet in India usually comes with
a lot of challenges for entrepreneurs. But the challenges and
dares are more when you replicate a foreign brand’s model
in India. So, what are the challenges that the far-off food brands
see while foraying in India. Let’s talk to experts from the
F&B sector and know more on this.
As per Third Eyesight, a consulting firm – The number of international
brands continued to grow each year at a steady pace until the
early 2000s and took off exponentially thereafter. It is growing
with each year passing. The brands prefer mostly franchise route
for entering India. However, few also choose licensing and JV’s.
Fast food is not a new concept in India. With roadside shops,
chat places and other easy pick eatables, Indians have always
been very well aware of the offerings. But with the entry of McDonalds,
KFC, Pizza Hut, Dominos and many others in the Indian market,
whole scenario changed. Indians have loved the westernisation
of Indian fast food. Like a tikki in a burger with a little twist
is now recognised as Aloo patty.
Another brand, The Chocolate Room is an Australian brand and
entered India via the franchise route. Chaitanya Kumar, Chief
Managing Director, The Chocolate Room opines: “Indian franchisors
are very eager to get franchise partners for their brand. But
once they get an investor, most of the franchisees face problems
in inadequate awareness of brand, training, communication, quality
and customer service standards. Lack of franchisor’s follow up’s
and support to the franchisees results in rumors about the brand
in the market place. Few of the major challenges for the restaurants
here are fragmented market, operational challenges, real estate,
manpower and supply chain.”
License intricacies and challenges to run a resturant
In India, obtaining the requisite licenses, e.g. health license,
food safety license, police license, No Objection Certificate
(NOC), from the fire department and the state pollution control
board, and so on is a major obstacle hindering the smooth operations
of a restaurant. The process is not centralised as yet and requires
filing applications with individual stakeholders, which involves
a lot of paperwork and is a time-consuming activity. The licenses
required to start a restaurant are the same throughout India,
except in some states like Maharashtra. A player needs approximately
12-15 licenses just to open a restaurant. In comparison, the licensing
requirements internationally are not as intricate as in India.
As a result of globalisation and consequently diminishing trade
barriers, our economy has opened new avenues of opportunities.
With these opportunities, comes a great deal of challenges that
threaten the success of business. Multinational brands on entering
a new market, sometimes strive to create a competitive advantage
over local established brands. There are a lot of challenges that
an international food service brand faces when entering a market
like India. According to Manpreet Gulri, Country Head, Subway
Systems India Private Limited: “some of the major challenges
are adapting to the local taste and preferences, developing familiarity
with ethnic differences and abiding by them, operating under the
legal framework of the market, establishing a connect with the
consumers, keeping with the brand value and maintaining standardisation
in the systems and also a few challenges related with the supply
chain.”
Engaging the local customer
A major challenge for an international Quick Service Restaurant
(QSR) brand is to engage the local consumer. Keeping in view the
local preferences, Subway has adapted to the local palate by introducing
vegetarian and non-vegetarian offerings such as Chicken Tandoori
and Paneer Tikka. For a sensitive market like India, vegetarian
and non-vegetarian service counters are kept separate as far as
possible. Another challenge is to have a system in place wherein
standardisation of the products and their quality is ensured throughout
the market which is why, Subway franchisees are supported by locally-based
Development Agents and their staff that provides additional business
expertise. This helps in running the operations smoothly.
Gulri of Subway adds: “In food service industry, there are
no set formulas or shortcuts to excel in the business. An idea
that works for other countries might not work in India. The key
to gain an edge over the established home-grown brands is: Research
– Adapt – Innovate.”
To conclude, in order to create and sustain a global competitive
advantage, multinational companies today need a systematic approach
to research, renew and enhance their core capabilities before
entering a new market. Localisation strategies like competitive
pricing, store expansion, delivering value for money products
and engaging with the consumer can help one operate successfully
under such circumstances.
Other major challenges for restaurants in India:
(Published in Retailer.)
admin
August 26, 2014
Nikita
Garia, MINT
Bangalore,
26 August 2014
San Francisco-based Uber Technologies Inc. may be forced to change its business model, which relies on cashless transactions, after India’s central bank on Friday issued a notification that will reduce the convenience associated with the taxi booking app.
The Reserve Bank of India (RBI) on Friday said Uber and other companies that offer app-based purchases cannot allow customers to pay with their credit cards without a two-step authentication process. Customers have hitherto simply had to enter their credit card details at the time of signing up with Uber. Every ride was automatically charged to the card without any further verification.
RBI has given all such businesses time till 31 October to comply with the regulation. In late July, the Association of Radio Taxis (ART) had written to the central bank that Uber was storing credit card details of customers in its server and deducting fares without the two-step authentication, which involves entering the CVV (Card Verification Value) number and password.
Uber will now have to offer payment modes such as cash or mobile wallets and even consider installing credit card machines in every car, analysts said.
“Uber right now has only two options in front of it. One, exit the country. Two, tweak its business model which is not a very lucrative option,” said Anand Ramanathan, associate director at KPMG.
Uber did not respond to phone calls and emails sent by Mint seeking comment on RBI’s regulation.
In an interview in May, Uber’s general manager in Bangalore said that the company is “working on adding more options for customers to use Uber by staying cashless”.
Uber, which started its India operations in August last year, is present in 10 cities, which makes India second only to the US in terms of number of cities covered. It began operations in 2009 and is present in 44 countries. It allows payment only by credit cards in all these countries.
Moving to a different model of operation will not be easy for Uber as it will force the company to make significant investments and expose it to risks that it hasn’t had to take in any of its markets yet.
“The cash model will definitely add to costs. The logistics of cash management is not part of the Uber model,” said Devangshu Dutta, chief executive at Third Eyesight, a consultancy. “For managing cash, Uber will have to open cash collection centres which will create challenges at the services level.”
Besides cash, Uber’s other options include adding a mobile wallet to its app. A mobile wallet can be recharged by the customer using a payment gateway and the user can add money via credit card, debit card or net banking, all of which require a one-time password and CVV number.
“This will however work opposite to a credit card where user gets 45 days to make a payment. With a mobile wallet, the user will have to store money beforehand,” said Prashanth Rao, director at KPMG. The users will then have to think whether it is a good option to keep the money blocked in Uber’s wallet, Rao added.
Uber’s competitors in the Indian market largely work on a cash-based model. However, rival companies TaxiForSure, Meru Cabs and Olacabs are evaluating mobile wallets to ease transactions. Meru Cabs already has a card machine installed in each of its cars that customers can use to pay either via credit or debit card. Meru Cabs also has an app-based payment system that allows customers to enter their credit card details once. The details are saved but the customer has to enter the CVV number and password every time a transaction is made.
“We will be launching our mobile wallet in the next 15 days for which we have partnered with a payment processing company,” said Siddhartha Pahwa, chief executive officer of Meru Cabs. Pahwa, who is also the secretary of the Association of Radio Taxis, said that RBI’s regulation now brings everyone on a level playing field.
The global payment model of Uber works in a similar fashion across countries and the company is not known to change its model.
RBI’s move could possibly have one advantage for Uber: it may potentially increase its customer base. “If Uber moves to a cash model, it can work in its favour in the medium to long term. With cash, Uber can target a larger market. However, it is definitely a setback for now,” said Ashish Jhalani, founder of consultancy eTailing India.
(Published in MINT.)
