Indian retailers welcoming customers back as stores are opening up – a look at what changes are in store.

Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.

A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.

Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.

Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)

On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.

Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.

The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.

The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.

So, what now?

Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.

Someone once said, never let a good crisis be wasted.

This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.

(This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”. 

Remember the year 2000? After Y2K passed safely, that year some optimistic analysts predicted that India’s modern retail chains would reach 20 per cent market share by 2015. Two years after that supposed watershed, another firm declared that modern retail will be at around that level in 2020 – but wait! – only in the top 9 cities in the country. Don’t hold your breath: India surprises; constantly. As many have noted, “predictions are tough, especially about the future!” What we can do is reflect on some of this year’s developments that could play out over the coming year.

In many minds 2019 may be the Year of the Recession, plagued by discounting, but that demand slowdown has brewing for some time now. However, there’s another under-appreciated factor that has been playing out: while small, independent retailers can flex their business investments with variations in demand, modern retail chains need to spread the business throughout the year in order to meet fixed expenses and to manage margins more consistently.

To reduce dependence on festive demand, retailers like Big Bazaar and Reliance have been inventing shopping events like Sabse Sasta Din (Cheapest Day), Sabse Sachi Sale (Most Authentic Sale), Republic Day / 3-Day sale, Independence Day shopping and more for the last few years. In ecommerce, there’s the Amazon’s Freedom Sale, Prime Day, and Great India Festival, and Flipkart’s Big Billion Day Sale. This year retailers and brands went overboard with Black Friday sale, a shopping-event concept from the 1950s in the USA linked to a harvest celebration marked by European colonisers of North America. (The fact that Black Friday has a totally different connotation in India since the terrorist bombings in Bombay in 1993 seems to have completely escaped the attention of brands, retailers and advertising agencies.) Be that as it may, we can only expect more such invented and imported events to pepper the retail calendar, to drive footfall and sales. The consumer has been successfully converted to a value-seeking man-eater fed on a diet of deals and discounts. With no big-bang economic stimuli domestically and a sputtering global economy, we should just get used to the idea of not fireworks but slow-burning oil lamps and sprinklings of flowers and colour through the year. Retailers will just have to work that much harder to keep the lamps from sputtering.

Ecommerce companies have been in operating for 20 years now, but the Indian consumer still mostly prefers a hands-on experience. The lack of trust is a huge factor, built on the back of inconsistency of products and services. The one segment that has been receiving a lot of love, attention and money this year (and will grow in 2020) is food and grocery, since it is the largest chunk of the consumption basket. Beyond the incumbents – Grofers, Big Basket, MilkBasket and the likes – now Walmart-Flipkart and Amazon are going hard at it, and Reliance has also jumped in. Remember, though, that selling groceries online is as old as the first dot-com boom in India. E-grocers still struggle to create a habit among their customers that would give them regular and remunerative transactions, and they also need to tackle supply-side challenges. Average transactions remain small, demand remains fragmented, and supply chain issues continue to be troublesome. Most e-grocers are ending up depending on a relatively narrow band of consumers in a handful of cities.  The generation that is comfortable with an ever-present screen is not yet large enough to tilt the scales towards non-store shopping and convenience isn’t the biggest driver for the rest, so, for a while it’ll remain a bumpy, painful, unprofitable road.

Where we will see rapid pick-up is social commerce, both in terms of referral networks as well as using social networks to create niche entrepreneurial businesses – 2020 should be a good year for social commerce, including a mix of online platforms, social media apps as well as offline community markets. However, western or East Asia models won’t be replicated as the Indian market is significantly lower in average incomes, and way more fragmented.

As a closing thought, I’ll mention a sector that I’ve been involved with (for far too long): fashion. In the last 8-10 decades, globally fashion has become an industry living off artificially-generated expiry dates. A challenge that I have extended to many in the industry, and this year publicly at a conference: if consumption falls to half in the next five years, and you still have to run a profitable business (obviously!), how would you do it? Plenty of clues lie in India – we epitomise the future consumers; frugal, value-seeking, wanting the latest and the best but not fearful about missing out the newest design, because it will just be there a few weeks later at a discount. If you can crack that customer base and turn a profit, you would be well set for the next decade or so.

(Published as a year-end perspective in the Financial Express.)

Written By Rasul Bailay

NEW DELHI: Jeff Bezos, the founder of Amazon, will visit India in January when he is likely to meet Prime Minister Narendra Modi. During his visit he will kick off the US retailer’s annual event around small and medium enterprises, which are perceived to be hurt by deep-pocketed ecommerce companies.

The world’s largest online retailer is said to be worried about the changing ecommerce rules in India, where the Seattle-based company has invested more than $5 billion and created one of its largest foreign subsidiaries.

Bezos comes calling amid protests by a group of small traders against foreign-funded ecommerce companies. The Amazon founder is expected to highlight that it is generating jobs in India and empowering SMEs and other small businesses, according to two people familiar with the matter. He will also raise aspects such as stable business environment and policy continuity for foreign companies, they said.

“We do not have any plans to share at present for this,” an Amazon spokesperson said in an emailed response to a questionnaire regarding Bezos’ upcoming visit.

The outcry against ecommerce companies escalated after the Diwali festive season, when small traders accused Flipkart and Amazon of “unfair business practices” and violation of foreign direct investment rules. They blamed the predatory pricing strategies of the two foreign-owned marketplaces for a slump in traditional retail business during Diwali.

Flipkart and Amazon generated combined sales of Rs. 31,000 crore ($4.3 billion) during the 15-day festival period in October, according to a report by Red Seer Consulting.

The government has been stepping up its scrutiny of Amazon and its India rival Flipkart over their compliance with India’s foreign direct investment laws for ecommerce marketplaces.

The commerce ministry had asked Amazon and Flipkart to furnish details including their shareholding, subsidiaries, business structure and information on their top sellers and their tax details.

Amazon and Flipkart have responded to the questions raised by the government and maintain that they are in full compliance with FDI legislation.

“It is a huge distraction for us,” a senior ecommerce executive said, asking not to be identified. Amazon has reasons to be nervous. The US giant considers India its fastest-growing market with a potential to reach $10 billion in gross merchandise value and outpace the UK, Germany and Japan as its largest overseas subsidiary. In October, Amazon pumped in Rs. 2,800 crore into the flagship Amazon, in marketplace after injecting Rs. 9,450 crore in the unit last year.

So far, Amazon has invested more than $5 billion in India. “The various twists and turns in policies and caveats over the years have created ambiguity and room for interpretation as to what is allowed under the ambit of foreign investment,” said Devangshu Dutta, CEO of retail consultancy Third Eyesight.

“If any foreign-owned or foreigninvested entity is operating in the fuzzy zones of policy and law, there is bound to be concern. ‘Interpretation’ is a double-edged sword — on the plus-side it can give businesses strategy flexibility, but the downside is that government officials can also interpret it strictly.”

In October, Walmart CEO Doug McMillon had written to Modi, seeking certainty and a predictable business environment in India.

Last year, Walmart had purchased Flipkart, India’s largest ecommerce entity, for $16 billion, bringing the US adversaries to a direct fight over market share in the nation’s burgeoning online retailing market.

Following Walmart’s acquisition of Flipkart, India amended the FDI rules for online marketplaces in December, plugging many holes that Amazon and Flipkart are alleged to have misused. Opponents of foreign-funded ecommerce accuse both the global titans of virtually running inventory-led ecommerce, which India bars.

The legislation called Press Note 2 restricted bulk purchases by any vendor from any entity or group company of marketplace to 25%. The rules banned any financial affiliate of the marketplace operator from selling on such platforms. These changes came as blows to Amazon and Flipkart as they either sold through partner entities or through independent vendors that sourced directly from wholesale units related to the FDI-funded

Source: economictimes

Indian tea brands want a piece of this steaming hot business.

Written By Devika Singh

The company now plans to expand to the North Indian cities of Gurugram, Chandigarh, Amritsar and Lucknow, among others.

Homegrown tea makers are foraying into quick-service restaurants (QSRs) to tap into the ‘eating out’ culture in India and grow the business. But competition is aplenty — global brands have a formidable presence in India’s QSR scene, even as start-up brands such as Chai Point and Chaayos are gaining traction. According to a report by CARE Ratings, the total market size of QSRs in India is approximately Rs 25,900 crore. The overall restaurant and food service industry is expected to grow at a CAGR of 10.4% between 2018 and 2020.

Indian tea brands want a piece of this steaming hot business. Society Tea, a brand predominantly present in Maharashtra, recently opened its first tea café in Mumbai. Goodricke Group has tied up with the Tea Board of India to launch tea lounges in Mumbai and Kolkata on the latter’s premises. Gujarat-based Wagh Bakri, which was among the first movers, plans to expand its tea lounge presence to 50 large and small format outlets, from the current 13, over the next four years.

What’s brewing?

When Wagh Bakri opened its first tea lounge in Ahmedabad in 2007, the company saw it only as another experiential marketing tool. “Initially, it was a place where people could explore different kinds of tea. But, over the years, we saw a demand for these lounges,” says Parag Desai, executive director, Wagh Bakri Tea Group. The company claims to receive a footfall of 300-400 people per day on an average in stores present in high-street locations.

“We have deliberately stepped out of food courts to keep our offering premium,” Desai adds. A Wagh Bakri tea lounge could entail an investment of Rs 50-75 lakh. The company now plans to expand to the North Indian cities of Gurugram, Chandigarh, Amritsar and Lucknow, among others.

Society Tea, meanwhile, plans to open 10 more stores — mid-size stores around corporate offices — in Maharashtra. Pricing will be its key differentiator. “We are not pricing the product at Rs 300 like other players, but offering a full glass of chai at Rs 50,” says Karan Shah, director, Society Tea.

Goodricke Group has five operational tea lounges in the country, with plans to open one more, its second, in Darjeeling by the year end. The aim is to first foster brand awareness via its presence in locations of high tourist interest.

Blending in

Is a QSR foray really their cup of tea?

According to Devangshu Dutta, chief executive, Third Eyesight, each player could be backed by a different motivation to enter this space. Some may want to use it purely as a marketing tool, while some others may look at it as an alternative source of revenue.

QSRs can be an effective marketing tool especially for brands that have limited access to customers through retail. “Such stores help increase visibility and offer insights about their customers, their spending patterns, etc,” says Pinakiranjan Mishra, partner and leader, consumer products and retail, EY India.

However, expanding footprint in the market and eyeing revenue from the QSR chain could entail substantial investments for tea brands. “If tea companies look at QSRs as an additional business stream, then besides tea, there are food items and cold beverages to be served, which cannot be sourced just from the gardens,” says Dutta.

Furthermore, it will be an uphill task in the presence of biggies Starbucks, Café Coffee Day and Costa Coffee, that are established names in the market, in addition to other upstarts like Chaayos, which has over 50 cafés across Delhi-NCR, Mumbai and Chandigarh, and Chai Point which has 100 cafés in eight cities.

To get an edge, Harsha Razdan, partner and head – life sciences and consumer markets, KPMG India, says that new entrants would have to go beyond metros “and should ensure competitive pricing as the market is price sensitive”.

Source: financialexpress