Yassir A Pitalwalla, Meghna Maiti, Financial Chronicle

Mumbai, December 10, 2012

McDonald’s outlets in south and west India are going for a changeover as Hardcastle Restaurants (HRPL), the master franchisee for west and south India operations is preparing for a reverse merger with its parent Westlife Development (WDL). With the changeover, HRPL aims to connect better with older customers and increase sales.

“Fashions too change over time. To keep ourselves relevant we are reimaging the look of our restaurants by going in for softer lighting, more use of wood and more apt graphics. This whole new design has already been implemented in some of our newer outlets in Navi Mumbai and at a few locations in Mumbai city itself,” Amit Jatia, vice chairman of HRPL, told Financial Chronicle.

The re-imaging is part of a billion dollar plus worldwide drive by the maker of Happy Meals to revitalise the look and feel of its stores to make it a cool place to hang out, marking the biggest makeover in its 56-year-old history. Hardcastle Restaurants hopes that the makeover will help it increase same store sales and sell more of its higher priced items replicating the experience in US post makeover. McDonald’s had earlier this year said that by the end if 2012 it hopes to have completed the interior renovations at about half of its worldwide restaurants.

Harish Bijoor, CEO of Harish Bijoor Consults, said it is important for McDonald’s to perk up their image to stay relevant and competitive. “The company has to compete with players such as, Subway, Starbucks among others.”

“We have got good feedback from customers. Some of our customers are now much older than when we first started out in India over a decade ago. The re-imaging ensures that we will not lose our connection with our older customers and we stay relevant to our current consumers,” said Jatia.

In the US, the fast food chain is moving to seating zones, slow zones for coffee sippers enjoying the wifi, fast zones at high bar tables for single diners wolfing down a sandwich, and family zones with booths for parents to lock their children on the inside to prevent them from wandering. “We plan to upgrade all our old restaurants to the new look in the course of the next two to three years while all new outlets will sport the new look from day one itself,” said Jatia.

McDonald’s has been trying to capture a larger share of sales by extending its offerings via home delivery and also by setting up dessert kiosks within the vicinity of its existing outlets. “Our ice-creams are very popular so we try to set up dessert kiosks selling our Sundaes and McFlurry’s among others in high street areas or the atrium of a mall where footfalls are very heavy,” said Jatia.

Devangshu Dutta, chief executive of consultancy Third Eyesight, said most players in the quick service restaurant space are trying to attract more profitable customers and focusing on outlet profitability. “The consumers would come more frequently. Also, people who come there could feel better about the product,” said Dutta.

Jatia hopes that the remodelling and the menu changes such as the extra value meal, spicy range and breakfast menu will help the quick service restaurant, reposition itself in the minds of consumers from a snacking occasion to a meal occasion. “We want people to consume meals in the lunch and dinner day parts. It’s about scale and volumes for our supply chain as we are in a high volume, low margin business. As our volumes increase operating leverage will continue to grow,” added Jatia.

Hardcastle, which is in the midst of Rs 500 crore capex to double its network to 250 restaurants, is following the principle of setting up where the customer wants them to be. “The marketplace has tremendous opportunities and we want customers of all levels of society such as section B and C too not just section A to frequent our stores,” said Jatia.

Alpana Parida, president of DMA Works, said, “In India, McDonalds is symbolic of America.”

Raghavendra Kamath, Business Standard
Mumbai, November 19, 2012

His rivals and analysts may not agree, but Future group Founder and CEO Kishore Biyani insists that his mall concept, Central and discount chain Brand Factory, have become “the largest department store network” in the country.

Central and Brand Factory, whose financials are integrated, posted a turnover of Rs 2,200 crore in FY 2012, while Raheja-owned department store chain Shoppers Stop posted sales of Rs 2,167 crore and Westside, the department store of Tata-owned Trent, posted a turnover of Rs 770 crore.

“Both the formats are bigger in sales than all other fashion retailers and we feel they have the potential to touch the billion-dollar mark in the next couple of years,” Biyani said.

Early this year, he had sold a majority stake in department store chain Pantaloons to the Aditya Birla Group for Rs 1,600 crore to reduce the burgeoning debt of the group.

“Central plus Brand Factory is bigger than Big Bazaar and Pantaloons put together in cities such as Hyderabad and Bangalore. But in cities such as Mumbai, we are constrained as Central requires large spaces,” Biyani says.

With a turnover of Rs 270 crore and Rs 200 crore in Hyderabad and Bangalore respectively, stores in those cities are one of the largest among all retailers in the country, he claims.

Rivals beg to differ. “Everyone seems to be claiming that his is the largest department store chains even when he is not running any department stores. You should have a certain yardstick for calling yourself a department store,” says a top executive at Shoppers Stop.

Adds Abneesh Roy, associate director, institutional equities-Research at Edelweiss Securities: “You can’t compare Central and Brand Factory with others. Both Westside and Shoppers Stop are far bigger brands than Central. I think it is not proper to combine both Central and Brand Factory.”

But a Pantaloon executive says Central can be easily transformed into a department store format given its average size of 100,000 sq ft and over 500 retail brands.

Biyani also has grand plans for these formats. He wants to double the business of these two formats in the next three years. Currently both of them have a total retail area of three million square feet and Biyani plans to double that count in the next two to three years.

After covering big cities, Biyani says he wants to take them to tier II cities such as Pune, Ahmedabad, Nagpur, Mysore among others and expand the footprint of Brand Factory which competes with discount chains such as Megamart, Promart among others.

From a 22-store network, Central will become 38 stores during the next two-three years and Biyani is planning same number of stores by 2015.

Some like Edelweiss’s Roy say it is a challenging task. “It is fragmented and a me-too market. It is a tough task for anybody to double the business in the next two to three years,” says he.

“I think it is a fairly aggressive growth target though not impossible,” says Devangshu Dutta, chief executive of Third Eyesight, a retail consultant.

Besides expanding network, Central is also doing customer activations and getting exclusive ranges and collections from fashion brands to get more shoppers into its stores.

Central is doing ‘Trouser festivals’, ‘Partywear collection,’ and Ethnic wear festival’ with brand such as Van Heusen, Arrow, AND, Biba, 109 and others where brands launch new collection and range during those events.

During such events, Central creates something called ‘switch areas’ where additional spaces are created to highlight the categories and visual merchandise.

“When you organise such events, the depth and width of the category increases and we have seen 100 to 200 per cent jump in sales during such festivals,” says Rajesh Seth, vice president, sales at Central.

Central has also added new categories such as novelties and gifting under ‘OMG’, dollar store style offering under ‘Top Buys’ and baby products under ‘Baby World’. The chain has completely revamped home category and launched Home at Central at its stores.

Seth says the chain has recently launched exclusive western wear brand ‘Oxygen’ in partnership with apparel brand 109 and looks to launch two to three more brands.

However, other chains such as Shoppers Stop are also doing such activities to boost sales. Shoppers Stop recently did ‘Makeover marathon’ in association with leading cosmetic brands. It also did event around watches and ladies western wear.

“The key point is that you have to able to differentiate yourself to different customer segments. Your whole communication and offering has to be tailored in a way to tap that segment,” Third Eyesight’s Dutta said.

Priyanka Pani, The Hindu Businessline
Mumbai, November 16, 2012

Mahesh Patel, owner of a departmental store in suburban Lokhandwala in Mumbai, is disappointed with the festival sales this year. Patel, who also trades in crackers, said there was a 20 per cent decline in sales this time.
Several big box retailers such as Shoppers Stop, Pantaloons and Croma, which form some 6 per cent of the retail market (according to retail advisory firm Technopak), were reported to have witnessed a bumper sale. The rest 94 per cent feel that this festival season was the worst in the last four years.

The only segment that grew was personal gadgets such as mobiles and tablets, said Nilesh Gupta, MD, Vijay Sales, a consumer durable retailer.

He said this year there was 8-10 per cent growth compared with 15-18 per cent last year.

Girdhar Bagari, an apparel retailer in Angul, a tier III town in Orissa, said his three-floor store used to remain open till late in the night during festival time. However, this Durga Puja he had to shut shop by 10 p.m.

“Diwali sales were the only respite this time as people bought several traditional wears and sarees but overall there was a 25 per cent slump in sales compared to last year,” Bagari said.

Mahesh Agarwal, a retail commission agent in Raipur, said that there was less demand for branded/premium apparels this season from Orissa, Chattisgarh, Jharkhand, Bihar and Madhya Pradesh. “The sales for high-end (Rs 1,500 and above) was down by 30-40 per cent,” he added, while saying the demand dropped drastically in West Bengal.

However, a few markets in Andhra Pradesh fared well during the Vijaya Dashami celebrations. Om Prakash, owner of Kanak Durga Silks in Warangal saw sales worth Rs 40 lakh per day. While Delhi and other northern markets had a subdued Durga Puja celebrations, Diwali wasn’t able to add any sparkle to the overall business as the prices of crackers and sweets doubled over last year.

“The decline in sales could be due to the extended sale/discount period this year. High value items were impacted and clothing. The economy is slow and companies are looking conservative,” said Devangshu Dutta of marketing research firm Third Eyesight.

Meanwhile, Arvind Singhal of Technopak Advisory said that the economic slowdown in the last 12-18 months has led to a low volume growth for almost all consumer firms. “Most of the companies grew in single digit from 10-15 per cent last year even as consumers restrained themselves from discretionary spends on back of high inflation of 8-10 per cent. If this continues, we expect this to decline further to 5-6 per cent in the next few months,” he added.

Raghavendra Kamath & Shivani Shinde, Business Standard
Mumbai, October 29, 2012

E-commerce sites are giving out home makeovers, wardrobe offers and free gift deliveries during the ongoing festive season to woo customers. Most of the sites offer additional products, other than discounts, to lure customers.

For instance, ‘members only’ site fashionandyou.com will launch a 15-day ‘home makeover’ campaign, wherein three highest shoppers will get home improvement products costing between Rs 10,000 and Rs 50,000.

The e-commerce site is running a month-long promotion called “Festival of indulgence” from October 16 to November 16, wherein the highest shopper can win a designer gold necklace worth over Rs 3 lakh.

Private label-focused site Zovi.com is running a ‘wardrobe offer’, wherein the buyer gets accessories worth Rs 399 for free on purchases worth Rs 1,500 and above.

“We do not believe in discounts. We thought by giving free accessories, we can engage with them better and strike a personal chord,” said Kavindra Mishra, founder-member and vice-president, sales at Zovi.com.

Zovi is also looking to launch the kidswear segment on its site and add a range of winterwear next month to its offering. Another site, Jabong.com, is launching exclusive international products on its site and has started free delivery of gifts.

“Free delivery of gifts requires a lot of effort and processes. We thought the festival period is ideal to launch this service,” said Praveen Sinha, co-founder and managing director at Jabong.com.

Online market place eBay, too, has been promising goodies during the festive period. For purchases made between October 5 and October 15 for up to and above Rs 5,000, gifts such as branded headphones, iPod shuffle, mobiles, iPads and laptops were given out. During October 16-31, buyers need to make purchases only for Rs 2,500 to get gifts.

Besides, eBay has come out with an offer for purchases worth Rs 20,000 to Rs 4 lakh between October 19 and 31. On such buys, customers get gifts such as LED televisions and laptops.

Another player, Snapdeal, is also offering special Diwali offers around home products, consumer durables and others. According to consultants, the strategy of e-commerce sites will not only push sales of products, but also increase margins and positioning in the minds of customers.

“There are two ways of giving offers. Either you can give a discount of 50 per cent on a Rs 500 product, or you can offer the product for Rs 400 and give an additional product,” says Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy firm.

According to Dutta, this (the additional product) would push up the implied value of the product in the minds of customers.

Dipti Jain, The Times of India

New Delhi, October 25, 2012

After a sluggish start for retailers this year, even the festival season might not be a mood-lifter. With consumer spending still not encouraging, retailers are not as ambitious on their prospects this festive period as compared to the previous years even as they expect a pick up in sales.

While most retailers that TOI spoke to said this quarter (October-December) sales would definitely be higher than the rest of the year, not many expect the increase to be same as during a typical October-December period. According to industry estimates, the retail sector has been reeling under the impact of steep price increases and a significant depreciation of the rupee.

Growth in the industry has nearly halved between 2010-11 and 2011-12 , causing most retailers to aim for even lower growth targets this financial year, analysts said. While the luxury sector has performed relatively better, it is the mid to premium range of brands that have been worst hit. "Festival quarter has always been good but there is still a fair bit of slowness in the economy. Retailers will push very hard to revive some optimism ," said Mohit Bahl, partner , transaction services at KPMG India.

Madura Garments-owned Louis Philippe, said while it was expecting around 20% growth this quarter, it is significantly lower than previous years. The brand, which is currently witnessing a 15% annual growth, said growth has declined from 50% in 2010-11 . Even last year, sales growth was in the range of 20%-25 %. "Raw material prices have gone up. Plus excise duties have increased and so imports are costlier . Even hiring is low in the industry so the sentiments are poor," said Jacob John, brand head, Louis Philippe.

Having taken multiple price hikes in last one year, retailers said any further increase would not be possible either as it would further dent purchasing sentiment. The industry has seen a 20%-30 % increase in prices in the last one year.

"Retailers are cautiously optimistic and are focusing on improving footfalls through promotions as well as margins by promoting higher priced and higher margin products. Expansion plans are more realistic ," said Devangshu Dutta, CEO, Third Eyesight, a specialist consulting firm.

With the festival season setting in late this year, the window for raking in huge profits for retailers is smaller too. DLF Brands, which has the franchise rights for international brands like Claire’s , Alcott, Boggi, Sunglass Hut, said it has significantly ramped up its marketing and promotion activities this year to increase footfalls. "The reform measures announced by the government in the last few weeks will take time to show its benefits. So people are more cautious. Brands which have come up new might perform well, but those existing already will continue to feel the pinch," said Pradeep Bhanot, senior vice president (accessories), DLF Brands.

Offering heavy discounts is not on the cards for most brands but retailers are looking at adding new range of low-priced products to increase footfalls. Adventure sports brand Woodland is planning to come up with "well-priced" products apart from offers for its loyal customers. The brand, which grew 30% last year, is expecting a 12-15 % same store growth for this quarter. "These three to four months are very important for us. We are tying up with a lot of advertisers to increase sales this season," Woodland India MD, Harkirat Singh said.