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August 18, 2023
Viveat Susan Pinto, Financial Express
August 18, 2023
Retail activity in the country is set to increase with some 20 foreign brands likely to enter India in the next 6-8 months, according to retail consultants and experts. This is double the number of about 10 foreign brands that would enter India annually in the pre-pandemic period.
An attractive retail market and growing affluence and consumer tastes are among the key reasons for the interest shown by foreign brands in India, said experts. Also, large groups such as Reliance and Aditya Birla are open to partnerships with foreign brands, with Reliance Brands, part of Reliance Retail, in particular, being the most aggressive of the lot.
“Global markets are witnessing slowdown and recessionary concerns, which is hurting retail sentiment. In contrast, retail sentiment in India is upbeat despite food inflationary pressures. Spending across non-essential categories will also grow as the festive season nears,” said Abhinav Joshi, head of research, India, Middle East & North Africa at consultancy CBRE.
The consultancy on Thursday released a report which said that retail leasing activity in India had grown 24% year-on-year in the first half of CY2023, led by foreign and domestic brands. The second half of the year was also expected to see a strong double-digit rate of growth in terms of leasing activity, with overall retail leasing likely to touch 5.5-6 million sq. ft. at the end of the CY2023, second only to the peak of 6.8 million sq. ft. seen in CY2019.
Of the names eyeing an India-entry in the next few quarters include labels such as Italian luxury fashion brand Roberto Cavalli, American sportswear and footwear brand Foot Locker, Armani Caffe, the luxury cafe brand of Armani, British luxury brand Dunhill, Dubai’s Brands for Less, Old Navy and Banana Republic from Gap, Chinese brand Shein, Maison De Couture from Valentino, Spanish luxury brand Balenciaga, EL&N, a UK-based boutique cafe, Galleries Lafayette from Paris, Kiabi, Mavi, Damat, Dufy, Tudba Deri, Avva, Boohooman and Miss Poem, all apparel brands from Turkey and Europe, say industry sources.
Barring Galleries Lafayette which has tied up with Aditya Birla Fashion and Retail for its India entry, most other names are either talking to Reliance Brands (part of Reliance Retail) or have tied up with the company, persons in the know said. For instance, Balenciaga, EL&N, Shein, Gap’s Old Navy and Banana Republic, Armani Caffe, Maison de Couture from Valentino have tied up with Reliance Brands for their India entry. Executives at Reliance Brands were not immediately available for comment.
Most of these brands are eyeing a presence in cities such as Mumbai, Delhi-NCR, Bengaluru and Hyderabad in the first phase of launch, before expanding their presence to other cities such as Pune, Ahmedabad, Chennai and Kolkata.
“The India retail opportunity is a compelling one, which most foreign retailers don’t want to miss,” says Devangshu Dutta, chief executive officer at Gurugram-based consultancy Third Eyesight.
“Some of the brands who’ve come earlier have also tasted success especially in the fast fashion category. This is an indication that brand awareness is growing and that people are ready to spend on global products as discretionary incomes grow,” he says.
On Wednesday, Japanese fast fashion retailer Uniqlo said that it was setting up two new stores in Mumbai in October, after launching 10 stores in the north over the last four years. The company’s chief executive officer Tomohiko Sei indicated that the retailer was open to new markets and store openings, but would focus on Mumbai for now.
CBRE says that Mumbai has seen retail leasing grow by 14.6% year-on-year in the first half of CY2023 on the back of a push by foreign brands to acquire space in the city. Delhi-NCR, meanwhile, reported a higher 65% year-on-year growth in retail leasing in the first half of the year, led by retail activity by both foreign and domestic brands.
(Published in Financial Express)
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August 11, 2023
Christina Moniz, Financial Express
August 11, 2023
Pizza chain Domino’s recently unveiled a Rs. 49 pizza, its cheapest anywhere in the world. At $0.60, the pizza chain’s seven-inch cheese pizza is priced far lower than Domino’s in China (where $3.80 is the cheapest option). As per media reports, the rising inflation has caused Jubilant FoodWorks, which runs Domino’s outlets in India, to see a 70% slide in profits in the first quarter of CY23.
Competitor Pizza Hut has launched its Flavour Fun range, offering 12 new pizzas in five different sauce flavours, starting at a price of Rs. 79, which is easy on the pocket, especially targeted at young consumers. “We further stabilise costs by rolling out value deals from time to time such as 1 Plus 1 (two personal pizzas at Rs. 299 each), a Hut Treat Box for four starting at Rs. 799 and My Box deals starting at Rs. 229 for solo consumption. While food inflation is projected to persist, QSR brands must demonstrate agility and innovation in their offerings to effectively engage with customers,” says Merrill Pereyra, managing director, Pizza Hut India Subcontinent. Despite the competitive nature of the QSR market, he remarks that the rising purchasing power of consumers opens up promising opportunities for brands to expand.
Get the drift?
Crisil says the cost of a vegetarian thali rose 28% in July on the back of high tomato, onion and other raw material prices. With consumers also cutting back on eating out and discretionary spends, brands are bending over backwards to serve offerings at attractive prices to drive up footfalls .
Other fast food chains in the country too are rolling out value meals and snacks to appeal to price-conscious consumers. Burger King India announced its latest value range of ‘Tasty Meals’ starting at Rs. 99 to encourage dine-in consumers, while KFC too has unveiled its snacker range, featuring its most popular offerings like the classic chicken roll and chicken popcorn, at Rs. 99. McDonald’s India (West and South) also recently unveiled a campaign showcasing its easy-on-the-pocket McSaver meals at Rs. 179. McDonald’s India (North and East) made headlines with its decision to temporarily drop tomatoes from their products due to quality concerns and supply shortage.
This is just the second quarter of the current fiscal, but Devangshu Dutta, CEO, Third Eyesight, observes that the trend among QSR brands is to absorb costs or reduce expenses rather than raise prices and risk a drop in footfalls. Most brands are hoping to keep consumer demand up and make up for the loss in margins in the second half of the financial year.
That would be a 1% hit on margins on account of inflation, say experts.
Pramod Damodaran, CEO, Wagh Bakri Tea Lounge, has a slightly different take. Noting that food input cost is just one cost item for a QSR brand, he says that most companies make gross margins of over 60% on each order. These margins are without taking into account costs of labour, rent, etc. “The new price points are designed to drive more walk-ins and new customers. The menu is vast enough to get consumers to eventually spend more after they walk in. Customers often buy a small burger but that is not a substantial meal and so they need to buy fries or other sides, which have higher margins. Most QSR chains find a way to pass on the inflation-added cost to the customer,” says Damodaran. For example, he says, if the inflation rate is at 5% this year, restaurants may increase the price of certain items on the menu by 3% for the first six months and by another 3-4% in the next six months, thus covering the additional input cost.
Focus on efficiency
The fact that brands have launched affordable, lower-priced offerings may have landed them in a slightly tricky situation, says Rajat Tuli, partner, Kearney. “The value offerings at lower prices have encouraged trials and new customer walk-ins, but existing customers are also opting for these. That has resulted in a lower average ticket size, while the cost to serve stays the same. Order volumes have grown but average order values have stayed the same or reduced, which could be a challenge if the trend continues,” he points out, though he adds that gross margins in the current quarter have shown improvement over the last quarter. Fast food chains need to bring in more efficiencies in cost, streamline processes and introduce more digitalisation.
It is also something that McDonald’s India (West & South) is working towards, says MD Saurabh Kalra. Noting that inflation is not new to the company in India, Kalra explains, “Recognising that food inflation is a domestic truth, over the years, we have developed tools and strategies to manage it effectively. This is attributed to our strategic management of our supply chain and product mix, as well as our cost initiatives. We have been successful in managing our costs and in maintaining healthy margins.” Further, with the reality of global warming, there will be pressures on agricultural output.
Kalra argues that enhancing efficiency and adoption of new technology are the only ways to create long-term solutions, something that McDonald’s has been doing globally too.
(Published in Financial Express)
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August 5, 2023
Viveat Susan Pinto, Financial Express
August 5, 2023
Two of the country’s best-known retailers, Nykaa and Reliance Retail, are now clashing head-on for a bigger share of the online beauty and personal care (BPC) market. Signs of this became apparent on Thursday, when Nykaa said that its CEO Falguni Nayar would “guide the marketing function directly” as part of its larger initiative to strengthen its marketing leadership and management.
The announcement, according to industry experts, came amid senior-level exits at the company and increasing competition from Reliance Retail’s Tira, which was launched in April this year as an online-cum-offline beauty destination.
Nykaa, which is estimated to have a share of 38% of the $1.3 billion (Rs 10,920 crore) online BPC market in India, says that it is evolving into a multi-dimensional business.
“Leadership roles are being augmented with an eye on strategic realignment, cost rationalisation and growing complexity of the business,” Nykaa said in a statement.
While Reliance Retail’s Tira is smaller in comparison to Nykaa, it is beginning to chip away at the heels of its bigger rival, industry sources said, within months of launch.
For instance, in four months since going live in April, the Tira app has over 1.7 million downloads and is eyeing a number of around 10 million in the next few months, persons in the know have told FE. It intends to do this on the back of aggressive tie-ups with local and international brands and positioning itself as an aspirational yet affordable beauty player. A mail sent to Reliance Retail elicited no response till the time of going to press.
The Nykaa beauty app has over 40 million downloads, but has been around longer than Tira, executives in the know said. Discounts on both platforms (Tira and Nykaa) range from 10-50% for various brands with BOGO (buy one get one) offers, virtual try-ons, blogs, tutorials, tips, recommendations and videos being part of the online experience. Tira also has a unique fragrance finder, which helps consumers match fragrances closest to their preferences.
“For beauty retailers, the game will increasingly be omnichannel,” says Devangshu Dutta, chief executive officer at Gurugram-based retail consultancy Third Eyesight. “While the consumer set is young for beauty brands, convenience and access, whether online or offline, is key for sustainable growth,” he says.
Nykaa has doubled its beauty store count from 72 outlets in FY21 to 145 stores in FY23, the company said in a recent investor call. Plans include adding another 50 outlets in FY24 and taking total store count to 150 stores, according to a report by brokerage firm JM Financial.
Reliance Retail also intends to expand its Tira footprint by setting up stores in suburbs such as Andheri in Mumbai besides BKC in Bandra and Infinity Mall in Malad, which are up and running. The Malad store, for instance, was launched just last week. Over the next few months, satellite cities such as Thane and locations such as Pune, Bangalore, Chennai and Hyderabad are likely to see Tira stores, informed sources said, with more outlets lined up in tier-I and II cities, including Delhi-NCR.
Reliance Retail is also laying special emphasis on the design of its Tira stores, with the flagship 4,300-sq ft outlet in Bandra Kurla Complex, for instance, put together by London-headquartered studio called Dalziel & Pow. The studio is best-known for its work for brands such as Marks & Spencer, Toyota, Volkswagen and Jaguar Land Rover and has designed the BKC Tira stores as a go-to destination for beauty shoppers.
(Published in Financial Express)
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August 3, 2023
Viveat Susan Pinto, Financial Express
August 3, 2023
The country’s largest organised retailer, Reliance Retail, is working on a new value retail store format called Yousta. The move will pit Reliance Retail directly with Trent’s Zudio, Landmark Group’s Max Fashion and Shoppers Stop’s Intune, informed sources have told Fe, as growth prospects beckon in the category.
Reliance Retail will roll out the new Yousta stores of around 5,000-10,000 sq. ft. in size in cities such as Hyderabad, Delhi and Mumbai in the initial phase, the sources said.
Pricing will be competitive at under Rs 500 per unit, targeted at youth, children and families.
A gradual ramp-up of stores across more metros and cities will happen in the months ahead, as Reliance Retail is looking to take store count of Yousta to around 200-250 over the next few years. The retailer is speaking to malls and high streets across cities to lease space for the new format, persons in the know said. Executives at Reliance Retail were not immediately available for comment.
However, some experts see Reliance Retail’s move as a belated acknowledgement of a segment that constitutes nearly 90% ($45 billion) of the estimated $50 billion domestic fashion market. The premium end is pegged at 10% ($5 billion) of the domestic fashion market.
“Much of the attention of apparel retailers in recent years has been at the top-end of the fashion market. While affluence at the top-end is high, the space has also become crowded with local and international brands,” says Devangshu Dutta, chief executive officer at Gurugram-based retail consultancy Third Eyesight.
“The larger value retail market has consumers in the middle and lower middle class who while being conscious of their budgets are also aspirational,” he says. “With the right product and pricing, volume sales can be significant in this segment,” he says.
Reliance Retail has an existing value retail format called Reliance Trends, which has nearly 2,500 stores across the country. However, the company has been looking to broaden its appeal in the category with more store formats, sector experts said. Yousta is expected to fill that gap, they say.
“The value retail market has long-term growth potential because there are number of consumers who are moving from unbranded to branded products. They are looking at affordably-priced branded goods, which value retailers can cater to,” says Aliasgar Shakir, retail analyst at Mumbai-based brokerage Motilal Oswal.
Some experts say that the discretionary slowdown in the marketplace has pushed apparel retailers to look at the value retail space more closely.
“Intune is a ‘Fashion For All’ format, which is one of our strategic initiatives to cater to young families,” Venu Nair, MD & CEO, Shoppers Stop, said in a recent investor call.
Nair admitted on the earnings call that the apparel segment in general has been witnessing moderation and that the value retail foray could help the company tap into the growing trend for affordable fashion and lifestyle products.
Trent’s Zudio and Max Fashion have big plans for the category. At Trent’s FY23 annual general meeting held recently, the company said it would open 200 stores of Zudio in FY24, much higher than estimates of analysts. In FY23, Trent had opened 117 Zudio outlets taking the total store count of the brand to 352.
Max Fashion will add 100 stores in the next one year, top officials at the company said, taking its total outlet count to close to 600.
(Published in Financial Express)
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May 6, 2023
Gargi Sarkar, Inc42
6 May 2023
With one of the largest consumer bases in the world, the Indian retail industry is on a constant upward spiral, thanks to the increase in the purchasing power of Indian consumers and the ever-increasing ecommerce adoption.
Notably, this has helped segments like online beauty and personal care (BPC) sustain and grow faster than the players in the offline space.
According to industry experts, the online BPC market has been growing in the range of 20% to 25% annually, compared to the offline segment at around 8% to 10% a year. According to a IMARC Group report, India’s BPC market size reached $26.3 Bn in 2022 and is expected to reach $38 Bn by 2028, growing at a CAGR of 6.45% between 2023 and 2028.
Notably, in their endeavour to capture this opportunity, new players are entering the BPC space, and the existing ones have started to scale their omnichannel presence.
The newest entrant in the space is Reliance Retail. The retail major forayed into the BPC market with its omnichannel platform, Tira, earlier last month. Along with launching its app, Reliance Retail also opened its flagship Tira store in Mumbai.
It is crucial to note that existing marketplaces like Nykaa and Purplle, and D2C brands such as SUGAR Cosmetics and Mamaearth, too, have started expanding their offline footprint, after scaling up their online presence.
Similarly, offline retailers such as Loreal India, Sephora, and Hindustan Unilever’s Lakme have increased their focus on expanding their online presence via direct-to-consumer websites.
Given that Reliance’s Tira has entered the market with an omnichannel playbook, piggybacking on its parent’s cash reserves, it becomes all the more important to understand what impact it will have in the long run on the existing players and industry dynamics.
According to the industry experts that Inc42 spoke with, the beauty and personal care market offers more than enough opportunities for multiple players to grow, due to multiple favourable factors.
“The BPC segment remains one of the fastest growing categories in consumer retail because the penetration of beauty products has remained relatively low. With increasing awareness, and more disposable income, the BPC segment has witnessed decent growth. Now, since the segment is growing, there is a scope for multiple players to grow. That is why some of the big players have entered into the market,” Ashish Dhir, EVP (consumer and retail), 1Lattice said.
Despite Dhir’s optimism, it is pertinent to note that Nykaa saw some initial pressure on its share prices and overall stock performance with the launch of Tira. Brokerage firm Macquarie said that the entry of new players such as Tira could exacerbate the problems for Nykaa at a time when the competition in the segment is already tough.
In the past, Reliance’s entry into the fashion ecommerce space with Ajio impacted leading existing players like Myntra. Now that we already have an example from the past, coupled with a falling will to spend due to factors like rising unemployment and inflation, it will be interesting to see how Nykaa performs under such pressure.
How Tira Could Threaten Nykaa & Ilks Dominance In The Beauty & Personal Care Space
It is no wonder that Reliance Retail will look at disrupting the market to emerge as a market leader as it has done in every segment.
Compared to sectors such as apparel and telecom, the BPC segment is different, and it is not very easy to scale here the way Nykaa has done over the years, according to Karan Taurani, SVP Research, Elara Capital. He noted that many other players in the past tried to scale but failed.
“Nykaa has emerged as a winner due to several factors such as a superior consumer experience on the app, trustworthiness, and product variety. Currently, the product delivery time is also lesser on Nykaa compared to Tira, although the latter could improve it. Moreover, Nykaa has created a network of influencers over the years, and its approach on social media is very different,” Taurani added.
He, however, highlighted that there will be an initial consumer churn as some customers will try Tira as well, and whether the new venture, Tira, can retain all these customers will depend on the consumer experience it provides.
As per Taurani, marketplaces like Nykaa will see some sort of pinch in terms of demand but will not have a significant impact until Tira offers a differentiated experience. Right now, Tira has very few differentiating factors.
However, we should not forget that Reliance Retail is experienced in building brands and has the heavy financial backing to scale in the offline segment.
Given that many players do not have much experience in the offline segment, they may see a visible impact facing the retail giant in the offline BPC space.
It is important to note that Nykaa’s consolidated net profit fell 70.7% year-on-year (YoY) to INR 8.5 Cr in the December quarter of the financial year 2022-23 (FY23), despite the festive season.
In addition, Mumbai-based beauty ecommerce startup Purplle’s net loss almost quadrupled to INR 203.6 Cr in the financial year 2021-22 (FY22) from INR 52 Cr in FY21.
An optimistic Dhir, however, likes to believe that Tira would only increase the competition in the segment and would not impact the profitability of its rivals, at least in the near term.
Will D2C Beauty & Personal Care Brands Face The Heat?
Along with conglomerate-backed large players such as Tata Cliq and online marketplaces, there are several Indian startups and brands such as mCaffeine, Mamaearth, Sugar and Minimalist, which are looking to capture a big chunk of the ever-increasing BPC market pie.
According to an Inc42 report, BPC will remain one of the fastest-growing D2C segments between 2022 and 2030, growing at a CAGR of 27%.
Talking about Tira’s impact, experts said these (aforementioned) D2C brands will not see any major impact due to two factors.
“Firstly, these brands will have similar arrangements with Tira as they have with Nykaa. Secondly, these brands have created a loyal customer base for the products they offer and they have their recall,” Taurani said.
“While deep-pocketed companies can spend their way into buying the market share, all brands need to be prepared for the long term. Also, for these brands a clear positioning be crucial to stand out, not just in their product and service mix but also the overall customer experience specific to their target audience. This would also give opportunities to several beauty and personal care brands to profitably serve niches that may be too small for the larger companies driving for the market, “Devangshu Dutta, the founder of Third Eyesight, said.
Also, Nykaa and Purplle have a portfolio of private labels, which includes skincare brands such as Dot & Key, Earth Rhythm, and Good Vibes, among others. Hence, it will not be surprising if Tira launches its private labels or acquires small brands to grow its portfolio.
As brands like Dot & Key, and Good Vibes are already direct competitors to these D2C beauty brands, a new player can pose more challenges for them.
What Else Could Work In Tira’s Favour
“Our vision for Tira is to be the leading beauty destination for accessible yet aspirational beauty, one that is inclusive and one that harbours the mission of becoming the most loved beauty retailer in India,” Reliance Retail’s executive director Isha Ambani said at the time of launch in April 2023.
When Reliance entered new segments like telecom and fashion ecommerce with Jio and Ajio, respectively, many of the existing players struggled to sustain in the segment as the Mukesh Ambani-led conglomerate scaled up quickly, thanks to its strong financial position. Hence, it will work as the biggest favourable factor in the beauty and personal care space as well, industry experts believe.
Tira is also expected to lure customers with big discounts. “For Tira, a big chunk of revenue will initially go towards marketing and customer acquisition, at least for the first couple of years, as it is a new brand. More than marketing, Reliance will look at discounting more prominently. Reliance will try to give higher discounts compared to other players,” Taurani said.
He added that Reliance has some expertise in building new platforms, such as Ajio, and a rich talent pool and strong brand exposure.
While players like Tata Cliq, Purplle, and Myntra’s beauty segment have tried to scale up in BPC, none of these players has seen significant growth. Hence, the market consists of one large player, making it easier for a deep-pocket player like Tira to carve its positioning quickly and create a duopoly with Nykaa.
At the time of Tira’s launch, the company said that the brand would offer a curated assortment of the best global and home-grown beauty brands. In terms of its offline play, Reliance Retail can leverage partnerships with global beauty brands and suppliers to get better deals. As it is looking at an omnichannel play at an entry stage itself, it may be able to gain market share from smaller beauty retailers, especially in bigger cities.
The Tira offline store will have the latest beauty tech tools such as virtual try-on to create customised looks and a skin analyser that will personalise and assist consumers in making purchasing decisions based on their needs, the company said.
On the luxury side, Reliance Retail is also directly targeting the market which has higher margins and could eat into the margins of Nykaa easily. It must be noted that Nykaa’s Luxe is still in its infancy.
While it is true that Tira will increase the competition in the BPC segment, it is not likely to rewrite the industry’s future over the next couple of years. Tira currently has very few differentiating factors in both the online and offline segments. Additionally, in the offline segment, Tira has opened only one store while Nykaa already has 141 physical stores across 56 Indian cities, as shared in its Q3 earnings report.
Even though there are glaring differences, some industry experts see Tira’s journey to be the same as that of Nykaa, going ahead.
(Published in Inc42)
