admin
January 10, 2013
Nupur
Anand, DNA (Daily News & Analysis)
Mumbai,
January 10, 2013
It’s
not even mid-January yet, but a "flat 50% off" sale
is already on at an apparel brand outlet at Mumbai’s poshest mall.
This unseemly break with tradition – the two-week-long ‘sale’ season used to start in the third week of January, offer nominal discounts initially but jack them up later towards half price is not a case in isolation.
Sale, that four-letter word with the power to smoke out even
the tight-fisted shopper from self-imposed shopping exile, is
now plastered across all kinds of retail outlets at malls.
What’s more, several brands are already offering ‘flat 40-50% off’ in the first week of their sale. And no one knows how long this year’s sale season would last.
Abhishek Ranganathan, analyst at Phillip Capital, says the trend of advanced sale started last year due to infrequent ringing of cash registers. “This was expected to correct from this season. But that was not to be. As a few brands launched their ‘sales’ early again this year, others had to follow suit. For, if you don’t, then you’ll end up losing business to the store next door.”
Retail industry observers say premium fashion brands started the season with deep discounts. Agrees the manager of the apparel outlet at Phoenix. “We’ve realised that we do better business in the sale month of January than we do in July-December. So, in order to attract customers, we’ve started with a flat 50% off.”
There’s more to it, says Devangshu Dutta, CEO of Third Eyesight, a retail industry research firm. “New stock typically starts coming in from mid-February. Since slow economic growth has affected sales for the entire year, companies had to start with deep discounts in order to free up cash.”
Early starts, prolonged duration, deep discounts from the word go… such aspects of 2012 sale had caused concern to the retail industry. And it’s no different this year.
Experts say discounts help inboosting volumes but eat into margins. Worse, a relatively longer sale season was also driving away customers who are not essentially bargain-hunters.
As a result, retailers had started correcting their strategy. Analysts point out that in the past six months, attempts have been made to check inventory and forecast demand. “We’ve been trying to shift to a quicker inventory churn so that we could curtail the sale season, but it may take a quarter more,” says the CEO of a multi-brand outlet.
Retailers say that the extent of footfalls in the first two weeks of the sale season will decide how long the discount period may be extended.
If sales fail to pick up in spite of discounted sales, the sale period may well stretch to a month like it happened last year, say experts.
admin
January 6, 2013
R Krishna,DNA (Daily News & Analysis)
Mumbai, January 6, 2013
Unity
in diversity is one of those maxims that makes no sense in India,
except in the rarest of contexts. Chai, a colonial import, is
one such factor that Indians can identify with regardless of class
and religion. That’s why it’s surprising that there
are few places that serve good tea outside of our homes. Tea from
vending machines tastes artificial. At hotels, the decoction is
rarely fresh. And though tapris do serve good tea, they are over
boiled and sickly sweet.
“If I ask you to recommend one place in Mumbai that offers
great tea, you won’t be able to come up with a clear answer,”
says Amuleek Singh Bijral, founder of the Bangalore-based tea
chain, Chai Point. According to him there is a demand for good
chai that is not being met. “In terms of sheer volumes, tea
is consumed far more than coffee in India,” says Bijral,
“It is just that nobody has given it the kind of branding
that coffee enjoys. There is an opportunity for organised players
to come in to address this need.”
A challenge Starbucks faced
However, tea chains like Chai Point, which have come up in the last five years or so, face an uphill battle. Tea’s popularity in Indian homes, in fact, acts against its image. Coffee is considered a lifestyle statement, while tea is ordinary. It’s easy to convince a consumer to spend upward of Rs 80 for a cup of coffee. However, even Rs 30-40 for a cup of tea is considered expensive. Bijral is aware of the problem. “Starbucks had a similar challenge almost 30 years ago when they opened their chain in the US. Coffee was a drink every American prepared in his home. But they created a brand that convinced Americans to spend money on a cup of coffee,” says Bijral. Over the years Starbucks and other coffee chains developed a model such that the coffee chains’ popularity has less to do with the beverage itself, and more to do with the whole experience. Tea chains, on the other hand, are blazing a new path.
Chai Point, for instance, targets the white-collar worker. “Nobody in office takes a cappuccino break. We take a chai break. Office-goers are not looking for a lounge,” says Bijral, “Our outlets are in areas with lots of offices around. We want our customers to come to our outlets several times in a day to have a freshly brewed cup of tea at a hygienic place.”
Delhi-based Tea Halt has put up kiosks in colleges, marketplaces and in office areas. “We first wanted to introduce customers to various kinds of teas before putting up cafes which add to the cost,” says Ankur Agrawal, co-founder, Tisane which runs Tea Halt, “The range of teas we offer depend on the area in which we have put the kiosks in. For instance, near colleges our tea starts at Rs10. Near offices, we offer teas that are more expensive.”
Variety holds the key
While both Chai Point and Tea Halt stress on convenience, Golden Tips, the Kolkata-based tea company has taken a different approach with their own tea lounge, Tea Cosy. “We want to make tea glamorous by offering large variety of teas, as well as sell equipment such as infusers and teapots, stuff that people haven’t tried before,” says Bala Sarda, vice president, business development, Golden Tips.
Sarda says that customers can sample white tea, oolongs, and other varieties of tea at Tea Cosy, and buy the leaves of the ones they like. The leaves can be a blend from different tea estates or sourced from a single estate from different regions in India and the world. “Consumers can get a simple cup of tea at home. What we want to do is to introduce them to the world of tea. The sheer variety of teas on offer and the growing awareness about tea’s health benefits is attracting younger consumers (18-30 age bracket) to our outlets,” she says.
Still, tea chains attract a miniscule crowd compared to coffee chains. But if global trends are anything to go by, things can only get better. Earlier this year Starbucks paid $650 mn to take over the tea company, Teavana. Just two weeks ago Starbucks CEO Howard Schultz announced that apart from introducing Teavana products at their own outlets, the company would open standalone Teavana stores to “do for tea what it [Starbucks] did for coffee”.
It is some such move that will make tea chains contemporary, says Devangshu Dutta, chief executive of consultancy firm Third Eyesight, “It would have been easier for tea chains 20 years ago when coffee was not present in the urban market. Things could change in the future. But if past experience is anything to go by, it will not be an Indian company that will cause the turnaround. Tea chains will need an approval stamp from the West.”
admin
December 31, 2012
Meghna
Maiti, Financial Chronicle
Mumbai,
December 31, 2012
In
the year gone by, high inflation left consumers with lower disposable
incomes. Analysts said in 2012, consumers were worried about their
jobs, volatility in the stock market and soaring real estate prices.
More importantly, the grim outlook on fresh hiring, muted forecasts on wage hikes and lack of any spectacular bonuses created a sentiment of caution. Consumers are now awaiting the finalisation of budgets in the New Year to decide whether they should live it up or save for the rainy day.
While recent reports on the economy have been mixed, several indicators suggest the turnaround in the economy is yet to come. A recent research report by Crisil said as the current industrial slowdown is both well entrenched and broadbased, it will take a while for industrial growth to recover.
Retail giant Reliance Retail hopes the spurt in reforms in the last quarter along with the renewed resolve of the government to drive growth and the possible change in the bleak European macroeconomic climate will steer the Indian economy. “While not much is expected in this first quarter of 2013, hopefully after the Union budget 2013, we should see a spurt in economic growth and an improvement in domestic consumption. Consumers will come back to the stores and footfalls will increase,” said Bijou Kurien, president and chief executive for lifestyle at Reliance Retail.
Kurien said 2012 belied the expectations that retailers and FMCG companies had. “Obviously, the global economic headwinds coupled with lack of any domestic stimulus, failed to catalyse consumption. Growth was lacklustre and profit performance of companies was muted. The impact was bigger in discretionary spend categories, while categories driven by basic needs such as food appeared unaffected,” he added.
P Ganesh, executive vice-president (finance & commercial) and company secretary of Godrej Consumer Products (GCPL), said: “We have not seen any downturn in 2012. In the New Year, nothing will radically change in terms of consumer behaviour. Having said that, we can still expect renewed optimism and confidence in the market with the government turning focus on reforms,” said Ganesh.
Over the next year, the success and failure for consumer goods and retail companies will be determined by the speed and thoroughness with which they are able to adapt to changes at all levels, said industry experts. Given the dynamic developments, global as well as local, affecting sentiments, this will separate successful firms from also-rans. Consumer companies will have to constantly innovate, optimise supply chains, and drive brand value and sales through greater engagement with the consumer, added industry experts.
Chaitanya Deshpande, executive vice-president & head of investor relations and M&A at Marico, said on an overall basis, 2012 was a good year for the FMCG sector. “Although there has been a slowdown in the GDP growth, yet there was no significant impact on items of daily consumption. We have continued our investment on brand building and expanding our distribution reach. Having said that, a deceleration in growth was seen for items of discretionary spends and packaged foods,” said Deshpande.
While lower order flow through the CSD channel affected most companies, a sustained lower macroeconomic growth could ultimately have an adverse impact on the items of daily consumption as well, he added.
Devangshu Dutta, chief executive of Third Eyesight, a consulting firm based in New Delhi, said the previous year was challenging both on cost and demand side. “While cost inflation has happened for most players, real estate prices also went up. There was loss of confidence on the part of consumers. Now the challenge is for firms to survive in the short term to remain a player for the long term,” added Dutta. However, he said retail and FMCG players are more aggressive than ever and young consumers are entering the market.
Amitabh Mall, partner and director at Boston Consulting Group, said the growth rate has definitely come down for most consumer goods companies. “While consumer sentiment is clearly down compared with the previous years, it is not really a concern for retailers. Flat sales indicate things have stopped getting worse,” added Mall.
T D Mohan, joint managing director of CavinKare, said demand has slowed down and the volatile dollar and rupee are affecting production costs. There are concerns over rural consumption. “On the macroeconomic front, interest rates and higher financial costs are matters of concern. FMCG companies will not be able to maintain the 15-18 per cent growth rate they were seeing earlier. When the raw material costs go up it has to be passed on to the consumer at some point. For manufacturers, it will further reduce demand and volume growth. Price hike will also contribute to higher inflation. The government has to work on its monetary policy to bring back demand, create investment climate and fuel employment opportunities,” added Mohan.
(With inputs from Sangeetha G)
admin
December 25, 2012
Sagar
Malviya, The Economic Times
Mumbai,
December 25, 2012
Teenager
Aniruddha Aggarwal keeps nearly a dozen pairs of jeans stacked
up in his cupboard. The brands range from international labels
such as Wrangler and Lee to local ones like Killer and Flying
Machine.
But one brand that is barely visible in Aniruddha’s closest is Levi Strauss. Reason? Aniruddha’s father swears by the denim brand that sports the leather tag with the iconic two-horse design – virtually every denim in his wardrobe has the Levi’s stamp on it. "Levi’s is a good brand, but it’s what my father and his generation wears. I like to wear jeans that are fashionable and trendy rather than going purely by brand value of the past," says Aniruddha, who owns just one pair of Levi’s jeans.
The divergence in the father-son’s sartorial preferences succinctly portrays the 160-year-old denim maker’s predicament in India. After dominating the organised denim market – estimated to be worth about Rs 2,200 crore – over the past decade, courtesy its historical leadership status worldwide, competition from other global brands as well as a rash of local labels have resulted in its disconnect with the youth.
After being in India for 18 years, Levi’s is the country’s largest denim brand with revenues of Rs 741 crore in fiscal year 2012, as per recent filings with the Registrar of Companies. Sales grew 23% in the last fiscal year through its network of over 400 stores, adding over Rs 250 crore to its top line since 2010.
That’s the good news. The not-so-good part is that the Indian operation is losing money, with accumulated losses of some Rs 127 crore.
What is more, rival jeans brands seem to be on a faster growth track. US Polo, which opened its first store just last year with India partner Arvind Brands, has already reached the Rs 200-crore sales mark. "We will cross Rs 250 crore by end of this fiscal year, making US Polo the fastest-growing retail brand in the country," claims J Suresh, managing director & CEO, Arvind Lifestyle Brands, which has over 100 US Polo stores and plans to add 40 shops each year. A year ago, Arvind sold off its entire stake in the joint venture that sells Lee and Wrangler apparel brands to partner VF Mauritius.
Then there’s Italian fashion brand Benetton, which almost two years ago changed its India strategy and became a pure-play wholesale trading entity; franchisee owners have taken the store count to over 600 now. The gambit has worked nicely: Benetton, which entered the country around the time Levi’s did, has doubled sales from two years ago by adding Rs 300 crore since then. "Like a true Italian fashion brand, Benetton always appealed to the younger lot by having hip and trendy styles. This, along with faster store expansion, added to the revenues," said a senior official at Benetton India who didn’t wish to be quoted.
More agile competitors are just one half of the problem. Levi’s has also suffered because of shift in strategy at the San Francisco headquarters – from chasing market share till a few years ago, Levi’s has now chosen to boost profit margins across global markets.
In India, this meant cutting brands such as Dockers, Sykes, Signature and, two months ago, mass brand Denizen, which had been adding substantially to the company’s top line. "Levi’s globally is acting more like an FMCG company than a fashion or retail firm. Even their top management comprises veterans from the consumer goods space with very little experience in retail," said a senior official of a rival firm who did not wish to be quoted.
He is referring to Levi’s global president & CEO Chip Bergh, who spent over 28 years with Procter & Gamble, as well as its India head Sanjay Purohit, who spent more than a decade with Cadbury. "That’s why you see the company shedding non-profitable brands, a move which generally an FMCG company would make," he added.
The rationalisation, however, has done little to contribute to the Indian operation’s profitability. The Indian company attributes the piled-up loss partly to a higher royalty payment to its parent company. "India is a very important market for Levi Strauss & Co and we believe in the long-term potential of the Indian market," said a Levi Strauss spokesperson for Asia-Pacific. "We are focused on growing the Levi’s brand in India by driving innovation, service and the brand experience. We are working to elevate the consumer’s experience through a globally designed line of clothing that has the right amount of localisation for the Indian consumer."
The problem, though, is Levi’s may not be the only denim marketer doing all this. "What has changed in the last two years is that many international brands have entered or become aggressive in the market. While Levi’s has been maintaining a price differential compared to its local rivals till now, global brands have come with a similar positioning," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said. "There is also a novelty factor for the newer brands."
Levi’s plays on premium positioning and sells at an average price of Rs 2,200 a pair. That may help boost its margins, but doesn’t help in the market place when rivals US Polo and Benetton have priced their wares Rs 300-500 cheaper, making them more accessible to the youth. At the premium end, labels from Calvin Klein and Tommy Hilfiger have been able to establish a sense of fashion excitement in the past two years, justifying their higher average price tag of Rs 4,000.
Meantime, local brands such as Flying Machine from Arvind Brands and Kewal Kiran’s Killer jeans could benefit from Denizen going off the shelves. "The biggest challenge for any jeans maker in the country is at what price to sell. We have been primarily focusing on smaller towns, which has helped us get volume and economies of scale," said Kewalchand Jain, chairman, Kewal Kiran Clothing.
admin
December 22, 2012
Raghavendra
Kamath & Sharleen D’Souza, Business Standard
Mumbai,
December 22, 2012
Quality
space and high street seem to sell even in a slow economy.
While many malls in the country are going vacant and space supply
surpassing demand in many cities, shortage of quality space and
heavy demand from retailers for high-footfall areas have pushed
up high-street rents by 58 per cent this year.
Vittal Mallya Road in Bangalore, Colaba Causeway in Mumbai and Camac Street in Kolkata have seen a rise in rents of 58 per cent, 56 per cent and 33 per cent respectively, said a study from global property consultant Cushman & Wakefield.
“There are no good malls that are expected to come up in the next one or two years and hence demand for high street has gone up,” said Rajesh Jain, director and chief executive of fashion brand Lacoste, which has a store in Colaba Causeway. “Also, mall rentals are already very high and there is no room for rents to go up further.”
Sohel Kamdar, vice-president of Metro Shoes, said: “Footfalls are very high at high streets and productivity of our store in Colaba is twice as that of our other stores. Also, high streets have a ready customer base”
Retailers are opting for standalone stores on high streets rather than malls due to high maintenance charges, consultants said. Lower space-efficiency has also led to high demand for high-street spaces.
An executive with Tata-owned Trent said common area maintenance charges in malls have risen to Rs 40 a sq ft, against the Rs 10-12 a sq ft considered viable for department stores such as Westside. “Malls in cities such as Mumbai are now asking for a rent of Rs 400 per sq ft a month. A couple of years earlier, this stood at Rs 120 per sq ft. Office rents have moved in the reverse direction. Nothing explains the increase in mall rents,” the executive said.
Of the two dozen outlets Tata-run Trent planned for Westside this financial year, about two thirds would be standalone properties in high-footfall areas. Croma, Tata-owned chain of electronics and durables stores, planned to open a dozen of the 18 stores this year in standalone properties.
According to the Cushman report, over 58 per cent of the mall supply — around 4.8 million sq ft — had been deferred to 2013 by real estate developers due to low demand, poor liquidity conditions and hopes that they will get lot more brands next year as the government has allowed foreign direct investment in retail.
Khan Market in Delhi remained the most expensive retail location with rental values at Rs 1,250 per sq ft. It registered a rent rise of approximately four per cent over last year.
However, some high-streets saw rents stabilising or dropping in 2012. Brigade Road, Sampige Road, Kamanahalli Main Road and Commercial Street in Bangalore and North Usman Road, Anna Nagar Second Avenue in Chennai witnessed year-on-year drop in rentals, the report added.
According to Devangshu Dutta, chief executive of retail consultancy Third Eyesight, high-street stores also help brands establish their identity and build brands.
“Many retailers are finding it better to not be in a mall if they want to be a destination store. In a mall, you are among many other brands and do not have control over look and feel and customer experience,” he said.
