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July 19, 2023
Faizan Haidar, ET Bureau
19 July 2023
E-commerce companies’ share in warehousing space leasing has fallen to 3% amid declining demand from more than 20% during Covid-19. With the easing of the pandemic, demand faltered for e-commerce companies, even as bricks-and-mortar rivals rented 14% of space during the January-June period as they witnessed a demand resurgence.
In 2020, during the pandemic, e-commerce took more than a fifth of warehouse space while physical retailers had a 9% share, according to data by Savills India.
The overall leasing activity in India continued to grow, with a total space take-up of 22.4 million square feet in the first six months of 2023, up from 20.9 million sq ft a year ago.
“E-commerce companies had over-committed space during Covid, expecting the exponential growth they experienced at that time to continue. There are many facilities where they continue to pay rentals without utilising the full space,” said Gagan Randev, executive director, India Sotheby’s International Realty.
According to Savills data, after increasing demand for warehousing space over the past five years, tier-2 and tier-3 cities saw the share of e-commerce declining to 4% in the January-June period from 34% a year ago.
“In the past three years, year-on-year space absorption from e-commerce has undergone a significant change due to increased investments in their warehousing operations and footprint optimisation through automation, shelving and improved racking systems. These investments have enabled them to increase their existing storage space and enhance overall operational efficiency,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
Experts said the companies are also looking to outsource the space they had taken during the pandemic.
“E-commerce overbuilt the capacity as Covid-led growth was harvested by them. Now that capacity is vacant. That’s why you see a lot of marketplaces trying to externalise their services. That is not coming out of a business model, that is coming out from vacant space,” said Ashvini Jakhar, founder of Prozo, which manages supply chains for companies.
In the first half of 2023, the third-party logistics sector continued to drive warehousing demand, accounting for 44% of the total absorption, up from 37% a year ago, followed by the manufacturing (22%), retail (13%) and fast-moving capital goods and consumer durables sector (6%).
“E-commerce, grew exponentially during Covid when physical retailers were constrained by prevailing conditions and immediately after that when chain stores were still recovering from the pandemic shock,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “However, the retail business in India is predominantly offline; as demand continues to grow overall, it is only natural for physical retailers’ own growth to be driven by the market’s momentum and that would be reflected in warehousing space taken up by them across the country.”
For most retailers, after Covid-19, the warehouse is the epicentre for omnichannel distribution network for offline as well as online clientele.
(Published in Economic Times)
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July 1, 2023
Viveat Susan Pinto, Financial Express
July 1, 2023
The rivalry between two of the country’s best-known retailers – Reliance Retail and Nykaa – is beginning to play out in multiple categories. After Reliance Retail stepped into the beauty retail space in April with Tira, an online-and-offline beauty destination, to counter Nykaa, the country’s largest organised retailer has set its sights on the women’s inner wear market.
Around 60-70% of the $6-billion inner wear market in India is unorganised, with the balance 30-40% being organised with online and offline brands. The organised market is growing at around 15-20% per annum, making it a compelling story for retailers, industry experts said.
To be sure, Reliance Retail has six inner wear brands in its portfolio, including private label Hush retailed through Reliance Trends, acquired digital brands Clovia, Zivame and Amante and partnerships with international brands Marks & Spencer and Hunkemoller, persons in the know said.
But what has been missing in its portfolio are retail stores dedicated to inner wear. Reliance Retail is now piloting a new retail format in the inner wear segment called Blush Lace, according to informed sources, and may formally launch these stores in the next few months, targeting the mass market, including tier II and III cities. Reliance Retail executives were not immediately available for comment.
Thee effort from Reliance Retail, however, comes as Nykaa makes steady inroads into the inner wear market with Nykd, its in-house brand that is available both online and offline. The company has rolled out six stores so far of Nykd in cities such as Bengaluru, Delhi, Chennai, Hyderabad and Mysore and is slowly emerging as a strong player in the category with a combination of good designs, affordable price points and easy-to-navigate tutorials, a strategy it has successfully used in beauty retail. Annual sales of Nykd have touched `85 crore within three years of launch, Nykaa said during its recent investor day, with plans to scale up operations as business booms in the category.
“Though a large part of the inner wear market in India is fragmented, over the last few years, the market has seen the entry of national and international brands as general awareness and disposable incomes grow among consumers. The presence of online players has also helped grow the organised market and most brands, whether online or offline, have an omni-channel strategy to tap consumers,” Devangshu Dutta, chief executive of Gurugram-based retail consultancy Third Eyesight, said.
Apart from lingerie, Blush Lace will have women’s accessories, beauty and skin care products, loungewear, shapewear and sleep essentials as it seeks to position itself as a one-stop shop for all things inner wear.
While Reliance Retail’s current portfolio of inner wear brands will be part of Blush Lace’s catalogue, the company may introduce more brands in the future to drive footfalls, informed sources said. For Nykaa, on the other hand, Nykd, along with 20 Dresses, another owned brand from the company, will be big focus areas in the future.
(Published in Financial Express)
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June 30, 2023
Pooja Yadav, Afaqs
June 30, 2023
Over the last two-three years, we have seen technology innovations making its way into the Indian jewellery sector. Brands have been trying to transform the online jewellery segment by using various technologies like augmented reality (AR), artificial intelligence (AI), live video assistance, computer-aided design (CAD), computer-aided manufacturing (CAM), and more.
Despite the numerous innovations, the offline jewellery segment is still ahead of the online space, when it comes to sales. What makes the offline jewellery segment outpace the online segment?
The Indian e-commerce market is expected to grow to $111.40 billion by 2025 from $46.2 billion in 2020, as per an International Institute of Gemology report. While the segment remains to grow, what drives it back is the customer preference for physical jewellery stores.
Vipin Nair, marketing head & CRM at Malabar Gold & Diamonds, points out, “As of now, there seems to be no real alternative to trying on jewellery pieces in a retail store. Brands have been able to crack the logistics part, but not the ‘feel’ part. AR/VR has been around for a long time, but it doesn’t give you a feel of the jewellery pieces. It is a poor technology. The big purchases will continue to happen only in offline stores.”
Nair adds that despite the many challenges in the online space, it is now growing faster than before. “Earlier, there was a disconnect in the online segment. A customer had to wait for two-three weeks to receive a product. The online platforms seem to have cracked this business model, as whatever you like today, you can order and get it in a day’s time.”
Online jewellery segment started gaining popularity in 2020. In 2018, Tanishq started its e-comm website, and many other brands accompanied it in the online journey. What started with Tanishq has become a new journey for many start-ups and brands in the online space.
During Covid, the jewellery industry has been one of the worst-hit. Advent of online shopping and consumers relying on digital platforms during pandemic, helped brands strategise and invest more on online platforms.
According to Devangshu Dutta, founder and chief executive of Third Eyesight, trust is important when one is buying jewellery.
“It’s not a question of innovations. You can have virtual trials, whether it is online or in a store. But at the end, the customers have to see the piece and then buy it. Even if you are an online brand, you have to be able to offer an omnichannel experience. You have to enable in-home experience.”
As per Dutta, what’s required in this segment, is a change of mindset. “The share of online and modern retail will grow with time.”
Brands like Tanishq, Bluestone, Malabar, Kalyan Jewellers, Tata CLiQ, etc., are working on newer technologies. Then there are new players like the Aditya Birla Group that is set to foray into the branded jewellery retail business, with an investment of Rs 5,000 crore. The group’s new venture ‘Novel Jewels’ will have in-house brands in large-format exclusive retail stores across India.
Rashi Goel, founder and CEO, Performonks, says that the new brands entering the category, are trying to change the rules of the game. “These brands cater to working women, who want lighter, modern and fashionable pieces that they can match and wear with their outfits every day. So, the battle will be of brand building.”
“Tanishq offers light pieces, but tends to advertise heavy wedding jewellery, because that is in line with the category codes. The Aditya Birla Group will have to differentiate itself through the product experience. It will have to tell a brand story that takes the category narrative forward. If it is targeting young women looking for modern styles, it may benefit by having a direct-to-consumer (D2C) element (alongside retail stores in big cities). It could incorporate technology, where women can ‘try on’ jewellery virtually on the app.”
Recent trends
Citing the World Gold Council, Asian Lite International reports that there is a growing demand for lightweight and studded jewellery. Bridal jewellery alone accounts for at least half of the market share.
“Women prefer lightweight jewellery because it is practical and blends well with a modern lifestyle,” shares Nair of Malabar Gold & Diamonds.
Technology innovations may bring in some challenges, but they are also helping many people, in terms of convenience and choice. The online segment, which is still a fraction of the offline segment, is lately generating interest among digital savvy millennials.
Puneet Mansukhani, partner, KPMG in India, states that the online jewellery space has been garnering significant attention, especially amongst the millennials.
“Customer expectations are changing. Personalisation is playing a critical role. Technology involvement is increasing by the day, with AR taking the lead. However, the industry still has to tackle challenges around pilferage.”
On the upcoming trends, Mansukhani says, “Jewellery which is made to order with a modern look of hyper-personalisation (customised), is gaining importance, considering that value and convenience continue to be the top drivers of consumption.”
Manufacturers are increasingly focussing on producing lightweight pieces to satisfy the demands of young consumers, especially those who want to wear gold jewellery that matches with their western outfit every day, as per a World Gold Council report.
According to Third Eyesight’s Dutta, since fashion (lightweight) jewellery usually doesn’t cost much, “a consumer is not that invested in it. You can buy it online, like any other fashion product.”
The World Gold Council report adds that studded jewellery – known as ‘Polki’, ‘Kundan’ or ‘Jadau’ – has an estimated market share of 15-20%. The share of studded jewellery in North India is considerably higher. In South India, consumers are more inclined towards gold products, 60-70% of which are studded with diamonds and the remaining 30-40% are set with precious or semi-precious stones.
Jewellery landscape
In India, jewellery was traditionally purchased for investment purposes. People used to believe in buying heavy jewellery. But now, there’s a shift towards versatility and contemporary jewellery.
Nair states, “Contemporary designs are getting a lot of traction lately. It was not the case 10-15 years back. Lightweight jewellery is now in vogue and heavy jewellery is restricted to occasions like weddings. People now are looking for something practical. They are more into the design, quality, etc.”
Will the changing consumer preferences impact the bridal jewellery market?
Bridal jewellery dominates the gold jewellery landscape, with 50-55% of market share. Indians usually purchase gold for two occasions – weddings and festivals.
Around 11-13 million weddings take place in India every year. With women marrying at an average age of 22 and more than half of the country’s population below the age of 25, the demand for bridal jewellery will remain strong over the long-term, as per the World Gold Council data.
Going forward
The jewellery manufacturing landscape in India is largely unorganised and skill-intensive. Most jewellery pieces are still hand-crafted by artisans.
“Hence, the scale continues to be limited. Although we are gradually seeing jewellery retailers invest in large set-ups. We are also witnessing the overall jewellery market heading towards formalisation on the back of GST, government policies around hallmarking and exports,” shares Mansukhani of KPMG.
“For large players looking to enter this space, automation and focussing on in-house manufacturing, could help jewellers counter the high manufacturing charges.”
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June 29, 2023
Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023
Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.
One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.
“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”
One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.
Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.
The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.
The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.
The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.
Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.
As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.
“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.
As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.
As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.
“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.
Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.
As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.
With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).
The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.
(Published in Economic Times)
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June 29, 2023
Raghavendra Kamath, Financial Express
June 29, 2023
Zara, touted as “Fast Fashion Queen”, has achieved a unique feat in India. The Spanish brand has been growing its revenues without opening any new stores.
The fashion brand, run by a joint venture between Tata-owned Trent and Spain’s retail group Inditex, posted a 40.7% growth in its revenues to Rs 2553.8 crore in FY23. The catch is that while many retailers/brands garner sales from opening new stores, Zara did not open any store but closed one during FY23.
In FY21 and FY22, its store count remained constant at 21 but its revenue grew 61.2% in FY22. Zara’s revenues grew at a 15.5 % CAGR in the last five years.
“Zara did not foray into any new city and closed one store. That said, it saw an exceptional performance on store productivity (83% higher than FY19). The increase in revenues lead to highest ever Ebitda margins at 16.3%,” said Nuvama Institutional Equities in a recent report.
The contribution in productivity includes contribution from online and also increase in store sizes, the brokerage said.
A mail sent to Inditex did not elicit any response. Trent executives could not be contacted.
Experts attribute Zara’s success to increase in customer spends and improved offerings by the brand.
“The customer base they are targeting has grown and their merchandise mix has become sharper,” said Devangshu Dutta, chief executive officer at Third Eyesight, a retail consultant.
Dutta said when a retailer opens stores, it would immediately boost sales, but to maintain sales momentum, one has to have “right merchandise at right price and have stores at right locations”.
Zara is known to churn its designs and styles very fast, and target young customers. In its Indian venture also, its parent Inditex controls merchandise mix and so on.
“The said entities (Zara and Massimo Dutti) are obliged to source merchandise only from the Inditex Group. Also, the choice of product & related specifications are at the latter’s discretion. Further, the entities are dependent on Inditex for permissions to use the said brands in India subject to its terms & specifications,” Trent said in its FY23 annual report.
Zara is also focusing on opening in select locations, a reason it could not open more stores in the country, experts said.
“The incremental store openings for Zara continue to be calibrated with focus on presence only in very high-quality retail spaces,” Trent said.
Susil Dungarwal, founder at Beyond Squarefeet, a mall management firm, said that propensity to spend has gone up among Indian shoppers after the pandemic and Zara being a renowned global brand with its stylish merchandise seems to be have been the beneficiary of the trend.
“They understand customers very well and brought products which are liked by Indian shoppers in terms of looks, styles and so on,” Dungarwal said.
Zara is a case study for Indian brands as to how to run a retail business successfully, he said.
(Published in Financial Express)
