admin
September 8, 2015
Devina
Joshi, Financial Express
Mumbai,
8 September 2015
E-commerce,
as we know it, is old news. Hyperlocal is the hot new buzzword
in retail hallways, going by the recent spate of well-funded launches
in this space. There is already a wide range of services on offer,
from grocery delivery to home, office and personal care services.
Hyperlocals, services-based or inventory-based, are largely an
urban India phenomenon. Services are hyperlocal by their very
nature, driven by locality or communities. When moving into a
new city, for example, people would like to stabilise as quickly
as possible and here, such services step in.
To put the whole picture in context, the Indian retail industry
is worth $500-600 billion. Of this, grocery items account for
about 67% of the revenue. However, in case of fast moving consume
goods (FMCG) and grocery, modern retail formats account for less
than 10% of the total sale. E-commerce or hyperlocals are obviously
a tiny part of the pie just yet. Most companies, therefore, are
still at a stage where they have to prove their business models
and change consumer behaviour.
While on-demand grocery delivery—the model that players
such as Grofers ride on—has immense potential in this space,
other high potential categories include delivery of services (such
as supplying peons/delivery boys, specialised laundry services,
plumbers or electricians), price comparisons, food ordering apps,
etc.
Hyperlocal startups in India
It is a no-brainer that an aggregation model, since it is asset-light,
is less capital-intensive than the inventory-led one. Moreover,
it is easier to scale up such a model. The new generation of hyperlocal
start-ups is coupling aggregation with logistics/delivery, thus
controlling even the last mile.
Take Zopper, a product-based hyperlocal which started off as
a price comparison website for electronics but now is a platform
for purchasing products from offline stores. It counts on faster
delivery through tie-ups with local shops near a buyer. “City
by city, we need to bring more merchants on board, and all they
have to do is download an app and their product can be listed
on Zopper,” says Neeraj Jain, CEO, Zopper. The company’s
margins vary from 2-8%.
Home services start-up Taskbob, founded by Aseem Khare, charges
a 20% commission from its servicemen. Product price comparison
website MySmartPrice works on commission too, while providing
a free six-month on-board period to offline sellers, where they
can use the platform for gaining traction. The revenue model of
BookMeIn, another home services company, includes a monthly subscription
fee for a SaaS-backed system given to service providers to manage
their business. Further, it gets revenues on leads/bookings done
by customers on the website, along with revenues through ads of
service providers. So what’s working in their favour?
A fertile environment
Indian retail is still dominated by brick-and-mortar stores, which,
oddly, is an opportunity in disguise for hyperlocal players. Unlike
non-hyperlocal e-commerce, these start-ups are not really competing
with offline retailers, but are partnering them instead.
Hyperlocal business models spell instant, on-demand delivery as
they cater to needs of a more immediate nature. The gratification
is far more accelerated – the entire transaction can be completed
in an hour sometimes. Customers also tend to trust hyperlocals
more than non-hyperlocal e-commerce websites, as the stores they
buy from through online platforms have a physical presence, making
it possible to attend to any grievances quickly. Further, the
start-up can tap into existing infrastructure, acting as a bridge
between existing retailers and the consumer.
“Due to the convenience factor, by being able to tap
into consumption opportunities that might have otherwise been
missed, the aggregator can actually drive new demand to the retailer
in the short term,” says retail consultant Devangshu Dutta,
chief executive, Third Eyesight.
Within hyperlocals, services have higher margins of around 20%
as opposed to product based models which earn 2-10% margins or
even non-hyperlocal e-commerce companies, which operate on 3-7%
margins, depending on the category.
This is because there is virtually no warehousing, inventory management or logistics involved in a services hyperlocal. Within services, food-ordering apps have an added advantage of the frequency of purchase as opposed to, say, e-commerce products. “The category is a high-repeat one as opposed to home repair for example,” says Saurabh Kochhar, co-founder and CEO, India, and chief business officer, global, Foodpanda.
A word of caution
While it ensures higher margins, replication of a services model
is much more difficult. Training of people in services is very
difficult as each individual has to be available wherever the
customer is located. “Second, when a product delivery happens,
I need local people to deliver it but if a person is coming to
give a service, he represents your brand and should know how to
handle a customer,” says Alagu Balaraman, partner and MD,
Indian operations, CGN Global India, a supply chain management
consulting firm.
Third, as the services industry is rather fragmented, it is difficult
to form partnerships with associations or groups of such service
providers, as specialists are spread out across the country. Fourth,
creating a need for services might be difficult as people may
already have their own local set-up in place. “But that mindset
is changing, with a large group of urban people who don’t
have the time or patience and need professional services,”
he says.
The biggest learning will be the capability to scale. A hyperlocal that focuses on a single ‘locality’ will find it difficult to get the scale needed to create an economically viable model. Being able to identify a widespread but local need, and having a model that adapts to each new market will be crucial.
(Published in Financial Express.)
admin
May 12, 2015
A seminar was organised on the 12th of May in Zeist (the Netherlands) on “the Opportunities & Challenges for Dutch (Semi-) Processed Food Companies in India”. Highlights of a report and other insights were presented by Devangshu Dutta, chief executive of Third Eyesight. Other entrepreneurs who also shared their experiences in India, and the Dutch agricultural counsellor, Wouter Verhey, was present at the event.
The sessions included:
You can download a summary of the report via this link: India – Opportunities Challenges for Dutch Processed Food Companies
admin
April 17, 2015
Panel Discussion moderated by Mr. Devangshu Dutta, Chief Executive, Third Eyesight at the Indian Retail Congress 2015 (17-18 April 2015). The panel included Mr. Manish Mandhana (Managing Director of Mandhana Industries with the brand Being Human), Mr. Sanjay Warke (Country Head of Toshiba India), Mr. Tanmay Kumar (Chief Financial Officer of Burger King India), Mr. Kinjal Shah (Chief Executive Officer of Crossword Bookstores) and Mr. Ranjan Sharma (Chief Information Officer of Bestseller India, with the brands Vero Moda, Only, Jack & Jones).
Devangshu Dutta
October 29, 2014
(The Hindu Businessline – cat.a.lyst got marketing experts from diverse industries to analyse consumer behaviour during the last one month and pick out valuable nuggets on how this could impact marketing and brands in the years to come. This piece was a contribution to this Deepavali special supplement.)
Two trends that stand out in my mind, having examined over two-and-a-half decades in the Indian consumer market, are the stretching or flattening out of the demand curve, or the emergence of multiple demand peaks during the year, and discount-led buying.
Secular demand
Once, sales of some products in 3-6 weeks of the year could exceed the demand for the rest of the year. However, as the number of higher income consumers has grown since the 1990s, consumers have started buying more round the year. While wardrobes may have been refreshed once a year around a significant festival earlier, now the consumer buys new clothing any time he or she feels the specific need for an upcoming social or professional occasion. Eating out or ordering in has a far greater share of meals than ever before. Gadgets are being launched and lapped up throughout the year. Alongside, expanding retail businesses are creating demand at off-peak times, whether it is by inventing new shopping occasions such as Republic Day and Independence Day sales, or by creating promotions linked to entertainment events such as movie launches.
While demand is being created more “secularly” through the year, over the last few years intensified competition has also led to discounting emerging as a primary competitive strategy. The Indian consumer is understood by marketers to be a “value seeker”, and the lazy ones translate this into a strategy to deliver the “lowest price”. This has been stretched to the extent that, for some brands, merchandise sold under discount one way or the other can account for as much as 70-80 per cent of their annual sales.
Hyper-opportunity
This Diwali has brought the fusion of these two trends. Traditional retailers on one side, venture-steroid funded e-tailers on the other, brands looking at maximising the sales opportunity in an otherwise slow market, and in the centre stands created the new consumer who is driven by hyper-opportunism rather than by need or by festive spirit. A consumer who is learning that there is always a better deal available, whether you need to negotiate or simply wait awhile.
This Diwali, this hyper-opportunistic customer did not just walk into the neighbourhood durables store to haggle and buy the flat-screen TV, but compared costs with the online marketplaces that were splashing zillions worth of advertising everywhere. And then bought the TV from the “lowest bidder”. Or didn’t – and is still waiting for a better offer. The hyper-opportunistic customer was not shy in negotiating discounts with the retailer when buying fashion – so what if the store had “fixed” prices displayed!
This Diwali’s hyper-opportunism may well have scarred the Indian consumer market now for the near future. A discount-driven race to the bottom in which there is no winner, eventually not even the consumer. It is driven only by one factor – who has the most money to sacrifice on discounts. It is destroys choice – true choice – that should be based on product and service attributes that offer a variety of customers an even larger variety of benefits. It remains to be seen whether there will be marketers who can take the less trodden, less opportunistic path. I hope there will be marketers who will dare to look beyond discounts, and help to create a truly vibrant marketplace that is not defined by opportunistic deals alone.
admin
September 27, 2014
Alys
Francis, Nikkei Asian Review
New
Delhi, 27 September 2014
A few months ago, a group of wealthy industrialists and other
businessmen gathered in a plush Mumbai hotel suite to pore over
a selection of John Lobb handmade welted shoes that cost up to
$12,000 a pair.
It may just be a temporary “pop-up” store, but Thomas Collette, John Lobb’s commercial director for India, was excited. He said that a local agent for the bespoke shoemaker would start taking orders by appointment only. “This is a big step for us and a big step as well for the country,” he said.
Although international luxury brands have opened flagship stores all over developing Asia, they have hardly touched the Indian market. This may be about to change.
After all, many people in the population of 1.3 billion are steadily getting wealthier. According to the Associated Chambers of Commerce and Industry of India, luxury spending will reach $14 billion a year by 2016 compared with $8.5 billion in 2013.
But foreign luxury brands have had a tough time in the country, partly due to restrictions on investment.
Many major brands, such as Prada and Versace, only entered after 2006 when the government began to allow foreign investors in single-brand retail operations. Prior to that, foreign companies were only allowed to operate wholesale “cash-and-carry” outlets.
While companies welcomed the chance to open in India — albeit
with the requirement that a local partner owned at least 49% of
the business — they struggled with the lack of suitable retail
space and trained staff, bad supply chains, and a raft of customs
taxes and duties, as well as a long wait to turn a profit because
there was only a nascent market for their goods.
Since 2006, Prada and Gucci have been among the 50-odd brands that have either left India, restructured or quit soured partnerships, according to a 2012 report by retail consultant Third Eyesight.
In 2012, India started allowing full foreign ownership of single-brand retailers but included restrictions such as the need to source at least 30% of products from local small and midsize enterprises. That is virtually impossible for most luxury labels since their brand integrity often rests on the craftsmanship of products made in their home country. Unsurprisingly, the new rules did not trigger an influx of foreign brands.
Jones Lang LaSalle, the real estate company, in August ranked New Delhi and Mumbai near the bottom of its list of 30 major Asia-Pacific cities in terms of the presence of top luxury brands.
Indians optimistic
Some foreign brands, like John Lobb, have decided that franchise and distribution deals are a better way to establish their presence in a difficult market.
John Lobb’s local partner is Regalia Luxury, which spent a year wooing the Hermes-owned brand before securing a deal to sell John Lobb’s “By Request” line of shoes that are custom-made for each client.
Regalia Luxury is one of a number of Indian companies eyeing the rising number of style-conscious local shoppers who are hungry for Western luxury brands but are wary of entering the market on their own.
“From a longer-term perspective, there’s immense opportunity if you do it the right way,” said Regalia Luxury founder Pratik Dalmia, who clinched a franchise for bespoke Italian suitmaker Kiton in 2013 and expects to sign up two more brands by year-end.
But he admits that the market boom has yet to start and that operators will have to “run a tight ship” for the next couple of years.
Indian companies that represent foreign luxury brands need to have a long-term view and keep a close eye on what the younger generation likes — these are the customers with the most potential, since they are more exposed to overseas fashion trends.
“India is all about the customer of tomorrow,” said Darshan Mehta, CEO of Reliance Brands, a subsidiary of Reliance Industries that was set up in 2007 to bring foreign luxury fashion to India.
Mehta often sits in a cafe at DLF Emporio, New Delhi’s first luxury mall which opened in 2008, and watches shoppers. He said many people shop at Zara but they walk into Gucci and Zegna just to have a look. “That is what makes markets like India so promising: the aspirational consumer,” he said.
Unlike China, where a lot of luxury retailers are now at a consolidation stage after years of rapid expansion, brands are still struggling to find space in India for their first shops.
Even in Mumbai, the Emporio is the “only true luxury mall,” according to Mehta.
It may take some time before India’s luxury market takes off, but the market has been boosted by a stream of well-off Indian professionals and students returning after working and studying abroad, including many bankers who left Wall Street and London after the global financial crisis.
Luxury players are also expecting a boost from the introduction of a Goods and Services Tax, which was promised by India’s new government and would get rid of complex multi-level taxes that are hampering the sector.
Reliance Brands, which also represents Reiss and BCBG Max Azria, expects to add three more brands to the company’s stable of 16 foreign brands by year-end.
A few pioneers are even setting up boutiques in smaller cities. Bangalore firm Fervour, which has licenses to sell Nina Ricci and Christian Lacroix, is planning to expand to Chennai and Hyderabad.
But most don’t see these cities as viable markets just yet.
“There is no sustained luxury market outside of Bombay and Delhi,” Mehta said. He expects luxury demand outside the two main cities to take another three years to reach critical mass.
Sanjay Kapoor, the founder of distributor Genesis Luxury, said India’s luxury market is not yet at the point where China was 10 years ago, even if the potential for growth is immense.
Kapoor founded Genesis Luxury in 2008 to sell foreign luxury brands in India and has deals with Jimmy Choo and Armani, among others.
“As awareness and retail space spread, demand will accelerate in smaller cities in the interior of India,” Kapoor predicted.
Tight ships
Amid the shortage of high-quality retail space, one option is to use the “shop in shop” model.
R&B International rents small spaces in other retailers’ stores to sell Australian luxury label Easton Pearson. The manufacturing firm supplied embroidery to the brand for years before nabbing a distribution agreement in India in June.
Dalmia also said he is in no hurry to open flagship stores for John Lobb and Kiton before 2016.
Instead he is targeting ultra-rich customers who want the pampering that comes with exclusive, by-appointment-only services. Clients are shown samples of Kiton’s made-to-measure suits and John Lobb shoes, and then measured by a trained team at a place and time that suits them, often at home in the late evening.
Collette said he’s been pleasantly surprised by how well the brand has been received in India. While the brand has wholly-owned stores in Japan and the U.S., Collette said it would have been impossible for it to enter India alone.
(Published in Nikkei Asian Review.)
