India could be 40 times bigger by 2050, and may also have the potential to be larger than the US by that time. To achieve this, however, India needs to implement many changes.
These are the findings of a global research report on ‘Ten Things for India to Achieve its 2050 Potential’, brought out by Jim O’Neill, Head Global Research at Goldman Sachs, and Tushar Poddar, V-P Research, Asia Economic Research Team at Goldman Sachs India.
The reports lists a number of things for India to do, such as improving its governance, controlling inflation, introducing credible fiscal policy, liberalising financial markets and increasing trade with its neighbours. “Delivery of all these and more would ensure strong, persistent, medium-to-long-term growth, allowing India to reach its amazing potential,” it says. Here are the 10 top challenges for India: 1) Improve governance
Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build its infrastructure, increase agricultural productivity and ensure that the fruits of economic growth are well established.
Governance problems stem from the increasing inability of the government and public institutions to deliver public services in the face of rising expectations. A large gap between physical access to services and the quality of services provided is leading to a citizen satisfaction gap.
2) Raise educational achievement
Among more micro factors, raising India’s educational achievement is a major requirement to help achieve the nation’s potential. According to the basic indicators, a vast number of India’s young people receive no (or only the most basic) education. A major effort to boost basic education is needed. A number of initiatives, such as a continued expansion of Pratham and the introduction of Teach First, for example, should be pursued.
3) Increase quality and quantity of universities
There is also significant need for better higher education. The likely numbers seeking higher education can be expected to grow by three of four times by 2020 from the current number of around 10 mn. The National Knowledge Commission has proposed an increase in the number of universities from 350 today to 1,500 by 2016. It has also proposed an increase in the 18-24 age group—to be educated to university level from 7 to 15 per cent. 4) Control inflation
For a nation that is rightly proud of its democracy and has a history of reasonable stability in terms of inflation, formal Inflation Targeting (IT) should become a centrepiece of a clearer, more defined and credible medium-term framework for macroeconomic stability. As part of this, greater independence for the Reserve Bank of India and the abolishment of all FX controls are recommended.
We are well aware of some of the difficulties, both real and perceived, for India to adopt these choices, but it is in India’s best long-term interests to undertake these steps. IT has given major benefits to a broad variety of countries, ranging from ‘developed’ countries (such as New Zealand, Sweden and the UK) to ‘developing’ ones (such as Brazil, Korea and South Africa). For India, there are probably broader powerful benefits.
5) Introduce a credible fiscal policy
India’s gross fiscal deficit remains one of the highest in the world and, recently, government liabilities have been increasing at an alarming rate. The overall government deficit stood at just under 6 per cent in FY2008. In FY2009, this may accelerate to above 7 per cent, due to a large debt-waiver for farmers, a big wage hike for civil servants, increasing fertiliser and oil subsidies, and higher exemptions on income tax. At such high levels, government borrowing crowds out private-sector credit, keeps interest rates high, adds to already high government debt, and becomes a key source of macro vulnerability.
Further, the composition of spending is undesirable. Expenditures are directed less towards productive investment—especially in much-needed areas such as health, education and infrastructure, which could enhance growth—but rather on wages and subsidies. A medium-term strategy for fiscal policy, which reduces the overall deficit to a sustainable level, is critical for India.
6) Liberalise financial markets
India’s financial sector remains small and underdeveloped. The state still dominates the sector, holding 70 per cent of banking assets, a majority of insurance funds and the entire pension sector. Additionally, markets are lacking in corporate debt, currency and derivatives. This leads to a lack of credit and low financial savings. Total credit, at 50 per cent of GDP remains well below that of its Asian neighbours (an average of over 100% of GDP) and especially compared with China (111% of GDP).
Within this, consumer credit remains abysmally low (at 11% of GDP) compared with an Asian average of over 40% of GDP. Household savings tend to be in physical assets and gold, and risk diversification channels are not available.
To meet its growth potential, India needs to pursue financial reforms to channel savings effectively into investment, meet funding requirements for infrastructure and enhance financial stability.
7) Increase trade with neighbours
In the past decade or so, Indian trade with the rest of the world has ballooned. Lower tariff barriers encouraged by Indian authorities have been key, as has booming world trade. This impressive development needs to be kept in perspective, however, as it has come from an exceptionally low base.
India currently accounts for no more than 1.5% of global trade. India still ranks below the average of all developing countries. India’s trade with China is rising sharply, and China now ties with the US as India’s biggest trading partner. Again, however, it is important to recognise that trade with China remains very low. India takes just 1.93% of China’s exports and provides just 1.46% of its imports. Total trade with the US in 2007 was just $42bn. For comparison, total US trade with China in 2007 was $405bn. Similarly, total Indian trade with China was just $37bn.
If India can be encouraged to think increasingly ‘global’, the virtuous benefits of trade with other emerging giants with large populations could be a source of considerable upside surprise for India. 8) Increase agricultural productivity
Increasing agricultural growth is critical not only for India to sustain high growth rates, but also to move millions out of poverty. Currently, 60% of the labour force is employed in agriculture, which contributes less than 1% of overall growth. India’s agricultural yields are a fraction of those of its more dynamic Asian neighbours. For instance, rice yields are a third of China’s and half of Vietnam’s.
Agriculture, especially in these times of rising prices, should be a great opportunity for India. Better specific and defined plans for increasing productivity in agriculture are essential, and could allow India to benefit from the BRIC-related global thirst for better-quality food.
9) Improve infrastructure
India's constraints in infrastructure are obvious to first-time visitors or long-term residents. The problems of clogged airports, poor roads, inadequate power, delays in ports have been well-recognised as impeding growth. Indian companies on average lose 30 days in obtaining an electricity connection, 15 days in clearing exports through customs, and lose 7% of the value of their sales due to power outages.
Incremental demand for infrastructure will continue to increase due to economic growth and urbanisation. The impact on infrastructure demand will be enormous, from demand for inner-city transport, water and sewerage to low-income housing. The Planning Commission estimates that India needs almost to double its ports, roads, power, airports and telecom in the next five years to sustain growth.
10) Improve environmental quality
India's high population density, extreme climate and economic dependence on its natural resource base make environmental sustainability critical in maintaining its development path. History is replete with instances of societies that have depleted their natural resources in the course of their development, thereby leading to severe loss of growth, and in some spectacular cases (e.g., Easter Island) a complete collapse of the civilization. Although such dire prognostications are premature, urbanisation, industrialisation and ongoing global climate change will take a heavy toll on India’s environment, if not managed better.
Monday, June 16, 2008
Tuesday, June 3, 2008
Anti-ageing cream goes young
When consumer products major Hindustan Unilever (HUL) recently relaunched its Pond’s anti-aging skin cream range, it was not only launching a ‘new-improved’ version of the product but also responding to a larger change in the core target consumers of anti-aging products — from the middle-aged 35-40-years-old women to 20-something girls, yes, but even men too!
Says Oriflame India national sales manager Shilpa Ajwani: “Today, we have customers in the 20-years-plus age group who start preventive skin care through anti-aging creams and while women are still the larger consumer base, there is faster growth in demand for anti-aging products by men too. This is unlike the scenario sometime back when classically 40-years-plus women were our target customers.”
The company launches about six anti-aging products a month, which now account for over a quarter of its sales in India.
Cosmetics are conventionally bundled into three categories — skin lightning, moisturising and anti-aging. Market research firm ACNielsen puts the anti-aging cosmetic market in India at over Rs 60 crore. Though just over 2% of the country’s Rs 3,000-crore skin care market, the anti-aging segment is the fastest growing at 93% year-on-year.
Anti-aging cosmetics include products as diverse as anti-aging lipsticks and eye balms, facial creams, hair lotions and foot creams. Consumers pay Rs 500-6,000 for such products from brands like Mary Kay, Revlon, Schwarzkopf, Procter & Gamble, HUL, et al.
Schwarzkopf Professional country head Murali Sundar confirms anti-aging products’ age defying trend: “With time, usage of anti-aging products has got little to do with a person’s age. Rising consumer awareness means that people in their late twenties have started buying our anti-aging hair care products. While the bulk of our customers are still women, men are fast waking up to hair-care.”
While busy lifestyles and concomitant stress hasten skin aging, rising incomes and awareness are facilitating fast consumer adoption of anti-aging products. But that’s not all, for there is also another important factor at play here. Consumers today opt to prevent and correct rather than repair at a later stage. Marketers are quick to spot this trend and are responding appropriately.
Says HUL skin care category head Venkat Shridhar: “Today, sales of bulk of our anti-aging creams come from 28-30-years-old women. Personal care spends have increased a lot in the past 3-4 years. Easy access to parlours, supermarkets and greater exposure to media have led people to spend more on hygiene and beauty. Hence, all our communication also highlights prevention as the way out to delay aging.”
Agrees Mary Kay India senior marketing manager Nirupama Rao: “Anti-aging products have ceased to be prescriptive in nature. Today, they are used for preventive purposes. Consumers realise that they help in delaying the damage caused due to aging.”
Though the current penetration of anti-aging products is low, marketers see huge potential in the category and are prioritising for its growth. Says Devendra Shinde, marketing head, Kaya Skin Clinic, Marico’s 56-store strong skin-care division: “Our age control Botox and Fillers treatments have grown up to four times in the last year.
Currently, age control packages account for 15% of our revenues and are expected to grow even more robustly.”
“We are witnessing a 30% year-on-year growth in the anti-aging segment. The age of consumers of anti-aging cosmetics is coming down rapidly and there is increased penetration of these products in India. This segment is expected to contribute substantially to our growth,” says Revlon India marketing director Deepak Bhandari. The company markets its anti-aging products under the Revlon Reveal brand, priced Rs 350-750.
Says Oriflame India national sales manager Shilpa Ajwani: “Today, we have customers in the 20-years-plus age group who start preventive skin care through anti-aging creams and while women are still the larger consumer base, there is faster growth in demand for anti-aging products by men too. This is unlike the scenario sometime back when classically 40-years-plus women were our target customers.”
The company launches about six anti-aging products a month, which now account for over a quarter of its sales in India.
Cosmetics are conventionally bundled into three categories — skin lightning, moisturising and anti-aging. Market research firm ACNielsen puts the anti-aging cosmetic market in India at over Rs 60 crore. Though just over 2% of the country’s Rs 3,000-crore skin care market, the anti-aging segment is the fastest growing at 93% year-on-year.
Anti-aging cosmetics include products as diverse as anti-aging lipsticks and eye balms, facial creams, hair lotions and foot creams. Consumers pay Rs 500-6,000 for such products from brands like Mary Kay, Revlon, Schwarzkopf, Procter & Gamble, HUL, et al.
Schwarzkopf Professional country head Murali Sundar confirms anti-aging products’ age defying trend: “With time, usage of anti-aging products has got little to do with a person’s age. Rising consumer awareness means that people in their late twenties have started buying our anti-aging hair care products. While the bulk of our customers are still women, men are fast waking up to hair-care.”
While busy lifestyles and concomitant stress hasten skin aging, rising incomes and awareness are facilitating fast consumer adoption of anti-aging products. But that’s not all, for there is also another important factor at play here. Consumers today opt to prevent and correct rather than repair at a later stage. Marketers are quick to spot this trend and are responding appropriately.
Says HUL skin care category head Venkat Shridhar: “Today, sales of bulk of our anti-aging creams come from 28-30-years-old women. Personal care spends have increased a lot in the past 3-4 years. Easy access to parlours, supermarkets and greater exposure to media have led people to spend more on hygiene and beauty. Hence, all our communication also highlights prevention as the way out to delay aging.”
Agrees Mary Kay India senior marketing manager Nirupama Rao: “Anti-aging products have ceased to be prescriptive in nature. Today, they are used for preventive purposes. Consumers realise that they help in delaying the damage caused due to aging.”
Though the current penetration of anti-aging products is low, marketers see huge potential in the category and are prioritising for its growth. Says Devendra Shinde, marketing head, Kaya Skin Clinic, Marico’s 56-store strong skin-care division: “Our age control Botox and Fillers treatments have grown up to four times in the last year.
Currently, age control packages account for 15% of our revenues and are expected to grow even more robustly.”
“We are witnessing a 30% year-on-year growth in the anti-aging segment. The age of consumers of anti-aging cosmetics is coming down rapidly and there is increased penetration of these products in India. This segment is expected to contribute substantially to our growth,” says Revlon India marketing director Deepak Bhandari. The company markets its anti-aging products under the Revlon Reveal brand, priced Rs 350-750.
IPL adds zing to TV sales during April-May
After witnessing a near 4% dip in sales in the first quarter (January-March) of 2008, TV sales have yet again gained momentum during April-May.
The industry saw TV sales growing by 35% during the period, courtesy the unbridled cricket mania.
The surge in demand comes at a time when TV sales normally remain flat. What's more, manufacturers have seen robust demand from not just the metros but also rural markets. The industry feels the IPL-led TV sales will form a large chunk to meet the industry’s sales target of 12.5 million this year.
Samsung India Electronics deputy MD R Zutshi told ET: "The eyeballs which IPL generated led to incremental growth in TV sales. Our TV sales shot up by 40% during May. And we leveraged IPL by announcing a promotional offer during this period which should sustain sales growth till June."
Latest ORG figures reveal that overall TV sales in April grew by 34.7%.
The industry saw TV sales growing by 35% during the period, courtesy the unbridled cricket mania.
The surge in demand comes at a time when TV sales normally remain flat. What's more, manufacturers have seen robust demand from not just the metros but also rural markets. The industry feels the IPL-led TV sales will form a large chunk to meet the industry’s sales target of 12.5 million this year.
Samsung India Electronics deputy MD R Zutshi told ET: "The eyeballs which IPL generated led to incremental growth in TV sales. Our TV sales shot up by 40% during May. And we leveraged IPL by announcing a promotional offer during this period which should sustain sales growth till June."
Latest ORG figures reveal that overall TV sales in April grew by 34.7%.
Wednesday, May 7, 2008
FMCG prices up on higher input costs
The rise in raw material costs has caused a 10 per cent increase in the retail prices of fast-moving consumer goods as companies are passing on the rise in costs.
In the last few weeks, the price of the 100 gram bar of Godrej No 1 has gone up by Rs 2.5 to Rs 13, Wipro's [Get Quote] Santoor by Rs 2 to Rs 16, Reckitt Benckiser's Dettol by Rs 2 to Rs 17 and Hindustan Unilever's Pears by Rs 2 to Rs 23. Even mass market brand Lifebuoy, the largest selling, has become costlier by Re 1 to retail for Rs 12.
Food items, too, have become costlier. "We had increased milk prices in February 2007, August 2007 and then again in February 2008 - each time by Re 1. We also raised the prices of select items such as ice-creams by 1-2 per cent in February," said R Sodhi, chief general manager, Gujarat Cooperative Milk Marketing Federation, which markets the ubiquitous Amul.
Procter & Gamble's Ariel detergent now costs Rs 122 for a 1 kg pack, a rise of Rs 6, while HUL's Surf Excel's price is up at Rs 126, costlier by Rs 10. In some cases, the prices have remained unchanged but packs have become lighter. The 1 kg pack of HUL's Wheel washing powder has shrunk to 800 gm.
However, HUL has bucked the trend in the case of Lux, its flagship soap brand, deciding to roll back the 5 per cent price increase it had effected earlier.
"This is consequent to the excise duty reduction announced in the Union Budget for home and personal care products from 16 per cent to 14 per cent, along with changes in abatements," said a spokesperson for the company.
This is an act unlikely to be replicated. The price of palm oil, which comprises 80 per cent of the raw material in soap making, has gone up by 9 per cent since January. Soda ash, a key ingredient in detergents, has become costlier by 20 per cent in the last six months to touch Rs 9,000 a tonne.
Since January 1 this year, the price of groundnut oil has gone up 7.81 per cent, sugar by 9.34 per cent and wheat by 3.09 per cent.
A temporary relief for some players is a forward contract cover for vegetable palm oil for the next three to six months. However, once this contract ends, the new contract will be based on the increased prices and put still more pressure on consuming companies.
"The way the prices of raw materials are increasing, the indications are that we would need to take another price hike. We are contemplating a price hike of up to 6-8 per cent in soaps," said Hoshedar Press, executive director and president, Godrej Consumer Products [Get Quote].
ITC is dealing with the situation by building scale. The company has also dispersed its manufacturing base, reducing the time and distance to market.
Saturday, April 19, 2008
Marks & Spencer to tango with Reliance
Britain's leading retailer Marks and Spencer Group (Marks & Spencer) announced a JV with Mukesh Ambani-promoted Reliance Retail on Friday, involving an initial investment of £29 million (Rs 230 crore), with plans to set up 50 stores over the next five years. M&S plans to pick up majority stake of 51% in the JV, Marks and Spencer Reliance India, while the balance will be held by Reliance Retail, once its application is cleared by the foreign investment promotion board. The UK-based clothing and food retailer expects to increase sourcing from India and bring into the country a wide range of products from its global portfolio through its proposed stores. "We intend to open bigger stores, selling a wider range of products at lower prices, including a growing number of products sourced from local suppliers,'' Marks and Spencer Reliance India CEO Mark Ashman said. "Subject to FIPB approval, we will open our first store in six to nine months. To begin with, the focus will be on cities like Delhi, Mumbai, Hyderabad and Bangalore, and in next couple of years we will also go to tier II and tier III cities,'' he added. The new JV will have the right to operate Marks & Spencer stores in India selling items such as women's, men's and children's clothing as well as homeware. Planet Retail, Marks & Spencer's existing franchise partner in India, will continue as a franchisee in respect of the 14 existing franchise stores, says a company statement. This announcement is part of Marks & Spencer's plans to grow its international business to 15-20% of group revenues within the next five years. Stuart Rose, CEO, Marks & Spencer said: "India is a very exciting opportunity for Marks & Spencer and a market where there is the potential for M&S to become a major retail brand. Reliance Retail is the ideal partner for us to accelerate our expansion and create the opportunity to open much bigger M&S stores. We have been very impressed by their strength in technology, logistics and property and the speed with which they have become a major player in India's retail scene.'' The JV is at present called Tapti Trading. Commenting on the development, Reliance chairman Mukesh Ambani said: "M&S is a very well respected brand globally. At Reliance, we have always strongly believed in the power of the Indian consumer market. We are excited to partner with M&S to combine Reliance's understanding of the Indian marketplace, and its traditional strengths in the areas such as technology, infrastructure, logistics and training with M&S's legendary retailing and product development capabilities to deliver a delightful experience for Indian consumers.'' The £8.5-billion M&S employs over 75,000 people in over 600 stores in UK, and over 275 stores in 39 territories around the world.
Rasna set to foray into fast food
In a major diversification move, Ahmedabad-based soft drink concentrate major Rasna is cooking up a foray into the fast food mart with an exclusive chain of outlets retailing fast food and beverages. To be christened Devil's Workshop, Rasna's fast food chain is aimed at not just taking on industry biggies like McDonald's but also cafe majors like Barista and Cafe Coffee Day as well.
The diversification move has been brewing for the past six months and has seen Rasna set up a separate division to be spearheaded by a CEO, apart from a central kitchen at a cost of Rs 1.5 crore in A h m e d ab a d , sources said. Rasna plans to set up small outlets of around 600 sq ft and kiosks at malls, multiplexes, educational institutions and transpor tation hubs, sources added. Interestingly, while the National Institute of Design was roped in to design the concept as well as outlets, Rabo Bank carried out the viability study.
The outlets, the first of which are to be rolled out on a pilot basis at a multiplex in Ahmedabad this weekend, will retail not just fast food delicacies like pizzas, croissants and patties but also donuts, pastries as well as hot and cold beverages. While the cold beverages will come from the Rasna stable, the company has joined hands with Italian coffee player Caffe Vergnano for its coffee offerings, sources said. When contacted, Piruz Khambatta, chairman of the Rs 300-crore Rasna group, confirmed the move and said the company was eyeing revenues of nearly Rs 100 crore from the food business by 2009-end.
"We plan to target nearly a dozen tier-II cities, including Pune and Chandigarh, for the fast food business, for which we will also take the franchisee route,'' Khambatta said, adding that the company will set up a central kitchen in each city it enters. Explaining the reason for the foray, Khambatta said: "We found that the biggest growth in the food retail segment is coming from ready-to-eat foods due to changing lifestyles and onset of modern retail.''
The diversification move has been brewing for the past six months and has seen Rasna set up a separate division to be spearheaded by a CEO, apart from a central kitchen at a cost of Rs 1.5 crore in A h m e d ab a d , sources said. Rasna plans to set up small outlets of around 600 sq ft and kiosks at malls, multiplexes, educational institutions and transpor tation hubs, sources added. Interestingly, while the National Institute of Design was roped in to design the concept as well as outlets, Rabo Bank carried out the viability study.
The outlets, the first of which are to be rolled out on a pilot basis at a multiplex in Ahmedabad this weekend, will retail not just fast food delicacies like pizzas, croissants and patties but also donuts, pastries as well as hot and cold beverages. While the cold beverages will come from the Rasna stable, the company has joined hands with Italian coffee player Caffe Vergnano for its coffee offerings, sources said. When contacted, Piruz Khambatta, chairman of the Rs 300-crore Rasna group, confirmed the move and said the company was eyeing revenues of nearly Rs 100 crore from the food business by 2009-end.
"We plan to target nearly a dozen tier-II cities, including Pune and Chandigarh, for the fast food business, for which we will also take the franchisee route,'' Khambatta said, adding that the company will set up a central kitchen in each city it enters. Explaining the reason for the foray, Khambatta said: "We found that the biggest growth in the food retail segment is coming from ready-to-eat foods due to changing lifestyles and onset of modern retail.''
Monday, March 31, 2008
India ranks 44 as global retail destination
India has been ranked 44th on the list of most preferred destinations by global retailers, according to a report by real estate consultant CB Richard Ellis.
The report explores the globalisation of the retail industry and scrutinises retailer presence in relation to market sectors, country of origin, regional trends and other influences.
"Even though the Indian economy is growing at a rapid pace with consumers having more buying power, we are still only at the 44th position," said Anshuman Magazine, chairman and managing director of CB Richard Ellis (South Asia).
"This is primarily due to FDI (foreign direct investment) restrictions in retail and also relatively lower average per-capita income in the country. Hopefully in the future, if the FDI norms are relaxed, coupled with expected economic growth, India would move up in the rankings," Magazine added
Among the BRIC (Brazil, Russia, India and China) group of countries, only China and Russia have been able to make it to the top 10.
Britain leads the chart with the presence of 55 percent retailers, Spain second with 51 percent retailers followed by France, a close third with 49 percent retailers.
France and Germany also performed strongly in the global ranking, achieving third and fourth positions respectively. The United Arab Emirates, China and Russia figured in the top 10, the report said.
"The penetration of international retailers into these emerging markets is similar to that of much more mature economies, explained by a number of domestic political, economic and retail market idiosyncrasies," it said.
Interestingly, the US was ranked 11th with the presence of 39 percent of international retailers.
Presence of luxury goods dominated the international retail expansion, with almost 90 percent having a presence in more than 10 markets, whereas grocery, food and drink retailers indicated 60 percent presence in 10 or more markets.
The report explores the globalisation of the retail industry and scrutinises retailer presence in relation to market sectors, country of origin, regional trends and other influences.
"Even though the Indian economy is growing at a rapid pace with consumers having more buying power, we are still only at the 44th position," said Anshuman Magazine, chairman and managing director of CB Richard Ellis (South Asia).
"This is primarily due to FDI (foreign direct investment) restrictions in retail and also relatively lower average per-capita income in the country. Hopefully in the future, if the FDI norms are relaxed, coupled with expected economic growth, India would move up in the rankings," Magazine added
Among the BRIC (Brazil, Russia, India and China) group of countries, only China and Russia have been able to make it to the top 10.
Britain leads the chart with the presence of 55 percent retailers, Spain second with 51 percent retailers followed by France, a close third with 49 percent retailers.
France and Germany also performed strongly in the global ranking, achieving third and fourth positions respectively. The United Arab Emirates, China and Russia figured in the top 10, the report said.
"The penetration of international retailers into these emerging markets is similar to that of much more mature economies, explained by a number of domestic political, economic and retail market idiosyncrasies," it said.
Interestingly, the US was ranked 11th with the presence of 39 percent of international retailers.
Presence of luxury goods dominated the international retail expansion, with almost 90 percent having a presence in more than 10 markets, whereas grocery, food and drink retailers indicated 60 percent presence in 10 or more markets.
Retail biggies discover future in hypermarket format
Hypermart is the flavour of the season. The big guns of organised retail have entered new markets with small-sized supermarkets and branded convenience stores. Now they are ready for bigger investments and larger formats.
Reliance, Aditya Birla and Tata’s Star Bazaar are focusing on large European-style hypermart roll-out while old hands like Spencer’s and the Future Group too are scaling up their hypermart formats. Hypemarket are the next stage in retail revolution for some brands. They will get higher margins, volumes and more brand recognition.
“The supermarts have already established brands, now hypermarts can levearge that brand recognition and create a captive customer in smaller markets. European style of hypermarket with roomy isles and white lights seems to be favoured by the new players in India”, says a marketing consultant attached to an Indian retail business house.
According to a Technopak study, 66% of the total domestic investments in retail (estimated to be at $1,011 billion by 2017) would be done in hypermarts and supermarts formats. In the next five years, 32% of the new investment in retail is expected to be in the hypermarkets, says the study.
Typically, a hypermarket is weekend shopping destination that works on low price points and high volumes, covers a large floor area (anything from 40,000 square feet to 200,000 square feet) and has a larger catchment area. It is a combination of supermarket and departmental store and stocks a large amount of product categories, including groceries, general purpose goods to specific apparel and even automobiles etc.
The Tata, Reliance and Aditya Birla groups have by co-incidence of design launched their hypermarts in Gujarat during the beginning of this year. For most, it was a combination of easy availability of property in a reasonably mature market. “There was property easily available since retail development had commenced in Ahmedabad.
Since the hypermarket business was new to us, we wanted to test in a market that was value-conscious and gauge the results before spreading our footprint across the country,” Smeeta Neogi, brands head, Trent, told ET. Russell Burman CEO, hypermarkets, Aditya Birla Retail, says that the Gujarat opening and timing of hypermart is a coincidence.
“We have been planning it for sometime. It has more to do with which property developed early,” he said. More is planning to open some dozen hypermarts this year in NCR and across tier two cities in India. Reliance, which has already opened two hypermarts in Gujarat, is also rolling out the retail model across the country.
Reliance, Aditya Birla and Tata’s Star Bazaar are focusing on large European-style hypermart roll-out while old hands like Spencer’s and the Future Group too are scaling up their hypermart formats. Hypemarket are the next stage in retail revolution for some brands. They will get higher margins, volumes and more brand recognition.
“The supermarts have already established brands, now hypermarts can levearge that brand recognition and create a captive customer in smaller markets. European style of hypermarket with roomy isles and white lights seems to be favoured by the new players in India”, says a marketing consultant attached to an Indian retail business house.
According to a Technopak study, 66% of the total domestic investments in retail (estimated to be at $1,011 billion by 2017) would be done in hypermarts and supermarts formats. In the next five years, 32% of the new investment in retail is expected to be in the hypermarkets, says the study.
Typically, a hypermarket is weekend shopping destination that works on low price points and high volumes, covers a large floor area (anything from 40,000 square feet to 200,000 square feet) and has a larger catchment area. It is a combination of supermarket and departmental store and stocks a large amount of product categories, including groceries, general purpose goods to specific apparel and even automobiles etc.
The Tata, Reliance and Aditya Birla groups have by co-incidence of design launched their hypermarts in Gujarat during the beginning of this year. For most, it was a combination of easy availability of property in a reasonably mature market. “There was property easily available since retail development had commenced in Ahmedabad.
Since the hypermarket business was new to us, we wanted to test in a market that was value-conscious and gauge the results before spreading our footprint across the country,” Smeeta Neogi, brands head, Trent, told ET. Russell Burman CEO, hypermarkets, Aditya Birla Retail, says that the Gujarat opening and timing of hypermart is a coincidence.
“We have been planning it for sometime. It has more to do with which property developed early,” he said. More is planning to open some dozen hypermarts this year in NCR and across tier two cities in India. Reliance, which has already opened two hypermarts in Gujarat, is also rolling out the retail model across the country.
Big retailers to take care of mom-&-pop stores
India Inc is all set to script an Indian model for retail growth. The government has asked big retailers to chart out an India-specific strategy for organised retail, which would result in inclusive growth of mom-&-pop outlets.
“We have had two rounds of meetings with retailers such as Reliance, AVB Group, Future Group, Bharti and the Tatas,” minister for food processing industries Subodh Kant Sahay told ET. “We want small shopkeepers to get access to big supply chains. Everybody should benefit,” he said. This could be the answer to the political criticism over large retail trampling small kirana shops.
“Organised retail, in the long term, would create a market as it would help boost supply-chain management for our farm produce also. Without retail, farmers cannot get optimum value for their produce. Due to lack of an efficient supply-chain network, more than half of India’s produce gets wasted,” Mr Sahay said.
India could consider opening up its $330-billion retail market to foreign investment after it is convinced that the kirana stores will not be affected by big retailers. “Organised retail, backed by an efficient supply chain, has the potential of raising the rate of growth of the food processing sector from 13% to 20% in the next three to five years,” the minister added.
Last year, states like Uttar Pradesh cracked down on organised retail, especially in fruit and vegetables, following protests from vendors. This sector has a strong lobby of middlemen, who control significant chunks of local vote banks.
“We have had two rounds of meetings with retailers such as Reliance, AVB Group, Future Group, Bharti and the Tatas,” minister for food processing industries Subodh Kant Sahay told ET. “We want small shopkeepers to get access to big supply chains. Everybody should benefit,” he said. This could be the answer to the political criticism over large retail trampling small kirana shops.
“Organised retail, in the long term, would create a market as it would help boost supply-chain management for our farm produce also. Without retail, farmers cannot get optimum value for their produce. Due to lack of an efficient supply-chain network, more than half of India’s produce gets wasted,” Mr Sahay said.
India could consider opening up its $330-billion retail market to foreign investment after it is convinced that the kirana stores will not be affected by big retailers. “Organised retail, backed by an efficient supply chain, has the potential of raising the rate of growth of the food processing sector from 13% to 20% in the next three to five years,” the minister added.
Last year, states like Uttar Pradesh cracked down on organised retail, especially in fruit and vegetables, following protests from vendors. This sector has a strong lobby of middlemen, who control significant chunks of local vote banks.
Saturday, March 29, 2008
same old storey
Considering that the apparel and lifestyle retail format, Shopper’s Stop is one of the oldest players in Indian retail, BS Nagesh and his team can feel a sense of achievement. But the oldest network also brings a rider along — that Shopper’s Stop has the largest number of old stores. This for the team is a matter of concern because in addition to launching new stores across new regions, the old stores also need a boost from time to time. Currently, there are four stores under revamp across Delhi, Hyderabad and Bangalore. “If you open three or four stores a year, they look newer and your first 20 stores look older. So in your own generation, yesterday’s business looks extremely old,” says B S Nagesh, CMD, Shopper’s Stop. While one can see the thought behind the revamp of older stores within Shopper’s Stop network, it’s only 18 months since the Croma store at Juhu opened for business and already changes are in the offing. Not because footfalls or per square feet realisation is dropping, but the idea here is to create a more customer friendly environment. “When sales are good, the normal logic is don’t touch it. But in the last 18 months, we have studied customer traffic. Based on what we found out, we have decided to incorporate some changes,” explains Ajit Joshi, CEO, Infiniti Retail. The retailers today are doubling up as cosmetic surgeons undertaking elaborate makeover sessions. The intervention has been necessitated by worries about same store sales, a phenomenon which has hit the Indian retailing market. As players are leapfrogging the retail curve and aggressively expanding, they are faced with shorter retail lifecycles on older stores. Globally, average retail life cycles are six to seven years but Indian modern retailers have been forced to re-invest in old stores by the third year on account of the rapid pace of expansion. Same store sales are generated only by establishments that have been open more than a year and give a clear sense of how the industry is really performing. It is crucial since the older stores bring in most of the business until newer ones consolidate their position. Globally , the same stores metrics are used to measure the health of the business and are also a trademark of the health of the economy particularly in countries with a developed retail environment. It’s this phenomenon which is keeping Salil Sahu, CEO, Home Stores India, which runs Sabka Bazaar in the North on his toes despite a complete revamp recently. Home stores, part of Wadhawan retail holdings, acquired Sabka Bazaar in July 2007. Post acquisition, the company revamped all 30 existing stores while adding new ones to its fold. Six months into business, old store sales have grown by 50%, while footfalls grew by 70%, says Sahu. “A reasonable timeframe can be four years before a major overhaul is undertaken , but changes are taking place in all directions , from cost pressures , competition to shopper behaviour. Thus one needs to constantly monitor the need for incremental changes from time to time,” he explains. Industry estimates indicate the retailers target between 5% and 15% same stores sales growth depending on inflation and shape of the economy. India however is witnessing erratic behaviour. Considering the nascent stage, the growth should be increasing consistently. However, studies reveal that while stores do better in the first year, the second year witnesses a drop. Hemant Kalbag, principal - consumer & retail practice, AT Kearney believes the drop is more to do with the novelty factor associated with a store. Since retail is a new phenomenon , barring big metros, most catchments haven’t got exposed to modern trade.
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