Madhav Chanchani, The Times of India
Bengaluru, 28 June 2016

If traditional retailers weren’t so busy creating digital avatars to take on their new-age rivals, they might have noticed online stores gaining a firm foothold in their territory, one store at a time.

Some of India’s largest online stores including baby products retailer Firstcry, eyewear brand Lenskart and furniture marketplace Pepperfry are beginning to see significant contributions to revenue and bottomline from their physical stores.

“We get significant revenues from our offline business and we are already EBITDA-positive (profitable from core operations) collectively,” said Supam Maheshwari, chief executive of Firstcry, declining to disclose specific numbers. Firstcry was among the earliest online retailers to open offline stores in 2012.

Encouraged, online retailers are preparing to rapidly expand their offline presence in the coming years, opening a new front against traditional brick-and-mortar stores that are struggling to wrest similar success online. India’s largest business groups including Reliance Industries and Aditya Birla have launched online apparel stores in the past year, and Tata Group’s jewellery and watches brand Titan Company is acquiring online jeweller Caratlane.

Firstcry and Lenskart have opened hundreds of stores through franchisees, boosting their sales. The physical stores of companies like Caratlane and online lingerie retailer Zivame function more like showrooms, tending to be smaller than those of their brick-and-mortar peers as they keep limited products and use a central inventory.

More importantly, building a physical presence helps these retailers tap those millions of customers who are still uncomfortable shopping online. Take, for instance, a Firstcry customer who recently posted on the company’s website that ‘Aloe Veda Castor Oil’ was not available at its Ernakulam, Kaloor franchisee in Kerala.

She urged Firstcry to make it available at that store so she could purchase it as “I don’t like online shopping.” To capture these customers, Firstcry plans to ramp up its offline presence to 700 stores in 3-4 years from about 170 now.

“We have seen that offline customers are also transacting online and vice-versa, so joint cohorts are much higher,” said CEO Maheshwari. Cohorts is repeat customer purchase, which helps measure if a company is making a profit on each acquired customer, a metric closely watched by investors.

Firstcry’s offline network is already bigger than its competitor Mahindra Retail’s Babyoye, which was known as Mom & Me before Mahindra group acquired online baby products retailer Babyoye in 2015. Babyoye, which runs 115 owned stores, has announced plans to open new stores through the franchisee route like Firstcry.

Mom & Me made revenue of Rs 210.5 crore and net loss of Rs 118.9 crore in fiscal year 2015, according to Mahindra & Mahindra’s annual report. Firstcry reported revenue of .Rs 118 crore and loss of .Rs 63 crore for the same year. As for Pepperfry, which plans to double its store count to 16 this year, “offline stores are the best marketing channel we have started,” said CEO Ambareesh Murty. “It helps us provide that reassurance to customers that we are a specialised player and translates to trust in the brand.” Also, customers walking into physical stores tend to purchase more often than online buyers and at a higher average price, he said.

Pepperfry opens stores based on customer purchase data of the previous 24 months, which helps it zero in on pin codes with high customer density. By opening stores in such areas, it is also able to drive supplychain efficiencies as more orders from an area translate into lower average cost of delivery.

“These players are already established leaders in online space. The question they are addressing is how do you redefine the market to grow be-cause only 5% of Indian customers have bought online,” said TCM Sundaram, managing director at IDG Ventures India, an investor in Lenskart, Firstcry and Zivame.

Online shoppers in India are expected to increase from 50 million to 150 million by 2020, according to a recent report by Google and AT Kearney, adding that not having an omni-channel presence in categories like consumer electronics, home furniture and personal care could cause retailers “to lose out on 20-30% of potential buyers.” Experts spout the adage that retailers need to be where the customers are rather than choose one basket.

“The retail business is not divided in black-or-white between old-world physical retailers and the upstart online kids – at least the consumer doesn’t think so,” said Devangshu Dutta, CEO at retail consultancy firm Third Eyesight.

Some online retailers agree. “The idea is to create an eyewear brand, and channels keep changing. We want a store in 372 towns in India that have a population of over 50,000,” said Peyush Bansal, CEO, Lenskart.

The company has 200 stores from where customers can book products and pick up later from the store or get these home delivered. The company charges a franchisee fee and pays a commission to store owners on each sale, while it manages the inventory and customer experience. It plans to expand to 400 stores by the end of the year. Lenskart, with annualised revenue of about Rs 300 crore, is targeting Rs 2,500 crore revenue in the next four years. Bansal expects the physical stores to contribute about half the revenue in the next two years. Lenskart competes with Titan’s eyewear business, which earned net revenue of Rs 372 crore in fiscal 2016 from its 404 stores.

(Published in The Times of India)

Sapna Agarwal, MINT

Mumbai, 21 January 2016

Mahindra Retail, a part of the $16.9 billion Mahindra Group, will sell products of US kidswear firm Carter’s Inc. in its chain of BabyOye stores across India and online, the company said on Wednesday.

This will be Atlanta-based Carter’s third attempt at establishing itself in the Indian kidswear market.

Mahindra Retail plans to open 40 so-called shop-in-shop BabyOye stores—where a brand owner or retailer takes space in another retailer’s store—in 15 cities across India in 2016.

In the past, the OshKosh B’gosh kidswear brand, which Carter acquired globally in 2005, tried to make inroads in the Indian markets, first in the 1990s and then in 2008.

“With OshKosh B’gosh it had adopted a premium positioning which did not work in India as kidswear is a competitive segment with well entrenched local players,” said Devangshu Dutta, chief executive officer, Third Eyesight, a retail consultancy firm. According to him, getting the pricing and product right is important in this segment.

Now, Mahindra Retail and Carter’s have entered into a buy and sell arrangement. However, the two companies are looking at partnering beyond the agreement to create the look and feel of the Carter’s retail experience in India, said Prakash Wakankar, chief executive officer, Mahindra Retail.

Also with this partnership Carter’s is hoping to make the brand accessible to India. “We don’t anticipate any pricing discrepancy. We plan to make the brand accessible and have great value offering,” said Keving Corning, Carter’s executive vice-president (international). He did not rule out the possibility of bringing OshKosh B’gosh back to the Indian market in the future.

The Carter’s range will start at Rs.600 and go up to Rs.2,500 and will be available for the just born to 24-month-old toddlers in the brick and mortar stores. Online the company will have products for up to seven-year-olds.

(Published in Mint)

Sagar Malviya, The Economic Times
Mumbai, 19 January 2016

Fabindia Overseas has crossed Rs 1,000-crore sales mark to become the largest retail apparel brand in the country, significantly ahead of nearest rivals Zara and Levi’s India.
During 2014-15, the ethnic wear firm posted a 12% rise in consolidated sales at Rs 1,148 crore with 36% increase in profit before exceptional items at Rs 112 crore. Its domestic business grew 25% to touch Rs 767 crore ahead of largest fast-fashion brand Zara that clocked sales of Rs 720 crore during the same period.
"Customers are moving to one of two responses to retail. Either they are responding to products as commodities, or investing in curated products and experiences. We will continue to focus on the quality of our design and curation," said William Bissell, managing director at Fabindia, which runs more than 205 stores in India. The company also attributes its success to a policy of no discounting and instead build a sustainable cash flow.
Founded in 1960 by Bissell’s father John Bissell to market craft traditions of India, Fabindia started out as a company exporting home furnishings. The first retail store was opened in Greater Kailash, New Delhi, 15 years later. In mid 1990s, William Bissell took over the company.

The company added the non-textile range in 2000, while organic foods and personal care products were launched nearly a decade ago. Experts said the brand, which has expanded its portfolio over the years, has been finding acceptance among younger consumers since the last decade, a new development in a category earlier largely restricted to older buyers.
"The brand has been consistent to its core and they have been adding newer categories to remain relevant and also earn higher margins," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight. "The challenge is to continue the momentum since their sourcing is dependent on thousands of craftsmen instead of a few large manufacturing units."
Ethnic wear, a segment still mostly fed by the unorganised segment, has been growing at an average of more than 10% a year over the last decade.

Leading department chains such as Shoppers Stop, Lifestyle and Westside are increasing the width of their private label range and offer contemporary styling in the ethnic space, fuelling growth. The ethnic wear segment is also seeing a lot of aggressive expansion from newer players both in online and brick-and-mortar space, something that could hurt Fabindia’s growth prospect going forward. For instance, Kolkata based Manyavar, which had just one store till 2008, has more than 400 stores across the country now and is expanding its portfolio from wedding and special occasions to everyday clothing.

Fabindia, in comparison, opened eight stores last fiscal and has added 14 doors in the current financial year. ET, last month, reported that the private equity arm of Louis Vuitton Moet Hennessy (LVMH), plans to sell its 8% stake in Fabindia.

(Published in The Economic Times)

Richa Maheshwari, The Economic Times
Bengaluru, 14 January 2016

The couriers ride geared bikes and carry packages of up to 7.5 kg per trip. With incentives, a bicycle messenger could earn about Rs 7,000 to Rs 8,500 a month compared with Rs 14,000 a month for those on motorbikes, according to people aware of compensation levels.

Online retail, which is being increasingly adopted by Indian shoppers, is expected to account for 3% of the total by 2020, according to a PwC report. Further, orders per million are expected to more than double from five million in 2013 to 12 million by 2016. While this will mean more opportunities for e-commerce companies, delivery staff will have to ensure goods reach buyers in time.

The US-based online retailer is working on novel methods of delivery, including Prime Air, "designed to safely get packages to customers in 30 minutes or less using small unmanned aerial vehicles, also called drones," according to its website.

The e-commerce giant is seeking delivery alternatives as logistics costs rise, experts said.

"In India, the density of population is higher, hence bicycles will help them reduce cost compared to motorcycles. Similarly, in the US, since the market is less dense, air cargos will help them reduce cost, reduce time and improve accuracy," said Devangshu Dutta, chief executive officer of consultant Third Eyesight. "The purpose is the same, how it is done is different, depending on the geography." Amazon said using cycles was green and enabled couriers to slip through traffic easier, when asked whether this would allow it to lower costs.

"Our focus for this initiative was two pronged – to be eco-friendly and to be able to cut through congestion in metro cities," it said. "You’ll find more people who own bicycles or if need be can afford to purchase one. It is lighter on the pocket to own a bicycle compared to a bike. We will see how it goes with Amazon with respect to safety and then decide whether we want to add bicycles to our fleet or not," said Vijay Ghadge, chief operating officer of GoJavas, primary logistics arm of e-tailer Jabong.

(Published in The Economic Times and The Times of India)

Shambhavi Anand & Varun Jain, The Economic Times

New Delhi, 6 January 2016

Discount sale on winterwear has started in the middle of the season, as an unusually warm winter has hurt demand, forcing top brands to tweak their strategies. Industry experts estimate India’s annual winter wear market at around $2.3 billion (Rs 15,300 crore). This year, sales are around 15% below the expected level because of a mild winter in the North, said two of them.

Brands such as Woodland and Marks & Spencer, which are high on winter wear, started selling winter wear in October, a month earlier than usual, expecting people to buy in anticipation of a harsh winter. While several of them are now replacing heavy woolens with light ones, brands such as Levi Strauss and Woodland started offering discounts on winter apparel, footwear and accessories as early as December 23.

"Due to the balmy winters this year, we at Woodland have tweaked our inventory at the stores accordingly. Since we see slow demand for bulky winter merchandise, we have stocked our stores with sweatshirts, fleeces, bomber and gilet jackets instead, which have been flying off the shelves. We also have a range of ankle boots, which have been the rage all winter and have replaced thigh high boots this season," said Managing Director Harkirat Singh.

Marks & Spencer is focussing on light knits, cable knits and cashmere jumpers this season.

"This winter, layering was a key trend. As every part of India does not face winter with same intensity, having a range of styles in linen refreshed in latest colours of the season really helps, so we continue to offer linen all year round," said Venu Nair, managing director of Marks & Spencer Reliance India. He refused to comment on current trading and trading over the last quarter citing the silent period before reporting its group results on January 7.

Pepe India, which is primarily a denim brand but also sells winter apparel extensively, launched its winter collection ahead of Diwali. "Normally we used to launch winter collection after Diwali, but this year we went ahead with it by October 15. We also reengineered our product line and brought more of sweat shirts and lighter denim jackets which are useful for a longer part of the season," said CEO Kavindra Mishra.

Most parts of northern India, which is a huge market for winter wear for apparel brands, has experienced warmer winter this year. According to the India Meteorological Department, minimum temperature as on Tuesday was 5-7 degrees above normal in places such as Delhi, Chandigarh, Punjab, Haryana and Himachal Pradesh.

"Winter wear is an extremely seasonal product and it is limited to a small part of the geography of India," said Devangshu Dutta, CEO at consultancy Third Eyesight. "From that point of view, the sales of winter wear would have got impacted." However, he said, it is too early until late January to term the season a write-off.

"We have seen that the weather patterns are fairly unpredictable; so you can actually get a cold snap in the middle of January and that time it pushes up sales."

(Published in The Economic Times.)