admin
May 18, 2010
Sapna
Agarwal & Gouri Shah
Mint,
Mumbai, May 18, 2010
Across Mumbai, New Delhi and Gurgaon, children’s apparel and accessories store Okaidi has been inviting customers for happy hour sales over the past week. No, the French chain hasn’t suddenly started selling drinks; it’s offering a flat 20% discount on the purchase of its usual T-shirts, chemises and other items between 10am and noon, Monday through Thursday.
The marketing mantra may sound incongruous outside a bar, but retailers from a range of sectors have started borrowing it to push sales in traditionally lean hours—betting that everyone loves discounts.
“It’s definitely a trend,” says Devangshu Dutta, chief executive of New Delhi-based retail consulting company Third Eyesight, adding that sectors such as organized retail, telecom and entertainment are adopting the strategy.
Retail analysts say that besides boosting revenues, the strategy eases seasonal and peak-time customer load and improves manpower utilization.
Fashionandyou.com, an e-commerce site that sells premium brands such as Moschino, Salvatore Ferragamo, Dolce and Gabbana, Hugo Boss and GAS at hefty discounts, last week introduced happy hours between 5pm and 8pm that let consumers win “free luxury gifts” every 15 minutes.
“We just wanted to offer our consumers some fun incentive to log on to Fashionandyou.com, but once the figures came in, we were surprised to see that the announcement had generated tremendous traction,” says Pearl Uppal, co-founder and chief executive, Fashion and You India Pvt. Ltd, which runs the website.
Uppal adds that traffic has doubled since the website announced the happy hours.
A few months ago, Cinemax India Ltd, which has 94 multiplex screens nationwide, introduced earlier-than-usual screenings of the film 3 Idiots. With 28 shows daily in some places, the first would start as early as 6am, with as much as 50% slashed off the ticket.
“My rentals and manpower costs are fixed. The only additional costs are electricity. But we managed to get a new set of audiences to walk into our theatres during those times,” says Devang Sampat, senior vice-president at Cinemax India.
The shows, which also offered free tea and biscuits, drew college students and senior citizens after their morning walks.
“It worked beautifully,” recalls Sampat, adding that the strategy has worked for other films too, pushing up audience numbers by at least 100%.
Okaidi, for instance, has registered a 200% hike in sales, says Neelu Mundra, sales manager at the Okaidi store in Mumbai’s Atria Mall. “Mornings are usually dull with hardly any walk-ins or sales,” she says, but adds that the promotion has seen sales grow three fold.
Candies, a multi-cuisine restaurant in Mumbai, offers 25% off on food between 8pm and closing time.
“Close to 15% of the day’s products are usually left unsold at the end of the day, but with discounts like this we see all our inventory sold with just 1-2% left unsold,” says manager Ashish Anton.
Dutta of Third Eyesight points out that retailer Big Bazaar offers deep discounts every Wednesday, which has traditionally been a weak day for it, while mobile service provider Bharti Airtel Ltd offers free or discounted rates during some hours to spread its load more evenly.
“It (promotions) typically also serves to attract new entry-level customers who otherwise might not have come—so if you take away the cost of customer acquisition, then these promotions become even more profitable,” says Neelesh Hundekari, principal at global consulting firm AT Kearney.
As a bonus, consumers who go for such promotions also tend to buy at full prices, helping them trade up at no extra cost, he added.
But happy hours pose some dangers as well. Managers at Okaidi are wary of letting the promotion wean away customers willing to buy at full price during peak hours between 5pm and 9pm, which are typically half of total sales.
“The objective is to increase the sale, assuming that the peak hour sales remain the same,” says Kamal Kotak, director, Major Brands India Pvt. Ltd, which manages Okaidi.
“The expectations from this offer is to see an increase in (overall) sales of 25-30%,” he said, adding that if successful, Major Brands could adopt the strategy for other brands they manage, such as Mango, Promod and Aldo.
This may be a challenge but it is not impossible, says Hundekari of AT Kearney. “People are used to different discounts at different times of the year; getting used to different times of the day is not very hard.”
admin
May 17, 2010
Vishal Krishna
Businessworld, May 17, 2010
The outskirts of Bangalore, home to many large hypermarkets, see a lot of frontier action in retail. Recently, the Raheja Group’s hypermarket, HyperCity, opened a store in Mahadevapura, where the likes of Future Group’s Big Bazaar and the Jubilant Organosys-owned Total already enjoy a loyal clientele. But nobody was more anxious about fresh competition than the manager of More, which also has a store here.
As it turned out, “Our sales were not affected in the weekend in which the new store opened in our catchment,” says Kapil Agarwal, More’s vice-president, operations hypermarket (south), with relief. “The Mahadevapura store hopes to grow by 30 per cent this year.”
The $25-billion (Rs 1.15-lakh crore) Aditya Birla Group’s retail chain is on a quest to garner greater market share in the $350-billion (Rs 16.1- lakh crore) Indian retail market. More’s CEO Thomas Varghese says he has a strategy in place to get the company back on track. This newfound confidence comes after a three-year struggle with runaway overheads that saw More shutting down some 100 stores, in spite of which its balance sheet continues to bleed. Now, More has only 631 stores, including seven hypermarkets. To make up for the closure, More has had to scale up quickly to 3 million sq. ft of more affordable retail space.
Even as it focuses on hypermarkets and consolidates its position in the south, More is betting big on private label products that add up to 320 items or stock keeping units (SKUs). Varghese believes the company can grow only by driving private labels, something that Future Group’s Kishore Biyani has tried successfully at Big Bazaar.
Currently, market leader Pantaloon (Future Group) holds 10 per cent of the $20-billion (Rs 92,000 crore) Indian organised retail space. More expects its turnover to touch Rs 1,500 crore in 2009-10, up 30 per cent from the past year. It also hopes to break-even operationally by 2012, and is aiming to match Pantaloon’s share by 2015. It is a tall claim and tough to achieve: competition is growing and survival depends on large groups’ ability to sustain bleeding retail businesses.
Going Private
More’s private label gamble is one of the reasons why it has to be watched closely. “We are one of the largest private label players in the industry,” says Varghese. “Close to 17 per cent of our sales comes from our private label products. The share is growing by 50 per cent in the food category, and by 20 per cent in the fast-moving consumer goods (FMCG) category.”
In food items such as noodles and sauces, More’s private label sales touch 30 per cent of the sales. This is not unexpected. Globally, Tesco and Wal-Mart earn 55-60 per cent of their revenues from private labels, of which nearly 60 per cent comes from food, and only 45 per cent from FMCG. Like many large retailers, More too has its own brands such as Feasters (food category), Jaan (tea), Kitchen’s Promise (pickle) and Enriche (personal care), across 40 categories.
But industry analysts have reservations about More’s pre-emptive private label strategy. “In terms of branding, apart from quality and the category acceptance, private labels usually succeed when the retailer has managed to build brand equity at the store level,” says Sanjay Badhe, a retail consultant who has worked with the Aditya Birla Group. “More, on the other hand, is betting big (on its private label) even before establishing itself.”
In sheer numbers, More is close to Pantaloon, which has more than 50 private label categories that offer more than 350 SKUs. “The Pantaloon brands are now powerful retail brands that strengthen our lead in modern trade,” says Santosh Desai, CEO of Future Brands in Mumbai. He adds that powerful product brands also act as strong store differentiators in the long term.
Private label precedents have been established already in India. Pantaloon has the highest private label sales — close to 85 per cent in apparel and 35 per cent in food. Shoppers Stop credits 20 per cent of its turnover to private label. More hopes to achieve 30 per cent by 2012.
“We realised the potential of private labels with our project in Visakhapatnam,” says Farida K., assistant vice-president and private label head at More. The company realised that when more private labels were stacked along with FMCG brands, customers did not mind experimenting with More’s in-house brands. Now, More’s private labels account for 30 per cent of all sales in its 17 stores in Visakhapatnam.
More now works with 45 vendors through the 17 distribution centres it has created with warehouse space of 450,000 sq. ft to make timely deliveries. It also sources 25 per cent of its fresh food products directly from farmers, the rest from local mandis, and has eight farmer-linked collection centres across India for vegetables.
While Pantaloon has more than a thousand suppliers, according to Biyani, More wants private label to be its main business as it involves low supply costs, offers margins of up to 70 per cent, and forces FMCG firms to offer better terms of trade.
“Now, our strategy is not about expansion,” says Varghese. “We will add a few stores and keep shutting down unviable ones.” He wants to keep capex costs as low as Rs 1,500 per sq. ft over the next two years — the average capex for a retailer is about Rs 1,750 per sq. ft.
Analysts say More was successful in the south — 60 per cent of its stores are there, and 55 per cent of its revenues come from the region — after its acquisition of Trinethra Retail’s 160 stores, with an established supply chain and process in place. The deal cost More Rs 170 crore in early 2006. It was from Trinethra, a value retailer, that the Aditya Birla Group created the blueprint for More.
Paying For The Past
While More seems to be pulling itself out of trouble, it still
has a long way to go. In mid-2006, Kumar Mangalam Birla, chairman
of the Aditya Birla Group, gave Sumant Sinha, a former investment
banker from the US, the charge of the group’s plans to compete
with the likes of Reliance Retail. At that time, Reliance Retail
had just announced its
Rs 25,000-crore plan to conquer India’s consumer market.
But when Sinha’s team suggested a strategy of rolling out only 10 branded stores in a region and offered a conservative plan on expansion, the board rubbished the strategy. “The board did not want to lag behind Reliance or Pantaloon, and it wanted to roll out 500 stores in six months,” says a source in the company. “So, the management team just signed properties at higher rates, without processes to support the stores.”
So by 2008, 730 More supermarkets were making high losses to high rentals, exorbitant staff costs and a disorganised supply chain. It nearly ended the conglomerate’s retail dream.
To make matters worse, the entire senior management of the retail chain was either asked to leave or shifted to other departments. In fact, some say the problem with the retail chain was more internal than at the store level.
More’s management and Trinethra’s CEO Pranab Barua had differences over the methods of running the business. Barua is now the member of the board and advisor to the retail chain. “We understand retail is a low-margin business,” says Varghese. “But when I took over the company, the overheads were extremely high.”
Varghese says he had little understanding of retail when he took over as the chief executive in 2008, but he had to act fast. He froze hiring, and shut down properties that had high rentals, which added up to 10 per cent of the company’s turnover.
In 2009, the company was paying a whopping Rs 731 per sq. ft of retail space as compared to Pantaloon’s Rs 573. Since then, More has renegotiated rentals for 90 per cent of its stores (see ‘It’s A Tough Business’ and ‘Repenting At Leisure’). Standard rentals are now below Rs 500 per sq. ft.
“Unless the rent is 4 per cent of the cost of sales, a retail
business will not make money,” says Varghese. Usually, builders
ask for 5-8 per cent of sales in a revenue-share model or charge
high rent in case of lower sales, he adds.
However, a revenue-share model is not the perfect answer. Says
Ajay D’Souza, head of research at Crisil, in Mumbai: “What
matters is whether there is traction in going into organised retail.
Only increased sales will determine if retail companies can sustain
even the revenue-share model.”
Hypermarkets And More
As a sign of the times, all organised retail chains are bullish. Says Govind Shrikhande, CEO of Shoppers Stop: “Retail is coming out of the slump, and sales are on the rise.” Lower rentals and revenue-sharing models bring quicker profitability to retail chains, he says.
Retailers such as More see sense in opening hyper-format stores because of the large assortment of customers it caters to, the higher incidence of sales, and the absence of competition from kirana stores, which hit the supermarket end of modern retail.
In effect, hypermarkets allow corporate retailers higher efficiencies than neighborhood stores on equivalent square footage basis. “This happens because, for a given amount of management resource and possibly lower financial outlay, there is significantly greater sales turnover and higher margin,” says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy in Delhi.
By the end of this year, there will be two more hyper stores from More in Hyderabad, and there is talk of a property being signed for a possible hyper store in Chennai, taking its all-India tally of hyper stores in Mumbai, Ahmedabad and Nagpur to 10. It is expected that the new stores will cost Rs 10 crore each to build. “We want to create world-class hypermarkets,” says a confident Varghese.
The Aditya Birla board had devoted Rs 8,000 crore to its retail venture when it started out. Now, three years, Rs 2,300 crore and several setbacks later, More looks less upbeat. Its struggle for an identity is far from over.
[From BusinessWorld
issue dated 17 May 2010]
admin
April 15, 2010
Pradipta
Mukherjee / Kolkata
Business
Standard, April 15, 2010, 0:26 IST
Cigarettes to hotel major ITC entered the consumer products business in 2007. In three years, it has managed to corner a two per cent market share.
But ITC feels that’s no mean achievement for a late entrant. The consumer and personal care products market is highly competitive, dominated by well-entrenched brands from companies such as Hindustan Unilever (HUL), Procter and Gamble, L’Oreal India, Dabur India and Cavinkare. The lion’s share is with HUL, whose brands – Lux, Dove, Sunsilk and Clinic Plus – have about half the market.
Some analysts agree with ITC’s view. Anand Shah of Angel Broking, says it takes about five years for a brand to break even. If ITC gains 5 to 10 per cent market share in 10 years, that should start earning the company profits, Shah adds.
In absolute terms, two per cent of the personal care market is not a small share. According to Nielsen, the personal care market between March 2009 and February 2010 touched Rs 16,313 crore, which is a growth of 10 per cent over the same period in the previous year. While the men’s personal care market is estimated at Rs 1,429 crore and growing at 10 per cent, that for women is worth Rs 6,678 crore and growing at nearly 21 per cent.
ITC knows it’s a tough fight and is willing to give time. Innovation and extensive marketing are the company’s mantra to strengthen its footprint in the personal care domain.
"We intend to build on innovations to find a foothold in the already cluttered personal care market," says Sandeep Kaul, chief executive of ITC’s personal care business. The Fiama Di Wills transparent gel bathing bar is an example of product innovation which is developed with liquid crystal freezing technology that intends to combine a shower gel in a bathing bar format. ITC’s current personal-care portfolio includes soaps, shampoos and fragrances. These products are marketed under the Fiama Di Wills, Superia and Vivel brands. Superia caters to the mass consumer segment, Vivel targets the premium and Fiama the so-called super-premium market.
According to Kaul, the personal care sector holds immense appeal for ITC due to the category’s size and growth potential.
But the personal care segment in India is immensely competitive. Anand Ramanathan, analyst with KPMG, says, "In categories like soaps, the competition is quite intense. But ITC is likely to combat it with its distribution muscle. However, because of intense competition, ITC would be under margin pressure and so the personal care business for the company would not be as profitable as its other businesses."
"ITC, however, can recover from the margin pressure to some extent with the help of premium products in niche categories," Ramanathan points out.
Devangshu Dutta, chief executive of specialist management consultancy firm, Third Eyesight, says that a market leader like HUL still feels it reaches only 60 per cent of the market. So, even a new entrant like ITC can find potential in the personal care segment.
"ITC has diversified over the last 10 years as part of its strategy to expand into non-cigarette categories. The real challenge will be effective communication and marketing", Dutta adds.
Ramanujam Sridhar, CEO, Brand-Comm, says: "There is a reasonable amount of loyalty among consumers for personal care products, especially in skincare, which can pose a challenge for any new entrant, including ITC.
However, ITC enjoys a strong brand recall and its strongest qualifier is its distribution muscle, which should help the company establish itself in newer categories as well."
admin
April 1, 2010
Kamya
Jaiswal
Money
Today , April 1, 2010
As they wrap the refrigerator for delivery, you can’t help feeling smug. For one, despite loud protests by the salesman, you wrangled a 10 per cent discount on the price. The extra-large freezer also seems a smart pick; after all you throw beer parties regularly. The extra Rs 2,500 for a three-year extended warranty is another good move. You won’t have to pay a rupee if some part goes in the next three years. What’s more, it is a fivestar refrigerator, so your annual electricity bills will be much lower.
Sounds like a good deal. In effect, it may not be so. Consider this: according to research by Consumer Reports, the odds of a refrigerator requiring repair in the first three years is just 8 per cent. Also, the price difference between a four-star and five-star refrigerator is about Rs 2,500, whereas the difference in the electricity consumed annually is only about 100 units. This means that the difference in your annual eletricity bills will be Rs 400 (at Rs 4 per unit). And you forgot that chilled beer can be stacked anywhere in a refrigerator.
Most people think they are value-conscious customers, especially in the case of big-ticket expenses like consumer durables. Yet, they fall into the trap of paying for services and features that they don’t need. Here’s how you can avoid doling out money for the unnecessary extras.
Ignore extended warranty
The biggest problem with this option is that you may never use it. The study by Consumer Reports says that in the first three years, the probability of a washing machine requiring repair is 22 per cent and a microwave, 12 per cent. Such products face problems either in the first year or after a long period of usage.
Says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy: "There are enough horror stories about service quality in the first year of warranty. How can one be sure that the service will be good during the extended warranty?" He also cautions against the fine print. For instance, you may have to lug the product to the service centre or if you shift to another city after buying the product, the extended warranty (also called annual maintenance charge) may no longer be free. Perhaps the biggest flaw in extended warranty is that it does not cover the expense of replacing a part. Mostly, it provides for free engineer visits and minor repairs only.
"This concept works in the West, where labour charges are very high, but in India, the services of an electrician are relatively cheap," says Dutta. Even if you call engineers from the brand’s service centre, they charge approximately Rs 250 a visit. This means that by paying Rs 2,500 for an extended warranty, you expect the appliance to break down at least 10 times in two years. Not practical is it?
Match energy efficiency with usage
Yes, energy-efficient products reduce your electricity bills.
However, the financial benefit is usually nullified by the premium you pay for the more efficient product. It takes seven years for a five-star, 1.5-tonne, split air conditioner (AC) to justify the additional cost over a four-star AC. By this time, you will probably be looking for a new one that is packed with more features and better technology.
How can you start reaping the dividends of a five-star AC from the first year itself? By using it every hour of every day. Of course, this also means that your electricity bill will be more than Rs 66,000 a year. This is not the usage pattern in most households. So before shelling out money for a more efficient appliance, ensure that the benefits are earned during its lifetime.
Buy what you need It is really a no-brainer: if you are not likely to use a particular feature, do not opt for the appliance, or choose a more basic model. Says Dutta: "The biggest issue with consumers is that they tend to buy products with more features than they need. There is value attached to these features, which increases the cost of the product."
So why not rein in the technophile in you? Don’t opt for a 10-kg washing machine if you have three members in the family. Check if the cooling technology with a fancy tag is any different from that offered by other brands. If this option doesn’t work for you, buy warm beer once in a while.
Reproduced from Money Today. Copyright 2010
admin
March 2, 2010
Diwakar Kumar
Indiaretailing.com, March 2, 2010
It is an every day challenge for a retailer to satisfy the diversified demands of discerning customers. The further challenges are to reel in more customers, assure their loyalty, drive in more footfalls and the ensure the conversion rate. In order to gain more profits, retailers try to lure the customers with in-store signages, advertisements and customer-loyalty programmes. No matter how unique these strategies may be, they do not guarantee a success rate.
Thus, to ensure a minimum return on investment, the retailers need to ascertain that the format, product assortment and the location of their store assures profits. Exclusive brand outlet (EBO) does ensure that the store is never out of stock, thanks to the predominant one-brand presence. However, veterans argue that it is the multi-brand outlets (MBOs), which drives more footfalls. In the MBOs, the retailers offer wider range of merchandise but EBOs are in command with better visual merchandising, more control over the brand, customer experience etc.
In the response to the open poll question on IndiaRetailing — Exclusive brand stores may allow for greater depth and branding of merchandise, but multi-brand outlets and shop-in-shops are really the revenue drivers for a brand — 91.67 per cent of the respondents support the statement while the remaining 8.33 per cent of them negated it.
Devangshu Dutta, chief executive, Third Eyesight observes, “MBOs and shops-in-shop (SIS) can certainly help a brand build its footprint more rapidly and with lower capital than it could with only exclusive brand outlets. However, EBOs provide more control to the brand on the overall customer experience, merchandise assortment, pricing and margins."
Gopalkrishnan Sankar, chief executive, Reliance Footprint says, “MBOs and shop-in-shops give the size and scalability opportunities. Customers also look for variety of products, choice of price points all in one place. This is best captured by MBOs, particularly the ones who are positioned as destination stores.”
Sunil Sanklecha, managing partner, Nuts ‘n’ Spices maintains, “From any business perspective, the model that leads us to bottom line is the right strategy which depends on different aspects, such as, is the individual brand strong enough to survive with exclusive store format? How do we want to position our brand? Are we looking at the long-term or short-term strategy and strength of the finance on the marketing part.”
He strongly believes that EBOs have better future than MBOs or SIS format. He says, “Everyone wants the larger pie. We see the that the big stores want bigger margins and they start building their own brand. The manufacturers want their presence everywhere in the store but without sharing a larger pie.”
“A well-put together and well-located MBO is usually a destination for most of the categories that sit within it. Also by virtue of the range and brands that it encompasses, the customer engagement is strong. This ensures good footfalls and hence individual brands in MBO’s stand a far better chance of maximising revenues vis-a-vis exclusive stores,” says Viney Singh, MD, Max Hypermarket India Pvt Ltd.
T S Ashwin, managing director of Odyssey India Ltd, which has recently opened an SIS at Easyday Market comments, "This depends on what kind of brand it is. If the brand is niche and has a clear TG, then it needs more exclusive stores to showcase the width and depth of the range. Also it may really not have the market size for selling through multi-brand outlets. If the brand is not niche, then the exclusive stores help in building the brand and the multi-brand stores and shop-in-shops will help in increasing the visibility and reach of the brand as sales channels for the fast moving SKU’s in the brand."
Thomas Varghese, CEO, Aditya Birla Retail Limited says, “Exclusive brand stores have a place in the marketing strategy for a brand as they enhance visibility within the catchment, a consistent story to the consumer and a depth and breadth of merchandise. However, positioning a brand in multi-brand outlets enables the brand to enhance reach across a cross-section of customers thereby driving revenue.”
In the further analyses on the store formats in India, Dutta says, “In a market like India, brands need to follow a blended approach since in many locations MBOs or department stores suitable to the brand may not be available and the only option may be to open EBOs directly or through franchisees.”
“There is no ideal balance between EBOs, MBOs and shops-in-shop. The mix would differ from brand to brand and also change over the lifecycle of any single brand,” concludes Dutta.
