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April 24, 2022
Written By Christina Moniz
Brand and marketing experts, while expressing surprise at the development, as the two labels enjoy significant brand equity, also noted that if true, it highlights the challenges faced by legacy brands, with international brands growing their footprint in the country.
Apparel and textile major Raymond may be in the midst of talks to sell its prized apparel brands Park Avenue and ColorPlus, amid rising speculation about the future of the company’s apparel business. As per media reports, the company is in talks with Danish retail group Bestseller — which houses labels such as Jack & Jones, Vero Moda and Only — for the sale, seeking a valuation of around Rs 500 crore for ColorPlus, and even more for Park Avenue.
Brand and marketing experts, while expressing surprise at the development, as the two labels enjoy significant brand equity, also noted that if true, it highlights the challenges faced by legacy brands, with international brands growing their footprint in the country. Also, legacy brands, especially in the formal wear category, have been facing headwinds ever since the pandemic led to a work-from-home culture.
However, Sunil Kataria, the newly-appointed CEO of lifestyle business for Raymond, told FE these reports are “speculative”, stating that both Park Avenue and ColorPlus currently account for close to 50% of the company’s apparel business. In September last year, the board had approved the demerger of Raymond’s apparel business, which, at that time, was being managed by a 100% subsidiary of Raymond Ltd, Raymond Apparels, explains Kataria. The demerger covers all of the company’s ‘power brands’ — Park Avenue, Raymond Ready to Wear, ColorPlus and Parx.
“We want to double our apparel business revenues in the next three years. We ended up doing business of over Rs 300 crore in Q3 FY22, even at a time when the Covid-19 impact was still there, and that is the clearest proof that the sale of our brands is not on the cards,” asserts Kataria. The company also claims to have plans to further expand its retail footprint for Park Avenue, ColorPlus and even the newly-launched Ethnix brand. Kataria is betting big on the upcoming wedding season and the resurgence of travel in the next few months to drive growth.
Raymond currently has a retail footprint of close to 1,500 stores across 600 cities, of which 300 or so are exclusive outlets for brands like Park Avenue, Parx and ColorPlus.
For Samit Sinha, founder & MD, Alchemist Brand Consulting, said the reports of the sale of these two labels are surprising since both enjoy significant brand equity. “For a long time, Raymond and Park Avenue have been inextricably linked. Independent of its marketing performance, Raymond as a brand continues to hold great aspirational value and still holds its own despite the presence of big international labels,” he remarked, noting that the reported `500-crore valuation would be much below what the brand could command.
On the flip side, the speculation about the sale of these brands also highlights the new reality facing legacy brands in the retail segment — particularly in the formal wear category, with ‘work from home’ eclipsing professional lives. Offline-heavy Raymond has been no exception, with its business being impacted by the pandemic and the consumer shift to online shopping, observes business strategist Lloyd Mathias. “Apparel retailing is a competitive space, and many international brands have been increasing their retail footprint in India. These global companies with deep pockets will continue to grow in size and scale, and penetrate into smaller towns and cities,” points out Mathias. This means that brands like Park Avenue and ColorPlus will face serious challenges in sustaining their growth.
Interestingly, over the last three years, Raymond has increased its footprint in Tier III and IV markets as a part of its growth strategy. Devangshu Dutta, CEO of retail consultancy Third Eyesight, states that when a brand seeks to widen its presence in smaller markets, it is usually because it is facing headwinds in terms of growth, or because there is saturation in demand from the big markets, on account of the large number of international labels entering the country. “The challenge in smaller cities, though, is that the sales density you can achieve is also much lower as compared to the larger ones. You have to have an operation that is growing in terms of topline while also running efficiently to make this kind of expansion strategy successful,” Dutta explains.
Raymond’s Kataria adds that the company will continue to invest in these smaller markets and leverage its current brand equity.
Source: financialexpress
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April 24, 2022
Written By Suvashree Ghosh, Bijou George, and Sankalp Phartiyal
It was a contentious plan to repay overseas bondholders in full that brought what would have been India’s biggest retail deal to a grinding halt.
Debt-laden Future Retail Ltd.’s offshore bondholders — a relatively smaller part of the creditor pool — were promised 100% payment in the rescue offer from billionaire Mukesh Ambani, according to people with knowledge of the matter. Indian lenders were asked to take a haircut of as much as 66%, the people added, asking not to be identified discussing confidential information.
The unequal treatment led to the move last week, when the local banks rebuffed the $3.2 billion offer from Ambani’s conglomerate. Reliance Industries Ltd. announced the purchase plan in August 2020 but struggled to complete the transaction in the face of legal challenges mounted by Amazon.com Inc., which argued it had the first right of refusal contractually.
Bank of India and State Bank of India, the main bankers to Future Retail, didn’t immediately respond to emails seeking comment on reasons for voting down the deal. Representatives for Future Group and Reliance also didn’t immediately comment.
State-run lenders risked probes from federal agencies if they accepted these discriminatory terms, they said, explaining their preference now for a court-mediated insolvency process where bids are called in and there’s no risk of them being accused of cutting a bad deal. Bank of India has already requested an Indian court to initiate the process.
Hard-Nosed Decision
The hard-nosed decision by Indian banks has pushed the teetering Future Retail, which ran one of the nation’s largest retail grocery chains before the pandemic struck, one step closer to bankruptcy. Future Retail is almost certain to default on its $500 million bond coupon payment due July 22, S&P Global Ratings said Tuesday, while downgrading the company’s ratings deeper into junk territory.
The lenders’ action has also taken the wind out of a tortuous two-year-old litigation between Reliance and Jeff Bezos-owned Amazon — the e-tailer had started arbitration proceedings in Singapore to block the deal — but left the door open for Ambani to snag these retail assets, possibly at an even cheaper price, under the bankruptcy process.
“Reliance and other parties could be eligible to bid for its assets by submitting their resolution plans” even if Future Retail ends up in bankruptcy, according to Satwinder Singh, New Delhi-based partner at law firm Vaish Associates Advocates. “This would also lead to moratorium on any or all ongoing arbitration proceedings against Future.”
While the local lenders were agreeable to the deal when it was first announced, a lot changed in the past year or so, the people said. While the Amazon lawsuit dragged on, the asset value eroded and the pandemic worsened the cash crunch at Future Retail that began defaulting on its debt repayments.
Secured Indian lenders were promised recoveries ranging between 34% to 88% of the total $4 billion in dues and even those payouts were staggered over seven years, the people said.
Bloodless Coup
Reliance dealt a body blow to the Kishore Biyani-led Future Group in February when it quietly began poaching employees and taking over rental leases of hundreds of stores earlier run by Future Retail and Future Lifestyle Fashions Ltd. Ambani’s bloodless coup prompted Amazon to suggest settlement talks on the bitter dispute and alarmed Future’s investors and lenders who worried about asset-stripping.
Reliance’s unexpected takeover of Future’s stores eroded bankers’ confidence in the deal as it stripped off value from the chain and potentially could erode Reliance’s offer terms.
The out-of-court truce talks between Amazon, Future and Reliance collapsed soon after the store-purchases were initiated, the companies informed India’s top court on March 15. Amazon will continue with its arbitration proceedings against Future Group in Singapore, according to a person familiar with the matter, who asked not to be identified as the deliberations are private.
“A major turning point was when Reliance physically took over Future’s stores, which turned it into a no-holds barred situation,” said Devangshu Dutta, head of New Delhi-based retail consultancy Third Eyesight. “Before this the battle was being fought in courts and across the negotiating table. But at this point it moved over to the real business.”
Source: bloomberg
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March 24, 2022
Written By Aditya Kalra & Abhirup Roy
MUMBAI, March 6 (Reuters) – At a large Future Retail (FRTL.NS) supermarket in Mumbai last week, workers were unloading hundreds of bright blue grocery crates belonging to India’s biggest retailer Reliance.
Prospective customers were turned back by security, disappointed at the closed state of the store that still carries the signage of Future’s biggest brand, Big Bazaar, but which will likely soon be rebranded as a Reliance outlet.
Across India, similar scenes are being played out as Reliance Industries (RELI.NS), India’s biggest conglomerate run by Mukesh Ambani, the country’s richest man, presses ahead with a shock de facto takeover of prized retail real estate that Amazon.com Inc has been keen to take part-ownership of.
The high-profile bitter dispute between corporate titans in which Amazon has sought to block Reliance’s planned $3.4 billion purchase of Future Group’s retail assets is currently before India’s Supreme Court.
Reliance’s takeover began with utmost stealth on the night of Feb. 25 when its staff began arriving at Future stores. Many in Future’s management were in the dark about the plans as store employees from all over the country frantically began to call, according to people with direct knowledge of the matter.
“It was tense, everybody was panicking. We didn’t know who they were. They wanted access and seniors didn’t know about it,” a New Delhi Big Bazaar store employee said, describing what happened around 8 p.m. that day.
At a Future store in Sonipat town in northern Haryana state, announcements were made asking customers to leave as Reliance seized control, one source said. In Vadodara in western Gujarat, Future employees arriving for work the next morning were asked to go back home with no explanation, said another source.
Citing unpaid payments by Future, Reliance has taken control of operations of some 200 Big Bazaar stores and has plans to seize another 250 of Future’s retail outlets. Combined, they represent the crown jewels of Future’s retail network and around a third of all Future outlets. read more
Although Reliance had not played a large public role in the legal dispute, it had, according to sources, for some months assumed many of the leases held by cash-strapped Future, India’s No. 2 retailer and Amazon’s estranged business partner.
Reliance’s sudden possession of the stores appears to have landed what some analysts are calling a coup de grace that spoils Amazon’s chances of untangling the transfer of Future’s assets to Reliance. That’s despite a series of legal battles won by the U.S. e-commerce giant to date blocking the 2020 deal announced between the two Indian companies.
“What will Amazon fight for now?” said a source close to the U.S. company with knowledge of the legal dispute. “The shops are gone.”
Representatives for Reliance, Amazon and Future did not respond to Reuters queries for this article. Sources asked not to be identified due to the sensitive nature of the dispute.
AFTER THE TAKEOVER, TALKS
Future Retail said on Feb. 26 it was “scaling down its operations” to cut losses although it made no mention of Reliance in its statement. Future Group as a whole has more than $4 billion in debt.
Reliance plans to retain Future’s employees at the stores it takes over, sources have said.
Amazon, which has a stake in a separate Future Group unit that it argues prevents Future from selling retail assets without its permission, has called the supermarkets and other stores an “irreplaceable” network in a sector worth $900 billion in revenues annually.
The legal wrangles had over time become increasingly high-stakes and marked by ugly rhetoric. At one point, Amazon sought for Future Chief Executive Kishore Biyani to be detained in prison for disobeying a legal order. And Future once likened Amazon to Alexander the Great and his “ruthless ambition to scorch the earth”.
But on Thursday, six days after Reliance’s move, Amazon at a Supreme Court hearing unexpectedly called for cordial talks to end the dispute – a proposal Future agreed to.
“People have taken over shops … let’s at least have a conversation,” Amazon’s lawyer Gopal Subramanium said.
Discussions are expected to begin soon. read more
Whatever the outcome of the talks, analysts say Amazon had gravely underestimated Reliance.
“If anybody should have seen this coming, it should have been Amazon and they should have prepared against it,” said Devangshu Dutta of retail consultancy Third Eyesight.
“Clearly, they didn’t.”
Source: reuters
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November 28, 2021
By Rasul Bailay & Writankar Mukherjee, Economic Times
November 27, 2021
Reliance Retail aims to be one of the world’s top retailers, but for the last couple of years, it has been a buyer, not a seller. It has bought a string of retail brands — from online pharmacy Netmeds and online furniture retailer Urban Ladder to digital lingerie seller Zivame, online grocer MilkBasket and haute couture label Ritu Kumar. The latest acquisition was Sri Lankan lingerie brand Amante.
These acquisitions are crucial cogs in Reliance Retail’s further push into brick-and-mortar and ecommerce, and are part of Mukesh Ambani-led Reliance Industries Ltd (RIL) unit’s larger strategy: To break into the global top ten retailers. India’s largest retailer (by sales as well as by the number of stores) is currently ranked 53rd in the world, according to Deloitte’s Global Powers of Retailing 2021. Reliance Retail reported an annual revenue of $22 billion and a net profit of $750 million for the fiscal year ending March 2021.
At the same time, the company is looking beyond pure retailing. It’s pursuing a larger play to tap into the growing pie of the country’s overall consumption story — from contract manufacturing to distribution of everything from affordable fashion and consumer electronics to grocery products in India’s $850 billion annual retail market that is expected to swell to $1.3 trillion in the next few years. (Reliance did not respond to ET’s questionnaire.)
Analysts say Reliance’s overall plan is to engage India’s burgeoning consumers in its ecosystem one way or the other at any given point of time: shopping in its vast network of physical stores or on JioMart ecommerce platform, using Jio’s mobile or WiFi networks, watching movies on Jio Cinema, paying through Jio wallet so on and so forth that it is dubbed by the petroleum-to-telecommunications conglomerate as “retail plus” strategy.
“Their plan is to weave their products and services so deeply into your life that from morning to evening you are spending time and money on their networks either directly or indirectly,” says a top executive of an online grocery retailer. “Their idea is to constantly keep consumers engaged in a Jio bubble or in a Jio world.” The executive estimates India has a middle class of around 40 crore people. “Even if they succeed in capturing 10% of that wallet share, it is going to be huge,” he says.
That’s the reason Reliance Retail is betting big on business-to-business (B2B) ecommerce, with a digital wholesale marketplace along the lines of Alibaba for products such as smartphones, televisions, garments and grocery items, among other products, according to people aware of the plan. It’s looking to service a whole gamut of retailers in cities and villages.
Reliance has already started distributing its licencee products of Kelvinator- and BPL-branded consumer electronic items and its smartphone JioPhone Next, produced in collaboration with Google, to retailers outside of Reliance’s stable. The company also boasts a whole host of private brands and many of them are making inroads into general trade.
“The market for modern retail and ecommerce put together would be 15-20% in India. The rest 80% is still in the traditional market. If Reliance can make an entry into the traditional market and partner the smaller stores, the opportunity for growth and revenue is much more,” says an industry executive aware of the plans.
“Reliance’s approach is not to be a threat to small stores or merchants, but to be their enabler, provide them merchandise at best wholesale rates, upgrade their stores and even list them on their ecommerce platforms to help them reach newer consumers,” he adds.
Reliance is doing exactly that. Earlier this year, it started supplying Puric InstaSafe-branded FMCG products like soaps, home disinfectants and sanitisers to kiranas in Punjab and West Bengal. It is planning to roll these items nationwide. The company has put in place a marketing team for the first time to push these products. Similarly, B2B portal Ajio Business is selling T-shirts for Rs 79 onwards, a pair of jeans for Rs 220 and shirts for Rs 170 onwards to small businesses. Last quarter, Reliance Retail forayed into the wholesale business of medicines through Netmeds by roping in neighbourhood pharmacies under its B2B initiative.
These are some of the steps in the conglomerate’s bet not just on pure retail play but on end-to-end gameplay in the retail ecosystem, controlling manufacturing, wholesale, supply chain, ecommerce and payments.
To augment its digital wholesale plans, Reliance Retail has already converted its network of cash-and-carry outlets into fulfilment centres.
Analysts say Reliance’s ambitions are long-term and capital intensive and the company is ready for the long haul and to spend. “Reliance’s plan to rope in and aggregate many elements together — retailers, B2B buyers, suppliers, small players — and bring them on board takes time and is a capital-hungry business,” says Devangshu Dutta, chief executive of consulting firm Third Eyesight. “But controlling end-to-end is Reliance’s game plan in any business, including telecom, where it spans the entire value chain of not just providing the mobile network but also a digital interface with consumers.”
In a bid to feed its ambitious consumption plans, Reliance Retail is lapping up stores and warehouses nationwide to service both ecommerce and B2B sales through its “new commerce” omnichannel plans that will also involve legions of kiranas as last-mile delivery agents as well as buyers of Reliance’s products. Reliance Retail, which operates more than 13,000 stores of various formats, plans to open around 5,000 outlets of its Smart Point that would entail a convenience store, a pharmacy, agnostic centre, a telecom services and financial services products outlet all rolled into one across the country.
Reliance is planning to take this format to even tehsils, according to sources. Real estate agents and mall executives say Reliance is scouting for space for supermarkets, fashion outlets and jewellery and footwear stores.
They say Reliance is also planning to enter newer retail formats like a department store chain to compete with Shoppers Stop and Lifestyle. Also in the works is a Sephora-style beauty and cosmetics chain, they say.
“We will focus on expanding our store footprint multifold this year with co-located delivery hubs over the next few years. They will provide a strong network to reach and serve millions of merchants and customers,” Ambani said at the last AGM of shareholders.
Deloitte’s Global Powers of Retailing 2021 report ranked Reliance Retail as the world’s second fastest growing retailer, behind South Korea’s Coupang Corp.
Global financial and tech titans have taken notice of Reliance Retail’s play and pumped billions of dollars into it. Last year, the holding company Reliance Retail Ventures Ltd raised Rs 47,265 crore by selling about 10% stake to some of the biggest names in global private equity, including Silver Lake, KKR, General Atlantic, Abu Dhabi Investment Authority and TPG.
Reliance will continue with its acquisition spree, say analysts. However, Reliance Retail’s largest, the Rs 25,000 crore acquisition of Future Group, is bogged down by Amazon’s opposition to the proposed deal.
(Published in Economic Times)
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November 1, 2021
Written By Vaishnavi Gupta
D2C brands are taking the traditional retail route to scale up
Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase
While brands across categories made a beeline for e-commerce during the pandemic, physical retail earned prominence among direct-to-consumer (D2C) brands. Melorra, Plum, Pee Safe and Libas, among others, have been building their offline presence over the past year.
The total retail market in India is estimated to be worth Rs 63 lakh crore, of which 95% buying happens through offline formats, according to Devangshu Dutta, founder, Third Eyesight.
Having started as an online-only brand in 2013, Pee Safe launched its first exclusive store in India in February, 2021. The personal hygiene brand currently operates a store each in Gurugram, Bengaluru and Ahmedabad; and plans to launch 50 offline stores in the next 12 months. “There is a strong demand for personal hygiene and wellness products in the offline market. Hence, opening exclusive outlets is a crucial element of our growth strategy,” says Srijana Bagaria, co-founder and director, Pee Safe. These exclusive brand outlets (EBOs) will be launched through the franchise-owned and franchise-operated (FOFO) model.
Online ethnic wear brand Libas, meanwhile, unveiled two brick-and-mortar stores in New Delhi in September, 2021. The brand has an ambitious target of 200 more stores by 2025 in malls and high streets across metro and tier II cities. A click-and-collect facility will be operational soon, says Sidhant Keshwani, managing director, Libas. “We are aiming for our offline market share to be 25% in the coming two years,” he adds.
The brand offers a range of wedding and occasion wear, as well as ready-to-stitch fabrics exclusively in its offline stores. Soon, it also plans to foray into the kidswear and menswear categories, as well as home décor.
Beauty brand Plum, which has been retailing online since 2014, launched its first store in Mumbai in October, 2021. Plum’s founder and CEO, Shankar Prasad, says the goal is to take the store count to 50 by 2023, and for EBOs to contribute “10-20% of our total sales in two-three years”.
Jewellery brand Melorra extended its presence offline back in December, 2020. “We have been growing 200% year-on-year; we expect to post even stronger numbers this year with the addition of offline stores. We are looking to touch $1 billion in revenue in five years,” says the company’s founder and CEO, Saroja Yeramilli.
A good step?
Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase. “D2C players have so far done a great job of owning the consumer journey which is largely online. They now see that for the next wave of growth and penetration, they need good representation in a larger set of touchpoints,” says Rachit Mathur, partner and MD, BCG.
However, online is likely to remain the primary revenue stream for these digital-first brands. “Brands such as Lenskart, Nykaa and FirstCry have done a great job in driving strong retail presence and viable productivity, but continue to have a higher bias of online sales,” Mathur notes.
D2C brands could perhaps try a mix of formats for an offline foray, from EBOs to a presence in departmental stores, or even small SIS (shop-in-shop) counters in shopping centres. But brands would need to be cognisant of the fact that consumers behave differently depending on the shopping environment they are in. Hence, the interface, service offering, and even the product mix may have to be tweaked. “Simply bringing in technology into an offline environment just because you are an online-first brand may do nothing to enhance the consumer experience, and may even detract from it,” Dutta says.
Source: financialexpress
