Inditex to launch Bershka and Zara Home in India this year

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April 15, 2024

Sagar Malviya, Economic Times
Mumbai, 15 April 2024

Spanish fashion company Inditex said it will launch youth clothing brand Bershka and Zara Home in India this year.

“Bershka will open its first store in Mumbai Palladium, and Zara Home will open in Bangalore,” it said in its latest annual report.

Inditex had launched fast fashion brand Zara in 2010 and premium clothing brand Massimo Dutti eight years ago. Its new offering, Bershka, will pitch it directly against Reliance Retail’s Yousta, which too targets the younger consumer segment.

Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing Western-style clothing. Fast fashion brands such as Zara and H&M became runaway successes soon after they entered the country.

Experts said Bershka’s target consumer profile is mostly teens to mid-20s, slightly younger than that of Zara, which is pitched at 20-40-year-old fashion-driven customers.

“The product assortment is different, with a higher share of knits, fewer dresses and more casual overall compared to Zara, keeping in line with the lifestyles of the customer group. So in that sense it wouldn’t cannibalise Zara in any serious way, though some of the younger set among Zara buyers could migrate some of their purchases to Bershka,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “The biggest question is, can they hit the price points that young Indian fashion consumers want as with domestic brands such as Zudio, Yousta and others, or will consumers overlook higher prices for the style mix and a European brand pull in significant numbers to make the brand viable.”

According to a recent report by Motilal Oswal, the ₹2.5 lakh crore value fashion segment accounts for 57% of the total apparel market and is one of the largest and fastest-growing segments. A substantial untapped opportunity beyond the metros and tier-1 cities, driven by better demographics, higher incomes and greater customer aspiration, has compelled several big players to enter a market that was previously dominated by regional and local operators.

Since its inception in 2016-17, Zudio has seen considerable expansion and reached nearly 400 standalone stores, outpacing most apparel brands primarily due to its competitively priced products with an average selling price of ₹300. Following the success of Zudio, a unit of the Tata Group’s Trent, the segment has seen the entry of national retailers in the affordable youth clothing segment such as Yousta by Reliance Retail, Style-Up by Aditya Birla Fashion and Retail and Shoppers Stop’s InTune.

(Published in Economic Times)

Flipkart wants a bite of India’s Q-commerce growth

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March 18, 2024

Christina Moniz, Financial Express

March 18, 2024

It is not difficult to understand why e-commerce firm Flipkart wants a bite of the Q-commerce pie.

India’s quick commerce market has been growing year-on-year at 77% to reach $2.8 billion in GMV (gross merchandise value) in 2023, according to a Redseer report. In comparison, e-commerce has been growing at 14-15% year-on-year. No one would dispute that with instant deliveries of products and groceries in 10-20 minutes, quick commerce firms like the Zomato-owned Blinkit, Zepto and Swiggy Instamart have changed the face of e-commerce and retail over the past few years.

While quick commerce thrives, none of the players in this ring are profitable yet. According to Devangshu Dutta, CEO at Third Eyesight, most quick commerce firms are in an expensive market acquisition phase and are at least a year away from profitability — perhaps longer. He expects that the unit economics for these companies will improve. “Some of the quick commerce players have created a substantial consumer base, which is growing in the frequency of transactions, moving to higher order values and transacting more products with potentially better margins,” says Dutta.

Both Zepto and Blinkit expect to turn profitable in FY25, as per their public statements.

So what are the primary challenges? “Traditional large e-commerce players face obstacles in facilitating last-mile deliveries, establishing dark stores, managing supply chains effectively, and navigating fierce market competition,” says Anshul Garg, managing partner & head, Publicis Commerce India.

The other key challenge for the late entrants is that customers seldom switch platforms. This is different from the way customers shop for products like electronics on e-commerce, where they compare prices/ deals across multiple e-commerce marketplaces. Brands like Flipkart need to define their playbook by maybe exploring categories other than grocery if they are to make a dent in this market.

As things stand, quick commerce has a mere 7% of the potential market. The total addressable market is estimated at $45 billion, higher than food delivery, as per JM Financial. Blinkit leads the market with a 46% share, followed by Swiggy Instamart at 27%, and Zepto at 21%.

Growing-up pangs

Kushal Bhatnagar, associate partner at Redseer Strategy Consultants, explains that there are broadly three ways that Q-commerce firms are working towards profitability. The first is by pushing higher priced items on their platforms and bumping up higher average order values. They’re also foraying into non-grocery segments such as cosmetics and headphones.

The other lever is ensuring dark store efficiencies. “While dark stores are an added cost, most platforms have a solid understanding of the demand across micro markets and are able to extract better profitability from each dark store. So the trend is positive, even if profitability is still to be achieved,” explains Bhatnagar.

For a dark store to deliver ROI and become profitable, it needs to cross 1,200-1,300 daily orders.

Some players like Zepto are also experimenting with a nominal platform fee of Rs. 2 per order, which they sometimes increase during peak times — by up to Rs. 10 — to gain from a surge in demand. Some are also implementing 12-15% fees for orders under Rs. 500, nudging customers to spend more.

Ad revenue is another important lever driving growth for these platforms, especially as D2C brands hop on board and advertise on them to reach GenZ and millennial consumers in metros and tier-I markets. Advertising revenue is around 3% of a platform’s GMV, and it is expected to keep growing.

FMCG and F&B are the top advertising categories on quick commerce currently but that can change as platforms move into higher value categories. “Quick commerce is also venturing into unconventional categories such as electronics, mobile and large appliances. If all goes according to plan, we can anticipate a significant shift in advertising contribution, given that these categories boast higher average selling prices, prompting advertisers to adopt a slightly more aggressive stance,” says Shashank Rathore, vice-president, e-commerce at Interactive Avenues (IPG Mediabrands India).

(Published in Financial Express)

Reliance Industries in talks to bring British fashion retailer Primark to India

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February 29, 2024

Sagar Malviya & Faizan Haidar, Economic Times

New Delhi, 28 February 2024

Reliance is in exploratory talks with British fashion retailer Primark to bring the label to India, a move that will pit it against Tata’s Zudio, Landmark Group-owned Max and Shoppers Stop’s new value format InTune.

The 55-year-old brand, popular for its moderately priced clothing and shoes, has been evaluating the Indian market for the past few years and may partner Reliance through the joint venture or licensing route, said two people aware of the development.

Most of their stores will be on the high street due to its big box format, unlike other global retailers, which prioritise malls, the executives added.

Primark has been a successful value-priced retailer and its global revenue has exploded in the last few years, aside from two Covid-hit years. Average prices are even cheaper than retailers such as H&M and Uniqlo. While China is the largest source country for Primark, India is second in the number of small to large factories that supply the company. Nearshoring is already embedded in Primark’s supply chain strategy, and it can deliver goods from Indian suppliers directly to a local retail unit for cost control and flexibility while being responsive to local market needs.

As the largest retailer in India and with its portfolio of multiple international brand partnerships, Reliance can provide a significant edge with real estate and operational synergies, said Devangshu Dutta, founder of retail consulting firm Third Eyesight.

“India is an obvious growth market choice for large brands and retailers such as Primark,” he said. “In the end, though, it will come down to how effective the merchandise and the marketing is in connecting with the diverse needs of Indian consumers across the country.”

Primark is owned by London-listed Associated British Foods and has over 400 stores globally with a stated ambition to expand across new and existing markets to reach 530 outlets by the end of 2026. In the lower-priced segment, Reliance has Trends and recently launched fashion and lifestyle store Yousta, which competes directly with fast-fashion brands Zara and H&M in India. Reliance currently has over 18,774 stores-these include supermarkets as well as electronics, jewellery and apparel outlets. It has also either partnered with or acquired over 80 global brands for local sales.

Reliance didn’t respond to queries. A Primark spokesperson said, “As a growing international business, we’re always open to new opportunities. However, we don’t comment on speculation about where we might expand to next.”

Experts said India’s consumption structure has been skewed in the past over a narrow base of richer consumers accounting for a large chunk of market. However, now the opportunity for value-brands is expanding.

(Published in Economic Times)

Sequoia struggles to sell Prataap Snacks

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February 29, 2024

29 February 2024, Mumbai

Prince M. Thomas, TheMorningContext

Prataap Snacks should have been an easy sell for Peak XV Partners. The venture capital firm, which till recently was known as Sequoia Capital India, is the largest shareholder in the snack maker with a 47.56% stake. It first invested in Indore-based Prataap Snacks in 2011 and has since seen the company become the sixth largest player in the industry. An exit now would give Peak XV returns that would match some of its best exits, like those from Zomato and Go Fashion.

The reality is, finding a buyer for Prataap Snacks isn’t as easy as selling a packet of “chatakedaar” rings bearing its Yellow Diamond brand. In fact, those packets of rings may be one of the reasons why the company seems to have lost some of its spice with suitors. We will come to that in a bit, but first it’s remarkable how many doors Peak XV has knocked on without any luck…

The company’s choice of products, most of them falling under the category of “western snacks”, was prudent. “When it comes to snacks, the Indian market is very diversified. Each region has its own flavour and there are local nuances,” says Devangshu Dutta, founder of consulting firm Third Eyesight. That means a regional snack, like the gathiya that is popular in Gujarat, will have fewer takers in eastern and southern states. Prataap Snacks’s products had no such problem as chips and rings were not region-specific…

Read more at: https://themorningcontext.com/business/sequoia-struggles-to-sell-prataap-snacks

Fashion 2024 & Beyond: Adapting to Changing Innovation Dynamics (VIDEO)

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February 21, 2024

The ability of fashion businesses to endure and thrive in the face of stiff competition and changing market dynamics is all about adapting to innovation, customer-centricity, and strategic planning. The correlation between high performing fashion business and product innovation is undeniable.

This panel discussion brings Design and Business Heads together to brainstorm on how fashion companies can devise strategies to drive innovation to remain competitive, meet evolving consumer expectations, and stay ahead of the race.

Moderator: Devangshu Dutta, Founder & Chief Executive, Third Eyesight

Panelists:

  • Anshu Grover Bhogra, CBO, Forever New
  • Diksha Bhatia, Founder, Gioia Co
  • Mansi Lohia, CEO, Black Watermelon
  • Rohit Aneja, Director- Grapevine Designs, CEO be-blu! Lake Como
  • Sean Ashby, Founder & CEO, Aussiebum
  • Swikruti Pradhan, Founder, Rustic Hue
  • Yogesh Kakar, Chief Product Officer – Tommy Hilfiger & Calvin Klein, PVH Arvind Fashion