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March 24, 2022
Written By Christina Moniz
D2C brands take the offline route to widen reach
Direct-to-consumer (D2C) brands are fluffing up the Indian mattress category with promises of lower prices, mattress-in-a-box convenience, 10-year warranty and 100-day trials. In a market that is predominantly unorganised, startups such as Wakefit, The Sleep Company, SleepyCat and Flo are aspiring to establish themselves as better alternatives to legacy brands such as Kurlon and Sleepwell, with most of them looking at the offline retail route too, to boost sales.
According to a Research and Markets report, while India’s overall mattress market has grown at a CAGR of over 11% in the last five years, the organised industry has grown at 17%. The mattress category in India is worth `12,000-13,000 crore; of this the organised segment commands 40% share.
New-age mattress brands are able to deliver products at lower price points by taking control of the entire consumer journey – from product discovery to post-sales support. Therefore, these D2C brands save big on distributor and retail margins, says Devangshu Dutta, CEO, Third Eyesight. These savings go towards compensating for higher customer acquisition costs and logistics, he observes. The elimination of the middlemen means that customers get their products at 30-35% less than what traditional players offer.
However, these digital-native companies are aware that they operate in a touch-and-feel category, which is why many offer a 100-day trial period. Priyanka Salot, co-founder, The Sleep Company, says that the product return rate is only 2-3%, and the returned mattresses are donated to charities but never resold. The Sleep Company, which entered the market a little over two years ago, is eyeing a turnover of `1,000 crore in the next five years, and has plans to launch its first offline store in a few months.
Online players also save on logistics, says Chaitanya Ramalingegowda, co-founder and director at Wakefit. “We implemented the roll-pack technology that allows the mattress to fit into a compact box. This lets us ship more products at a time,” he says. Wakefit has only two factories—one in north India and the other in south India—as opposed to older players with 10-12 factories across the country, he points out. The company hopes to close FY22 with a turnover of 630 crore, up from197 crore in FY20. It has one offline experience centre in Bengaluru, with plans to launch 10 more across five cities soon; these centres will not only be experiential, but also double up as booking/ retail sales outlets.
Offline boost
Rajat Wahi, partner, Deloitte India, points out that these new-age mattress brands must establish deeper offline distribution to expand reach. “After all, more than 90% of retail is offline in India,” he notes.
This is why D2C brands are not only taking the offline route, but also foraying into other segments like furniture and sleepwear. Kabir Siddiq, founder and CEO of SleepyCat, says the brand has plans to launch around four experience centres, and aims to become a one-stop shop for all sleep and comfort solutions, offering comforters, pillows and even bedding for pets.
Is the proliferation of D2C players giving legacy brands sleepless nights? Mohanraj J, CEO, Duroflex, says it has been akin to a “wake-up call”. He says the company has poured in investments into the D2C segment in the past few years, and now even has a completely online brand called Sleepyhead, catering to the millennial consumers. “Until recently, about 10% of our company’s growth was from online sales, but we expect that number to change to 30-35% this year,” he adds.
Despite the influx of new-age players, he maintains that Duroflex has doubled its growth in the past two years, with traditional retail registering 25-30% annual growth.
Source: financialexpress
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January 24, 2022
Written By Devika Singh
The entry of Jubilant FoodWorks will intensify competition in the fried chicken segment, where KFC so far has maintained its stronghold.
Popeyes, founded in 1972 in New Orleans, Louisiana, has over 3,400 restaurants in over 25 countries around the world. Popeyes (Wikimedia Commons)
Jubilant FoodWorks, the franchisee for Domino’s Pizza, will launch the iconic US-based fried chicken brand Popeyes, known for spicy New Orleans-style fried chicken and chicken sandwiches, in India on January 19 with the unveiling of the first outlet in Bengaluru.
“Popeyes was founded in 1972 and has been one of America’s most popular and fastest-growing chicken brands. Popeyes aims to delight Indian guests with the bold and delicious flavours of its Louisiana-style chicken,” the company said in a filing to stock exchanges.
“The success of the brand lies in its traditional and unique technique of hand breading, battering, and marinating its fresh chicken for 12 hours in bold Cajun seasonings,” the company added.
Popeyes runs over 3,400 restaurants in 25 countries.
With the entry of Jubilant FoodWorks, the competition is set to intensify in the fried chicken segment, where KFC has maintained leadership in the country so far.
“KFC has enjoyed a free run in the fried chicken market. There are some local players in this segment but no large QSR (quick service restaurant) player had a presence in it until now. With Popeyes as a competitor, now Jubilant FoodWorks is stepping into that opportunity,” said Devangshu Dutta, chief executive at consulting firm Third Eyesight.
While launching its initial public offering (IPO) last year, Devyani International, the largest franchisee of Yum! Brands (which owns KFC), had stressed the advantage it has over other QSRs in the country.
“We have no competition for KFC in India,” Ravi Kant Jaipuria, chairman, Devyani International, had said at the time. Devyani International runs 284 KFC India stores across 107 cities and the brand contributes more than half of its revenues. Sapphire Foods, which too launched its IPO last year, is another major franchise for KFC in India.
Both the companies already compete with Jubilant FoodWorks in the pizza segment as they also operate Yum! Brands-owned Pizza Hut in India. Jubilant FoodWorks with Domino’s Pizza, however, has clear leadership in the pizza market. Sample this: Pizza Hut currently has 500 stores in India, of which 317 are run by Devyani International; Jubilant FoodWorks, on the other hand, already has 1,335 outlets of Domino’s Pizza in India.
Now with the launch of Popeyes, Jubilant FoodWorks, it seems, wants a chunk of the fried chicken pie too.
Westlife Development, which holds the master franchise for McDonald’s in southern and western India, also has set its sight on the fried chicken segment in India. In an interview with Moneycontrol in September last year, Smita Jatia, managing director of Westlife Development, shared an ambitious plan to become a market leader in the segment. The company has already introduced fried chicken in its 125 stores in South India and plans to soon launch the food item in the western region too.
Clearly, the fried chicken market is certainly headed for interesting times as several new QSR players vie for a share of it. According to experts, the segment also offers the next avenue for growth for QSR players. “While fried chicken was the first to take off in Southeast Asia, in India, pizza and burgers found takers given the preference towards wheat-based cuisine in some parts of the country,” said Rajat Tuli, partner at global management consulting firm Kearney.
“However, as Indians become more experimental with food and trying out different cuisines, the fried chicken segment offers the next arena for growth to QSR companies,” he added.
Tuli also believes that the segment has enough space for a couple of players. “The QSR space is poised for over 20 percent growth in the next five-six years and hence there is enough headroom for multiple players to grow in it,” he said.
‘Veg options and no MSG’
The Popeyes India menu will feature the signature Cajun-flavoured Chicken Sandwich and Popeyes signature Chicken in Classic and Spicy flavours. The Indian menu will also feature an array of vegetarian options and will also have rice bowls and wraps. The entire India menu has no flavour enhancer monosodium glutamate (MSG), and the chicken is antibiotic-free, said Jubilant FoodWorks.
In a statement, Shyam S. Bhartia, chairman, and Hari S. Bhartia, co-chairman, Jubilant FoodWorks, said, “We are excited to introduce the Popeyes Louisiana Kitchen brand to chicken-loving Indian consumers. We are confident that Popeyes will not only delight guests but also strategically complement our portfolio and fortify JFL’s leadership in the QSR domain.”
Popeyes will start with its flagship store in Bengaluru’s Koramangala on January 19, followed by stores in New BEL Road and Kammanahalli soon thereafter. The brand will have its own app (Android and iOS) and mobile website.
To ensure a smooth and seamless delivery experience, Jubilant FoodWorks has built its in-house delivery fleet with e-bikes to enable zero-emission delivery. The company is also taking precautions given the pandemic situation.
“Safety protocols like daily temperature screening for all employees and frequent sanitisation of the restaurant are being implemented and frequent sanitisation of bikes will be conducted. All delivery riders will be compulsorily wearing face masks and gloves while following the frequent hand sanitisation protocol,” it added.
Source: moneycontrol
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January 17, 2022
Financial Express, 17 January 2022
The e-grocery market has seen the emergence of new-age, hyperlocal players, each outmaneuvering the other in terms of delivery timelines. Vaishnavi Gupta asks experts if online and offline grocery retailers ought to worry as quick commerce companies like Dunzo, Zepto and Blinkit, which promise delivery in a matter of minutes, get in the fast lane.
‘Knowing your customer’s needs is key’ – Devangshu Dutta, Founder, Third Eyesight
The answer to various questions around the e-grocery space in India lies in how you respond to this one question: if grocery is delivered tomorrow instead of in 10 minutes or even on the same day, who cares? Knowing the customer you are targeting, and what they need, is what helps in crystallising a unique value proposition. The online grocery market is made up of diverse customers with diverse needs/ wants. There’s a whole spectrum from digital natives to those for whom shopping online is an add-on for specific products or specific needs. Figuratively speaking, most customers won’t put all their grocery eggs in one basket.
If ‘authoritative selection’ is the value proposition you want to play off, a hyperlocal infrastructure is virtually impossible to create. On the other hand, if hyperfast, hyperlocality is what your customer is after, then product selection must be strictly narrow. Time-criticality is also determined by the nature of the product. Fresh produce that is ordered regularly and frequently won’t shift en masse to a hyperfast website.
‘Impulse purchases small fraction of total purchases’ – Alagu Balaraman, CEO, Augmented SCM
Customers normally plan bulk purchases and prefer to get them out of the way. So, fewer orders are more convenient. Customers also like to browse for new brands and packs. So, it is likely that a 10-minute delivery will be useful for impulse purchases or emergencies. This accounts for a small fraction of the total purchase basket of the customer. Servicing small orders will raise the unit delivery cost per item. Initially, this might be funded by investors, but eventually, the customer will pay. Or will they?
From a sustainability perspective, the “oops I forgot” or “I want it now” style of purchase is counter to the green style of the new generation. Having small orders transported to doorsteps will substantially damage our collective carbon footprint and aggravate climate change issues. We have seen this excitement over hyperlocal delivery companies before — first in 2015 and again in 2018. Most have retreated on plans or have allowed themselves to be acquired at presumably modest valuations.
‘E-grocery profitability a major challenge’ – Rajat Wahi, Partner, Deloitte India
The majority (around 85%) of the grocery sales are done through the 10-12 million kirana/ mom-and-pop stores spread across India; 8-10% sales happen through modern retail chains; while online sales account for less than 3% of the total grocery sales today. Online grocers need to surpass the services that end customers demand — such as products to suit local tastes, sales credit, instant delivery on orders via phone or WhatsApp, small orders with no minimums, personal touch, returns and exchange — which is being done at a very low cost and margin by the kirana stores.
This is a tall order for e-grocery players. They are tying up with kiranas for last mile order fulfilment and delivery, offering a differentiated range of products, and better value using their EDLP (every day, low price) model, focussing on fresh meats through a better cold chain, offering credit and discounts, and more. Unless we see a major consolidation of retail in the coming years, building a successful and profitable e-grocery business will continue to be a major challenge.
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January 10, 2022
Written By Vaishnavi Gupta
UAE-based Tablez has launched a kids’ super store in India
Tablez, the retail arm of UAE-based LuLu Group, has launched its kids’ super store House of Toys in India. Tablez has been around in the country as the master franchisee of brands such as Desigual, Build-A-Bear, Go Sport, Yoyoso, Cold Stone Creamery, and Galito’s. The toy market in India, currently pegged at $1 billion, is estimated to double in size by 2025, according to a FICCI-KPMG report.
All stacked up
The first House of Toys store was unveiled at Global Malls, Bengaluru, in December, 2021. The store offers more than 20,000 products, from feeding bottles, strollers, and bathtubs, to wearable tech, remote-controlled toys, and stationery. Spread across 5,100 sq ft, the store also houses the Build-a-Bear shop, where kids can make their own soft toys. “We have toys starting from Rs 30, going up to Rs 30,000 in our assortment. We have 3,000 toys in the value segment of below Rs 500,” says Adeeb Ahamed, managing director, Tablez.
House of Toys aims to open 12-15 stores by the end of this year, initially in South India, and metros, followed by tier I cities and beyond. Tablez also plans to rebrand at least 10 Toys“R”Us stores in India to House of Toys in the second half of this year. The store’s products are available on Tablez’s own e-commerce platform, and will soon be listed on third-party marketplaces like Amazon and Flipkart. “House of Toys has potential to be one of the top revenue contributors of Tablez,” Ahamed says.
Tablez has been consolidating its presence in the Indian market lately. Last year, Tablez launched Yoyoso’s seventh outlet in India, and opened another outlet, its 33rd, of American ice cream brand Cold Stone Creamery, both in Kerala. Further, it has earmarked an investment of Rs 100 crore for the expansion of sportswear store Go Sport. Fashion brand Desigual, which caters to women in the 25-45 age group, is now present on Tata CLiQ Luxury, and will soon make inroads into Mumbai and Bengaluru, followed by Chandigarh and Hyderabad.
Presently, Tablez operates 80 brand stores in India; it plans to take this number to 250 over the next five years.
Playing smart
Given that more than a quarter of India’s population is under 15 years of age, intuitively, it makes for a “great market for toys,” says Devangshu Dutta, founder, Third Eyesight. He says upper-income households with fewer children tend to buy more toys, games and learning aids, especially since children have been much more confined to the home environment in recent years.
According to Angshuman Bhattacharya, partner and sector leader (consumer products & retail), EY India, the growth of this market has been driven by improved availability and penetration of branded toys, upgradation from manual to automated toys, and improved awareness and availability brought about by e-commerce.
However, any kids category, whether apparel or toys, has been a difficult model to crack, owing to factors such as low SKU proliferation, and difficulty in inventory management, says Bhattacharya.
To stand out in the market, analysts say, brands need to create an authoritative and diverse product mix, which, in turn, requires a relatively large store footprint in high-visibility high-footfall locations. “The stock turnover is also slower than many other product categories, so merchandising and replenishment strategies need to be really smart. Branded merchandise offers lower margins, so private labels and unique products are necessary to add to the margin mix,” Dutta notes.
Deeply understanding a store’s catchment, so that consumer engagement can be kept high through the year — rather than being limited to local celebratory peaks and holidays — could be a useful strategy, say analysts.
Source: financialexpress
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December 23, 2021
Devika Singh, Moneycontrol
December 23, 2021
Male grooming products startup The Man Company, known for its online-first strategy, is looking at offline expansion for its next leg of growth. The company, which operates 28 exclusive brand outlets in the country, plans to launch 60-70 more stores by the end of this fiscal to gain presence across at least 100 locations.
“A lot of growth will come from the offline channel for the next one year at least, especially in Tier II and III cities where launching exclusive stores is a good way to introduce the brand to the consumer as shopping malls are weekend destinations there,” co-founder Hitesh Dhingra told Moneycontrol.
The company, backed by fast-moving consumer goods (FMCG) major Emami which holds a 48.49 percent stake in it, is also looking at introducing its products in more multi-brand outlets. The Man Company is present in 1,200 multi-brand outlets which include lifestyle stores such as Shoppers Stop, Central and Lifestyle as well as hypermarkets, supermarkets and pharmacies. The company plans to be in 2,500 multi-brand outlets by the end of financial year 2022-23.
It currently draws about 70 percent of its sales from online channels including its own direct-to-consumer (D2C) platform and online marketplaces and 30 percent from offline channels. The startup’s strategy is focused on expanding its base in Tier II cities and beyond, which account for 50-55 percent of its sales even on online marketplaces.
“Out of our 28 exclusive brand outlets, only five to six are in top 10 cities and the rest in Tier II and smaller towns. For the new store openings also, we are going to adopt a similar strategy and only 10 percent of the new outlets will be in large cities,” said Dhingra.
The offline way
Several D2C brands have been eyeing the physical retail channel as they try to scale up and tap a wider set of consumers. Brands in the women’s beauty and personal care segment such as Mamaearth, Sugar Cosmetics and Plum Goodness are expanding their presence in the offline retail format. Plum, for instance, is looking to launch 50 exclusive brand outlets in the next two years.
Male grooming startups, too, are following a similar trajectory. For instance, Bombay Shaving Company and Baeardo are launching their products in more and more offline stores.
Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said it makes sense for digitally-native companies that have achieved some brand recognition to launch in offline format for the next phase of growth. Brands in the 1990s for example, he said, who wanted to establish an identity, entered new formats or channels besides the existing ones. Similarly, digitally-native brands need not restrict themselves to online platforms alone, he added.
But he pointed out that these brands will have to address challenges such as ensuring availability of their products in offline channels. “In the online segment, companies can cater to customers with limited stocks. However, in the offline channel, they need to ensure availability of products across stores,” he said.
New categories
Apart from new retail categories, The Man Company has plans to enter categories such as sexual wellness and personal appliances. It has tied up with a marketplace for the launch of personal appliances such as beard trimmers and shavers and the category will be launched exclusively on the platform. The sexual wellness products, too, will be introduced on its D2C platform and later to other marketplaces and offline stores.
“We always launch a product on our platform to test it and get consumer feedback and, based on the response, we introduce the product to the wider market,” said Dhingra.
Launched in 2015, The Man Company caters to the men’s grooming segment and claims to have developed more than 65 stock keeping units. According to Dhingra, the company which competes with Beardo, Bombay Shaving Company and Ustraa will double its sales to Rs 100 crore by the end of this financial year.
Male grooming startups have of late attracted attention from FMCG companies. Marico last year completed the acquisition of Ahmedabad-based Beardo by buying an additional 55 percent stake in the company. It had acquired an initial 45 percent stake in 2019. British consumer goods giant Reckitt Benckiser Group invested Rs 45 crore in Bombay Shaving in February 2021. LetsShave and Ustraa are backed by Wipro Consumer Care.
According to industry estimates, the male grooming market in India was valued at Rs 15,806 crore in 2019 and is expected to cross Rs 36,402 crore by 2025, growing at a compound annual rate of 15-14 percent. Though growth was hit by the pandemic, experts are still bullish about the segment.
(Published in Moneycontrol)
