The FMCG & RETAIL Marketing Blog

The Changing Kiranawala!

2011-09-20T21:54:00.001+05:30

80 Lakh Kirana outlets have beena number constantly quoted in various studies as the first consumer choice forshopping across India. They have distinct advantages that are obvious now;convenience, extension of credit, home delivery & leveraging personalrelationships. But threats from outside & inside have ensured that theyhave evolved rapidly over the last 5 to 10 years.

Outside-threats are of course,the imminent opening up of the retail sector by the Government, with theintroduction of 100% FDI in this sector. Opposition or not, perception is thatthe sheer size of the wastage our supply chain faces currently, will reduceonce foreign players are in full-on.

Now, coming to the changing face oftraditional retail, there are two aspects to it. One is the adaptation of theKirana stores in light of organized competition & changing consumerpreferences, and the other is the importance with which companies have startedtreating this traditional channel.

I feel the first aspect is a no-brainer;new Independent self-service formats within Kiranas, computerized billing,stocking niche & imported products, the health angle, a cold storage unitare few of the areas where they have evolved. But the next step is ‘Collectivebargaining’ – i.e. when groups of big Retail outlets start creating a semblanceof an ad-hoc DC (Distribution center) & start procuring centrally fromevery big company. They’ll ask for better margins, differentiated service, morevisibility solutions; the list will become endless. I’ve seen instances of thisconcept being tried in a few key metros across India.

Now, lets us examine howcompanies are approaching this channel. Every FMCG company has realized that ifModern Retail is growing at a phenomenal growth rate, so is traditional trade.The projected numbers from various 3^rd party agencies are quitemind-boggling. Hence focus towards garnering a higher share from within thischannel is soon becoming one of the biggest challenges faced by the topmarketing minds in this country.

In my previous article I had mentioned thatHUL had already started treating its key Kirana outlets with the same servicepack that they are offering Modern Trade. This is one big step towardsacknowledging the importance of the oldest channel in this country. Othercompanies have also started offering differentiated service packs & levelsto the top contributing outlets within each market.

Studying visibility as a separatesection throws a lot of light on the importance of this channel. Decisions aremade at Point-of-Sale; & companies are letting no stone unturned incapturing premium real-estate within these outlets. Shelf level Displays havebecome an essential part of any company’s strategy, whether they are for alaunch, a re-launch, a new communication message, a new variant etc. This fightfor this space has automatically made the retailer smarter, whose bargainingpower has thus increased significantly.

But, I still agree that such animportant medium for communication is still under-leveraged at this currentjuncture.

To‘end’ this small anecdote on the Kiranawala, it is very obvious that he/she is aconstantly evolving & adapting entity & will continue to co-exist withother formats in many a years to come. The differentiation across outletswithin this channel will soon become starker over the coming years, withdifferent clusters of outlets getting formed basis the speed of evolution thateach outlet undertakes.

Who are the Blackberry Boys?

2011-04-02T00:10:00.000+05:30

Raving reviews of O&M's new look for Vodafone Blackberry users. Now Blackberry services are no longer accessible only to the top & premium segment.

All guns blazing, anyone who can afford it, please access it.

The advertisement in itself, I agree is quite clutter-breaking & different. A group of typical top management executives dance to a catchy tune of being the ‘Blackberry Boys’. Then comes in a guy in summer wear & is followed by many more facets representing the Indian youth populace.

A simple & clear communication that a Blackberry is for everyone.

I agree that the market for smart phones have opened up; & coupled with growing consumerism, many companies have started betting big & spending top money to lure the young Indian.

Nokia is the company getting hurt, their dwindling market share, especially within the smart phone segment has been led by the growth of Blackberry & other competitors.

Now that the context has been set, the question I’m raising here is Blackberry’s strategy. Especially for a high involvement product – a smart phone costing upwards of 10 grand.

The manager who is paying top rupee to purchase the phone with the most gizmos & easiest access to business usage will now have his favorite Blackberry Bold being used by one and all.

How is Research-In-Motion (RIM) differentiating between these varied sets of target groups by launching an umbrella Blackberry campaign?

Nokia had successfully managed to do the same by having extensions for their various consumer segments & price points. But within Blackberry these distinctions do not seem to come out that strongly.

Not to say that Blackberry needs to go the Nokia way, but just to bring about the argument that it is easy for a smart company to take Blackberry’s place in the premium segment.

I thought maybe a HTC, but their recent strategy seems to be nothing in line, it seems like all the companies need their phones to be sold to anybody & everybody who can buy them.

Maybe something as basic as Targeting needs to be relooked.

Has Shopping become complicated?

2011-03-19T08:36:00.000+05:30

Published article in Point of Purchase Magazine - Feb '2011

Who says shopping isn’t complicated? With the number of variables being plugged into shopping every day, it has become an art & a science both for the Shopper & the Marketer.

But, who has made shopping complicated?

In the current Indian scenario of such intense competition, the rate of change is constantly pushing new limits. Just a couple of years back, an Organized Retail in-store innovation used to make marketing headlines & office talk across companies. Now, they all seem common place. Every week, companies are fighting for space & retailers are auctioning it to the highest bidder. As the End-cap prices sky-rocket, brand managers need to innovate constantly in-order to engage the shopper just that little bit extra.

The options for a typical middle / upper-middle class urban household meanwhile are ever increasing. The phenomenal success of malls & multiplexes, irrespective of their high-end pricing speak for themselves. Shopping behaviour is changing & fast, led by: rising household incomes, brisk entry of more foreign players, a younger India & penetration of technology. For FMCG in particular, it is predicted by booz&co. that 30% of total trade will come in from modern trade by 2020. 30% across India would mean a number in the range of 70% for Urban India.

The Concept of Shopping thus has & will continue to become more complex, especially for the Marketer.

Almost every FMCG player has accorded special focus towards the Modern Trade format & has infrastructure & managerial capabilities dedicated towards this channel.

What about Traditional Retail or General Trade as in FMCG parlance? Companies are realizing the potential these 8 million mom-and-pop stores provide. Currently and in the near future, they will continue to remain the most preferred format for a majority of Indians.

A leading FMCG company for instance, accords the same importance of a Modern Trade outlet towards all of its top Grocery turnover mom-and-pop stores. The same margins, the same schemes and the same quality of dedicated merchandising. This is the future, the evolution of the so-called unorganized sector. ‘Necessitated by the local retailer’s need in face of competition, but driven by the various FMCG players in the industry.

As a fundamental consequence, this leads to a multitude of options for the Shopper. They are spoilt for choice even within their conveniently placed local Grocer. Has this led to Shopping becoming more complicated? Well, it has certainly become more attractive for the Shopper.

Let me cite the case of private labels in Modern Trade. Two of India’s leading Food Retail chains both have private labels placed right beside popular brands from established market players. These private labels play mainly on the ‘significantly lower price’ or on the ‘higher weight for the same price’ angle. A typical Middle class shopper might get severely conflicted during purchase in many low involvement categories, thereby playing into the hands of these private labels.

A shopper thus starts to assimilate more & more information on price & weight (ingredients, freshness, freebies etc.) comparisons thus leading to the point of inflection in the brand vs. price trade-off. Ultimately the simple decision of buying a Floor Cleaner now involves a complex matrix of numbers & scientific text.

Challenging times in Shopping behaviour ahead, ‘the more the merrier’ seems to be the ‘shopper’ mantra till date, as the ‘Marketer’ continues to grapple with building capabilities to tackle the same.

The Mysterious Games we Play

2010-09-09T20:03:00.000+05:30

It was a complete Mystery; I was flummoxed at the news article after reading it, ‘HUL foxes P&G through successful Ambush Marketing’.

It was a great outdoor marketing campaign by P&G in Mumbai, and I think it did get foxed and frustrated by HUL, but the outcome of the whole melodrama that followed is still uncertain.

There were huge outdoor hoardings, model bus-stops, and full page print ads by P&G to create excitement over Pantene and its new packaging. Carefully ironed out, or so P&G envisaged. It was too open to attack, and Dove took the bold step and stepped into the fray. Kudos to HUL for getting it done ‘within a day’. I think it was more of a, ‘done within a month’ than ‘a day’. Competition intelligence as they call it, has definitely come into play here. HUL was waiting for the bait to get hooked on. But still, a campaign rolled out within a few weeks is commendable. (Brand executives would concur)

But did it achieve anything for HUL? Brand connotation with the ‘Mystery Shampoo’ is and will always be Pantene; Dove did nothing to change that.

All that HUL visualized was a retort back at P&G through the necessary buzz within everybody’s mind. They achieved the buzz, but inside the marketer’s head. The consumer was left lurking during the delivery of the Dove message. (‘There is no Mystery, Dove is the No.1 Shampoo’)

Marketing circles were talking about it for weeks, I should know, I was there. But the real consumer, the actual user of the brand & the product didn’t see any value in the fracas between HUL and P&G.

Sadly, this event might in the short run; temporarily, end such campaigns, where the consumer is kept at the edge of his/her seat before the prized message is communicated.

Betting Big on Celebrity Endorsements

2010-04-05T16:27:00.001+05:30

Why do Marketers go for Celebrity endorsements? The reasons could be many; the highest recall among consumers, immediate positive impact on sales, new brand launches and re-introductions etc.

As a few experts put it, the reason could also be one of pure pressure from the top management to deliver on the brand and see immediate results. The pressure is definitely not unreasonable, as in today’s competitive scenario, the number of touch points that a consumer is exposed to, is showing a manifold increase. Hence, after years of meticulous R&D on a particular product, there is a rush on the Marketing side of the new brand.

The valid question that needs to be raised is the rationale or science behind each celebrity endorsement, from the marketer’s angle. From the celebrity’s angle, the rationale is purely one of personal choice or value of contract.

Breaking the clutter within multiple touch points, warrants the Marketer to come up with innovative attributes that will latch onto the consumer’s mind. Unfortunately, this is definitely not possible each and every time, with multiple people handling multiple brands in an organization. FMCG biggies in India have all implemented excellent clutter-breaking media from time to time. But everyone’s had their share of naïve moments.

The prospect of bringing some sense of sanity and consistency into marketing leads to celebrity endorsements. Statistics on the latest survey show that only around 30% of the consumers would consider the purchase of a brand based on a popular face. A higher percentage would associate themselves to a brand, if the celebrity is actually linked to the brand message in some way or the other.

Many pundits are now arguing about the ‘Tiger Woods’ phenomenon, ‘putting all your eggs in one basket’. Whether the associated brands have been affected or not, is debatable. Only Gatorade, would have suffered an immediate impact, due the withdrawal of an entire range of ‘Tiger’ branded drinks.

In India too, many brands solely run on the back of successful celebrities, the flip side would be a ‘Tiger’, but the positives weigh much more than the intangible probability of the brand getting hammered. Especially in light of Brand Managers changing almost every 2 years.

The only simple mantra, can be to stick to one’s ‘Brand message’ atleast for established brands, irrespective of the celebrity or non-celebrity route, Airtel is a good case in point. For new brands like Max, Karbon & MicroMax (IPL), ‘celebrity’ power could be the only way forward in a highly competitive category like Mobiles.

This post is a consequence of the Brand Equity article on Celebrity endorsements.

Gift Cards - The talking point in Organized Retail

2009-11-17T13:56:00.001+05:30

Retailers in India have already started the concept of co-branded credit cards. A current example would be the aggressive salesperson in any Spencer’s store showcasing the HSBC-Spencer’s offering.

Another vivid example would be the Future Group credit card which had TV ads across channels for quite some time. The response though had been lukewarm.

With organized retail sales looking downward over the last year, especially in Q3 and Q4 of 2008-09, these offering had disappeared from the table. But, Q1 & Q2 of 2009-10 have been particularly good, with around 15% growth in the sector on the back of a successful festive season.

The new buzz word that is coming up in Retail circles is the Gift card, which is basically gift vouchers/certificates in the form of smart cards.

They will be profitable for retailers as it will breed loyalty through repeat purchases. There will also be a significant portion of card value (10% in America: Economist) which are never redeemed.

Retailers in India are still nascent when it comes to maintaining a comprehensive customer database, and this will be a small, yet significant step towards the same.

The future for gift cards will yield many innovatively packaged offerings similar to the trends in America.

A few examples from the Economist:

1) Target: Gift cards that double as wind-up toys

2) Gift cards through email

3) Best Buy: multiple people can contribute small amounts for an expensive gift card to be created

4) Time based gift cards during the day. E.g. Happy hour shopping times for Gift card redeemers

Expiry dates in gift cards will foster consumers to buy within a specified period and this will always help the retailer waiting on the other end. If not redeemed this goes directly into the company’s kitty. But a lot depends on how the retailer will handle consumers who arrive at their store with expired gift cards. A balanced act will go a long way in establishing the customer friendly side of a retailer.

Another interesting trend in America would be the auctioning of such gift cards online. E-bay is estimated to sell 100,000 gift cards every month through the second-hand route. Consumers give up gift cards that they are unable to redeem online at almost half their price.

All this leads to a overall healthy trend for the gift card concept.

Manufacturers are already present in India for smart cards, who are currently in advanced talks with retail biggies.

The advantage for consumers is pretty obvious; a gift card would be the ideal choice for any wedding, birthday and other such occasions.

Volkswagen 'Road-block' for India

2009-11-16T16:15:00.008+05:30

“German Engineering, Made for India”
An entire Times of India edition blanketed with only Volkswagen, over and over again as each page was turned on by surprised readers & confused marketers. Confused & in awe only because of the gravity of the money that had been spent for the day, 11th November 2009.

This is the kick start of a 40 crore campaign by Volkswagen India, who have also come up with a Television ad recently, showcasing their brands.

The print ads introduced and appraised readers to the various Volkswagen brands that are currently available (Passat & Jetta) & the ones that are lined up for India (Polo, Beetle, Touareg).

Each brand of Volkswagen caters to a different target group, and the company is hoping that the 40 cr. media spend will help establish all its brands; they certainly got people talking for almost a week now.

The media spend will include print, TV, outdoor & the internet.

Expect the internet & outdoor impact to be similarly innovative-Mudra Group

The 40 cr. question?
is whether this will boost their numbers, which were poor in Oct' 2009. They operate in the very niche top end of the business, which accounts for less than 2% of overall car industry sales. India is touted as one of the growth markets for Volkswagen and they are not that far behind Mercedes or BMW in their numbers. Apr to Oct sales show that they are only around 700-900 cars behind.

The main question is the relevance of such a blitzkrieg campaign in a daily known for being friendly (readers may spell irritating) to full page print advertising. Is this the best channel for a niche top end brand like Volkswagen? Would it do any good if the word-of-mouth continued in the lower floor circles of an office?

Brand building, definitely yes! & a good job at it too, but at what cost, is the 40 cr. question. Meanwhile entertainment galore for readers & marketers alike, let’s hope the numbers look up, while people look forward to the Beetle & Polo hitting the hard Indian roads.

The Coca-Cola University: Parivartan

2009-05-05T11:54:00.005+05:30

FMCG companies in India are all looking towards increasing their penetration into rural markets. Coke, the world's largest non-alcoholic beverage company is looking at semi-urban and rural markets as its future growth paths.

The 'Parivartan' program- targeting retailers

Coke's new strategy involves training retailers in a program launched by the Coca-Cola University. In 2007, the company launched Coca-Cola University — a virtual, global university for all learning and capability-building activities.

The company calls this the "parivartan" program (meaning "Change" in English). Shop owners (traditional retailers) are given training on displaying and stocking products well. The goal of the innovative training program is to provide traditional Indian retailers with the skills, tools and techniques required to succeed in a constantly changing retail scenario.

Presentations (including audio/visual technology) in local Hindi language help small retailers (with stores less than 200 square feet in average size) to better understand the concepts involved. Each retailer also receives a Coca-Cola "Certified Retailer" certificate at the conclusion of the program.

The program, which debuted on Dec. 18 in Agra, will equip "mom-and-pop" shop owners with the skills, tools and techniques required to succeed in India's evolving retail landscape. All invited retailers attended the session, which allowed them to learn in a formal setting using leading-edge audio/visual technology and engaging presentations conducted in the local Hindi language.

Here are some of them: print a visiting card with your telephone number; around 80% of your business comes from 20% of your products, so build up visibility for these; try and display posters of discounts; organise a home delivery facilty; be courteous to your customers-SundayET. The content is structured around the four pillars of retail—customer, shop, stock and finance.

And this seems to be just the tip of the iceberg. The programme has covered 20,000 retailers in North India so far. “Based on their feedback we are developing ‘Advanced Parivartan’ that will cover issues like shop layout and location, display, basics of finance, knowledge of credit card transactions, people management skills, among others.

For Coca-Cola it’s a big pie. There are around 12 million retailers in the country, out of which kirana stores account for over 90% of the Rs 7,40,000-cr retail business in India. But a company official maintained that these retailers would not be pushed to stock Coca-Cola products through this programme. Some of these retailers don't even stock soft drinks.

The idea was supposedly born out of a meeting at the World Economic Forum in Davos around two years ago when Coke’s global chief met the commerce minister of India and suggested running the programme in India. Also, as a token of goodwill gesture, an accidental death insurance of Rs 1 lakh is being provided free of cost to all the attending retailers as a protection against any eventualities.

In bigger cities the company has conducted Parivartan programme in classrooms or by hiring hotels. The classroom Parivartan programme has been organised across cities in UP and Punjab -Agra, Ludhiana, Chandigarh, Amritsar, Gorakhpur, Lucknow, Bareilly, Haldwani, Bilaspur, Kolkata, Faizabad, and Rajamundry.

The ‘Coca-Cola University on Wheels’ has also covered small towns such as Hoshiarpur, Mukeria, Nakodar, Phagwara, Nawanshahar, Malerkotla, Barnala, Khanna, Moga, Jalandhar, among others. Going forward in the future, Coca-Cola’s plan is to scale up this initiative by taking it across India.

http://article.wn.com/view/2009/05/03/CocaCola_India_launches_CocaCola_University_on_Wheels/

http://economictimes.indiatimes.com/Features/The-Sunday-ET/Coca-Cola-India-launches-Coca-Cola-University-on-Wheels/articleshow/4477620.cms

http://www.casestudyinc.com/Articles/Coke-Strategy-Training-Retailers.html

http://www.thecoca-colacompany.com/citizenship/news_india_retailers.html

Pepsi's Biscuit Challenge: 50-50?

2009-05-04T16:41:00.005+05:30

Parle, Britannia, ITC and now Pepsi. Pepsi foods is seriously contemplating its entry into the 6000 crore plus organized biscuit market. Taste tests are on in various urban markets across India.

They are still yet to come up with an official brand name for their new portfolio. It would be interesting to note if they would follow either a Parle/Britannia strategy or an ITC strategy. ITC typically follows a branding strategy under the umbrella name "Sunfeast". With multiple sub-brands created under this banner. This has been logical for ITC due to its late arrival into this category. A common brand name across its portfolio would ensure better recall among the consumers.

Parle/Britannia have multiple brands that are well established, e.g GoodDay, Tiger, Milk bikis, Monaco, 50-50, Krackjack, Hide&Seek etc. Glucose biscuits have always been a price game with little money being made by each of the 3 existing players. A price increase of even a rupee will involve significant risk with respect to the response that would ensue from the consumers. Hence these 3 companies have been constantly tinkering with their weight/grammage during the period when input costs have risen.

Pepsi would mostly enter first into the salted biscuits category as per their information given to the Financial Chronicle. There are strong household names like 50-50, Krackjack and Monaco in this sub-category. Even ITC is trying to eat into this pie with their Snacky label. Innovation with salted biscuits have included products like Salt & Sweet, Salt & Chilli Cracker, Maska Chaska etc.

Pepsi food's products, locally distributed by Frito Lays include namkeems and finger snacks. Their foray into the biscuits market would be their first across the world, in the various markets that they operate in.

Pespi is already against ParleAgro (separate entity) in the beverages market and head-on-head with ITC in their snacks category (Lays Vs. Bingo) The biscuit market is estimated to register a 10% growth every year.

Pepsi has a well established distribution system in India, made robust by being in the complex bottling business, but whether it would invest huge amounts into establishing their biscuit brand remains to be seen. The other 3 companies are all currently heavily focused on increasing their market size in India. Hence taking them on would not be a easy feat.

We will have to wait and see what kind of response it would get from Organized Retailers, who all have their private labels like Tasty Treats, Feasters etc. But like ITC leveraging on its other brands, Pepsi could very well give its biscuit business a push by leveraging on its very well established beverage portfolio.

The Great Indian Shopping Festival

2009-02-10T11:14:00.005+05:30

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

2008-10-19T16:33:00.000+05:30

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.

Ab har kisaan ho kamyaab

2008-10-12T11:03:00.001+05:30

Recent economic woes—sparked off by rising oil and commodity prices earlier in the year, then sustained by the ongoing Wall Street crisis—would suggest that retailers should be a worried lot today. But accounts from across the world offer a mixed bag of good and bad news. In the US, with the holiday season standing around the corner, the National Retail Federation has said that sales growth will be down to the worst in six years. Other forecasts are even gloomier, with TNS Retail Forward predicting the worst holiday showing in 17 years. On the other hand, China, where economic growth has slowed for the fourth straight quarter, is yet seeing retail sales growing at close to the fastest pace in at least nine years.

As for India, although some headlines have been focusing on organised retail taking a hit, most analysts remain upbeat about future prospects. A Northbridge Capital report released late last month finds that this segment is growing at 40% a year. Organised retail is currently valued at $300 million, with only 7.5% of the total retail pie, but this share is projected to grow to 20% by 2010. There are other reports offering other figures, but what they all have in common is 1) a certain bullish tone on growth projections and 2) a certitude that a big chunk of this growth is going to take place in the country’s hinterlands, which extend from tier II and tier III towns to rural India.

By some accounts, the rural market puts away almost 50% of the goods consumed in the country and about 35% of the offtake for FMCG products. And the affluent sector in rural India is growing faster than the urban one, with per-households spending in rural India forecast to reach current urban levels by 2017. The news is good even on the employment front, with an Icrier study showing that the 3.93 million jobs added in rural retail during 2000-05 put the urban growth of 0.51 million to shame.

Recently, the Rural Marketing Agencies Association of India and Francis Kanoi Marketing Research conducted a study of the retail habits of rural India. According to Francis Xavier, managing director of Francis Kanoi, “the main finding from the study is that the number of retail outlets in rural areas is booming, with nearly 45% of them set up in the last five years, and the rural folks seem to be favouring the retail outlets in their villages to meet most of their daily needs.”

All’s under one roof

ITC, which has already scripted a great success story with its groundbreaking eChoupal initiative, whereby local internet kiosks link farming communities with global markets by providing information on everything from comparative crop prices to weather forecasts, is now creating a physical version of the same concept with Choupal Saagars. These are being set up at the hub of every 40 eChoupals, to facilitate all the material transaction needs of farmers, ranging from the sale of produce to the purchase of household goods. From one in 2004, the Choupal Saagars have now grown to 23, with ITC shooting to scale these up to 100 in the near term. Guiding mantra: Jaruratein Anek, Jagah Ek.

The one-stop shop idea is integral to DSCL’s Hariyali Kisaan Bazaar (HKB) initiative as well, which has also been on an expansion spree, with the five projects set up in 2002 having grown to 203. Their motto: Ab har kisaan ho kamyaab. As for the future, HKB president and business head Rajesh Gupta says that the company has an all India plan, but location decisions for each new unit are based on intensive microanalysis of whether the demographics and spending ability of a given catchment area suits the HKB business model: “This includes factors like literacy, receptiveness to new ideas at the agricultural level and even TV penetration.” This data dynamic is also critical to determining the product mix being carried at different stores. HKB’s merchandise list is made up of 60-70% core commodities, with the variables being determined by local brand and price preferences.

In the last three years, according to Xavier, the strongest growth in the number of retail outlets has been in the North zone at 38% as against an all-India growth of some 30%: “Notwithstanding the popular stereotypes, the prosperity levels now seem to be growing the most in the North.”

The entry of such enterprises has transformed product choices. With the rapidly expanding outlets offering both branded and non-branded versions of consumer goods, electricals, durables, kitchen appliances, construction materials and, of course, agri-inputs, Xavier says: “Even the infrequently bought products are entering villages rapidly.”

S Sivakumar, who heads the international business and agricultural division of ITC, points out: “The buying and usage habits of consumers in villages and small towns are changing rapidly with increasing incomes and greater exposure to media. They have started experimenting with newer products and also at higher price points. The demand for the products that were not available earlier through normal retail channels is also growing.” Here, he gives the example of how ready-made garments now comprise 95% of his apparel sales, in sharp contrast to how 80% of these are in fabric form as far as traditional rural retail channels are concerned. Another fast growing category Sivakumar points to is that of products that provide innovative solutions to day to day needs, “where organised retail has taken the role of a market maker”. A good example: the BP Oorja stove that uses biomass pellets as fuel.

Too much , too soon?

Still, at a time when retailers’ shares are going South along with the rest and when various players are paring down their headcounts and expansion plans, shouldn’t rural retail be a worried sector as well? Was the bugle sounded too early on this frontier? Gupta says that there is no question that a shakeup is on the way, and we will see some players fall by the wayside in the next few months. This, he predicts, will be as much on account of faulty business models as of failures in the due diligence processes propping up these models. HKB, however, seems to be on a strong wicket so far because of its traditional agri-strengths, which complement a robust and efficient supply chain in a sector where the cost of servicing the markets is very high.

Vishal Retail chairman Ram Chandra Aggarwal, who opened his first hypermarket in 2003 and now oversees 135 of the same spread across tier II and III towns, explains that his company’s strength lies in its foresight: “We want to be among the top five companies in Indian retailing, and any company operating in the retail space today has to recognise that a major chunk of consumers is in the hinterlands. This is where the masses are located and all the players are eyeing them. In these virgin markets, our first mover’s advantage will reap exponential returns.”

For a sector that predominantly relies on farmers and agriculture as a source of business, the future is also dependent on the government. As of now, Sivakumar says that the laws restricting agricultural produce marketing, procurement of essential commodities and futures trading constrain companies in significant ways. If theAPMC, Futures Trading, and Essential Commodities Acts were to be reformed, this would help the players procure in large quantities, hedge against risks and so on.

Sivakumar also identifies two factors as critical for any player’s future in the rural sector: First, every market has to discover its own ideal model and this discovery process involves experimentation. What is also natural in this process is that some formats wind down over time while others, the more prescient ones, move on and on. Second, in contrast to the FMCG goods for which there is a well laid out map for moving brands through the country’s interiors, stores have to sort out supply chain issues, delivery formats and reaching out processes for many other goods from scratch.

His final word: “There is no question of the rural retail revolution having been mistimed. Even if it had occurred five years later, we would still have to go through a process of consolidation and shakeouts. But as for whether the rural Indian is ready for this format, he always has been.”

Big Bazaar footprint explodes all around

2008-10-06T22:56:00.002+05:30

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.

Reliance may merge retail arms to beat slowdown

2008-10-06T22:53:00.000+05:30

Faced with a difficult retail environment and on the lookout for a winning formula, Reliance Industries is mulling the merger of its different formats to make its retail arm more efficient.

The company is considering merging the management of hypermarkets (Reliance Hypermart), supermarkets (Reliance Super) and convenience formats (Reliance Fresh) just a year after these formats started as separate profit centres , according to people familiar with the development. The idea of the merger is still at a conceptual stage and the company hasn’t taken a final decision.

A Reliance spokesperson denied that the company was proposing any move to merge its three formats. Reliance Retail, which operates around 650 stores under different formats, has already taken several measures to cut operational cost, ranging from rationalising manpower to cutting office expenses. It has also reduced by almost one-third the size of its hypermarket in Ahmedabad.

The merger of three formats will potentially kick in economies of scale and help the company rationalise its human resources, thereby bringing down overall recurring expenditure. Sources said the company is close to taking the first step in this regard by merging the respective IT and HR functions of Reliance Super and Reliance Hyper.

Lack of experience in retail adds to Reliance’s woes

Sources say the company’s decision a year ago to have all three formats as separate profit centres was aimed at bringing in higher efficiency and more accountability. Three formats , even if they offered several similar products, targeted different audience and needed to have separate strategies, the company had felt then but it is now re-examining this.

India’s potentially multi-billion dollar retail industry has attracted mammoth interest from Indian and overseas corporate heavyweights in the past few years. Reliance too jumped on the retail bandwagon two years ago with a bigbang announcement.

The outlook for the retail sector, however, has changed since then. Lack of experience in retail has only added to Reliance’s woes. The company though is not alone in battling a tough time in retail industry. A 16-year-high inflation, high interest rate, slowing Indian economy and the world teetering on the brink of recession is spelling trouble for domestic retailers. They have been struggling to keep up sales even at the cost of losing a fair share of their margins.

Due to this, despite its financial muscle and ability to attract the best talent in the industry, Reliance has, in its short journey in retail, regularly kept revising strategies. The biggest strategic shift has been its decision to forge joint ventures in over half-a-dozen speciality formats and logistics spaces.

Unlike other retailers, which have been more cost-conscious, Reliance is said to have been more extravagant and possibly because of that, sources say, it may be forced to take stricter measures. The company has had more employees than required on its payrolls, augmenting its costs. However, Reliance is also more capable of withstanding difficulties.

Slowing economy may offer respite to retail sector

2008-10-06T22:49:00.001+05:30

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.

RCF in talks with rural retailers for tie-ups

2008-09-29T20:21:00.000+05:30

State-run Rashtriya Chemicals and Fertilisers (RCF) is in talks with some leading private sector rural retail chains for innovative marketing strategies and for trading in new arenas.

RCF, which last year entered into strategic alliance with rural marketing companies such as ITC e-Choupal and Godrej Aadhar, is planning to rope in more such retail chains to enter into trading of cement, pesticides and seeds.

RCF, which is one of the largest domestic fertiliser and industrial chemical manufacturers, is in discussions with regional retail players such as the DCM Sriram Group for an alliance in South India and with Triveni of Uttar radesh.

“We are also talking to Hindustan Insecticides (HIL) to offer their entire pesticide range to farmers and with two to three cement manufacturers for strategic marketing alliances to offer cement through our network and reach. Though margins are thin in trading business, it contributes to our growth and product basket since the needs of the rural markets are changing,” said J Kohareswaran, director (marketing) of the Rs 5,243-crore turnover company.

Further, the company is planning to take up floriculture as another area of diversified business, utilising the surplus land available at its facilities. A Yes Bank report estimates that India’s rural retail market is expected to grow by 29 per cent to Rs 1.8 lakh crore by 2010, thanks to rising incomes and changing consumption patterns.

Kohareswaran said the marketing initiatives include soil testing and field demonstrations, undertaken in association with the expertise of rural retailers. The farmers will get scientific advice and training in modern agricultural practices to increase productivity through such programmes and the increase in turnover was mainly from the acceptance of such initiatives. The firm carried out over 4,000 field demonstrations during the 2007-08 period, alone with ITC e-Choupal.

RCF, which achieved the highest ever turnover during last year with a quantum jump of 46.17 per cent from the previous year’s Rs 3,643 crore, had 43 per cent of its revenues from sales of traded products.

Indian retail market to touch Rs.18.1 tn by 2010: report

2008-09-28T19:46:00.000+05:30

(IANS) The country’s retail market will grow to Rs.18.1 trillion ($395 billion) by 2010 as organised retail is expected to be 13 percent of the total market, according to a report.”The organised retail market, which is expected to grow at 45 percent, will be worth Rs.230,000 crore (Rs.2.3 trillion) by 2012,” said the India Retail Report 2009, released by the New Delhi-based research group Images F&R Research.

“This will require investments in real estate alone of over $50 billion, much of which will be FDI spurring the balance of the trade,” it added.

“The consumer spending in India has increased by an impressive 75 percent in the last four years and will quadruple in the next 20 years, even when this quarter has seen some decline in spending on account of inflation,” the report added.

This will trigger the growth of this sector.

Food and grocery dominated the retail segment with 59.5 percent share valued at Rs.7.92 trillion, followed by clothing and accessories with a 9.9 percent share at Rs.1.31 trillion.

However, the report said the market for specialised retail, especially the luxury retail, will grow significantly in the next few years.

“Even when the metros and tier II cities will get the major share of organised retail, emerging cities like Chandigarh and Jaipur, which have a growing cosmopolitan population and high purchasing power, will emerge as new centres for the global luxury brands,” it added.

The report has contributions from over 100 think tanks in the retail industry.

“However, to enable this sector to realise its full potential FDI restrictions will have to be relaxed further and retail rentals will need to go some degree of rationalisation,” it added.

Commenting on the report, Commerce and Industry Minister Kamal Nath said: “India retail model needs to go beyond the urban shopping malls and create an attractive retail environment where a large number of rural population can also find products and services.”

Organised retail to form 18% of overall retail pie: McKinsey

2008-09-27T19:12:00.000+05:30

This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.

“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report.

Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.

Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.

The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.

“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.

CavinKare to take on HUL, ITC in bottled shampoo biz

2008-09-18T15:08:00.004+05:30

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.

Retailers plan course correction to beat slump

2008-09-18T15:08:00.001+05:30

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.

SAP sees strong retail growth

2008-09-12T15:21:00.000+05:30

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

FMCG companies get IT savvy

2008-09-12T15:18:00.001+05:30

Adoption of projects like ‘push technology’ in sales expected to improve efficiency.

Fast moving consumer goods (FMCG) companies are looking at 10-20 per cent improvement in production and efficiency levels this year because of the adoption of newer technologies to track expansion of product portfolio and manufacturing locations, besides aggregation of godowns and shipment warehouses.

FMCG companies will spend around 10-15 per cent of their net profit on technology. Companies like ITC Limited, Emami and Marico have forayed into diverse businesses in FMCG alone. This has not only led to the rapid expansion of the supply chain but has also increased complexities.

ITC’s manufacturing locations have increased rapidly to about 200 from about a dozen-owned manufacturing facilities for its different businesses. In addition to these manufacturing locations, ITC’s aggregating of godowns and shipment warehouses have grown exponentially in a couple of years.

Emami’s recent investment in IT has ensured finalisation of its balance sheet in a record 35 days against the 60-day norm.

Mohan Goenka, director, Emami, says: “We foresee an improvement of 10 per cent in production and efficiency levels at Emami for financial year 2008-09. This will be achieved by implementing sales and operation planning, demand management and distribution resource planning which will enable system control to forecast sales, check inventories at locations, plan manufacturing resources and logistics to meet the customer schedules.”

Marico, on its part, is investing in better connectivity through enterprise portals, wi-fi enabled offices and in unified communications.

Marico is investing in automation of many workflows like Writeoffs, insurance claims, and media spend management portal.

According to Udayraj Prabhu, head, business applications, Marico: “We have commenced Project Edge, an initiative to improve the budgeting, planning and review systems using the TM1 tool of IBM-Cognos. This will enable us to strengthen our budgeting, planning and review processes by making them quicker, error-free and less tedious. This should lead to a significant saving in time for those involved in these activities.”

The company has also launched HR portal platforms as active channels of communication within the organisation.

ITC Ltd is building an IT infrastructure to bar code its produce at the warehouse itself, even before it reaches the retailers.

This is expected to help ITC keep track of product manufacturing time, thereby enabling implementation of first-manufactured-first-out (FMFO) strategy, which means items manufactured first are shipped out of the factory and the warehouse earlier than products manufactured later.

Among other projects, ITC will also implement this year usage of ‘push technology’ for its sales force.

VVR Babu, chief information officer, ITC Ltd, says: “Each salesman is allotted specific locations and he has to track sales and requirements of all shops and stores of a particular area. We are working on an integrated IT system which will gather and push information onto our salesmen’s laptops so that they don’t have to waste time looking up details on the company portal. For instance, if a salesman is covering 10 outlets of a region, every evening ITC’s systems will push onto his laptop the sales, distribution and requirements of that region and also the target to be met.”

2008-09-11T13:44:00.000+05:30

Business Std: Thursday, Sep 11, 2008

To open 30 Xcite consumer electronic outlets in India by 2009.

Impact Retail Private Limited, a newly-incorporated company promoted by West Asian retailer Tony Jashanmal, has drawn up plans for the Indian consumer electronics retail market.

“We plan to open 30 exclusive Xcite consumer electronic showrooms in top 15 cities in the country by the end of 2009 with an investment of Rs 200 crore,” Srikant Gokhale, chief executive officer of Impact Retail, told mediapersons, after inaugurating the company’s first store in India at Hyderabad on Wednesday.

Impact retail has forged a franchise and original equipment manufacturer (OEM) relationship with Alghanim Industries, a Kuwait-based conglomerate with interests in consumer electronics retail, auto retail and manufacturing, to run its stores under the Xcite brand.

Gokhale said each of the multi-branded large-format stores, with a carpet area of over 20,000 sft, will offer over 3,000 products across different categories – home entertainment, small appliances, white goods, computers and peripherals, communication, music, imaging and gaming – from 150 national and international brands.

Besides, it will sell its private label products (excluding laptops and mobiles) under the Wansa brand, sourced from the OEM.

“The company will soft launch eight Xcite stores in cities like Pune and Bangalore by the end of 2008 to fine tune our understanding of customers and the format. With this learning, we plan to expand aggressively for a pan-India footprint,” Gokhale said.

The Indian consumer electronics market is currently pegged at $13.3 billion and growing at 10 per cent a year. Of this, organised retail accounts for 7.3 per cent.

5 Reasons Retailers Replace their Retail Management System

2008-09-07T14:38:00.002+05:30

Article From:Software advice

http://www.softwareadvice.com/articles/retail/5-reasons-retailers-replace-their-retail-management-system/

As software selection advisors, my team has talked to thousands of retailers considering a major new software purchase. The vast majority are replacing an existing system - one they’ve used for years. Why?

Why replace what’s familiar? Why pay up for something entirely new when an upgrade is - on paper - less expensive? Why move away from a long-term vendor relationship?

There are plenty of reasons. Here are the top five responses we hear when we ask, “What’s driving you to replace your existing system?”

Improve usability and adoption. For many businesses, the system that best matched their functional requirements turned out to be too difficult to use. In an environment where employee turnover is high, poor usability can make it very difficult to get new employees up-to-speed. By far the biggest challenge we hear from buyers is that their existing system is non-intuitive; they are looking for a new system and their primary requirement is ease-of-use.
New store growth. It’s a big leap to go from managing one store to managing two, five ten, one hundred or more… This challenge is especially difficult if a retailer plans to manage their inventory and accounting for multiple stores in one single POS software or inventory management system. Often the simple, single-store system that was easy to get going is grossly insufficient for rapid new store growth.
Poor tech support. Frequently, buyers come to us when they’ve gotten too frustrated with the poor support they are getting from their existing vendor. Either the vendor was a “one-man shop” that couldn’t keep up, or the vendor “lost its personal touch” as it grew too big, too fast. This impetus for change is even more powerful when poor service is combined with increases in support fees.
Integrating multiple channels. Many retailers are moving to support multiple channels - retail stores, e-commerce websites, mail-order catalogs… As they roll out new channels they often implement separate, redundant software systems - one for each channel. We talk to a lot of buyers that are now looking for a new, all-in-one system for multi-channel retailing.
Hardware failure. Many retailers have been on the same system for a decade or more. They may have remained patient with an old, DOS-based system, but their hardware eventually gave out. An upgrade to new hardware presents a logical opportunity to bring their software up to current standards as well. Much of the time, they can’t even install a dated system on new hardware and are forced to move to new-generation software.

We’ve heard many other reasons for replacing existing systems, but these are the most common. They also present a good lesson for new retail organizations that want to invest ahead of rapid growth. Consider these challenges and invest in a retail management system that will support your expansion plans.

ITC’s ‘holy smoke’ biz adds to the bottomline

2008-08-24T11:34:00.000+05:30

Business Line:

If there is a product that requires lighting up, ITC will make it — cigarettes, of course, but also agarbattis and candles.

ITC officials say that the company’s leap into fragrant incense sticks received a telling comment from Sri Sri Ravishankar — “from smoke to holy smoke.”

In a business context, the contribution of Mangaldeep agarbattis to ITC’s turnover is a trifling Rs 40 crore to the company’s net sales of Rs 13,000 crore. However, the business is growing and is profitable. The three-year-old agarbatti division has now gathered enough momentum to grow, like its safety matches business did, into a medium-sized business in a few years.

Now, ITC wants to replicate the agarbatti model in its new candles business. The company got into this business only in November last year. A Bangalore-based company Wellburn makes the candles for ITC which are packed and exported under the brand ‘Expressions’. In November-March last year, ITC sold Rs 1.2 crore worth of candles.

US market

But the US market for aromatic candles is $3 billion big. Mr V. M. Rajasekhar, CEO of ITC’s agarbatti division, who is also incharge of the candles business, says that ITC saw an opportunity when the US imposed an anti-dumping duty on Chinese candles. The market held by the Chinese is now slowing moving into Vietnam and Thailand and ITC moved into for a bite.

However, why does a company of ITC’s size get into these little businesses? (There are many of them — stationery, greeting cards, and organic manure.) Mr R Srinivasan, Member, Corporate Management Committee, notes that first of all these businesses have a synergy with one of ITC’s main lines of operations — FMCG. Secondly, they are profitable, with prospects to grow to a few hundred crores of sales in good time.

Building managers

But according to Mr Srinivasan, more important than these considerations is the management-bandwidth spin-off that ITC gets from these divisions. “Each division is an incubation centre for a future manager,” Mr Srinivasan told Business Line. Professionals who manage these divisions, like Mr Rajasekhar, learn aspects of brand building, quality control, handling human resources, and above all, working under tight budgets.

Marketers adapt retail trends in changing times

2008-07-14T12:03:00.005+05:30

ET: Monday
MUMBAI: Traditional shopping-streets, bazaars and markets, predecessors of India's organised retailing, have emerged as equal contributors to the country's retail eco-system and have become resilient.

India's leading high streets such as Connaught Place or Khan Market in Delhi, Mumbai's Linking Road, Colaba or Breach Candy, Brigade Road in Bangalore, T Nagar in Chennai, Kolkata's Park Street and Pune's F C Road have adapted themselves to cater to the changing aspirations of consumers as well as changing retail trends.

The appeal of the high street is expected to be enhanced in the future, a study conducted by international property consultants Jones Lange La Salle-Meghraj (JLLM) said.

"India's leading high streets have been at the forefront of India retail and consumer change and have demonstrated their resilient nature."

"The prime shopping street rentals across the board in these streets have almost witnessed an increase over the last few years ranging anywhere from 30% to up to 100%," said JLLM country head Anuj Puri in its study "Leading High Streets, Embracing Change."

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Kolkata, Pune, Bengaluru, Hyderabad and Chennai also figure in the pecking order. More than 50% of the top 30 brands with high penetration are of international origin, while the rest are domestic brands.

High streets in particular enhance the retail appeal and attractiveness of a brand. Malls on the other hand, enhance the overall shopping experience for any brand.

But the ability and willingness of the buyers to spend and the catchment area are some of the key factors for growth of these high streets, Mr Puri said.

In terms of rental benchmarkings, Delhi's prime shopping streets Khan market, Connaught Place and South Extension occupy the top three positions, followed closely by Linking Road, Colaba and Breach Candy of Mumbai.

Malls in India are taking time to establish themselves as a one-stop destination. Also, the construction of a mall takes time. Moreover, usually high-end malls come up in some distant suburb or off-prime locations.

But high streets do not have that kind of customised environments. Pantaloons CEO Rakesh Biyani said, "High-street shopping areas are existing since ages.

It is expected that they will do well, in spite of organised retail coming in. Retailing is a new phenomenon as far as Indian consumers are concerned. But unfortunately there are not many high streets in India."

The retail supply is limited in inner city locations of high streets. With the customers base exploding over the years, there is a greater demand for products.

Despite the high valuations and the spectre sealing in the non-regularised commercial streets, Delhi's main high streets have been successful in targeting consumers, as well as national and international retail brands.

Innovative retail concepts trigger consumer frenzy

2008-06-29T08:59:00.000+05:30

Source: ET, NEW DELHI:

They are making enough noise to pull people to malls, they are the toast of big retail set-ups and are a small but fast growing part of a multi-million dollar industry within the country. Yes, we are talking about recreational retail. From pottery-painting to portrait-making, creating toons or casting gold and silver impressions, there are a variety of concepts that abound in malls or exist as standalone ventures. In fact, a whole new concept of leisure retail beckons the Indian consumer like never before.

“Indian consumers are rapidly upgrading lifestyles and their recreational spend is growing by leaps and bounds. But entertainment options for them are still very limited. That’s when we decided to come up with Colour Factory, places where people can come and be themselves,” says Vikas Verma, Founder and CEO, Colour Factory. The company started operations in January 2006. At its stores, people can choose utility items such as cups and mugs and colour them at will with food-safe colours. These are then glazed, fired and returned to them within a week.

Verma noticed something similar in an outlet in Netherlands and brought the concept to India. “We are a small part of the Indian recreational industry that is approximately worth Rs 20,000 crore. We currently have five stores and plan to have five more by the year-end. The fact that we are growing at 70-80% per annum proves that people are liking the concept. We had set up a temporary camp in Meerut and people there too were extremely excited.”

Besides Verma, there are others who have some illustrious clients for their unconventional retail concepts. Ask Bhavna Jasra, CEO, First Impression, who casts 3D hand and foot-impressions in gold, silver and bronze. Bhavna, who started the concept six years back after chancing upon tiny foot impressions of a friend’s daughter in London, today counts famous names such as Abhishek-Aishwarya, Rani Mukherjee, Anil Kapoor and Subhash Ghai as her clients.

Says Bhavna, “I have been achieving steady 30-40% y-o-y growth over the last three years. It’s an extremely niche concept and I have deliberately kept it class rather than mass.” With a price point starting at Rs 15,000 for babies and Rs 30,000 for impressions of a couple holding hands, the concept no doubt is niche. But that hasn’t stopped its growing popularity and Bhavna has already introduced her second brand under First Impression called ‘Photo Concepts’.

Ditto for Meghna Pant, CEO and founder of Make My Toon, which is into the business of making customised cartoons online. The costs vary from Rs 3,000-10,000 depending on the clients’ needs. “We got a very encouraging response. We started a year back and at that time we barely got one-two orders a month as against 30-40 orders a month now,” she says.

But how effective are these concepts in a market where acceptance of unconventional business models is yet to pick momentum? “We have 50 people visiting our store everyday. The conversion rate is greater than 50%. This is an American concept but today’s Indians are ready for it. They are well travelled and give us great response,” says Surabhi Sawhney, director, StarShots, a store where people can get themselves properly modelled and have photographs clicked.

The fact that these concepts are affordable adds to their popularity. While a StarShots portrait costs anywhere between Rs 2,500 and Rs 5,500, Colour Factory’s products cost in the range of Rs 145-200. But even if they are priced in a higher range, the concept is unique and does draw eyeballs. “When I started six years back, the concept was novel. But now with increasing travel, exposure and awareness, the market has opened up considerably. I get at least 100-200 enquiries a month and convert close to 50% of them into sales,” adds Bhavna.

What’s more, their traction power also keeps mall management in high spirits about housing such retail concepts. “More than footfalls, such stores help drive interest to our mall. That is why they are so popular. We take extreme care before selecting the outlets. They are unique and that’s why they are here,” says Anjali Wadhawan, senior business development manager, Select CityWalk Mall in Delhi. The mall has invited some such stores to start operations in its premises. Their growing numbers and customer interest is a clear sign of the fact that leisure retail is definitely here to stay.

Strong consumer demand should help boost revenues

2008-04-15T10:51:00.000+05:30

Growth in consumer spends and value generated by price hikes are expected to deliver steady growth for fast moving consumer goods (FMCG) companies in the quarter ended March, 2008.

The year-on-year average growth in the operating profit growth could be around 18 per cent on a net sales growth about 15 per cent while the net profit is expected to be about 20 per cent.

The better performers in the FMCG space could be Nestle and Godrej Consumer: the former is expected to post the highest growth in net sales over around 17 cent whiel the latter Godrej is expected to post the highest growth in net profit at 40 per cent. Both these firms should benefit from margin expansion resulting from price hikes taken by them to offset cost increases.

ITC may well post a decline in volumes growth due to the recent excise duty hike on non-filter cigarettes. However, together with the FMCG and other businesses, ITC should turn in a growth in net sales of over 11 per cent and growth in operating profit of close to 18 per cent.

(Rs crore) Company	Net sales			Operating profit			Profit after tax
(Rs crore) Company	Q4FY08 E	Q4FY07	Change %	Q4FY08 E	Q4FY07	Change %	Q4FY08 E	Q4FY07	Change %
ITC	3,867	3,466	11.6	1,095	930	17.7	753	650	15.8
HUL	3,627	3,184	13.9	446	362	23.5	397	333	19.2
Nestle	1,054	899	17.2	220	178	23.2	139	111	25.4
Dabur	480	444	8.0	86	73	18.0	75	65	15.0
Marico	359	335	13.0	42	38	12.0	30	27	11.0
Tata Tea	287	251	19.0	18	15	26.2	11	2	636.3
GCPL	210	186	12.9	39	32	21.2	35	25	40.6

Price hikes taken in the detergent category and growth in personal care products business could help Hindustan Unilever deliver a growth in net sales of about 14 per cent and an operating profit growth of about 24 per cent.

Other companies which are expected to witness strong growth in earnings are Dabur, Marico and Tata Tea. However, Dabur's expected net sales growth of 8 per cent and operating profit growth of 18 per cent would be primarily volume-driven as it has not taken any price increase in this quarter.

Marico should deliver a revenue growth of 13 per cent and an operating profit growth of 12 per cent, enabled by the growth in sales of its functional foods and hair care brand Parachute.

For Tata Tea, the impact of profit from Glaceau stake sale could cause a jump of over 600 per cent in net profit. However, its operating profit due to better domestic performance could grow by 26 per cent and net sales are expected to grow by about 19 per cent.

State Bank of India takes no-frills ATM to rural masses

2008-03-13T19:11:00.000+05:30

India's largest bank is turning to one of the country's smallest technology companies for a new minimalist cash machine it hopes will solve the subcontinent's chronic financial services shortage.

State Bank of India (SBI) has 10,000 branches, the second largest network in the world, but struggles to reach the farming communities that make up 70 per cent of India's population.

About 85 per cent of India's workers are employed in the "unorganised sector" – where wages are paid in cash – and at least half do not have a bank account. Hoping to reach the underbanked masses, SBI is trialling a new automatic teller machine (ATM) that costs a tenth of the price of conventional models and is cheap enough to deploy in areas where the average transaction is 100 rupees (£1.25).

Built around a pared-down software platform and connected to a bank via the web, the Gramateller ATM makes do without the frills found on its Indian city cousins, such as the ability to make payments to the local temple.

Instead it includes features useful for country living. A fingerprint scanner provides an identification system suitable for a country where 70 per cent of the population is illiterate. It runs on just 60 watts of electricity – a fraction of the 3,000 watts required by a conventional ATM – to cut the cost of supplying backup power in areas where blackouts are common. The new generation ATM also emits far less heat, which means unlike a traditional cash machine, it does not need to be housed in an air-conditioned closet.

Moreover, though it will only handle a single denomination of currency, the Gramateller can take deposits and deal with dirty and crumpled notes – helpful, since rural users are often suspicious that crisp new cash is forged.

The machine has been developed by Vortex, a Madras-based technology start-up funded by a 2 million rupee (£60,000) investment from Aavishkar, a specialist "micro venture capital" firm that is backed by groups including Deutsche Bank. ICICI, India's largest private bank, is also piloting the technology while one of Indonesia's largest retail banks has told Vortex it will "buy as many ATMs as the company can build" – provided the Gramateller passes its current field tests.

"Manned branches are too expensive; conventional ATMs cost too much and are not equal to the challenges of rural environments," Lakshmimarayan Kannan, of Vortex, said. "We built the Gramateller to bring banking in reach of those not covered today."

Comparisons with developed economies suggest the market for the minimalist ATM is potentially massive. In the US, where credit cards are common, there is a cash machine for every 1,000 people. In India, where cash is still king, there are only about 30,000 machines in the entire county – one for every 43,000 people – and most are densely packed into big cities.

However, the Gramateller is only one of several "branchless banking" models being tested around the world. In the Philippines, for instance, Globe Telecom customers can operate electronic accounts through mobile phones and similar systems are being used across Africa. In India ICICI already uses microfinance institutions, which specialise in granting tiny amounts of credit, as retail agents.

Against mobile-phone based systems, the Gramateller may be relatively vulnerable to thieves. However, Mr Kannan points out that it will carry only about a fifth of the amount of money found in a city ATM. "There won't be a need to have very much cash in our cash machine," he said. "Actually, there are likely to be plenty of assets around it worth more."

ITC to expand its retail footprint

2008-02-28T09:46:00.000+05:30

ITC`s lifestyle retailing business division is planning to expand its retail footprint further by setting up more Wills Lifestyle, John Players and Miss Players stores across the country, reports Economic Times.

The company has also embarked on an active exercise to create a stronger brand and retail identity for Wills Lifestyle, which it wants to position as a more international and aspirational brand.

ITC has piloted a new store concept with FRCH Design of the US, a specialist in store and mall design. Three concept stores have already been launched, two in Mumbai and one in Delhi. It is also working with the UK`s Elemental Design and The Friedman Group from the US in areas like product presentation, visual merchandising and retail training.

The company intends to increase the number of Wills Lifestyle stores from 250 to 400 by the end of 2008-09.

Fortis HealthWorld enters rural India with Godrej Aadhaar

2008-02-19T16:12:00.000+05:30

Fortis Group company Fortis HealthWorld Ltd (FWHL) on Monday said it has tied up with the rural retail initiative of Godrej Agrovet Ltd, Godrej Adhaar, to open pharmacies in rural areas.

By setting up FHWL pharmacies jointly with Godrej Adhaar, the company seeks to empower the rural India mainly the farming community by providing all encompassing health needs under one roof, FWHL said in a statement.

These stores will also be equipped with a wide range of fast moving health good and support systems. To start with these Aadhaar Pharmacies are being launched at the key Aadhaar centres, at Taran Taran, Batala and Mehta Chowk in Punjab, it added.

"This partnership with Godrej Aadhaar is an integral part of our commitment of providing world class pharmacy and allied services to rural India," FWHL CEO Ashish Kirpal said.

"The rural market in India holds huge potential for pharma industry. Godrej Aadhaar with its extensive reach in Rural areas is uniquely positioned to provide a platform for products and services for rural areas," Godrej Agrovet Ltd CEO B S Yadav said.

Fortis HealthWorld is the retail arm of the Fortis Group, which is planning to set up retail network of health stores across the India.

Hariyali Kisan Bazaars: DSCL

2008-02-12T19:34:00.000+05:30

Hariyali Kisan Bazaars are helping transform rural India by providing all manner of services to farmers.

While the retail revolution in urban areas is going ahead at its own pace, the retailing in rural areas is also getting modernised in a unique manner to cater exclusively to the wide-ranging needs of customer-farmers. The trend setter in this case has been the “Hariyali Kisan Bazaar” chain launched by the DCM Shriram Consolidated Ltd (DSCL) in 2002-03 with a well-conceived model of value-added retailing.

Beginning with just five outlets, the Hariyali chain has already grown into 127 centres spread across seven states. Interestingly, the turnover of this chain has clocked a massive 75 per cent growth in last one year due to higher sales and rapid expansion of the network. The footfalls in each of these outlets averaged around 150 to 200 per day, rising to even 1,000 a day during key phases of the cropping cycles.

The spectacular success of the DSCL initiative has, significantly enough, attracted the attention of the Harvard Business School which took it up as a case study and discussed it in the prestigious international agri-business seminar held last month in Boston.

Indeed, what sets the Hariyali enterprise apart from normal retailing is that it goes beyond just the sale of farm inputs or household necessities to provide farmer-clients technical guidance and other support services to improve farm productivity and net returns. All the salesmen in these bazaars, notably, are agricultural graduates and trained agronomists. Besides offering guidance on cropping patterns and technology issues, they also hold training courses at various Hariyali centres and even visit the farmers’ fields to offer on-the-spot problem-solving counsel.

Besides, Hariyali outlets are information technology-enabled and have running strips displaying current as well as futures prices of agricultural commodities. The farmers are advised on post-harvest operations like grading of farm produced to fetch higher prices in the market. Many outlets have petrol and diesel dispensing stations attached to them. The bottomline is that these centres seek to meet most, even if not all, the needs of the farmers under one roof.

The men behind this rural retail movement, Ajay S Shriram and Vikaram S Shriram, DSCL’s chairman and vice-chairman, respectively, attribute its success to winning the trust of the farmers through the supply of genuine products and fair and transparent business. They have, indeed, chosen to adhere to the best practices for retailing as are followed by organised urban retail ventures. As such, these outlets deal mostly in branded products of reputed companies, offering the customers wide range to choose from. “The farmers want good quality products and they are willing to pay for them,” they maintain.

DSCL plans to expand its outlets to have an all-India presence in about two years. “We want to open Hariyali centres in all agriculturally important areas,” say the Shriram brothers. The products on offer, apart from all farm inputs, range from consumer durables like television sets, dish TVs, mobile phones and washing machines to factory-packed grocery, luggage items, cosmetics and toys.

DSCL has already tied up with ICICI Bank for providing banking services at the Hariyali outlets. Talks are in progress to have similar arrangements with a few other banks, including HDFC Bank. For providing insurance cover, the company has tied up with ICICI Prudential and some others.

The scope of the Hariyali model is now proposed to be enlarged to provide warehousing facilities to enable farmers to defer the sale of their produce to get better returns. Five warehouses with an area of around one lakh square feet are currently under construction in various northern states. These are likely to become operational in the next couple of months. The receipts of these warehouses for stored products will allow farmers to get bank loans against them.

Not only that, a medical centre is being set up at one of the Hariyali outlets in Punjab with facilities for tele-medical services. Fortis Hospital is collaborating in this venture. Besides, DSCL is in touch with NIIT to offer computer training facilities at Haryiali bazaars.

Indeed, the Hariyali bazaar initiative has shown how well thought out initiatives in rural retailing can help transform Indian agriculture and improve the economic conditions and living standards of village dwellers, even while being a commercially sustainable business. As such, there can be little doubt that rural retailing on modern lines is here to stay.

Reliance Retail to sell connected homes concept

2008-02-11T19:16:00.000+05:30

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.

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.

Deepika Padukone: ITC vs HUL

2008-02-11T19:12:00.000+05:30

In a queer coincidence, the newest star on the block, Deepika Padukone, features in different commercials belonging to rival camps. She has been roped in by ITC to promote its Fiama Di Wills soap brand, and is also seen in a rather dated commercial of Close-Up which has been revived by rival HUL.

While the Fiama Di Wills print advertisement has been recently unveiled, the "Kya aap Close-Up karte hain...." commercial dates back a couple of years when Deepika was a budding model.

Though Fiama Di Wills and Close-Up belong to different categories, and thus, do not compete, ITC is a fierce rival to HUL which has till date towered over meek and strong brands alike, in the highly competitive FMCG sector.

ITC has already marked a foray into core FMCG categories-soaps and shampoos. Industry observers say that it would eventually expand the basket to include more personal products. ITC's good financial backing is expected to assist the company in competing against the might of HUL.

On why ITC roped in Deepika, Sandeep Kaul, general manager, personal care business, ITC, said: "The Fiama Di Wills Brand personality is that of today's modern, confident, intelligent and aware woman. Deepika is the perfect embodiment of this personality."

Reasons for the revival of the old Close-Up commercial could not be ascertained. HUL is said to be within its legal bounds to feature a commercial done years ago, which brings forth the question: Would Deepika's Liril commercial done some years ago also be revived? There are no answers to this one, but if that happens, then the star would be seen promoting two rival brands from the same category.

While ITC did not respond to a TOI query, all an HUL spokesman said was, "the right on any creatives which are generated shall be governed by the law of the land".

O&M was responsible for the creative three years ago and Lowe, which is handling the Close-Up brand for HUL now, refused to comment. Advertising sources, however, said: "If the ad works for the company, they would use it. Ad agencies don't change creative elements unless there is consumer boredom."

BBDO's Josy Paul said, "It is opportunistic thinking and increases the buzz in the market."

Nearly a decade ago, Close-Up was caught in a similar wrangle with rival Colgate-Palmolive, when an old commercial featuring model Ruby Bhatia was revived ahead of a new Colgate product commercial which had the same model. The embarrassment was such that Colgate was forced to replace Bhatia.

Unilever Growth to Sputter as P&G Takes Market Share in India

2008-02-06T17:52:00.000+05:30

Unilever, which sells soap to more than 500 million Indians, may see global revenue growth slow in 2010 as Procter & Gamble Co. and ITC Ltd. step up marketing in Asia's third-biggest economy.

The world's second-largest consumer products maker has relied on accelerating shipments of Surf Excel detergent in India to make up for sluggish sales in Europe. Now Cincinnati- based Procter & Gamble is stocking Indian stores with Olay skin- care products after nearly halving the local prices of Ariel and Tide detergents in 2004.

Asia and Africa, which make up about a third of Unilever's worldwide sales, will see their share of the company's growth fall to 2 percent in 2010 from 3.3 percent in 2007, according to Brussels-based brokerage Petercam SA. Revenue from the two continents rose 11.4 percent in the first nine months of last year, helping offset 1.9 percent growth in Europe and 4.2 percent in North and South America.

``Unilever is quite heavily dependent on the region for growth, so a slowdown there would hurt growth at Unilever as a whole,'' said Yann Gindraux, an analyst at Vontobel Holding AG in Zurich, speaking about Asia and Africa. He rates the stock ``sell'' and expects sales in the regions to expand by 9 percent in 2009 from 11 percent last year.

Unilever's overall sales growth will slow to 4.9 percent in 2010 from an estimated 5.3 percent in 2007, according to the median of five analysts in a Bloomberg survey.

2010 Expectations

P&G, the world's largest consumer-goods maker, will continue to gain share in the next five years in India, according to Ali Dibadj, an analyst at Sanford C. Bernstein in New York, who rates the stock ``outperform.'' Hindustan Unilever Ltd., 52 percent owned by the London- and Rotterdam-based parent, lost ground in shampoo, bath soap, toothpaste and tea in the quarter ended Sept. 30, compared with the year earlier, according to the company. Its share of the shampoo market declined by more than a percentage point to 47.7 percent, the company said.

ITC, the largest Indian cigarette maker and partly owned by British American Tobacco Plc, is also making inroads. It started selling more brands including Fiama Di Wills shampoo and Superia soap last year as the government raised tobacco taxes.

`Profitable' Cigarettes

The tobacco maker ``has a very profitable cigarettes business which will help it to invest and expand its personal- care portfolio,'' said Anand Shah, an analyst at Angel Broking in Mumbai, who has a ``neutral'' rating on the stock. ``It has the ability to take losses in this segment as long as it grows its sales. This strategy will still satisfy investors.''

Rising prices of raw materials have made it more difficult for consumer-goods makers to pass on higher costs. The price of palm oil, used to make soaps and foods, has surged 70 percent in the past year.

``Given the competition, profitability will continue to be under pressure,'' said Macquarie Securities Ltd. analyst Unmesh Sharma, who has an ``underperform'' rating on Hindustan Unilever. He expects the stock to drop to 180 rupees ($4.57) in the next year from 190.9 rupees. The company has a market value of about $11.8 billion.

India is Unilever's biggest market in Asia, generating about 6 percent of annual sales. It has sold soap in the country since 1888 and controls about half of the sales of products such as skin creams, bathing soaps and shampoo.

Cescau Sells

Chief Executive Officer Patrick Cescau has sold frozen food and perfume units to boost performance. Unilever aims for sales growth, excluding acquisitions, divestments and currency swings, of 3 percent to 5 percent annually through 2010. P&G revenue, on that basis, rose 5 percent in fiscal 2007, partly because of China and India.

Cescau is also trying to take on Nestle India Ltd. and ITC in food. Hindustan Unilever wants to convince urban consumers to shift from fresh to manufactured food such as Knorr soup. Indian packaged-food sales reached $14 billion, compared with unpackaged sales of $275 billion, according to a company presentation last year.

``As incomes increase, people will be spending more on products such as chocolates and other packaged food,'' said Suhas Naik, who helps manage the equivalent of $200 million at IL&FS Ltd. in Mumbai. ``This is where the growth will come from. The penetration of these products is still very low in India.''

Unilever's Indian operating profit as a percentage of sales declined to 14 percent in 2006 from more than 20 percent in 2003, according to data on Unilever's corporate Web site. The margins exclude restructuring costs and gains on disposals.

``It's very surprising that given their brand recognition in India, they aren't more aggressive in entering new businesses,'' said Angel Broking's Shah.

PepsiCo’s FritoLay & ITC Foods in mkt warfare

2008-02-05T10:22:00.000+05:30

The market dynamics will soon change in the Rs 2,500 crore branded snacks sector in India. To gain a leading edge in the overcrowded category, ITC Foods, a new entrant with a market share of 16% is drawing up a fresh game plan. For starters, ITC Foods is doubling up its distribution network and hiking its ad budget by 30% this quarter. Meanwhile, PepsiCo’s FritoLay is reinvigorating its product portfolio to sustain its leadership in the sector. The company has roped in MS Dhoni to bat for its flagship brands.

To pump up volumes, FritoLay is in the process of rolling out an aggressive marketing campaign led by its star endorsers, Saif Ali Khan, MS Dhoni and Juhi Chawla. According to industry analysts, ITC and PepsiCo will soon wage a pitched battle for market share and mind share in the highly competitive sector.

On the company’s strategy, Ravi Naware, chief executive officer of ITC Foods said, “We are getting ready to launch a media-blitz for ‘Bingo’ next month. We forayed into this sector in March 2007 and our market share today stands at 16 %. Our goal is to capture a 50 % share in this sector.” Created by Ogilvy & Mather, ITC’s new ad campaign will harp on the ‘quality of Bingo’ in its communications. As part of its inorganic growth strategy, the company is also scouting for acquisitions in domestic Markets, said Naware.

Across the road, FritoLay is in the process of rolling out a high-voltage interactive promotion titled Chala Change Ka Chakkar to woo new consumers. According to Gautham Mukkavilli, managing director of FritoLay India, “This is s one of the biggest interactive promotions undertaken by us since 2001. With this move, we hope to gain market share and mind share in this sector.”

Industry analysts point out that ITC has been steadily stealing market share from Pepsi ever since it entered this sector in March 2007.”

Within a year, ITC has got 16 % share. In a bid to take on new rival ITC, FritoLay is now beefing up its operations,” said an analyst based in Mumbai.

Glaxo launches new Horlicks for women

2008-02-02T17:58:00.000+05:30

Healthcare products maker GlaxoSmithKline Consumer today launched a new supplement for women buyers -- Women's Horlicks -- to strengthen its product portfolio in the health drink segment.

"The health drink - Womens Horlicks - is the only health drink in India with a complete list of micronutrients recommended by the World Health Organisation (WHO) for women between 19 and 50 years of age," Glaxo said in a statement.

Womens Horlicks is available in two flavours - chocolate and caramel and is priced at Rs 100 for a 200gm jar.

Eureka Forbes plans new retail channels

2008-02-02T14:18:00.000+05:30

Eureka Forbes is setting up alternative and new retail channels to increase the penetration of water purification devices.
Its retail division is now extending its products to chemists, CSDs (Canteen Stores Department) and general merchandise stores to reach out to households which do not use water purification devices.

RESIDENTIAL AREAS

Mr Bal Palekar, Senior Vice- President, Marketing, Eureka Forbes, told Business Line, "We have a range of nonpower using products under the Aquasure brand which we are promoting through the new channels set up by the retail division. The purpose is to target 60 million households in urban and rural residential areas which have never used water purifiers.''

PRODUCT RANGE

These would be a range of innovative products such as storage water purifiers which cost Rs 1,800 onwards. Targeting areas such as Sec B&C towns where there is dearth of water and electricity, Eureka Forbes is hoping its new alternative retail channels will help in reaching out to the masses in these parts.

LOW PENETRATION

According to Mr Aslam A. Karmali, Senior Vice President, Consumer Division, Eureka Forbes, "There is low penetration in the business of water and we have to first try and expand the physical reach of our products. Today we are evaluating new ways of reaching our consumers as there is just about 9 per cent penetration in this category."

Meanwhile Eureka Forbes would continue using its traditional sales channels (direct doorstep sales) and traditional outlets to vend its products. "The classification of our outlets comprises the family-owned outlets which are now being professional run and also the key dealers," stated Mr Palekar. The Rs 1000 crore Eureka Forbes has a 62 per cent share in the residential water purification market.

Taken from Business Line

ITC’s Bingo: Successful Launch

2008-02-02T12:49:00.000+05:30

Business Standard's Annual Brand Derby has picked Bingo as the most successful launch of 2007. Vodafone was a close second to Bingo for its highly effective simple message: Hutch is now Vodafone. Ten months after it entered the category with its wafer snack brand, Bingo, ITC's foray into the Rs 1,800-crore branded snack market has fetched the company a 16 per cent market share across the country (Source: AC Nielsen). What made the brand tick let's take a look

Research:
After making the decision to launch Bingo it started by sending a cross-functional team of eight individuals were sent across the country to research the snacking habits of the Indian consumer. After travelling to 14 cities and speaking to more than 1,000 people, the team came back with an insight that Indian consumers were looking for novelty and excitement in existing snacks.

Taste:
For the recipes, the company went to the chefs in its hotels. The chefs came back with 16 flavours with twists like bindaas masti chaas, chatkila nimbu achar and tandoori paneer tikka-flavoured potato chips, chilli and tomato-flavoured mad angles — inspired by khakras — and other snacks.

Targeting:
The Company decided that youngsters in the age group of 16-30 are the most experimental and hence they would be the primary target audience.

Marketing & Advertising:
Bingo touched a chord with consumers through humour and irreverent advertising. On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product. It also created a website www.bingeonbingo.com with offers, online games, downloads and even mobile games. According to industry estimates, ITC spent close to Rs 100 crore on marketing.

Distribution:
The Company distributed more than 4 lakh large racks, to display the brand at all points of sale. The racks created so much impact that even competitors like market leader Frito-Lay's introduced its own version of wafer racks. This incredible leveraging of distribution system is credited by many as major cause of Bingo's success. Now due to this lays started doing re-branding exercise and introduced has introduced Lay's Chaat street, India's Mint Mischief and Wafer Style. Lays has relaunched itself in the health platform. This December, Lays has launched the concept of Snack Smart which talks about a healthy snack. Now Lays is with 40% less saturated fat. That means same taste and more healthy..
The latest launch is in line with the announcement made by Pepsico's Global Chief Ms Indra Nooyi that the Company is moving towards a healthy platform. This initiative is intended to silence the critics that Potato Wafers are junk food.

Together with the relaunch, Lays has introduced new flavors : Lay's Chaat Street, Mint Mischief and Wafer Style. The new variant which are Indian flavors is a result of the tough competition from Bingo. Its interesting to note that Bingo has forced Lays to relearn its own lessons. Lays had captured the Indian consumer's mind through Indianisation but later somewhere the brand lost its focus. The latest health positioning is definitely going to give Lays some additional leverage in the market. But Bingo is not sleeping either, if you have noticed the pack of Bingo , it says " Baked , Not Fried " to remind the consumer that no oil is used.

The "Healthy " competition has started.... FritoLay India leads the market with a share of 45 per cent. Haldiram's and ITC have a market share of 27 and 16 per cent, respectively
------------------------------------------------------------------------------------------------

The health positioning is something that maybe Lays is counting on, but that does not mean that Bingo cannot survive with its existing strategy of being a "Rich" snack.The technology of efficient & less fat production of potato has now been acquired by ITC as well.The superior Online advertising and huge market recall Bingo has got needs to now filtered into fewer brands, as the there are currently too many for the consumers to handle.

Bharti eyes Big Apple as starter for retail feast

2008-01-21T11:25:00.000+05:30

Bharti Enterprises, slated to start its retail business in the first quarter next year, may acquire Big Apple — the Delhi-based supermarket chain with 65 stores. Bharti’s acquisition blueprint in the retail sector may be a replay of its telecom business, where the group built up a pan-India mobile presence by acquiring telcos such as JT Mobile in Karnataka and Andhra Pradesh, Skycell in Chennai and Hexacom in Rajasthan.

A senior source said the Bharti Group and Big Apple are at fairly advanced stages of negotiations and if price expectations match, the deal could be sealed as early as next month. He also said Big Apple has quoted its price and Bharti has given a revised offer. “Talks will resume after Christmas vacations,” he said.

Bharti plans to start retail operations in March by opening its first small format retail store in North India while the cash and carry business in partnership with Wal-Mart will start in the third quarter of next year. Acquisition of regional retail chains is likely to give Bharti a headstart in terms of locations, a readymade supply chain and operations.

Bharti plans to invest $2-2.5 billion in retail by 2015. It is planning pan-India operations and is looking at approximately 10 million square feet of retail experience across all cities in India with a population of over one million.

As western-style supermarkets take off in India and large companies enter the business, a consolidation is likely. Small regional chains, unless backed by a large group, have limited funds to expand and scale up, and will look for joint venture partners and buyers.

The process has already started. Wadhawan Retail, which runs Spinach retail chains in the west, took over Delhi’s Sabka Bazaar and Home Store as well as the management contract of Maratha Stores in Mumbai. Similarly, AV Birla group’s retail arm took over Trinethra stores in the south. Reliance Retail took over Adani Retail in Gujarat but steep valuations in other states kept it away from acquiring more.

Spinach retail buys out Sabka Bazaar

2008-01-21T11:21:00.000+05:30

June: 2007

After Aditya Birla–Trinethra and Reliance–Adani Retail deal, more consolidation is happening among small and medium-sized retailers. Mumbai-based Wadhawan Retail, owners of stores under name ‘Spinach’ have taken over Delhi-based Sabka Bazaar and The Home Store for over Rs.100 crores.

Wadhawan has also bought 15 outlets of Mumbai’s co-operative Maratha Stores. The Home Store offers home and lifestyle products and present in nine major cities while Sabka Bazaar sells food and grocery items has 35 stores in Delhi-NCR.

The acquisitions slips nicely into Spinach’s fold as Wadhawan Food Retail had plans to open 1,500 stores in 90 cities. Currently it has 23 Spinach stores in Mumbai. It gives a good hold in the northern and Mumbai market and initially would retain the same brands as they are well-known in their respective regions and own clientele. .

The Home Store was also in need of funds to expand and looking for Rs.150 crore funding from venture capitalists to expand its operations nationally with 100 outlets. Besides this it is establishing 3 hypermarkets in northern India for Rs.15 crore.

Now, Wadhawan Retail (a retail venture of Dewan Housing Finance) would spruce up the acquired outlets to take on Reliance Fresh and Food Bazaar. Spinach earlier bought HLL’s home-delivery retail business, Sangam Direct in Mumbai.

As unorganised retailing picks pace in India, small and medium sized retailers will consolidate to scale up their operations and meet capital requirements. Also, they could then meet with problems of rising real estate prices and lack of quality space availability.

US giant Big Apple comes to India

2008-01-21T11:10:00.000+05:30

Popular international retail giants are now heading towards India for setting up their stores. Yet another addition to this list is Big Apple, the Indian version of the popular US retail chain 7-Eleven.

It plans to launch 100 convenience stores in the national capital and surrounding areas by August to cater to the urban consumers. With shopping becoming another casualty of long working hours, Express Retail Services Pvt Ltd is rapidly expanding its Big Apple chain of convenience stores with 25 stores already merchandising 2,500 products including FMCG, grocery, fruits and vegetables.

The stores will remain open from 7 AM to 11 PM. After August, Big Apple will expand into cities adjoining the national capital to double the number of stores to 200.

In the second phase, expansion is planned in Karnataka and Gujarat.

The company's stores are doing an average sales of Rs 16 lakh per day and it is just six-month away from break- even.

"They are just two per cent away from break-even." A typical Big Apple store is 1,500 to 1,800 sq feet and stores over 2,500 product merchandise, and they claimed it was way ahead of competition from Reliance Retail's neighbourhood stores and Subhiksha. They change product line every 90 days based on customer acceptance and demand.

The Rs 40-crore company has a direct tie-up with farmers in Haryana, Rajasthan, Himachal Pradesh and Uttar Pradesh.

Bru Cappuccino

2008-01-19T00:23:00.000+05:30

The North: e.g. Delhi

Bru Cappuccino ads have been popping up in City and Delhi times regularly for the past couple of months. The brain behind the campaign has to be appreciated. This is a different and a pretty expensive 360 degree campaign.

Print media, PVR theatre boards, Concerts in DU - Euphoria, MTV shows - Flirtbook, and various other Below the Line activities like a mobile coffee vending van that travels across different institutes.

Hindustan Unilever Ltd’s flagship coffee brand, Bru, has announced Karan Johar as the official brand ambassador for Bru Cappuccino. Johar will kick off this new association with Bru Cappuccino’s ‘One is Not Enough Festival’ in Delhi. Johar, who is the host of the well-known celebrity chat show, ‘Koffee with Karan’, has taken his tryst with coffee a step ahead.

http://in.promos.yahoo.com/bru/flirt_contest.html

This is one of their online gaming links on flirting.

The South: e.g. Chennai

Will the same strategy work in the South? There are a lack of specific magazines or newspapers that would target the same segment as a City or a Delhi Times does.

Bru as a brand in itself is huge revenue source in the south. Hence airing a commercial for Bru Cappuccino with the "Flirt More" tag would definitely not go well with the exsiting strong customer base.

"Trinethra" being rebranded as "More" by Aditya Birla Retail

2007-12-28T23:54:00.000+05:30

Chennai, Dec 20: Aditya Birla Retail Limited will rebrand 'Trinethra' grocery retail supermarkets to 'More', to offer consumers a more fulfilling retail experience. Talking to newspersons here today, Aditya Birla Retail Limited CEO Sumant Sinha said the 'More' stores would offer the customers a wide range of products, including fruits, vegetables, home care and dairy products.

''The acquisition of Trinethra Super Retail has provided Aditya Birla Retail a strong retail footprint in South India, extending to 260 stores over more than half a million sqft in Andhra Pradesh, Karnataka and Kerala,'' he said. He said the 'More' stores were developed after an in-depth research to understand the needs and expectations of Indian consumers.

Mr Sinha said to ensure supply of fresh fruits and vegetables to the customers, the company was building direct linkage with the farmers. ''It is also investing to develop a robust supply chain, connecting households more directly with the farmers,'' he added.

Stating that the demographic movements in India over the last two decades had made organised retail a necessity, he said ''the retail industry is today valued at around US Dollar 320 billion.''

Consumer firms widen Health Food portfolio

2007-12-27T08:03:00.000+05:30

In a bid to address the needs of health-conscious Indian consumers, FMCG majors have lined up a slew of products for launch in 2008.

ITC's foods division is launching Sunfeast Benne Vita Flaxseed biscuits early next year to expand its health biscuits portfolio.

The company already has two other health offers under Sunfeast Sachin Fit Kit, Sunfeast Sachin's FitKit Vitamin and Protein enriched biscuits and Sunfeast Sachin's Fit Kit Multi-grain biscuits.

Since consumer tastes have changed towards a healthier one, we foresee a good growth in the health foods category and expect our portfolio of these products too will continue to grow in the years ahead, added Naware.

The company also offers a health pasta option Sunfeast Benne Vita pasta in four variants.

PepsiCo India's food arm, Frito-Lay India, has already cut down the use of around 5,000 tonnes of saturated fat by switching to rice bran oil for its core products. The company is now aiming to cut trans fats further by using whole grains for its snack offerings. Says a FritoLay India spokesperson,

In recognition of the fact that consumers are living smarter and constantly making lifestyle choices, we have made our core product range healthier, encouraging consumers to snack smart.

Our core product Lay's Kurkure, Uncle Chipps and Cheetos is now being cooked in rice bran oil. In the process, we have reduced saturated fats in these products by 40 per cent, while maintaining the same great taste and at the same price. This is in addition to the fact that all our products have zero-trans fats.

Homegrown FMCG company Dabur India, which has already made heath and wellness its focus area, introduced ChyawanPrakash, a sugar-free variant of Chyawanprash last month.

The product is targeted at the calorie-conscious consumers.

Says K K Chutani, general manager, marketing, Dabur India, The launch of this product comes at a time when Dabur is putting in a concerted effort at expanding the category and use of Chyawanprash. Dabur's entry into the sugar-free segment with Dabur ChyawanPrakash is yet another step in this direction.

According to industry experts, due to increasing health concerns and rising rates of chronic lifestyle diseases, consumers are today asking for products that address their health needs and with this trend growing, food companies will continue to extend their portfolio to healthier offerings.

Hindustan Unilever (HUL) is believed to be in the process of introducing a range of nutritional drinks and snacks for children next year. The range is set to be launched under Amaze Brainfood, a part of HUL's parent company Unilever.

Amaze Brainfood has already been launched in Turkey and the range is said to include tasty bite-size cereal treats and milk drinks for children that contain iron, iodine and protein.

__________________________________________________________________

All the major FMCG's are expanding their Foods business. Whether the move towards healthy alternatives is a consequence or a cause towards the general mindset of the consumer is going back to an age old debate.

What is interesting to wait and see is the positioning ITC's Bingo would take in response to Lay's new Health statement.

Marico's Distribution Network

2007-12-26T08:36:00.000+05:30

Marico's distribution width and penetration is acknowledged as one of the best in the industry and is a leverageable strength.
Every month, 56 million consumer packs are sold to about 1.8 million households through 1.6 million retail outlets spread across the country.
Marico's distribution network covers almost every Indian town with a population of over 20,000. The chart below depicts Marico's distribution network in the urban & rural markets:

Thus, 1 out of every 10 Indians is a Marico consumer.

Distribution Alliance:
Our distribution strength has been recognised by Indo Nissin Foods Ltd. through their association with us for the distribution of Top Ramen products on a national basis.

Rural Sales & Distribution:
Marico's parallel rural sales and distribution network ranks among the top three in the industry and contributes 24% to the company's topline.

Their infrastructure comprises 882 direct distributors, 153 super distributors, catering to 2393 small stockists and 4523 van markets. A dedicated team of Territory Sales Executives and Pilot Sales Representatives distribute Marico's as well as alliance brands through this vibrant network.

Sales Capacity:
They have made significant progress in the areas that enhance sales capacity. Quality of our distributors Quality and number of the distributor field force Upgradation in the role of the company's front-line sales force.

Technology (IT) in Sales:
Marico has been making investments in IT to ensure:
Supply Chain efficiencies
Availability of the SKU at the right distributor point,
at the right time in right quantities
Timely availability and reliability of Sales
MIS, which help in taking prudent decisions on a real time basis.

In order to reap maximum benefits from its sales and distribution network, Marico embarked on an internet-enabled application - MI-Net - to establish a network between Marico and its distributors through a web interface. This project is aimed at providing real time information on the status of various business operations between Marico and its distributors. This initiative is expected to provide business benefits in the form of increased penetration by the sales force, reduced communication costs, reduced working capital requirements, etc. The project went live on April 1, 2002 with connectivity to 330 urban distributors, who together account for about 3/4th of Marico's domestic turnover. The business benefits are expected to accrue over a period of time.

Sales Promotions

2007-12-14T14:23:00.000+05:30

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Essar to invest Rs 1,200 cr in telecom retail expansion

2007-12-07T14:04:00.000+05:30

Essar Telecom Retail has entered into an agreement with the UK-based Virgin Group for brand licensing, technical and consultancy services for its mobile phone retail chain.

Virgin will provide its expertise in branding, customer care, store operations and staff training, and will also get royalty for use of its name.

The logo `Powered by Essar & Virgin' will accompany the store name of `The MobileStore'.

Telecom retail, it seems, is the latest buzzword in India, with Essar Telecom Retail, a unit of Essar Group, planning to increase the number of its stores from 250 at present to 2,500 by 2010. The company will invest Rs 1,200 crore over the next three years in its multi-brand telecom retail stores that operate under the brand name of MobileStore.

The company will also increase its headcount from 1,500 to 10,000 by 2010 and expects to close the fiscal with a revenue of Rs 1,000 crore. With this, it joins players like HotSpot, RPG Cellucom, Pantaloon and Subhiksha, who have announced big-ticket investments to tap the Rs 35,000-crore mobile market.

“Essar Telecom will also sell mobile phone connections, accessories, new connections and provide after sales support, repairs and other services. With these offerings, we are eyeing a 10% share in the next three years,” Essar Telecom Retail CEO Rajiv Agarwal told FE.

Currently, Essar has about 1.5% market share in the country and 4% market share in the 22 cities where it operates. In Delhi it enjoys a market share of about 8%. The company wants to focus only on telecom and related products to garner this pie and denies venturing into other retail formats.

Buoyed by sales of Rs 5 crore on August 15, the company has decided to continue with its scratch and win scheme, where its promises customers a gift worth Rs 5,000 on every purchase.

“Earlier we wanted to run the scheme only for a week, but after getting a positive response, we have decided to continue it till the competition does that,” said Agarwal. The scheme helped Essar sell 1 lakh phones in a single day.

Lee bets big on ‘concept’ stores

2007-12-03T01:53:00.000+05:30

Denim brand Lee is betting big on ‘concept’ stores to create brand stickiness.

(Concept stores essentially are built around a theme and convey a certain brand ethos, thereby, enhancing the shopping experience.)

Lee recently opened a boutique store in Greater Kailash, Delhi – in an upmarket shopping area frequented by women. This store conveys an uppity attitude and “celebrates snobbery” – right from its diamond studded signage to store interiors with modern minimalist furniture, vanity mirrors, plasma screens and foot massagers.

While the Lee store in Bangalore is all about the “vintage meets contemporary”, its Pune store addresses the youth primarily. Lee is all set to open up a ‘Buddy Lee’ café in its store in Ahmedabad (Buddy Lee is the brand’s advertising icon). The café is aimed at being yet another “point of connection with the youth.”

“Concept stores give consumers a complete brand experience and convey the values and ‘lifestyle’ imagery of the brand,” says Mr Chakor Jain, Business Head, Lee.

“While a multi-brand outlet stacks our merchandise like just another product, large concept stores try to bring about all the images of the brand. After all, the store is an extension of the brand,” says Mr Jain. Lee is looking to take the concept story forward by setting up more such stores in various cities.

VF Arvind Brands will have 90 exclusive Lee outlets in place by December.

Source: Business Line Similar concept stores are also running on a pilot basis for Reebok simultaneously with their existing showrooms. The Franchise needs to be flexible enough to adopt an innovative model which will be running on a pilot basis. The entire store is extremely colorful and targets women and the metrosexual male in particular.

The Missing Metric: Measuring Shelf-Space Profitability

2007-11-30T23:00:00.000+05:30

The shelf may well be the most precious real estate in the consumer-retail value chain: In some categories, as much as 80 percent of all purchase decisions are made at the point of sale. Regardless of how much effort went into promotion or product design, the shelf is the point where the consumer meets the retailer, the brand, and the product. The outcome of all those relationships and the buying decision depends entirely on what happens halfway down Aisle 2.

Yet surprisingly little is known about that interaction. In fact, many crucial shelf-space questions are still surprisingly difficult for retailers and manufacturers to answer on the basis of anything but gut instinct. How much is this store’s shelf space worth? What products and brands would make the most profitable use of my space? What products and assortments drive the greatest growth at the shelf? How do I make sure that these are the products my customer wants? These essential questions are still very difficult for retailers and manufacturers to answer.

It doesn’t have to be this way. If retailers and manufacturers had an objective and easily duplicated metric for shelf-space profitability, they could craft better decisions about which products to stock and how to best make use of all that space. Retailers would know which products to carry and which brands to push. Manufacturers would know which promotions were working and which products were underperforming.

The idea isn’t new. In fact, a number of companies have tried to develop ways to find this missing benchmark but have never been able to create a solution simple enough to make the measurement useful. Technological approaches to measuring shelf profitability, such as the use of data from RFID tags, have turned out to be too expensive and complex to serve the purpose. Furthermore, the high level of distrust that typically exists between retailer and manufacturer has made it difficult for the two parties to collaborate deeply on anything, including data sharing.

Fortunately, there are relatively simple ways to measure shelf-space profitability (SSP). The first step is to calculate the cost per linear foot of space in the store network, including all product-related costs: for instance, total store costs, internally funded marketing support, distribution, and servicing and repairs. Next, to understand the overall costs associated with selling a particular product across the store network, apply these total costs to the space allocated to the product in a store. Apply this shelf-space cost to the net cash margin that the product or brand generates across the network to find the SSP for a given manufacturer, category, brand, or set of products and thus better understand growth and profit contribution. By using this metric, retailers and manufacturers are able to learn not only which items are most profitable, but which are most profitable given the amount of space each item uses.

Better information about product performance enables retailers to make better stocking decisions. Better stocking decisions, in turn, make it easier to build a strong relationship not only with manufacturers but with consumers as well. Stocking the right products in the right places is a good way to engender consumer loyalty toward both the store and the brand. Everyone wins with good shelf-space profitability metrics: The store earns a reputation for carrying a strong assortment of goods that are always available, and the manufacturer
can focus on stocking product lines that are recognized as winners.

Source: Booz Allen

Methods used for valuing brands

2007-11-30T15:44:00.000+05:30

A number of authors and consulting firms have proposed different methods for brand valuation. The different methods consider that a brand’s value is:

1. The market value of the company’s shares.

2. The difference between the market value and the book value of the company’s shares (market value added). Other firms quantify the brand’s value as the difference between the shares’ market value and their adjusted book value or adjusted net worth (this difference is called goodwill).

3. The difference between the market value and the book value of the company’s shares minus the management team’s managerial expertise (intellectual capital).

4. The brand’s replacement value

4.1. Present value of the historic investment in marketing and promotions.

4.2. Estimation of the advertising investment required to achieve the present level of brand recognition.

5. The difference between the value of the branded company and that of another similar company that sells unbranded products (generic products or private labels). To quantify this difference, several authors and consulting firms propose different methods:

5.1. Present value of the price premium (with respect to a private label) paid by customers for that brand

5.2. Present value of the extra volume (with respect to a private label) due to the brand

5.3. The sum of the above two values

5.4. The above sum less all differential, brand-specific expenses and investments. This is the most correct method, from a conceptual viewpoint. However, it is very difficult to reliably define the differential parameters between the branded and unbranded product, that is, the
differential price, volume, product costs, overhead expenses, investments, sales and advertising activities, etc.

5.5. The difference between the [price/sales] ratios of the branded company and the unbranded company multiplied by the company’s sales. This method is used by Damodaran to value the Kellogg’s and Coca-Cola brands.

5.6. Differential earnings (between the branded company and the unbranded company) multiplied by a multiple. As we shall see further on, this is the method used by the consulting firm Interbrand.

6. The present value of the company’s free cash flow minus the assets employed multiplied by the required return. This is the method used by the firm Houlihan Valuation Advisors.

7. The options of selling at a higher price and/or higher volume and the options of growing through new distribution channels, new countries, new products, new formats … due to the brand’s existence.

Consumers’ Paradigms: A Challenge for Retailers

2007-11-28T23:11:00.001+05:30

Source: Booz Allen Hamilton: Retail Innovation in Latin America

Consumers know that they can’t have it all, in terms of getting the best of everything, all the time. Most purchasing decisions involve some form of trade-off in light of constraints such as price, distance, time to shop, or credit.

Our study revealed that consumers have preconceived notions of how to address these trade-offs in the retail world. Whether these notions reflect negative experiences or simply consumers’ perceptions, they often hide frustrations and desires in equal measure. We call these preconceived notions “consumers’ paradigms” and they are associated with the trade-offs that need to be made with respect to products, services, design, quality, assortment, and location.
Although not exhaustive, the following paradigms are based on our fieldwork and reflect the most relevant information at the time of this research. While the concept of trade-offs is applicable to most income classes, our analysis and examples are focused on emerging consumers.

1. “Access to high-ticket items requires a long term-sacrifice.” As shown in our previous study, emerging consumers dedicate a proportionally higher portion of their income to household purchases: In Latin America, they spend approximately 50 percent to 75 percent of their budget on consumer products.

As a general rule, daily needs are the top priority for emerging consumers, followed by emergency purchases and large purchases to stock up. As a result, savings are very limited and so is the emerging consumer’s ability to acquire high-ticket items, such as cars, computers, and household appliances like freezers and microwaves. As an illustration, a 42-inch plasma TV can cost as much as 20 percent to 25 percent of the annual salary of an emerging consumer in Brazil.

The purchase of high-ticket items is made even more challenging for emerging consumers as access to financing is limited. The primary reason for this limitation is clear: Only about 45 percent4 of emerging consumers possess bank accounts in Brazil, for example. Yet even for the “bankable” consumers, obtaining credit can be a challenge, since financial institutions require extensive documentation, such as proof of income, which the vast majority of emerging consumers do not have. Furthermore, even when consumers are able to obtain credit, there is little or no room for debt renegotiating, which impacts the consumers’ credit history,
another important factor in the financial institutions’ decision to grant credit.
In the context of their limited savings capability and financing options, the key question for emerging consumers is, “Can I possibly buy a personal computer or a car?” Our discussion groups indicate that emerging consumers do not believe this is the case, unless they are willing to make a long-term sacrifice: They have to save for an extended period of time and pay relatively high installments, thus giving up on shorter-term consumption. A C-class consumer in Mexico characterizes this situation very well: “Before Elektra, I remember how hard it was to have the discipline and the sacrifice to save to get us our first color TV.”

2. “Better quality must be more expensive.”
“Can I find trendy, quality furniture at a reasonable price? Are my choices limited to traditional, unfashionable staple products if my budget is limited? Can I get higher-quality products at competitive prices?” In the minds of emerging consumers, the answers to these questions are, “No, yes, and no.” They believe superior quality, which they generally associate with intermediate or leading brands, carries a premium in price. This belief can drive the purchasing process to the point where emerging consumers don’t even compare prices and limit the number and type of stores that they visit. A D-class consumer in Chile stated, “I buy my clothes in La Polar or in Lider, because Falabella is not for me.” The same belief holds when emerging consumers shop for other products, such as furniture and electronics.

3. “If a store is nice and trendy, its products must be expensive.”
Emerging consumers take for granted that a modern, trendy shopping environment, carrying
stylish products, also carries a premium price. “C&A stores are really nice and chic; it is not for people like me,” stated a Brazilian C-class consumer. Alternatively, as a B-class Mexican consumer said, “Palacio is expensive, but you find better things, more modern, exclusive; they get the products before other stores, and they run the best brands.” The perception is clear: If a store is trendy, the products must be trendy as well, and therefore expensive.

4. “If the store is small, the assortment must be very limited.”
Emerging consumers believe the store area is an indication of the available assortment. Consequently, they believe that if the store is small, one has to shop around in many other stores or commute to a larger store to access greater variety and, in certain cases, feel comfortable about making the “right choice.”
It is important to note that emerging consumers have often stated their preference for shopping at small stores nearby, as going to larger stores a distance
away requires more time and more expensive transportation, which is significant in the context of their limited budgets.
In the case of mid- to high-ticket items, this paradigm of a clear trade-off between store size and assortment has a much greater impact, as lower-income consumers usually do more research to purchase. As a D-class consumer in a small town in Brazil said: “I bought a new washing machine last month to replace the old one. But it took me five months to have my husband take me to Campinas, where there was a store with broad variety.”

5. “Better service and sales assistance must be more expensive.”
Our study identified service as a highly valued attribute for emerging consumers.
Nonetheless, they usually do not have positive experiences in this respect. It is common for them to find sales assistants too “sophisticated” to understand lower-income consumers, or believe that assistants have a cold and snobbish attitude toward them.

Accustomed to not having technical assistance and good service, emerging consumers believe that complimentary services can only be obtained with higher prices. When one C-class consumer in Colombia commented, “I like K-tronix; they have good products, nice people to help, and they even installed the refrigerator I bought for free,” another consumer responded, ”Nothing is for free, my friend. The cost is somewhere inside the price you paid.”

CMO Thought Leaders: A Snapshot

2007-11-27T19:28:00.000+05:30

The book explores how leading marketers are grappling with and surmounting the challenges of heightened customization demands, fragmentation of media and markets, growing pressure for returns on marketing investments, and other crucial issues.

Key Challenges

What the CMOs Are Talking About

Put the Consumer

at the Heart of

Marketing

􀀗Knowing what consumers are actually

thinking & doing

􀀗Changing research and knowledge

management practices

􀀗Transitioning the mind-set of a whole

organization

“HP knows the top 10 factors that drive

customer loyalty, and it measures them

constantly. Corporate marketing can

then go back to each business and say,

‘Here’s where you’re falling behind in

terms of the customer experience you’re

providing, and here’s how it relates to

market share and margin growth.’”

-- Cathy Lyons, CMO Hewlett-Packard

Make

Marketing

Accountable

􀀗Marketing accountability on two levels

􀀗ROI metrics and the marketing

dashboard

􀀗Measuring the impact of new media

􀀗Developing the measurement capability

“The most important thing that’s changed in

the last 10 years is measurability of what

we do… New channels are regularly

emerging that allow us to understand what

it is we’re doing as it related to acceptability

with the marketplace. And we can do it

with much faster turnaround.”

- John Hayes, CMO, American Express

Embrace the

Challenges of

New Media

􀀗Openness to experimentation

􀀗Balancing the new and the old

􀀗Pull vs. push

“ …consumers are in control. It’s more than

just click the remote capabilities or the ability

to do a browse/search on the Internet.

Consumers are telling us that they want to

be in control of the storytelling. And as part

of that desire, they want to engage in

advertising in different ways.”

- Beth Comstock, President, Integrated

Media, NBC Universal

Live a New

Agency

Paradigm

􀀗Identifying the right agency partners to

meet marketing’s needs

􀀗Creating a new kind of partnership

between marketers and agencies

􀀗Balancing cooperation and competition

to get the best ideas

“[Agencies] need to get more integrated.

They need to collapse structures. They

need to go digital. Those that are making

those changes are turning away

business. Those that haven’t adjusted

are struggling.”

- Jim Stengel, Global Mktg Officer, P&G

Recognize the New

Organizational

Imperative

􀀗Balancing generalist and

specialist skills

􀀗Driving the training agenda

􀀗Integrating with other functions

“ In marketing, you need to use both halves

of your brain…You need to have the

analytics. You also need to have the

intuition. And you have to be quite flexible

at using and leveraging both parts of your

brain”

- Rob Malcolm, CMO, Diageo

Remain

Adaptable

􀀗Making adaptability an inherent part of the

marketing agenda

􀀗Raising senior leadership awareness of

issues and implications

􀀗Driving marketing as an integral,

integrated part of the enterprise

“ I’ve never worked for the same

company for more than two years in a

row, because FedEx keeps changing.

We have new marketing challenges

every day.”

- Mike Glenn, CMO, FedEx

GRP and TRP

2007-11-24T13:32:00.000+05:30

GRP (short for Gross Rating Point) is the sum of ratings achieved by a specific media vehicle or schedule. It represents the percentage of the target audience reached by an advertisement. If the advertisement appears more than once, the GRP figure represents the sum of each individual GRP. In the case of a TV advertisement that is aired 5 times reaching 50% of the target audience, it would have 250 GRP = 5 x 50% -- ie, GRPs = frequency x % reach.

A Target Rating Point (TRP) is a measure of the purchased target rating points representing an estimate of the component of the target audience within the gross audience. Similar to GRP (short for Gross Rating Point) it is measured as the sum of ratings achieved by a specific media vehicle of the target audience reached by an advertisement. For example, if an advertisement appears more than once, reaching the entire gross audience, the TRP figure represents the sum of each individual GRP multiplied by the estimated target audience in the gross audience.

In the case of a TV advertisement that is aired 5 times reaching 50% of the gross audience with only 60% in the target audience, it would have 250 GRPs (= 5 x 50%) -- ie, GRPs = reach x frequency and 150 TRPs (=250 x 60%).

Both of these metrics are critical components to determine the marketing effectiveness of a particular advertisement.

http://www.ksg.harvard.edu/case/3pt/berkovitz.html

Here is a link towards a more detiled outlook on an entire Media Plan.

More to come on these topics in detail soon..

Unique Customer Perception (UCP)

2007-11-21T10:37:00.000+05:30

Marketing is a domain which is dynamic i.e. involves change, an important phenomenon not to be overlooked. We have come across a term “Unique Selling Proposition”(USP) which companies feel as a constant factor . Every organisation is an open system of management which means change is inevitable and is associated with environmental factors. Companies need to focus not only on USP of their products but also on the “Unique Customer Perception”(UCP) of the final end users.

The prop of marketing is based on the need identification and the USP's are prepared based on the identified needs . If the needs are wrongly identified then even the USP's which are unique to the product would not serve the purpose. USP identifies a product/service from its competitors while UCP is the perception or picture a customer develops from all types of promotional inputs from the company about their product or service. It is often seen that some brands do extremely well compared to other brands having the same resources. The reason for the brands not to do well is probably the communications which does not reflect the customers perception. So it is not the USP but UCP that plays an important role .This has lead to the concept - “Customer Perception is the Rule and not Customer Satisfaction”.

Remember that a customer always buys a product or service with a lot of expectations which he has derived from the promotional inputs of the company or other sources including word-of- mouth . So a customer would be satisfied when Performance is equal to Expectation while would not be satisfied when Performance does not match with Expectations. Now this expectation is what has been derived from perception.

Perception is not good or bad, right or wrong, it is just the way someone judges an experience based on their value system of what they believe should happen. Since people are unique, each of their perceptions are unique .On the other hand each situation is a "point of contact" with an employee that will tell the customer a "truth" about the company's idea of customer service. Each situation will create expections of what the next experience will probably be like.

Companies spend considerable amount on advertisement and in this world of competitive advantage advertisement has to be repetative in nature. Brand hammering results in brand recall which is a costly affair. So companies need to understand the Unique Customer Perception to facilitate Advertising and Sales Promotional (ASP) efforts towards a better bargain. The cost incurred on advertisement is huge i.e. if we refer to the 5 M's of advertising, http://fmcg-marketing.blogspot.com/2007/11/5-ms-of-advertising.html

Money is a budgetary constrain for an ideal advertising canpaign. Thus UCP has to be rightly analysed for better results by the company to match performance and expectation.

the 5 M's of Advertising

2007-11-21T10:31:00.001+05:30

Advocacy Advertising

2007-11-21T10:12:00.000+05:30

• Advertising used to promote a position on a political, controversial or other social issue.

• Expresses a viewpoint on a given issue on behalf an institution.

• Is often provided by government agencies and non profit organizations

Advocacy advertising almost always is related to a specific public policy or upcoming legislation. The ad will express an opinion on the issue or position the sponsoring industry or company as a leader in its field or area of expertise, such as health care, the environment, or education.

•Public Health Promotion:
Anti smoking , AIDS prevention

•Public Safety Promotion:
Seat belt usage and fire prevention

•Education-related issues:
Literacy programs

What Makes an Advocacy Advertisement Effective?

A quality advocacy advertisement is well-expressed, phrased in human terms, and articulates the debate on your terms, rather than the opposition’s point of view. Providing research to substantiate your claims make the advertisement more powerful.

Repetition of the key message is important. Although separate advertisements within a campaign may be targeted to different audiences, each of these advertisements should communicate the same central message of the campaign.

Companies use that kind of communication to develop their public image and promote their values (Benetton, De Beers, Kellogg's, Philip Morris…)

Philip Morris : 1996 :
launch of an advertising campaign to publicize its position that kids should not smoke
Broad effort to repair the company’s battered public image
Message provided through athletes and celebrities

Benetton : From 80’S to the end of 2000 :
pointed out society issue but without giving any opinion (AIDS, war, sex, culture…)

DeBeers :
Creates the Diamond Trading Company and implements the « supplier of choice » strategy Publishes the « Best practice principles » which encourages proper working conditions, as well of the respect of the environment

Vertical Marketing Systems (VMS)

2007-11-20T15:28:00.000+05:30

A vertical marketing system (VMS) is one in which the main members of a distribution channel--producer, wholesaler, and retailer--work together as a unified group in order to meet consumer needs. In conventional marketing systems, producers, wholesalers, and retailers are separate businesses that are all trying to maximize their profits. When the effort of one channel member to maximize profits comes at the expense of other members, conflicts can arise that reduce profits for the entire channel. To address this problem, more and more companies are forming vertical marketing systems.

Vertical integration is the expansion of a company by moving forward or backward within your vertical market or industry.

An example of forward integration might be ITC buying wheat from farmers to produce Aashirwad atta and Sunfeast biscuits recently.

Corporate VMS - A group of companies performing different tasks under one ownership.
Contractual VMS - Independent companies that join together for mutual benefit. Producer, wholesaler and retailer have sub-groups.

Producer/Wholesaler - Franchise operations fall in this category. The manufacturer licenses the wholesaler to distribute the product.
Producer/Retailer - Another franchise operation where the retailer must meet certain quotas to operate under the company name. Must be a strong company name.
Retailer/Wholesaler - If the wholesalers are the owners they encourage retailers to band together to buy as a group to receive more desirable pricing. If the retailers are the owners, they are called co-operatives. They buy from the jointly-owned wholesaler and share the profits those purchases generate.

Administered VMS - The big dog in the meat house concept. Whoever wields the most economic power within the group can force greater cooperation and support from other members of the group.

If you can't go vertical, go horizontal. Horizontal simply means that instead of companies being under your control in a vertical stack. They are beside you as equals. You don't control them, they don't control you. But, you still need each other. If you are a small business or just starting you may need them more than they need you.

SERVQUAL or Gaps Model

2007-11-20T10:01:00.000+05:30

There are seven major gaps in the service quality concept, which are shown in Figure 1. The model is an extention of Parasuraman et al. (1985). According to the following explanation the three important gaps, which are more associated with the external customers are Gap1, Gap5 and Gap6; since they have a direct relationship with customers.

· Gap1: Customers’ expectations versus management perceptions: as a result of the lack of a marketing research orientation, inadequate upward communication and too many layers of management.

· Gap2: Management perceptions versus service specifications: as a result of inadequate commitment to service quality, a perception of unfeasibility, inadequate task standardisation and an absence of goal setting.

· Gap3: Service specifications versus service delivery: as a result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.

· Gap4: Service delivery versus external communication: as a result of inadequate horizontal communications and propensity to over-promise.

· Gap5: The discrepancy between customer expectations and their perceptions of the service delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.

· Gap6: The discrepancy between customer expectations and employees’ perceptions: as a result of the differences in the understanding of customer expectations by front-line service providers.

· Gap7: The discrepancy between employee’s perceptions and management perceptions: as a result of the differences in the understanding of customer expectations between managers and service providers.

The SERVQUAL instrument has been the predominant method used to
measure consumers’ perceptions of service quality. It has five generic dimensions or factors and are stated as follows (van Iwaarden et al., 2003):

(1) Tangibles. Physical facilities, equipment and appearance of personnel.

(2) Reliability. Ability to perform the promised service dependably and accurately.

(3) Responsiveness. Willingness to help customers and provide prompt service.

(4) Assurance (including competence, courtesy, credibility and security). Knowledge and courtesy of employees and their ability to inspire trust and confidence.

(5) Empathy (including access, communication, understanding the customer). Caring and individualized attention that the firm provides to its customers.