The Times of India

Bangalore, March 5, 2012

Prepaid cards have become the latest retail tool to keep consumers hooked to brands. They offer convenience and safety, because customers don’t have to carry cash, and they often come with a variety of offers , including discounts.

Brands like Cafe Coffee Day, Pizza Hut, Provogue, Kaya, Fastrack, Gili and a host of others have launched prepaid cards. A prepaid card works like a debit card with a PIN number that can be redeemed at the brands’ outlets. The cards in India are based on the closed loop model – that is, they can be redeemed only at the brand’s stores. "When I have money loaded on the card, the tendency to come to the same place is higher," says K Ramakrishnan, marketing president at Cafe Coffee Day. The brand’s card Cafe Moments , launched this month, offers a 5% bonus on cards with a value of Rs 100 to Rs 499, 7% on Rs 500 to Rs 999 and 10% on Rs 1,000 and above.

A prepaid card obviates the need to pay cash every time, and it also enables faster accumulation of bonus points or other offers . Prepaid cards in India are currently being used more as gift cards. Some brands have used it to launch a promotion or a service. What the prepaid gift card did for Kaya was to generate incremental walk-ins ," says Suvodeep Das, marketing head at Kaya Skin Clinic. In Kaya prepaid cards, currency can be reloaded in multiples of Rs 500 to up to Rs 2 lakh. Kaya sells about 250-300 gift cards a month.

Global Prepaid Exchange recently estimated that the size of the organized prepaid gift card and gift voucher market in India is Rs 2,000 crore and would grow to Rs 8,000 crore by 2015. "The acceptance of gift cards in proportion to vouchers has increased significantly," says Pratap T P, chief marketing officer at QwikCilver Solutions , a provider of prepaid card solutions.

However, Devangshu Dutta, CEO of retail consultancy Third Eyesight, says growth in prepaid cards would be restricted by the fact that they can be used only at a particular brand’s outlets. "Also, a customer cannot claim the minimum residual value in the card. He will have to top it up to redeem it," he says.

Sarah Jacob , The Economic Times

Bangalore, March 2, 2012

Apparel and home products retailer Marks and Spencer’s has appointed Venu Nair as head of its India operations, replacing CEO Martin Jones who is moving back to the parent company.

Nair takes charge as managing director, the London-headquartered company said. Sources said Jones was moving back for personal reasons. Nair was head of sourcing for the £9.7-billion British retailer in South Asia and director of buying operations for India.

M&S operates in India through Marks & Spencer Reliance India, a joint venture with Mukesh Ambani-led Reliance Industries, selling clothes and home decor but not its food products. It has 24 outlets across the country.

"Unlike an expatriate, Nair would have stronger understanding of the Indian market and his being involved directly in sourcing will play to his strength," said a senior executive of a rival firm. M&S has been to work towards sourcing 70% of its merchandise from India and Jones had been driving this change.

"While other international companies look at India as an interesting and emerging market, M&S clearly identifies India as a market of importance," said Devangshu Dutta, chief executive of management consultancy Third Eyesight.

Shilpa Phadnis , The Times of India

Bangalore, February 24, 2012

Homemakers are likely to love this – someone cutting vegetables for them for free, someone making chappatis for them, again at no charge.

It’s the latest from Future Group’s value retail chain Big Bazaar. They call it the Seva initiative, and the store at Rajajinagar in Bangalore has become the first to launch the services.

Customers in the store can choose from a combination of different grains that go into making a dough, and the store staff will then grind, knead and make it into fresh chappatis. The promise is that the entire process will take no more than 12 minutes. Customers can go to the vegetable counter and get the vegetables sliced and diced in different styles for free.

The ‘sevaks’ at the 1.3 lakh sft store will assist customers in availing free after-sales service for the electronic goods they purchase or in identifying a vendor for dry-cleaning their carpet. The store even has a Bangalore One counter where they can pay electricity or phone bills, and avail other public services.

"We don’t merely want customers’ share of wallet or mind. We also want their heartshare," said Ashni Biyani, director of Future Ideas, the innovation and incubation cell of the Group.

The retailer incurs additional costs to deliver these free services. But analysts say the cost is mostly related to labour. "This is a clever strategy to attract customers at relatively low-incremental costs," said Hemant Kalbag, partner at consultancy firm AT Kearney.

Usually, the cost attached to delivering a service gets embedded into the product. "But free give-aways along with experiential marketing become a hook for customers, which could potentially translate into a higher billing size at the counter," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

The Future Group has both internal and external pressures to try and find innovative ways to build a more robust business. External pressure comes from Big Bazaar’s competitors like Spar Hypermarket, which offers a better ambience and attracts more upmarket customers. Big Bazaar has been upgrading its stores to enhance customer experience, and Seva can be seen as part of this. "Big Bazaar stores launched in the last one year are less chaotic and resemble a Spar," said an analyst who did not want to be named.

Internal pressure for the Group comes from its huge debt of about $1 billion and high interest cost, which has impacted profitability. The retailer is working on a plan to turnaround its retail operations. It is exiting some of its non-core businesses and shutting down loss-making stores. It has closed five Food Bazaar outlets and 11 E-Zone stores and has laid off 3,000 people in the recent past.

To cater to more evolved customers, the Group is rolling out FoodHall, a food store for value-added food products and international food ingredients. The Seva initiative will be rolled out to 12 Big Bazaar Family Centres in the next two months. The Family Centre sub-brand makes customized product and service offerings based on the needs of the people living in and around the catchment area.

Meghna Maiti, Financial Chronicle

Mumbai, February 22, 2012

Kishore Biyani, whose proposed licensing and distribution venture (JV) with US footwear retailer Skechers fell through last year, has revived partnership plans with the foreign firm. It has even seconded one of its senior most executives Sanjeev Agrawal previously joint CEO at Future Value Retail as CEO of the proposed JV.

“The group is in the process of signing a JV agreement with Skechers and Agrawal will head this venture,” said at least three company officials in the know of the development. Future Group already has a 50:50 joint venture with UK-based footwear brand Clarks which is steadily scaling up.

“The footwear segment is seeing evolution in terms of product mix, pricing and demand growth, helped by the availability of international brands,” said Devangshu Dutta, CEO, third Eyesight, a consulting firm focused on retail and consumer products sector.

Earlier Future group had tied up with Liberty Shoes in a joint venture that was scrapped because of poor customer response. India is one of the strategic markets for Skechers and the company is said to have done good research over the last three years to establish the right strategy and partnership to develop the brand in India.

An email sent to Kishore Biyani, group CEO at Future group on February 20, 2012 seeking comments on the Skechers JV did not elicit any response till the time of going to press. Sanjeev Agrawal, ex-joint CEO at Future Value Retail said, “No comments.” Skechers USA in an email said, “Your email has been forwarded to the appropriate department for review.”

Purnendu Kumar, vice president at Technopak Advisors said, “The growth opportunity in the footwear segment is very high primarily because of low penetration in terms of point of sales, number of brands. There is pent-up demand in the market. Growing affluence is also driving demand in this category.”

Skechers USA, incorporated in 1992, designs and markets Skechers-branded lifestyle footwear for men, women and children under several lines such as those for shaping up, running and walking. The over $ 2 billion Skechers had signed a deal with Pantaloon Retail in the year 2009 to licence and distribute Skechers footwear and apparel in India. The deal involved Winner Sports, a wholly owned subsidiary of Pantaloon Retail India (PRIL) as the licensee and distributor of Skechers footwear and apparel through Future Group’s retail format Planet Sports.

The market for premium shoe products is growing at 15-20 per cent annually, according to Technopak Advisors. The growth potential has prompted several firms to enter the market in the past few months. Tata global trading arm Tata International started its chain of stand-alone stores, Tashi, targeting the segment late last year. Reliance Retail has entered into a licence dela with US-based Timberland.

Future Group’s other footwear JV Clark, has five standalone stores and around 10 shop-in-shops across India. “This venture will take two years to become profitable and it’s now in scale-up mode. By the end of the next financial year, we are confident that cash accruals from existing stores will be able to take care of the growth requirements of the lifestyle footwear, bags and accessories joint venture,” said a top Future group official involved with that business

Vidya Padmanabhan, Mint

Chennai, February 6, 2012

Banking on the growing purchasing power and busy lifestyles of urban, dual-income families, a slew of firms are now offering to help them run their homes, attempting to bring a measure of professionalism to a largely unorganized sector.

While there’s no dearth of cook’s cousins or aunt’s office assistants who will repair a ceiling fan, wash the car and even fix software bugs, entrepreneurs are now seeing an opportunity to step in with streamlined services for affluent professionals who want to avoid the uncertainties of the informal ecosystem.

“We did the research and saw the shift,” said Siddharth Bhatia, the head of operations of Gurgaon-based eTechies.in, a company he co-founded in mid-2010 to provide onsite and remote information technology support for individual users and small businesses. Bhatia and his co-founders, who had previously worked for several years in a firm providing remote technical support to users overseas, received a $2 million infusion in January from venture capital firm Inventus Capital Partners on top of an angel investment from Google India’s managing director Rajan Anandan.

“People in the middle and upper-middle classes are now ready to pay to get professional service and peace of mind,” Bhatia said.

With more than 1,500 individual subscribers and over 400 small-business subscribers for the company’s Rs. 3,000-per-computer annual contract—a 20-30% premium over rates at local repair shops, according to Bhatia—eTechies plans to extend its services to Bangalore and Mumbai in the next four months.

The move to organize the home-focused services sector is prompted by the same economics that drives the retail industry, which has seen mega malls and hypermarkets springing up in anticipation of the increase in the disposable income of India’s burgeoning middle class.

According to a recent report by the National Council for Applied Economic Research, India’s middle class, defined as families with an annual income between Rs. 3.4 lakh and Rs. 17 lakh, will grow 67% from the current level to 53.3 million households or 267 million people in the next five years. Further, according to the report, the typical middle class household spends half its income on basic daily expenses, leaving the other half for saving or discretionary spending.

Along with the growing affluence, however, comes increasing demands on the time of upwardly mobile professionals, which is where those who seek to organize the home-directed services economy come in.

“Given today’s busier lifestyles, with long commutes and extensive work-related travel, people have less time to hunt for a specific individual handyman—this offers an opportunity to companies that can offer a comprehensive set of services,” said Devangshu Dutta, chief executive of Third Eyesight, a retail and consumer products consultancy.

“Our target is the typical working couple that doesn’t have the time to deal with (service-related) issues at the end of the day,” said Prerna Bhutani, co-founder of Chennai-based One Call India, which facilitates home appliance purchase, delivery and after-sales service. She regularly sets up stalls in information technology parks, high-end apartment complexes and supermarkets to reach out to her target audience.

For Rs. 1,000 as annual subscription, or Rs. 100 per call, the company researches best prices among retailers, offers discounts through tie-ups with the retailers, arranges pick-up and drop services for purchases and repairs, and otherwise coordinates with retailers and repair centres to improve customers’ service experience, according to Bhutani.

With around 1,000 customers in Chennai, One Call India started operations in Bangalore and Gurgaon late last year, and may seek venture capital funding to expand to all major metros in the next three years.

“We have the exposure today to the kind of services people are using in the West, and customers are demanding that,” Bhutani said.

The potential in upscale Indian homes hasn’t escaped the big guns. The Indian arm of ISS A/S, a $14 billion Danish multinational that maintains facilities for the corporate sector, began a domestic cleaning service last year.

“Our research states housing and utilities make a prominent presence in the average consumer spending pattern of people in metros, hence a huge potential exists for ISS Homecare,” Stanley Britto, chief operating officer, said in an email.

The company charges Rs. 5-7 per sq. ft for cleaning services including specialized floor care, carpet care and glass cleaning, according to Britto. ISS Homecare earned about Rs. 1 crore from its operations in Mumbai, Bangalore and Chennai in the past year, and expects the figure to double every year, with services to be extended to other cities across India in the next 12-18 months.

However, Third Eyesight’s Dutta sees a gap between the demand and most efforts so far to tap it. “Most (of the companies) rely on a network of individuals as subcontractors, and there are gaps in terms of filtering these individuals for skill level, there is little or no roster management, and the result is highly inconsistent customer service. Therefore, customer retention for repeat contracts is an issue, and with time, if the poor reputation spreads, new customer acquisition also becomes difficult.”

In the case of eTechies, it was the management outlook, more than the market demand, that motivated Inventus’ investment.

“Yes, Indian consumption growth (of devices) was clearly a driver for eTechies,” Parag Dhol, a director at Inventus, said in an email. “We tend to be hugely entrepreneur driven, though.”

The founders’ work experience in remote technical support and their business model, proven successful in the National Capital Region, clinched the funding decision, Dhol said.

The companies, naturally, insist that their services beat what’s currently available. “Personally, as a working woman living alone, I found it very difficult to repair a broken tap or flush—just waiting for the guys—and safety was an issue,” said Shaifali Agarwal, founder of Delhi-based EasyFix Solutions, which provides plumbing, electrical and carpentry solutions.

The company checks recruits’ background, technical competency and basic reading skills needed to help them check and reply to mobile text messages, Agarwal said. They also undergo behavioural training to make customer interaction smoother, she said.

EasyFix, which charges a minimum of Rs. 100 per visit, has had about 1,300 customers in the National Capital Region, and plans to expand to Mumbai, Bangalore and Hyderabad by March.

Agarwal admitted that handling a large group of workers—24 in her case—was a significant challenge, one that probably has kept the sector mostly free of corporatization.

Pegasus Facilities of Chennai, which provides cleaning services for residences and vehicles, combines attractive employee benefits with a nifty micro-management system to stay in control of its workforce of 40 full-time employees. The company’s cleaning staff earn about Rs. 7,500 a month as salary, besides conveyance fare and a customer-referral bonus, plus tips, co-founder Vijay Simha said.

Employees must check in to the company with missed calls when they reach a customer’s residence, when they finish the job and when they leave, Simha said.

The company offers several cleaning packages—entire residence, kitchen, fans and fittings, windows—of which the bathroom cleaning service begun two years ago has been the most in demand, according to Simha. For a minimum of Rs. 5,500 per year, the company cleans two bathrooms twice a month. Of 9,000 households that use the company’s services in Chennai, about 60% are dual-income families, Simha said, adding that he gets three-four new contracts and one or two renewals every day. Pegasus expects to expand to Pondicherry and Coimbatore this year, and is seeking franchisees in cities across India. Simha gets occasional complaints from customers, he said, and he tells them, “I can’t make your bathroom new—I can just clean it. What you don’t have the time to do, I do—that’s all.”