In a startup world, founders are typically creators first while investors see themselves as the monitors. Therefore, conflicts between the two are almost a default feature of a relationship that in effect funds a dream. From ‘off’ chemistry to differences of opinion to what some founders see as shackles on entrepreneurial freedom, the reasons could be any or a mix of all. Watch this discussion, with a mega-panel of intense start-up founders on the one hand and investors with VC funds on the other, addressing the pain points on Cash, Control, Creativity, Chemistry and Culture in a supercharged encounter. Session Anchor, Devangshu Dutta (Founder, Third Eyesight) reflected, “Those who have heard classical music jugalbandi or witnessed jazz musicians jamming will appreciate the creative tension, the give and take that was the thread throughout this discussion, reflecting the reality of the relationship between entrepreneurs and VCs.”

Watch the video

INVESTORS:
Ankita Balotia, VP, Fireside Ventures
Aashish Vanigota, Principal – Investments, IvyCap Ventures Advisors Private Limited
Bhawna Bhatnagar, Co-founder, We Founder Circle
Nitya Agarwal, VP-Investments, 3one4 Capital
Harmanpreet Singh, Founder & Managing Partner, Prath Ventures
Vamshi Reddy, Partner, Kalaari Capital
Zoeb Ali Khan, Vice President, Sauce.vc

D2C FOUNDERS:
Abdus Samad, Founder, Sam & Marshall Eyewear
Akshay Mahendru, Co-Founder & CEO, The Pet Point & Nootie
Malvika Jain, Founder, SEREKO
Nitin Jain, Founder, Indigifts
Puneet Tyagi, Egoss Shoes
Radhika Dang, CEO & Founder, The Good Karma Company
Rahul Aggarwal, Coffeeza
Udit Toshniwal, Founder & Director, The Pant Project
Vaani Chugh, Co-founder & Director, D’chica
Yash Kotak, Co-founder, Bombay Hemp Co.
Yashesh Mukhi, Co-founder, Chupps

Akash Podishetty & Krishna Veera Vanamali, Business Standard

New Delhi, 8 July 2022

India’s $900 billion retail market has emerged as one of the most dynamic industries and is expected to reach anywhere between $1.3-$1.5 trillion by 2025. The organized retail is seen gaining 15% market share in the overall retail space, while food & grocery and apparel and lifestyle may account for 80% of India’s retail market by 2025.

Large market offers big opportunities. And it looks like Reliance Retail has seized it, with its massive omni-channel retail play of physical stores, B2B with kiranas and e-commerce.

The company went on an acquisition spree and partnerships in the last three years, adding to its portfolio some of the biggest names, including Hamleys, Dunzo, Zivame etc.

It has also partnered with famous global retail chain 7-Eleven. Catering to India’s affluent consumers, Reliance, meanwhile, houses some of the most iconic brands such as Versace, Armani Exchange, GAP, GAS, Jimmy Choo, Michael Kors among others. The premium segment has become one of the fastest growing categories.

Also firming up its inorganic play, the company is planning to acquire dozens of niche local consumer brands to build a formidable consumer goods business.

Arvind Singhal, Chairman and Managing Director, Technopak Advisors says, there’s focus on physical retail expansion. Reliance is looking to cater to both price conscious and brand conscious customers, while trying to capture as much of the private consumption market as possible, he says.

Reliance Retail’s competitors are nowhere close to even put up a fight. The company has over 15,000 offline stores across categories, compared with DMart’s 294 stores or Aditya Birla Fashion’s 3,468 outlets.

Reliance retail’s revenue has grown five times in the last five years and the core retail revenue of $18 billion is greater than competitors combined, according to a Bernstein report.

Speaking to Business Standard, Devangshu Dutta, CEO, Third Eyesight, says, Reliance wants a decent share of Indian consumers’ wallet. From that perspective, Reliance still has a long way to go, he says. As consumer preferences evolve, Reliance too should adapt.

An undisputed leader in the domestic market, the aim of Reliance, according to Mukesh Ambani, is to become one of the top 10 retailers globally. Part of this bet is based on the premise that incomes and consumption power of Indians will increase across the board in coming years. However, could the uneven recovery that different segments of the population have seen stop the pie from growing larger and prove to be a dampener for Ambani’s ambitions?

(Published in Business Standard)

B2B event companies don’t often think about consumer spending as something directly relevant to their business. However, consumer trends can allow industry event and exhibition organizers to get an advance view of where the opportunities can lie in the future. In this Keynote address at UFI’s Asia Open Seminar in Bangalore, Devangshu Dutta shares his views about the key consumer trends in India, and the implications for the events and exhibitions industry.

(This presentation was delivered on 6 March 2014 in Bangalore, India.)

(Published in ETRetail.com on 6 December 2013)

Franchising isn’t rocket science, but advanced space programmes offer at least one parallel which we can learn from – the staging of objectives and planning accordingly.

A franchise development programme can be staged like a space launch, each successive stage being designed and defined for a specific function or role, and sequentially building the needed velocity and direction to successfully create a franchise operation. The stages may be equated to Launch, Booster, Orbiter and Landing stages, and cover the following aspects:

1. Launch: assessment of the franchiser’s own readiness to launch and manage a franchise network in the target geography
2. Booster: having the franchise pack ready to target the appropriate geographies and franchisee profile
3. Orbiter: franchisee recruitment
4. Landing: operationalising the franchise location

Stage 1: Launch

The first and perhaps the most important stage in launching a franchise programme is to check whether the organisation is really ready to create a franchise network. Sure, inept franchisees can cause damage to the brand, but it is important to first look at the responsibilities that a brand has to making the franchise network a success. Too many brands see franchising as a quick-fix for expansion, as a low-cost source for capital and manpower at the expense of franchisee-investors. It is vital for the franchiser to demonstrate that it has a successful and profitable business model, as well as the ability to provide support to a network of multiple operating locations in diverse geographies. For this, it has to have put in place management resources (people with the appropriate skills, business processes, financial and information systems) as well as budgets to provide the support the franchisee needs to succeed. The failure of many franchise concepts, in fact, lies in weakness within the franchiser’s organisation rather than outside.

Stage 2: Booster

Once the organisation and the brand are assessed to be “franchise-ready”, there is still work to be put into two sets of documents: one related to the brand and the second related to the operations processes and systems. A comprehensive marketing reference manual needs to be in place to be able to convey the “pulling” power that the brand will provide to the franchisee, clearly articulate the tangible and intangible aspects that comprise the brand, and also specify the guidelines for usage of brand materials in various marketing environments. The operations manual aims to document standard operating procedures that provide consistency across the franchise network and are aimed at reducing variability in customer experience and performance. It must be noted that both sets of documents must be seen as evolving with growth of the business and with changes in the external environment – the Marketing Manual is likely to be more stable, while the Operations Manual necessary needs to be as dynamic as the internal and external environment.

Stage 3: Orbiter

Now the brand is ready to reach out to potential franchisees. How wide a brand reaches, across how many potential franchisees, with what sort of terms, all depend on the vision of the brand, its business plan and the practices prevalent in the market. However, in all cases, it is essential to adopt a “parent” framework that defines the essential and desirable characteristics that a franchisee should possess, the relationship structure that needs to be consistent across markets (if that is the case), and any commercial terms about which the franchiser wishes to be rigid. This would allow clearer direction and focussed efforts on the part of the franchiser, and filter out proposals that do not fit the franchiser’s requirements. Franchisees can be connected through a variety of means: some will find you through other franchisees, or through your website or other marketing materials; others you might reach out to yourselves through marketing outreach programmes, trade shows, or through business partners. During all of this it is useful, perhaps essential, to create a single point of responsibility at a senior level in the organisation to be able to maintain both consistency and flexibility during the franchise recruitment and negotiation process, through to the stage where a franchisee is signed-on.

Stage 4: Landing

Congratulations – the destination is in sight. The search might have been hard, the negotiations harder still, but you now – officially – have a partner who has agreed to put in their money and their efforts behind launching YOUR brand in THEIR market, and to even pay you for the period that they would be running the business under your name. That’s a big commitment on the franchisee’s part. The commitment with which the franchiser handles this stage is important, because this is where the foundation will be laid for the success – or failure – of the franchisee’s business. Other than a general orientation that you need to start you franchisee off with, the Marketing Manual and the Operational Manual are essential tools during the training process for the franchisee’s team. Depending on the complexity of the business and the infrastructure available with the franchiser, the franchisee’s team may be first trained at the franchiser’s location, followed by pre-launch training at the franchisee’s own location, and that may be augmented by active operational support for a certain period provided by the franchiser’s staff at the franchisee’s site. The duration and the amount of support are best determined by the nature of the business and the relative maturity of both parties in the relationship. For instance, someone picking up a food service franchise without any prior experience in the industry is certainly likely to need more training and support than a franchisee who is already successfully running other food service locations.

Will going through these steps guarantee that the franchise location or the franchise network succeeds? Perhaps not. But at the very least the framework will provide much more direction and clarity to your business, and will improve the chances of its success. And it’s a whole lot better than flapping around unpredictably during the heat of negotiations with high-energy franchisees in high-potential markets.

(Published in “BusinessWorld SME Handbook 2012-13”, released on Oct. 29, 2012 in New Delhi, and “Indian Management”, the journal of the All India Management Association in January 2013, published by Business Standard.)

There are parallels between Christmas and the growth of modern retail. At Christmas much of the attention is fixed on Santa Claus, while the elves labouring away behind the scenes barely get any air-time. So also in the retail business, the focus very much is on the retailer; the bigger the better.

The Indian retail sector’s sales are estimated at about Rs. 26 lakh crores. Of this, more than 80% of the product requirements are estimated to be met by small or mid-sized businesses. We don’t usually think about these myriad manufacturing and trading companies that make up the retailer’s supply chain. Large branded suppliers – multinational or domestic corporate groups – are still able to make their presence known, but most others remain largely invisible. Many of these fall not just into the small-medium enterprise (SME) classification, but in micro-enterprises, even cottage-scale. Not only do the large retailers source from SMEs directly, those small suppliers in turn work with other upstream SME manufacturers.

Chicken or Egg?

Most of us are inclined to view the growth of modern retail as a precursor to the growth of the SME sector. Actually the reverse is equally true, perhaps even more so. Without a robust base of suppliers having taken the initial risk of setting up better-organised manufacturing facilities and supply chains, modern retailers would not be able to set up their businesses in the first place. We may view modern retailers as the catalyst for this development; however, they are first beneficiaries of SMEs, and only after they achieve critical mass can they catalyse further SME growth.

For instance, through the 1950s and 1960s, as the American and western European economies grew with the baby boom, it was the growth of manufacturing entities and brands – most of them SMEs – that led the charge. As these SMEs consolidated their growth, modern retail chains actually rode upon this. Subsequently, of course, retail chains have put most of their suppliers in the shade in terms of overall size and profitability. Japan in the 1960s and 1970s, Taiwan and Korea during the 1970s and 1980s, and China during the 1990s and 2000s also saw similar manufacturing-led prosperity and consumption, although their growth was driven initially by exports to the west.

In India, too, the tremendous social and economic changes in the last two decades have encouraged a resurgence of the entrepreneurial spirit. The consumer sector is specifically attractive to entrepreneurs as something that is tangible, provides visibility of the business fairly quickly and can be communicated and positioned well within the entrepreneur’s family and social circle, an important driver.

The Rationale for Supporting SMEs

We tend to ignore the fact that India has a workforce estimated at over 750 million, and which is growing annually by 9-10 million. Most of these people will not be employed by the government, or in large organisations or in the much-feted service sector. Allowing for a declining active employment in agriculture, it is manufacturing, trading and retail by small businesses that is needed to keep the economic engine running.

It is also important to remember that growth of SMEs raises prosperity rather more equitably than other sectors. Widespread growing incomes lead to growth in consumption, supporting retail growth, which in turn can feed back into further growth of SMEs. There are enough significant examples of such economic growth worldwide, whether we look at economies such as Western Europe and Japan recovering from the ravages of war, or at the Asian tigers, China and others emerging countries who’s GDPs are not overly dependent on extractive natural resources.

Innovation is another reason to nurture SMEs. Consumer needs are changing more rapidly than ever before in India’s history, with rising incomes, and evolution of life styles and social structures. Small companies are better at foreseeing or at least reacting to rapid changes. Large companies compete on the basis of their sheer scale and aim to maximise returns from every investment made, but small businesses have no choice but to be innovative in some way simply to enter the market or to stay in business. Experimentation with products, business models, service level and commercial practices is what SMEs thrive on. Differentiation is what makes small suppliers attractive to retailers. With the technology and tools available today, we should expect ever increasing amount of innovation to emerge from small rather than large companies in the consumer sector.

Small suppliers also provide diversification of supply risk for individual retailers, as well as for the market overall. Concentrating on a few large sources has, time and again, proven to be a risky approach, whether it is due to the balance of power tilting unduly towards a specific supplier, or simply the risk of product not being available in case the dominant large supplier’s business is affected. A mix of small suppliers is more like a supporting cushion – a bean bag, if you like – which can be adapted and moulded more easily to changing customer needs.

The Role of Modern Retail

There are three areas in which modern retail can be a significantly more important partner for SMEs than traditional channels.

Firstly, modern retail stores are possibly the most effective route to launch new products, or even entirely new categories. As a platform they offer a more consolidated and effective way to reach a new product to consumers, and to gain visibility and acceptability quicker.

As a follow-on to this, due to their innate need to scale-up successful initiatives, a product and or a service proven in one store or region would typically get included in buying plans for the retailer’s stores across the country. This provides a quicker and more efficient scaling up opportunity than the small brand or supplier trying to reach myriad stores across the country on its own.

Third, whether it is quintessentially Indian brands such as Fabindia, or Indian products through international brands and retailers such as Monsoon, Gap, Mothercare, Ikea, Marks & Spencer, these are but a few examples of the access route for small Indian companies to major world markets. In fact, B. Narayanaswamy suggested in an article titled “Opportunity Lost is Gone for Good” (July 2012), that the Indian government should negotiate hard with retailers interested in investing in India to open supply opportunities to the retailers’ businesses globally, rather than putting minimum sourcing requirements for the small Indian business alone which only act more as a constraint than an enabler. The government has, in the past, used such opportunities to allow investment in the consumer sector while enlarging the playing field for Indian businesses – Pepsi is a case in point.

For some companies, modern retail is in fact a launch pad for wider ambitions, as they evolve into building brands themselves. Mrs. Bector’s has grown from a contract supplier to the likes of McDonald’s to launching its branded products not only in India but also in international markets targeting Indian expatriates. Genesis Colors went from being a Satya Paul licensee for ties to being the owner of the brand, and then further to being a partner for many internationally established premium and luxury brands who want to be part of the India growth story. Others become growth vehicles for larger businesses after being acquired by them, such as ColorPlus by Raymond, Fun Foods by Dr. Oetker (Germany) or Anchor by Panasonic (Japan).

Making Business Easier

India is one of the few countries to have a Ministry dedicated to SMEs. However, India’s SME sector is very far from competing effectively with SMEs in other countries.

The German Mittelstand employs more than 70% of Germany’s workforce and is acknowledged to be at the leading edge of technology and efficient business management. Other western European countries such as the UK and Italy also have vibrant SME sectors. All these countries have not only been competitive globally as exporters, but have also co-opted into the growth of industries elsewhere including the BRICs.

Three enormous obstacles stand in the way of the growth of India’s SMEs, as a huge amount of entrepreneurial energy is wasted tackling these areas. The government certainly has a large role to play in all, but one of these is also the responsibility of large corporate groups.

The lack of adequate infrastructure is arguably the most recognised obstacle, followed by compliances that can hold SME operations hostage under outdated laws, many of which have not been reviewed since India had an Empress! Entrepreneurs and businesses lose millions of manhours annually managing these two areas.

However, the one area in which not just the government but large retailers can play a role is in ensuring that SMEs are funded adequately. Bank sources in the form of term loans and working capital limits is only the start. The rest comprises of actual cash flow, much of which are limited by the long credit period demanded by retailers. Payment can stretch as far as 6-8 months, and include sale-or-return terms which squarely place the burden of funding the retailer’s business on the SME supplier. Unless we can mandate better payment practices, the boom of retail giants will be created using millions of dead or barely alive SMEs as building blocks. And what we don’t realise is that the retailers’ own health is also at stake, because lazy payment terms create a maze of poor practices, from product planning at head office all the way to the retail store. For instance, products that will not sell get stocked for short-term margin through placement fees, and block shelf-space and cash flow that affects other suppliers. Promptness of payment to SMEs must become a metric to measure the health of retail companies – after all, what gets measured gets tackled. And for the proponents of “Corporate Social Responsibility” – what better way to promote CSR and wide-ranging economic well-being than by ensuring the the smaller businesses in the ecosystem are not starved of the funds that are rightfully theirs!

SMEs are not just the foundation, but also the beams and pillars on which the glass and steel cathedrals of modern retail are built, and a vital indicator of the economy’s overall health. The sector needs to be tended to proactively and holistically, both by government and by large businesses, as an investment in India’s economic future. Perhaps we will even create some world-beating companies along the way.