admin
January 20, 2014
Ankita
Rai, Business Standard
New
Delhi, January 20, 2014
Here’s a small quiz on online versus brick and mortar retailers:
Think about it. For an average consumer, the choice between an offline and an online retailer was a matter of trade-offs. Till now. Even as we write this article many online retailers are moving in to occupy the space that was seen as the exclusive preserve for brick and mortar.
The fact is, e-retailers like Jabong, Myntra and Yebhi have been offering same-day delivery in their home locations for quite some time now. But none of these e-retailers offer a guarantee on such service. So when Amazon shook up the market with its ‘One-Day Delivery’ guarantee for a small additional cost of Rs 99 per order in December 2013, followed by Flipkart’s ‘In-a-Day Guarantee’ at Rs 90 per item, it became clear that the e-commerce battle has moved to last-mile delivery. Just recently, Snapdeal threw its hat into the ring with its ‘Same-Day Express Delivery’ at select locations with Tradus in tow in Delhi/NCR. While Snapdeal offers the service for free, Tradus charges anything between Rs 5 and Rs 25 depending on the distance between the buyer and seller. (For the record, under same-day delivery the product is delivered on the same date. One-day or 24-hour delivery means getting it the next business day.)
Evidently, with increasing competition in e-commerce space, delivery has become an essential factor after price and assortment. That said, charging for services like express delivery, while prevalent in many mature markets, is new in the Indian context. The fact that Amazon and Flipkart are putting a price tag to their delivery promise shows they are confident the service will find takers.
Admittedly, 24-hour-delivery is easier said than done. "The whole promise of e-commerce is convenience and a big part of convenience is fast and reliable delivery," says Amit Agarwal, vice-president and country manager, Amazon India. "The challenge is to provide fast delivery across wide range of stock keeping units across country, not just in select locations," he adds. Here the problem is, to quote Agarwal again, "an e-retailer cannot simply stock all the products as it can lead to redundancy of inventory."
But more of that later; first the disclaimer: In-a-day guarantee on delivery is currently restricted to select products, to the home-locations of the e-tailers and, in most cases, only on products delivered by their in-house logistics arms. The good news is, all these players are working to expand the service with a wide variety of products and by covering as many pincodes as possible.
Sounds ambitious and begs a few questions: How should an e-tailer plan inventory and move it across the pipeline so that it is delivered to the customer within 24 hours of the order being placed? What are the typical bottlenecks in the process? And last but not the least, can smaller online players afford that sort of investment?
Working backwards
To begin with, there are three key stakeholders in the e-commerce ecosystem: the merchants/vendors, the fulfilment centres/warehouses, and finally the logistics/shipment. E-retailers need to fully integrate each of these elements to keep the delivery promise. Now understand that the first two elements – the merchants/vendors and the fulfilment centres/warehouses – are inextricably linked. How you manage one determines your relationship with the other.
To cut the fulfilment time, e-tailers need to have their inventory close to the customer location. Given that a majority of the e-retailers are moving towards an inventory-less model, this is a tough call. So what Amazon, Flipkart or Snapdeal are doing is shipping products from company-fulfilled sellers. A company-fulfilled seller is a merchant who keeps his products in the e-retailer’s warehouse and takes advantage of the latter’s fulfilment services such as quality checks, packaging and logistics services. But that also means someone in the chain is holding the inventory, which adds to the cost. According to various estimates, warehousing and inventory can add about 20 per cent to the e-retailer’s supply chain.
Again, inventory ageing is a critical issue e-tailers have to grapple with. Many e-commerce companies try to reduce their inventory exposure by opting for the sales-on-return or SOR method. Under SOR, an e-commerce company buys an item from a supplier with the understanding that if the product is not sold within a stipulated time, the supplier will take the item back. "To enable express delivery, e-retailers are exploring the opportunity to work on an SOR basis. This is the essence of a just-in-time production strategy that strives to improve a business’ return on investment by reducing in-process inventory and carrying costs," explains Priyesh Jain, founder, Shopuli.com, a Mumbai-based multi-retail online store.
To minimise inventory holdings, but at the same time retain control of shipment of products, some e-retailers are also stocking products in the vendors’ warehouses. However, most retailers that follow the inventory-led model buy stock in advance. While this ensures higher margins it can also push the e-tailer into the unsold inventory trap – one reason why many e-tailers have moved to the marketplace model over time.
Moving forward
Whatever the business model-be it a managed marketplace, an inventory-led model, or a mix of both-the fulfilment centre has to be structured in such a way that the product is handled to the courier partners with a few hours of the order.
Flipkart, which moved to marketplace last year, mapped the supply-chain extensively to help the delivery partners and sellers pin down the exact location from where a product is shipped and the amount of time it takes for each item to move from one stage of the order process to the next. "We have worked with merchants, vendors and courier partners on optimisation of these processes to reduce timelines, keeping in mind the reliability and overall lead times," says Ravi Vora, senior vice-president, marketing, Flipkart.
Snapdeal, a managed marketplace, is able to offer same-day delivery in Delhi/NCR by training its merchants on the importance of keeping the right stock. "We have to cut significant time at the merchant and the courier level," says Saurabh Goyal, vice-president, supply chain operations, Snapdeal. "Currently we are able to ship 90 per cent of the products in 24 hours, but that 24 hours had to be cut down to fulfilling orders in two hours to enable same-day delivery. Courier boys also need four hours to deliver. That means cutting 50 per cent time at the courier and merchant partner."
"Fast shipping service in a marketplace requires merchants with deep SKUs, which means tying-up with merchant who stock similar products in large quantities," says Sanjay Sethi, co-founder and CEO of Gurgaon-based online marketplace ShopClues, which currently delivers 10 per cent of the order volume the same day in Delhi and NCR.
Gurgaon-based Jabong, which started same-day delivery in July 2012, is able to deliver the product at its home location the same day if order is placed before noon. For cities like Mumbai and Bangalore the cut-off time is 5:00 pm to get the delivery the next day. The service is only for products serviced by JaVas, its logistics arm, which also services other e-commerce companies. Jabong, which operates two models – marketplace and own-inventory – does not provide express shipping for products sold through its marketplace. "We mention on each product if it is provided by a partner or by Jabong. Though Jabong doesn’t gurantee, 70 per cent of the orders are delivered the same day," says Praveen Sinha, co-founder and managing director, Jabong.
Sinha says the biggest pain point for Jabong was the customer verification process. "We realised it was the most time consuming. It was important to arrest fraudulent transactions. So we worked on a system to enable faster telephone and credit card verification. We are able to do it in 10 minutes of the order placement," he adds.
Tradus, on the other hand, leverages the ready stock at traditional offline retailers to offer same-day delivery. Says Mudit Khosla, CEO, Tradus, "To launch our express service, we went on a drive to enroll real world sellers/retailers who have ready stock. Hundreds of such sellers have been trained to deliver nearly a lakh different products the same day." Orders received by sellers from select markets in New Delhi like Chandni Chowk, Nehru Place etc are picked up by delivery teams by afternoon and delivered to buyers the same day. Tradus has also invested in technology to ascertain the location of the buyer and calculate the distance between each buyer and the seller to arrive at an accurate delivery fee and time required for delivery.
Bangalore-based e-retailer Myntra, which has two warehouses in Bangalore and Delhi, delivers half of its shipment within 24 hours in these cities. To enable this, Myntra uses advanced queuing algorithms, which reduces the time an order comes and the time it goes to the shipment company. It has also invested in remote handheld devices at the warehouse level. "Nobody moves around with papers to pick up goods these days," says Ganesh Subramanian, chief operating officer, Myntra. "Everybody in the warehouse receives orders on their remote handheld devices, which automatically tells the location and the availability of the product in the warehouse. On an average, there is a 50 per cent reduction in fulfilment time at the warehouse and in shipment. So we can process an order in two hours against the average of four hours," he adds.
Many e-commerce-focused logistics players are also offering inventory management and warehousing solutions to enable express shipping. For instance, some merchants and marketplace players use the warehouses of delivery company Delhivery to stock products. The logistics company currently has three fulfilment centres in Delhi, Bangalore and Mumbai. "Delhivery provides a unique solution to clients to enable 24-hour delivery," says Nikhil Agarwal, vice-president, fulfilment at Delhivery. "There is full integration with the seller – the product is already in our warehouse before the customer buys it. We use tablets and mobile apps to help quick pick-up if the stock is not in our warehouses. For cash on delivery we are able to return the cash to the client (the e-tailer) within 24 hours."
Outbound traffic
Inbound and outbound logistics alone can add 40-50 per cent to the e-tailer’s total supply chain cost. So getting it right figures high on their agenda. Most e-retailers offering in-a-day or same-day delivery service – such as, Amazon, Flipkart, Jabong and Myntra – do it through their in-house logistics arms, while some others like Snapdeal and ShopClues have roped in third-party courier partners (3PLs).
Everyone agrees the easiest way to handle this is to have your own logistic arm. Jabong’s same-day deliveries are handled by its logistics arm JaVas. Myntra uses its own logistics arm Vector E-commerce to handle two-thirds of its product shipping. Amazon says it is able to cover slightly less than 50 per cent of the customer demand under its ‘One-Day Delivery’ guarantee because it has been able to replicate its global logistics solutions in India. Marketplace major Snapdeal uses services of 3PLs for all its deliveries, including the same-day ones.
While routine shipments are typically done on a first-in-first-out basis, in the case of urgent shipments e-retailers often have to press additional resources into service. "This additional cost should be seen as a customer acquisition cost," says Devangshu Dutta, CEO, Third Eyesight. "Till year before last, crores of rupees were spent on advertising; if you look at the last six months e-commerce firms haven’t spent very much. Some of that cost is getting shifted to alternative means of customer acquisition like in-a-day delivery," Dutta adds.
As you can see, the advantages are blurring between online and offline retail. Same-day delivery is certainly the Holy Grail, though it involves an awful lot of homework and investments.
To make it a sustainable business strategy and put down the costs, the key point is to invest in robotics and technology. Take the Amazon’s model in the US. In March 2012 Amazon purchased Kiva Systems, a specialised maker of robots that services warehouses. We can already imagine Amazon’s warehouses: robots going from bin to bin picking out and picking up products to the shipping department. This process should bring down Amazon’s cost of shipping in a noticeable way and speed it up as well. By using automation at the e-retailers’ fulfilment centers, you can improve how you pick, pack and stow.
Analysts also say, it is still not viable for the smaller online retailers who probably can’t compete with the big dogs on speed. What should they do? Work on their overall value proposition perhaps and look out for services that can add to the shipping experience. Not easy, but must-do.
5 STEPS TO SAME-DAY DELIVERY
To execute same-day-delivery e-retailers need to take a cross-functional
approach that involves thoughtful planning, IT investments and
close ties with transportation partners.
HERE ARE SOME KEY STEPS:
(Sourced from Business Standard.)
admin
January 19, 2014
Rhik Kundu and Vaishnavi Bala, Financial Express
Mumbai, January 19, 2014
Chung wa tobacco, a favourite among Chinese nationals, always
gets frontline display whenever a flight from China lands at the
Delhi airport. Chinese literature and price tags replace the English
ones, along with salespersons fluent in Mandarin, to cater to
customers. The stores then scurry to make more changes to the
merchandise once flights from other sectors start landing.
Similarly, when a flight from Japan lands, the literature is
changed to Japanese and popular items—Indian destination
merchandise like replicas of Taj Mahal, stones, artifacts, souvenirs—occupy
the front rows at the retail counters. “Russians prefer hard
vodka, so we line them up at the front whenever a Russian flight
lands at the airport,” says an official of Delhi International
Airport.
This is just one day in the retail arena of the Indira Gandhi
International Airport in New Delhi. The hectic pace is common
to all airports nationwide and across the globe, making retail
at airports a dynamic aspect of airport operations. As Romy Juneja,
chief commercial officer (non-aero), Delhi International Airport,
says, “We are looking at shifting from a product-centric
approach to that of a experience-centric one.”
Airport retail business in the country, which touched about
Rs. 5,500 crore during 2013, is set to cross the Rs. 6,000-crore
mark during 2014, according to Devangshu Dutta, chief executive
at Third Eyesight, a retail consultant.
“The airport retail segment is seeing a year-over-year growth of about 15%, as an increasing number of travellers are shopping at airports,” he says.
The recently inaugurated terminal 2 (T2) at Mumbai is adding to the excitement for retailers, partly because of the added opportunity and partly because of the immense retail space—21,346 sq m—available. The experience of shopping at a swanky terminal is an added plus, and the new terminal is expected to drive growth by more than 15% annually.
Dutta adds that “T2 has a lot more retail space than the existing domestic airport at Santa Cruz. This, coupled with the wide range of merchandise, will definitely drive growth of retail at the Mumbai airport.”
Amit Burman of Lite Bite Foods, a subsidiary of Dabur that operates in the F&B sector and which will operate 32 stalls at T2, is bullish about his sales from T2, especially as the new terminal is expected to handle 40 million passengers yearly.
While the company plans to open 17 stalls by January 15, it will open the remaining 15 by September. At the terminal’s F&B section, apart from Lite Bite, 20 other stalls will be operated by Devyani Food.
Burman, vice-president of Dabur, says currently food stalls at Delhi and Mumbai airports—where the company has a presence—constitute 10% of Lite Bite Food’s overall sales. This is set to touch 35% by the end of this year on the back of T2 operations. He also expects his total sales from the airport businesses to be around Rs. 80-85 crore by September this year.
Switzerland’s Nuance Group, which is a travel retailer, gets about 93% of its total revenues from airports. According to Nuance Group, perfumes and cosmetics constitute 38% of its sales, followed by liquor at 19%.
Delhi Duty Free’s marketing head Abhijit Das says they try and provide “distinctive value” to shoppers in every area, besides initiatives like loyalty programmes, etc.
“Perfume, cosmetics and destination merchandise are the largest-selling items at the departure section of the Delhi airport, while liqour is the largest-selling item in the arrival section,” adds Delhi airport’s Juneja.
But not everything is rosy and retail at airports comes with a big challenge as well. As Kimaya Fashion’s founder Pradeep Hirani says, “Retailing at airports is quite challenging, but, at the same time, has high returns.” Kimaya is a fashion house that retails designer brands. It has a 2,000 sq ft store at Delhi’s international terminal and is soon opening a new store at Mumbai’s T2. The company’s Delhi store saw sales zoom 56% last year, from an increase of 38% a year ago. The company did not divulge absolute numbers.
Hirani also points out that retailers at airports need to be flexible and should be able to turnaround their merchandise quickly. “Most regional flights are clubbed together and depending on the origin of flights, we keep making changes in the store. For example, we rotate the merchandise every two-three hours. If there is a high frequency of flights from Africa, then we keep merchandise and motifs that would be appreciated by locals there,” he says. Also, the profile of passengers differs at each airport. For example, Delhi gets more Japanese tourists than Mumbai, so retailers in Delhi try to have a product mix after studying the trends at the airport, Hirani adds.
Airport stores have 120% higher sales than sales at high-street retail outlets. But high costs are a prevalent factor. Shoppers Stop’s managing director Govind Shrikhande had previously stated that airport retailing has high risks. Shoppers Stop has four stores at domestic airports in Delhi, Bangalore, Hyderabad and Jaiplur, and one duty-free store at Bangalore International Airport that is operated as a JV.
Retailers also point out that costs of operations are higher at airports as stores need to remain open through the day, thereby doubling employee costs. On an average, per square feet rentals at airports are almost double of what retailers pay at high streets. For instance, New Delhi’s South Extension commands rentals of Rs. 725 per sq ft a month,while rentals at the T3 terminal hover upwards of Rs. 1,000 per sq ft.
Similarly, Hyderabad’s Banjara Hills commands rents of Rs. 130 per sq ft a month, while rentals at Hyderabad Airport are way higher at around Rs. 400-500 per sq ft.
Retailers point out that a store’s location at the airport is of utmost significance. Kimaya, for example, has both its stores located right next to the liquor stores, which generally happen to be hotspots at any airport. Of course, this means even higher rentals.
Airport operators at the Delhi and Mumbai airports, however, say they don’t charge rent, but work on a partnership model with outlets/brands. The revenue-sharing arrangement between operators of Delhi airport and the brands present at the retail segment of the airport vary from 15-60% depending on the brands, adds Juneja of Delhi International Airport.
Both GMR and GVK—operators of Delhi and Mumbai airports, respectively—did not comment on the exact footfall of customers to their retail segment, nor on the business figures from their airports’ retail business.
At present, the total number of passengers at airports gives an idea of the average footfall at airports. As per latest figures, during the April-October 2013 period, Mumbai airport saw 18.28 million domestic and international passengers (both arrivals and departures), while Delhi airport saw 27.52 million domestic and international passengers (both arrivals and departures) from January-December 2013.
(Sourced from Financial Express .)
admin
January 17, 2014
Meghna
Maiti, Financial Chronicle
Mumbai,
January 17, 2014
Both
are full of bombast. Both are bleeding. So what’s the difference
between the virtual retail market and the real retail market?
Not much really as far as making money is concerned.
Oh yes, for you and me the difference is obvious: when you buy from an e-shop, you pay much less for an item that lands at your doorstep by post or courier and you suddenly decide you don’t like it after all. Try returning that – it’s a learning process you don’t want.
Much better is the real world: you see, hold and buy what you want, but the price you pay for it covers the rent of the place, the salary of the staff, the electricity and air-conditioning cost, the huge margin, the works. In short, you pay through the nose. But the return policy works fine.
If you are vicarious, you will be pleased to know that both your e-retailer and the flesh and blood retailer are losing loads of money every time he sells you anything.
But e-retailers do come up with clever spot ads on TV. In contrast, r-retailers (real retailer) mostly use print media for full-page ads that are dull, prosaic, but factual. Unfortunately, neither cleverness nor dullness brings in profits.
By way of bombast, there’s Flipkart: the e-retailer founded by Sachin Bansal and Binny Bansal claims it will sell goods worth Rs 6,200 crore by 2015. Ask how much they sell now, mum’s the word. What we do know is that in none of the seven years it has been around has it made a profit. Also chronicled is their takeover of a string of mom-and-pop-shop equivalents in the e-world. Mime360.com and Chakpak.com, for example.
For the rest, one has to do a little snooping in the office of the registrar of companies (RoC) where filed data show up a firm called Flipkart Internet. This company’s last available financials are for October-March in 2012-13. And it had filed only the balance sheet, not the profit and loss account.
But its director’s report gave a pointer: in the six months its income was Rs 15.46 crore and expenditure Rs 71.29 crore. Loss before depreciation and tax was Rs 55.76 crore and after depreciation the net loss was Rs 62.68 crore.
But Flipkart Internet paid Rs 94.15 crore to Flipkart India for purchasing the e-commerce business and another Rs 19.70 crore as cost reimbursements. Flipkart India is a subsidiary of Flipkart Internet. The pyramid raises two more levels: Flipkart Marketplace of Singapore is the Indian firm’s holding company whose holding firm is Flipkart, also based in Singapore.
This story is, of course, not about the holding structure but its e-business in India. Given that it was pitiful in the last RoC filing, isn’t the year 2015 plan but a pipe dream?
eBayIndia.com story is not much different either. eBay India data with RoC indicates a net loss of Rs 72.15 crore in 2012-13. In 2011-12 its net loss was Rs 15.29 crore.
Neither the Flipkart spokesperson nor eBay officials want to comment on the results. But eBay officials were most willing to share the hype associated with e-shops. Sample: the company sells 15 items every minute and has customers in 4,600 Indian cities. Or so claims Deepa Thomas of eBay India.
Claims in the e-retailing business are always tall. A specialised e-retailer, Lenskart.com, for example, says it has doubled in one year. “We are selling 1,000 (pairs of) spectacles a day,” Peyush Bansal, founder and chief executive officer. His online business is growing but he has gone offline as well, clearly not willing to put all the eggs in one basket.
Similarly, Jabong.com (in the business of fashion and lifestyle) too has sealed its lips on financials, but Arun Chandra Mohan, co-founder and MD, says online retail has a large potential and that they are trying hard.
Myntra.com, according to RoC data filings, is legally called Vector E-Commerce. It too has filed only the balance sheet and not the profit and loss account. The file has two pieces of hazy data under the head ‘Profit Loss For Period’. One is Rs -3.50 crore and another is Rs -2.60 crore. They, quite certainly, are losses, but for which year is not clear.
Like the others, Myntra.com is not forthcoming with any information. Mukesh Bansal, founder and CEO, had earlier told Financial Chronicle that they expected “a gross merchandise value” of Rs 800 crore in 2013-14. How much of it has been achieved is not known.
Analysts think they know where the failure comes from. Most e-retailers lack the credentials, strong business models or experience, and their costs are very high.
For now, at least publicly, e-retailers still take pride in their “phenomenal growth story” and point gleefully to the sad plight of r-retailers. True, footfalls at r-retailers have dropped and sales are not encouraging at all. Reliance Retail has discontinued its TimeOut range of specialty stores. Future Group has shut eZone and positioned it as a convergence platform for physical and online shoppers. Music World stores are disappearing. Other books, music and movies chains like Crossword, Planet M and Landmark have trimmed themselves.
While offline retailers have slipped, it is true that e-retailers managed to have double-digit growth. But in the process their costs have soared and margins shrunk.
In the r-retail business, ‘same store sales’ (SSS) is a good indicator of growth. Over the past year this growth has slipped to single digit in the case of Kishore Biyani’s Future Value Retail, which operates Big Bazaar (8 per cent), and Home Town and eZone (7.4 per cent), according to Q3 data.
K Raheja’s HyperCity has seen 8.9 per cent growth at the end of September. Govind Shrikhande, managing director of Shoppers Stop, had claimed to FC “7 to 9 per cent” growth in December. Discount apparel chain ‘The Loot’ has actually seen a 10 per cent drop in SSS growth last month from the level a year ago, according to Jay Gupta, MD.
If not profits, online shops have certainly seen volume growth, but, according to Gupta, this comes on a low base. Gupta attributes the growing online business to big price discounts customers get. “They save 15-20 per cent in their annual budget when they shop online. They realise there is great value in online retail.”
This is perhaps reflected in the fact that 10 per cent of urban consumers in India now use the internet as the primary medium to make purchase decisions. “This will rise to 30 per cent in three years,” says Shweta of the Boston Consulting Group.
According to a recent Technopak study, the Indian retail market is worth $490 billion now and will grow a 6 per cent annually to $865 billion by 2023. Within this market, e-retail, now just $1 billion, will grow 0.2 per cent annual to $56 billion by 2023, which will be still be only 6.5 per cent of the total market. By then, the share of organised r-retailers will grow from 7 per cent now to 17 per cent.
In other words, mom-and-pop stores and the kirana shops will still rule the retail roost. Organised r-retailers see the vast cluster of e-retailers as a menace, though a few of them are trying their hand at online business too. The need for a different strategy to face the online challenge is felt.
“We have to become more convenient to the consumer. We need to have a more cooperative kind of model to survive,” says Shrikhande of Shoppers Stop, which runs two online shops: Shoppersstop.com and Crossword.in.
Rahul Mehta, MD of Creative Casuals and head of the clothing manufacturers associations of India, does not agree that online is a threat to offline. “Online retailers have only 8 or 9 per cent of the retail space. It is not a big threat, but offline players need to re-work their strategies to stay relevant.”
Profit or no profit, online retailers are gung ho — in the manner that all small businessmen trying to go big are. They see holding the edge with clear access, convenience and low prices. “And, do not underestimate the great power of choice,” says Mohan of Jabong.
Bansal of Lenskart points to other advantages to the customer: “It (buying) happens from home or office. You have everything under the sun, and the freedom to buy any time and get it delivered to any address.”
True, says Preeti Vyas, chairperson of Vyas Gyanneti Creative, a design consultancy. “Even for categories like shoes, people in all age groups are placing orders online.”
According to Amitabh Mall of the Boston Consulting Group, online retailers are able to influence the customer better. The influence is highest for categories such as travel, electronics and financial products like insurance.
Still, there is resistance because of uncertainty of quality, safety of transaction and inability to navigate easily. “These will likely get solved as better portals with innovative service features emerge and allay these apprehensions,” adds Mall.
Some others say just the opposite: that a large number of consumers transacting online are young and the internet is an integral part of their life. They browse, compare, review and use multiple online sources of information simultaneously to take decisions. “But product and service unpredictability remains a barrier even for them,” says Devangshu Dutta, CEO of the consultancy Third Eyesight.
So, for now, online is mostly about information, attention, influence and social interaction related to a purchase, according to Dutta. He also believes that over time, physical retailers will improve their online presence to tap customers’ cross-channel behaviour.
What this implies is that offline and online retail may have to be combined to create a new business model. Actually, it is already happening: some offline retailers are also offering their best rates on their own websites. “In the future, offline retail will seek more and more integration with online players to stay profitable,” thinks Mark Ashman, CEO of HyperCity India.
This is why Kishore Biyani entered e-commerce in 2010 after a full decade of being around as a physical retailer. At the time he had hoped to derive 10 per cent of Future group’s sales from online portals.
Last September the company was oozing confidence, and its website said: “The digital world is where the future lies… There is vast potential for the Future group to become front-runners of retailing in digital space.” It had then boasted that “our reach and relationship with customers provide us with the benefit of low customer acquisition cost for the digital space….”
Although the Future group refused to comment on it now, clearly it has not quite worked as it had hoped.
Croma of the Tata group has also copy-pasted the e-shop model of other physical retailers. It entered e-commerce in 2012. Ajit Joshi, MD and CEO of Croma, Infinity Retail, exudes confidence: “We hope to provide a one-stop destination for our patrons…, enabling them to personalise their online shopping experience.”
Words heard before.
Aditya Birla Retail, too, went online last year to sell Madura label apparel from trendin.com. Media reports suggest Reliance Retail also plans to get into it within six months. The company is already on record that it plans to adopt multi-retail channels. Reliance did not respond to an email query from FC.
The lesson learnt? If you can’t beat them, join them. Holds true for both e-retail and r-retail. The best of both worlds for the customer.
(Wih inputs from Rajesh Gajra)
(Sourced from Financial Chronicle .)
admin
January 17, 2014
Priyanka
Pani, The Hindu Businessline
Mumbai,
January 17, 2014
Retailers and mall owners are throwing open malls at eight in
the morning and doling out offers and discounts to boost slackening
sales. Experts have attributed this trend to high inflation, slowing
economy, competition among retailers and emergence of online players.
They believe too much discount is detrimental to the sector.
Infinity and Growels mall in suburban Mumbai decided to remain open for shoppers from 8 a.m. till midnight for a day on January 17. Korum mall in Thane and Oberoi in Goregaon were running flat 50 per cent discount across 90 well-known brands until midnight on January 11.
Additionally, there were prizes every hour from cars to diamond jewellery and international holidays. DLF mall in Delhi has similar schemes for 27 days starting January 10. Retailers are spending more during the sale period for customer acquisition. But are these campaigns translating into sales?
According to Devangshu Dutta of retail consultant Third Eyesight, the demand has certainly been subdued due to macroeconomic sluggishness and damp consumer sentiment. “I don’t think the current discount sales are attracting heavy footfalls. In fact, discounts were being offered within the season, too, which would have taken some of the possible ‘sale’ footfalls into the core season as well,” he added.
Mukesh Kumar, Vice-President, Infinity Mall, said that while the economy was playing spoilsport, there has been an increase in the number of sale seasons and prolonged sale period as fewer people were coming to the malls. Kumar said while the topline for most retailers has jumped 30 per cent year on year, the margins have been impacted.
Margins have been hit by 30-40 per cent, an official at a premium brand said.
“Everyone seems to be part of the race to the bottom and most brands and retailers are losing out in the discount game by sacrificing both short-term margin as well as long-term brand equity,” said Dutta of Third Eyesight.
The emergence of e-commerce players, which are playing the cards of convenience and reasonable pricing, are also posing threat to the brick-and-mortar sales mostly in small towns where there are not too many brands and malls.
(Sourced from The Hindu – Businessline.)
admin
January 15, 2014
Sonali Chowdhury, Moneycontrol.com
New Delhi, January 15, 2014
In
spite of slower economic growth and spiralling inflation, India’s
e-commerce market is bucking the trend. It recorded a staggering
88 per cent growth in 2013 to $16 billion, according to a recent
survey by industry body Assocham, which estimates the e-commerce
market in India to reach $56 billion by 2023.
That’s great news for entrepreneurs wanting to strike gold in
the e-tail space. However, if you’re one of these enthusiasts,
be warned. The e-commerce market is fast growing but there is
a tough competition with big league of players existing in the
space.
Hence, smaller players had better have a solid plan for their
venture, a smart revenue model and loads of imagination for a
stand-out offering.
But let’s get back to the good news. “The B2C space will
see lots of entrants because of a limited retail footprint in
India, especially in Tier 2 & 3 cities, which will start shopping
online looking for products,” predicts Rajat Wahi, Partner
FMCG & Retail, KPMG in India. Here are a few tips you should
consider while taking the plunge.
1. Establish Differentiation: The e-commerce space has
evolved to becoming a market crowded with players. It is important
to build a unique proposition or core differentiation in your
offering. It could be customisation of a product, an experience
no one else is offering. “It is no longer as simple as displaying
a product or selling it online. Chances are, you will encounter
a price war and those with deep pockets will have an edge. So
the key is to offer something very different,” says Peyush
Bansal, CEO & Founder, Lenskart.com.
Does that mean a niche offering will leave you better placed?
“I would agree, to some extent, like focusing on a particular
area and developing special expertise. But that does not mean
offering a niche product or service in a category that is still
very simple for someone else to copy is a good enough differentiation.
You need to keep working on your USP even in the long run,”
adds Bansal.
Even if you have a truly unique idea, once you launch it, the
idea is open for others to copy. “So think carefully about
what will keep you in the game and ahead of the pack,” advises
Devangshu Dutta, Third Eyesight, a consulting firm focused on
the retail and consumer products ecosystem.
2. Choose The Right Revenue Model: You have to find a gap
in the market or geography you are trying to address. The gap
could be the absence of players or that existing players are unable
to serve the market well. Then decide what kind of model to follow
— inventory-led or marketplace — because each one has its own
complexities.
“Determining the right model will eventually dictate how
you make money, the revenue stream and whether can scale up your
business and sustain. It will also help you determine the complexity
of managing the businesses or ecosystem partners you need to bring
on board, from payment, to search companies, to logistics,”
points out Deepa Thomas, evangelist at Ebay India.
3. Driving Offers: One of the many key challenges for e-tail
ventures is to drive traffic and acquire customers. To attract
maximum eyeballs, you will be forced to follow strategies like
offering coupons, discounts, cashbacks, cash-on-delivery and try-and-buy.
“It is always a challenge for new players to attract new
customer and retain them. That’s where the big cost lies,”
says Wahi.
You should be able to justify your cost of operations and remain
price competitive but if you go on a discounting spiral, at the
end of the day, even your suppliers will shy away and your brand
will be perceived as a discounted brand. “Discounts are a
necessary evil for acquiring a first-time customer but price cannot
be the sole point of differentiation and it is not sustainable,”
says Pragya Singh, Associate Vice-President, Retail,Technopak.
You should be carefully driving discounts and offers. “A
negative, or even zero, profit margin due to the use of discounts
and cash backs cannot translate to profits, even at scale,”
says Ravi Narayan, Director, Microsoft Ventures India.
4. Get Tech-Savvy: Technology is at the core of an e-commerce
business, whether front end or back end. It is therefore imperative
that your online business is backed up with strong technology.
You cannot survive if you don’t build an efficient process at
all levels, from the front-end on the website, to customer support
to ERP (Enterprise Resource Planning) system. “It is better
not to outsource the technology and have an in-house team or someone
in the core team who is conversant with technology,” says
Bansal.
5. Make Sure You Can Scale Up: “Every business is not a potential Amazon, Facebook, Google or EBay. Or, for that matter a Reliance, Tata or Wal-Mart. Figure out the potential scale of your business and then build your business accordingly,” advises Dutta. There is nothing wrong with having an online business that pays the bills and gives you a comfortable lifestyle, without giving you a multi-billion dollar market cap, he adds. When planning to scale up, you will inevitably require external or internal funding, and whether this funding comes or not will depend on you’re your business stands for.
“A lot of venture funding dried up in 2013 and, in smaller categories, most of it goes either to large players or leading players. New players have to think of propositions which could get good ROI to inspire funding in the long run,” opines Singh.
6. Get A Grip On Numbers: You need to have a command over your numbers like sales, margins, last order placed, number of products or services sold, money spent and lost on each product, apart from analysing the pattern of users navigating your website. As a new entrant you should be able to balance ‘cross sale’ and ‘up sale’ between categories of products, which will eventually help you manage discounts, cash backs, promotions etc. Analysing demography, size of population and geography will help in marketing to target the right audience.
“You have to be able to balance between organic (directly bringing the customer online) and inorganic (through ads) traffic to keep down the cost of marketing,” says Priyesh Jain, Founder and Director, Shopuli.com. Adds Dutta, “Most importantly, make sure you’re not setting up your venture as a victim of CPA or cost per acquisition.” You need to employ a marketing mix of public relations, email campaigns, blogs, pay-per-click advertising, and targeted content marketing such as search engine optimization. Even the use of aggressive marketing tactics by companies would be of no use if there isn’t fundamental demand for the product, and use of such tactics is an indicator of a lack of demand. “Assuming demand is not an issue for a company, ideally, marketing should account for no more than 20% of spending costs,” says Narayan.
7. Master The Execution Process: The Internet does not level the playing field for execution because e-commerce is not only about the Internet. “To make your business work, you need to think about product, branding, marketing, sourcing and supply chain, and finance — all the back-of-house, ‘boring’ things that offline businesses have to deal with,” underlines Dutta.
Underestimating costs and difficulties relating to delivery, including shipping, returns or undelivered items and cash-collection are some other mistake you would do well to avoid. If you don’t have a clear path-to-profitability per transaction, it would be such a shame.
“Through right process (quality control checks/packaging) and policies (limited no. of days/ mishandling, etc) you can make products/categories profitable even when customer returns for genuine reason,” says Praveen Sinha, Co-founder, Jabong.com.
8. Be Patient: E-commerce is a retail business, where you spend money setting up your store, getting ready to serve customers, beating your drum about the market. Then wait. And wait. Traffic will only build over time as customers walk in one at a time, make their purchase decisions one at a time, and may come back if they’re happy. “Have the patience and the cash to last till your business starts generating momentum and cash to meet current and future needs,” advises Dutta.
(Sourced from Moneycontrol.com.)
