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)
Viveat Susan Pinto, Financial Express
August 28, 2023
Coffee Day Global, which operates the Cafe Coffee Day (CCD) chain, has been given a temporary relief against bankruptcy proceedings initiated by lender IndusInd Bank last month. The Chennai bench of the National Company Law Tribunal (NCLAT) last week halted admission of IndusInd Bank’s plea against Coffee Day Global, a subsidiary of the listed Coffee Day Enterprises (CDEL), by the NCLT Bengaluru, till September 20.
What this means for CCD is that it get some more time at a time when it has swung into the black after struggling for the last few years, since the tragic demise of its founder VG Siddhartha in 2019. Coffee Day Global posted a net profit of Rs 24.57 crore for the June quarter of 2023-24 (FY24) versus a net loss of Rs 11.73 crore reported in the same period last year.
Revenue from operations stood at Rs 223.20 crore in the quarter under review, a growth of nearly 18% versus the year-ago period, CDEL results for Coffee Day Global showed.
More importantly, CCD outlets are down to 467 in the June quarter of FY24 from a peak of 1,752 stores in FY19, indicating that the company is shutting down unprofitable operations as it looks to manage its debt and other expenses. Group debt is down to Rs 1,711 crore, according to its latest annual report for FY23, versus Rs 7,214 crore reported in FY19.
“While the coffee retail market in India is growing, in CCD‘s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
CCD’s financial health is critical for CDEL, which derives close to 94% of its group turnover from the coffee retail business, according to its FY23 annual report. In FY22, the contribution of the coffee retail business to group turnover was 85%. Losses of Coffee Day Global in FY23 narrowed to Rs 69.62 crore from Rs 112.48 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.
Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is at around 265 now from a peak of 537 in FY19, the number of vending machines have been growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now at 50,870 in number, the company’s latest results show.
CCD is also expected to fight the insolvency proceedings against it aggressively, according to industry sources. IndusInd Bank has claimed that Coffee Day Global defaulted on a loan of Rs 94 crore, which occurred on February 28, 2020. The company has disputed this in court.
(Published in Financial Express)
Faizan Haidar, ET Bureau
19 July 2023
E-commerce companies’ share in warehousing space leasing has fallen to 3% amid declining demand from more than 20% during Covid-19. With the easing of the pandemic, demand faltered for e-commerce companies, even as bricks-and-mortar rivals rented 14% of space during the January-June period as they witnessed a demand resurgence.
In 2020, during the pandemic, e-commerce took more than a fifth of warehouse space while physical retailers had a 9% share, according to data by Savills India.
The overall leasing activity in India continued to grow, with a total space take-up of 22.4 million square feet in the first six months of 2023, up from 20.9 million sq ft a year ago.
“E-commerce companies had over-committed space during Covid, expecting the exponential growth they experienced at that time to continue. There are many facilities where they continue to pay rentals without utilising the full space,” said Gagan Randev, executive director, India Sotheby’s International Realty.
According to Savills data, after increasing demand for warehousing space over the past five years, tier-2 and tier-3 cities saw the share of e-commerce declining to 4% in the January-June period from 34% a year ago.
“In the past three years, year-on-year space absorption from e-commerce has undergone a significant change due to increased investments in their warehousing operations and footprint optimisation through automation, shelving and improved racking systems. These investments have enabled them to increase their existing storage space and enhance overall operational efficiency,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
Experts said the companies are also looking to outsource the space they had taken during the pandemic.
“E-commerce overbuilt the capacity as Covid-led growth was harvested by them. Now that capacity is vacant. That’s why you see a lot of marketplaces trying to externalise their services. That is not coming out of a business model, that is coming out from vacant space,” said Ashvini Jakhar, founder of Prozo, which manages supply chains for companies.
In the first half of 2023, the third-party logistics sector continued to drive warehousing demand, accounting for 44% of the total absorption, up from 37% a year ago, followed by the manufacturing (22%), retail (13%) and fast-moving capital goods and consumer durables sector (6%).
“E-commerce, grew exponentially during Covid when physical retailers were constrained by prevailing conditions and immediately after that when chain stores were still recovering from the pandemic shock,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “However, the retail business in India is predominantly offline; as demand continues to grow overall, it is only natural for physical retailers’ own growth to be driven by the market’s momentum and that would be reflected in warehousing space taken up by them across the country.”
For most retailers, after Covid-19, the warehouse is the epicentre for omnichannel distribution network for offline as well as online clientele.
(Published in Economic Times)
Raghavendra Kamath, Financial Express
June 29, 2023
Zara, touted as “Fast Fashion Queen”, has achieved a unique feat in India. The Spanish brand has been growing its revenues without opening any new stores.
The fashion brand, run by a joint venture between Tata-owned Trent and Spain’s retail group Inditex, posted a 40.7% growth in its revenues to Rs 2553.8 crore in FY23. The catch is that while many retailers/brands garner sales from opening new stores, Zara did not open any store but closed one during FY23.
In FY21 and FY22, its store count remained constant at 21 but its revenue grew 61.2% in FY22. Zara’s revenues grew at a 15.5 % CAGR in the last five years.
“Zara did not foray into any new city and closed one store. That said, it saw an exceptional performance on store productivity (83% higher than FY19). The increase in revenues lead to highest ever Ebitda margins at 16.3%,” said Nuvama Institutional Equities in a recent report.
The contribution in productivity includes contribution from online and also increase in store sizes, the brokerage said.
A mail sent to Inditex did not elicit any response. Trent executives could not be contacted.
Experts attribute Zara’s success to increase in customer spends and improved offerings by the brand.
“The customer base they are targeting has grown and their merchandise mix has become sharper,” said Devangshu Dutta, chief executive officer at Third Eyesight, a retail consultant.
Dutta said when a retailer opens stores, it would immediately boost sales, but to maintain sales momentum, one has to have “right merchandise at right price and have stores at right locations”.
Zara is known to churn its designs and styles very fast, and target young customers. In its Indian venture also, its parent Inditex controls merchandise mix and so on.
“The said entities (Zara and Massimo Dutti) are obliged to source merchandise only from the Inditex Group. Also, the choice of product & related specifications are at the latter’s discretion. Further, the entities are dependent on Inditex for permissions to use the said brands in India subject to its terms & specifications,” Trent said in its FY23 annual report.
Zara is also focusing on opening in select locations, a reason it could not open more stores in the country, experts said.
“The incremental store openings for Zara continue to be calibrated with focus on presence only in very high-quality retail spaces,” Trent said.
Susil Dungarwal, founder at Beyond Squarefeet, a mall management firm, said that propensity to spend has gone up among Indian shoppers after the pandemic and Zara being a renowned global brand with its stylish merchandise seems to be have been the beneficiary of the trend.
“They understand customers very well and brought products which are liked by Indian shoppers in terms of looks, styles and so on,” Dungarwal said.
Zara is a case study for Indian brands as to how to run a retail business successfully, he said.
(Published in Financial Express)
Viveat Susan Pinto, Financial Express
April 21, 2023
Retailers of Apple products in Mumbai and Delhi, which account for around 20-21% of the brand’s annual sales in the country, fear the launch of stores by the US giant within these cities may dent their business.
In particular, retailers in the vicinity of these outlets, at Bandra-Kurla Complex (BKC) in Mumbai and Saket in Delhi, say consumers will prefer to go to these company-owned stores rather than make it to their outlets to purchase Apple products.
“That is a visible danger for those Apple retailers who are located near these outlets,” a senior executive at Unicorn Infosolutions, an Apple premium reseller in Delhi and Mumbai, said. Unicorn has 37 outlets in the west and north of India and is looking to its increase its footprint to 75 stores in the next three years.
“You have to keep in mind that the base of consumers for Apple is growing, both in Mumbai and Delhi as well as other cities. It will not be feasible for all the consumers to make it to these outlets. Yes, some high-end consumers may choose to shop at these Apple stores in the two cities, but for those staying away from these stores, it will be difficult to make it to these outlets,” the Unicorn executive said, declining to be quoted.
Nilesh Gupta, managing director of Vijay Sales, an electronics retailer, which has stores in the west and north of India, had reiterated a similar point on Tuesday (April 18), the day the Apple BKC store was launched in Mumbai. He said that he saw the store launches in Mumbai and Delhi as an opportunity for brand-building and further growth in sales.
“Apple is launching just two stores in India, one in Mumbai and the other in Delhi, for now. Even if they launch more outlets, not everyone will be able to make it to these stores, given the size of India and the aspirations of people wanting to own an Apple. The word-of-mouth and excitement going around following the launch will positively impact all of us who stock and sell Apple products in the country. I see more consumers wanting to buy Apple products in the future,” Gupta said.
While Apple has been in India for more than 25 years, it has had no direct retail presence in the country until now. An Apple online store in India was launched around three years ago. In other words, say experts, the Cupertino-based tech giant has depended largely on a network of online and offline retailers, including premium resellers, multi-brand operators and e-commerce channels, for sales in India.
“And Apple will want to ensure that its retail partners are not impacted because of its direct retail foray into India,” says Devangshu Dutta, founder and chief executive officer, Third Eyesight, a Gurugram-based retail consultancy.
“The Apple premium resellers, for instance, may choose to upgrade their retail experience at their outlets to ensure that there is no loss of business, especially in Mumbai and Delhi,” Dutta said.
Apart from Unicorn, some of the other Apple premium resellers in India include Maple in Mumbai and Ample Technologies, which runs the Imagine brand of stores in cities such as Bengaluru and Chennai.
Both the Apple stores in Mumbai and Delhi are high on experience, visitors to these outlets have said, coming at a time when the brand, amongst the most valuable in the world, has clocked a record revenue in India.
A Bloomberg report this week said that Apple had reported a turnover of $6 billion in India in FY23, up from $4.1 billion in FY22.
The Apple craze has drawn huge crowds both to the Mumbai and Delhi stores this week. The retail push will come as the company looks to expand manufacturing in India, experts said.
While Apple has been manufacturing older iPhone models in India since 2017, it began assembling the most recent smartphone models in 2022, with the iPhone 14.
According to the International Data Corporation (IDC), Apple’s iPhone shipments in India stood at 6.7 million units in 2022 against 4.8 million in 2021 and 2.7 million in 2020.
Apple also captured 25% of the ‘Made in India’ smartphone shipments in terms of value in 2022, compared to 12% in 2021, according to Counterpoint Research.
Among cities, Mumbai accounted for 10% of iPhone sales in India, trailing only Delhi, which accounted for 11% of sales, Counterpoint Research said.
(Published in Financial Express)