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March 10, 2009
By Radhika Sachdev
Tuesday March 10 2009
Guess what is clearing off faster on eBay India than the proverbial fresh baked cakes? Jewellery, pen drives, flash memory cards, hard discs and anti-virus software.
Had Sigmund Freud been alive and kicking today, the father of psychology would have read "recession anxiety" in this trend. For despite the low internet penetration in the country (4.9%, according to the Manufacturer’s Association for Information Technology) certain commodities are flying off faster on the net than offline.
Statistics gathered from eBay India (formally Baazee.com) reveal that one of the top-sellling category is jewellery and watches (Rs 8,000 crore). Every sixth minute, a piece of jewellery is sold on the auction site. Other hot categories are clothing and accessories (Rs 18,000 crore), sporting goods (Rs 106 crore), collectibles, home furnishings and musical instruments.
"Lately data portability devices are doing extremely well," says Deepa Thomas, senior manager, Pop Culture at eBay India.
These online shopping trends throw two big myths out of the window. One that the lack of the "touch and feel" factor is the biggest constraint in the path of e-commerce growth in India. And second, that only low value items peddle on the net, namely old books, cassettes, CDs etc.
"During a slowdown people look at buying or disposing off assets in the most cost-effective manner. They want to pay commissions that are a norm in offline transactions," reasons Satya Prabhakar, CEO, Sulekha.com, that projects itself as the online yellow directory of India.
"Shoppers these days are also looking for great offers," says eBay’s Thomas. "Our deals are at least 20-30% cheaper than the store price," she adds. Add to this the missing hassle of finding parking place, running up fuel costs, food and beverage costs etc, and you end up saving quite a bundle. eBay’s ‘price challenge’ and ‘deal of the week’ initiatives kicked off early this year and already, Thomas claims, the site is doing better than the industry rate of growth of 30%, year-on-year.
"Thirty per cent growth rate for the e-commerce industry is not unbelievable," concedes Devangshu Dutta, chief executive of Third Eyesight, a specialist firm in the retail and consumer products space. "Travel has been the biggest driver of e-commerce in the past three-four years. Other drivers are the number of offers, improving connectivity, and growing numbers of consumers who are now comfortable with making online transactions."
According to statistics available with the Internet and Mobile Association of India (IAMAI) based on a study conducted by IMRB, formerly known as the Indian Market Research Bureau (see box below), the e-consumer market (B2C and C2C) in 2007-08 was Rs 9,210 crore. The main driver for the industry, points out Dutta, was online travel (Rs 7,000 crore) followed by e-tailing (Rs 1,105 crore that clubs revenues of online retailers and auctioneers) that now contributes around 12% to the sector. Top players, according to Dutta are Yahoo!’s shopping website, Rediff, Indiatimes, Futurebazaar and TV18’s in.com.
Defining e-commerce as "buying and selling of products and services on the internet or on any other application that relies on the internet," the IAMAI study crumbles the cookie into online travel, e-tailing, classifieds (job portals, matrimony, property and automotive sites), sites dealing with paid content subscription as well as the market for digital downloads, from the internet and mobiles.
On surface, these numbers may appear small compared to the offline organised retail (around Rs 78,400 crore, according to India Retail Report 2009). Says Sankarson Banerjee, CEO, Futurebazaar.com, the e-tailing outfit of Future Group, "Numbers are no indication when organised retail is also just 6% of all retail in India." Banerjee concedes some impact of the slowdown, especially, in high spending categories such as consumer durables, but he hurries to point out that apparel and books have the potential to move even in a downturn. Agreeing with him, eBay’s Thomas says that response to certain categories on the site is so encouraging that overall, these categories are doing better than the industry average of 30%.
"On the classified side," reveals Vivek Pahwa, CEO of Accentium Web, the company that runs Secondshaadi.com and Gaadi.com, "Jobs have the biggest share (Rs 200 crore), followed by matrimony (Rs 100 crore) real estate (Rs 50 crore) and automobiles (Rs 10-20 crore). "Our auto business is hit but matrimony is recession proof," he chuckles.
Again, export-oriented categories continue to do well on eBay, perhaps with access to a wider global berth through the internet. Top on this list is horse saddlery from Kanpur, maritime collectibles from Bhavnagar, sporting goods from Jalandhar, brass trumpets from Meerut and ethnic wooden furniture from Jodhpur. Lately, movie and cricket memorabilia have also begun to do well on the site.
In 2008, eBay set up a separate division by the name of Pop Culture that creates campaigns, autographed merchandise etc for movies and sports companies.
"We did it for Slumdog Millionaire, Sarkar Raj, Jodhaa Akbar, Drona, Contract etc and the response was good," says Thomas. The commission that eBay charges is different for different categories. It’s lower for fast-moving goods, such as technology products and electronics (1%), higher for lifestyle and collectibles (5%) and the highest for books (6%), where there is no listing fee as the category demands bigger display and variety.
As for demographics, 85% of eBay subscribers are male in the age bracket of 18 to 40, mainly from top metros. In addition, Futurebazaar targets housewives. "Over 40% of our deliveries are made outside the top 10 cities," says Banerjee.
Summing up, Dutta says, "Convenience, including the ability to compare prices and products, is possibly the biggest driver for this industry. This is what makes them recession-friendly businesses."
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March 2, 2009
By Raghavendra Kamath
BUSINESS STANDARD
Mumbai March 2, 2009
Raheja-owned department store chain Shoppers Stop Limited (SSL) is pulling out of unviable new ventures and shutting loss-making stores to conserve cash for the company in the ongoing economic downturn.
The retail firm had announced on Friday that it has closed three of its book stores ‘Crossword’ – one at Mumbai Airport, and two others in Chennai and New Delhi. The company also closed its airport retail store ‘Stop & Go’ at Mumbai Airport.
“They were not profitable. We open new stores without much information but, when we close them, we have complete knowledge about operations,’’ said BS Nagesh, Managing Director of Shoppers Stop, while not specifying how many stores the company has closed in the last one year.
Shoppers Stop recently pulled out of a catalogue retailing venture with UK’s Home Retail group under the Hypercity-Argos brand. The decision to wind up operations was taken “…as the business did not meet planned performance levels, (and) to support investments required in the current economic climate,’’ Shoppers Stop had said recently.
The company has also moved out of food business after announcing that its Café Brio outlets would be replaced with Café Coffee Day outlets over the next couple of months. Another brand, Fresh Basket, has become a private label of group firm Hypercity Retail.
“We cannot say that new retail ventures do not work
in the country. Crossword is a profitable venture,’’
Nagesh stressed.
In late December last year, Fitch ratings downgraded a Rs
30-crore short term debt and Rs 50-crore commercial papers
of Shoppers Stop due to ongoing margin pressures resulting
from slower sales growth and losses from new businesses.
“The company’s business has been impacted by slowing
growth in same store sales, and the ongoing slowdown in domestic
consumer spending,’’ Fitch said.
The company had reported a net loss of Rs 47 crore in the first half of FY 2009. As of 30 September 2008, SSL had a debt of Rs 220 crore as compared to Rs 207 crore in March 2008, Fitch said.
“Indian shoppers still prefer traditional forms of retailing. New formats are yet to catch up in the country,’’ said Devangshu Dutta, Chief Executive of retail consultancy Third Eyesight.
Some of the biggest retailers – such as Reliance Retail,
Aditya Birla Retail, Spencer’s and Future Group –
have closed down their stores and are going slow with expansion
plans as consumers downtrade and defer their big ticket purchases.
While Reliance Retail has closed down 30 stores, Aditya Birla
has closed 45 of its unprofitable stores in the last one year.
Retail major Future Group’s CEO Kishore Biyani, who
was targeting a retail space of 30 million square feet by
financial year 2011, now expects to have the space by FY13.
“Retailers have closed stores which are not meeting their expectations. In the current scenario, they are being as conservative as they were being optimistic 2-3 years ago,’’ Dutta said.
Even a report from Edelweiss Securities pointed out how across the board expansion plans are being re looked at because of capital scarcity and reassessment of catchment.
“Given high debt levels and an almost dormant equity
market, the capital for growth has become scarce,’’
the report said.
If Pantaloon added 0.3 million sq ft of space in the December
quarter of the current financial year compared to 0.9 million
it added in the corresponding quarter last fiscal, New Delhi-based
Vishal Retail added only 0.2 million sq ft of space in the
just-concluded quarter compared to 0.5 million sq ft it added
in the year-ago period.
However, Shoppers Stop added the same amount of space in the December quarter of this year compared to last year’s corresponding quarter.
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February 20, 2009
By VISHAL KRISHNA
Businessworld
20 Feb. 2009
Lesser stock on display racks in your neighbourhood Subhiksha, and may have started going elsewhere instead. One fine day, you may have even noticed that the shop was shut. What happened was this: Chennai-based value retailer Subhiksha Trading Services, neck-deep in Rs 600 crore of debt (plus Rs 180 crore raised internally as shareholders’ funds) accumulated over the past three years, could not pay its vendors as all its earnings was going to service the debt. So, over the past six months, it temporarily shut all 1,600 of its outlets in 110 cities.
Yet, till recently, Subhiksha’s managing director and promoter, R. Subramanian, was thinking of expansion. “I will add another 2 million sq. ft by the end of the fourth quarter of 2009,” he had told BW in December 2008, a move that would have raised his store count to 2,200 for an additional Rs 1,000 crore. Today, the company is on the threshold of a closure — it has no money to run its operations, its senior staff are deserting, many of its stores have reportedly been looted, and the government may initiate an independent audit of accounts at the instance of ICICI Ventures, the second-largest shareholder with 23 per cent stake.
However, Subramanian has not given up. Firm in the belief that Subhiksha can still be a viable business, he is making a last-ditch effort to survive by pitching for a Rs 300-crore loan from a consortium of 13 banks, besides attempting a debt restructuring exercise. In a letter sent to BW, Subramanian says, “The infusion of Rs 300 crore would revive Subhiksha soon.” That would allow him to pay off the vendors and resume operations at a minimal level, though he might also have to shell out a significant chunk of his 59 per cent stake. Subramanian’s confidence stems from his belief that his business model is viable. “We did not raise enough equity, and we paid the price,” he says. “It was a capital structure problem rather than a business model problem.”
Analysts agree that Subhiksha’s low-cost model was sound. They blame the company’s troubles on its rapid expansion with debt capital to open 800 stores in a year. Although the same store sales were as high as Rs 12,500 per sq. ft during the first few months of 2008, the debt taken on a number of new stores and the financial crisis put paid to Subhiksha’s exuberance. The industry average for stores of 2,000 sq. ft (Subhiksha’s typical store size) to break even is Rs 5,000 per sq. ft, and analysts say that Subhiksha’s new stores never achieved break-even levels.
The desire to expand at breakneck speed is not typical of Subhiksha alone. “All retailers have read the Indian market wrong,” says Devangshu Dutta, who runs retail consultancy Third Eyesight in Delhi. “There was no prudence; (there was a mismatch) between what the real consumer demand was and the number of stores opened.” Pinakiranjan Mishra, partner of retail and consumer product practice at Ernst & Young, says, “Retailers have spread themselves too thin to benefit from scale.”
The Rs 300-crore and the restructuring may help Subhiksha revive, but only if it closes at least 40 per cent of its stores. That may keep it afloat, but would be disastrous for a company that fundamentally offers low prices and relies heavily on high volumes for better discounts from consumer companies.
(Businessworld Issue Dated 24 February-02 March 2009)
admin
February 11, 2009
Business Standard BS Reporters
Mumbai February 11, 2009, 0:31 IST
Kishore Biyani-owned Pantaloon Retail’s same-store sales in January grew at the second slowest pace in five years as consumers curbed spending and the retailer struggled to survive the downturn by offering discounts.
The slow growth comes after the retailer’s value and lifestyle same-store sales registered a negative growth in December.
Pantaloon’s same-store sales in the value retailing segment
climbed 4 per cent in the month of January after dropping
4 per cent in December.
Lifestyle sales grew 12 per cent in the month after declining
14 per cent in the previous month.
"Overall the market has improved and since we are the mass retailers we are gaining. Home segment has also picked up compared to December. Same-store sales growth in mobile, furniture and electronics which had dropped in December has also picked up,” said Kishore Biyani, managing director, Pantaloon Retail.
Same-store sales, a common metric in the retail industry, compares sales of stores that have been in the business for a year or more. The measure allows investors to determine what portion of new sales has come from sales growth and what portion from opening new stores. The figures are usually released by retail companies every month.
Analysts attribute the spurt in sales to the month long "The Great Indian Shopping Festival” which was launched on December 13. The sale was extended till January 7. The retailer also unveiled another 3-day shopping festival to coincide with the Republic day, which helped push the sales higher.
"December-January is full of discounts which push up customer’s traffic. The real picture will emerge when a chain stops the offer. Retailers are not out of the woods yet. Consumers are still feeling conservative about spending and cutting back expenses,” said Devangshu Dutta, chief executive, Third Eyesight, a Gurgaon-based business consultancy.
Analysts covering the company’s stock say the future growth for Pantaloon isn’t robust and average sales of the country’s biggest retailer may be contained at Rs 500 crore a month compared with Rs 690 crore in January.
admin
February 10, 2009
Reuters
Tue Feb 10, 2009
Indian textile manufacturers have sought a two-year moratorium on repayment of term loans, withdrawal of excise duties on man-made fibres and waiver of service taxes on exports as well as taxes on textile machinery.
The embattled textile industry, reeling under a slowdown in demand and high input costs, also seek to bring domestic cotton prices at par with international prices, an industry body told Reuters, ahead of the interim budget on Feb 16.
Textile firms such as Arvind Ltd, Bombay Dyeing & Manufacturing Co and Gokaldas Exports posted losses in the Oct-Dec quarter.
The Confederation of Indian Textile Industries (CITI) has sought a two year moratorium on repayment of principal amounts against term loans "to avoid defaults and loans turning into non performing assets," it said in a statement.
"It is a significant demand. The money could actually be used for working capital in the short term as availability (of working capital) is a huge issue," said Devangshu Dutta, chief executive of Third Eyesight, a textiles and retail consultancy.
The government can make nationalised banks provide a moratorium, but is tough to say if private banks would follow suit, he added.
CITI is also seeking exemptions in service tax, import duties on man-made fibres and restoration of 4 percent interest rate subsidy on bank loans of exporters.
In October, 2008, the government had withdrawn a 4 percent interest rate subvention granted to textile exporters.
Subsequently, in a stimulus package last December, the federal government extended a two percent interest rate subsidy and said it would provide 14 billion rupees for a technology upgrade funding scheme for textile firms.
"As of now they have restored 2 percent interest rate subsidy, they should restore that fully to further improve competitiveness for textile exporters," said Sunil Khandelwal Chief Financial Officer of Alok Industries.
"A partial reinstatement of interest subvention on export credit that had been withdrawn from October 2008 and some cosmetic changes in duty refunds…do not have the potential to rescue this industry from its current crisis," CITI said.
Alok Industries’ Khandelwal said there was also an urgent need to bring down cotton prices to international levels as that would improve margins of cotton-dependant textile firms.
"Today, India’s cotton prices are 15 percent higher than international prices. At least procured cotton should be disposed off at international prices," D.K. Nair, secretary general, CITI said.
India had hiked the minimum support price for cotton by up to 40 percent for medium staple cotton in September last year.
