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September 25, 2012
Writankar Mukherjee, The Economic Times
Kolkata, September 25, 2012
Consumers can look forward to some mouth-watering bargains this festive season as white goods makers and lifestyle retailers ready to dole out freebies and special discounts to prop up demand at a time when sales have slowed down.
Durable makers like Panasonic, Samsung, Whirlpool, Godrej and Videocon are bringing back sales promotion schemes after almost four years as a last-ditch effort to boost sales in a period that typically accounts for up to 40% of annual sales.
These
manufacturers have decided to hold onto prices despite a recent
appreciation in the price of raw materials.
"Promotional offers are expected to boost consumer sentiment,
which has been down so far this year," says Manish Sharma,
Panasonic India’s managing director for consumer products. "There
was a brief period of jump in sales during May-June when air-conditioner
sales spiked due to extended summer, but the market after that
has become worse," he adds.
Panasonic plans to invest 70 crore on promotional offers and
marketing during the festive period.
As per industry estimates, sales of refrigerator and washing
machines have remained flat throughout the year, while growth
in air-conditioner sales fell by more than 10%. Sales of flat
panel televisions including LCD, LED and plasma televisions grew
marginally by 10% as compared to 80-90% growth during the pre-slowdown
days, albeit on a lower base.
Arvind Uppal, managing director, Whirlpool India, reckons the
weak consumer sentiment is more exaggerated than the ground reality.
"We expect demand will pick up during festive season, but
we have learnt not to live in hope. We are drawing strategies
to outperform the market to grow by 15-20% during this period,"
he said.
Both Whirlpool and Panasonic have lined up gifts with every purchase, while Korean major Samsung is offering bundled offers with its premium product range such as flat panel televisions and side-by-side refrigerators.
These marketers are also going easy on passing increased costs in raw materials to the consumer. "We are holding onto prices despite input cost pressure," says Mahesh Krishnan, vice president, Samsung India; he expects consumer sentiment to improve and his sales to grow by 25-30% during the festive period.
While the rupee has stabilized against the dollar, durable makers say the pricing pressure on input materials is rising once again. Godrej Appliances COO George Menezes says copper prices have firmed up by 5% in the past one week. However, he adds, the industry has no option but to keep price hikes on hold during the festive season.
"Prices have increased three times this year, making refrigerators
dearer by 7-10%, washing machine by 15-18% and air-conditioners
by 18-20%; this has played a big role in dampening sentiments,"
says Menezes.
Godrej Appliances is launching a new range of refrigerators and washing machines during the festive season. It has lined up gifts with every purchase and even a trade promotion whereby dealers can get up to one kg of gold based on their sales realization. "It has to be a three-pronged growth strategy: product, trade and consumers to win in this tough market," says Menezes, who is a eyeing 25-30% growth in sales during festive season.
Analysts say the recent policy initiatives and reform on the policy front are unlikely to work as immediate triggers to boost consumer demand. "Hence companies have to create motivators to move products off the shelves since consumers are resisting any price hike," says Devangshu Dutta, CEO, Third Eyesight, a consulting firm.
Meantime, retailers too have lined up special deals around the festive season. Atul Chand, chief executive of ITC’s premium lifestyle retail format Wills Lifestyle, says it is currently working on a consumer promotion scheme.
Shoppers Stop too plans to offer special discounts or gifts to its loyalty card members, while India’s largest jewellery retailer Gitanjali is offering discounts on certain brands during the Durga Puja festival in the east. Gitanjali has also made few design changes to make the products more affordable.
"For instance, last year if a specific product had 4-5 grams of gold, we have reduced it to 3-4 grams this year to make it more affordable," Gitanjali Gems president Abhishek Gupta said.
(Additional reporting by Sagar Malviya from Mumbai.)
admin
September 24, 2012
Sagar
Malviya, The Economic Times
New
Delhi , September 24, 2012
Last week some 100 grocery shopkeepers gathered in the capital,
not to demonstrate against FDI in retail, but in the hope of being
selected as franchisees for Kishore Biyani’s neighbourhood store
format KB’s Fair Price.
So what gets the average kiranawallah excited about joining the country’s top retailer when opposition leaders are in the streets saying the government’s decision to allow foreign investment in multi-brand retail sounds the death knell for corner shops?
"We don’t have to run around for different purchases. The margins offered by Future Group will be much better compared to existing wholesalers we are dealing with," says Arun Singhal, who runs a kirana store at Khanpur in South Delhi and has now signed for a KB’s Fair Price franchise for the same location.
Last month, Future Group initiated a franchisee movement calling for entrepreneurs to operate KB’s Fair Price stores through a nine-year agreement with a three-year lock-in period by paying a one-time registration fee and initial working capital.
Till now, nearly 170 KB’s Fair Price have been running as company-owned outlets. But starting next month, Future Group will give complete ownership to entrepreneurs planning to open KB’s Fair Price stores in lieu of royalty.
"We have seen our store earning more than double than that of the kirana store at the vicinity because of better sourcing and planning," says Sachin Rokade, who has been running a company-owned KB’s Fair Price since the last six months and now wants to own one as a franchise.
But what’s in store for Future Group? It gets to sell goods to these entrepreneurs as a wholesaler and at the same time enjoy a buying clout with vendors for its other formats such as Big Bazaar and Food Bazaar too.
"Over the years, we have realised that convenience stores is a very attractive format," Damodar Mall, director at Future Group, says. "Kirana stores have to deal with lots of vendors and petty issues that make them inefficient. We know from experience that… single-point sourcing can help them attract more customers and do business profitably."
Mall adds that KB’s Fair Price will also get a branding boost with mushrooming of such neighbourhood stores.
The Confederation of Indian Industry, the National Scheduled Caste Finance and Development Corporation (NSFDC) and the Future Group have recently initiated a public-private partnership to build and develop entrepreneurs from the scheduled caste community.
These entrepreneurs will run retail outlets under the Future Group’s brand ‘Aadhaar’ in rural areas and KB’s Fair Price outlets in semi-urban and urban areas. The project will be supported and financed by the NSFDC through its channelising agencies in different states.
But what really was the trigger to push its smaller store format when the company over the years made a fortune by selling through larger supermarkets and hypermarkets?
Experts feel this will give Future Group an advantage when global convenience store retailers look for partners in India. "Any retailer would look at players who have experience in running similar formats. So apart from scale of business, expertise in small store format would make Future Group a preferred partner," Devangshu Dutta, CEO of retail consultancy Third Eyesight, says.
The need for such initiatives also stems from the fact that ubiquitous neighborhood stores in the country are doing brisk business despite burgeoning of modern retail outlets in the last five years.
Globally, corner shops such as 7-Eleven in Japan, Taiwan and Singapore, Lawson in Japan and Oxxo in Mexico are among the largest retailers in their respective country, reflecting the growing business of small outlets in several countries despite the markets being opened for retail giants. Future Group too is trying to replicate a similar scalable corner shop business in India and plans to add over 900 stores to its 170-odd KB’s Fair Price in the next two years.
Just last week, it acquired Delhi’s convenience store chain Big Apple that operates 65 stores in the National Capital Region for around Rs 62 crore in an all-cash deal. These shops are expected to be rebranded KB’s Fair Price.
admin
September 19, 2012
Leonie
Barrie, just-style.com
September
19, 2012
Moves last week by the Indian government to open the country’s multi-brand retail sector to foreign investment have been hailed as everything from a “historic decision” to a “big bang” reform.
But observers also warn that far from reviving economic growth, the plans come with so many restrictions that they may well deter overseas firms from investing in the country. And the prospect of strong opposition from within the ruling coalition may also mean the measures have to be abandoned before they have a chance to get off the ground.
After all, relaxation of foreign direct investment (FDI) rules in India has long been a contentious issue, and it was just nine months ago that a similar plan was rolled back in the face of fierce opposition.
At the time, the government was able to ratify its decision allow up to 100% FDI in single-brand retail – but was forced to suspend plans to extend FDI to 51% in multi-brand retailers.
It now hopes the latest raft of reforms settle outstanding concerns about easing investment restrictions.
Under the proposed new rules, multi-brand retailers such as Wal-Mart, Tesco and Carrefour will be allowed to own a 51% stake in supermarkets, but with conditions that include:
This last point also applies to single-brand operations in India. At the moment, if they have more than 51% foreign investment, at least 30% of merchandise must be sourced from small and mid-sized Indian companies, artisans and craftsman.
Who stands to benefit?
The changes would enable single-brand companies to take complete control of their Indian businesses, as long as 30% or more of the merchandise on sale is already sourced locally.
It’s an attractive market, since India’s single-brand retail sector is valued at roughly $7bn, and is expected to reach $20-25bn in value over the next five years. The country also boasts a growing population, including 300m individuals identified as ‘middle-class’ with a purchasing parity equivalent of $30,000/year.
As retail consultancy Third Eyesight notes, this is an important change and “opens up possibilities of sourcing from the retailers’ current supplier base that may comprise of larger companies.” It may also lead to the growth of Indian companies who benefit from being plugged into the retailers’ global supply chains.
However, the management consultancy also points out that, conversely, for multi-brand retailers the sourcing stipulation remains a significant barrier, “since neither the retailer nor the SME vendor base would be able to draw upon efficiencies of scale with growth of the retailer’s business in India, nor benefit significantly from any export opportunities presented by the retailer.”
It also notes that the local sourcing requirement will remain a barrier for brands that do not source any significant volumes from India.
The changes would also mark a milestone for international retailers of multi-brand products who have until now been restricted to cash and carry formats and “back-end” supply businesses. “This is a significant motivator for global retailers who are looking at future decades of expansion,” Third Eyesight says.
The Washington based US-India Business Council (USIBC) describes the government as “courageous” for making another attempt to push through the reforms, and says it “serves as an assurance to investors that its economic liberalisation agenda is back on track.”
“India’s supply chain infrastructure will see improved efficiencies and expertise, consumers will benefit from increased quality and choice, and inflation and rising food costs will be tamed,” says Ron Somers, president of USIBC. “These big bang reforms send a crystal clear signal that India is open for business.”
Meanwhile, the Confederation of Indian Textile Industry (CITI) hails the decision for encouraging organised retailing and its centralised procurement and improved supply chain management. This, in turn, will reduce costs for businesses and prices for consumers, especially for textiles, and push up consumption,” its chairman SV Arumugam claims.
The Apparel Export promotion Council (AEPC) agrees that the move “will give a much-needed fillip to the entire textiles industry.” Its chairman, Dr A Sakthivel, notes employment opportunities, increased manufacturing activity and a rise in demand for cotton products and yarn are among the likely benefits.
“Domestic demand is going to pick up,” he enthuses, adding: “It will lead to easing of inflation in the country and small and medium enterprises will also benefit out of this policy change. Gradually GDP will pick up and economic outlook will improve.”
“This historic decision is going to be beneficial to domestic textile and garment export industry in a big manner and would also encourage overseas big retailers to source from India.”
A note of caution
But it’s important not to get too carried away just yet.
Fierce opposition from both outside and within India’s coalition government means there is no guarantee policy decisions will go ahead.
Indeed, Mamata Banerjee, founder and leader of All India Trinamool Congress, Chief Minister of West Bengal and member of India’s ruling coalition, has already announced her opposition to the reforms.
A key catalyst in last year’s abandoned attempt to drive change, she said yesterday (18 September) that the Party would resign in protest over plans to open the door to foreign investment in the retail sector.
Leftist parties have also called for a national strike on Thursday in protest at the plans and at other reforms announced last week, including a hike in diesel prices.
Another word of caution comes from Jon Copestake, retail analyst at the Economist Intelligence Unit. He notes the situation arising “appears to be identical to the postponed attempt to do so last December, when the government approved the easing of restrictions but was forced to backtrack by widespread popular opposition. It may still be premature to see the measures succeed in becoming law.”
(This article appeared in just-style.)
admin
September 18, 2012
Vandana,
The Week
September
18, 2012
There
was a time when the Murjani Group was synonymous with luxury retail
in India. It offered Indians a taste of luxury by bringing in
iconic brands such as Gucci, Jimmy Choo, Bottega Veneta and La
Perla. However, the “luxury powerhouse” exited all its
joint ventures in just about two years, and has now moved to premium
lifestyle brands.
What went wrong? “Imbalance between franchisers and franchisees is one of the biggest challenges for luxury retail in India,” says Mohan Murjani, the group’s chairman. Experts note that though margins are quite high in luxury business, Indian partners often get only a small share.
The Indian luxury market is going through a shake-up. Even as the country went full throttle in projecting itself as the most happening destination for luxury sales, recent developments seem contradictory.
About one-third of 150 international fashion brands launched in India since 2006 have either changed partners or exited the market. Twenty-six brands changed partners, and as many brands exited the market, says consumer goods and retail consultancy Third Eyesight.
Take the case of Alfred Dunhill. The British luxury menswear
and accessories brand is winding up its India operations. It has
already shut its stores in Delhi, Mumbai and Bangalore. Dunhill
was partnering Brandhouse Retails, which also deals with global
brands such as Reid & Taylor, Belmonte and Carmichael House.
Analysts say the disconnect between partners is one of the major reasons for ‘separations’. Deals fall apart when one fails to meet the other’s expectations. In the case of Dunhill, S. Kumars, which owns Brandhouse Retails, apparently did not have sufficient experience to market a luxury brand. Most brands in its portfolio are, at best, premium.
“Luxury is a high-gestation business. You need to wait for eight to ten years to reap the returns. S. Kumars might not have wanted to wait for that long,” says an investment banker who has worked on deals with the brand.
Also, store expansion of luxury brands happens at a slow pace. For instance, in the past four years, Dunhill opened just three stores in India.
“Basically, there is a very different thought process needed to market luxury,” says Neelesh Hundekari, principal at consultancy firm A.T. Kearney. “The luxury market in India is still at a very nascent stage. Consumers in India are still evolving and we have not even completed a cycle.”
While Dunhill chose to quit India, several other luxury brands have been breaking away from partners and realigning their India operations. DLF Brands, the retail vertical of India’s largest real estate developer, recently parted ways with Italian luxury major Giorgio Armani. It has also put on hold its expansion drive with Salvatore Ferragamo.
DLF Brands started off in 2008 with huge plans. It even started a dedicated luxury shopping destination, Emporio Mall, in Delhi. But it could not maintain the momentum. With the parent company under financial stress, DLF Brands was not able to invest into its partner brands. Also, it could not reach its five-year targets, which restricted growth further.
The group is now going the Murjani way and gradually freeing up its portfolio of luxury brands. “Luxury is a futuristic business at the moment in India. The premium segment is much more profitable and scalable,” says DLF Brands chief executive officer Dipak Agarwal.
He adds that luxury brands do have a big future in India, but they will need another five to seven years to achieve a strong scale and market size. “For us, size with speed was important,” he says. The company opened only four Ferragamo and three Armani stores since it entered the luxury brands segment in 2008 as expansion of such brands in a limited market was difficult.
In comparison, its British partner in the premium segment, Mothercare, which sells prams, pushchairs, car seats, baby clothes and maternity dresses, entered India in 2009 and already has 42 stores. It will add another 15 outlets this year. Understandably, DLF has planned aggressive expansion for premium brands in its portfolio.
Another separation story is of Delhi-based Blues Clothing Company and Italian brands Versace and Corneliani. Blues, which started off as a suit retailer, shot to fame by tying up with the two marquee brands. But the partnership hit the wall as, sources say, Blues did not have sufficient financial wherewithal and management bandwidth.
“International brands are looking for Indian partners who have the ability to facilitate growth and help multiply their presence across the country, housing them in the right environment and coming up with out-of-the-box ideas,” says Roasie Ahluwalia, general manager (marketing), Genesis Colors, which markets Burberry and Jimmy Choo.
The global slowdown, too, has been a spoiler. “It extends the gestation period for a business to break even. It also reduces the ability of companies to pump money into a venture,” says Devangshu Dutta, CEO, Third Eyesight.
And to top it all, policy roadblocks—chiefly FDI in retail—have irked foreign brands planning Indian launches. “It is a great disappointment that the government has not been proactive in pushing policy reforms,” says Tikka Shatrujit Singh, chief representative in Asia, Louis Vuitton Moet Henessey. “Instead of encouraging investment, they have delayed the whole process. And for want of a suitable avenue, investments may go elsewhere.”
(This article appeared in Week.)
admin
September 17, 2012
Nupur Anand, Daily News & Analysis (DNA)
Mumbai, September 17, 2012
Trousers
at 80% off, a pair of Reebok sneakers for 60% less, buy two shirts
and get four free.
Discounted apparel stores that include Cantabil, Koutons, Vishal
Retail and Loot had created a buzz with such too-good-to-believe
offers when they first appeared on the retail scene a few years
back.
The deals, available round the year, were good enough to tempt
even the tight-fisted shoppers.
And with inflation pushing up apparel prices, these firms were
expecting a windfall and long queues before their stores.
However, things haven’t turned out as per expectations as fewer
footfalls and inventory pile-ups have reduced the industry to
half in the last one year.
Experts said the discounted apparel industry, which was estimated
to be Rs 2,000 crore till 2010-11, is now not worth more than
Rs. 1,000 crore.
Extended sale seasons by regular brands to beat economic slump,
adverse impact of an excise duty hike, negative brand perception
and "deceptive" pricing have led to the decline of discounted
apparel stores, they said.
Consequently, stores that went on an expansion spree during 2008-2010
have been consolidating and closing down several stores across
cities. The excise duty hike of 12% in 2012 Union Budget has been
a huge dampener for the industry.
Abhishek Ranganathan, analyst at MF Global, said the tax was
required to be paid on the MRP (maximum retail price). "So
even if the company was selling the clothes at a discount it had
to bear the excise duty on the full price. These companies generally
work on margin of 15-20%. Following the duty hike, the retailers
have seen margins slipping to single digits," he said.
Big brands and other retailers stretching sale seasons to
counter competition and slowdown made matters worse for discount
stores.
Gimmicky discounts, too, drove consumers away. "Most
discount retail stores generally went for an inflated original
price and then offered a huge discount on it. As a result, the
net saving of the customer was very less and so they could see
through the fictitious discounts being offered," said Devangshu
Dutta, CEO of retail consultancy Third Eyesight.
Experts said that consumer perception of these brands being "cheap"
as they came with huge discounts probably hit sales.
"Not every one wants to be seen sporting a discounted brand
that offers ‘buy two get three free’," said a retail analyst.
No wonder Megamart, another apparel chain, is looking to get
rid of the discounted tag.
Though analysts don’t see a future in this business model, there
are still takers for it.
"The fact that several retailers in this space have shut shops spells huge opportunity for us. We know the mistakes these brands have made and so keeping that in mind we are treading carefully," said Punit Agarwal, director, Promart, a new entrant in the discounted apparel segment.
Also, the creation of affordable fashion by big retailers like Pantaloon, Max and Reliance is luring consumers that are looking for a value deal.
