Bindu D. Menon, Financial Express
August 28, 2023
Calvin Klein, Levi’s, Adidas and Lacoste are among the several players who are looking to tap the potential of Outlet malls, which are generally located on the peripheries of cities and major highways. These malls are fast replacing the old factory outlets of major brands, which were located in the cities in crowded places.
Real estate developers are also strategically choosing such locations to attract a wider customer base. Value-driven customers are thronging to such malls as it offers branded products at a discounted price ranging from 30-70%.
A few companies FE spoke to said Outlet malls are refined version of factory outlets and companies are able to generate revenue by liquidating stocks at a lower price.
Outlet Malls are a concept popular in the international market and are a huge hit among travellers. They are typically large group of shops outside city periphery that sell apparel, shoes and luggage at a discounted price. In the last decade, Outlet malls have sprung all over the country especially adjoining highways.
In New Delhi’s Jasola district, Pacific Premium, real estate firm has opened premium shopping space. Pacific Group operates around six malls spread across Delhi and Dehradun. Its new premium outlet mall is its largest to date and has four storeys and sizeable parking area.
The mall houses aspirational brands such as Birkenstock, Tommy Hilfiger, CalvinKlein, Levi’s, Adidas, Madame, Lacoste, Vero Moda and American Eagle among others. Other leading brands such as Nykaa and CaratLane, too have signed lease for occupying mall space.
Players like Village Groupe are developing mixed use development space in off location like Khapoli on Mumbai-Pune highway, Ludhiana and even Jaipur highway. A company disclosure says that it is developing over 500,000 sq feet mixed use space off-city limits.
“Outlet malls are a great opportunity for consumers who want to get the touch and feel experience. To that they offer brands at a discounted price is huge attraction for consumers,” said Susil S Dungarwal, promoter, Beyond Squarefeet Advisory, a mall management advisory firm.
Asked if online companies will pose a challenge to Outlet malls, Dungarwal says that there is no competition. “Outlet malls are an impulse destination. A consumer may be travelling along a highway, a good mall with discounted brands will be sure shot attraction,” he said adding growth in private vehicles has given a shot in the arm to Outlet malls.
“Till mid 1990s only 20% of vehicles on highways were private vehicles (cars and buses) and the rest were commercial vehicles (trucks and lorries). However, in 2023, almost 60% of the vehicles on highways are private vehicles,” he said.
Devangshu Dutta, Founder, Third Eyesight, said, “Outlet (discount) stores sit at the confluence of a mutual need. Branded chains with excess inventory to liquidate which they don’t want to carry at their primary stores, and consumers who want lower prices for their purchases”.
He points that outlet malls can offer brands some of the same advantages as regular malls, in terms of acting as footfall magnets, and offer shared services, but at lower costs due to a cheaper location.
“Rather than creating their own standalone outlet stores, brands can take up spaces in an outlet mall. The challenge of maintaining and managing footfall is shifted to the mall. However, as with regular malls, outlet malls need to be located well and need to be also managed well,” he added.
According to consultancy firm Anarock, top cities have over 51 million sq feet of mall stocks across the country with Delhi-NCR, Mumbai Metropolitan Region and Bengaluru accounting for 62% of the total stock.
(Published in Financial Express)
Manu Balachandran, Forbes India
July 28, 2023
Revant Himatsingka doesn’t despise junk food.
The 31-year-old firmly believes that those who consume it also know the perils and long-term risks associated with it. From obesity to heart disease and diabetes, junk food is often counted as a more serious threat to life than even smoking according to some studies. “Most people who consume Coke and cigarettes know they are bad for you and consume them,” Himatsingka says.
Himatsingka, however, has a problem with junk food masquerading as healthy. That’s why over the past few months he has been busy calling out its makers, and in the process taking on some of the world’s biggest FMCG behemoths.
Since April this year, Himatsingka, through his social media profile, Foodpharmer, claims to have taken on almost all the FMCG companies in India, whose products he has reviewed, and in the process has been swamped with lawsuits. Himatsingka has a following of half a million followers on Instagram.
“Food is probably 60-70 percent of what shapes our health,” Himatsingka told Forbes India over a telephone call. “And what is shaping our food today is packaged food, which is very different from what our grandparents grew up eating. Most packaged food is just selling junk and they’re marketing it as healthy. This happens even more in relatively poorer countries.”
Himatsingka began his war against fake claims with a video about Bournvita, made by confectionary maker Mondelez. That video, critiquing the children’s drink for its excessive use of sugar, was shared across social media and on WhatsApp. Himatsingka poked fun at Bournvita’s tagline Tayyari Jeet Ki (preparing for victory), instead suggesting that Bournvita was preparing children for diabetes.
He listed out all the ingredients in Bournvita, debunked claims that the drink is healthy, and remarked that half of a package of Bournvita is sugar, and [it] even contains cancer-causing ingredients.
Trouble soon followed. Mondelez sent Himatsingka a legal notice asking him to take down the video within 24 hours. Coincidentally, the notice came to him on the last day of his notice period at McKinsey where he had been working as a consultant. Unfortunately for Mondelez, the video continues to be in circulation, more so across WhatsApp. Himatsingka took down the video and even issued a statement saying that he had no interest or resources to take on the company in any court cases.
“Most people have Coke once a week,” Himatsingka says. “But people have Bournvita twice a day. So you end up having 14 [servings of] Bournvita in a week. So, the net impact of Bournvita is probably worse than that of Coke.”
“As a growing market, India is potentially a natural “dumping ground” for poor products and processes that have been used by prominent brands in other markets,” Devangshu Dutta, the founder and CEO of management consultancy firm Third Eyesight says. “It is incumbent upon Indian customers to be diligent, picking up cues not only from Indian consumer-activists and but also their counterparts in the developed economies.”
From Kolkata to New York and back
Himatsingka grew up in an upper-middle-class household, with a homemaker mother and a father running his own business in Kolkata.
After his schooling, Himatsingka went to New York to study finance at the New York University’s NYU Stern School of Business where he graduated in finance. For a year after that he worked with a bank in the US. At 22, he ventured out into writing a book, Selfienomics, a self-help comedy book focusing on managing finances, health, religion, death, starting a business, and even completing projects on time.
“I wrote one chapter on how to read a food label even then,” Himatsingka says. “Back then, and even now I believe that it is the most important skill in the 21st century.” While he did secure admission into the illustrious IIM Bangalore, Himatsingka turned it down, instead focussing on his book.
By 2018, Himatsingka went to do an MBA at Wharton and followed it up with a course in nutrition, while also starting work at McKinsey as a consultant. “As a consultant, you work to solve business problems and you try to structure solutions,” Himatsingka says. “We focus on our career when it comes to structuring solutions and being data driven. But I try to extrapolate that into life. In life, one of our most important aspects is health.”
Himatsingka was also concerned by the growing link between cancer and heart diseases to packaged and processed food. In 2019, a study published in the British Medical Journal (BMJ) suggested a possible link between “ultra-processed” foods and cancer. The study defined ultra-processed foods as those lacking vitamins and fibre, which also contain high levels of sugar, fat, and salt. Such ultra-processed food, the study noted, represents as much as half of the daily energy intake in several developed countries.
“This is such a big problem and no one is talking about it,” Himatsingka says. “No one is trying to solve it. So, I thought, I wanted to do something in this space.”
That meant, Himatsingka, who by his own account was making very good money in the US, decided it was time to come back home, and try and do something around awareness. “I’m very social impact driven,” Himatsingka says. “April 1st is when I made the Bournvita video. I made a video showcasing how Bournvita was falsely labelling itself. Their label showed that you get stronger bones and muscles. Then I got a legal notice from Bournvita asking me to take down the video in 24 hours.”
The idea for the Bournvita video, Himatsingka says, came from his concern that a product like Coke had become the face of obesity and junk food, while many others were marketing themselves as healthy, without it being so.
Mondelez, the makers of Bournvita soon retorted that the drink contains nutrients such as Vitamin A, C, D, iron, zinc and copper that help build immunity and have been part of its formulation for 70 years. It also said that every serve of Bournvita has 7.5 grams of added sugar, much less than the recommended limit for children.
imatsingka though found support from unexpected quarters. The Nutrition Advocacy in Public Interest India (NAPi) a think tank comprising independent experts in epidemiology, human nutrition, community nutrition and paediatrics, medical education, administration, and management, issued a statement supporting Himatsingka.
“The food product Bournvita falls under the ultra-processed food (UPF) category based on its ingredients list,” NAPi said in a statement. “This industrial formulation is inherently harmful. There is enough scientific evidence present in the public domain pertaining to the negative impact of increasing consumption of UPFs on human health, which include several chronic diseases such as obesity, diabetes, cardiovascular disease, cancer, and depression (Non-Communicable Diseases-NCDs).”
The National Commission for Protection of Child Rights (NCPCR) also issued a notice to Mondelez asking the company to review and withdraw all misleading advertisements, packaging, and labels. The NCPCR is a statutory body to protect child rights.
Fighting it out now
Personally, for Himatsingka, the pushback from Mondelez couldn’t have come at a worse time. “I had just quit my job. And my family was asking me what I was trying to do with my life. They said ‘you had such a good job, you left all of that, now you are getting into a legal fight’,” Himatsingka says. “So I removed the video as they asked me to. And that got even more attention.”
Since then, Himatsingka has been actively taking on FMCG companies and their products in the country, ranging from ketchup, and chyawanprash to juices and bread among others. Himatsingka recounts having received legal notices from Dabur and even been asked to remove a video by Sting Energy, owned by PepsiCo.
He says his strength, however, comes from many parents who have reached out to him and are thanking his efforts for making them aware of the importance of reading labels. “People are reading labels for the first time and have now started figuring that many of the products are not that healthy,” Himatsingka says.
However, the pressure of the job continues to be heavy. “There is a lot of pressure,” the 31-year-old says. “These companies send legal notices and I have no idea how to deal with it. These are very technical and very dense documents, where they analyse each line and write a paragraph on each line. I once got a 300-page document from one company and they were asking me for a few crores. It’s strenuous.”
What lies ahead?
For now, the 31-year-old says his focus remains steadfast on raising awareness around food.
“Because of the Bournvita controversy, the rollover impact is that all the other companies are also going to get scared now to falsely market themselves,” Himatsingka says. “I cannot think of a human problem that is relatively easy to solve than nutrition labels and it creates massive impact.”
A few weeks ago, Himatsingka raised awareness about the growing consumption of bread in India and how most makers of bread who sell whole wheat or brown bread use more maida, which has less fiber, and is unhealthy. He had also called out juice makers for their use of sugar by comparing various mango juices available in the country.
“When a movie comes out, there are reviews and I can openly say whether I liked a movie or not,” Himatsingka says. “So why can’t I say the same about a food product? I’m just unboxing a product and saying what is there inside it. So I don’t think I’m legally wrong. They can ask me for whatever money they want. But I don’t think they can win on that.”
Along the way, he says he has also seen positive changes in companies. For instance, Himatsingka made a video on ketchup and explained how Maggi Rich Tomato Ketchup has more sugar than tomato in its ingredients. “Last month, they (Nestle) announced that they’re changing the recipe,” Himatsingka says. “They’re reducing their sugar content and they are going to have more tomatoes than sugar. One tiny change like that has such a major impact on the large scale.”
Experts agree that the growing scrutiny about ingredients is certain to give FMCG majors sleepless nights. “Given that food has a disproportionate share in our spend, an enormous impact on our health as well as a tremendous ecological footprint, it is only natural for consumers to question the composition, the origins, and the overall impact of the food that is being sold by leading brands,” says Dutta of Third Eyesight. “Over the last several decades, packaged food has become laden with synthetic flavouring, colouring, and shelf-life-extending chemicals, which are being called into question by activists through blogs and social media. On several occasions, prominent companies are forced to change their product composition or, at the very least, admit to the health-negative implications of their ingredients.”
Meanwhile, over the past three or four weeks, Himatsingka says he hasn’t been flooded with lawsuits. That’s partly because he has become quite careful about how he words his statements, instead focusing only on the merits of his argument.
“There are millions of problems in the world. But most of the problems are very hard to solve, like air pollution. But teaching people how to read a food label is easy. I feel learning how to read a food label is more important than coding in the 21st century, where most of what we’re eating is processed or packaged.”
Indeed, the fight is long. And Himatsingka is only gearing up for more.
(Published in Forbes India)
M. Sriram and Aditya Kalra, Reuters (MUMBAI/NEW DELHI)
June 7, 2023
Starbucks is revamping its strategy to lure Indians, including children, with smaller, cheaper beverages as it looks to expand in small towns amid a fierce challenge from domestic startups in one of its fastest-growing markets.
Among the first foreign coffee brands to enter tea-loving India, the U.S. giant has taken almost 11 years to open 343 stores, in contrast with private equity-backed chains Third Wave and Blue Tokai that opened about 150 in the last three years.
“As you grow in size, you need to get new consumers,” said Sushant Dash, the chief executive of Starbucks in India, adding that the chain’s “pricing play” would help shatter a perception that it is expensive.
The company has launched a six-ounce drink, “Picco”, which starts at $2.24, and milkshakes for $3.33 as part of its revamp to target affluent Indians who prefer smaller servings.
Starbucks plans to open more stores in smaller towns, said an industry source, who spoke on condition of anonymity.
Both its new offerings are unique to India and unavailable in China, Singapore and the United States.
India’s small but fast-growing specialty tea and coffee cafe market is worth $300 million and set to grow 12% each year, Euromonitor estimates. Canada’s Tim Hortons and Britain’s Pret A Manger are also expanding, but have only a handful of outlets.
“Excessively large portion sizes are an American phenomenon,” said Devangshu Dutta, head of retail consultancy Third Eyesight.
“Indian consumers are value-conscious. If adjusting portion sizes down to what is more normal helps make prices accessible, that’s a double win.”
He was among the analysts who felt the move by Starbucks, operating in India in a joint venture with Tata Group, could further boost its sales, which hit a record $132 million in fiscal 2022/23.
Although Starbucks still dominates in India, rivalry is fizzing in the capital, New Delhi, and the technology hub of Bengaluru, where many Third Wave cafes are often as crowded as Starbucks outlets.
“We’ve lost 30 cups a day to them,” said a barista at a Starbucks shop in Delhi that sells 7,500 drinks a month, referring to a Third Wave that opened nearby months ago, but already sells 3,700.
Starbucks has faced homegrown challengers elsewhere, most notably in China, where its 6,200 stores service the biggest market outside the United States.
There, in just the last five years, Luckin Coffee has used discounts to lure customers to its 10,000 mostly pickup or delivery stores.
Bet On Chai
In India, where Starbucks has added domestic touches to its offerings over the years to boost their appeal, it is now stepping up that game, just as global giants McDonald’s and Domino’s have done.
It estimates that just 11% of Indian homes drink coffee, as opposed to 91% drinking tea. Hot milky tea, or “chai” as it is known in Hindi, is sold at roadside stalls by the hundreds of cups each day for as little as 10 rupees (12 U.S. cents).
Starbucks, which offered for years just one milk chai “latte” made with tea syrup, has launched “Indian-inspired” tea offerings laced with spices and cardamom, both favourites in many Indian homes, which start at 185 rupees ($2.24).
The drinks were introduced to attract those who do not drink coffee and shun Starbucks, said Dash, adding the company would retain its focus on coffee and not make chai a primary offering.
The launch of smaller, cheaper beverages in India indicates Starbucks may have seen “a decline in traffic related to a pushback” on higher prices, said Chas Hermann, a U.S.-based restaurant consultant and former Starbucks executive.
Competition, Small Cities Push
In May, people lured by a one-for-one offer queued in a street outside the first Starbucks store in the western city of Aurangabad, a YouTube video showed in scenes reminiscent of when it first opened in India.
But its rivals are catching up and a price war has begun.
Soon after Starbucks’ May launch of $3.33 milkshakes, designed to attract children, Third Wave launched its own range, a fifth cheaper at $2.71.
In Bengaluru, startup investors and founders hold meetings in Third Wave outlets. It has more than 40 stores there, exceeding the 35 of Starbucks, data from real estate analytics firm CRE Matrix shows.
Third Wave’s chief executive, Sushant Goel, said he planned to add 60 to 70 stores every year, with a focus on big cities. He saw Starbucks’ cheaper, small-sized drinks as a response to competition in “an incredibly price-sensitive market”.
Matt Chitharanjan, chief executive of Blue Tokai, said it had “seen success in converting customers from Starbucks”, partly because of lower prices.
While Dash said he was undeterred by competition, Starbucks recognises the threat, although privately.
In one lease deal for a Bengaluru mall reviewed by Reuters, Starbucks inserted a “cafe exclusivity” clause barring the mall owner from allotting space on the same floor to rival “premium” brands, including Third Wave and Blue Tokai.
“Going deeper into smaller cities, beyond the metros, is the only way to grow,” said Ankur Bisen, head of retail at India’s Technopak Advisors.
(Reporting by M. Sriram and Aditya Kalra; Additional reporting by Anushree Fadnavis in New Delhi, Varun Vyas and Euan Rocha in Bengaluru, Miyoung Kim in Singapore, Sophie Yu in Beijing and Hilary Russ in New York; Editing by Clarence Fernandez)
Gargi Sarkar, Inc42
6 May 2023
With one of the largest consumer bases in the world, the Indian retail industry is on a constant upward spiral, thanks to the increase in the purchasing power of Indian consumers and the ever-increasing ecommerce adoption.
Notably, this has helped segments like online beauty and personal care (BPC) sustain and grow faster than the players in the offline space.
According to industry experts, the online BPC market has been growing in the range of 20% to 25% annually, compared to the offline segment at around 8% to 10% a year. According to a IMARC Group report, India’s BPC market size reached $26.3 Bn in 2022 and is expected to reach $38 Bn by 2028, growing at a CAGR of 6.45% between 2023 and 2028.
Notably, in their endeavour to capture this opportunity, new players are entering the BPC space, and the existing ones have started to scale their omnichannel presence.
The newest entrant in the space is Reliance Retail. The retail major forayed into the BPC market with its omnichannel platform, Tira, earlier last month. Along with launching its app, Reliance Retail also opened its flagship Tira store in Mumbai.
It is crucial to note that existing marketplaces like Nykaa and Purplle, and D2C brands such as SUGAR Cosmetics and Mamaearth, too, have started expanding their offline footprint, after scaling up their online presence.
Similarly, offline retailers such as Loreal India, Sephora, and Hindustan Unilever’s Lakme have increased their focus on expanding their online presence via direct-to-consumer websites.
Given that Reliance’s Tira has entered the market with an omnichannel playbook, piggybacking on its parent’s cash reserves, it becomes all the more important to understand what impact it will have in the long run on the existing players and industry dynamics.
According to the industry experts that Inc42 spoke with, the beauty and personal care market offers more than enough opportunities for multiple players to grow, due to multiple favourable factors.
“The BPC segment remains one of the fastest growing categories in consumer retail because the penetration of beauty products has remained relatively low. With increasing awareness, and more disposable income, the BPC segment has witnessed decent growth. Now, since the segment is growing, there is a scope for multiple players to grow. That is why some of the big players have entered into the market,” Ashish Dhir, EVP (consumer and retail), 1Lattice said.
Despite Dhir’s optimism, it is pertinent to note that Nykaa saw some initial pressure on its share prices and overall stock performance with the launch of Tira. Brokerage firm Macquarie said that the entry of new players such as Tira could exacerbate the problems for Nykaa at a time when the competition in the segment is already tough.
In the past, Reliance’s entry into the fashion ecommerce space with Ajio impacted leading existing players like Myntra. Now that we already have an example from the past, coupled with a falling will to spend due to factors like rising unemployment and inflation, it will be interesting to see how Nykaa performs under such pressure.
How Tira Could Threaten Nykaa & Ilks Dominance In The Beauty & Personal Care Space
It is no wonder that Reliance Retail will look at disrupting the market to emerge as a market leader as it has done in every segment.
Compared to sectors such as apparel and telecom, the BPC segment is different, and it is not very easy to scale here the way Nykaa has done over the years, according to Karan Taurani, SVP Research, Elara Capital. He noted that many other players in the past tried to scale but failed.
“Nykaa has emerged as a winner due to several factors such as a superior consumer experience on the app, trustworthiness, and product variety. Currently, the product delivery time is also lesser on Nykaa compared to Tira, although the latter could improve it. Moreover, Nykaa has created a network of influencers over the years, and its approach on social media is very different,” Taurani added.
He, however, highlighted that there will be an initial consumer churn as some customers will try Tira as well, and whether the new venture, Tira, can retain all these customers will depend on the consumer experience it provides.
As per Taurani, marketplaces like Nykaa will see some sort of pinch in terms of demand but will not have a significant impact until Tira offers a differentiated experience. Right now, Tira has very few differentiating factors.
However, we should not forget that Reliance Retail is experienced in building brands and has the heavy financial backing to scale in the offline segment.
Given that many players do not have much experience in the offline segment, they may see a visible impact facing the retail giant in the offline BPC space.
It is important to note that Nykaa’s consolidated net profit fell 70.7% year-on-year (YoY) to INR 8.5 Cr in the December quarter of the financial year 2022-23 (FY23), despite the festive season.
In addition, Mumbai-based beauty ecommerce startup Purplle’s net loss almost quadrupled to INR 203.6 Cr in the financial year 2021-22 (FY22) from INR 52 Cr in FY21.
An optimistic Dhir, however, likes to believe that Tira would only increase the competition in the segment and would not impact the profitability of its rivals, at least in the near term.
Will D2C Beauty & Personal Care Brands Face The Heat?
Along with conglomerate-backed large players such as Tata Cliq and online marketplaces, there are several Indian startups and brands such as mCaffeine, Mamaearth, Sugar and Minimalist, which are looking to capture a big chunk of the ever-increasing BPC market pie.
According to an Inc42 report, BPC will remain one of the fastest-growing D2C segments between 2022 and 2030, growing at a CAGR of 27%.
Talking about Tira’s impact, experts said these (aforementioned) D2C brands will not see any major impact due to two factors.
“Firstly, these brands will have similar arrangements with Tira as they have with Nykaa. Secondly, these brands have created a loyal customer base for the products they offer and they have their recall,” Taurani said.
“While deep-pocketed companies can spend their way into buying the market share, all brands need to be prepared for the long term. Also, for these brands a clear positioning be crucial to stand out, not just in their product and service mix but also the overall customer experience specific to their target audience. This would also give opportunities to several beauty and personal care brands to profitably serve niches that may be too small for the larger companies driving for the market, “Devangshu Dutta, the founder of Third Eyesight, said.
Also, Nykaa and Purplle have a portfolio of private labels, which includes skincare brands such as Dot & Key, Earth Rhythm, and Good Vibes, among others. Hence, it will not be surprising if Tira launches its private labels or acquires small brands to grow its portfolio.
As brands like Dot & Key, and Good Vibes are already direct competitors to these D2C beauty brands, a new player can pose more challenges for them.
What Else Could Work In Tira’s Favour
“Our vision for Tira is to be the leading beauty destination for accessible yet aspirational beauty, one that is inclusive and one that harbours the mission of becoming the most loved beauty retailer in India,” Reliance Retail’s executive director Isha Ambani said at the time of launch in April 2023.
When Reliance entered new segments like telecom and fashion ecommerce with Jio and Ajio, respectively, many of the existing players struggled to sustain in the segment as the Mukesh Ambani-led conglomerate scaled up quickly, thanks to its strong financial position. Hence, it will work as the biggest favourable factor in the beauty and personal care space as well, industry experts believe.
Tira is also expected to lure customers with big discounts. “For Tira, a big chunk of revenue will initially go towards marketing and customer acquisition, at least for the first couple of years, as it is a new brand. More than marketing, Reliance will look at discounting more prominently. Reliance will try to give higher discounts compared to other players,” Taurani said.
He added that Reliance has some expertise in building new platforms, such as Ajio, and a rich talent pool and strong brand exposure.
While players like Tata Cliq, Purplle, and Myntra’s beauty segment have tried to scale up in BPC, none of these players has seen significant growth. Hence, the market consists of one large player, making it easier for a deep-pocket player like Tira to carve its positioning quickly and create a duopoly with Nykaa.
At the time of Tira’s launch, the company said that the brand would offer a curated assortment of the best global and home-grown beauty brands. In terms of its offline play, Reliance Retail can leverage partnerships with global beauty brands and suppliers to get better deals. As it is looking at an omnichannel play at an entry stage itself, it may be able to gain market share from smaller beauty retailers, especially in bigger cities.
The Tira offline store will have the latest beauty tech tools such as virtual try-on to create customised looks and a skin analyser that will personalise and assist consumers in making purchasing decisions based on their needs, the company said.
On the luxury side, Reliance Retail is also directly targeting the market which has higher margins and could eat into the margins of Nykaa easily. It must be noted that Nykaa’s Luxe is still in its infancy.
While it is true that Tira will increase the competition in the BPC segment, it is not likely to rewrite the industry’s future over the next couple of years. Tira currently has very few differentiating factors in both the online and offline segments. Additionally, in the offline segment, Tira has opened only one store while Nykaa already has 141 physical stores across 56 Indian cities, as shared in its Q3 earnings report.
Even though there are glaring differences, some industry experts see Tira’s journey to be the same as that of Nykaa, going ahead.
(Published in Inc42)
Tushar Goenka, Financial Express
March 13, 2023
Flipkart Supermart, the online grocery delivery platform of the Walmart-owned ecommerce company, is betting on regional brands to unlock the next phase of growth. Over the past few months, the e-tailer has been listing brands and making them more readily available in cities where their recall value is high.
The regional push targets staples and is pronounced across categories such as atta, tea, pulses, among others. So, instead of offering, say, just the Tata brand of tea, Flipkart also showcases local favourites like Nameri Tea for the residents of Assam. Similarly, instead of selling Nestle’s Maggi and ITC’s Yippie noodles across the country, Flipkart will also let customers pick brands selling Korean noodles, popular among north east teenagers.
The shift in focus is vital in a country whose grocery bill totals $600 billion, of which offline sales account for a staggering $592 billion, while online is a much smaller $8 billion. Further, of the total grocery bill, the share of regional brands at around 60% is much higher than organised national brands that stood at 40%, according to rough estimates from EY.
So far, the plan seems to have worked for the company. Smrithi Ravichandran, head of grocery, says her unit has grown 2.5X between June 2022 and February 2023.
The reason for this shift in focus is easy to understand. In Ravichandran’s own words, “The Indian palette changes every 150 kilometres.” Consider this. The kind of toor daal consumed in Chennai is different from that consumed in Madurai. That is, even within a single state (Tamil Nadu in this case) there is a huge difference in preferences. And that is true for most categories.
Next, look at the potential. Ravichandran’s department sees about 65-70% of its orders coming from Tier 2 and beyond, with metros and Tier 1 cities accounting for the rest.
Analysts believe Flipkart’s initiative is a step in the right direction. Says Devangshu Dutta, CEO, Third Eyesight, a retail consulting firm, “Focusing on regional brands makes eminent sense not just to cater to tastes in a particular geography but to also serve consumers who have moved away from their hometowns and might find it difficult to buy their chosen brands.”
That said, catering to regional preferences is easier said than done. “If one has the same selection even for the same state, it doesn’t help. But there is a cost in catering to that varied choice and we’ll need to operate more fulfilment centres,” Ravichandran adds.
From what to how
Flipkart’s plans to double down on the regional selection in grocery will mean partnering with some of them. Here consumer data available with Flipkart will come in handy, says Ravichandran.
Angshuman Bhattacharya, national leader, consumer product and retail, EY India, believes that by offering more regional brands in categories like atta, Flipkart will deepen penetration, giving smaller players a chance to tap a wider customer base. “Smaller, regional brands will be hungrier for growth and may end up offering healthier margins than what a nationalised player would do,” he adds.
In this, Flipkart’s approach is similar to that of Future Retail under Kishore Biyani, who underscored the importance of a regional brand-led strategy. “The Future Group had launched around 10 private labels of atta and that is no easy feat. A regional brand-led focus might prompt Flipkart to toy with the idea of launching its private labels at a later stage. Or it may even end up asking the regional brands to package staples under its brand, thereby yielding much higher margins,” Bhattacharya of EY points out.
Flipkart isn’t drawing the line just yet. The company will invest in technology to tell customers about the origin of the products they order. “Conscious consumerism is another aspect we will focus on. So, on the packet of a toor daal, consumers will have traceability regarding where and when exactly the daal was harvested,” Ravichandran adds.
This journey will not be a cakewalk for Flipkart. Analysts point out that to be able to partner with Flipkart and address its customer base of over 450 million, smaller brands must up their supply chain spends. That apart, there is always the fear that if the e-commerce giant does not get the desired results, it might discontinue such tie-ups, leaving the regional players in the lurch. Flipkart must allay these fears right at the outset.
(Published in Financial Express)