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July 23, 2009
By
Sruthijith K K, ET Bureau
THE
ECONOMIC TIMES
New
Delhi 23 July, 2009
Wadhawan Retail has decided to shut its Spinach food and grocery stores, multiple people familiar with the development, including one senior executive of the group, said.
Most of the 45 Spinach outlets will down shutters by the end of this month and many suppliers have snapped their relationship with the company because of huge outstanding bills, several current and former company executives said.
About 600 employees are likely to be affected by the development, they said.
Spinach has some 35 stores in Mumbai and about 10 stores in Kolkata, down from a 2008 peak of 55 stores in Mumbai and 15 in Kolkata.
Wadhawan Retail is part of the `12,000-crore Wadhawan group that has interests in real estate, retail, financial services, education and hospitality, and runs operations in India, the UAE and UK.
It runs retail stores under the Smart Retail brand in South India, Sabka Bazaar in the National Capital Region, and Spinach in Mumbai and Kolkata.
Wadhawan Retail CEO Ashok Bhasin was unavailable for comment. When contacted, a company spokesman said, "We don’t comment on market speculation."
Recently there has also been a steady stream of exits from Spinach, which has been in trouble for more than a year now.
Two executives from rival retail firms, who spoke on the condition of anonymity, said their companies were inundated with resumes of job seekers from Spinach Retail.
Wadhawan Retail will also review the operations of its Sabka Bazaar stores starting next month, an executive said.
"The company suffers from a lack of focus from the promoters, who are busy in real estate, which is their core business," a retail consultant said on the condition of anonymity.
He said the company has been downsizing for a while, but he didn’t know if there has been a decision to close the stores.
The group ventured into retail business in late 2005, with the target of launching 750-1,500 stores across the country.
In June 2007, it acquired NCR-based Sabka Bazaar and The Home Store from Home Stores. And in September the same year, it bought a chain of stores called S*Mart and rebranded it Smart Retail. In 2008, Ashok Bhasin, a global director at Whirlpool Corporation, USA, joined the company as CEO.
"Food retailing is a tough business," said Devangshu Dutta, CEO at retail consultant Third Eyesight. "Fresh produce is what drives footfalls, but that is also a very difficult category to manage. Ensuring the freshness of the produce is tough," he said.
Mr Dutta said that margins on FMCG products are really slim. "On top of that, there is a certain level of shrinkage all retailers suffer from. It’s important to maintain a really lean operation," he said.
India’s modern retail industry, which holds the enormous potential of nearly a billion future customers with rising disposable incomes, has so far claimed a number of players, small and large, who expanded too soon, or committed one of the several possible cardinal errors in the business.
Last year, Subhiksha Trading Services wound up operations due to financial difficulties.
Vishal Retail, which operates Vishal Mega Marts, is in the process of restructuring more than Rs. 740 crore of debt. Unsecured lenders have filed winding up petitions against the firm.
Even as the government is calibrating its policy approach towards domestic and foreign retailers, many early movers are struggling to stay afloat in the retail business.
Clearly, Wadhawan is no Popeye; Spinach has failed to give it strength.
With inputs from Ratna Bhushan
admin
July 20, 2009
By Priya Kapoor
MoneyToday
July 20, 2009
Convenience and low prices are spurring an increasing number of Indians to purchase goods and services through the Internet. The innovations in securing online transactions are also fuelling the trend .
Sandhya Kaushik, a 32- year- old healthcare professional, bought a kitchen appliance online and saved nearly Rs 800.
It wasn’t a one- off purchase, or the first time she had done so.
Kaushik has been a regular on the online circuit for the past two years. Her purchases range from kitchen items and educational toys for her children to books and flowers. Her motivation — lower prices and sheer convenience.
“Even if the physical store offers a discount, you end up paying more in transport cost. Also, it works best if you have a hectic schedule,” she says.
Kaushik is no aberration. Parul Suri, a 27- year- old consultant, also swears by online shopping. “ In today’s fast- paced life, there is hardly any time to make physical purchases. An online platform not only saves time but gives you a lot of options,” she explains. Kaushik and Suri represent a growing breed of people who see value for money in buying online. The current ‘ online shoppers’ base in India stands at 34.5 million compared to 28 million last year. This includes a sizeable chunk of ‘ window’ shoppers too, who use the Net for research and cost comparison.
A Mastercard survey conducted in December 2008 reveals that the average number of online purchases in India grew to 2.9 transactions in three months, up from 2.6 during the same period in 2007.
It’s a trend replicated in mature markets — in the UK, online shopping outperformed the high street last year. A December 2008 UK- based survey by Lightspeed Research revealed that 35.5 per cent of the respondents preferred to shop online. Another survey by Mintel, a leading consumer research firm, shows that though America’s economic growth has been flattened by the recession, online retail continues to show more signs of life than consumer retail as a whole.
admin
July 20, 2009
By Diwakar Kumar
indiaretailing.com
20, July 2009
The primary challenge in food retail, no doubt, is its supply chain, which is making things difficult for retailers and food processors to procure quality produce at competitive costs directly from farmers in India. Last year at the India Retail Forum held in Mumbai, this prime challenge was centrestage for retailers to sidestep efficiency bottlenecks of the modern marketplace. The Indian supply chain for fresh and processed food is extremely poor and characterised by panoptic wastage and poor handling. A food retailer’s supply chain must be short and tightened by professionally-drawn efficient practices to avoid long chain of products from farm to fork, failure of which costs a retailer not just efficiency and just-in-time inventory control, but also results in a higher cost-of-operations burden.
Last week, we posted an open question for our audience to poll on, on our sister website www.imagesfood.com — Food retailers should adopt the following strategy to stay out of financial trouble in a slump: 1. Cut costs, 2. Increase revenue, 3. Combination of the two. Over 19.05% of the respondents supported cost cutting, 33.33% were in favour of increasing revenues and 47.62% polled for a combination of the two strategies.
Food safety and security are essential concerns for grocery retailers of all sizes. But the main challenge lies in boosting revenue, even as the cost of operations rise and sales appear to be slowing. A good retailer respects the value of always being in-stock, which in turn depends on highly efficient supply chain, inventory management and demand forecasting. In many cases, maximising square foot returns can entail additional spends – on upgraded cold chain systems, technology-enabled SCM, shopper data mining or hosting promotional events in alliance with suppliers, among on others.
Sunil Sanklecha, managing partner of the Chennai-based supermarket chain Nuts ‘n’ Spices, points out that every penny a retailer spends is out of profits, but every penny of the revenue is not profit. Cutting cost while simultaneously increasing the revenue is the mantra of any business model. "To increase the revenue is every businessman’s challenge; retailers must rework their strategies very frequently as today’s strategy may not work after one year. One has to constantly work on strategising the business model in alignment with market shifts," he suggests.
He further adds, "We must also understand that cost cutting does not work everywhere; cutting down on the basic infrastructure and basic customer services is a no-no. We need to cut costs only in the areas where the input is not productive."
Devangshu Dutta, chief executive of Third Eyesight points out that in many cases, business projections are also unrealistically high; there are locations where the expected change-over from the kirana to modern retail has been over-estimated, and the business has been modelled with costs that are in line with the over-expectation of revenue. "Rather than trying to fit the world to our business model, we need to fit the business model to the real world that exists," he says.
admin
June 29, 2009
By Raghavendra Kamath & Neeraj Thakur
Business Standard
Mumbai/new Delhi June 29, 2009,
Vijay Pokare, owner of a 400 square foot store in Mumbai’s Dadar market, knows his onions – literally. Just four months ago, he used to sell just 20 kg of them every day. After the nearby Subhiksha store on the ground floor of Shiv Sena Bhawan closed, Pokare spotted an opportunity and started packing washed onions in two kg plastic bags with a 10 per discount tag. Sales have soared three-fold since then.
In South Delhi’s Kalkaji area, a dozen small mom-and-pop stores (known as kirana stores in north and west India) have formed an informal alliance to buy in bulk from fast moving consumer goods (FMCG) giants to get better prices and fight the competition from retail biggies. The strategy worked; companies such as Hindustan Unilever and Godrej started offering higher trade margins.
The friendly neighbourhood stores are fighting back – and how. If the 1,500 square foot store of A P Mani & Sons in the narrow by-lanes of Mumbai’s Chembur station have cashiers in smart uniforms working with bar-code readers, Durgaram Choudhary, who owns Panchdeep Market in Pune’s Viman Nagar, has extended the free credit period from 30 to 50 days. Panchdeep is even offering free services such as crushing grain at the flour-mill and delivering to customers’ homes.
"You have to stoop to conquer," said Choudhary. Ingenuity is the key here. Pokare, for example, has only studied till standard four, but talks SMS marketing, home deliveries with customer ID numbers, or even loyalty programmes – all modern trade techniques but in a desi way. A few months ago, Pokare began registering customers who walked into his shop for the SMS service. Today, he has a data base of over 1,500 customers who are fond of beauty treatment products and keeps them informed about offers and discount schemes regularly. "No retail giant can afford to give such intensely personalised services," Pokare said.
It’s not just a coincidence that most of these initiatives have come at a time when modern retail is battling the slowdown in the economy. Some, like Subhiksha, have downed shutters, others are closing stores, burdened by consumer expectations of more frills compared to the no-frills kirana formats. By some estimates, FMCG sales from modern formats, which grew over 30 per cent in the past two or three years, have been almost flat this year.
Small retailers in India have inherent advantages, said a report titled "Rising Elephant" prepared by PriceWaterhouseCoopers and Confederation Indian Industries.
"They are located next to the consumer, making it convenient for top-up purchase. They know them well, some even by name. They give credit too – which no large retailer does. Their fixed costs are so low that their breakeven point is as low as 46 per cent of sales," the report said.
"Two years ago, when Sabka Bazaar (owned by Wadhawan Food Retail which runs the Spinach brand of stores) opened in our area, we had lost a lot of our customers as they wanted to buy from air-conditioned stores where they can pick and choose the products of their liking. But we renovated our shop with air conditioning and self-service facility. We are not lagging behind any big chains in terms of convenience and service now,” said Rajat Sharma, a shop-owner in South Delhi.
Analysts agree and have already pared the growth projection for organised retail, given the downturn in the economy.
According to a recent study by business consultancy KPMG, the growth in organised retail sales in India may continue to falter for the next 18 months at least. The share of organised retail was expected to grow to just about 10 per cent of the overall retail market by 2012, rather than the 16 per cent estimated earlier, the KPMG report said. Organised retail currently accounts for around 5 per cent of the estimated $350 billion Indian retail market.
"We give what our customers want and at the right price. We do not bombard irrelevant items with offers. Even in grocery, the price of some of our items are actually 5 to 10 per cent lower than theirs,” said R Ramasubramanian Nadar , co-owner of AP Mani & Sons, who manages around 1,000 customers a day at his store and plans to set up a dozen convenience stores across Mumbai with the help of a private investor.
That new-found confidence prompted Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy, to say: "When you go to kiranas, you fulfill your needs but when you visit a modern retail store, you end up buying more than what you need. In a downturn, an increasing number of shoppers think that they do not want to spend more. In that sense, there is a connection between shoppers switching from modern retail to kiranas."
Kirana stores said the arrival of "big retail" forced them to offer new things to customers. Rupali Saha of RGN Stores has lit up her store well and now stocks more products than before.
"I realised that consumers go to supermarkets if they do not get what they want on a daily basis from the shop next door. So, I carried out a survey on their daily requirements. For instance, now I also stock reading material for school children and accessories that they need for school-level project-work. Sales have automatically gone up," Saha said.The fast moving consumer goods (FMCG) companies are also increasingly acknowledging the significance of kiranas. For starters, modern retail contributes just 5-9 per cent of revenues of the top FMCG companies such as Hindustan Unilever, Marico, Godrej among others.
"The slower growth of modern retail does not have any impact on our sales. If modern trade growth slows down, traditional trade will take up the slack," said Adi Godrej, chairman and managing director of Godrej Consumer products, which gets nearly eight per cent of its revenues from organised retail.
(Additional reporting by Pradipta Mukherjee in Kolkata, Kaustubh Kulkarni in Pune and Sapna Agarwal in Mumbai)
admin
June 25, 2009
By Sangita Ghosh & Sarimul Islam Choudhury
Indiretailing.com
Thursday, June 25, 2009
By how much has the consumer’s pocket been impacted by the economic crisis? This is a question that has been troubling consumer goods manufacturers and retailers over the past few months. Thoughts on how to emerge from the crisis slowdown stronger and more resilient are keeping most modern retailers busy these days. How the Indian retail industry navigates the current challenges will determine its character and shape in the coming years, experts say.
It has been suggested that investing in innovation during a downturn helps retailers counter depressed consumer sentiments. But it is also said that instead of investing in innovation, concentrating more on value addition of the existing products could result in higher benefits. According to most experts, organisations should focus more on their sales and marketing efforts during a downturn. There are organisations who fortify their positions by investing more in innovation, and there are others who choose to make the same investment in R&D on value addition, during such times.
So, which strategy works better? Last week, IndiaRetailing opened the following statement to debate: "Marketing during a downturn should focus on value and not so much on innovation." The subject received a positive response of 70.49 per cent and a negative from 29.51 per cent of the total respondents.
To further nitpick on the thought, IndiaRetailing opened the floor to individual retailers as to what should be appropriately implemented in the situation.
Sharing his views, Balvinder Singh Ahluwalia, president, Koutons Retail India Ltd, states, "When a market hits a slump, that’s when we realise how it gets into its shell just as a cocoon does. However, I believe that a downturn is no time to stop spending on marketing." On the contrary, it’s the best time to invest in value marketing rather than putting more emphasis on innovation, Ahluwalia advised. "To my mind, brands that increase advertising during a downturn can improve their market share and return on investment thereafter."
Ambeek Khemka, group president, Vishal Retail also believes in this strategy. Echoing Ahluwalia’s opinion, he says that in the current scenario, marketing strategy should be value-driven as consumers are particularly conscious about the worth of currency they are spending.
But the word ‘value’ somewhat can be misleading and can become synonymous to only discounting on prices. Therefore, Asim Dalal, MD, The Bombay Store, doesn’t believe in offering value in terms of discounts at the cost of brand value. "There are supermarkets and hypermarkets, which are selling products at cheaper prices in the mistaken belief of giving value to their customers," he stated. According to him, a slowdown doesn’t necessarily mean that each and every retailer should sell products at lower prices. "One can’t suddenly change one’s focus because of a slowdown. Also, without being innovative, how can a retailer survive?" Dalal argues.
On a similar note, Shriti Malhotra, GM, The Body Shop, iterates, "Without being innovative, how can a retailer offer value to its customers?" In this context, she instances the example of The Body Shop’s marketing initiative during the first quarter of 2009. "We at The Body Shop lowered prices of some of our best selling products in March 2009 and invested heavily in advertising and translating PR communication in regional languages, besides English, to offer value to our customers as well as to reach out to as many consumers in the cities we are operational in." Following the implementation of the strategy, The Body Shop received ‘satisfactory and positive response’ in these markets, Malhotra informed.
Elaborating on the points that the retailers should consider during a slowdown, Ahluwalia states, "A downturn also creates opportunities in the market. Companies should be more efficient at turning marketing investments into revenue, as competition is much lowered overall." During these times, marketing budgets might scale down significantly broadening space for creativity of the marketing professional to come into play, Ahluwalia pointed out, while analysing the situation. "It is the best time to step up your marketing strategy and that too in terms of quality, not quantity. We at Koutons view the downturn as an opportunity to develop an aggressive marketing strategy in response to it."
Devangshu Dutta, chief executive, Third Eyesight remarks that ‘value’ is a much misused word and it gets misused even more during economic downturns. "For many people ‘value’ seems to have gotten equated with ‘discount’. If I were to look at the statement, I would rather re-state it as, ‘marketing during a downturn should focus on true value, and not just discounting on prices’."
According to Dutta, what is important and more significant is that retailers and brands should concentrate more on evaluating the term ‘value’. "For some, innovation in products or services may be termed as value but for many, still, the term is synonymous with discounting on prices," he notes.
It is incorrect to assume that all consumers trade down during an economic downturn and only want cheaper products, Dutta pointed out. "There are also consumers who want the best of the offerings and may even trade up to more expensive products so that they get a better ‘return on investment’ during the time," he concludes.
