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October 7, 2024
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)
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September 16, 2024
Sesa Sen, NDTV Profit
16 September 2024
As India’s economy grows and digital technologies reshape consumer behavior, the future of kirana stores—the quintessential neighbourhood grocery shops—hangs precariously in the balance.
These soap-to-staple sellers, once impervious to change, now confront an existential threat from quick commerce players like Blinkit, Instamart, Zepto, and from modern retailers such as DMart and Star Bazaar, raising a pivotal question: Can kiranas survive the pressure of change, or will they die a slow death?
The All India Consumer Products Distributors Federation, that represents four lakh packaged goods distributors and stockists, has recently raised alarms, urging Union Minister for Commerce and Industry Piyush Goyal to investigate the unchecked proliferation of quick commerce platforms and its potential ramifications for small traders.
Their concerns are not unfounded. Data suggests that the share of modern retail, including online commerce, which is currently below 10%, is set to cross 30% over the next 3-5 years. Much of this growth will come at the cost of traditional retail.
“Unless the government takes on an activist role to support the smallest of business owners, the shift toward large corporate formats is inevitable,” according to Devangshu Dutta, head of retail consultancy Third Eyesight.
Casualties Of The Boom
Madan Sachdev, a second-generation grocer operating Vandana Stores in eastern Delhi, has thrived in the recent years, adapting to the digital age by taking orders via WhatsApp and employing extra hands for home delivery.
Despite having weathered the storm of competition from giants like Amazon and BigBazaar, he now finds himself disheartened, as his monthly sales have halved to about Rs 30,000, all thanks to quick commerce.
Sachdev is worried about meeting expenses such as rent, his children’s education, and other household bills. He finds himself at a crossroads, uncertain about how to modernise his store or adopt new-age strategies in order to attract customers in an increasingly competitive market.
India’s $600 billion grocery market, a cornerstone for quick commerce, is largely dominated by more than 13 million local mom-and-pop stores.
Retailers like Sachdev are also seeing a steep decline in their profit margins from FMCG companies, which now hover around 10-12%, down from the 18-20% margins seen before the Covid-19 pandemic. The consumer goods companies are instead offering higher margins to quick commerce platforms so that they can afford the price tags.
Quick deliveries account for $5 billion, or 45%, of the country’s $11 billion online grocery market, according to Goldman Sachs. It is projected to capture 70% of the online grocery market, forecasted to grow to $60 billion by 2030, as consumers increasingly prioritise convenience and speed.
Many of the mom-and-pop shops are family-run and have been in business for generations. Yet they lack the resources to modernise and compete effectively with larger chains. Modern retail businesses, including quick commerce, begin with significantly more capital, thanks to funding from corporate investors, venture capital, private equity, and public markets.
“They can scale quickly and capture market share due to a superior product-service mix, larger infrastructure, and more robust business processes,” said Dutta.
Moreover, their ability to engage in price competition poses a challenge for small retailers and distributors, making it difficult for them to compete.
“This is something that has happened worldwide, in the largest markets, and I don’t think India will be an exception,” Dutta said, adding that it would be incomplete to single out a specific format of corporate business such as quick commerce as the sole villain in this situation.
“India is a tough, friction-laden environment at any given point in time, including government processes which don’t make it any easier,” he said.
Peer Pressure
Data from research firm Kantar shows that general trade, which comprises kirana and paan-beedi shops, have grown 4.2% on a 12-month basis in June, while quick commerce grew 29% during the same period.
Shoppers are becoming more omnichannel, rather than gravitating towards one particular channel, said Manoj Menon, director- commercial, Kantar Worldpanel, South Asia. “While the growth [for quick commerce and e-commerce] might appear to have declined compared to a year ago, a point to note is that the base for these channels has significantly grown. Therefore, achieving this level of growth is still commendable.”
Consumer goods companies such as Hindustan Unilever Ltd., Dabur India Ltd., Tata Consumer Products Ltd., etc., have acknowledged the salience of quick commerce to their packaged food, personal and homecare products. The platform currently comprises roughly 40% of their digital sales.
“We are working all the major players in the quick commerce space and devising product mix and portfolio. This is a very high growth channel for us,” according to Mohit Malhotra, chief executive officer, Dabur India.
Elara Capital analysts have pointed out that the share of quick commerce is expected to rise to60% in the near future with e-commerce and modern trade turning costlier for FMCG brands than quick commerce. “The larger brands tend to make better margins on quick-commerce platforms versus e-commerce due to lower discounts on the former,” it said in a report.
However, it is too premature to draw a parallel between kirana and quick commerce in terms of competition, given the significant size difference.
The average spend per consumer on FMCG in kirana stores stands at Rs. 21,285 annually while the same is Rs. 4,886 for quick commerce, according to Menon.
Rural Vs Urban Divide
Quick commerce is still an urban phenomenon. In contrast, in rural settings, where internet penetration is still catching up and access to large retail chains is limited, kirana stores continue to thrive.
According to Naveen Malpani, partner, Grant Thornton Bharat, while the growth of quick commerce is undeniable, this channel is not poised to replace traditional retail, which still has a wider reach in the country. “It will complement older models, filling a niche for immediate, smaller purchases. Also, a 10-20-minute delivery may not have a strong market pull in rural markets where distance and time are not much of a concern.”
Yet many others believe, even in these areas, the challenge is palpable.
The small businesses are beginning to feel the sting of same slow decline that once befell the ubiquitous telephone booths in the era of mobile phone, according to Sameer Gandotra, chief executive officer of Frendy, a start-up that is building ‘mini DMart’ in small towns where giants like Reliance and Tatas have yet to establish their presence.
As rural customers slowly start to embrace digital shopping and seek more variety, kirana stores must adapt or risk becoming obsolete, he said.
Besides, the popularity of quick commerce is set to challenge the dominance of incumbent e-commerce platforms, especially in categories such as beauty and personal care, packaged foods and apparel.
“Quick commerce is primarily operational in metros and tier 1 markets, which is impacting the sales of traditional companies in these areas. However, if quick-commerce players were to extend their operations to tier 2 and tier 3, it would even challenge companies such as DMart and Nykaa, and would pare sales and profitability,” noted analysts at Elara Securities.
Frendy’s Gandotra believes the journey for kirana stores is not a lost cause, but it requires strategic interventions. Many kirana store owners struggle to integrate point-of-sale systems, inventory management software, or even digital payment solutions. These stores need to embrace technology.
Another aspect is the need for policy support. Regulations to ensure fair competition can prevent monopolisation by large retailers. Additionally, subsidies, tax benefits, and grants for infrastructure improvements can help small businesses adapt to changing market dynamics. With renewed support, kirana stores can continue to be the backbone of Indian retail.
Nonetheless, there will be some who’ll be left behind during this shift. Analysts at Elara Capital warn that the swift rise of quick-commerce platforms, combined with aggressive discounting, could wipe off 25-30% of traditional grocery stores.
(Published on NDTV Profit)
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January 5, 2024
Sagar Malviya, Economic Times
January 5, 2024
Top global apparel and fast fashion brands appear to have struck a strong chord with young customers, racking up sales growth of anywhere between 40% and 60% in FY23, bucking the trend in a market where the overall demand for discretionary products slowed down.
For instance, Swedish fashion retailer H&M and rival Zara reported a 40% increase in its topline while Japanese brand Uniqlo saw a 60% jump in sales. American denim maker Levi Strauss and British brand Marks & Spencer posted a 54% increase, latest filings with the Registrar of Companies showed. Dubai-based department store Lifestyle International, too, saw a 46% jump in revenues on a large base. These brands garnered combined annual revenues of nearly $2.6 billion, more than double compared to FY21 when it was $1.1 billion all put together.
“With consumers getting brand conscious, global brands have a natural advantage. There is a distinct aspirational momentum for international brands that carries them through. Also they can sustain having unsold inventory and discounting better than smaller peers,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “Also, these brands have not yet reached saturation point in terms of network and hence can invest further to widen their reach.”
The revenue surge was also led by brands’ shifting focus on ecommerce, which now accounts for more than a quarter of their sales, even as they face intensify competition from both local and global rivals in an increasingly crowded market where web-commerce firms continue to offer steep discounts. Over the past two years, sales growth for most retailers have been price-led, reversing the historic trend when volumes or actual demand drove a bulk of the sales.
The fashion retail segment has been struggling with a demand slowdown since January last year due to inflationary headwinds. The overall retail growth slowed down to 6% in both March and April, increasing marginally to 9% in August and September before falling slightly to 7% in October and November, according to the Retailers Association of India.
“Spends are shifting to experience, holidays and big ticket purchases such as cars. Stronger retailers which had the right product to price proposition works for consumers who are not necessarily looking at brands from global and local lens. What helped our sales was product rationalisation, renovation of stores as well as our value proposition,” said Manish Kapoor, managing director at Pepe Jeans that clocked 54% growth to Rs560 crore in FY23. “The current fiscal has been muted and we expect election spending and improved sentiment to drive recovery next fiscal.
As the world’s second most-populated country, India is an attractive market for aspirational apparel brands as rising disposable incomes cause the consuming base of the pyramid to broaden further. “The Indian economy is on course to be among the top economies in the world. The key factors driving the India consumption story include a large proportion of young population, rising urbanization, growing affluence, increasing discretionary spending and deeper penetration of digital,” said Levi Strauss in its latest annual report.
Last year Levi’s said India is now the largest market for them within Asia and sixth largest globally while M&S said it is opening a store every month in India, already its largest international market outside home in terms of store network.
(Published in Economic Times)
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October 26, 2023
Sagar Malviya, Economic Times
26 October 2023
Surging demand for fitness wear and sports equipment for disciplines other than cricket and football helped Decathlon’s India unit expand sales 37% to Rs 3,955 crore in FY23. With more than 100 large, warehouse-like stores selling products catering to 85 sporting disciplines, the French company is bigger than Adidas, Nike and Asics all put together in India.
In FY22, sales were Rs 2,936 crore, according to its latest filings with the Registrar of Companies. The retailer, however, posted a net loss of Rs 18.6 crore during the year ended March 2023 compared to a net profit of Rs 36 crore a year ago.
Experts said a host of factors – from pricing products about 30-40% lower than competing products to selling everything from running shoes, athleisure wear to mountaineering equipment under its own brands – has worked in its favour. “They have an extremely powerful format across different sporting activities and have something for both active and casual wear shoppers. For them, the market is still under penetrated with the kind of comprehensive product range they sell for outdoor sports beyond shoes and clothing,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “Even their front end staff seem to have a strong domain knowledge about products compared to rival brands.”
By selling only private labels, Decathlon, the world’s biggest sporting goods firm, controls almost every bit of operations, from pricing and design to distribution, and keeps costs and selling prices low.
Decathlon uses a combination of in-house manufacturing and outsourcing to stock its shelves. In fact, it sources nearly 15% of its global requirement from India across sporting goods. And nearly all of its cricket merchandise sold globally is designed and made in India.
(Published in Economic Times)
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August 28, 2023
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)
