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August 5, 2023
Viveat Susan Pinto, Financial Express
August 5, 2023
Two of the country’s best-known retailers, Nykaa and Reliance Retail, are now clashing head-on for a bigger share of the online beauty and personal care (BPC) market. Signs of this became apparent on Thursday, when Nykaa said that its CEO Falguni Nayar would “guide the marketing function directly” as part of its larger initiative to strengthen its marketing leadership and management.
The announcement, according to industry experts, came amid senior-level exits at the company and increasing competition from Reliance Retail’s Tira, which was launched in April this year as an online-cum-offline beauty destination.
Nykaa, which is estimated to have a share of 38% of the $1.3 billion (Rs 10,920 crore) online BPC market in India, says that it is evolving into a multi-dimensional business.
“Leadership roles are being augmented with an eye on strategic realignment, cost rationalisation and growing complexity of the business,” Nykaa said in a statement.
While Reliance Retail’s Tira is smaller in comparison to Nykaa, it is beginning to chip away at the heels of its bigger rival, industry sources said, within months of launch.
For instance, in four months since going live in April, the Tira app has over 1.7 million downloads and is eyeing a number of around 10 million in the next few months, persons in the know have told FE. It intends to do this on the back of aggressive tie-ups with local and international brands and positioning itself as an aspirational yet affordable beauty player. A mail sent to Reliance Retail elicited no response till the time of going to press.
The Nykaa beauty app has over 40 million downloads, but has been around longer than Tira, executives in the know said. Discounts on both platforms (Tira and Nykaa) range from 10-50% for various brands with BOGO (buy one get one) offers, virtual try-ons, blogs, tutorials, tips, recommendations and videos being part of the online experience. Tira also has a unique fragrance finder, which helps consumers match fragrances closest to their preferences.
“For beauty retailers, the game will increasingly be omnichannel,” says Devangshu Dutta, chief executive officer at Gurugram-based retail consultancy Third Eyesight. “While the consumer set is young for beauty brands, convenience and access, whether online or offline, is key for sustainable growth,” he says.
Nykaa has doubled its beauty store count from 72 outlets in FY21 to 145 stores in FY23, the company said in a recent investor call. Plans include adding another 50 outlets in FY24 and taking total store count to 150 stores, according to a report by brokerage firm JM Financial.
Reliance Retail also intends to expand its Tira footprint by setting up stores in suburbs such as Andheri in Mumbai besides BKC in Bandra and Infinity Mall in Malad, which are up and running. The Malad store, for instance, was launched just last week. Over the next few months, satellite cities such as Thane and locations such as Pune, Bangalore, Chennai and Hyderabad are likely to see Tira stores, informed sources said, with more outlets lined up in tier-I and II cities, including Delhi-NCR.
Reliance Retail is also laying special emphasis on the design of its Tira stores, with the flagship 4,300-sq ft outlet in Bandra Kurla Complex, for instance, put together by London-headquartered studio called Dalziel & Pow. The studio is best-known for its work for brands such as Marks & Spencer, Toyota, Volkswagen and Jaguar Land Rover and has designed the BKC Tira stores as a go-to destination for beauty shoppers.
(Published in Financial Express)
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August 3, 2023
Viveat Susan Pinto, Financial Express
August 3, 2023
The country’s largest organised retailer, Reliance Retail, is working on a new value retail store format called Yousta. The move will pit Reliance Retail directly with Trent’s Zudio, Landmark Group’s Max Fashion and Shoppers Stop’s Intune, informed sources have told Fe, as growth prospects beckon in the category.
Reliance Retail will roll out the new Yousta stores of around 5,000-10,000 sq. ft. in size in cities such as Hyderabad, Delhi and Mumbai in the initial phase, the sources said.
Pricing will be competitive at under Rs 500 per unit, targeted at youth, children and families.
A gradual ramp-up of stores across more metros and cities will happen in the months ahead, as Reliance Retail is looking to take store count of Yousta to around 200-250 over the next few years. The retailer is speaking to malls and high streets across cities to lease space for the new format, persons in the know said. Executives at Reliance Retail were not immediately available for comment.
However, some experts see Reliance Retail’s move as a belated acknowledgement of a segment that constitutes nearly 90% ($45 billion) of the estimated $50 billion domestic fashion market. The premium end is pegged at 10% ($5 billion) of the domestic fashion market.
“Much of the attention of apparel retailers in recent years has been at the top-end of the fashion market. While affluence at the top-end is high, the space has also become crowded with local and international brands,” says Devangshu Dutta, chief executive officer at Gurugram-based retail consultancy Third Eyesight.
“The larger value retail market has consumers in the middle and lower middle class who while being conscious of their budgets are also aspirational,” he says. “With the right product and pricing, volume sales can be significant in this segment,” he says.
Reliance Retail has an existing value retail format called Reliance Trends, which has nearly 2,500 stores across the country. However, the company has been looking to broaden its appeal in the category with more store formats, sector experts said. Yousta is expected to fill that gap, they say.
“The value retail market has long-term growth potential because there are number of consumers who are moving from unbranded to branded products. They are looking at affordably-priced branded goods, which value retailers can cater to,” says Aliasgar Shakir, retail analyst at Mumbai-based brokerage Motilal Oswal.
Some experts say that the discretionary slowdown in the marketplace has pushed apparel retailers to look at the value retail space more closely.
“Intune is a ‘Fashion For All’ format, which is one of our strategic initiatives to cater to young families,” Venu Nair, MD & CEO, Shoppers Stop, said in a recent investor call.
Nair admitted on the earnings call that the apparel segment in general has been witnessing moderation and that the value retail foray could help the company tap into the growing trend for affordable fashion and lifestyle products.
Trent’s Zudio and Max Fashion have big plans for the category. At Trent’s FY23 annual general meeting held recently, the company said it would open 200 stores of Zudio in FY24, much higher than estimates of analysts. In FY23, Trent had opened 117 Zudio outlets taking the total store count of the brand to 352.
Max Fashion will add 100 stores in the next one year, top officials at the company said, taking its total outlet count to close to 600.
(Published in Financial Express)
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July 19, 2023
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)
admin
June 29, 2023
Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023
Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.
One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.
“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”
One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.
Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.
The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.
The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.
The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.
Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.
As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.
“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.
As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.
As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.
“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.
Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.
As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.
With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).
The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.
(Published in Economic Times)
admin
June 16, 2023
Sharleen D’Souza & Shivani Shinde, Business Standard
June 8, 2023
Why are companies finding it difficult to sustain the supply-chain business?
Experts point out that gross margins in supplying fast-moving consumer goods (FMCGs) are very low.
While it does look attractive because it is the largest part of the consumption market, the last-mile supply chain and retailer are not making money.
“FMCG brands have ensured high margins for their businesses by streamlining and smoothing their supply chains over decades and making them cost-efficient,” said Anshuman Singh, founder and managing director, Stellar Value Chain Solutions.
Singh said in rural markets, the costs of supply chains were proportionately high due to lower volumes.
He added: “The low margins in the last leg of the FMCG rural supply chain make it difficult for new-age rural distribution players to offset the high costs.”
Devangshu Dutta, chief executive officer, Third Eyesight, a consultancy firm, said modern B2B (business-to-business) players had tried to step in to replace the traditional links in supply chains with price incentives and a large selection of products.
“Traditional distributors and wholesalers don’t just add costs but also add value, including aggregating demand for brands, disaggregating supplies for small retailers, providing market intelligence to both ends of the chain, and giving credit to retailers and a sort of financial guarantee for manufacturers,” Dutta said.
He said for their business models to work — online or offline — B2B businesses needed a significant concentration of demand, which had been tough to get in many locations.
On July 6, 2022, the Competition Commission of India (CCI), in the dispute between biscuit manufacturer Parle and B2B player Udaan, upheld the plea of the former, saying it did not violate competition laws. Parle had refused to sell its products directly to Udaan.
Udaan was the first B2B start-up to have a run-in with a well established brand, which was not interested in moving away from the traditional distribution model.
What has that meant for Udaan? It has meant tweaks to its business.
It further diversified its product portfolio so that its access to the market was not impacted.
It forayed into the mobile accessories segment as local brands tapped into its network of over 3 million retailers.
Earlier, this year it expanded its reach in the miller segment, which supplies staples like pulses, grains, wheat, rice, and oil.
Udaan aims to take on board about 100 miller partners per quarter.
It works with over 500 miller partners, supplying over 10,000 SKUs (stock-keeping units) to retailers and kirana owners, according to the company in an interaction with Business Standard.
The other company that recently had to tweak its business or go back to its focus on rural India is Pune-based ElasticRun.
B2B start-up ElasticRun has decided to focus on the core business and wind up its new expansion plans.
Backed by SoftBank and Prosus Venture, ElasticRun, which typically runs distribution for FMCGs in rural areas, decided to expand and also cater to retailers within city limits, i.e. tier 1 and tier 2 markets that had a strong distribution owing to companies having direct distribution in those areas.
“We initiated a pilot for urban markets. But through the year, as the macro changed, we decided not to pursue the urban pilot and focus on our core of rural business … we have to part ways with almost 2 per cent of our employees,” said Sandeep Deshmukh, co-founder and chief executive officer, ElasticRun, in an earlier interaction with Business Standard.
ElasticRun extends the reach of the brands’ direct distribution networks to deep rural markets. It enables access to a set of net new stores and customers, who were not accessible through traditional distribution networks.
The need to spend in order to get market share has caused well-entrenched players like Amazon to pull out of some of its distribution business.
Amazon India has decided to shut down Amazon Distribution, according to sources. This follows its recent decision to close down its food delivery and edtech offers. The moves are part of the annual operating planning review process amid global macroeconomic uncertainties. The e-commerce giant is looking to focus on its core businesses, sources said.
Amazon Distribution operates a platform where sellers sell FMCGs and apparel products from companies and distribute them among kiranas and small neighbourhood stores.
However, this unit operated in only three cities of Karnataka — Bengaluru, Mysuru, and Hubbali.
(Published in Business Standard)
