heady growth



heady growth
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
f you are an ordinary
Indian, you go to the State
Bank of India (sbi) to open
an account, cash a cheque
or even, like Vijay Mallya, take a loan. If you are
already an account holder,
you go there to buy lingerie.
The Juliet Pink Non-padded Bra which,
unlike Mallya, will never conceal nonperforming assets (npa s), is available
for `185. If you are more bottomline
oriented, you could choose the Red
Blue Star Ruffle Bum Bloomer (`249).
The folks at sbi might believe they
are incubating a new class of assets,
but some former chairmen of the
hitherto-staid, 200-year-old organisation must be going up in smoke
– a second time. “This is a one-stop
solution for all your shopping needs,
offering great discounts and a large
portfolio of products to choose from,”
notes sbi on the site – statebank.yourmarketplace.in. It is restricted to sbi
debit card holders. But, with millions of sbi debit cards in circulation,
that’s a large universe.
Abhay Deshpande, founder &
ceo, MartJack, a digital commerce
solutions provider, explains that the
marketplace is a product of a marriage between his organisation and
the bank. “They have the customers,” he says. “We have the technology platform and the retailers.”
MartJack is totally in charge of the
operations; there are no bankers here
evaluating the assets.
The sbi marketplace is a sign of the
times. India’s biggest bank has been
online for a long time in its more
regular pursuits. The marketplace
is an additional channel to connect with customers (and, perhaps,
Total retail
($ billion)
Organised retail
Source: Pulse of Indian Retail 2014, EY
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Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
A New Tale
in Retail
The Indian retail market is worth
`3,893,425 crore today
Growing at 16-18% per annum
Estimated growth over the next
three years is 16% per annum
India may be evolving
a model of its own
Source: India Retail Forum
become an Amazon some day). “It
is very necessary,” says Deshpande.
“In an Omni world, you can’t leave
any stone unturned.”
hat is Omni, which
seems to have suddenly
captured the imagination of retailers of all
hues? At the India Retail Forum (irf)
in Mumbai last month, there was
a session on Omnichannel Retailing: Fad or market reality? Most participants didn’t know whether they
would be hearing a case study on a
Maruti vehicle or a shopping mall
in Miami. Omni has not been part
of the Indian retailers’ lexicon. “Year
2014 marks the dawn of omnichannel retailing age,” says a report by ey
(formerly Ernst & Young) titled Winning in the omnichannel retailing
world. ey is talking globally, not just
about India.
At the irf, Omni turned out to
be something everybody was thinking about, but hadn’t put a word to.
“When a retailer approaches customers through more than one channel,
he is said to be an Omni or multichannel retailer,” says Ajay Srinivasan, director, Crisil Research. “The
channels are the physical stores,
ecommerce, catalogues, call centres...
In the omnichannel model, multiple
customer touch points are integrated
seamlessly. Shoppers also have multiple options for purchase and delivery. For instance, a buyer can place an
order online on the ecommerce site
of Croma and pick up the order from
the physical stores of Croma. Some
of the retailers like Amazon and the
Future group plan to go a step further
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Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
From bricks to clicks
ast month, retail giant
Walmart pulled out yet
another string to its online
bow. In its hometown Bentonville (Arkansas), it launched
the Walmart Pickup Grocery. Customers can order
online and pick up their shopping from a designated warehouse. This is an experiment.
But it needs to work. Rival
Amazon is growing at a much
faster pace.
Walmart is streets ahead
of Amazon in terms of revenue. In 2013, the company
chalked up $476 billion in
sales against Amazon’s $74
billion. But Amazon is growing at around 23 per cent
against Walmart’s 1 per cent.
That’s in brick and mortar.
Walmart’s online sales stand
at around $10 billion. The
growth projection for 2015
is better than Amazon’s at 25
per cent. Many of the largest online retailers are actually meatspace companies
(see chart).
“Indian companies and
brands have realised that they
From clicks to bricks
f you were in a San Francisco mall early this year,
you may have seen a strange
sight – an Amazon store. Hold
your horses; the world’s largest online retailer has not
gone brick and mortar. These
are pop-up stores – shortterm retail commercial space
that can be put up in a jiffy.
Amazon is using these makeshift – yet classy – outlets to
sell Kindles. The company
has also tested what it calls
the Pop-up Loft, designed for
developers who can attend
free technical classes and
scoff pizza and beer.
Google’s brick and mortar entry. You can’t buy
anything here, just check
out the Google range of
Nexus phones and tablets,
and Chromebook computers. eBay too has an eBay
Boutique along similar lines.
Pop-ups are a way of testing
the waters. If the grapevine
is to be believed, the experiment has proved successful.
Both Amazon and Google will
set up physical stores by the
end of the year. Multichannel retail demands that you
ride all possible horses, even
those you never earlier imagined would be part
of your string.
According to an
Accenture study, 72
per cent of US digital shoppers ‘showroom’ – they first
check out a product at a store and
the buy it online.
An even larger 76
per cent ‘webroom’
– research the product on the Net and
then head to a store
to buy it. “Consumers expect to shop
seamlessly across
in-store, online and
must go online,” says Abhay
Deshpande, founder & ceo
of digital commerce solutions
provider MartJack. “That is
where the action is and will
be. Your products may be
available with online retailers. But you need to have a
presence of your own.”
So what are Indian companies doing? Here’s a sampler:
Raymond Ltd, a textiles solutions company, has flagged off
RaymondNext.com. The company also has RaymondSelect.
ParzSelect.com and ParkAvenueSelect.com – quite a range to
select from. Raymond has a
budget of `20 crore to develop
these sites.
Arvind has set up a new
company Arvind Internet Ltd.
Notes Arvind group executive
mobile channels,” says Accenture. Adds Peyush Bansal,
founder & ceo, Lenskart.
com, a New Delhi-based eyewear company: “Consumers
online but shop offline.”
Omni has arrived.
What the big boys are still
cogitating over, smaller companies and startups are implementing post haste. Eyewear
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O c t o b e r 13 -2 6 , 2 014
director Kulin Lalbhai: “We
are all set to be a leading consumer lifestyle player in digital
space by engaging in several
business models that can scale
globally. Creyate (Creyate.
com) is our first offering.”
Creyate hopes to be a `100
crore brand by 2015. This
retailer is an e-tailor: you can
design garments online.
maker Warby Parker, menswear e-tailer Bonobos, babyproducts company Baby
Town and Gap-owned Athleta
(women’s yoga clothing) and
Piperlime (women’s clothing
and accessories) started life
online. They have all set up
physical stores.
“This is an evolutionary
step for modern retail,” says
Bansal. Lenskart has opened
physical franchised
stores and is targeting 150 retail stores
across the country
over the next two
years. “Our plan is
to put spectacles on
every Indian face.”
Bansal is not
alone in marrying
offline. Says Vikram
Chopra, co-founder
and ceo, Fabfurnish.
com: “We currently
have two stores in
Delhi and two in
Bangalore. We are
looking at several
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Hindustan Unilever Ltd
(hul) is looking at a model
in which it does the online
booking and the delivery is
through the kiranas. hul has
an advantage in that the kiranas anyway stock its products;
it has 3.2 million outlets across
the country. Three years ago,
hul launched a “Bru online
café where consumers could
order coffee from the comfort
of their homes or offices”. It
didn’t work and only betrayed
the fmcg giant’s lack of
understanding of the new
media. But it has learnt a lot
since then.
The Aditya Birla group
has set up a team to steer its
entry into online. It already
has TrendIn.com, a Madura
Fashion & Lifestyle initiative
which hawks brands such as
Allen Solly, Louis Philippe,
Peter England, Van Heusen
and Pantaloon. On the financial side, there is MyUniverse.
co.in, which offers
The biggest online retailers ($ billion)
the usual range of
financial products.
hdfc Bank has
a marketplace for
Like an online loo,
its opening page
has sections for
Macy’s 4.2
His and Her. If you
Office Depot 4.1
Dell 3.6
had flipped over
Source: Internet Retailer
discounts, try this
out. Handbags are
array of its brands on Rupagoing at 75 per cent off and OnlineStore.com from Bumperfumes at 60 per cent.
chum and Hunk to Torrido
and Eurotica. “Online retailing
itc has online shopping
ShopWillsLifestyle.com is offering a cusp of growth
KitchensofIndia.com. to the overall innerwear and
But its real success is a differ- knitwear industry,” says the
ent channel – the eChoupal company’s annual report.
– which is a case study in Like sbi, it is selling underwear
business schools.
on the Net – with far more
Rupa & Co has a wide justification. u
other cities. All these will be
franchisee outlets.”
presence helps us build trust
and credibility,” he adds. The
outlets are small concept stores
with a limited inventory. “But
they are good enough for consumers to gain confidence in
our quality and brand value,”
says Chopra, who is just as
ambitious as Bansal. “In two
years we will become India’s
largest and most loved brand
in home décor,” he avers.
Also in furniture space is
Ashish Shah, co-founder &
coo, Pepperfry.com. He plans
to launch four experience centres in key cities by the end of
2014. “In the past two-and-ahalf years, we have had customers who have inquired if
they can check our products
to experience their quality.
For any individual, furniture
buying is a huge investment
and he would like to get a
touch and feel of the product
as an assurance.”
The need to touch and feel
is what brick and mortar retailers earlier claimed was the reason why online wouldn’t work
beyond a point. They were
wrong. But is depends on the
category. “Spectacles are experiential products,” says Bansal.
Clothes, unless you are going
in for readymades, do better in physical outlets. In fact,
any high-involvement product (toys for babies,
for one) should perform better in real
stores. A caveat is in
order here: you cannot always generalise.
Books may be very
bookstore is doomed
except as a place to
have coffee.
One key issue is
trust. Every online
buyer in India is worried about what he
will get; he is worried about the shopping
The first ecommerce
players in India ripped off
the early shoppers. If you
got a defective item, you had
to move heaven and earth
to have it replaced or get a
refund. Some of their tribe
(even belonging to big media
houses) are still around.
This is where Flipkart
introduced a new level in
customer service and then
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destroyed its reputation in a
day (see box: Bakras on Bakri
Eid day). Flipkart ceo Sachin
Bansal declined to respond to
Business India’s questions save
to forward the apology email
to customers.
So, is Flipkart also planning to foray into meatspace?
It already has. In a corner of
Bangalore is a store called
the company’s first
store on terra firma
and sells a variety
of Flipkart-branded
mainly intended for
employees, but outsiders can shop there
too. The plan is to
set up similar stores
in other cities. You
can get several novelty items out here.
And mugs. No supply-side
for the company;
on Big Billion Monday, Flipkart created a lot of them. u
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Wooing the kiranas
ill a couple of years ago,
the kirana was considered
cannon fodder, as the multinationals came marching in
with their big guns. Today, it
is accepted that, while modern trade may take some market share, the kiranas will not
only thrive but also be a key
component of this ecosystem.
“Last-mile delivery is a big
challenge for online retailers
and they are trying to pilot
newer delivery models given
Pragya Singh, associate vicepresident, retail, Technopak.
“One of them is using kiranas
as delivery points. This move
can simplify last-mile fulfilment by minimising delivery
locations. This can be especially relevant for a country
like India where a large-scale
B2C network doesn’t exist
and it is difficult to locate
addresses for lack of proper
street and house numbers in
several locations. However,
these are still early days.”
Walmart has come into
the country with its Best Price
cash-and-carry stores. It has
also come wooing kiranas.
“There are an estimated 12
million kirana stores in India of
which as much as 90 per cent
are not directly serviced by
India’s fmcg majors,” says the
company. “Best Price offers
them access to quality products at the lowest prices.”
With just-in-time supplies, the
kiranas can use the Best Price
store as their godown, freeing
up working capital. Walmart
also has a programme styled
Mera Kirana, which involves
training in various aspects of
shop management.
Walmart is the world’s
largest brick and mortar
retailer. At the other end of
the spectrum, in online space,
the world’s largest online
retailer Amazon has started
a pilot project in Bangalore
to use kiranas as the last-mile
delivery point. If it works, this
hybrid model will be rolled
out nationally.
Even before the new mncs
could target kiranas, older
companies in India have got
into the act. Modern retail
manages to sell products
cheaper because of the economies of scale and the fact
that manufacturers give discounts for bulk orders. Companies like Hindustan Unilever
Ltd (hul) and Marico have
started giving bulk discounts
to small retailers also (though
the size of the orders can
hardly be classified as bulk).
They have also started pilot
projects to make kiranas part
of the family. Select kiranas will be upgraded and, to
some extent, branded. Marico’s choice of umbrella is Mera
Store. The Delhi-based Dabur
has called its scheme Parivaar.
hul has had its Super Value
Stores for some time now.
The mistake many analysts seem to have made is to
equate the kiranas with the
mom-and-pop stores in the
US. The mom-and-pop stores
are empty nesters which
have become a burden with
no one to take over; young
Americans desert the smalltown parental hearth to head
for Hollywood to become
a Marilyn Monroe or Wall
Street to become a Gordon
Gekko. In India, a kirana is a
small business handed down
from father to son.
“Local kirana stores will
continue to thrive, as many of
them are efficient, offer personalised and customised service to customers, and give
sweeteners such as a credit
period for loyal customers,”
says Ajay Srinivasan, director,
Crisil Research. Notes a ficciPwC report: “The one difference between the traditional
kiranas in India and the momand-pop stores in the West is
that the latter, historically,
were relatively inefficient as
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compared to modern trade.
However, it has been proved
that the traditional kirana
stores and outlets in India are
ultra-efficient and have been
able to compete very successfully with modern retail for a
very long time. Modern trade
has expanded dramatically,
but the classical, traditional
kirana and convenience outlets have grown, modernised
and become self-service outlets to do remarkably well.”
In fact, an Assocham report
says Indians prefer kiranas to
malls. “Malls only entertain
the shoppers and make a big
hole in their pockets, while in
case of retail shops consumers
have the satisfaction of scanning through major brands
and products for which prices
are generally negotiable.”
If Napoleon had reached
India – he had his eyes on
Mysore – instead of getting bogged down in Egypt,
he would have called the
country a nation of small
shopkeepers. u
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
and involve the local kirana shops as a
delivery touch point.”
“To meet and exceed consumer
needs, retailers have to be wherever
the consumer wants them,” says
Deshpande. “Omnichannel needs
become their growth mantra.” At the
irf, MartJack and Microsoft released
a jointly-published book – It’s Commerce Sense: Omnichannel retailing handbook for offline retailers and
brands. MartJack has more than 350
clients, including well-known names
such as the Godrej group, Body
Shop, Indigo Nation, Metro footwear
and hcl . And, yes, it also runs
another banking marketplace with
all the necessary appurtenances – for
hdfc Bank.
Omni is not too old in the West,
but the numbers are already surprising. Omni channel sales for Walmart
were $13 billion in 2013 and growing
at 30 per cent. (This is different from
Walmart’s purely online sales.) Tesco
is spending $750 million this year to
beef up its Omni strategy.
n India, they are not talking big
bucks as yet. True, Omni is happening – brick and mortar companies are going online (see box:
From bricks to clicks) and vice versa
(see box: From clicks to bricks). Others are deploying kiranas as their lastmile delivery point. “Taking cues
from the success of multichannel
retailing in such mature markets as
the US and UK and facing increasing
competition from Web-only players,
brick and mortar retailers are trying
to leverage their physical presence
in their approach towards multichannel,” says Pragya Singh, associate vice-president, retail, Technopak,
a management consulting firm.
“Going forward, online players will
not only be competing with onlineonly players but multichannel
players as well.”
At the irf, though Omni was
like an unknown ghost peering
over people’s shoulders, everyone
was thinking multichannel. Online
hobnobbed with offline over Bacardi Breezers. Marketplaces chatted
up product companies over brandy
snifters. In the mood of general
bonhomie, several deals were struck.
India Retail Forum: chatter on omnichannel retailing
Delhi-based Snapdeal announced
a tie-up with electronics store Croma.
“We are extremely excited to launch
Croma’s flagship store on Snapdeal,”
says Kunal Bahl, co-founder & ceo
of the online marketplace. Croma, a
Tata group company, already has an
elaborate online presence. Incidentally, Tata group chairman emeritus
Ratan Tata has invested in Snapdeal
in a personal capacity.
Last month, Snapdeal also tied
up with Mahindra & Mahindra for
pre-bookings of its new Scorpio variant and with celebrity chef Sanjeev
Kapoor for a gourmet food category.
“Partnership has been the crucial
element of our business and we will
continue to enter into a whole lot of
partnerships,” says Bahl.
Alibaba, the Hangzhou-based
e-commerce giant which raised $21.8
billion in an ipo end-September, is
talking to Snapdeal to make an India
entry. Alibaba is present in India
through Easy Business India E-commerce which it acquired in December 2010 and renamed Alibaba.com
India E-commerce. The company
sources several billion dollars of
products from India annually.
Sourcing is, of course, the tail end
of e-commerce. It’s an important
tail, but largely invisible to the public eye. Things are happening there,
true. The Kishore Biyani-owned
Big Bazaar, for instance, is asking
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entrepreneurs to walk in with product samples and get approvals on
the spot.
But the real action is in the frontlines. Biyani is also talking to Amazon for a tie-up. When India’s largest
retailer (Mukesh Ambani’s Reliance
may dispute that) joins hands with
the world’s largest ecommerce
company, you know that it’s the
way forward.
“The Indian retail landscape is
under transition,” says Debashish
Mukherjee, partner at at Kearney.
“The market is following a global
trend, where offline and online components are expected to play a complementary role towards formation
of a much more robust value chain.”
Adds Abheek Singh, senior partner
& director, The Boston Consulting
Group: “The Indian consumer’s profile has changed considerably. He
is seeking an enhanced experience
in a combination of brick & mortar
and online.”
“Recent years have seen a remarkable transformation in the way India
shops and trades,” says Ajit Joshi,
managing director & chief operating officer, Infiniti Retail, the wholly-owned Tata Sons subsidiary that
operates the Croma chain. “E-commerce has captivated the imagination
of an entire generation of consumers.
This is the reason for the three-fold
growth the industry has witnessed
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
kea , the $37 billion Swedish
furniture maker, is setting
up shop in India. Last month,
it signed an agreement with
the Telangana government
for its first store in Hyderabad. It will be a greenfield
project and the tab per store
is `500 crore. Earlier, the
company had looked at available retail spaces all over the
country but found nothing
to fit its requirements. “We
think long term,” says ikea
India ceo Juvenico Maetzu.
“We look 100 years ahead.”
(ikea already has a presence
in India; in 2012-13, it sourced
goods worth $450 million for
its global operations.)
If ikea is to be believed,
most of our malls don’t measure up to international standards. The popular debate
in retail is the future of the
kiranas. A more pertinent issue
may well be the future of the
malls. “Our earlier malls were
haphazard,” says Susil S. Dungarwal, chief mall mechanic,
Beyond Squarefeet, a boutique mall advisory company.
“Builders saw something they
liked and duplicated it. After
the novelty had worn off, it
didn’t work.”
An assocham survey last
year said that almost 70-80
per cent of the space in the
malls that had come up in
the past two years was lying
vacant. “The vacancy levels are due to poor location,
poor design and poor parking facilities,” said the survey. Some have closed down;
others have converted themselves into offices.
Building a mall in the heart
of a city is asking for trouble.
Crossroads (now Sobo Central) was India’s first shopping
mall. It opened in 1999 in
downtown Mumbai offering
150,000 sq ft of retail space.
Early days saw a mob rush; at
McDonald’s, one of the anchor
A new beginning
tenants, there were 100-deep
queues. But the visitors (at the
mall, not McDonald’s) turned
out to be rubberneckers. The
site was close to a pilgrimage point and religious rustics
from the outskirts of Mumbai
treated this as part of the itinerary; those who came to pray
remained to scoff. Crossroads
started asking for mobile
phones, credit cards or a club
membership before allowing
people in. There was a public outcry and the number of
relevant visitors (read buyers)
began to drop. Even when the
screening was discontinued,
the footfalls kept plunging.
Crossroads was clearly in the
wrong place and the management compounded the error
by taking an elitist stand.
Location has always been
very important for malls. Parking is another issue. In India,
malls have been coming up
wherever there is space available. Delhi and Mumbai were
congested, so there was a rash
of malls set up in Navi Mumbai and Gurgaon. “Many
malls in India are today facing
a crunch in terms of footfalls
and occupancy rate,” says
Shubhranshu Pani, regional
director (retail services), Jones
Lang LaSalle India. “The reason often is that, with most
malls offering more or less
the same brands and stores,
visitors are not finding any
differentiation.” Says the Assocham survey: “Both retailers
and consultants seem convinced that the mall magic
has disappeared in a puff
of smoke.”
Tenants have been moving out as soon as their lease
period expires and are proving
difficult to replace. The villain
of the piece is the high rental.
But that is a consequence of
the cost of land and nothing
can be done about it.
An allied problem is lack of
mall management skills. Builders put up malls. They settle
for a hodgepodge of tenants.
Attention is paid only to the
anchor tenants. Dungarwal
says the hard skills – setting
up facilities etc – are not so
much an issue as the soft skills
– interacting with the tenants.
Today, mall owners are leasing space to all and sundry;
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a random survey of some
malls found a fortune teller,
a doctor’s clinic, an ngo and
a recruitment agency. Pani
doesn’t think this is born of
desperation. Says he: “Many
owners of vacancy-plagued
malls in India have now discovered that including nonretail tenants such as fitness
clubs, spas, travel agencies,
vacation brokers and car servicing centres is a very effective
strategy. Gyms, in particular, are a unique category of
tenants that brings several
advantages. For many retail
landlords they are, in fact, the
cavalry riding to the rescue.”
Research, which released its
report at the IRF, there are
250 malls coming up currently. (There are about 470
operational malls in the country today.) There will be an
increase of 18 per cent in the
average number of stores
per mall and a 10 per cent
decrease in store size. So
more fortune tellers can get
in but there may not be room
for the parrot.
Consultants say that malls
can succeed in India in the
long term only if they go in
for events and try to attract
a younger crowd. Unlike the
average housewife, young
India likes to spend. Organise, say, a beauty pageant
with customer participation,
and you will attract the right,
well-heeled crowd. After that,
it is for the individual stores to
cash in on the footfalls.
Dungarwal is optimistic.
He thinks builders have traversed the learning curve
and now know what they
are about. One thing that’s
a great success is the food
court. “Every Indian is a
foodie,” he says.
The way to a customer’s pocket is through his
stomach. u
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B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
over the past five years.” What’s happening today is “a healthy collaboration between online and brick &
mortar retailing. We at Croma are
much in sync with the relevance and
importance of omnichannel retailing. As a result, we have further
strengthened our online presence
through a strategic partnership with
Biyani’s Future group, which
includes Big Bazaar, is investing `100
crore in Omni retail – Big Bazaar
Direct. Says Biyani: “Big Bazaar
Direct is a unique business model,
which is the next revolution in the
retail industry.” It basically involves
enrolling ‘entrepreneurial Indians’ as
franchisees. They use a tablet to sell
deals to customers. The amount of
the deal gets deducted from a security deposit. Big Bazaar takes care
of the delivery. When the customer
pays up (cash on delivery – CoD), the
money is returned to the franchisee’s
security deposit.
ne can visualise scores
of kirana stores joining
the scheme. The coming demise of the kirana
store is a story oft told, but unlikely
to translate to reality (see box: Wooing the kiranas).
The kiranas are also a possible solution to a growing problem: Flipkart
and Amazon have stopped taking
orders above `5,000 in Uttar Pradesh
(`10,000 for Flipkart) because people buy things just for fun and refuse
to pay up (on the CoD system, also
unique to India). When the kirana
does the selling, the shopowner is
dealing face-to-face with someone
he knows (not an online stranger).
The chances of his customers taking
him for a ride by refusing delivery
are much lower. “Big Bazaar Direct
will empower millions of entrepreneurial Indians to be a part of this
revolution,” says Biyani.
Biyani is not the only retailer
adding strings to his bow. Other
big retail chains have been slow.
Smaller chains – and single stores
and product companies – have established an online presence to display
their wares. But many have transferred execution to the bigger online
Key retail sectors and growth projections
The apparel retail market is worth `324,500 crore and is growing at
20-21%. Modern retail is estimated at 43.1% of this market and is expected
to grow much faster at 30-40%. The growth is being driven by the surge in
demand for readymade apparel in semi-urban areas, rising income levels
and youth population, and increasing preference for branded apparel
Food service
The food service retail market is worth `204,438 crore and is growing at
23-24%. Modern retail is estimated at 13.3% of this total and is expected
to grow at a much higher rate
Mobile and Telecom
The mobile & telecom retail market is worth `203,981 crore. The market is
growing in all sub-segments – services (64% of the market), handsets (31%)
and accessories (5%). The share of modern retail is estimated at 19.3%
The jewellery retail market is worth `201,344 crore growing at 24-26% and
is expected to reach `383,000 crore by 2017. Modern retail is estimated at
10.2% of this total market and is expected to grow at a lower rate of 22%
The total consumer durables and information technology (CDIT) retail
market is worth `137,750 crore and is growing at 19-21%. Modern retail
is estimated at 23% of the total market and is expected to grow by 28%.
The market is led by retailers with multi-brand offerings
The total pharmacy retail market is worth `105,570 crore is growing at 10-11%.
Modern retail is estimated at 5.9% of this total market and is expected to
grow by 24-30%. Same store revenue growth has been more than 22%
Home & Interiors
The home & interiors retail market is worth `102,750 crore. All three
segments- furnishings, furniture and décor- have been growing. Modern
retail is estimated to be 18.6%. There was a small shift of market share
from furniture to décor during past two years. But the furniture segment
contributes highest in the overall market
Entertainment & Gaming
The entertainment & gaming retail market is worth `96,094 crore growing
at 14-15%. Modern retail is estimated at 14.3%. Growth has been over 50%
in terms of number of retail outlets. Same-outlet revenue has 20% growth
Other key sectors are beauty and personal care (`68,930 crore), eyewear (`43,243 crore),
leisure (`36,009 crore), fashion accessories (`15,557 crore) and timewear (`11,592 crore)
Source: India Retail Report 2015
retailers. It doesn’t always work. You
can ‘shop online’ for the Funskool
range of toys and baby products; the
international range includes Lego,
Tomy and Baby Alive. Then you are
directed to both Amazon and Flipkart. Like as not, they don’t have the
products in stock.
Funskool is an example of product companies that are going online.
For independent retailers it is becoming a matter of survival. But Omni is
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really a matter of mindset. “The benefits of omnichannel retail include
widening the consumer base geographically, effective management of
inventory and providing customers
with a seamless shopping experience
wherein they can exercise the store
pickup service, in-home demonstrations and much more,” adds Joshi.
At Shoppers Stop, ceo Govind
Srikhande is looking at an Omni
strategy. It requires significant
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
Bakras on Bakri Eid day
n 6 October, Flipkart,
the darling of India’s
itself in the foot. Its welladvertised Big Billion Day garnered $100 million in sales.
But it easily cost the company
much more in terms of reputation and valuation. In social
media (see chart) and in the
newspapers, the company was castigated for
biting off more than it
could chew. The first
round of the online
battles has gone to
Amazon and Snapdeal,
albeit by default. Snapdeal claimed that it had also
reached $100 million in sales.
Amazon, like some other
mnc subsidiaries attached
to apron strings, doesn’t talk
about turnover in India.
The event was top of mind
because of tv spots, hoardings and full-page ads in the
papers. Snapdeal added to
the excitement with a “Diwali
Bumper Sale”. Amazon, perhaps directed from Seattle
where Diwali doesn’t ring a
bell, had a Mission to Mars
Celebration Dhamaka. Myntra announced “a cracker of a
sale”. In its own corner, LocalBanya.com had “A Festival of
dealights”. Even sbi had a Big
State Bank Sale.
Flipkart got a billion hits.
But it alienated a million
potential customers. What
Flipkart’s initial reaction
was to boast about its success
– $100 million in gross merchandise value in just 10 hours.
Then, as the dimensions of the
pr disaster dawned, founders
Sachin and Binny Bansal sent
an email apology to their customers. “...we are really and
truly sorry... most of our special deals were sold out as
soon as they went live…” On
the puffed up discounts, they
went wrong? First, the servers
collapsed intermittently. Second, the advertised bargains
were not available; apparently, the stock got over in seconds. Third, buyers who had
snagged attractive deals found
their orders cancelled. Finally –
and most importantly – there
were widespread accusations
in social media that the company had marked up prices
just before the sale in order to
show a higher discount.
wrote: “This breaks the trust
our customers have put in
us.” (Flipkart’s unpreparedness was symbolised by the
fact that the BigBillionDay.
com domain was booked by
rivals as late as 4 October; it
led to Amazon.in.)
An earlier generation of
ecommerce players in India
had taken customers for a
ride. Flipkart scored simply
because it put so much stress
on customer satisfaction. This
investments and new technology,
so implementation may take 18-24
months. “Even today, online sales
haven’t crossed more than 10-15 per
cent of total sales in most advanced
markets,” he says. “Physical stores will
continue to provide a major chunk of
sales. Online, however, will provide
the key factor of convenience.”
mni has wider dimensions.
“No channel is an island,”
notes an Accenture report
titled Capturing the Potential of Omnichannel Commerce. “(In)
today’s omnichannel commerce
world, consumers, employees and
business partners leverage a variety
of channels to reach their objective,
whether that is to research product information, complete transactions, or collaborate. What’s more,
consumers expect companies to
use the digital data trail created by
their activities to generate deeper
customer insight.” While Omni is
today’s buzzword, big data analytics will be the big thing tomorrow.
(Walmart Labs already has a technology centre in India.)
“The entire retail landscape is a
huge pie and the good part is that it
is growing and is expected to grow
unabated in the coming years (see
chart),” says B.S. Nagesh, founder,
Trrain, a retail people advisory. “All
the three formats including traditional retail will coexist and continue to grow going forward. It is a
matter of customer experience as
also convenience that will drive the
market in India.”
“Backed by increased availability of
information, customers have become
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O c t o b e r 13 -2 6 , 2 014
is why the betrayal matters
so much and is likely to take
more than $100 million – even
$1 billion, perhaps – off Flipkart’s $7 billion valuation. The
company will take months to
address all the complaints.
The brick and mortar folks
were quick to react. “You can’t
take a nation for granted even
for one day,” read full page
ads from Kishore Biyani’s Big
Bazaar. “No deal can win the
trust of a billion people.
You have to earn it.”
The one-day shopping orgy doesn’t matter
as much to Biyani & Co
as the discounts being
given. This is far more
than manufacturers are
offering. Traditionally, a store
used to stock a product at a
much cheaper (even below
cost price) rate to attract customers, who would then buy
other products. It was called a
loss leader. At the ecommerce
sites on the manic Monday,
every item was a loss leader.
How did Flipkart manage?
By taking a big hit on the
bottomline, of course! It has
recently raised $1 billion from
Tiger Global Management,
more demanding,” says Amit Agarwal, country head of Amazon India.
“Though experimentation is imperative for retailers, the whole business
should hover around stability. One
may be relentless, but cannot afford
to be stubborn in approach.” In other
words, be prepared to sup with the
devil, the long spoon be damned.
Not everybody is so gung ho.
“India continues to be an underserved market and things are not
going to change in hurry,” says Sam
Balsara, chairman & managing director, Madison World. “Each format
has its strengths and weaknesses.”
Adds Srinivasan of crisil: “Currently,
omni-channel retailing accounts for a
miniscule proportion of the turnover
of retailers.” It will grow, he agrees.
But it isn’t about to change the world
overnight. Adds Singh of Technopak:
Cover Feature
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
online sales. SamMorgan
sung has decided
and others. SnapSome of the Twitter comments on Big Billion Day
to stop selling 48
deal has raised
Rahul Roushan @rahulroushan
cellphone models
$100 million from
Good news. The 500 Internal Server Error pages are gone from Flipkart.
Now you have 404 Page Not Found pages. 19.2% off on error message.
On WednesAmazon ceo Jeff
GabbbarSingh @GabbbarSingh
day, the governBezos has been
The Flipkart Big billion sale ended at 8:05 a.m. Thanks for coming.
ment got into the
in India flashing
act. Commerce &
around a cheque
abidpatel @TheAbidPatel
Industry Minister
of $2 billion for
Flipkart should change 500 server error to “You are our Bakra of the Day”
Nirmala Sitharaphoto-ops.
man told the
The UnReal Times @TheUnRealTimes
media in Delhi that
this has raised the
Raghuram Rajan lauds Flipkart for doing its bit to fight inflation.
there had been
bogey of foreign
Ramesh Srivats @rameshsrivats
several complaints
So, Flipkart is giving 44% off on Half Girlfriend. Which of course makes it just slightly over
about Big Billion
Indian retailers out
a Quarter Girlfriend.
Day. The governof business. Ecomment was exammerce has money
kray kray @krazyfrog
ining whether a
to burn. ModFlipkart ded. Snapdeal ded. Amazon should offer their domains for sale now.
policy change was
ern trade is under
siege even before
In the US, Amazon has
it has had time to establish are doing unethical wrong getting regarded as a disitself in the country.
trade practice in the coun- count product is like a kiss of had a largely unchallenged
Biyani says that selling an try” (sic) is likely to spearhead death for an upwardly mobile run and online vs online wars
brand. Among the companies have happened only in speitem below cost price is anti- the protests.
competition. Retailers are
The predatory pricing that have taken objection are cific sectors. But Alibaba is
planning to approach the has also been assailed by the Sony, lg, Canon and Lenovo. coming. It is sure to eat into
Commission. manufacturers. First, their lg, which has an online retail Amazon’e fiefdom. After
The anti-fdi lobby, which was own outlets are impacted. presence at lgBrandStore. the Flipkart fiasco, there is
acting as sob sister for the kira- Second, other bulk customers com, issued an advisory on unlikely to be another fronnas, now has further ammuni- are asking for large discounts Monday saying it had noth- tal attack – deep discounts,
tion for its campaign. A new on the assumption that the ing to do with the discounts. crashed servers and dissatisbody – the All India Mobile online retailers are getting As a pre-emptive measure, fied customers. The confronRetailer Association – formed them. Third, many feel it is Lenovo is planning a sep- tation will be insidious; watch
“to fight against online, which damaging to their brands; arate class of products for out for the 40 thieves.
“Till sometime back online was
looked upon as a youth-centric fad
and most brands and brick and mortar retailers did not take it seriously.
Disruptive growth in the adoption
of digital devices and the increasing
growth of Web-influenced sales are
pressurising retailers to keep up with
u 47 u
O c t o b e r 13 -2 6 , 2 014
a changing environment.”
“The conventional buying cycle is
dead,” counters Deshpande of MartJack. He points to another of his clients tiffin.com, which started as a
Web only service for lunch and dinner. Now it has six locations in Philadelphia. The project was inspired by
the dabbawalas of Mumbai another
channel that has diversified and is
now selling, among other things,
Airtel cellphone connections. When
you have integrated online, brick
and mortar, direct selling, TV shopping and the dabbawala, you will
know that you are truly Omni. The
pizza you order online, confirmed
on your mobile and delivered by the
dabbawala along with mailers for sbi
cards will taste so much better.

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