Sagar Malviya, Economic Times
Mumbai, 14 December 2024

Fast fashion was on a slow lane in the last fiscal year. Sales growth slowed for top retailers and fast fashion brands, show the latest regulatory filings of Marks & Spencer, Zara, H&M, Levi’s, Lifestyle, Uniqlo, Benetton and Celio. The bottom line too had taken a hit, with most brands posting lower profits in the fiscal year ended March 31. Sales growth of H&M and Zara fell from 40% in FY23 to 11% and 8% in FY24, show the filings with the Registrar of Companies. Levi’s growth slowed to 4% from 54% in FY23, while that of Uniqlo halved to 31% from 60%.

The current year is not looking good either, as sticky inflation and stagnant income weigh on consumer spending on discretionary products, say experts.

Devangshu Dutta, founder of retail consulting firm Third Eyesight, said the job market has been under pressure and slower income growth for urban consumer impacted demand, a trend likely to continue even during FY25.

“There is a visible slowdown led by the urban middle class who buy branded products. These brands have been targeting young upwardly mobile consumers, who are tightening the purse strings due to the current economic circumstances of hiring slack and fewer jobs,” said Dutta. “The situation is not hunky-dory at all, and this will continue over the next few quarters.”

Being the world’s most populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing. But most international and premium brands have been competing for a relatively narrow slice of the population pie in large urban centres.

Over the past few years, top global apparel and fast fashion brands struck a strong chord with young customers, racking up sales growth of between 40% and 60% in FY23, bucking the trend in a market where the overall demand for discretionary products started slowing down. This has reversed now.

Consumers started reducing non-essential spending, such as on apparel, lifestyle products, electronics and dining out since early last year due to high inflation, increase in interest rates, job losses in sectors like startups and IT, and an overall slowdown in the economy.

According to the Retailers Association of India (RAI), sales growth in organised retail segments such as apparel, footwear, beauty and quick service restaurants halved to 9% last year and slowed further to about 5% in the first six months in the current fiscal year. This slowdown came after a surge in spending across segments-from clothes to cars-in the post-pandemic period, triggered by revenge shopping.

“The base post-pandemic was extremely high, and that kind of growth is not sustainable as there is nothing spectacular in economy to drive demand,” said Kumar Rajagopalan, chief executive officer at the RAI that represents organised retailers. “Our bet was on the festive and wedding season, but we will have to wait and watch until next year for the performance numbers,” he said.

(Published in Economic Times)

Sagar Malviya, Economic Times

4 December 2024

Demand for sportswear from running shoes to joggers and yoga mats slowed down for leading firms such as Puma, Adidas, Nike, Skechers and Asics, halting their sprint since the easing of the Covid-19 pandemic when they doubled their sales in two years.

Sportswear firms have reported 1-25% year-on-year increase for 2023-24, down from 35-85% increase for the previous financial year, according to the latest regulatory filings. While demand for fitness wear and sports equipment for disciplines other than cricket grew as people prioritised health with the onset of Covid-19, consumers cut back on discretionary spends across categories over the past six to eight quarters.

Experts said companies capitalised on the popularity of more casual styles in the wake of the pandemic, a trend that has subsided now although people are more health conscious than ever. A broader slowdown, especially in cities, hurt premium categories including sportswear, which are completely dominated by global players.

“Sportswear or footwear has a slower replacement cycle than apparel and lifestyle products. Also, there is a distinct slowdown as it all comes down to income growth versus inflation. So, a longer term potential still remains for the segment but there is a short-term consumption stress,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight.

With a population of 1.4 billion, India is among the fastest growing and largest international markets for footwear companies and over the years companies such as Under Armour, Asics and Skechers have expanded aggressively in the country.

Puma India managing director Karthik Balagopalan said the category has outpaced market growth with mid to high single digit growth rates even as subdued demand has lagged expectations.

“When it comes to health and fitness, consumers continue to spend on performance products and our sports-first strategy also leans towards that. Our ambition continues to grow at or be above market CAGR (compound annual growth rate) over the mid-term, and we think we are in a good place with our back-end infrastructure, our product portfolio and pipeline, BIS (Bureau of Indian Standards) readiness and our best-in-class team, who will continue to cement and retain our lead on competition,” he said.

In October, Foot Locker entered India through a long-term licensing agreement with Metro Brands, which will own and operate stores, while Nykaa Fashion will be its exclusive e-commerce partner.

However, there are challenges. In August this year, the government made it mandatory for footwear companies to obtain BIS certification for more than a dozen footwear products including sports brands. This impacted sales even last year as BIS had not issued licences to several foreign brands whose products were manufactured outside India, which in turn, forced brands to cut down on supplies.

American footwear firm Skechers said in its last earnings call that it had been growing exceptionally well in India for several years but there was a bit of an anomaly in part because of some of the regulatory changes that it had not yet fully responded to.

“We continue to work closely with both our India team and regulators to further advance our local sourcing strategy. We are seeing positive trends and remain optimistic about the progress in this important market. We see tremendous opportunity, not only in our lifestyle business, but also in performance,” Skechers chief operating officer David Weinberg told analysts.

(Published in Economic Times)

Writankar Mukherjee, Economic Times
7 October 2024

Reliance Retail has initiated efforts to enter the thriving quick commerce market in a move that is set to escalate competition for Zomato-owned Blinkit, Swiggy Instamart and BigBasket, among others. The country’s largest retailer has started offering quick commerce services in select areas in Navi Mumbai and Bengaluru through its ecommerce platform JioMart since last weekend.

It will initially sell grocery items from its retail stores totalling about 3,000 nationwide, eventually adding value fashion and small electronic products such as smartphones, laptops and speakers, a senior executive said. All orders will be fulfilled from its own network of stores including Reliance Digital and Trends.

The retail arm of Reliance Industries plans to rapidly scale up its quick commerce venture pan-India by this month-end with the aim to deliver most orders in 10-15 minutes and the rest within 30 minutes, the executive said. The company will use its acquired logistics service Grab for the fulfilment.

Reliance, however, doesn’t have any plan to set up dark stores or neighbourhood warehouses, unlike other quick commerce operators, the executive said. Analysts said this may become a challenge in delivering orders within 30 minutes in large cities where traffic is high during peak hours.

To entice customers, Reliance won’t charge any delivery fee, platform fee or surge fee irrespective of the order value, and keep a major focus on untapped smaller cities and towns where quick commerce operators like Blinkit are yet to enter, the executive said. Other platforms have a delivery fee and platform fee.

Reliance plans to offer a wider choice of products of 10,000-12,000 stock keeping units by linking its entire store inventory to the quick commerce business, which too is much more than rivals.

Eventually, the company aims to cover 1,150 cities spanning 5,000 pin codes where it runs grocery stores. The executive said the company would target a bigger share of business from towns and smaller cities hitherto untapped by quick commerce firms.

“Reliance has reworked the way orders are delivered for JioMart. Earlier, orders had a scheduled delivery taking 1-2 days by small trucks who would take multiple orders and deliver them one by one. Now, all grocery orders will be quick commerce where one delivery bike or cycle will deliver one order. Each grocery store will cover a 3 KM radius,” the executive said.

Earlier this year, the company tried to reduce JioMart delivery timings to a few hours or at least the same day under its hyperlocal initiative. It has fine-tuned the process further to 10-30 minute delivery. “This has become a top-of-the-kind requirement in the market right now,” the executive said.

A spokesperson for Reliance Retail didn’t respond to ET’s queries.

Devangshu Dutta, chief executive at consulting firm Third Eyesight, said Reliance can ultimately use a blended approach of quick commerce deliveries in areas near its stores and scheduled deliveries a bit far away.

“Since they are in a market share acquisition mode in quick commerce, charging no transaction fees and offering higher discounts on products is a given. There is significant scope for deep-pocketed players like Reliance to strengthen presence in quick commerce. They have aggressively backed other experiments in the retail business once they worked, and may do it again,” said Dutta.

For fast-moving consumer goods companies, quick commerce is the fastest growing channel, accounting for 30-35% of total online sales.

(Published in Economic Times)

MG Arun, India Today
Aug 31, 2024

Nearly five years after the Centre brought in norms to rein in multinational e-commerce companies operating in India, Union commerce minister Piyush Goyal sparked fresh controversy by raising concerns over the rapid expansion of e-commerce. He also drew attention to the pricing strategies used by some e-commerce firms, questioning what he termed “predatory pricing”.

“Are we going to cause huge, social disruption with this massive growth of e-commerce? I don’t see it as a matter of pride that half our market may become part of the e-commerce network 10 years from now; it is a matter of concern,” Goyal said at an event in New Delhi last week.

His comments come at a time when the ecommerce business in India is growing exponentially. Estimated at $83 billion (around Rs 7 lakh crore) as of FY22, the market is expected to grow to $150 billion (Rs 12.6 lakh crore) by FY26. The growth will be due to multiple levers: a growing middle class, rising internet penetration, the proliferation of smartphones, convenience of online shopping and increasing digitisation of payments. The overall Indian retail market was pegged at $820 billion (Rs 69 lakh crore) in 2023, according to a report published by the Boston Consulting Group and the Retailers Association of India. E-commerce still comprises only about 7 per cent of that, as per Invest India.

The Indian e-commerce market is dominated by global giants, including Amazon and Walmart (which took over Flipkart in 2018). They, along with domestic players, offer huge discounted prices compared to retail prices, which drives online sales significantly. In FY23, Amazon Seller Services and Flipkart posted Rs 4,854 crore and Rs 4,891 crore losses, respectively. Goyal’s argument is that these losses are due to their predatory pricing.

“Is predatory pricing policy good for the country?” Goyal asked, while stressing the need for a balanced evaluation of e-commerce’s effects, particularly on traditional retailers such as restaurants, pharmacies and local stores. “I’m not wishing away ecommerce—it’s there to stay,” he said. Later, he said e-commerce uses technology that aids convenience. But there are 100 million small retailers whose livelihood depends on their businesses.

The Centre has specific laws that permit foreign direct investment (FDI) in e-commerce exclusively for business-to-business (B2B) transactions. However, according to Goyal, these laws have not been followed entirely in letter and spirit. Currently, India does not allow FDI in the inventory-based model of e-commerce, where e-commerce entities own and directly sell goods and services to consumers (B2C). FDI is permitted only in firms operating through a marketplace model, where an e-commerce entity provides a platform on a digital or electronic network to facilitate transactions between buyers and sellers (B2B).

The country’s laws also stipulate that in marketplace models, e-commerce entities cannot ‘directly or indirectly influence the sale price of goods or services’ and must maintain a ‘level playing field’. Entities in the marketplace model re allowed to transact with sellers registered on their platform on a B2B basis. However, each seller or its group company is not permitted to sell more than 25 per cent of the total sales of the marketplace model entity.

Goyal said certain structures have been created to suit large e-commerce players with “deep pockets”. Algorithms have been used to drive consumer choice and preference. For instance, several pharmacies have disappeared, he said, and a few large chains are dominating the retail space. He invoked the importance of platforms like the Open Network for Digital Commerce where small businesses can sell their products.

E-commerce firms counter the argument on predatory pricing. “It is the sellers’ discretion as to what price they should sell at,” says an industry source. The e-commerce player who provides the platform seldom has a role in it, he explains. “Sellers could be doing clearance sales or liquidation of old products at cheaper prices. Some sellers also source products at manufacturing cost and park it with e-commerce firms instead of involving warehousing agents. This helps cut their overhead costs and allows them to offer lower prices on the platform,” he adds.

Some experts are of the view that the government should not step in with controls and allow the market forces to play their role in determining prices. Price controls may lead to shortages, inferior product quality and the rise of illegal markets. Moreover, the Competition Commission of India (CCI), which is mandated to act against monopolies, may be given more teeth. It is ironical that, on the one hand, the Centre wants more FDI to flow in, but places more and more controls on foreign players on the other hand. At the core are the interests of small traders and retailers, a key section of the electorate.

Others argue that the government has a role to ensure that there is fair competition. “It is not just small retailers the government would be speaking for, but for large domestic players too,” says Devangshu Dutta, founder of consultancy firm Third Eyesight, emphasising that the government’s role should be to establish laws and practices that promote fairness.

According to him, it is no secret that e-commerce has grown through discounts. “For large e-commerce firms, market acquisition happens by acquiring a share of the consumer’s mind and through pricing. When a large sum is spent on advertisements, it is for acquiring the mind share of the consumer,” he says. “Pricing matters in a big way too. Whether you call it predatory pricing or market acquisition pricing depends on which side of the fence you are.”

(This article was originally published in the India Today edition dated September 9, 2024)

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