admin
March 6, 2006
MUMBAI, March 6, 2006: The presence of Tier-II cities on the growth map of leading retailers has been on the rise in recent months. While sales are growing by 50-60%, albeit on a lower base, leading retailers say that volumes have been significant enough to encourage them to pan out quickly to other similar markets.
Currently, while the top metros growing at 35-40% are the biggest contributors to total sales, retailers say the format in the smaller cities is more profitable, owing to lower investments in land and manpower. In fact, the entry of several retailers in smaller cities has sent real estate prices zooming. Retailers say consumers in smaller cities are making more aspirational purchases in clothes, jewellery, accessories and footwear, among other things.
“The growth rates in the smaller markets show great promise. But it cannot be this or that. Urban markets continue to be crucial and there’s no question of saturation at all. In terms of sustainability, it is clear that consumers keep coming back, even after the initial novelty wears off. The entry of several retailers, including Indian corporates, means that real capital is coming into the business” said a top official in Big Bazaar.
Harminder P Sahni, chief operating officer of KSA Technopak, said that retailers are trying to tap growth in the smaller markets when the bigger cities are not really saturated. “It’s not unusual for consumers in the smaller markets to get aspirational or seek choices. Most retailers are trying to pan out faster in the smaller markets, worried that they may miss some great opportunities. While the smaller markets will offer the scale, retailers need to consolidate their presence in one area before moving out into the next,” he said.
When a big retailer opens outlets in a smaller city, that city is immediately on the map for other retailers, said Devangshu Dutta, chief executive of Third Eyesight. “These markets are growing faster than the industry on a whole, but this will stabilise over the next seven to ten years,” he said.
“Clothing is seeing a 5-10% growth in Tier-II cities, but the base is very small. There is an increase in employment and the number of working women is also going up. As a result, leading retailers are looking at these markets more seriously,” he added.
The driving growth factors are discontinuity in terms of lifestyle, coupled with a growing young population. Personal care, which is growing at 10-15%, is another segment which is gaining popularity in the smaller cities. As a result, grooming has also been seeing steady growth since the past five years.
“Retailers will have to cut prices for there to be an upsurge
in the market. There is a lot of buying during end-of-season
sales, so consumers do have a price point which they follow,
which retailers will have to address,” said Dutta.
admin
January 31, 2006
Written By Dr. H K Sehgal
In their frantic efforts to reduce cost to attract and retain customers, retailers / buyers have now innovated a new way to source – through reverse auction. Under this system, buyers / retailers issue specifications and invite, online, lowest bids for the garments from across the world.
Online discussed this new phenomenon with Devangshu Dutta,
a textile and apparel industry professional and international
consultant, on the future of this alternative to sourcing as is
being done today. This, he felt, could only be possible for mass
product categories rather than small, niche products that we specialize
in. We also spoke to Lalit Gulati of Modelama and Richa Exports
who has actually participated in reverse auctions, but failed
to click, as suppliers from Bangladesh and Indonesia could quote
much less that what he could possibly afford.
Dr. H. K. SEHGAL
In the sheer fight for survival, retailers are attempting to attempting to give more respect to “value for money”, which the consumer is seeking more vigorously than ever before. They are cutting corners to provide products to the consumer at the lowest rates to pass on the benefit to their consumer. One of their latest tools is “Reverse Auction”, which places the onus for competitive bidding on their suppliers with the support of new electronic methods.
Now imagine a fictional scenario. The room is dimly lit. All eyes stare transfixed at the projection of a computer screen. Every number must be legible to those gathered around the conference table this early morning.
Suddenly the image projected on the wall comes to life. The reverse auction pilot test has begun. Dollar figures flash as vendors from around the globe bid for the apparel order at hand. The atmosphere in the conference room has changed from one of apprehension to excitement as it becomes evident that the price that will be paid for today’s order will become quite competitive indeed.
Someone whispers encouragement for a long-time vendor as the group watches the contractor place his online bid in real-time. This spurs another buyer at the table to rally behind one of her favourite supplier, “Come on, you can do it! Just a little lower.” And all the while the dollar amounts on the screen become smaller and smaller and smaller still.
Will the increasing use of business-to-business (B2B) exchanges and reverse autions to procure apparel and soft goods change the way the retailers and the vendors conduct business with each other?First let us understand how the system works.
What are B2B Exchanges?
B2B exchanges are online marketplaces that enable trading partners to conduct real-time business communications with each other, whether they are issuing requests for quotes (RFQs), bidding for orders, sharing product forecasts or collaborating on product development. Exchanges usually are classified as public or private. Examples of public exchanges include Global NetXchange and the WorldWide Retail Exchange (WWRE).
Examples of private exchanges include Wal-Mart’s Retail Link and other portals that individual retailers, brands and trading companies have established for B2B communications with their own networks of customers and suppliers. (Article continued below)…
|
What are Reverse Auctions and How Do They Work? Reverse auctions involve bidding for orders – such as for a new type of product that a retailer needs produced to its specifications. The orders could be for everything from basic towels to private label jeans and dresses. Typically, before an online auction takes place via an exchange, the retail buyer issues product specifications and order requirements via the exchange to a select pool of approved vendors who are invited to participate in the auction. Request for product samples are usually issued at this time so that the buyer will have samples on hand to examine / approve prior to the auction. At the designated auction start time, the vendors log into the auction via the Internet, and begin submitting their prices to win the business. Bids are automatically processed in real-time, and the exchange automatically guides the vendors through the auction process. In some cases, vendors can see the prices being offered by competing vendors, although the identity of the other vendors is not revealed to them. The auction typically closes after a pre-determined period of time, which may be hours or days, and the retailer then determines which vendor will win the business based on the price and other variables at the retailer’s discretion, such as each vendor’s quality record, shipping history, etc. There can be many variations of the reverse auction business model, depending on differing retail procedures and exchange tools, but this is the gist of the process. Pertaining to apparel and soft goods procurement, the major public exchanges are being used by some of the world’s largest retailers but not many mid-tier or smaller retailers. For instance, among GNX’s members are retail heavyweights like Sears, Roebuck and Co., Federated Department Stores, Pinault-Printemps-Redoute (PPR), Carrefour, Linens’n’Things and Bed, Bath and Beyond. WWRE members include such major players as JCPenney, Kmart, Target, Target, Gap, ShopKo. |
BREAKING MYTHS A study by M. L. Emiliani of Lally School of Management, Hartford, USA and D. J. Stec of the Centre for Lean Business Management, Kensington, USA has listed some pointers relating to the concept of reverse auction. The key highlights, though not specific to the garment industry, are:
|
|
WINNING STRATEGY – Deepak Mohindra The assured success or the winning strategy for bidding in reverse auctions can only happen when all the members of the supply chain get together and jointly bid or the bidder should be a vertically integrated unit. Since the fabric constitutes some 65% of the total garment cost, the mills should be willing to reduce the cost of fabric by one cent for every two cents reduced from the manufacturing cost of the exporter / bidder. The costing of a product should be transparent
and open to all members of the supply chain with a total
professional approach and an attitude to win. This alone
will see the bidder get any foothold. To save on extra
fabric width-wise or length-wise, the mills should not
hesitate for any re-adjustment of the looms or re-working
the pattern by the supplier. The bidders should also
be encouraged to increase productivity through better
incentives. All factors, including flexibility, which
is India’s strength, should be built into the process
to get any foothold in the bidding process. |
What Worries Vendors? The advantage of reverse auctions is that all parameters are accessible in one place prior to bidding for an order, and the auction provides valuable insight into whether a price is “realistic”. One the flip side, it “hurts partnerships because price is not everything”. Although vendors must pass through the same retail approval processes and are competing for business based on the same set of specifications, they may not be getting credit for producing a better product. This, however, does not reveal the full story. Apparel Online asked Devangshu Dutta if “reverse auction has a future as an alternative to the sourcing option”. He says, “Reverse auctions have been most successful in standard and commodity supply areas, where a like-for-like comparison can be made. “Fashion goods mostly do not fit the description of ‘commodity’. Other than design, or look and feel, small qualitative changes or even labelling and packaging changes can create cost differentials, which can upset the standard reverse auction method.” He adds, “A retailer with almost US$ 3 billion of fashion buying per year, is reported to have sourced only around US$ 20 million over a two-year period through reverse auctions in an e-market in which it has a direct financial / equity investment. |
Say, if 75% of that US$ 20 million was this year, that is still only 0.5% of the total sourcing. Note that, as an equity-holder, this retailer has a vested interest in making this e-marketplace survive.” There may also be other motivations.
Devangshu says that, despite the fact that it is traditionally believed that there are increasingly more suppliers in the world than buyers, the reverse auction platform had most buyers registered than suppliers. So despite the technology, he asks, is the buyer really getting the best choice – are the best suppliers even participating in the reverse auction?
Second, despite all the contractual flim-flam, there were deals that did not go through, even if the buyer got his target price met by one or more of the suppliers.
Thirdly, the activity, and all that buzz, seems to be bunched around the very end – maybe even the last couple of minutes of the reverse auction. The result could be that the reverse auction gets extended – but how many times will it get extended and until when? Is that time really bringing the savings needed, he questions, or could those savings/ better margin have come from other areas? Reducing costs from specialised, non-commodity or engineered products needs discussion and collaboration between the buyer and the supplier, not an impersonal reverse auction, Devangshu feels.
|
The Indian Concern There is, however, one grace. India’s strength is not so much in “mass production” as in niche products in smaller quantities. Apparently, reverse auctions will not be possible in such cases. To that extent, the suppliers would be relatively safe from the onslaught of international competitive bidding. It is only the big players making basic garments, who might have to face the music, but then they, because of their inherent strengths, can possibly compete. Again, this concept will take its own time to catch up. On balance, it is felt that the technology-enabled reverse auctions are here to stay, but their importance is often blown out of proportion – perhaps there is a lot more hope or a lot more fear than there should be, Devangshu concludes. One could not agree more. Source: ApparelOnline, January 16-31, 2003 |
EXPERIENCE – Lalit Gulati Lalit Gulati of Modelama is one of the very few Indian exporters, who have actually participated in this process. Talking of his experience, Lalit said that the choice of vendors is entirely a prerogative of the buyers, who know which particular product can be made by which suppliers (manufacturer-exporters). “The buyers give us the style and specifications,
and we make the sample. They also quote their price
for the product, say $5 a piece. Now, once the competitive
bids start, every two minutes there will be price reduction
by different bidders. Suddenly there is a price quotation
of $3.60. Now, we cannot bring our price down to that
level. Though we have tried to offer our bids, we have
never been able to get any business. Generally it is
only for basic products, where such a reverse auction
system is possible, which again is bagged by other countries
like Bangladesh or Indonesia. Reverse auction is not
possible for value-added and fashion products, which
are our niche. “In yet another case, both Modelama and Richa jointly
participated in the reverse auction process but failed
to get business even when we were reducing the rates
– when quoted at $7.20, we offered t reduce to $5.60,
but someone made an offer at $4. At this price level,
there were no margins left at all and though we wanted
the business to come to India, we could not go down
to that level.” |
Source: ApparelOnline
admin
September 16, 2005
The jewellery trade and industry has taken a hit. The global economic meltdown, the winds of recession, the slump in diamond and jewellery exports, massive lay-offs, closure of factories (SEEPZ, Surat), the volatile prices of gold and, most importantly, the dampened sentiment of the consuming class (especially for non-essentials like jewellery) have adversely impacted this sector.
And as if these were not enough, the fear psychosis created by the recent terror attacks in Mumbai has further dampened sentiments.
We cannot of course sit down and cry about the gloom and doom. The time is for action – as the saying goes, when the going gets tough, the tough get going. We need to leverage the goodwill and strengths we have and carryon. Abhilasha Kale spoke to industry players and experts and asked them…
| “SMEs
(Small and Medium size enterprises), manufacturers,
and wholesalers are feeling the immediate pinch as the
dollar has strengthened (against the rupee) to Rs. 50.
America, which consumes nearly 45% of diamonds. Has
been hit by economic problems and that too during the
festive season. This is also due to the fact that their
major exposure has been to a particular market the diamond
rotation is of 150 + days, so the previous cycle payment
has been affected and current sales too are affected,
and the future is uncertain. Whilst this may all be
true to an extent, the fact also remains that you have
to weather cyclic business variations. Now in this time
of economic crisis, Brands would be stretched to think
innovatively stretch the rupee, find out what the consumer
really needs and see how they can provide it at a cost
that is acceptable to the consumers." |
What Next?
The issue of survival than sustenance holds a prime position
in the current economic meltdown. In this scenario, will "wait
and watch’ policy be the right Move? Or could you do something
to Minimise the severity of the economic disaster?
In tough times, studying the success stories of others or
understanding "industry experts’ opinions is a great
source of inspiration and learning. Such understanding helps
you to evaluate your business.
We spoke to industry players and experts on various aspects
of the) jewellery trade, and gathered various workable approaches
to ensuring survival and prosperity in the long run.
In the following story we see how staff training, technology, design and marketing and promotional initiatives have to be leveraged, especially in troubled times.
Consumer connect
Jewellery is one of the industries which require constant touch with customers to survive or thrive. In troubled times ¬as right now n right and optimum use of capital is necessary to connect with consumers. In the absence of a healthy customer relationship, it is possible for you to lose some customer base. This loss can be greater than imagined. Though Indians love for jewellery will never allow the industry to die, current scenario has made consumer extra cautious when it comes to spending.
But does that mean one stops marketing and promotional .activity, stops connecting with the consumer? The answer is a clear NO. Unfortunately, advertising and promotional programmes/or events are first to face the axe for reasons of "cost savings." "What’s the use of advertising and marketing?" is the common refrain from many players in the jewellery trade, not realising that these are the times when communication with consumers is most crucial.
Hammer Plus Managing Director Suchita Khandwala has decided
to go against the tide. The company has come up with increased
number of ads this year and also encouraged retailers to do
it locally and share the cost of their related local ads.
Moreover, it is not mandatory that publicity campaigns should
include ads only in print or electronic media. In other words,
there are other avenues too; one needs to invest time and
thought. Sohil Kothari, Director of Fine Jewellery, pursues
innovative and cost-efficient ways to reach out to customers
like tie-ups with premium restaurants, web sites and other
top brands, and also regular activities like launch of new
collections, direct mailers, and consumer offers. "For
retailers, it is more to do with keeping the brand at top
of the mind re-call of their consumers." explains Kothari.
Navin Sadrangani, Director at Nyuz, a jewellery retail service provider, looks at promotional programmes as trust-building exercises. It is the most important factor that brings old as well as new customers to a store. "There are other ways like internal signage, visual merchandising, direct mailers, and coop associations with leading companies that promote trust … all of this has to be used effectively and efficiently."
Ashok Minawala, Chairman of All India Gem and Jewellery Trade Federation (GJF), believes this is the most appropriate time to keep customers informed of the store and new products as the message is heard more effectively in a period of slowdown. He recommends joint advertising campaigns which will give a larger exposure to a group of jewellers in a city or Locality.
Expressing faith in Minawala’s ideas Subhash Bhola thinks
healthy and strong relationships are the best bet in any situation.
Bhola contacted 30 persons (some old customers, some potential
ones) with whom he had lost contact since last two three years.
To his surprise, he managed to turn some of them into customers.
Anaggh Desai suggests that marketing needs to change from
advertising to catchment driven Bft (Below the Line) activities
to attract consumers. BTL sales promotion programmes are cost
effective. They may include events, consumer offers, direct
mailers, tie-ups with other brands, etc.
Understanding consumer mindset
This emotional connect lends an opportunity to a company to understand the consumers’ mindset, lifestyle, taste and purchasing patterns. It helps to identify consumer trends, which guarantees jewellers that he will never go out of customer’s mind. C Ravishankar, Manager, Strategic and Commercial Intelligence, KPMG puts forward a simple activity – that is, to develop an experimental part of the store where a jeweller can tryout different and newer designs. Exhibitions and fairs, jewellery magazines, etc. are also useful tools to keep abreast of the changes.
Navin Sadrangani considers that updates on customer track record of purchases through a customized loyalty program monitoring allows each store to know the customers line of purchases, frequency of purchases, kind of jewellery preferred, references that he has given, etc. Such a study is more possible through direct offers and personalised proposals than advertising and promotions. Understanding consumer demands and then planning accordingly on such inventories according to the season around the year holds the key.
To achieve this end, Ashok Minawala says jewellers should continue to do events at his store, create new lightweight products, and improve service and marketing plans. "Try to see the stow-moving stocks and change them to fresh, acceptable collections, slow down new purchases and stop overtrading," adds Minawala.
Employees: Best asset to invest
A bunch of quality people is your best tangible asset. An employee works as a medium between you and your costumer. In the absence of proper training and product knowledge this asset may turn into a liability for your company. Motivation, recognition, right remuneration and skill – enhancement training are the factors that promise well-groomed staff with a result-oriented attitude. Such personnel win consumer confidence and consequently earn money for you.
“Transparency ethical behavior on the part of seller is sure to provide a competitive edge, whether at the customer end or any where in the supply chain.” Devangshu Dutta |
Building best sales staff is possible through skill advancement programmes. These programmes are a "must" to contribute to the bottom line as well as maintain one’s position as a serious player Sohil Kothari says he won’t be making any compromises when it comes to Fine Jewellery’s policy of staff training. For him a team of ill- informed, ill-trained sales staff can’t do justice to well-conceptualised, quality products. Sucheta Khandwala agrees with Kothari. As Hammer Plus deals in concept based spiritual jewellery, sales teams without proper knowledge of Indian culture, tradition, and values, would actually put their product at risk.
Being directly responsible for sales, sales personnel deserve special attention and training in customer handling. They are expected to be updated with product knowledge, market conditions and process orientation to get the vocabulary right in order to dose a sales deal convincingly. Commenting on this aspect, Navin Sadrangani explains, "The kind of sales personnel training required is on the lines of creating jewellery retail sales consultants in store. They should be able to comprehend what customer is looking for through conversation and questioning."
In a current situation, ‘getting a fair deal’ would be a
huge driver — guaranteeing product quality and the salesperson’s
strong knowledge to steer the customer towards the best product
to fit the budget could be a differentiator.
way business thrives on consumer confidence, so also an employee’s
confidence increases if the employer has faith in their abilities..
Moreover, it becomes necessary to keep your staff’s morale
high and provide them adequate training in keeping with the
changing times. A procedure of grooming an employee doesn’t
stop with professional training. The way you need honest and
hardworking staff. they too need your faith and recognition.
In tough times, they look forward to motivation from you to deliver their best. You may not be thinking of reducing headcounts but t~e very fear of losing
job in a gloomy situation might force your staff to perform poorly. That is not good either for you or your staff. It is inevitable that tough financial situations lead salespeople and businesses to look at reducing costs to increase profit l"QaLgins, and that can potentially lead to unethical behaviour. Therefore, keeping yourself and your staff motivated irrespective of market conditions is the need of the hour.
Tune in to technology
Technology remains the most neglected area in jewellery. As a part of security programme, technology has been a long-time companion of jewellers. However; one will find little evidence of use of technology in day-to-day business transactions. Technology in customer relationship management (CRM) is considered a new opportunity. "Use it to provide information that shall assist the staff to sell more/convert more. Understand the CRM element that would get results", instructs Anaggh Desai.
"We use technology in the area of CRM to increase our efficiency and productivity, which helps to position our brands in the market", says Balaji, Marketing Head at Kirtilals.
Describing the tech savvy nature of Hammer Plus, Sucheta Khandwala observes, "Together with some of the most advanced jewellery manufacturing machines and techniques, we use a number of on-floor product movement software for better time management and increased productivity."
Says Fine Jewellery’s Sohil Kothari: "The implementation of new software helps to connect our entire delivery chain – from the production to end consumer and also been useful to handle quality related issues."
Designing success
Design was a "zero investment" zone till date. Indian jewellers used to copy international designs in Indian style except a few chosen ones. However, it is better late than never. Jewellers are now beginning to take design seriously. The change in jewellers’-attitude is the direct result of a shift in consumer taste patterns.The possession of gold or diamonds is considered an investment. Now, Indian buyers’ horizon has broadened over the period, thanks to exposure to global trends through media and travel. There is a certain group taking shape within the larger Indian consumer group, and this group pays more attention to design. According to Navin Sadrangani, there is an audience that buys jewellery simply based on design, and then the similar tactics need to be used to communicate the design.
Sohil Kothari runs design and research cells in India and Hong Kong. He basically travels the world to study the latest trends and understand consumer needs. He observes, "With the socio economic changes in the country, Indian women have acquired an international taste. Corporate dressing also has a place for delicately designed jewellery, which the Indian women have started accepting as part of their office ensemble."
Prakash Chandra Pincha, Director, Kolkata-based Jewel India partly agrees with Kothari and Sadrangani. According to Chandra, the biggest share of sales is based on traditional basic designs but presented in a contemporary style. Some basic changes have appeared with the rise in the number of educated women, But still, the root to taste has not changed if we compare the percentage of sales of the so-called changed pattern. In the long run, jewellers need to provide well designed, quality products based on proper market research and with proper promotional and pas backing – thus providing a comprehensive package to the ultimate client.
Classical designs are heavy, intricate, and expensive, while the "impulse" or the "fashion" jewellery market demands light jewellery with clean lines. Traditionally, the two segments do not sit well next to each other. Some global jewellers have tried but failed to span segments under the same brand. In trying to overhaul their merchandise, companies have failed to gain new consumers, and at the same time lost the old ones. "In this context, the best bet would be to have a distinctive different brand under which to place the different segment offerings, and even within stores, segregate the offerings physically — ideally on different floors", suggests C Ravishankar.
Anaggh Desai opines that designs which have a high perception value but are cost effective and price friendly are the answer to increase sales. .
admin
September 16, 2005
Transcript from "Value for Money" on the Indian
television channel – NDTV Profit (2005)
Ambika
Anand (Studio Anchor, NDTV Profit): In 2005 pay packets of
Indians increased more than workers in the rest of Asia. Sonia
Bhaskar finds out what it means for consumer spending. After all,
what are Indians doing with more money in their hands.
———————-
Sonia Bhaskar (Correspondent, NDTV Profit): In the last ten years the amount that you or I have been spending out of our wallets has grown at over 10%. That is faster than the rate of growth of our economy. The reason for this: more money in our pockets, and the willingness to borrow more to fulfil our aspirations.
Indians, young and old, are riding high on desires to acquire all that money can buy. This stems from the fatter paycheques that most Indians are taking home today. Global Human Resource Services firm Hewitt Associates in its preliminary Asia Pacific salary increment survey finds that salaries in India grew faster than 11 other countries in the region.
Says Nischae Suri, Hewitt Associates (India), "Given the current economic context, the way organisations today are able to deliver pay-packages is more employee-friendly. Which means that you give them the money and tell them, well, spend it the way you want, and I think that is the element of flexibility that’s being built in. What’s really helped is that the income tax laws have provided for that avenue today."
So Indians are on a buying spree. What are they spending on? Quite a few things; from eating out, to electronics, from children’s education to domestic help. Experts categorise the spending into regular spends – things that we normally spend on – and emerging spends – things that we are now beginning to put our money into. In the regular spend category, the top categories include food and grocery, eating out, personal care items and consumer durables. As far as the emerging spends are concerned, topping the list for Indian consumers is the payment for household help, and then there’s mobile phones and even computers and laptops. In the last one year, emerging spends have grown 20% compared to just 4% for the regular spends.
"I think it’s younger people who are spending more on account of relatively high salaries. In TVs, music systems, we’re seeing a huge growth this year. TVs, especially the flat TVs, are going to be a big driver in the consumer electronics market in the years to come. People are buying bigger capacity refrigerators. So these are some of the areas where we are seeing a very direct impact of higher salary levels," says Arvind Singhal of KSA-Technopak.
The spending pattern is not just confined to the metro areas – experts believe that it is widespread across cities and towns of India. But yes, it is an urban phenomenon, and rural India is yet to see the surge in income and the desire to spend. As for the future, experts say that the trend is likely to continue. Increasingly, your salaries are going to be linked to performance. So the harder you work, the more you earn, and that will determine how much you can splurge.
—————————
Ambika Anand (Anchor, in the studio): To discuss the increase in consumer spend in India, I am now joined by Mr. Devangshu Dutta, He is the chief executive officer of Third Eyesight, a retail consultancy. Mr. Dutta, thank you so much for joining us on the programme. Let me begin by asking you what are the factors responsible for the spurt in increasing consumer spending in India, and do you see a let up in the years ahead?
Devangshu Dutta (CEO, Third Eyesight): There are two main factors that I see behind the increasing consumer spending. The first one is that there is a real rise in incomes. For the last 10-12-14 years there has been a growth in the economy, there has been a growth in business, there has been a growth in employment and a real increase in salaries. In fact, in the recent years the salary increases in India have topped increments on a percentage to percentage basis when compared to the other Asian countries. The second one, is that there is a real generational change – so if you take the generation that has come into the workforce over the last 3-4 years, this is a generation that I would call a post-colour TV, post-ASIAD generation, which has seen options, always. So there is an option to choose from multiple channels, colour is an option over black and white, there are options while choosing cars – in everything there is an option. And that means that they are also oriented towards spending on something that offers them choice. Today we have more choice available, and that group of consumers, the young consumers who are coming into the workforce are also, therefore, more oriented towards spending more time in areas which give them more choices. Shopping is one of them, and there is an increasing propensity amongst them to spend that money as well, whatever they are earning. As for the trend letting up: I don’t see it letting up anytime soon. We do see rises and falls, we do see what we might call booms and busts, but overall it’s an upward curve as far as I see it for now.
Ambika Anand: What impact is this increasing consumer spend having on the economy at large?
Devangshu Dutta: The increase in salary gets invested, in a sense, back into the economy, it goes back into business through shopping, and as it comes back into the economy it is an upward spiral. Broadly, that’s a beneficial impact.
Ambika Anand: But do you think the mall mania in India is really sustainable?
Devangshu Dutta: The retail sector has been developing organically over a long time. The real boom happened in the last 5 years, let’s say, when Delhi’s Ansal Plaza and Mumbai’s Crossroads took off, everybody else started thinking that there was a boom in the making. When there is a boom in the making, everybody wants to start investing. What has happened as a result is that real estate developers, shopping centre developers, various owners of parcels of real estate have got into the act of building a shopping centre. Whether those shopping centres are sustainable or not is a big question mark in my mind. There are shopping centres which are coming up now which are better planned, which are better integrated with the rest of the environment around them, and they are definitely sustainable over a longer term. There is an estimate in the market that there are likely to be 350-odd shopping centres that are likely to be developed in the country over the next 2-3 years. If I were to guess, a third or maybe even 25% might do very well, a bunch would completely fail, and the rest would get converted into other uses – maybe office blocks.
Ambika Anand: There are also a lot of speciality malls coming in; you have the Gold Souk, you have a Wedding mall. Are they really value-for-money?
Devangshu Dutta: When we look at the malls that are coming up as specialised malls or specialised shopping centres, they are structured around 3 or 4 themes really, at the moment. One is wedding. Now, if you take weddings, you have a number of products which you need to buy for a wedding, you need to buy a number of services, there’s lots of gifts – it’s a variety of things. So a wedding mall looks like a workable option. Too early to say, they are very new at the moment, but the concept looks workable. Another theme is home. If you take home, construction, design, if you mix all of that together, there’s a huge variety of products that you could be putting across to the customer. And that’s something again which is very, very workable.
Ambika Anand: Going ahead, one hears about a lot of hypermarkets coming into India, large format stores. Do you think Indian consumers’ pockets are deep enough to make them sustainable or do you see a shakeout?
Devangshu Dutta: The hypermarket is a "value department store", if I can call it that – I’m stretching the definition a little bit. It’s run by one retailer, it’s owned by one retailer. You might have concessions of different brands in the hypermarket, but it’s one operation. Which is different from a mall or a shopping centre, because in a shopping centre you have different tenants, each of which is a discrete operation by itself. A hypermarket, therefore, has one advantage over a shopping centre, which is that there is one company driving the whole strategy.
Ambika Anand: What are the challenges that you see, which could spoil the party for the malls and the hypermarkets?
Devangshu Dutta: Differentiation is a huge, huge challenge. Where do we discover new brands? How do we differentiate one shopping centre from the next one? The second is oversupply. The number of malls that are coming up concentrated in a very, very small geographical expanse – where will they get the customers from? When you look at it from the urban planning side, most shopping centres that are coming up in India are not at all integrated with the towns and cities that they are in. One clear example is traffic. They are planned for an average flow of traffic, so whenever you hit a weekend, you will have local residents almost fearing to get out of their house because there is this mad rush on the road – not just side roads but arterial roads getting blocked because of the traffic getting into the mall. There is no holding area, there is no traffic planning into the mall. When you take the product mix, it is not relevant to the local catchment, typically, because the shopping centre operator wants to fill the mall as quickly as possible, so they’ve gone and got the tenants out as quickly as possible. And that may be completely the wrong mix. And that has an impact on the success or failure of the shopping centre and the tenants. These are some of the major issues – there are others, but these are really big concerns.
Ambika Anand: Mr Dutta, thank you so much for joining us on this programme.
admin
September 16, 2005
By Diwakar Kumar
Indiaretailing.com
The fast growth of digital media has amplified the potential of modern retailers to gain momentum in pushing brand building and consumption of their respective products among younger consumers. Opportunities in online brand building are particularly important to understand, given the tremendous pressure Indian retailers face in generating revenues robust enough to counter high operating costs.
The proliferation of social networking media is an offshoot of the remarkable role digitisation plays in a modern consumer’s life. The galloping internet penetration in urban India has opened up avenues for marketers to target shoppers at a minimal cost compared to traditional media of ATL advertising. The cost per contact here is lower than in any other medium, which makes it that much more ‘user friendly’ for the advertiser.
Social networking websites such as Facebook, Linkedin, Twitter etc are categorised by the users’ general information about age, sex, areas of interest, etc, which may allow branding specialists to customise and target specific audience groups. E-retailers know the dynamics of what encourages consumers to transact online, and for that they (e-retailers) pay for advertisement on social networking websites and their success metric undeniably depends on sales per pixels rather than sales per square foot in general retailing.
Weekly poll question and experts’ view
Tapping into the marketing potential contained in social networking media, however, is still fairly under-leveraged by brands and retailers in India. In response to our weekly online poll question – Have Indian retailers under-leveraged social networking media to push brand building and consumption among younger consumers?, 96.03 per cent of our audience responded in the affirmative, while the balance 3.7 per cent believe that Indian brands are doing enough to push online branding on such vehicles.
Devangshu Dutta, chief executive of Third Eyesight says, "Social networking media such as Orkut, Facebook and Twitter are still experimental as far as marketers around the world are concerned, so Indian brands and retailers are not really that much behind the curve." He further adds, "Web 2.0 is more about buzz and creating a pull, which is difficult for most traditional marketers to grasp as they are more accustomed to creating a push through the traditional media. Overall internet penetration is also a barrier."
"Lastly, the overlap between social networkers and the target audience for most retailers in India is small, which is why other media remain more in focus," Dutta underscores.
Commenting on the same, Karthik Nagarajan, associate director, IT Practice/Nielsen Online, The Nielsen Company, says, "For retailers in India, word-of-mouth buzz and focussed advertising are critical to the success of their marketing plans. Social networking communities offer both, as it is consumer-generated media and is also made up of a captive youth audience."
"In the current economic climate, it also offers the best ROI for advertisers. The continuing, astronomical rise in popularity of social networking in India further sweetens the deal. However, in India, the potential is more than the uptake as of now and this is probably a segment that will see a lot of action in the coming days," he notes.
"Over the years, social networking media – especially sites such as Orkut or Facebook – has become very trendy in India. Youth of every age are hooked on to these sites or any other form of media – thus becoming an important platform for Indian retailers to push brand building and consumption among younger consumers," says Vijay Bansal,MD, Cantabil Retail India Pvt. Ltd.
"In Cantabil, where new and fashionable international clothing lines are provided at Indian prices, social networking media is hugely useful for brand building and promote the products," he informs.
Manmohan Agrawal, MD, Bigshoebazaar.com says, "Social networking media, be it in the form of internet sites or other, have become very popular in every part of the country – from rural to urban areas." These are also an important platform to publicise new product introductions, launches etc. In Bigshoebazaar.com, which itself is an online store for footwear, social networking media have proved to be a boon, Agrawal admits.
