Sapna Agarwal, MINT (A Wall Street Journal Partner)
Mumbai, October 15, 2012

VIP Industries Ltd, India’s largest listed luggage company, is positioning itself as a lifestyle brand by diversifying into handbags.

“Forty years ago, there was no branded luggage company in India. VIP created the category,” managing director Radhika Piramal said. “Now with Caprese (handbags), we hope to do the same thing,”

VIP has a 65% share in the branded luggage market that is estimated to be anywhere between Rs.650 crore and Rs.1,000 crore, according to Piramal.

Caprese aims to become a Rs.100 crore brand in five years and hopes to generate revenue equal to VIP’s luggage business within a decade, she said.

The company will also get into complementary categories such as clutches, wallets and leather bags.

“The idea is to be a lifestyle brand,” said Piramal, who took over the business three years ago as managing director. Since then, she has relaunched Skybags as a youth brand with a focus on backpacks and doubled revenue from the segment.

There are more than 200 international fashion and lifestyle brands in India and more are coming, according to Third Eyesight, a retail consultancy.

Lifestyle brands such as Espirit, Guess, Calvin Klien and Tommy Hilfiger sell everything from apparel and watches to handbags and accessories.

The Economic Times

Mumbai, October 11, 2012

Swedish furniture retailer IKEA is playing "a local carpenter" by taking cues from Indian consumers on product design and function as it waits for the government nod to open stores in the country.

"We have found that maybe we need to do things differently in India," Juvencio Maeztu, country manager of IKEA Retail India, said. "Maybe, we need to have different product function and quality in India that we don’t have globally," he said on the sidelines of the Indian Retail Forum on Wednesday.

A few months ago, a team from IKEA visited Indian homes across various income groups to understand what kind of design and products could work in India.

The world’s largest single-brand retailer has proposed to invest up to Euro 1.5 billion (more than Rs 10,000 crore) in two phases to open 25 stores in the country.

Experts say such a localisation strategy will help IKEA connect with Indian consumers.

"Food and home category require huge localisation and consumers can provide insights on what kind of products could sell," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said.

IKEA had faced initial hiccups in China when it entered the market with global products and ideas.

Maeztu, who worked for IKEA in Europe for 12 years before moving India, said the company will retain its global strategy of large-size store formats and build long-term partnership with its suppliers in the country.

"The beauty of India is that we have been working with the whole pipeline since the beginning," he said. IKEA sources goods from India for its global stores and many of its partnerships here were made more than 25 years ago.

India could be the 45th country to have IKEA stores.

Known for its affordable and modern furniture and home products, IKEA has 336 outlets with annual income of more than Rs 1.7 lakh crore in 2011.

After nearly four months of negotiations with the Indian government over a mandatory 30% local sourcing norm, IKEA Group this week said it will comply with the country’s newly diluted single-brand retailing regulations.

Once the government clears its proposal, it will take three years for IKEA to build a supply chain to roll out its first store in India. The company plans to invest Euro 600 million (about Rs 4,100 crore) in the first stage spanning over ten years to set up a chain of ten stores and its allied infrastructure. In the second phase, IKEA plans to bring in another about Rs 6,150 crore to open 15 outlets.

Nupur Anand, Daily News & Analysis (DNA)

Mumbai, October 6, 2012

The buoyancy in retail stocks is unlikely to last, experts would have us believe.

The sector has been upbeat since the government gave its go-ahead last month to 51% foreign direct investment (FDI) in multi-brand retail and 100% FDI in single-brand retail.

Retail stocks have gained anywhere between 7% and 36% in the past three weeks.

However, analysts believe poor earnings will poop the party.

Brokerage CLSA said in a note earlier this week that September quarter earnings will remain tepid for the sector with players like Shoppers Stop and Pantaloon expected to report up to 43-74% decline in profitability.

The key worry is same store sales growth (SSSG), which refers to sales logged by a retailer’s existing stores during a certain period vis-a-vis the corresponding period a year ago. In short, therefore, the reference is to stores that have been open for at least a year.

According to CLSA, SSSG has been hovering in low single digits for leading formats and is even negative for some.
Other experts corroborate the claim.

Devangshu Dutta, CEO of retail consultancy firm Third Eyesight, in fact, feels any huge improvement in same store sales growth is unlikely. “The business is still under pressure, margins continue to remain thin and it is unlikely that the festive season will be able to fuel growth for the retailers.”

Sales growth for the 14 listed retail players has slowed from 23% in the September 2011 quarter to 10% by the June 2012 quarter.

For a retailer, a healthy SSSG in the current economic scenario would be 14-15%, said Arvind Singhal of Technopak.

But going by analysts, most retailers won’t reach this figure in the coming 2-3 quarters.

Blame it on inflation and dampened consumer spirits.

An extended period of discount sales this year has also nibbled on margins, bringing down overall profitability even though volumes have improved, Dutta pointed out.

This is likely to reflect in the retailers’ balance sheets soon.

To be sure, separate consumer surveys by BluFin and Assocham have found that consumer sentiment continues to remain subdued and is unlikely to improve in a hurry.

Also, in August, rating agency Fitch had revised the outlook for the retail sector to negative from stable for the second half of this fiscal.

In the midst of all this, a slowing SSSG could wreak havoc on retailers’ bottomlines, to put in mildly.

Priyanka Pani, The Hindu Businessline
Mumbai, October 5, 2012

“We have done a soft launch in some geographies and have got a very good response. We will look at a national launch early next year,” said Ashish Dixit, Chief Operating Officer, Madura Fashions.

The kids apparel market in India is likely to reach Rs 80,000 crore by 2015 from the current levels of Rs 38,000 crore, said industry body Assocham in a report last November. Besides, Indian players such as Liliput, Gini and Jony, and international retailers such as Zara Kids, United Colours of Benetton, Burberry are also trying to capture the market here.

Allen Solly is currently available with online retailers such as Jabong and a few others. The kids brand will soon be made available at all company outlets. At present, there are 140 such retail outlets.

“It does make sense for large-scale players to enter the kids segment, either by creating a new brand or even extending existing ones, given the long-term proposition in the market. In the next 25-30 years, a large section of the population will be below 10 years. With rising incomes, expenditure on a child’s clothes increases as he outgrows them quickly,” said retail consultant Devangshu Dutta at Third Eyesight research firm.

Early this year, knitwear brand Monte Carlo also entered this segment.

Allen Solly, despite being a male brand, has been able to strike a chord with corporate women. Their women’s range accounts for 25 per cent to the annual sales turnover. The firm has also unveiled a new brand identity with a new logo, a revamped store look and new advertising and promotion.

Vishal Krishna, Businessword

Bangalore, September 29, 2012

It is an early Monday morning and Sandhya Ram is busy preparing a presentation. But at the back of her mind are thoughts about her kitchen supplies, and what to cook for dinner. Sandhya needs provisions in a hurry so she turns to a grocery retailing website — it is convenient and the order comes right to her door. “I am a PhD student, and a mother. My husband is a consultant. We have no time to shop, and shopping for groceries outside takes time and energy,” says Sandhya, who is also a teacher and research assistant at a business school in Bangalore. Sandhya and many others like her are just the kind of customers that online grocery retailers plan to tap. At least 20 such businesses have opened up in the past year, and most of them are based in Bangalore.

But there is many a slip between the cup and the lip. Online grocery retailing has not had a good run in other countries, barring the likes of Tesco and Walmart that have spent years getting their supply chains and technology right. “When it comes to start-ups, the easiest piece to create is the technology involved for a great user interface to attract the customer,” says Devangshu Dutta, CEO of retail industry consultancy Third Eyesight.

There are, however, other challenges in grocery retailing — sourcing, maintaining consistency in service and products, and keeping operational expenses in control. But there are bigger problems.

One, the business needs money to survive in the long run. The scale that many of these businesses have is limited to the top 10 major cities and their affluent populations. Two, a majority of Indian consumers is yet to experience shopping online. Of the 8-10 million Indian women working in the formal sector (according to the National Institute of Public Cooperation), it would be difficult to assume how many of them actually shop online. But the online grocery business’s survival will ultimately depend upon women as decision-makers.

This business may be easy to enter, but longevity is another ball game, and the entrants are still learning the rules.

The Right Direction?

After taking orders online the previous day, the five-member call centre of Towness.com dispatches the packing order to the delivery team. The next day, 20 trucks leave a 20,000-sq. ft warehouse in Peenya, Bangalore, with cartons of jams, lentils, rice, wheat and pickles from FMCG brands, including ‘Town Essentials’. “I have been running a B2B business for 10 years and that gave me enough experience to dabble in the B2C business with private labels,” says Amar Krishnamurthy, MD of Town Essentials. Thanks to private labels in lentils, jams and pickles, the B2C business gives him higher margins and he also has more control over the working capital cycle. Usually, say analysts, margins in the online retailing business are only as high as 8 per cent, and that too if one manages the supply chain efficiently. But if private labels are the main business, margins can be significantly higher.

“There is enough business within Bangalore and I am improving my website experience to get more orders,” says a confident Krishnamurthy, adding that his B2B business, which supplies to over 200 hotels and restaurants, funds the online arm and manages its delivery too. Towness.com gets about 45 orders a day. “I do my own sourcing of all the commodities, fruits and vegetables because I believe in maintaining consistent quality if the customer has to come back to shop at the website,” he says.

In another part of Bangalore, 20 Omni vans leave a mandi in Whitefield for a 6,000 sq. ft warehouse, from where Bigbasket.com takes its products to three hubs across the city and delivers groceries. “The ability to gauge demand is the key to success in this business as you do not want to end up with too much inventory,” says Hari Menon, who co-founded Bigbasket.com with Vipul Shah. Menon adds that every online grocery retailer has to operate multiple spokes supported by a large hub if this business has to succeed. Bigbasket.com has 20 trucks and claims to handle over 400 orders a day. To support large orders, it is moving to a 30,000 sq. ft warehouse that will also be its central hub. “In this business you have to meet a 100 per cent fill rate for the customer. If you do not have the product he or she likes, you have lost one customer,” says Menon. The company has raised $10 million from Ascent Capital, and is currently the only business in this segment to have external funding.