In recent decades, the dependence on established medical disciplines has begun to be challenged. There is the oft-quoted dictum that healthcare sector tends to illness rather than health. Another saying goes that some of the food you eat keeps you in good health, but most of what you eat keeps your doctor in good health. With a gap emerging between wellness-seekers and the healthcare sector, so-called “alternative” options are stepping in.

Some of these alternatives actually existed as well-structured and well-documented traditional medical practices for thousands of years before the introduction of more recent Western medical disciplines. This includes India’s Siddha system and Ayurved (literally, “science of life”), which certainly don’t deserve being relegated to an “alternative” footnote. Ayurved is also said to have influenced medicine in China over a millennium ago, through the translation of Indian medical texts into Chinese.

Other than these, there are also more recent inventions riding the “wellness” buzzword. These may draw from the traditional systems and texts, or be built upon new pharmaceutical or nutraceutical formulations. Broader wellness regimens – much like Ayurved and Siddha – blend two or more elements from the following basket: food choices and restrictions, minerals, extracts and supplements, physical exercise and perhaps some form of meditative practices. Wellness, thus, is often characterised by a mix-and-match based on individual choices and conveniences, spiked with celebrity influences.

A key premise driving the wellness sector is that modern medicine depends too heavily on attacking specific issues with single chemicals (drugs) or combinations of single chemicals that are either isolated or synthesised in laboratories, and that it ignores the diversity and complexity of factors contributing to health and well-being. The second major premise for many wellness practitioners (though not all!) is that, provided the right conditions, the body can heal itself. For the consumer the reasons for the surge in demand for traditional wellness solutions include escalating costs of conventional health care, the adverse effects of allopathic drugs, and increasing lifestyle disorders.

After food, wellness has turned into possibly one of the largest consumer industries on the planet. Global pharmaceutical sales are estimated at over US$ 1.1 trillion. In contrast, according to the Global Wellness Institute, the wellness market dwarfs this, estimated at US$ 3.7 trillion (2015). This figure includes a vast range of services such as beauty and anti-ageing, nutrition and weight loss, wellness tourism, fitness and mind-body, preventative and personalized medicine, wellness lifestyle real estate, spa industry, thermal/mineral springs, and workplace wellness. Within this, the so-called “Complementary and Alternative Medicine” is estimated to be about US$200 billion.

There are several reasons why “complementary and alternative medicine” sales are not yet larger. Rooted in economically backward countries such as India, these have been seen as outdated, less effective and even unscientific. In India, the home of Siddha and Ayurved, apart from individual practitioners, several companies such as Baidyanath, Dabur, Himalaya and others were active in the market for decades, but were usually seen as stodgy and products of need, and usually limited to people of the older generations and rural populations. In the West they typically attracted a fringe customer base, or were a last resort for patients who did not find a solution for their specific problem in modern allopathy and hospitals.

However, through the 1970s Ayurved gained in prominence in the West, riding on the New Age movement. Gradually, in recent decades proponents turned to modern production techniques, slick packaging and up-to-date marketing, and even local cultivation in the West of medicinal plants taken from India.

As wellness demonstrated an increasingly profitable vector in the West, Indian entrepreneurs, too, have taken note of this opportunity. Perhaps Shahnaz Husain was one of the earliest movers in the beauty segment, followed by Biotique in the early-1990s that developed a brand driven not just by a specific need but by desire and an approach that was distinctly anti-commodity, the characteristics of any successful brand. Others followed, including FMCG companies such as the multinational giant Unilever. The last decade-and-a-half has also brought the phenomenon called Patanjali, a brand that began with Ayurvedic products and grew into an FMCG and packaged food-empire faster than any other brand before! While a few giants have emerged, the market is still evolving, allowing other brands to develop, whether as standalone names or as extensions of spiritual and holistic healing foundations, such as Sri Sri Tattva, Isha Arogya and others.

An absolutely critical driver of this growth in the Indian market now is the generation that has grown up during the last 25-30 years. It is a class that is driven by choice and modern consumerism, but that also wishes to reconnect with its spiritual and cultural roots. This group is aware of global trends but takes pride in home-grown successes. It is comfortable blending global branded sportswear with yoga or using an Indian ayurvedic treatment alongside an international beauty product.

Of course, there is a faddish dimension to the wellness phenomenon, and it is open to exploitation by poor or ineffective products, non-standard and unscientific treatments, entirely outrageous efficacy claims, and price-gouging.

To remain on course and strengthen, the wellness movement will need structured scientific assessment and development at a larger scale, a move that will need both industry and government to work closely together. Traditional texts would need to be recast in modern scientific frameworks, supported by robust testing and validation. Education needs to be strengthened, as does the use of technology.

However the industry and the government move, from the consumer’s point-of-view the juggernaut is now rolling.

(An edited version of this piece was published in Brand Wagon, Financial Express.)

In 2016, brick-and-mortar modern retailers seemed to have begun recovering their confidence, and cautiously investing in expansion. However, currency shortage has significantly dampened demand at the end of the year. The hangover would continue into the first half of 2017, and consumers could be muted overall on discretionary purchases, including fashion, mobile upgrades and out-of-home dining.

On the other hand, while digital transactions introduce a note of caution (friction) in the consumer’s purchase decision, for e-tailers they do reduce complexity, cash-handling costs and potential returns which could provide significant unexpected wins.

I’ve written about this for years, and don’t tire of reiterating: the retail sector must recognise that shopping is a unified activity for the consumer; physical stores and non-store environments are alternative but complementary channels. Brands can and must use whatever channel mix works for them, and brick-and-mortar retailers need to invest in creating an integrated growth blueprint towards “unified commerce”.

On their part, while e-commerce companies are constrained by FDI policy, they will need to invest more in developing “old economy” strengths – strong product differentiation and distinguishable brands. Fashion, accessories, home decor and other lifestyle products are strong drivers of gross margin for all multi-product retailers, and e-commerce players struggling on the path to profit would focus on these even more, as well as on private labels. They also need to have management teams that are able to cast their minds 3-5 years into the future, while keeping close watch on immediate cash flows. Capital is available, but turning risk-averse. All businesses need to focus on up-skilling their teams, retaining good people, improving processes and adopting technology. In recent years, growth in the retail sector seems to have been driven by a “spray-and-pray” approach, not necessarily management sophistication. Spending like there’s no tomorrow is a sure way to no tomorrow.

In short, 2017 could be the year where the entire retail sector grows up – a lot. We hope.

(This piece was published in The Hindu – Businessline on 29 December 2016).

Suneera Tandon, Quartz
New Delhi, 12 September 2016 

The Platonic ideal

“Efficiency is doing better what is already being done.” – Peter Drucker, Innovation & Entrepreneurship: Practices and Principles

The practice

Research firm Gartner defines supply chain as, “…the processes of creating and fulfilling demands for goods and services. It encompasses a trading partner community engaged in the common goal of satisfying end customers.”

Sounds simple? But it hardly is. In fact, the supply chain can be one of the most complex structures in a business, piecing together design, development, sourcing, manufacturing, and distribution. It gets even more complex when it relies on rural India, which is scattered over 640,867 villages and are often hard to access. Fabindia, a chain of retail stores, has spent close to five decades scoping India’s hinterland to connect rural Indian artisans to urban shoppers. Here’s how they did it.

Fabindia began its India sojourn back in 1960 when John Bissell, who was first introduced to the country in 1958 while on a two-year grant from the Ford Foundation, decided to set up an export shop to sell home furnishings to overseas customers. Bissell, whose work at the foundation involved advising government-based craft organizations on handloom fabrics, spent a lot of time traversing the length and breadth of the country.

In 1976, the export house diversified into retail through a small store that sold leftovers from export orders in Delhi’s tony market of Greater Kailash. It took another two decades for retail to became the mainstay of the company’s business.

Fifty years later, Fabindia, managed by John’s son William Bissell, is a widely recognized global brand, known for handwoven and hand-made goods that connect some 55,000 artisans from the country to consumers worldwide. In the process, it has achieved two broad goals: to market the handloom tradition of India to the rest of the world and to provide sustained employment to artisans in rural areas.

The chain sells everything from handwoven saris, rugs, apparel, home d�cor, and organic food in its 220 stores across 83 cities in India, including eight stores in overseas markets such as Dubai, Singapore, Malaysia etc. It also retails its products online to 33 countries. For the fiscal year 2014-15, Fabindia had a turnover of Rs1,148 crore (approximately $170 million).
 
But behind the red and black Ikat-printed scarves, Kalamkari prints from south India, and block-printed Bagru fabric from north India is an extensive and complex supply chain that runs from villages across the country, covering a third of India’s over 650 districts.

The retailer has successfully taken its founder’s vision to enable social change at the grassroots level while engaging in a profit-making business for urban shoppers. It does this while building systems that encourage not just fair remuneration to India’s rural artisans, but also provides infrastructure, access to technology and systems, quality guidelines, and timely payments to these craftsmen. Fabindia also offers access to capital and raw materials to artisans working with the retailer.

As William Bissell puts it in a Harvard Business School case study: “It seems contradictory that we pursue both a social goal and a profit, but I believe that is the only way to do it.”

Through most of the ’90s and early 2000s, Fabindia grew as a retail chain expanding modestly in the country’s top metros.

Since the opening of the Indian economy through the economic reforms of 1991, Fabindia’s interaction with artisans scattered across the country has grown significantly (pdf). The complexity of the company’s supply chain is far different from that of a regular manufacturer that works through designated factories.
 
The company’s interaction with these artisans is very localized since it works with them through multiple associations. The retailer deals directly with individual artisans who work out of their homes and also with clusters of crafters and rural NGOs and organizations that have a crafts supply base.

In addition, the company uses its 11 production hubs across the country, which are basically aggregation points, to centralize orders and pair up vendors with artisans. Each hub has a number of field offices attached to it.

“The production hubs and field offices act as nodal points for interaction with the artisans that constitute the supply chain, which is one of the most unique in the world,” said Prableen Sabhaney, head of communications and public affairs at Fabindia Overseas.

While most artists have the skill and the craft, they don’t have the acumen to decipher fashion trends for the season. So Fabindia acts like a conduit between their crafts and the market.

At Fabindia, a large proportion of products carry some element of the handmade, which requires an ability to communicate with artisans and institute quality control as most artisans work largely in India’s hinterland. For instance, an 18-step process is required to create a simple pattern in Bagru print, a traditional form of block-printing using natural dyes perfected in the northern state of Rajasthan.

And the company has spent years putting processes to ensure newer collections reach the stores on time. Recently, the product range has become more diversified as well.

As for remuneration, Fabindia follows a bottom-up structure. It asks artists what it costs them in terms of—time, energy, skills, and raw material to hand-make a certain fabric or accessory and pays accordingly.

Analysts who track the sector believe that Fabindia’s unique model sets it apart from other domestic or export-focused handicraft companies purely because of the sheer volume of artisans it works with.

“In handicraft, there are several companies that have created substantial export-led supply bases, which tap into craft both from the rural artisans as well as those based in smaller urban centers,” Devangshu Dutta, chief executive at consulting firm, Third Eyesight said. 

“Among these, Fabindia has certainly had the most visible success in terms of size and brand profile domestically. Fabindia has achieved scale by working through artists, intermediaries and supplier companies who have acted as anchors in the rural communities,” said Dutta.

Sabhaney offers that challenges span from co-creating contemporary products while using traditional techniques to quality issues, since the products are created in environments that are very different from where they are finally used. The company also works hard to provide access to raw material and capital across many hard-to-access areas—and doing all of this at scale.

“The ability to do this and not lose anything in translation has been and will continue to be Fabindia’s strength,” added Sabhaney.

The takeaways

As the market evolves with e-commerce and the entry of foreign brands, which has altered consumer preferences and style-cycles, Fabindia knows it needs to quicken its response to these changes.

Not all of the innovations the company has tested remain. In a unique ownership structure created by Bissell, Fabindia set up supplier regional communities (SRCs), which were community owned companies, self-managed by a group of artisans, weavers and craft workers in a particular geography back in 2007. According to a case study by INSEAD (pdf), these SRC’s “offered artisans joint ownership of resources and access to common facilities. It also trained artisans and developed new handicrafts. The SRC allowed Fabindia to consolidate supply capacity instead of dealing with single-loom weaver units, and to implement a standard system for production and delivery control.”

The 2010 book, The Fabric of Our Lives reveals how production worked under the SRC model. A number of dedicated designers and sourcing officers worked closely with rural artists giving them design inputs in tandem with the latest trends in the market and order quantities through dedicated distribution centers in key villages. These designers worked with the weaver to develop samples. They were then shown by the designers that refer it to a product selection committee. The fabric was then approved and the cost price finalized. The quantity of fabric to be produced the first time was pre-determined by software based on a minimum stock requirement ratio and an order is given to the weaver to make the product. The weaver produced the requisite amount of fabric in a month and brought it into the distribution centers.

But the SRC model has now been diluted as the company looks more innovative ways to engage rural artisans.

In the company’s next vision plan, it is focusing more on cluster development that will basically help bring artisans up to speed with the processes and market trends.

“There are plans for a greater focus on the handloom and hand-craft sector,” Sabhaney said.

“There is a much bigger focus on the social aspect, there are going to be significant investments in developing clusters and bringing them up to what is required around the country,” she added.

(Published in Quartz)

Shinmin Bali, Financial Express

Mumbai, 21 February 2016

Having created quite a stir at the time of their launch, hyperlocal companies are now witnessing a dampened mood. While several have folded up operations in some cities, others have downsized staff, tweaked the services they offer and even made alterations to their business models. A recent example is Grofers shutting down operations in Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.

TinyOwl last year was in the news for a poorly-handled downsizing operation in Pune, with a dramatic hostage situation involving its co-founder Gaurav Choudhary. PepperTap also recently shut down operations in six cities.

Ironically, giants like Amazon have not only aggressively entered the hyperlocal space, they are building on it. Amazon is currently offering the service in Bengaluru, Amazon Now, after running a pilot project, Kirana Now, in 2015.

The investor sentiment in India is also on a decline, as was reported earlier this year. Investments by venture capitalists have dropped from $2.12 billion (October-December 2014) to $1.15 billion (October-December 2015), according to a report by CB Insights and KPMG International. This leaves an even shorter window of opportunity for players to retain investor interest.

Albinder Dhindsa, co-founder, Grofers, states that differing levels of technology literacy among the majority of merchants and consumer adaptation to the online platform are concern areas for the company. In 2016, the company is looking to bring over one lakh merchants aboard and ensure that turnaround time stays under an hour. Grofers delivers more than 35,000 orders per day on average. In Q4 2015, the firm acquired teams of SpoonJoy and Townrush to bring dynamic learning to the table.

For Swiggy’s co-founder Nandan Reddy, the focus is currently to grow the market, while catering to a wide demographic of consumers. He admits that in the early stages, the brand had trouble educating even its partners. Furthermore, operating a delivery fleet in an on-demand service offering sub-40 minute deliveries is a challenging task, given that there are at least 15 points of failure in an average order. Swiggy currently owns a delivery fleet of 3,800 delivery executives. The brand’s repeat consumers contribute to over 80% of orders.

Debadutta Upadhyaya, co-founder, Timesaverz, says some of the major challenges in a hyperlocal market are optimum resource utilisation and matching locations, price points, and other specific requirements to customer needs. Timesaverz currently has a service range spread across 40 categories, aided by a network of over 2,500 service partners across five metros. Its revenue model is commission based, where 80% of earnings from consumers are shared with service partners.

Vinod Murali, MD, Innoven Capital, points out that as the hyperlocal industry is in its nascent stages, it needs a fair amount of time to grow. “One aspect to keep in mind is that a large sized equity cheque does not imply that a company has achieved operational maturity or robust business metrics, especially in this segment,” he notes.

Given the recent consolidation in this category, the survivors have the opportunity and time to focus on improving unit economics and demonstrate that their businesses are viable and valuable.

Devangshu Dutta, CEO, Third Eyesight, is of the opinion that hyperlocals make the mistake of borrowing business models and terminologies from Silicon Valley, without adequately understanding the real context of the Indian market. “Is there an existing or even potential demand for the service claimed to be provided? Or are you just going to introduce an intermediary and an additional link in the chain, with additional costs and unnecessary administration involved?” he asks.

(Published in Financial Express)

Devina Joshi, Financial Express

Mumbai, 8 September 2015

Recently, there was news of restaurant reservation site EazyDiner expanding operations to Mumbai from the National Capital Region, having secured Series A funding worth $3 million led by existing investor DSG Consumer Partners, and Saamna Capital.

As per a PwC analyst, investors have pumped more than $150 million into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy, Zimmber and HolaChef, among others. Judging by the patronage showered upon them by customers and investors alike, it would appear that hyperlocal start-ups are all set to create the next big boom in the Indian retail sector. But is it really all that rosy? Probably not, as can be amply witnessed by acquisitions taking place in the nascent yet already overcrowded market.

Between November 2014 and February 2015, the Rocket Internet-backed Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured to be in acquisition mode with TinyOwl. Restaurant search app Zomato, which recently got into the food ordering space, is also reportedly looking to acquire minority stakes in food-ordering firms.

While investors are attracted to hyperlocal start-ups, controlling logistics well is key to sustained growth for these businesses — all of these will definitely go through a constraint in the supply of delivery boys, for example. In India, organising fragmented labour is a challenge and, hence, a services-based hyperlocal needs to figure out the mechanics of human capital even more than a traditional, product-based e-commerce firm.

For services, another challenge is customer stickiness. If a user uses an app to obtain the services of a plumber, for example, he may not go through the app to contact the plumber next time if his services are found satisfactory. Discounting can induce trials, but just like in any other business, prove fatal in the long run. Like what led to the end of HomeJoy in the US — excessive discounts to dissuade direct contact between servicemen and customers.

Even for product-based start-ups, maintaining data quality is a big hurdle as stock and prices may not be updated by retailers in real time, making it difficult to track offline sales.

Since the game is hyperlocal, you need to be physically present in the city to bring retailers aboard. For that, you need a city team. Other challenges include retailer verification and assessment, given that hyperlocals deal with small city retailers.

Stickiness is needed on both sides, and each locality will certainly evolve into having a market leader and a follower, with other players falling far behind. “So the critical success factor for a hyperlocal is being able to rapidly create a viable model in each location it targets, and then—to build overall scale and continued attractiveness for investors—quickly move on to replicate the model in another location, and then another,” says retail consultant Devangshu Dutta of Third Eyesight. As they do that, they will become potential acquisition targets for larger ecommerce companies, which could use acquisition to not only take out potential competition but also to imbibe the learning and capabilities needed to deal with microcosms of consumer demand.

(Published in Financial Express.)