The Great Indian Shopping Festival

A target of 700 crores during the 2 week period from Dec 13th '08 to Jan 4th '09, this was how much the Future Group had anticipated. It's true that Big Bazaar is one of the best Marketing success in India, but this festival took it a tad too far.

The number of press ads released were unprecedented. 'Times of India' carried a separate supplement with only Future Group ads, with every page & line screaming discounts. If these didn't get to the consumers, I don't know what will.

e-Zone, Pantaloons, Food Bazaar, Big Bazaar, Collections,Central etc all had % offs. But after a point the Retailer forgot about his customer. I strongly believe in maintaining a distinct identity that each retail brand should maintain because the primary base of customers visiting each of them are different. Future Group created 'Central' and its success was riding on the fact that it was a lifestyle fashion brand. The money rolled in as future group placed it's brands like 'John Miller' near much bigger players and earned higher margins on the same.

Now consumers have started associating 'Central' with the Future Group, whose primary success has been 'Big Bazaar', a discount retail brand, because of the umbrella advertising by Future Group as a whole.

From the Retailer's perspective, creating a property like the 'Indian Shopping festival' would have been a monumental task, whereby the back-ends of various other retailers would have been linked.

This similar to the 'Future group' Credit card which is years ahead of its time, but a concept that would surely pick up in the coming years as consumers realize actual hands-on benefits. This is nothing but credit from the retailer through an indirect route.

Future group may not be the best process oriented organization according to other retailers in the market who might comment that a time will come when Future Group's bubble might burst because of inventory, obsolescence etc, but the fact remains: no one else has managed to hit it big in Retail, at least from the customer's perspective.
They still remain the most flexible retail organization in India. Let us see if the trade-off works.

Biyani rolls out ethnicity, denies retail slowdown

The Future is changing track. The pioneer of organised retail in India, the Kishore Biyani-promoted Future Group has altered its strategy. From mass to class, the aspirational top-end consumers, to be specific. The undisputed king of Indian retail tells ET that he will focus more on the group’s fashion-driven retail formats like Pantaloon and the latest, Ethnicity, to achieve a turnover of Rs 10,000 crore in 2008-09. Mr Biyani insisted that slowdown is not reflecting from consumer spend. Excerpts:

Despite retail slowdown, you have launched yet another format Ethnicity. What makes you so sure that the concept will click?

Who says there is a slowdown? Although the environment looks gloomy, the Indian consumer is spending on FMCG, consumer durables and garments. Sales do not drop even if the sentiment is negative. Roti, kapda, makaan are essentials and consumer does not stop buying them.

Ethnicity is targeted at the aspiring urban Indian consumer who is looking for exclusive ethnic product-mix during marriages and festivals. It is an attempt to go back to our roots and create a niche category of ethnic wear and products like mojris, semi-precious jewellery, handbags, home decor products, handicraft, etc.

With brands deserting Ahmedabad and two Big Bazaar outlets closing down, are the times too challenging? Do you see a retail graveyard here?

It is a wrong presumption. With Nano happening in Gujarat, there is so much positivity around the state. If Nano can happen, so can Ethnicity. As it is, the success rate of any brand is 20-30%. While we had to wrap up one of the stores because of high rentals and another because we targeted the wrong consumer, we are expanding other formats (in Ahmedabad).

We have plans to set up eight Ethnicity stores across India in the next two years at Rs 8 crore per store spread over 25,000-30,000 square feet. Considering the urban poor customer is devoid of aspiration, a Big Bazaar would not click with them. At the same time, we have realised that we have to focus more on fashion even in Big Bazaar outlets to draw the aspirational `India One’ customer. (Future has re-categorised its target segment under India One, India Two and India Three.)

You are known to experiment with different retail formats. Which one has been your favourite?

All formats launched by the group are close to my heart. At this point in time, Ethnicity and Pantaloon are my favourite formats. That’s where the money is. Pantaloon is overachieving its target. We expect to record a turnover of Rs 10,000 crore in 2008-09 compared to Rs 6,500 crore in the last fiscal.

Ethnicity alone would fetch us revenues worth Rs 25 crore in the first year of operation.
How have real estate prices hit you?

Real estate scenario in a city like Ahmedabad is not inhibiting. In fact, realtors are so welcoming that they let us set shop without expecting any rentals for the first six months. We will add 5-6 million square feet of retail space in the near future.

There was a simultaneous boom in retail and aviation sectors. Now that the crisis looms over aviation sector, do you expect retail to be hit sometime soon? Could retail sector expect lay-offs?

Growth is important to avoid such stagnation. We believe that retail is booming and so there is no question of lay-off at this point. While investors like lay-offs (as it cuts down on the expenditure), promoters believe otherwise. One has to strike the right balance between the capitalist and socialist ideologies. I am a mix of both. A socialist-capitalist and vice-versa.

After Ethnicity, what next?

We are going to open the first stand-alone outlet of John Miller in Mumbai on Friday. The outlet will be located at Kala Ghoda and at the same store where I had started my first journey as an apparel supplier.

Big Bazaar footprint explodes all around

Kishore Biyani does not subscribe to the view of a global meltdown. His Future Group's strategy is paying off in numbers and his outlets seem to have more and more goods to offer.

In effect, he is increasing the real estate that has been leased out to his company for more and more retail outlets. 
One wonders whether people are buying more things if they enter a pretty looking showroom or a mall such as Pantaloons or Big Bazaar. To put it in John Donne's language , "Wasn't the customer weaned till then?" 

For one, the Future Group's retail chain Big Bazaar is itself is planning to have 300 hypermarkets in the country by 2010-11 . 

The company may also increase its annual turnover to Rs 13,000 crore by 2010-11 , up from Rs 3,600 crore last fiscal on the back of its expansion. They had reported begun with their first store in October 2001 and till date have crossed the 100-store mark. This was capped with three stores that opened recently in Pune, Cuttack and Delhi. The company's top brass plans to increase the number of stores to 300 by end of the 2010-11 fiscal. 

Big Bazaar chief executive officer, Rajan Malhotra has reportedly concurred on that figure. The company has also gone on record saying that it would have another 35 stores by the end of its fiscal in June 2009 to take the total number to 135. To achieve this they are targeting a turnover of Rs 5,000 crore in the current fiscal year and have formulated plans for reaching a figure of Rs 13,000 crore by 2010-11 fiscal. 

Malhotra has also reportedly concurred on such figures as well. 

Ror the expansion, the company would be looking at both the metros and Tier I cities, besides Tier II and smaller cities. 

The strategy seems to be perfectly on track as the Big Bazaar hypermarkets had a footfall of 11 crore last fiscal and the company is aiming for an increase in the numbers up to 14 crore this year. The average size of a Big Bazaar hypermarket is 30,000 sq ft to one lakh sq ft. 

The retail industry is the largest in India among the new and the old economy industries. It employs around 7.93 per cent of the total workforce in this happening economy and also contributes to over 11 per cent of Indian's GDP. 

The retail industry in India will keep growing as it is not yet targeting even one per cent of the potential customer base and their day to day needs. 

The industry as a result is expected to rise by 25 per cent yearly growth being driven by strong incomes, mutating lifestyles, and a young and spending populating compared to an aging one in other parts of the country. 

It is widely believed that by 2015, the burgeoning retail industry in India will be worth $175 - 200 billion. Incidentally, it seems that India's retail industry is one of the fastest growing with revenue to touch $320 billion in 2009. It may also be growing at a rate of six per cent every year. 

A still higher increase of seven to eight per cent is expected owing to growth in spending in urban areas, rising incomes, and a parallel rise in consumption in rural areas.

Slowing economy may offer respite to retail sector

Inflation may be eating into consumers’ wallets, but domestic retailers are not giving up just yet. Retail rentals are showing signs of fatigue after soaring multi-fold until recently. A slowing economy, hardened home loan rates and liquidity crunch indicate rental rates will soon fall in a manageable range. As of now, rentals have dropped by 5-10 % and are set to see a further fall of 15-20 % in the next few months. Even older deals are being renegotiated towards lesser per sq foot cost. 

Currently, lease rentals account for 15-25 % of retailers’ revenues in India and constitute the second-largest cost head, next only to merchandise cost. Salaries & wages and energy bills are next in line. Given the fact that operating profits of major retailers range from 5-10 % of their net sales, small savings on lease rentals can have a dramatic influence on their profitability. 

For instance, Pantaloon Retail’s rental cost for FY07 was Rs 209 crore, which was 6% of its net sales. The 80% growth in rental costs, compared to the 73% increase in sales, has hit operating margins. Though a part of the rise in rentals can be attributed to the company’s rapid expansion, the effect of soaring realty prices last year can’t be ignored. 

However, one cannot help miss the savings in the total operating cost. Even if we were to consider that rentals will stabilise at current levels, it will help Pantaloon Retail’s operating margins as the company continues to grow its revenues. 

The scenario is quite similar for Shopper’s Stop with rentals bills at Rs 101 crore for FY08, comprising 8% of the company’s turnover. Here also, the rental growth has doubled vis-a-vis the increase in retail sales. If rentals were to decline by an average of 10% at the current sales level, the company would have ended FY08 with a positive bottomline. 

EMERGING TREND: 

The domestic retail industry is following in the footsteps of its international counterparts. Having attained a decent geographic reach, players are experimenting with various formats to suit their respective business models. This is done keeping in mind the needs of the catchment area as well. 

Another important trend that has emerged from this drop in rentals is the co-existence of the revenue-sharing model in the domestic retail sector. In this system, there is no fixed monthly rent. Instead, there is a minimum guarantee amount, plus a revenue-sharing percentage between the landlord and the retailer. 

For instance, a typical co-existence deal will consist of the minimum guarantee of Rs 20-25 per month per sq ft with about 5% of revenue, compared to the Rs 70-110 per month per sq ft rent for an anchor tenant. 

In the current scenario, this model works well for the bigger players rather than the smaller players, as it is difficult to keep track of their ,sales. Big Bazaar, Shopper’s Stop, Provogue and Vishal Retail are going ahead with their expansions as planned. Some of these players have already worked out deals on a revenue-sharing basis. 

Online retailing or e-tailing is another format which is fast catching up with the conventional brick and mortar form of retailing. The fact that products can be delivered anywhere makes it a seamless form of shopping. Retailing through mobile phones, though a very recent phenomenon, is also catching up. 

GLOBAL VS INDIAN: 

Typically, international retailers pay just 3-4 % of their sales as rentals. Moreover, it is during similar downturns that global retail majors like Wal-Mart , Carrefour and Tesco increased their store presence, as rentals were low. Till not too long ago, real estate developers in India were not ready to negotiate prices, as there was ample demand for any mall located in a good catchment area. 

As retailers went on an expansion spree to attain geographical reach, it was a seller’s market. However , things have changed now. Not only have these organised retailers realised the importance of a sizeable reach, but they also know that good mallmanagement is important for a thriving business. 

Internationally, good facility management seems to be the key differentiating factor for the success of any mall. In India, too, it is now being recognised as an important deciding factor. As they say ‘customer is king’ ; it will be the customers who can make or break this entire euphoria about the retail industry’s success.

Retailers plan course correction to beat slump

Indian retailers are focusing on lower capital-intensive formats and also restructuring operations in an attempt to boost revenues and counter the slowdown.
The Future Group now plans to focus more on growing this segment in the next 12 months, said Kishore Biyani, chief executive officer of Future Group.
Aditya Birla Retail has embarked upon restructuring its operations including administration, to beat the slump in the economy, a top company official said.
The Future Group’s low-capital intensive focus includes expanding its no-frills store model, KB’s Fair Price Stores, small convenience store format Big Bazaar Best Deals, rural retail venture Aadhar, and home solutions venture Home Town.
“We are focusing a lot on return on capital employed. We are growing those formats which require less investment but have high business potential,’’ said Biyani.
The Future Group runs nearly 140 KB’s Fair Price Stores in cities such as Mumbai, Delhi, Ahmedabad among others, and plans to open 1,500 such stores in the next 18 months.
“We are trying to make our business model profitable so that we can sustain all the costs involved in the business,’’ said Thomas Varghese, chief executive officer of Aditya Birla Retail, which has over 615 stores in the country.
The group is also conducting a pilot project on smaller grocery stores under Big Bazaar Best Deals in Kandivali, a suburb of Mumbai, and if successful, the group would launch nearly 200 stores in the next couple of years, a company official said.
“We are focusing on such models where we invest Re one as capital but can reap a turnover of Rs 10,’’ Biyani said.
The Future Group is also expanding its rural retail venture Aadhar in 800 towns and villages in the next couple of years from 60-odd towns now.
“We have grown the business of Aadhar from Rs 5 crore a month to Rs 17 crore now,’’ Biyani said. The Future Group bought 70 per cent in Aadhar from Godrej for an undisclosed amount last year.
While elaborating on the business potential in the rural areas, Biyani said, “With rentals not more than Rs 8 per sq feet, business potential is huge.’’
On the other hand, the Aditya Birla group, as part of its restructuring process, plans to eliminate unnecessary posts, freeze recruitments in back-end operations and simplify administrative process, Varghese said. He, however, declined to quantify the cost saving from the restructuring process.
Aditya Birla Retail joins the likes of the Future Group which is planning to save nearly Rs 165 crore in the current financial year by cutting administrative and operational expenses.

CavinKare to take on HUL, ITC in bottled shampoo biz

CavinKare, a Chennai-based unlisted FMCG company known for its Chik brand, has embarked on a strategy which will test its mettle as a low-cost bottled shampoo-maker in the southern markets.
The company, which has successfully competed with multinationals, including Hindustan Unilever (HUL), in the sachet segment to retain leadership in key southern markets, will now have to prove its acumen in the bottled shampoo segment, which is increasingly getting competitive with the new marketing strategy of ITC and other players.
CavinKare’s sub-brand Chik Satin will address the affluent customers, pitting the company against HUL’s Clinic Plus and Sunsilk brands. Chik as a shampoo brand has predominantly been sold in the sachet format and has been positioned as an economy brand consumed largely in the rural market.
In effect, while attempting to address a larger portion of the urban market, CavinKare is also pushing its economy brand to the next level, currently populated by brands from HUL and P&G.
The overall market for shampoos in India is estimated at Rs 2,000 crore a year. The popular segment, where Chik Satin has been positioned, commands an estimated 25 per cent of this market.
According to a CavinKare executive, 75 per cent of Chik sales come from the rural market, while the industry sells only 52 per cent of its shampoo brands in the rural markets.
In the Indian shampoo market, where sachet (7ml) format accounts for 75 per cent of the total sales, Chik has been bringing in 90 per cent of its sales in this format.
CavinKare’s Executive Director Ramesh Viswanathan said, “Chik Satin is not a premium or niche segment product. It is slightly higher in the value chain.”
Experts believe that what CavinKare is attempting now is a bit risky and has not worked in the past. However, the earlier failures were at a time when affluence levels in the Indian market were far lower than what it is now. “Traditionally, when brands tried to move from the bottom of the pyramid to the top, they have not succeeded. For instance, Lux to Lux International and liquor brands such as Bagpiper to Bagpiper Gold. But then, times have changed. Those were when the economy was liberalising and now it is liberalised. It may work. We just have to wait and watch,” said Madhukar Sabnabis, Country Head (Discovery & Planning), Ogilvy & Mather.
The pricing of the new product is also done with an intention of taking on market leaders such as Clinic Plus. Chik Satin is priced at Rs 56 for a 200-ml bottle, while Clinic Plus is priced at Rs 63 and Sunsilk at around Rs 87 at the higher price point.
Sabnabis cites another recent success — Ponds Age Miracle, an anti-aging product that has found a niche for itself.
Santosh Desai, CEO of Future Brands (part of Kishore Biyani’s Future Group), believes that there is no one stand on whether what CavinKare is attempting will succeed. “When you attempt to move the economy brand up the value chain, it will not work if you peg it on price or as a category about status. It would be a numerator game, if value is equal to what you offer divided by the price.”
Desai cities the success of Lifebuoy soap that had managed to move up the value chain from being an economy product for several decades.
CavinKare has budgeted Rs 4 crore on television commercials to promote the new Chik Satin over a four-week period.

SAP sees strong retail growth

Major retailers partner with SAP to invest in an integrated solution portfolio

With over 60 high growth Indian retail companies embracing SAP technology for Retail Solutions, SAP India has made a mark in the growing Indian retail sector. This came about at the SAP Retail Customer Value Networking Event, being held in Mumbai, September 10.

According to a press release, SAP has a strong foothold in India, some of the major retail players such as are Future group, Reliance Retail, Tata Trent, ITC Retail, Great Wholesale Retail Club, Vishal MegaMart, Welspun, Nilgiris Dairy Farm, Videocon, Spencers etc. have partnered with SAP in their move to invest in an integrated solution portfolio to catalyze consumer demand across multiple channels, increase cost efficiencies, adapt to market changes and maximize profit margins. These retailers continue to increase their business in India and also SAP footprint in the Indian retail market to get better return on Investment.

Ramesh Shanmuganathan from John Keells Holdings PLC said, "We are beginning to realize the strategic benefits from our investments in SAP by leveraging its end-to-end capabilities which has helped us manage our IT footprint effectively through better business and IT alignment, whilst driving innovation and pursuing flexible business processes in providing for a stronger platform of growth for our businesses."

Some of the retailers who went live with SAP in India this year include Dabur, Nilgiris Dairy Farm, IndiaBulls, Subhiksha, Varkeys and the customer in global environment John Keells Holdings PLC (Srilanka) and Meena Bazaar (Bangladesh). SAP for Retail has further strengthened its presence with successful wins such as DLF Retail, Numerouno, Om Store Book Store in India and Gemcon Food and Agricultural Products Ltd. (Meena Bazar) and Otobi Ltd in Bangladesh. Worldwide, 6,200+ retail and wholesale customers run on SAP including 33 of the top 50 global retailers.

Tthe recently held SAP Retail Customer Value Networking Event, provided a common platform for discussion on Indian retail industry related topics, the event saw SAP showcase its investments in retail solutions, and product roadmap for the retail industry.

The other topics of interest included leveraging technology for growth and maximizing profitability through rural retailing. The forum witnessed participation from Sankarson Banerjee - CEO, Future Bazaar, Amit Mukherjee - CIO, RPG Group, Rajashekar, Executive Advisor, Wadhawan Group, Anil Garg, General Manager, Dabur, M VR Kumar – VP Asia Pac, MENA for SEAL INFOTECH and Ramesh Shanmuganathan, CIO John Keells Holdings PLC amongst others.

Speaking on the occasion, Amit Mukherjee - CIO, RPG Group, "In an industry faced with daily pressures on margins, performance and the bottom line, SAP offers robust solution which is able to handle large volumes of transactions and adapt to the changing industry landscape of the future."

Expressing his views, Anil Garg, General Manager, Dabur commented "A flexible solution platform that allows for incremental enhancements based on business needs and a clear road map for the future is critical to the long-term success. Dabur sees SAP as the IT provider of choice and a trusted partner who truly understands our business, and one that will continue to support its customers in the long run."

"Obtaining the flexibility to grow and adapt to market changes is a common objective for all of our retail customers. Having fully globalized technology in place to exploit new market opportunities and seamlessly integrate into a global operations network is crucial for many of our retail clients," said Dr. Deb Bhattacharjee, Vice President, Value Engineering, Industry & Solution Group, Indian subcontinent, "We continue to design a retail environment that puts customer needs in its epicenter and empower them to evolve as the best-run-business."

SAP has created and is operating an SAP Retail Innovation Center in India to better serve both the Indian and global markets with forward-thinking uses of retail technologies. The center houses fully globalized technology to exploit new market opportunities and seamlessly integrate them into operations network, best practices-based retail expansion and consumer intimacy programs a crucial for many SAP retail clients, states the release.

Integrated technology platform

Retailing continues to gain momentum in India with the main focus being on growing customer experience and increasing retails footprints. A Springboard Research study on IT in India's retail sector confirms SAP's strong position in the Indian market, with 27% of study respondents identifying SAP as the leading primary influencer in terms of solutions investments.

"Technology is a high-priority investment area for most large and medium-sized Indian retailers, as they look to scale up their business operations in a competitive market," said Nilotpal Chakravarti, Senior Analyst - Vertical Markets at Springboard Research. "We have seen a strong momentum for investments in ERP and other back-office solutions and SAP has emerged as a leading player in this space," he concluded.

SAP for Retail provides an integrated technology platform for retailers and a one point solution for supporting and managing different business models such as owned stores, franchise stores, shop n shop concepts. Strong business decision and analytical capabilities have enabled retailers of all sizes the power to make the right decisions quickly and profitably.

The SAP for Retail solution portfolio combines the SAP Business Suite family of business applications with a broad set of integrated retail applications to help companies profitably serve consumer demand across multiple channels.

Some of the most common solutions used in the retail industry by its customers are:

Merchandise and Master Data Management: Harmonized, synchronized and optimal workflow controlled master data across the different lines of business

Merchandise and Category Management ensures that assortments meet the expectations of customers within specific micro markets, determines optimal product mix, prices and promotions – supporting step-by-step cooperation and coordination in development, implementation, and monitoring of business plans.

Forecasting and Replenishment; solution that enables retailers to dramatically improve on-shelf availability, reduce inventory, and optimize the supply chain.

Workforce Management - A centrally managed, Web-enabled workforce management solution gives retailers improved flexibility and control over their business processes. It allows corporate management to take more ownership of schedule planning and execution, giving managers more time to assist customers and coach employees.

Store Management: Store management systems need to cater to the fast-changing needs of customers today. These systems must quickly gain fast and reliable, accurate, and insightful customer information in many ways,

POS Data Management - enables you to examine all your key issues – events and promotions, prices and margins, and reason codes for returns – as well as a host of other parameters.

RFID Framework

Reliance Retail to sell connected homes concept

Tata's Infinity Retail, Future Group's e-Zone already have tie-ups with Microsoft for the same.

Mukesh Ambani’s Reliance Retail has entered into an agreement with Microsoft to launch the ‘connected homes’ concept. GETTING WIRED Connected homes offers users the opportunity to connect all their consumer durables, electronic and IT products at home with their personal computer or laptops through Microsoft software such as Windows Vista and X Box The computer and the products are connected through wireless technology. http://fmcg-marketing.blogspot.com/2007/10/croma-electronics-megastore-tata-groups.html Reliance Retail’s consumer durable and IT format, Reliance Digital, is planning to launch the concept at its upcoming store in Gurgaon in the NCR region.

Tata’s Infinity Retail and Future Group’s e-Zone have already tied up with Microsoft to launch the concept as a pilot project at their stores.

Connected homes offers users the opportunity to connect all their consumer durables, electronic and IT products at home with their personal computer or laptops through Microsoft software such as Windows Vista and X Box, among others. The computer and the products are connected through wireless technology.

Reliance Digital will showcase the Microsoft products in a 500 sqft area in the store. Initially, it will be a pilot project and, depending on the success, the company is planning to open many such kiosks at Reliance Digital stores, which is eyeing revenues of Rs 20,000 crore by 2011, according to company sources.

At present, Reliance Digital has three stores and will have two more by March and aims to have nearly 50 stores by the end of the next financial year.

“If the pilot project succeeds, we will have the connected homes concept in all our stores,” said a Reliance Retail executive.

Reliance Retail has also tied up with Apple to open iStores in the country.

iStores sell Apple products such as Macintosh, i-Mac, iPod, and software and support services. Reliance Retail has three iStores and plans to launch 40 more in the next 18 months.

Tata’s Infiniti Retail has tied up with Microsoft to launch MS@Retail, a ‘connected homes’ concept at Croma outlets from October 2007. It was envisaged as a shop-in-shop pilot kiosk at Croma’s Juhu outlet.

“After the launch of the concept, we have seen a huge surge in our laptop sales. We are also planning to take it to our other stores,” said Ajith Joshi, CEO, Croma.

Croma has nine stores now and plans to add nine more in the next couple of months.

“The connected homes concept has gained popularity in the US and it will catch up in India, too, as users are benefiting from its usage,” said Joshi.

Future Group’s e-Zone, which tied up with Microsoft in January 2008 for its Hyderabad store, is taking the concept to its 28 other stores across the country, starting with a 30,000 sq ft store it is planning at Bangalore.

According to Manoj Kumar, CEO, e-Zone, “After the launch of the pilot, the sale of Microsoft products have gone up by five times. We are planning to take it to all our stores soon,” Kumar said. The company is planning to set up nearly 110 new e-Zones in the next 18 months.

After the success with Croma and e-Zone, Microsoft is believed to be taking the concept to all the major cities of India and ensuring its presence in major outlets.