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May 22, 2020
Written By Samreen Ahmad & Peerzada Abrar
Digital payments platforms are witnessing a spike in e-commerce transactions
At a time when the corporate world is seeing layoffs and salary cuts due to the Covid-19 outbreak and the nationwide lockdown, several ecommerce firms are on a hiring spree for their warehouses and delivery positions to fulfil the rising online demand for products.
Amazon India on Friday said that it has created close to 50,000 seasonal jobs in order to be able to effectively serve its customers and meet the surge in demand as customers are banking on its platform for their safety during the time of the Covid-19 pandemic.
These jobs, which are temporary in nature, are for a variety of roles at the e-commerce major’s fulfilment centres and delivery network, including part-time flexible work opportunities as independent contractors with Amazon Flex. “One thing we’ve learned from the Covid-19 pandemic is how important a role Amazon and e-commerce can play for our customers as much as for small businesses and the economy.
We take this responsibility seriously, and we’re proud of the work our teams are doing to help small and other businesses deliver to our customers through this difficult time,” said Akhil Saxena, VP, Customer Fulfilment Operations, APAC, MENA & LATAM, Amazon.
As India continues to maintain social distancing to fight the ongoing Covid-19 pandemic, Amazon India said it firmly believes it has a unique role to play in providing a critical service for the community. This includes helping them get the items they need for their families without leaving their homes.
While creating these job opportunities, Amazon said it remains committed to the health and safety of its associates, partners, employees, and customers, and has implemented a number of measures towards their well-being.
Early this year during India visit of Amazon founder and CEO Jeff Bezos, the company said it planned to create 1 million jobs in India by 2025 through continued investments in technology, infrastructure, and its logistics network. These will be in addition to the 700,000 jobs Amazon’s investments have enabled over the past six years in India.
Amazon has so far committed $6.5 billion to the India market, including $1 billion announced by Bezos in January this year, to tap the e-commerce market in the country.
Other e-commerce players are also on a hiring spree to meet the surge in demand as people prefer to confine themselves at home during the pandemic. E-grocery start-up Bigbasket which had announced hiring 10,000 executives for its warehouses and last-mile delivery said that the last two months have been very critical in terms of managing the manpower requirement.” Our regional teams have been aggressively hiring using multiple channels. In most of the locations we have been able to bridge the gap and have hired people,” said Tanuja Tewari, Vice President-Human Resources, BigBasket. Another e-grocer Grofers is also employing an additional 2,000 people from the industries which have been deeply impacted by the Covid-19 crisis such as textile, manufacturing, and services.
In view of the rapid growth in orders, Gurugram based Snapdeal too is working closely with logistics partners towards creation of additional delivery capacity to handle the increase in demand. “This will include new hiring by our partners while we are also encouraging delivery staff on leave to resume work,” said a company spokesperson.
Online pharmacies are also resorting to aggressive hiring in order to cater to the rising demands. While Gurugram-based 1 mg is immediately looking to hire 1,000 people over the next 2-3 months, Bengaluru-headquartered Medlife is working towards filling up 400 open positions mostly for last-mile deliveries and warehouse management.
As dependence on getting things delivered home will continue, experts feel this would create job opportunities at least for the blue-collared workforce.
“E-commerce and retailers do hire temporary workers to handle seasonal peaks. This is a non-seasonal peak but was expected as there is a lot of pent-up demand as people had only access to essential products till now,” said Devangshu Dutta, chief executive of management consulting firm Third Eyesight. He, however, added that largely India still shops offline but there is a growth in online shopping as the concept of social distancing is in favour of e-commerce
“Until a vaccine is found (for Covid-19) and even beyond that, there will be a huge surge of opportunities for blue-collared workers as customers will be uncomfortable going to stores to try and buy, or even for eating out,” said Pinakiranjan Mishra, partner and national leader, consumer products and retail at EY India.
With the lockdown situation starting to slightly ease out in different parts of the country, digital payments platforms are witnessing a spike in transactions in the last few days, particularly in e-commerce. “On our platform, we saw that the transactions in e-commerce (including transactions for non-essentials) increased by 25 per cent in a week’s time (between May 11-18, as compared to May 3-10),” said Harshil Mathur, CEO and Co-founder, Razorpay. “Also, the usually hailing payment methods like UPI and Cards grew by about 30 per cent and 18 per cent, respectively, indicating that the spending patterns are getting back to normalcy.”
According to data analytics firm GlobalData, Covid-19 pandemic will accelerate the growth of India’s e-commerce market taking it to about Rs 700,000 crore by 2023.
Source: business-standard
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May 20, 2020
Written By Manu Kaushik
Reliance Industries has been raking in large deals when corporations are struggling to survive – all with a bigger plan in mind, which can even propel Mukesh Ambani into the trillionaire club
How do you kill two birds with one stone? Ask Mukesh Ambani, the Chairman and Managing Director of Reliance Industries (RIL). As global corporations are fighting a survival battle, Ambani has managed to pull off four large deals with Facebook, General Atlantic, Silver Lake, and Vista Equity Partners in the past few weeks. Through these investments, Reliance has raised a whopping Rs 67,195 crore – a large chunk of which will go to retire RIL’s huge debt. Simultaneously, the deals have also propelled RIL’s next growth phase: the $700-billion ‘new commerce’ opportunity.
In July 2018 when Ambani first announced the ‘new commerce’ venture, he said that it has the potential to redefine retailing in India and become one of the biggest new growth engines for Reliance in the years to come. Essentially, new commerce is an integration of RIL’s digital and physical marketplaces, and the idea is to leverage the company’s entire distribution stack to tap the large universe of MSMEs, farmers, and kiranas. With the Facebook deal, Ambani expects to leverage the wide reach of Facebook-owned WhatsApp to speed up the new commerce business.
So while Reliance has many apparent upsides from the deals, what’s in it for its four global partners? The deals with General Atlantic, Silver Lake and Vista are more strategic that could benefit them if the valuations rise in the future as more investors join the Jio party. The partnership with Facebook, on the other hand, is deeper because it intends to explore mutual opportunities in areas like e-commerce and the offline-to-online (O2O) segment which has suddenly been gaining traction in the COVID-19 situation. It’s clear that the stakes are really high for Facebook as compared to the other three, but in a way, they will all benefit if Ambani could execute his plans.
The Repositioning Game
The last two years have been particularly life-changing for Reliance Jio. How? After setting up a large 4G network across the country covering nearly 98 per cent of the population, Jio began acquiring (and partnering with) tech-focussed companies to enhance capabilities in areas like AI, IoT, 5G, robotics and drones.
More than a dozen investments have been made – ranging from a few hundred crore to Rs 700 crore for AI firm Haptik – with a single aim: to reposition Jio as a digital company rather than just a plain-vanilla telecom operator.
This aim also dovetails into Ambani’s larger goal of moving RIL away from being an energy-focussed company. For years, RIL was perceived as an oil and gas major which doesn’t have the ability to run a consumer business. In 2018, it started efforts to change that notion when the company embarked on a mission to earn over 50 per cent of its revenues from consumer-facing businesses in the next 10 years.
RIL entered the retail space in 2006 and the telecom business in 2010, the perception didn’t change until recently (in 2019) when Reliance Retail became the largest retailer in the country, and Jio surpassed the incumbents in terms of subscribers numbers. Though in terms of revenues, the consumers businesses (telecom and retail) account for 29 per cent of the overall revenues, their contribution is likely to cross 40 per cent in FY21, and even higher in the subsequent years.
“These deals will help RIL reposition itself as a consumer/technology company,” said a May 8 report by Axis Capital. “The recent round of investments has further cemented RIL’s resolve to build upon the repositioning plank,” says a telecom analyst.
But what’s the need to reposition RIL as a consumers+tech company? In the words of RIL CFO Alok Agarwal, the repositioning exercise has huge benefits. How? In the recent earnings call, Agarwal said that three tech companies in the world command a market capitalisation of $1 trillion each. In comparison, all the energy companies don’t even have a combined market cap of $600 billion. “So essentially, investors have taken to the tech and consumer companies – Amazon, Apple, Microsoft, etc – as new investment themes,” he said. At an enterprise value of $74 billion (assuming exchange rate of Rs 70 per dollar), Jio Platforms (the RIL subsidiary where the deals are happening) seems to be marching in that direction but it still has a long way to go.
A recent report by Comparisun, an advice platform for small businesses, says Ambani could leapfrog into the trillionaire club by 2033, following Amazon’s Jeff Bezos, Alibaba’s Jack Ma, and two more tycoons.
RIL has indicated that Facebook’s investment is just 50 per cent of the targeted “value unlocking” that RIL has in mind for Jio Platforms. Given that Jio Platforms has emerged as the new poster boy in the tech world, more global investors would be considering buying a piece of it.
Hong Kong-based brokerage firm CLSA says there are 11 tech companies in the world with over $5 billion of net cash position, including Apple, Alphabet, Alibaba and Microsoft, who could potentially invest in Jio Platforms going forward. That means that if more global investors buy RIL’s repositioning story at higher valuation (as it has happened with General Atlantic, Vista and Silver Lake), the benefits will be reaped by all the existing shareholders.
How Facebook Got Lured In
Much like RIL, Facebook has not been satisfied with its current state. Despite earning a large chunk of its revenue from advertising (98.5 per cent), Facebook has been actively pursuing opportunities in the e-commerce space for the past four-odd years. Going back to its history, the social media giant focussed on building products for the first 12 years of its existence, and made itself a preferred ad platform for brands. But in 2016, it rolled out a consumer-to-consumer platform (Facebook Marketplace) followed by the ‘Checkout’ feature that lets users complete the transaction within the app.
Most recently, it has gone a step ahead with a new feature, Facebook Shops that allows businesses, particularly smaller ones, to sell their products right on the Facebook and Instagram platforms. While Facebook will earn ad revenues from these businesses, it can also earn commissions for facilitating payments. This is definitely a deeper engagement from Marketplace feature that allowed just listing, and advertising of products by sellers on Facebook. Of course, the idea to introduce Shops is to accelerate the e-commerce business since the existing Marketplace and Checkout features haven’t really done well.
With Jio partnership, Facebook has set its sights on the growing Indian e-commerce and O2O markets. The tie-up is an extension of a half-hearted attempt made by Facebook last June with an investment in start-up Meesho that enables resellers and individuals to connect with buyers on social media platforms like Facebook and WhatsApp.
Analysts say that India is a large market for Facebook given the large user base on both Facebook (328 million) and WhatsApp (400 million). It’s one of the most attractive markets to establish e-commerce presence given the vast demographic potential and absence of a single large established player. Currently, Amazon and Flipkart are two leading online players but their share is rather small in the overall retail pie. “There is no large established e-commerce player in India which is strong in O2O model,” said a recent report from Credit Suisse.
For Facebook, the reason to invest in Jio Platforms is five-fold: to mine the data of Jio’s 388-million subscribers, strengthen its e-commerce plans, push its WhatsApp platform for payments and businesses, tide over regulatory challenges, and using Jio’s telecom infra backbone to rollout new-age products – Oculus VR and enterprise solutions.
For instance, WhatsApp business account is currently being used by a lot of online service providers such as MakeMyTrip and Lenskart to communicate with their customers. WhatsApp charges for every message sent to the user. With its integration into JioMart (a Reliance Retail subsidiary), WhatsApp can tap a large number of local kiranas and small and medium businesses (SMBs) to use its paid service to communicate with their customers. Thus, it translates into additional revenues for Facebook.
Raja Lahiri, partner at Grant Thornton says that an investor, through RIL, gets a platform and a funnel to the entire consumers, telecom, retail, and internet space in India. “Global investors understand the impact of RIL in India, and that it knows the local market well which will help them to participate in the digital opportunity here,” he says. Indeed, one of the key reasons for Facebook’s investment in Jio Platforms was to bring onboard a strong local partner who can help it solve the regulatory puzzle. For more than two years, Facebook-owned WhatsApp has been struggling for approval for a full-fledged rollout of its payments service, WhatsApp Pay.
Though experts say that there could be a potential friction between Facebook and RIL since they are both going after the same set of SMEs and merchants to build scale for their e-commerce portfolio. In the current arrangement, RIL’s offline strengths (with Reliance Retail) and Facebook’s vast online reach (with WhatsApp and Facebook) have got the partners together. But at some point, there would reach a point where RIL may feel threatened by Facebook’s access to its SMEs and merchant base given that Facebook is going aggressive on its e-commerce vertical.
Taking on Amazon and Flipkart
Even though Amazon and Flipkart are leading the domestic online e-commerce space; their share is rather tiny in the overall retail pie. That’s because around 88 per cent of the domestic retail sector is unorganised and just about 4 per cent is e-tailing, according to an August 2019 report by CARE Ratings. Most large online retailers work on the marketplace model, and a bulk of fulfilment is done through a handful of merchants.
But that could potentially change if JioMart’s O2O model actually works. Take a look at the grocery (kirana) segment that JioMart plans to tap first. About 97 per cent of the grocery segment in India is unorganised. Grocery segment is important because it accounts for over 50 per cent of the monthly wallet share, especially for the middle- and lower-income consumers.
So while Amazon, Flipkart, Future Group, D-Mart, BigBasket and others are fighting for 3 per cent grocery share, Ambani is going after the bigger pie. And he’s going to leverage the offline and online reach of Jio and Reliance Retail to connect the last-mile kirana merchant with a bigger audience.
Thus far, JioMart has rolled out grocery services in three neighbourhoods of Mumbai – Kalyan, Navi Mumbai and Thane – to deliver daily consumption items such as staples, soaps, shampoos and household items. Ultimately, the target is to tap 30 million kiranas across the country in addition to 60 million MSMEs and 120 million farmers.
Devangshu Dutta, founder of Third Eyesight, a consulting firm focussed on retail and consumer products, says that for any large corporate to grow in retail, grocery is the most important segment. Other experts say that grocery, though large, is a low-hanging fruit. More retail segments like medicine distribution, fashion and lifestyle stores, and food delivery are likely to be explored later.
But there’s more to it. RIL is known for its backward integration capabilities from its early days. Starting as a textile player, RIL has moved backwards into the value chain over the years – from polyester to petrochemicals and refinery.
It has replicated a similar strategy in the retail business where it’s sourcing groceries from a large number of farmers and small vendors in a farm-to-fork model. The direct sourcing of groceries could enable Reliance Retail to get into high-margin private labels business. The experience in the retail business is likely to be leveraged to benefit partner kirana stores by bringing down their cost of procurement, etc.
“There are multiple opportunities for Facebook and RIL. But I see businesses with less friction picking up first. It might start with integrated digital payments, and over a period of time, when there’s a visibility of the merchants’ credit profile, new lending products can be created. As such, small merchants like kiranas don’t have enough financing options,” says Dutta.
“Additional synergies are expected to arrive in the form of Reliance Retail pushing its margin-accretive private label products to these (kirana) stores and providing easy credit terms,” said analysts at Motilal Oswal in a recent report.
The next big frontier that RIL would tap is SMEs. In India, there are over 50 million SME units that account for 37.5 per cent to the country’s GDP. For RIL, the opportunities are two-fold: digitise these SMEs and provide them lending facilities. For instance, as per Cisco India, 70 per cent of these SMEs are offline. With Facebook’s digital tools coupled with RIL’s in-house capabilities, a large number of these SMEs can be digitised.
Then, as per ratings agency CRISIL, SMEs accounted for 25 per cent of the corporate lending in the country in FY19. The current lending to SMEs stands at over Rs 17 lakh crore. With data mining tools, and access to other high-quality data, Jio can develop new revenue stream of lending to these small businesses. It already holds a payments bank licence (with SBI) but it hasn’t been able to make good use of it. With millions of merchants and farmers on its platform, it could create a bouquet of services around loans, insurance and mutual funds.
Even as these investments seem like a valuation game at the moment, the task before Ambani to make his ‘new commerce’ gambit work is going to be daunting. Since the nuts and bolts of Facebook deal are yet to come out, it’s safe to assume that there will be moments of conflicts between the partners. But then, if the potential market to tap is huge – bigger than the one currently catered by Amazons, Flipkarts and Future Groups of the world – there will be immense room for growth.
Source: businesstoday
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May 11, 2020
Written By Devika Singh
According to Nielsen, the share of the top three hand sanitiser brands dropped from 85% in January and February to 39% in March, after 152 new players entered the segment
According to a recent report by Nielsen, the demand for hand sanitisers in the country went up by 340% in March, as compared to 24% in the months of December, January and February. The demand for handwash increased by 60% and floor cleaners by 24% in March, in comparison to the pre-pandemic period, the report says.
This surge in demand has attracted companies from across sectors.
The extent of activity in this segment can be gauged from Nielsen’s findings that show that the share of the top three hand sanitiser brands dropped from 85% in January and February to 39% in March, after 152 new players entered the segment.
Serious business
Is it just a short-term strategy for these companies that have recently forayed in the segment or are they in it for the long haul?
Priti A Sureka, director, Emami, says the company has big plans. “We believe that increased hygiene consciousness is here to stay with significant consumer behavioural shifts. The launch of the hand sanitiser is a natural extension of the BoroPlus brand, and we have plans to offer more hygiene options solving different consumer problems in the coming days,” she says.
Marico and CavinKare have already started diversifying their hygiene and wellness portfolios. Marico, besides sanitisers, has also introduced a vegetable cleaner brand, Veggie Clean, in the market. “While hand, body, home and kitchen hygiene are in practice, the sanitation of fresh produce is still limited to only rinsing them with water. To bridge this gap, we launched a fruit and vegetable cleaner,” says Koshy George, chief marketing officer, Marico.
CavinKare, meanwhile, has launched gadget and surface disinfectants under the Bacto-V brand. Positioning its hand sanitisers for the masses, the company has also launched sanitiser sachets for as low as Re 1.
“There is a need for this category to move away from premium users to masses, and hence we introduced sanitisers in sachets. This is our attempt to democratise the category,” says Venkatesh Vijayaraghavan, director and chief executive officer – personal care and alliances, CavinKare.
The companies are retailing these products across channels — general trade, modern trade and e-commerce, and are relying on digital media for marketing.
Long term effect
The demand for hygiene products, although at its peak currently, will not fade away soon, experts believe. However, Ankur Bisen, senior vice president, retail and consumer, Technopak Advisors, says companies must exercise restraint. “These brands must take one step at a time, and evaluate what the new normal is and how much they should bet on this category.”
Companies with a strong presence in the non-food FMCG category stand to gain far more than the rest. “Companies that have high brand value, good distribution and reach, are on retailers’ minds and have accessible shelf space are likely to make more out of this emerging segment,” says Devangshu Dutta, CEO, Third Eyesight.
However, he adds, this necessitates that companies have enough capital to support the segment for the next six months. “Some of these products are a result of the gold rush mentality; some companies are trying to gain out of this opportunity and will disappear in some time, because the business needs investment,” Dutta adds.
Source: financialexpress
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May 6, 2020
Written By Pavan Lall
As ayurvedic formulations get a renewed push in the fight against Covid-19, can one of the oldest players in the segment step up its game?
The company is extending Brand Dabur into two different categories, home-care and personal care with an emphasis on products that boost immunity
Over the past few weeks the AYUSH ministry has stepped up its thrust towards ayurvedic cures and natural immunity boosters and a host of companies, large and small, have jumped in with special products or revamped age-old formulations that offer strength and vitality against a killer-virus. And Dabur, once the only major purveyor of branded ayurveda-based products in the country is doing the same, while it looks to regain its positioning leverage to keep the brand abreast of the times.
Source: business-standard
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May 5, 2020
Written By DEBOJYOTI GHOSH
From leader to challenger, Rupa & Company is shifting gears to reclaim its disruptor tag in India’s innerwear market.
Around the time Kolkata-headquartered innerwear and outerwear clothing manufacturer Rupa & Company set up shop, in 1968, the Indian hosiery market was dominated by unorganised players, barring a few strong local brands such as Dora, Asli Hira and Asli Sona. So much so that “everyone in the hosiery business then was talking about hira (diamond) and sona (gold),” Prahlad Rai Agarwala, the company’s 80-year-old chair – man and executive director, tells Fortune India. “So we decided to go with chandi (silver).”
Which translates to rupo or rupa in Bengali. The name, as everything else, was driven by a need to differentiate and yet belong, because it was a tough market. Brand Dora dominated, he recalls. “No hosiery store would sell anything else but Dora,” he says. To break through, they relied on two principles. Innovation, for one. In the early ’70s, for instance, Rupa launched elastic strap under – wear for men, a shift from the cotton rope string variety widely sold till then. Discipline and an undeterred work ethic, for the other.
Rai believes it is their never-say-die attitude that has got the company, No. 221 on the Fortune India Next 500 list this year, this far. Consider the challenges he faced upfront. Rupa first started selling its men’s vests in Patna, Bihar, a densely populated market with high demand for vests (baniyans). Men’s briefs and women’s innerwear followed a few years later, in the mid-’70s. “I would travel in general class coaches to Patna and most of the time would sleep in the narrow passage next to the toilet,” says Rai. The response time from stores—to give a nod to Rupa—was long, but, “despite that I would convince shop owners. Slowly we got a grip of the market and moved to other states.”
The growth is indisputable. Today, Rupa & Co., with a total income of ₹1,222.27 crore for FY19, has a pan-India presence through a distribution network of 125,000 retailers, more than 1,200 wholesale dealers and over 300 sales and marketing professionals. Rupa remains a family-owned enterprise with promoters’ holdings at 73.28% as of December 2019. It manages a portfolio of about 18 brands and over 8,000 SKUs (stock keeping units) across ranges for men, women, and children; at the back end, it has manufacturing facilities in Bengaluru, Tirupur in Tamil Nadu, Ghaziabad in Uttar Pradesh, and Kolkata in West Bengal.
Leading by example is Rai, who hasn’t slowed down even five decades after founding the Kolkata-based knitwear company. Always well-briefed and punctual, he follows a structured schedule of about eight hours of work a day. This discipline, he says, he inherited from his father. “During our college days, we have seen our father [Baijnath Agarwala] opening his hosiery shop sharp at 9 a.m. without fail,” says Rai’s younger brother Kunj Bihari (K.B.) Agarwala, 70, managing director, Rupa & Co. “Once my elder brother (Rai) opened the shop at 9.15 a.m. and our father came to know about it… the next day, he [their father] reached the shop at 8.45 a.m. to open it on time. He didn’t say anything to my brother but conveyed the message that punctuality cannot be compromised on.”
This is the classic entrepreneurial spirit inherent in first-generation business owners like Baijnath Agarwala, who opened a hosiery store in the 1950s; called Prahlad Rai Ramavtar, it was located on Kolkata’s Harrison Road (now Mahatma Gandhi Road). Soon after, in 1957, Prahlad Rai, his eldest son, started Binod Hosiery, a small trading business, while still studying for his B.Com at the University of Calcutta. “I was running that business till Rupa was launched in 1968,” says Rai, whose siblings (Kunj Bihari and Ghanshyam Prasad) joined the business later. The middle brother, Ghanshyam Prasad Agarwala, 74, is the vice chairman of the company but currently devotes more time on corporate social responsibility (CSR) activities. The next generation of the family, which is now part of Rupa’s management, has absorbed the ethos of their elders. That is holding them in good stead as they try and navigate a more competitive, complicated market that does not allow for complacency.
Kolkata-based Agarwals who own Rupa & Co.
Rupa had a strong hold on the knitwear industry till the late 2000s. So much so that it was even named the country’s largest manufacturer of knitted undergarments for five years in a row till 2010 by Limca Book of Records. Its success led it to list on the Calcutta and Jaipur stock exchanges in 1995-96, followed by the NSE and BSE in 2010-11 (where it currently trades at ₹212.70 and ₹213.50, as of February 25, 2020, respectively).
During that time, Rupa wore the disruptor tag proudly, with new products and an emphasis on quality. For example, from the outset, German knitting and dyeing machines were used for manufacturing and hi-tech Swiss machines for finishing the products. “Before we launched Thermocot [Rupa’s thermal wear brand], similar woollen material thermals were available in the market. But we first launched a television commercial about two decades ago on thermal wear to create awareness about the category,” cites K.B. Agarwala as an example of the disruption, adding, “We first launched knitted bermudas [Bumchums] for men in the early ’90s. Prior to that, it was mostly knickers with a cotton loop.”
Between the mid-’90s and late 2000s, it launched successful economy- to premium brands such as Macroman, Frontline, Air, Softline, Jon, and Bumchums. This set the tone for an aggressive advertising and promotional push backed by celebrity endorsements. Among the first was Aishwarya Rai Bachchan in 1988-89, even before she became Miss World in 1994. Since then, it has built an A-list including actors Saif Ali Khan, Sanjay Dutt, and Hrithik Roshan, to begin with, and now Ranveer Singh, Ranbir Kapoor, Sidharth Malhotra, and Anushka Sharma. The end of the noughties, however, saw Rupa lose its mojo and leadership status in the process. Industry experts say that the structured and execution-centric work ethic attitude morphed into a glass ceiling for the Kolkata-headquartered company.
“Leaders become sceptical towards change when something has worked for many years in the past. That bias perpetually stops them from taking that risk. That’s when they start missing consumer trends and the underlying shifts in the market,” says Ankur Bisen, senior vice president, retail and consumer products, Technopak. This gave room to other players who started upping their market share aggressively. Prominent in that regard is its cross-town rival Lux Industries, No. 237 on this year’s Fortune India Next 500 list. Founded by Girdhari Lal Todi in 1957, Lux, much like Rupa, began as a fledgeling business riding the wave of the changing dynamics of the innerwear market in India.
The company has grown from strength to strength over the last two decades, offering a range of over 100 products across 15 brands for men, women, and children and over 5,000 SKUs across its existing range of products. With six manufacturing facilities including four in West Bengal, and one each in Tirupur and Ludhiana (Punjab), Lux exports its products to Iran, Iraq, Kuwait, Bahrain, Saudi Arabia, Singapore, Canada, Australia, and the U.S., among others. In FY19, the company’s exports jumped to ₹136 crore from ₹105 crore in FY18—this is expected to go up to ₹175 crore in FY20.
Though the mass and economy segments in the men’s innerwear space form a bulk of both Lux and Rupa’s market shares, the former has managed to realise the potential of celebrity brand ambassadors better, especially in a price-sensitive market with a large rural base, say experts. Devangshu Dutta, chief executive of retail consultancy Third Eyesight, feels to gain any sort of premium over comparable products, a company needs to substantially and consistently invest in branding. “Companies that do so are able to lead the market.”
Lux has invested ₹380.56 crore in brand building in the five years ending FY19, according to data from its annual report in the last fiscal; of this, ₹90.89 crore was on advertising alone. This is an imperative since India’s innerwear market—pegged at ₹27,931 crore last year, and expected to grow at a CAGR of 10% to an estimated ₹74,258 crore by 2027—has altered significantly since the mid-2000s. Driving that change is current leader Bengaluru-based Page Industries, the sole licensee for underwear maker Jockey in India. “Jockey lifted the entire average price of the innerwear segment. There was a fundamental shift in price point. And the market is ready to pay a higher price. Page Industries created new rules in the market [through] differentiation of products. Today companies can’t get away with selling basic products,” says Bisen of Technopak.
In 1994, Sunder Genomal, managing director, Page Industries, along with his two brothers, set up the company in India for manufacturing, distribution, and marketing of Jockey products. But they have been in the innerwear business since 1959 when Genomal’s father set up their first factory in The Philippines where they were also Jockey’s exclusive licensee. (Page Industries is also the exclusive licensee of swimwear brand Speedo in India.) Today Jockey has a presence in over 55,000 outlets across India. In FY19, the company through its authorised franchisees opened 161 exclusive brand outlets (EBOs) including nine Jockey Woman outlets taking the total number of EBOs to 620. At present, its installed capacity is spread over 2.40 million sq. ft. at 14 locations in Karnataka and one in Tamil Nadu.
THE PEOPLE IN CHARGE at Rupa are paying heed to the need to keep up. “Rupa and Lux were caught off guard and they have realised that they need to catch the bus that they missed earlier. That’s when they started launching more premium products,” says Bisen. Like in 2009, Rupa introduced the Macroman M Series, a premium fashion line of innerwear and sportswear for men. Hrithik Roshan was roped in as brand ambassador; the brand Euro was also added to the premium category. As another sign of staying with the times, the Agarwals started Oban Fashions Private Limited, a subsidiary of Rupa & Co. that operates the Indian business of international brands under a licensing model. In FY17, Oban Fashions acquired exclusive licences for brands FCUK from French Connection Limited, and Fruit of the Loom from New York-based Fruit of the Loom Inc. (a wholly-owned subsidiary of Berkshire Hathaway) to develop, manufacture, market, and sell innerwear and related products in India. Rai’s grandson Siddhant Agarwal currently looks after this business.
“In a bid to enhance the share in the growing premium menswear segment, the company undertook various licensing of international brands,” says ICICI Direct’s research report on Rupa from August 2019. But because of intense competition from brands such as Van Heusen (from Aditya Birla Fashion), and Calvin Klein (Arvind Fashions is the Indian licensee), the management has not been able to scale up its business according to expectations, the report says. “Higher incentives offered by competitors have negatively impacted the offtake from dealers.” If the company’s pace seems frenetic, the reason is as K.B. Agarwala puts it: “There is a lot of competition in the market. Hard work is very crucial to stay ahead.”
The second generation is on board too. “Offering good quality products at an affordable price is the most obvious [move] today. So we have been innovating on our product line constantly including shapes, patterns, fabric, and finish,” says Rajnish Agarwal, 42, president, Rupa & Co., who focusses on brands such as Euro and Bumchums.
These have been some “intelligent” moves by Rupa to ramp up its premium segment, say analysts. Especially, as Third Eyesight’s Dutta points out, since the market is still evolving with considerable headroom for growth. “Whether existing companies can successfully manage to straddle the mass-, middle-, and premium segments simultaneously remains to be seen… since the segments have quite distinct needs not just in terms of pricing but also product design, quality, and service levels,” he adds. Pricing, distribution, and on-shelf availability are key drivers for this category.
With that in mind, Rupa has aggressive plans for modern retail trade that includes EBOs, increasing presence across e-commerce platforms, and large-format stores such as DMart, multi-brand retail chain V-Mart Retail, and Metro Cash & Carry. It currently has four company-owned EBOs in the eastern region. It plans to open about 100 exclusive brand outlets across the country in the next two years, through the more economically-viable franchisee model. “In the past, we opened large-size EBOs (500- 600 sq. ft.) but we realised that economically it is not a viable model because the average ticket size (₹150-₹200) of the product sold is too small to support the maintenance of a large outlet. Now we are looking at a store size of 250-300 sq. ft.,” says Vikash Agarwal, 43, president, Rupa & Co.
Another positive sign is the increased potential in the premium- to mid-premium segments. For Rupa, a strong player in the mid- to economy category, wholesale has been about 70%-80% of its total business. But the margin for the economy segment in innerwear is about 11%-12%, while the premium category commands about 18%-20%. “Now with the shift towards the premium category we can expect better profit margins,” says Vikash.
Rupa also wants to improve its contribution from exports, which is currently a small percentage of its turnover unlike competitor Lux Industries. “We intend to make it about 10% of the turnover in the next three to four years. The response is good and hopefully we will achieve the target. Currently, we export to Myanmar, Algeria, Middle East, Nigeria, Ghana, Vietnam, and Indonesia,” adds Ramesh Agarwal, 50, whole-time director and CFO, Rupa & Co.
From market leaders to now challengers, Rupa—and Lux—seem to have slipped into their new roles with confidence. Because, says Bisen, “the last 15-20 years have seen enough of stiff learning curves for these brands to understand what works in the market now and how they need to be on guard and continuously improve to seize new opportunities.” More importantly for Prahlad Rai Agarwala, what Rupa has on its side is “the culture of family discipline”. No one knows what’ll happen next, he says, but “that [the ethos] is still going strong and is still intact to run the business”.
(This was originally published in the March 15 – June 14 special issue.)
Source: fortuneindia
