admin
November 15, 2007
Source:
American
Shipper – Namaste, November 2007
Few analysts speak with more clarity and insight about a subject
than Devangshu Dutta does about Indian retail supply chain logistics.
Third Eyesight is a Delhi-based company that helps textile,
consumer durables and perishable shippers set up their Indian
supply chain. Namaste spoke with Dutta about a range
of retail supply chain topics, including why retail can sometimes
be a dirty word in India, and why India’s roads might
not be as bad as you’ve heard.
Namaste: Retail is a word that evokes extreme reactions
in India. Why is that so?
Dutta: Developments in retailing are no more or no less
divisive than any other change that is widespread in society.
The fact is that the retail sector touches each individual as
no other does. So whether you are a consumer, a retailer, a
vendor, a service provider or a policymaker, it is difficult
to adopt a distant approach.
The last 10 years have seen a tremendous amount of investment
in modern retail and its supporting infrastructure in the form
of shopping centers in India, and they are possibly the most
visible dividing line amongst all development. This is due to
several reasons.
While the environment within a shopping center may be world-class,
no similar investment is seen in the high streets where the
traditional retailer makes his living — whether in terms of
commercial or civic infrastructure.
While the shopping center developer is increasingly planning
his center impeccably, there is little regard still to the surrounding
catchment, whether in terms of merchandise mix, or in terms
of integrating with the urban infrastructure and landscape.
In many of the centers, there is minimal traffic planning with
regard to the surroundings, resulting in chaos over the weekends.
Simultaneously, large retailers are beginning to emerge in
the country and are counted as legitimate targets for pressure
and lobby groups of small traders, farmers, residents, non-governmental
and trade organizations. In this, India is actually no different
from other countries — witness the anti-Wal-Mart feeling in
many communities around the U.S. or the talk of "Tesco-poly"
in the U.K., or the strict planning norms regulating the growth
of large format retailers on continental Europe.
That may not be the case with other countries where similar
debates may be suppressed or may have limited visibility.
Namaste: Would it be fair to say the emergence of
the domestic retail sector in India seems to be pushing retail
logistics as much as foreign logistics companies or retailers?
If so, how will foreign companies benefit?
Dutta: Logistics and supply chain developments are certainly
being pushed along by Indian retailers and brands as much as
international ones. The larger Indian companies, especially
in the food and grocery sector, are aiming at adopting best
practices and adequate infrastructure to be able to compete
effectively against the operational skills of their foreign
competitors. Most of them can skip generations when looking
at supply chain standards, and do not necessarily need to go
through the same decades-long adoption and discarding or legacy
systems.
Foreign companies would also definitely benefit from this.
Any development in one retailer’s supply chain typically spreads
in ripples or waves through to other retailers as well, since
most vendors are not dedicated to any single retailer. For instance,
even if a specific physical link (such as a cold storage) may
not be available to more than one retailer, the process excellence
leaks across a vendor’s organization to benefit his other customers
as well. Similarly, the standardization of UCC/EAN bar codes
will not just benefit the initial founding retailers, but also
others along the way.
A foreign company stepping in after these developments have
been initiated by Indian retailers would find the environment
more conducive to its own processes and standards.
Namaste: What can Indian logistics services providers
learn from the influx of foreign interest and expertise in India?
Dutta: Foreign retailers expect to upgrade from the current
fragmented state of the Indian industry to norms that they operate
under in other markets. This provides an opportunity to Indian
logistics service providers to grow and develop, but is also
a threat to their existence in case they fail to change their
businesses to adapt to the new needs.
Indian service providers need to look at rapidly upgrading
their physical infrastructure, skill sets and systems. There
is significant interest amongst international logistics firms
to tap into the booming Indian market, and Indian service providers
can be their partners, to mutual benefit. The Indian companies
would stand to gain from the technical know-how, and possibly
even from customer relationships, while the international companies
can quickly gain the local base and ride on the local know-how
of their Indian partner.
Namaste: Infrastructure is the first word out of people’s
mouths — in India and abroad — when the potential barriers
to India’s success are mentioned. Is the country’s infrastructure,
as it relates to cargo movement, really as bad as it’s made
out to be?
Dutta: I would say that the infrastructure is a lot better
than it is made out to be, and is getting better still. But
this is one area where China stands in stark contrast to India,
where China has an infrastructure surplus while India runs into
severe deficit. Peak traffic, such as shipments of summer clothing
at the end of the calendar year, make the bottlenecks painfully
evident.
The second bugbear is documentation and regulatory process,
which again has gotten simpler, but needs to be simpler still.
VAT does not yet uniformly apply across the country, several
check points exist between and within states that hold up cross-country
cargo traffic. This not only adds time but also cost.
Namaste: Do you think the major retail chains who
have been itching to get into India will find the success they’ll
be looking for, and do you think they’ll have the patience it
takes to learn the Indian market?
Dutta: In my recent experience, most major retail chains
looking to enter the Indian market realize that it is a different
world from what they are accustomed to. They are prepared to
develop business plans cautiously, and with a long-term perspective.
The chief executive at one of our client organizations said
to me, while we were discussing its potential branding strategy
in India: "I see India as a market that will pay off in
the next 20 to 25 years, not just give us a quick buck in the
next five years."
Some have also learnt from their bitter experiences in China,
which also attracted companies with its billion-plus population,
but proved to be a burial ground for many reckless projections
and strategies imported from the West.
Namaste: Are Indian consumers — particularly those
outside of the cosmopolitan urban areas — ready to embrace
retail, and if so, what product categories are they most likely
to embrace?
Dutta: The Indian consumer is more sophisticated than
most people believe, and adapts new offerings at a very rapid
pace. This is true across product categories. The growth of
mobile phones amply demonstrates this. Not only have basic mobile
services grown rapidly, but also value-added services.
However, the price/value equation has to be right. Just because
a retailer has a swanky, air-conditioned store does not mean
that he can automatically charge a hefty premium over traditional
retailers. Again, mobile phone companies are a great example
— with the correct pricing, their penetration of even premium
services such as caller tunes, song-catcher, messages and calls
to premium numbers, etc. are prevalent not just in the metros
but in semi-urban and even rural areas.
Retail is similar, the only major difference being that due
to the need to put down physical stores, the growth is more
organic and looks staged rather than explosive. However, the
growth of shopping centers anchored by the Future Group in smaller
towns, or the aggressive launch of Reliance stores demonstrate
the willingness of the Indian consumer to also constantly evolve,
regardless of where they are based.
Namaste: What sections of the retail supply chain,
specifically, need to be improved to make them as efficient
as they’ll need to be to meet the expectations of foreign retailers
and transportation and logistics companies?
Dutta: Roads, truck fleets, distribution centers all
need to be upgraded, and are being. Some Indian companies —
Reliance is a notable example — are even pushing this along
and act as a domestic benchmark. Reliance has not only set up
a logistics company, but is also looking to manufacture trucks
in a joint venture with Volvo, to fulfill Reliance’s own requirements.
However, I believe foreign retailers will themselves evolve
a different mix for India, rather than sticking to their home-base
business models. I believe India, and possibly China, actually
changes companies as well. We might well find that these companies
will also carry back innovative practices to their home base
from India, as much as they bring in.
Namaste: Could you give a particular case you’re aware
of where improved supply chain efficiency from a retailer influenced
that retailer’s competitors to become more sound logistically?
Dutta: ITC’s rural initiatives — contract farming, e-Choupal
— have created copycat initiatives from other companies.
In the mid-1990s Spencer’s began pressing its FMCG suppliers
to bypass the distributor channel but were only somewhat successful
at that time. As they and other retailers have gained size and
weight, the tables have turned, and FMCG (fast moving consumer
goods) companies have even begun creating separate key account
business divisions to service large retailers.
McDonald’s had to create its supply chain from scratch before launching in India in 1996, and it did so with its supply chain partners from other markets which it paired up with Indian companies. These companies have then gone on to service other customers such as Domino’s and Pizza Hut, and some have also created their own brand of products (e.g. sauces, baked goods) to distribute in the wider market.
admin
November 8, 2007
Mint
(partner to the Wall Street Journal), New Delhi – 8 November
2007
By Rasul
Bailay
The shopping shelves of the Food Bazaar supermarket in Indirapuram
outside New Delhi are stacked with well-known brands such as
Britannia biscuits, Tropicana juices or Heinz ketchups. Sharing
the shelves are a host of obscure brands such as Lancer biscuits,
Chintamani namkeen and Fruitfil juices.
As millions of Indian consumers graduate from the traditional
small mom-and-pop stores to the legions of emerging branded
stores, modern retailers make sure that the consumers don’t
lose out on small local brands that are relatively cheaper and
are an integral part of the consumers’ grocery baskets. "It
provides choice and value to the customers," said Arvind
Chaudhary, chief executive of food business at Pantaloon Retail
(India) Ltd, which owns the Food Bazaar chain. "Consumers
need these products anyway and it completes their shopping baskets."
No wonder Food Bazaar and its hypermarket version Big Bazaar
stock Prakash namkeen, Jade cookies, Manyos
noodles, Nilon pickles, Garden farsan and
Maniar brand of khakra (Gujarati snacks) among other
local brands, constituting up to 15% of the hypermarket’s total
processed food category.
Retailers say local brands are mainly targeted at price-sensitive
customers. Sunil Jain, head of merchandising at discount retailer
Vishal Retail Ltd, said local products are up to 20% cheaper
than well-known brands. "We have all types of consumers,
middle-class to lower-end," said Jain. As far as local
brands are concerned, "we buy them at lower price and sell
them at lower price."
Local brands also ensure better margins compared with the paper-thin
margins by established brands. Vikas Srivastav, chief operating
officer of Express Retail Services Pvt. Ltd, which operates
65 "Big Apple" grocery stores in the New Delhi region,
said margins for local brands are 5-15% higher than known brands.
Local brands constitute almost 12% of the firm’s product portfolio,
he said.
Devangshu Dutta, chief executive of consultancy firm Third Eyesight,
said the margins provided by local brands could be 15% more
compared with a national brand, and it could be as high as 30%.
Mohit Khattar, president of marketing for discount retailer
Subhiksha Trading Services Ltd, said in most cases the local
products are "typically food products that are popular,
but are not manufactured by the Hindustan Unilevers and the
P&Gs of the world." He said low distribution cost and
near non-existent marketing expense of local brands ensure better
margins for retailers.
Pantaloon said the firm inspires local brands as part of a programme
called Ethnic Food Development Programme. "We encourage
them to put their products on our shelves, hand-hold them and
ensure their products get visibility," Chaudhary said.
The firm has even "adopted" some of the local brands
as part of its private labels. There are even counters and shop-in-shop
units for small brands in many Big Bazaar and Food Bazaar outlets.
Chaudhary said Pantaloon gives suggestions to small- and mid-sized
firms on products, and help in their packaging by hooking them
up with the Indian Institute of Packaging and other such groups.
admin
October 16, 2007
A discount outlet store sells merchandise that is off-season (such as summer merchandise in winter or vice versa) or out-of-fashion (hence possibly two-three seasons old) or comprising of manufacturing over-runs.
However, in India discounts are prolific even in the high street market. In clothing as an example, a large chunk (estimates vary from 40% to 70%) of ready-to-wear stock is sold under discount. Some of it is sold in factory outlets, but a significantly larger proportion is sold throughout the year in regular high street stores under offers that run throughout the year.
There are also discount streets within the city (such as Fashion Street in Mumbai or Sarojini Nagar in Delhi) operating the year round. This reduces the benefit that a discount outlet specifically provides to the consumer.
Second, discount stores typically are based “off-locations” away from regular customer traffic. In markets such as the US and the UK, an “outlet village” may be located 50-100 km from the nearest suburban or urban centre but quite close in terms of drive time. In India currently, due to poor road conditions, the stores have to be in higher cost locations.
Most critically, a sustainable and sizeable discount outlet also needs a base of many brands that have built up high profile and that operate consistent price premium at full-price levels. The brands must have enough scale so a discounting outlet cannot damage its brand image. This enables not just standalone discount outlets, but entire “outlet villages” to be set up. These clusters can generate a much bigger and sustainable customer footfall, much like a shopping mall. That ecosystem of brands has been weak in the past in India but has recently accelerated, and we are likely to see critical mass emerging in future, which may allow the discount business to grow.
In the coming years, expect more action, with clustering of stores and brands, specialist discount malls, and possibly even innovative and India-specific models to come up. How about air-conditioned haats with proprietary bus connectivity to town centres?
Let the good, discounted, times roll.
(c) Devangshu Dutta 2007
The author is Chief Executive of Third Eyesight, a specialist consulting firm in the retail and consumer products sector. (More articles on www.thirdeyesight.in/insights/ )
admin
October 15, 2007
By Devangshu Dutta
admin
September 15, 2007
By Sharmila Katre
Indian fashion has true potential to grow exponentially in
the next decade. But before that, argues Sharmila Katre, there
are many issues that the creators and producers of fashion
need to address.
Students of fashion design are taught the definition of fashion as ‘a reflection of lifestyles’, and truly the growth of the fashion industry in India in the past decade substantiates this. Fashion as a lucrative business proposition came to pass in the late 1980s with the advent of ‘salon’ stores like Ravissant and Vichitra Sarees that were the natural progression of the ‘boutique’ culture of the late 1960s and 70s. What caused this fast forward demand for ‘designerwear’ labels and home-grown couture apparel could be attributed to the liberalisation of the economy in the last decade of the previous millenium.
Fashion is a reflection of lifestyle. It is a reflection of the growing affluence of urban India – the upwardly mobile middle class, more so, the upper middle class The growth and progress of the fashion industry in the last ten years has even warranted the institution of the bi-annual fashion industry event known as the WIFW, the Wills Lifestyle India Fashion Week, which is eagerly awaited both by the producers and buyers of fashion in India. And, every year the fashion fraternity, glitterati and media await this event with much excitement and impatience. For weeks leading up to the event one reads of the who’s who of the international fashion scene, the top of-the-line buyers expected to attend the event. And yet, Indian fashion is yet to truly make its mark on the international scene. The Indian fashion fraternity is still waiting for its Issey Miyake to make his triumphant appearance on the international fashion arena and put India on the global map of the fashion world and make Delhi an international fashion destination.
What is it that ails our industry that we are not able to bridge that last gap? Are we so overwhelmed by our traditional crafts and cultural heritage that we cannot break free of its shackles and come up with innovative design? For India to have a true design identity, do we have to link it to its ‘craft’ design past? Is there not a designer amongst its design fraternity that can create modern Indian design sans chikankari, dabka, kasab et al, or give these traditional techniques a modern international identity and acceptability to create global fashion? Where is the innovation in form, use of textiles, textures, finishes, print designs and value-added techniques? Where is the spirit of entrepreneurship, a sense of business purpose?
Internationally, the Indian apparel industry is better known as a supplier of competitively priced, mass produced, ‘fashion basic’ apparel merchandise sold by various retail chains and discount stores. In design terms however, the merchandise in no way can be distinguished from any of the other merchandise on sale in the same outlets that have been produced in other Asian, Caribbean or east European countries. So where is the uniqueness of Indian fashion/design visible globally? And yet, when India forayed into the global clothing business in the late Sixties, it was its design identity of unique silhouettes, textiles and value-addition techniques that gave it international acceptance and demand. What sold very happily and profitably at that juncture was ‘Brand India’ through its cotton crepe kurtis and ‘drawstring pants’, and its handblock printed wrap skirts. Indian fashion laid the foundation of an industry that today employs over 35 million people and contributes 14 per cent to the GDP of the nation. Indian fashion has true potential to grow exponentially in the next decade but before that there are many issues that the creators and producers of fashion need to address.
“To grow, the fashion business fashion merchandise has to reach out to market segments beyond the fashion leaders and innovators and consumers of bespoke fashion or couture apparel. Product design through design discipline should enable a product to be scalloped and extend the product’s life span to justify the cost of design development. The product line has to evolve beyond the all-encompassing design technique perspective.”
Most importantly what comes to mind is design discipline combined with business discipline, understanding the commercial viability of design and realising that the business of fashion is like any business enterprise. To grow, the fashion business/ fashion merchandise has to reach out to market segments beyond the fashion leaders and innovators and consumers of bespoke fashion or couture apparel. Product design through design discipline should enable a product to be scalloped and extend the product’s life span to justify the cost of design development. The product line has to evolve beyond the all-encompassing design technique perspective. It has to have an individual signature that has a sense of permanence and identity of ‘unique’ design like an Hermes scarf, a Chanel jacket, a Bill Blass sheath dress, or a Louis Vuitton handbag. The signature design element itself becomes the product’s brand identity.
“The business of fashion needs to be pre-emptive, and proactive rather than reactive. Product design needs to be clever and production-friendly to ensure timely deliveries without taking away from the design innovation factor. Market potential needs to be studied vis-à-vis the adaptability of the design/fashion content of the product to enable growth in the market share and business, by straddling consumer segments.”
The business of fashion requires business strategies, planning, organised marketing and selling, promotion and positioning. Design research based on market and consumer feedback, lifestyle trends, market economics, raw material resources, colour palettes, textile trends and other factors need to be done in depth and in all seriousness. Fashion merchandise is highly perishable and dynamic. Product research and development needs to become an ongoing and continuous process, very much like the R&D processes, that are the norm for all other lifestyle products. The business of fashion too, therefore, needs to be pre-emptive, and proactive rather than reactive. Product design needs to be clever and production-friendly to ensure timely deliveries without taking away from the design innovation factor. Market potential needs to be studied vis-à-vis the adaptability of the design/fashion content of the product to enable growth in the market share and business, by straddling consumer segments.
International fashion designers have to realize that for fashion to last and be profitable, and businesses to grow, designs have to move down several market segments, evolving as it moves down, but holding true to the design concept/signature. And rather than have an original and innovative design idea copied and morphed into a product that would shorten its life cycle with the fashion leaders and fashion followers, it is better to give the original design idea to the followers of fashion in the form of a prêt collection. Prêt-a-porter collections allow designers to expand their market reach, give the much required production quantity volumes and also contribute to a healthy bottom line to grow the business. The success of Giorgio Armani’s business model of Emporio Armani and Armani Exchange is a good case in point. Roberto Cavalli is another successful business model of a fashion designer’s label straddling several market segments. Roberto Cavalli: the premier couture line featuring women’s clothing, sunglasses, men’s clothing, women’s and men’s shoes, handbags, timepieces, underwear, beachwear, and eyewear; Just Cavalli – a more affordable Cavalli line, well-known for its denim, featuring men’s and women’s apparel (mostly sold in upscale department stores) and men’s and women’s accessories; Roberto Cavalli Angels – the childrenswear line.
The fashion industry in India most certainly needs to wake up and smell the coffee. It needs to grow out of the ‘fashion boutique’ business mould of designing wedding trousseaus and ‘diffusion’ collections, and think ‘fashion corporate’ business. International brands, both the prêt collections of well known design brands, and the lesser known ones, have started entering the domestic market. If the fashion industry is not quick to react, the fashion followers and the large upwardly mobile middle class segments would gladly convert for the want of innovative and exciting home-grown design merchandise. And then we could be witnessing a unique ‘trickle up’ situation in the fashion scene where the fashion leaders may follow the fashion followers and shift loyalty to the better known international design labels!
