admin
January 14, 2014
Financial
Express
New Delhi, January 14, 2014
In what will be a big blow to global multi-brand retailers making them even more wary about investing in India, the Delhi government has decided not to allow them to set up outlets in the capital. New Delhi accounts for a fairly large chunk of the organised retail market in the country and would have been an attractive catchment for any retailer.
“We have written to the department of industrial policy and promotion withdrawing the Delhi government’s earlier consent allowing FDI in multi-brand retail,” a senior Delhi government official told FE on Monday.
The government’s policy allowing overseas retail firms to pick up to a 51% stake in multi-brand retail firms in partnership with Indian players requires the nod of state governments. The previous Delhi government under Congress party’s Sheila Dikshit had given its assent to foreign retailers setting up shop in the capital. With Delhi opting out, the number of states that have agreed to allow FDI in retail stands reduced to nine. So far, Congress/allies-ruled states of Maharashtra, Haryana, Manipur, Karnataka, Himachal Pradesh, Assam, Uttarakhand, Jammu and Kashmir and Andhra Pradesh have given their assent.
Since the government threw open the multi-brand retail to FDI in September, 2012, just one global player, the UK-based Tesco, has said it wants to do business in India — it plans to buy a 50% stake in the Tata Group’s Trent. A senior executive of Tesco said such changes were anticipated and didn’t “come across as a surprise”. Tesco plans to set up its first set of stores in Maharashtra and Karnataka.
“Not allowing FDI in multi-brand retail in Delhi has a dampening effect and reinforces the risk factor; foreign retailers will wait until the general elections for further decisions,” says Devangshu Dutta, CEO of Third Eyesight, who points out that even after the Tesco announcement, other retailers haven’t rushed in. Dutta adds that this move may result in more stores in Gurgaon and Noida that can absorb some of Delhi-NCR’s consumption demand.
“The Delhi government’s stance on FDI in multi-brand retail is not too positive but nothing changes as permitting FDI in multi-brand retail was always a state subject. Although Delhi is a huge market, modern retail penetration has traditionally not been too high in the city,” says Mohit Kampani, CEO, Spencer’s Retail.
“This does not affect us as we are not seeking fresh foreign capital,” Kampani said, adding that while Delhi is a big market, the bigger chunk lies in the neighbouring suburbs of Gurgaon (Haryana) and Noida (Uttar Pradesh). Cities like Bangalore and Hyderabad have the highest penetration of modern retail at close to 30%.
“We have not seen much momentum in foreign companies entering India through FDI in multi-brand retail so far; so, the announcement is not of importance,” Kishore Biyani, founder of Future Group, said.
“Aam Aadmi Party strictly opposes FDI in retail because if it enters into the retail sector, then crores of small-scale Indian businessmen will come on the road, as they will lose their business and their livelihoods. The Walmart experience shows that farmers in the US were not benefitted, but deprived besides being a very bad employer,” Arvind Kejriwal had told Delhi traders in 2012.
“FDI in retail should have been decided through a referendum. The way the parties had behaved in Parliament was very unfortunate,” Kejriwal had earlier said.
An AAP insider, however, said that the party has made its position on FDI in retail clear, but in case traders feel that they need to re-look into it, they could do a referendum through SMS, Internet polls and public meetings on the issue.
(Sourced from Financial Express .)
admin
January 6, 2014
Raghavendra
Kamath, Business Standard
Mumbai,
January 6, 2014
Disha
Maru, a 47-year-old resident of south Mumbai, says she is hooked
on to Zara: She shops at the Spanish fast fastion brand’s store
at a luxury mall in Lower Parel at least once a month. “I
also shop at Mango, Vero Moda but I prefer Zara for its styles
and pricing,” Maru says. The store had been abuzz with shoppers
such as Maru ahead of the brand’s day of discounted sale on January
2. On the day of the sale, there were serpentine queues of customers
at the billing counters.
Devangshu Dutta, chief executive of retail consultant Third
Eyesight, says that even before Zara launched its first store
in 2010 in India, the web traffic from India was one of its highest
in the world. “It is highly possible that Zara shoppers buy
once in five-six weeks, if not once in two weeks as they do in
western markets. Most of the other brands would be lucky if they
got the same shopper once in two months,” Dutta adds.
Real estate industry sources say Zara follows a revenue-sharing
model with malls rather than fixed rent. “We have seen developers
bending backwards to accommodate the brand. It acts as a status
symbol and crowd-puller for them,” says a top realty consultant
who did not wish to be quoted. Inditex, the brand’s parent, did
not respond to an email.
High on profits
Zara has not only been a draw among consumers but has managed to become profitable in a short time. Incorporated in 2009-10, Inditex Trent Retail India, the operational entity running
Zara in India and the joint venture between Inditex and Tata-run Trent, has made profits in the second year of operations and has been profitable since then. For the financial year 2013, Inditex Trent made net profits of Rs 45.19 crore on sales of Rs 411.19 crore. The Italian brand Benetton, on the other hand, which has been in India for close to a decade, posted a much smaller net profit of Rs 4.73 crore on higher sales of Rs 521.27 crore in 2012-13.
“I do not think there is any brand which has been this successful as quickly besides Zara. Levis, Benetton could be some of the biggest brands but they took long time to get there,” Dutta says.
Zara has 13 stores in Mumbai, Delhi and Bangalore, including those in Phoenix Mills malls in Pune, Chennai and Bangalore besides Mumbai. Globally, it has 1,808 stores in 86 countries.
More per square
In terms of per square-foot (sq-ft) sales, Zara is clocking the highest in the industry,say retail industry sources. While leading departmental stores such as Shoppers Stop or Pantaloons record sales per sq-ft of around Rs 8,000-9,000, Zara, with stores measuring 15,000 to 20,000 sq-ft, has sales of Rs 50,000 per sq-ft.
Says Rajendra Kalkar, senior centre director, west region, for Phoenix Mills, a Mumbai developer: “Zara is a trendy brand and retails collections of affordable clothes. It should create a flutter in the country.” At the company’s Palladium mall,where 2 million customers walk in every month, Zara alone draws in a crowd of over 100,000. Experts say that the brand’s choice of locations has played a key role in ensuring footfalls convert to sales.
Churn is good
The biggest draw for Zara’s clientele is its frequent refreshing of merchandise. Zara is believed to bring in a fresh collection once every fortnight in India, relegating older products to sale-time – either at marked-down prices or for end-of-season. In Europe, it updates its merchandise twice a week. In comparison, most fashion brands, both international and national, follow a season-based approach to bringing in new merchandise.
Zara has also tweaked its pricing. An affordable high-street brand worldwide, it has had a premium positioning in India. But today, it retails products in lower, mid and premium categories in womenswear, rather than just mid to premium as it did a couple of years ago.
Its prices are at least 20 per cent lower than its main competition Mango and Vero Moda in some categories, say consultants.
Direct competiton awaits
But Zara will have to work to maintain its dream run, now that many international brands are set to enter India. Says Kalkar of Phoenix Mills, “Today it does not have direct competition. When Gap and H&M enter India, there will be real competition.” Some say the business model will be in trouble if customers do not change their wardrobe frequently, owing to the slowdown that has also spurred preference for discounted merchandise. “Zara’s business model is built on the premise that customers will look for newness,” reminds Third Eyesight’s Dutta.
Dutta adds that when customers look for the best deal, it does not matter whether the products are fresh or not.
(Sourced from Business Standard.)
admin
December 31, 2013
Financial Chronicle
Mumbai, December 31, 2013
It’s holiday season. The Oberoi Mall, in a far-flung western suburb of Mumbai, is decked for the occasion: golden bells are strung in the eaves; cotton floss circles the huge Christmas tree like vanilla ice cream. The well-lit stores in the mall are buzzing with jittery shoppers who are crowding the aisles but not the billing counters.
As the year 2014 dawns, the images it brings in its wake — the dark facets of economy such as joblessness, decreasing disposable incomes and trickling foreign investment almost alter the very basics of consumerism. The economy is roiled with low gross domestic product (GDP) growth of 4.8 per cent, sharp depreciation of rupee, high inflation at around 10 per cent, merciless layoffs, less disposable income, rural slowdown and low consumer sentiment. Consumer spending fell to 1.6 per cent in the April-June first quarter of the current fiscal year, from 3.9 per cent in fiscal 2013 and an average of about 8 per cent in the five years to fiscal 2012, according to a report this month by property consultancy Jones Lang LaSalle (JLL).
Arvind Singhal, CEO of Technopak, says, “Yes, the Indian economy definitely needs more private consumption in 2014. However, the reality will be another year of subdued consumerism on the back of high inflation and the overall economic scenario. Last quarter growth number was also not great. In the next one year, there is nothing that promises dramatic change.”
While retailers shut down stores, reduced number of categories, streamlined supply chain, FMCG and consumer durable players increased prices of their products, innovated, in an effort to become more efficient and attract elusive customers. Yet as the New Year tiptoes its presence, the retail experts and consultants are saying that the world would remain as ‘chaotic’ and ‘depressed’ with signs of subdued ‘consumerism’ in India looming high on the 2014 horizon.
Retail experts say, while the upper middle class, that account for at least 40 per cent of all spending, will step up consumption in the next one year, the rest will choose to lie low for a while. “I usually shop during the Christmas and New Year week, but this year, I find myself resisting any kind of purchases due to worries of home loan, rent, increasing cost of food and other sundry expenses. I don’t see things changing to a great extent over the next one year,” said Mark D’Souza, a Mumbai-based 25-year old student of Psychology in Mumbai University.
Govind Shrikhande, CEO of Shoppers Stop, says, “Given the current scenario, the consumerism scene for the next one year is not very optimistic. The uncertainty could persist over the next two-three years.” He said they are interested in tie-ups with foreign partners looking at the Tata-Tesco deal.
Santosh Desai, MD and CEO of Future Brands, part of Kishore Biyani’s Future Group, believes that the situation is still quite volatile and turbulent at this point of time. “Hence, we are looking at the future with cautious optimism. We will definitely see an improvement in 2014 over last year, but its unlikely to be anything dramatic,” he said.
Even as mayhem strikes the consumer market, the election campaign is drumming up excitement. India’s politicians are strategising new populist measures for the country. Both BJP and APP oppose FDI in retail. Analysts say a stable Narendra Modi-led BJP government could boost investor sentiment.
“Post election, the economy must see an upswing. While consumerism might not increase to a great extent, debit card usage will go up in the next one year, younger people will also cash in on purchases,” said Alpana Parida, president of DY Works, one of India’s leading brand design firms.
Consultants say industry outlook is muted by political outlook and policy led economic issues such as inflation. “Consumer spending is also governed by emotion. While some income segments are optimistic, some are not. All consumer players need to look at the way their businesses are done. There is enough potential for growth,” said Devangshu Dutta, CEO of Third Eyesight, a Delhi-based specialist-consulting organisation for retail and consumer goods sector.
Consumerism in India mainly started in the 1980s with the arrival of television sets in many households. After the economic liberalisation of 1991, consumerism took shape over the next two decades, on account of privatisation and the IT boom. The momentum increased manifold in the late ’90 with a high degree of consumer awareness, aspirations and very high disposable income in the hands of the middle class. In the times we are in now, we can see a clear demand-supply mismatch. Whereas there is a very high level of aspiration, there are not enough resources available to support those.
[ARTICLE CONTINUES BELOW]
admin
December 30, 2013
Raghavendra
Kamath, Business Standard
Mumbai,
December 30, 2013
More foreign investments could flow in $450 billion-worth Indian retail after Foreign Investment Promotion Board (FIPB) today gave approval to Tesco-Trent’s proposed JV.
According to retail industry executives, some of the top European, Japanese and Korean retailers are seriously pursuing Indian retail.
Leading the pack is French retail giant Carrefour, which is expected to apply with the government by March next year, said sources in Ministry of Commerce and Industry.
Carrefour has already spoken to Kishore Biyani’s Future group and Shoppers Stop owned Hypercity for possible alliance, sources in retail industry said.
Hypercity, and Aditya Birla have already said that they are open to getting foreign partners in their ventures. “It (approval) paves the way for others like us to look at possible partnerships to take it to next logical level,” said Govind Shrikhande, managing director of Shoppers Stop.
Retailers were keenly observing how approvals would be given to Tesco’s application to pick up 50% stake in Trent Hypermarkets run by Tatas. Though government talked about fresh investments in Indian ventures, Tesco was investing in existing chain of Trent, thereby triggering debate that whether it was a brownfield or greenfield venture.
“Earier, it was meant that FDI can come only in Greenfield projects. If the government has cleared this proposal, it means FDI is allowed in brownfield also,” Shrikhande said.
Said Kishore Biyani, founder chief executive and founder of Future group;” “We have to study the whole thing before coming to any conclusions.”
Some like Devangshu Dutta, chief executive of Third Eyesight said the policy remains the same and the government is still talking about fresh investments.
“If any Indian retailer is looking at adding new facilities at back end and front end and looking for FDI, the policy will benefit them and not for the retailers who are looking to capitalise on existing facilities,” Dutta said.
According to a senior director of consulting firm, some activity in FDI in retail will happen between now and elections. “But most of the action will happen after elections.”
(Sourced from Business Standard .)
admin
December 23, 2013
Raghavendra
Kamath, Business Standard
Mumbai,
December 23, 2013
Tesco
has been powering Star Bazaar, Trent’s hypermarket for a
couple of years. The euro 72 billion Tesco was a back-end partner
and provided sourcing and technical knowhow. While announcing
the formal joint-venture with Tesco last week (following the easing
of retail FDI norms), Noel Tata, vice-chairman of the Tata’s
retail arm, had said that the company’s understanding of
the market along with the UK-based retailer’s expertise would
allow them to leverage the potential of the India’s retail
scene.
“As a JV partner, Tesco’s motivation to bring in its systems and knowhow is higher,” says Devangshu Dutta, chief executive of retail consultant Third Eyesight. Dutta says that senior Tesco executives must have been involved in the Tata business earlier but Tesco’s management involvement can only go up. He reminds that Tesco partnered with Tata not just to remain a back-end player but also to study the retail front-end.
Both Tesco India and Trent did not respond to queries on the subject. Retail experts say that Tesco is known for three areas of expertise.
Knowing its customer
Tesco’s customer relationship management (CRM) is well documented. It has the popular loyalty card ‘Clubcard’. It also owns dunnhumby, one of the biggest data analytics companies in the world. “In the UK, depending on what customers have bought in the past, it sends customised mailers to shoppers, leveraging its database,” says Abheek Singhi, partner and director at management consultancy Boston Consulting Group (BCG). Adds Arvind Singhal, chairman of Technopak Advisors, “It is its strength to analyse every transaction and design pricing and promotions at each store that makes it successful.”
Tesco has not brought in its CRM and data analytics systems to India yet because of Star Bazaar’s limited scale of operations. Neither has it been able to introduce its good-better-best (value, premium and finest segments) approach.
However, it has helped the Indian chain across its 16 stores across the country. Tesco provides its proprietary “planogram” software to Star Bazaar, which helps the latter with a better display of products. For instance, Tesco told Star Bazaar that the retailer need not stock soaps and shampoos near the entrance to the stores. The customer will seek out these essential items wherever they are kept in the store. Rather, it advised Trent to use the vantage position to showcase products with a novelty element and hence, commanding a higher margin, for more profitable sale.
Private brands galore
Tesco has introduced hundreds of its SKUs (stock keeping units) in Star Bazaar stores from personalcare to packaged foods. While the contribution of private labels to Star Bazaar’s revenue is in single digits, Tesco sees 45 per cent of business from private labels.
According to executives in the know, Tesco has played a role in developing Star Bazaar’s own private labels. “In the UK and other countries, shoppers prefer Tesco’s private lablels over other international brands due to their quality and pricing. We need to see how they will do it in India,” says a director of an international management consultancy who did not wish to be quoted.
Formatting the market
According to the proposal sumitted to the government, the JV will operate in India through a chain of stores under various banners such as Star Bazaar, Star Daily, Star Market, branded as ‘A Tata and Tesco Enterprise’. The plan is to open three to five stores every financial year.
Experts point out that Tesco’s calibre in running multiple formats would come in handy. Tesco runs over 6,700 stores across 12 markets and runs hypermarkets, supermarkets, compact hyperstores , express stores and an online venture.
Star Bazaar has tried another format besides hypermarkets, having launched a neighborhood store called Star Daily in Pune, which is supposed to be based on Tesco Express.
The chief executive of a national retail chain says Tesco’s best practices might just help Star Bazaar break even faster. Though Star Bazaar had set up its first store in 2004, it is yet to achieve profits. The chain registered a net loss of Rs 72 crore on net sales of Rs 785 crore in 2012-13.
Many consultants say Tesco could also bring in its renowned ‘Tesco in a Box’ – its supply chain systems that are deployed in a new country.
Dutta says, “When a retailer enters a new country, there is naturally an erosion in best practices and processes as markets are different from each other. Tesco’s standardised system in inventory management, supply chain and store operations prevents that erosion.”
Tesco already plays a key role in the supply chain of Star Bazaar.
It manages three distribution centres, that ensure high availability
and supply to the stores. Armed with its advanced demand forecast
system, auto-ordering mechanism and advanced warehouse management
system, Tesco has managed over 80 per cent fill-rate (the number
of times shelves get filled correctly against the orders placed)
at Star Bazaar stores. The industry average in modern retail hovers
between 60 and 65 per cent, as against 90-95 per cent in Europe
and the US.
(Sourced from Business Standard .)
