Luxury brands still a tough sell in wealthier India

Mumbai: On a recent evening at Mumbai’s luxury Taj Mahal Hotel, shoppers tried on sequined sandals and handmade moccasins at Joy Shoes, a family business that has sold out of its only shop for nearly 70 years.

Around the corner, a Moschino store with stylish displays of apparel and accessories off the Milan runways stood empty. Starting at 3,500 rupees ($70) for a pair of men’s shoes, Joy is not cheap. But the key to its enduring popularity, says Munna Javery, the third-generation owner, is knowing what customers want and maintaining relationships with them over the years.

These are just two of the already considerable challenges facing global luxury retailers in India. Despite its growing number of millionaires, India lags emerging market peers China and Brazil because of a lack of quality retail space, high import duties on luxury goods, a cap on ownership in local units, excessive red tape and piracy.

India had 123,000 millionaires in 2007 and showed the fastest pace of expansion, a Merrill Lynch/Capgemini report said, but that was the smallest number in the “BRIC” emerging markets quartet, with China already having more than triple that number of super-rich. BRIC comprises Brazil, China, India and Russia.

Luxury goods in India also make up the smallest proportion of the overall retail market, just 0.4 per cent, according to a Bain & Co report, compared to 2.7 per cent of China’s retail market.

“For luxury in India, the path is bumpy and long,” said Mohan Murjani, chairman of the Murjani Group which launched Gloria Vanderbilt jeans and Tommy Hilfiger globally, and partners such brands as Gucci, Calvin Klein and Jimmy Choo in India. “You need size, experience and patience for the long haul.”

Allowing global retailers access to India has long been a controversial topic because of concerns of job losses, and it was only in 2006 that foreign single-brand retailers were permitted to take up to 51 per cent in a local venture, opening the doors to brands such as Gucci, Versace, Chanel and Burberry.

But most brands have been forced to curtail their grand ambitions despite an economy that grew about 9 per cent in the last three years, with Louis Vuitton only having four shops to show for its five years in the country, compared to 25 in China, already the world’s No. 3 market for high-end goods.

“In any emerging market you can only target a very small part of the market for luxury,” said ClaudiaD’Arpizio, a partner with Bain & Co in Milan, who authored a recent report on luxury. “In India, in addition to that challenge is the regulatory framework and the undeveloped retail infrastructure,” she said.

STRONG TRADITION

Once the exclusive preserve of maharajas and business tycoons, luxury brands in India have found new customers in an increasingly wealthy middle-class, the growing ranks of working women and a youthful population that is not afraid to splurge. But challenges abound, such as high store rentals and taxes.

New Delhi’s small Khan Market, with its decrepit buildings, was recently ranked among the world’s most expensive retail real estate, where monthly rental is 1,200 rupees ($25) per square foot, higher than better equipped retail areas in Amsterdam and Stockholm.

The absence of quality locations has forced luxury brands to set up shop in top-end hotels, which is not ideal, said Murjani, who has just two Gucci stores in India, compared to 16 in China.

Add to that the high tariffs on imported goods, which can bump up prices by more than 25 per cent compared to Dubai or Singapore, and a long-abiding suspicion of foreign brands from a time when local importers sold overpriced, outdated products. For this, brands have only themselves to blame, Murjani said.

“Brands have to satisfy the consumer on the price point, the offering, the total experience — a small store in a corner of a hotel is not going to do the trick,” said Murjani, who last year opened India’s largest luxury space, a 3,400-sq ft Gucci store.

“Consumers will simply shop in Paris or Singapore,” he said, noting Indians still splashed out about $500 million on luxury brands abroad a year, nearly the same amount they spend at home.

The money goes mainly on watches, fragrances, sunglasses, leather goods and menswear, with Indian women still favouring traditional apparel and jewellery, despite the growing numbers of Bollywood stars who get decked out in Western designer wear. “India has a strong tradition in luxury apparel and jewellery so it should be easier to sell the concept,” D’Arpizio said.

“But the preference is for the intrinsic value of the jewellery rather than the brand, so a Cartier or a Tiffany’s will have a hard time cracking the market,” she said.

OWN CONCEPT

There is hope for luxury retailers, though.

India’s trade minister recently said he was “seriously considering” allowing foreign retailers to fully own their units in the country, a legislation analysts say is not so controversial as it does not threaten small mom-and-pop shops and traders.

There is pressure from the EU to cut taxes to meet WTO requirements, and high-end retail spaces are coming up in Mumbai, Bangalore and New Delhi, including the Emporio Mall, the first all-luxury complex, with gold-plated ceilings and marble floors.

Over the long term, the rising incomes and expanding economies of emerging markets such as India will provide plenty of opportunity for luxury retailers, D’Arpizio said. India’s luxury market is likely to grow at an average annual rate of 25 per cent over the next five years, she said, trailing only China’s 30 per cent growth and Brazil’s 35 per cent.

But while India’s super-rich may seem better insulated from the financial crisis that has curbed the appetite for luxury goods elsewhere, they will be harder to entice. “India has her own concept of time for absorbing change,” said Neville Tuli, chairman of auction house Osian’s in Mumbai.

“It’s not enough to just throw a nice party and talk about the glamour of your brand. It can take 10 years, maybe more to build something, and most companies don’t want to wait 10 years.”

Sources :- The Financial Express

Key players in the Indian Retail sector

Who are the top retailers in India today?
Here’s a brief summary of the key players..

Pantaloon Retail (India) Pantaloon’s managing director Kishore Biyani believes in changing the rules. When Pantaloon started the Big Bazaar discount stores in 2002, malls were not part of the shopping culture. Big Bazaar became a hit, as it combined the look and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality. Headquartered in Mumbai, the Rs 3,500-crore company now operates over 5 million sq ft across 40 cities.

Shopper’s Stop A menswear store owned by K Raheja in the Mumbai suburb of Andheri in 1991 has now transformed into Shopper’s Stop, with 27 departmental stores. The company entered airport retailing in a joint venture with the Nuance Group. It also launched India’s largest hypermarket, Hypercity. In 2005, it bought the Crossword bookstore chain.

Lifestyle Growing from one store in Bahrain in 1973, the NRI-led Landmark Group today operates over 5 million sq ft in the Middle East and India. The group’s first Lifestyle store in India opened in Chennai in 1999. Now it has 325,000 sq ft in Chennai, Hyderabad, Bangalore, Gurgaon and Mumbai. Its first hypermarket, branded as ‘Max’, is expected to open soon.

Reliance Retail Mukesh Ambani’s 15,000-people Reliance Retail has opened 250 convenience stores, branded as ‘Fresh’, across the southern states. It is now planning to launch 30 such outlets in Mumbai. Reliance Retail plans to invest Rs 25,000 crore on hypermarkets, supermarkets and specialty stores in the next four years. The first hypermarket will be up in Ahmedabad by the end of July.

Aditya Birla Retail The company, which will operate under the brand ‘More’, has selected two formats – hypermarkets and supermarkets – for its initial foray. The first store has opened in Pune. Last January, the company acquired Trinethra Super Retail, which has given it more than 5,00,000 sq ft and a strong presence in the South. The Birlas’ outlay for the business over the next three years is Rs 9,000 crore.

Bharti Retail The world’s largest retailer Wal-Mart, which prefers to go it alone outside the US, chose Sunil Mittal’s Bharti Enterprises as its partner in India. The venture will start with the cash & carry (wholesale) format, which could be extended to retail operations once foreign direct investment is allowed in multi-brand retail, as is expected. The entity is yet to start operations as the formal agreement has not been inked.

Sources:- India Retail News

The future of organized retail in India

What is the future of organized Retail in India?

There is no magic answer to this question. However, one can make some educated guesses based on established best practices and how Indian conditions will modify or replace conventional wisdom. Let’s consider some of the factors that could affect the future of organized Retail in India.

Consumers - Who understands the Indian consumer the best will win in the end. What do we mean by the Indian consumer? Is it the teenager in Mumbai who commutes by local train, buys fashionable clothes from Linking Road and watches movies at the multiplex? Or is it the housewife who buys vegetables from the sabzi mandi and saves up money for chicken on Sundays. Or is it the fisherman out at sea who uses a cellphone to communicate his catch to the market on the shore? The Indian consumer is hard to pin down. As someone wisely said, the Indian consumer shifts loyalties with every 25 kilometers and with every 10 Rupees. The dimensions to deal with include class, education, language, caste and local customs in addition to the standard marketing dimensions used in the West.

Merchandising – Merchandising is what retailers do. This aspect has not received much media attention in India. However, this is often what differentiates a successful retailer from a flash in the pan retailer. Examples that come to mind include Zara, 7-Eleven and Walmart. Put simply, merchandising is the art-science of deciding what to sell where, at what price and when. The retailers that understand the Indian consumers and provide the right products at the right price will beat the competition.

Talent - This is already becoming a bottleneck for several Indian retailers. Experienced corporate professionals as well as fresh talent at the store level are hard to come by. The retailers that are able to retain their talent and provide them with growth opportunities could easily gain an upper hand in running a successful operation in India.

Real Estate – This is a huge concern in India where quality real estate has become too expensive for many retailers to run a successful operation in cities. This is especially true for mass merchandise/discount retailers who operate on razor-thin margins. The acquisition of cheap leases in prime areas could decide whether a retailer becomes profitable at all or not. Another strategy is to expand in smaller towns and villages where real estate is still affordable and purchasing power is not as bad as one might think.

Supply Chain - This often quoted but not-so-often understood term basically refers to the back-end operations of a retailer. This includes the entire network of suppliers, warehouses, distribution centers and logistics operations. Effectively getting products to the right place at the right time is a lot tougher than it sounds when there are thousands of items and hundreds of stores involved. The supply chain infrastructure needs to be built from the ground up in India. This could easily affect the balance sheet of any retailer planning to start operations in India.

Policy - Although most people agree that FDI in Retail is just a matter of time, what this means is that till FDI is allowed, we will see our domestic players like The Future Group and Reliance Retail leading the way. What will happen when FDI is eventually allowed is anyone’s guess. If the examples of Brazil or China are taken into account, we will see a lot of consolidation with a few (6-8) large players remaining and several smaller niche players. Retail is a highly localized business (local preferences, local talent), so there is no guarantee that a foreign player will do better than an Indian player, as evidenced by Walmart’s failures in Germany and Korea. Surely, there are interesting times ahead!

Sources :- Indian Retail News

For retailers, naughty or nice holiday season?

As bills start piling up in consumers’ mailboxes, retailers are tallying receipts from one of the most difficult holiday shopping seasons in years and planning ahead to an uncertain new year. Early indications point to a decline in overall sales in November and December, retailers’ busiest time. Many of the nation’s biggest retailers are expected to report December sales on Thursday.

“It was the worst Christmas I’ve seen in 16 years,” said Jeff Hamilton, owner of Hamilton’s Pro Shop, a golf shop on Jefferson Davis Highway in Colonial Heights.He was one of three merchants the newspaper tracked during the holiday season to see how their strategies to bring in sales worked. The other stores were Moss House in Powhatan County and Saxon Shoes in western Henrico County.

Hamilton’s approach was to trust that his core customers would power his holiday sales. He said his pricing was already lower than competitors’, so there was no need for discounts.Midway through the shopping season he adjusted his tactic and bought an ad. Purchases did not increase, Hamilton said. Until a surge in sales the week before Christmas, receipts had been down about 75 percent.In all, he expects sales to be down about 70 percent this holiday from the 2007 season.Hamilton said he’s not sure what to expect for this year.

“I own everything here — the building, the equipment — and I keep my costs down, so I know I’ll be OK for a while,” he said. “I’m just going to hang on as long as I can.”Hamilton’s sales decline is significantly higher than what experts and analysts predicted for the industry as a whole.

. . .

At least one major retail industry association is predicting this to have been the worst shopping season in nearly 40 years. Same-store sales for this past holiday season could be down at least 1 percent compared with 2007, the International Council of Shopping Centers estimated. Sales at stores open at least a year are considered the best indicator of a retailer’s performance because they compare the results of the same stores.

A 1 percent decline doesn’t sound excessive when weighed against major stock index declines of more than 30 percent last year, but it would mark the worst retail season since 1970. And it could be worse for some merchants. Michael P. Niemira, chief economist and director of research for the shopping center group, predicted that large sectors of the retail industry will see double-digit drops. Holiday shopping makes up about 40 percent of retailers’ annual revenue, experts say.

The major reason for the drop in sales is that consumers are wary of spending money in the face of national economic hardships, analysts and experts say. Last week, the Conference Board’s index of consumer confidence fell to the lowest level since records began in 1967.

. . .

Entering the most recent holiday season, Saxon Shoes president Gary Weiner said he planned to increase advertising compared with the prior year. The day after Christmas, sales at the Short Pump Town Center store were up 25 percent compared with the same day last year, Weiner said. “We had no different savings. The same markdowns. The same everything” he said. Weiner said sales for the holiday season at his store should be close to 2007 levels, primarily on the strength of results from the final two weeks of December.

For the first three months of 2009, he expects sales to range from a 5 percent increase to a 10 percent decrease from the first quarter of 2007. Weiner believes President-elect Barack Obama will push for government stimulus checks in the spring that will get people shopping in April.

Saxon can survive the lean times because the company’s size allows it to be nimble, he said. “As a family-owned business, we’re able to watch over our overhead and then adjust our buying and expenses on the fly,” he said. Weiner did not say he planned to cut staff or employees’ work hours. “We have a large staff that has people who are able to take time off when business is slow and work more hours when we are busy,” he said. “They don’t need to work 30 hours.”

. . .

Rene Matthews, who bought a shop on U.S. 60 in Powhatan in June, said her first holiday season went well. Sales at Moss House, which carries household accessories to collectible Webkinz, were higher than she expected, by a single-digit percentage. She has not finalized sales figures. “It was definitely a surprise and it makes me feel better about the spring,” she said.

Despite advertising and holding open houses to lure customers, Matthews said keeping inexpensive items in the store was key, given this economy. “Customers have told me that they spent less this year, so I think that worked well for us,” she said. Because of that unexpected turn, she adjusted her ordering for 2009. “I am definitely not ordering anything frivolous or extravagant,” Matthews said. Instead she will stock merchandise that can be sold for between $7 and $40.

. . .

What will happen to the retail industry as a whole is less than clear. The same struggles that kept customers out of stores during the holidays are expected to continue this year. TNS Retail Forward, an Ohio-based retail think tank, predicts sales will grow 2 percent in 2009, down from the 10-year average of 5 percent growth. Through November last year, growth was 2.3 percent.

And even though the ink on the register receipts isn’t dry yet, analysts are saying retailers could begin closing stores as soon as this month, with some heading to bankruptcy court. “The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half,” said Lynn Franco, director of The Conference Board Consumer Research Center.

Sources :-Richmond Times-Dispatch

Online research before purchase rising: Study

New Delhi: In the present economic scenario, when the print and electronic advertising mediums are seeing a dip in revenues, online advertising is gaining momentum as advertisers are now looking at cost-effective mediums to reach to the target audience. Usage of the online medium as an advertising platform is increasing as the medium not just offers the advertisers the flexibility to reach the right kind of users but it is also used for creating brand awareness, to lead the generation.

To highlight the increasing popularity of online medium amongst consumers and hence advertisers Google India has conducted a study on consumer buying behavior, which suggested that consumer electronics, technology and telecom products were usually researched online but purchased offline.

As per the research, 56% for technology products, 56% are researched online but purchased in retail stores and 26% are researched and purchased online.

In the travel and media industry, however, the consumer trend is of researching and purchasing online. Google research reveals that 66% of Travel products are researched and purchased online and 40% of entertainment products are researched and purchased online.

Sources:- The Financial Express

Greeting waves in the air

Radio has been a popular medium with retailers for a long time, but had lost its sheen and audiences in the 90s. Today, radio is being revived. The overwhelming response to the opening up of FM space, with everyone from BBC to local educational intuitions vying for frequency in the 330 licenses in 90 towns on offer is a significant indication. Retailers can now look forward to sharper targeting and lower cost options in this audio media.

With the advent of television on a national base in the year 1982, radio took a back seat till FM came in a few years ago. With the second phase of the roll out of FM radio on the anvil, retailers have plenty more advertising options. What is the future of FM radio, considering the potential invasion of satellite radio is anyone’s guess and we will have to wait for the future to unfold that.

ROLE IN THE MEDIA PLAN

Once a retailer has decided what he/she wants to achieve with advertising, having identified the target audience with advertising, having identified the target audience, the next step would be to make a media plan. When one is evaluating media vehicles three aspects must be considered. Coverage- does it reach the target audience? Frequency- how often during the stores, campaign can it advertise and impact – the ability to grab audience attention and communicate effectively or the ability to make an impression.

In retail Advertising & Sales Promotion, authors Charles M Edwards, Jr and Carl F Lebowitz have lited nine things retailers must consider while evaluating media. “When a retailer wishes to deliver a selling message to potential customers, the selection of media should be made after careful consideration of factors like clientele sought by the store, type of store, trading area of the store, location of the store, the message to be sent, the means of communication available and their appropriateness (acceptance among customers), the cost of available media, the money advertiser has to append and the competition to be met.

Radio can be used as the primary medium or as a top-up medium in addition to newspapers or outdoor. This will depend on a host of factors including what needs to be communicated – is it general offer?

Radio being a local medium and for the various characteristics and advantages it has, is usually part of most retailers’ promotion mix. The role it plays in the entire promotion mix depends on a varities of factors including the choice made by the retailer. It can be ‘Mirchi’ in the tadka or many hues in the ‘rainbow’.

THE SPARK OF RADIO

• Local: In the days of ‘Akashvani’ and ‘Radio Ceylon’ – radio was a national medium, one that was used by large FMCG brands and to create some regional brands. In recent years it is much more local in content/reach and cater to the small geographical area – much like a store. This makes radio affordable to retailers and can be used to communicate during local events/festivals.
• Sharper targeting: There a number of programmes at different time of the day aimed at specific target audiences. As more channels will be added this year, the choice will be even greater! This will help the retailer choose specific channel /programme /time combination to reach selected audience. Apart from demographic based can be used effectively.
• Stickiness: Many studies have found a relationship; almost a bond exists between radio jockeys/hosts and their audience. Some FM radio stations have websites where content is divided into pages for each host/RJ. Even middle-aged males listening to the radio while driving to and from work are known to rarely switch channels. In Retail Advertising & Sales Promotion, the chapter on radio advertising begins with “listeners have woven radio broadcasts into their lives in many different ways: an alarm clock in the morning, an up-to-the-minute news report at breakfast, a travel companion in the car, a day-long visitor for the housewife, a game of suspense for sports buffs, a record player for music lovers. A radio can serve such contradictory purposes as lulling insomniacs to sleep or keeping drowsy drivers awake”. One reason for stickiness may also be the interactivity that medium offer nowadays.
• Flexibility: Radio offer many options in terms of time of day to advertise, type of advertising – announcements, jingles, sponsored programmers, time checks and spots of different duration. Most retailers can afford radio and it is a medium that one can use in varying amounts. You can have your advertisement aired once a day or many times to increase impact.
• Mobility: Radio reaches it audience wherever they are, in the bathroom, in the car, kitchen, on a holiday, going to collage or at a restaurant.
• Value for money: In the view of low production costs and relatively low cost per thousand-radio generally offers very good value for money. This also depends on similarity between the profile of the target audience and listenership.
• Quick cycle: As I am typing out these lines, am listening to the advertising of a local mail- it is about a festival programme at the mall and winners of a contest held yesterday. Weather it is to take advantage of the sudden cold wave in the city or some event, it take much less to get an advertisement on the radio than other media vehicles.

THE DUST ON RADIO

Radio has its limitation and the primary one is that it is an audio – only medium and has no visual element at all. One cannot use it to slow the interiors of the store or demonstrate products. Like in television advertising, radio advertisements and fleeting. 10-20-30 seconds and they are gone forever. Listening may not be able to remember such fleeting messages. Unlike television where the viewer is sitting in front of the TV, radio is usually in the background. Selective attention is a problem. Radio also has limitations in terms of creative flexibility. Being audio-only there is nothing much other then voice and music to work with. Popular radio programmes also suffer from the problem of clutter. This offers the option to mentally switch off till the next song.

GETTING THE MOST OUT OF RADIO.

Radio can help retailers in many ways. It can be a good medium of brand building the store. You can use it tactically also to communicate about a sale. One can use it a single medium or can be part of multi – media campaign. There are benefits of a ‘multiplier’ effects when it is used in conjunction with other media. Radio is also excellent for co-operative advertising. The focus will be the product and the store is where it is available.

COMMERCIAL ASPECTS

There are number of package/programmes and concessions for multiple advertisements. Each station has a variety of offers. It is important to compare the cast/audience of the programme with the potential number of the stores target audience reached to estimate the value of a package/programme. One buy slot of various spots of various durations. Rates depend on peak and off – peak listenership and sometimes based on specific programmes. Long-term contracts can be negotiated and it makes sense for retailers to have an annual plan.

Radio is the medium that all those who target young adults can ignore only at great risk. Thanks to the number of new station and competition, till some clear leaders emerge, retailer can get good rates from radio. The down side is the quality measurement of audiences will take time to be available. One has to judge a station/popularity of a programme mostly what one hears from costomers/community word-of-mouth. Radio stations usually have cost per thousand and profile of their audiences, which is a good starting point to evaluate a radio-advertising offer.

Music at low cost, mobility and local content will in my opinion keep audiences glued to their radios. Advertising on radio has already started to grow as a percentage of total advertising expenditure. It is a good time to use this medium after understanding the many variables involved.

The author is Assistant Professor at the Sir M Visvesvaraya institute of Technology, Bangalore. He can be contacted at Gp_sudhakar@rediffmail.com

India, next big market for retail financial services

According to the ‘Indian Retail Finance’ report, India is the next big market for the retail financial services. The Indian market may have come a long way but things are just getting started. The next 10 years will see more changes..

RESEARCH AND Markets has announced the addition of the “Indian Retail Finance” report to their offering.

This report uses exclusive interviews plus a survey of third party data to present the critical success factors in creating an Indian retail financial operation, including: Who’s who among domestic and foreign players? What are they doing? What are their existing and future growth strategies? Plus in-depth case studies of the post office network and the micro-finance movement. Key segments explained and de-mystified, ranging from the affluent, the female market, the un-banked consumers in regional and rural markets.

Multi-channel distribution strategies, including branch, mobile, peer-to-peer, and self-service. Understanding domestic regulations. Best practice and market intelligence in collection strategy, cultural due diligence and talent management. The size and shape of the deposit, cards (prepaid and credit), wealth management, mortgage lending, personal lending, and remittances markets, where the opportunities lie, how these markets will change, issues to watch and key success strategies.

This report is essential business intelligence for anyone seriously considering how to profit from the growing Indian financial services sector. It’s hard not to get excited at the thought of India as the next big market for retail financial services. Although Indian consumers have started to feel the affects of high commodity prices and the fall-out from global economic uncertainty, gross domestic products (GDP) growth remains impressive and as one of the ’BRIC’ countries, which included Brazil, Russia, India and China, she is set to become the world’s third-largest economy by 2050. The financial services sector is expected to be a lynchpin of this growth along with the retail, information technology and telecom industries. The market for banking products is growing at an even faster rate.

An economy transformed — The rising elephant

In 1985, 93 per cent of the nation lived on approximately a dollar per person per day. By 2005, that proportion had been reduced to 54 per cent, or 431 million people lifted from poverty (more than the population of the United States or of Western Europe).

India’s population is the youngest in the world. Half of its roughly 1.2 billion people are below the age of 25. Over the next 20 years, the number of people in their prime working years will continue to grow in India. Unlike in some of the other BRIC nations, where the population is aging, this again will grow the market for all retail finance products. Mortgages, in particular, will benefit as this population becomes of home buying age. The mortgage market is currently under-penetrated, with the value of mortgages representing just six per cent of GDP.

Changing attitudes to debt and consumer finance and rising affluence has altered consumer attitudes and the approach of the urban consumer has shifted from ’debt averse’ to ’spend now, worry later’. Abundant employment opportunities have increased peoples’ confidence in their future earning power and with that, an appetite for spending that their parents would have indulged in only after a lifetime of careful saving.

The credit card market in India has seen a rapid boom from less than two million cards in the market before 2005 to 26 million cards in 2008. India is the second-fastest growing cards market in the Asia-Pacific region, with an annual growth rate of more than 30 per cent. It is predicted by the Indian Banks’ Association that the financial cards market will increase threefold within the next five years.

The Indian market may have come a long way but things are just getting started. The next 10 years will see more changes than the past 25 years, and with just 59 per cent of the Indian population reported to have a deposit account (compared to an average of over 85 per cent in Western Europe), there is a lot of territory yet to be staked out for both banks and their suppliers. Many financial services firms have entered the fray, and there are now close to 300 foreign, public and private sector banks doing business in India — compared to only 60 ten years ago.

The opportunity of the 21st century

On almost every metric that matters, India invariably tops it. However, such a considerable opportunity does not come without risks. As many foreign investors have discovered in recent years, India is not a business proposition for the faint-hearted or the uninformed.

This report provides a complete 360-degree perspective on the Indian financial services sector giving readers both critical insights into the market as it is currently structured, and an informed perspective on the likely direction of change in the medium term.

You’ll learn not just how the banking sector is structured and regulated, but how it is likely to change over the next two years. The report goes well beyond the usual business and economic analysis, also covering both the cultural and political dimensions of Indian culture.

Who should read this report?

Retail banking and consumer finance operations – Heads of of strategy, marketing, risk and business development – assessment of the prospects for success with an Indian operation. Wealth management and private banks – Heads of strategy, marketing, risk and business development – assistance in targeting affluent and high net worth individuals (HNWI) based in India.

Banking sector – Analysts, data and analysis that can be used to arrive at a more realistic assessment of the potential of the Indian retail financial market.

Anyone else in retail banking and financial services who wants to know more about the opportunities, challenges and possible pitfalls of extending retail financial services to India as a strategy for growth can avail the report.

source:-.merinews.com

Customer Communities Are a Form of Retail Therapy for Consumers and Firms, a Study Suggests

Research shows that customers can receive up to six different types of therapeutic types of social support from friendships that they form with other customers in places such as video arcades, gym, and health clubs.

By participating in retail customer communities, consumers receive social support from other people, which improves their sense of well-being and of belonging in the world. This means that consumers may remedy feelings associated with depression, stress, and loneliness by forming friendships with other customers in retail environments.

Firms also benefit from a “return on community” as customers who form friendships in an establishment tend to be satisfied, loyal, and more willing to pay higher prices for a firm’s products and services.

“People do not have to depend solely on their spouses, partners, or co-workers for support. In fact, this strategy is often disastrous for people in the long run. People can also obtain the same social support from retail friendships and have multiple support sources,” says Mark Rosenbaum, marketing professor and author of the findings in the November issue of Journal of Service Research.

The findings come from studies conducted at a video arcade that caters to teenagers, at Gold’s Gym, and at Curves. “Regardless of whether consumers are teenagers, younger-aged men, or middle-aged women, the data reveals that customers, who participate in customer communities with other customers, realize health benefits,” states Rosenbaum.

Service establishments also realize lucrative returns from hosting customer communities as customers who obtain support in an establishment are more likely than others to display higher levels of commitment to the firm, including promoting the firm via word-of-mouth and remaining loyal despite price increases.

“Firms need to realize that customers perceive tremendous value in commercial friendships. In fact, customer friendships may be considered as a type of glue that attaches a customer to a retail organization. Therefore, the origins of an intense customer loyalty may reside not in outstanding products or services, but rather, in a firm’s ability to create an environment in which customers can obtain therapeutic social support from other customers and employees,” says Rosenbaum.

Although many Americans used to obtain social support from other people by participating in social communities that formed in not-for-profit and civic organizations, many people today may be turning to others in commercial environments for social support.

“Given the rougher economic climate, retail and service firms should consider how they can promote in-house customer communities. As Americans also experience stress associated with the economy, they are going to look to places that can offer them some type of mental rejuvenation. By encouraging customer friendships, firms may be able to obtain a positive return on customer community that helps them through the current economic downturn,” states Rosenbaum.

source:-marketwatch.com

Business at Oxford | Indian retail can be world’s best

The government should focus on keeping the wholesale distribution network separate from the retail network.

The recent announcement of UK retailer Tesco Plc.’s alliance with Trent Ltd, the retail arm of the Tata group, follows on from a similar agreement between Wal-Mart Stores Inc. and Bharti Enterprises, to supply goods and provide world-class retailing expertise. Such agreements are seen as the obvious response for international multi-brand retailers to the current constraints on foreign direct investment, or FDI, in India.

While many people will argue that the FDI constraints will not defend small shopkeepers from the inevitable power derived from the economies of scale offered by the hypermarket business model, there are many lessons to be learnt from these foreign retailers in their well-developed domestic markets that could provide a better way forward for Indian retailing, with major implications not only for small retailers and foreign competitors, but also for Indian society and the global environment.

In order to consider the future of Indian retailing, let us review the development of retailing and distribution in Tesco’s home market.

In broad terms, there are two distribution models operating in the UK grocery market: a large retailer model (Tesco, Wal-Mart’s Asda chain, J. Sainsbury Plc., William Morrisons Supermarkets Plc. and other multiples) and an independent retailer model (small shopkeepers).

Illustration: Jayachandran / Mint

The supply-chain network for a large retailer is controlled (though not necessarily owned) by the large retailer, often starting from the manufacturer’s factory gate, through regional distribution centres, and into the stores. This supply chain is largely driven by consumer demand at stores through an integrated IT and management system that ensures an efficient, disciplined and standardized operation. Through competition between retailers, as well as the utilization of third-party logistics providers, continual improvement and innovation is sought and regularly achieved — hence, the world-class nature of these distribution models.

The supply chain for an independent retailer is less integrated, with wholesalers playing a key role in receiving products from manufacturers and then selling (and delivering) them to stores. The wholesaler provides economies of scale for the smaller retailer and helps to integrate suppliers and retailers, but does not control them.

The supply chain for a large retailer is much more efficient and responsive than that of the small shopkeeper due to the larger volumes involved. This provides the major grocery retailers not only with advantages in terms of distribution, but also in terms of influence over manufacturers. While distribution costs account for a relatively small proportion of a retailer’s costs, purchasing costs are extremely significant, accounting for approximately 60-70% of costs.

Until recently in the UK grocery market, large retailers and small shopkeepers were considered to be independent markets by the competition authorities. However, over the last decade, the major players have been moving heavily into the convenience (small store) sector. Their “small store” supply chains have been built on top of their existing “large store” supply chains, giving them a competitive advantage over the existing players. Moreover, in light of the environmental and social concerns associated with food miles (the distance food has travelled from the place of production to reach the consumer), traffic congestion and noise pollution, such a solution makes sense for society and environment as it reduces distances travelled, reduces congestion, increases vehicle utilization and cuts waste.

However, this raises the question of fair competition between large stores and small stores within the UK grocery sector, not just in terms of retailing (as already existed with the hypermarket model), but also in terms of distribution. Independent small retailers are disappearing, with many economic, social and environmental benefits in distribution, but potential costs in terms of retail choice.

Thus, the FDI rules in Indian retailing are ultimately irrelevant for small shopkeepers. These rules impact the level of competition between domestic and international retailers adopting a large retailer business model. The ultimate threat to small, independent retailers is from large retailers with a hypermarket distribution system moving into the small store market — regardless of the nationality of their ownership. Moreover, this threat is unavoidable as the wider economic, social and environmental benefits will eventually outweigh the vested interests of independent, small shopkeepers.

So, is there an alternative way for Indian retailing to develop? By accident rather than design, through FDI constraints, the Indian government is creating a two-tier retail and distribution system, with foreign retailers developing a world-class distribution system that aligns with specific Indian retailers, allowing the Indian retailer to learn about world-class distribution, while the foreign business learns about Indian consumers.

Future development will depend on contractual arrangements and the development of government policy regarding foreign ownership, but the assumption must be that the two parties will either merge or set up their own separate businesses, each with the requisite knowledge for running a highly efficient and effective retail and distribution system.

At the current stage of retail development, the Indian government could take a more radical approach aimed at creating the most competitive retail sector in the world underpinned by the most efficient distribution system in the world. Rather than focusing on keeping international multi-brand retailers away from Indian consumers, the government could focus on keeping the distribution (wholesale) network separate from the retail network. A few large distributors could still retain the purchasing power and distribution efficiency of a Wal-Mart or Tesco, while having to compete for demand from the retail community, both large and small.

This retail model would provide three key advantages over the current “Western” model of modern multi-brand retailing.

First, additional economic, social and environmental benefits can be achieved by serving independent stores through the same distribution systems as national retailers.

Second, competition would focus at a national level in terms of purchasing power, thus allowing India to punch its weight within the international market.

And third, competition would focus at the local level in terms of retailing, thus allowing smart, small, independent retailers to punch above their weight — a vital difference to today’s model of modern multi-branded retailing that has the potential for India to create the best retailing and distribution sector in the world.

Richard Cuthbertson is research director at the Oxford Institute of Retail Management and senior research fellow at Saïd Business School.

source:-livemint.com

What Is Operations Research?

In the simplest terms, operations research (OR) is the process of using sophisticated analytics to tackle complex business problems. But to the growing number of companies that rely on massive amounts of data to efficiently run their businesses — everyone from Google to Hertz — OR is a secret weapon. Gone are the days when executives’ instincts determined when a product should launch or how much inventory should fill store shelves. Now, tools like enterprise-scale simulation and risk-assessment software — along with a core team of number crunchers known as “quants” — are arguably as important to a business’ overall success as its most-trusted execs.

Key Stats

• Discipline origins: Used during World War II to coordinate military logistics

• Also known as: Management science, analytics, decision science

• Key practitioners: P&G, Continental Airlines, Sears, UPS, Ford, NBC, DIRECTV

Why It Matters Now

The list of Fortune 500 companies getting into the OR game is expanding, says Mark Doherty, executive director of the Hanover, Md.-based Institute for Operations Research and Management Sciences. Complex, global organizations are constantly in need of better ways to manage their processes, resources, products, and people, he says. OR allows these companies to do exactly that and find a competitive advantage. “In the private sector, OR is the secret weapon that helps companies tackle complex problems in manufacturing, supply chain management, health care, and transportation,” he says. For example, Procter & Gamble doesn’t make any significant analyses on supply chain structure without input from the OR team, since improving the slightest of margins in a company of P&G’s size can generate huge dividends. Other sectors, too, are increasingly relying on analytics. “In government, OR helps the military create and evaluate strategies,” says Doherty. “It also helps the Department of Homeland Security develop models of terrorist threats. That’s why OR is increasingly referred to as the ‘science of better.’”

The Strong Points

One of the myths about OR is that it applies only to operational issues. But OR is a cross-functional discipline that can apply to anything from executive compensation and new product branding to inventory management and organizational design. Plus, thanks to exponentially more powerful computers and next-generation software, data gathering that used to take months can now be performed with the click of a button.

The Weak Spots

Off-the-shelf software for optimization, simulation, and other OR techniques often comes with the promise of solving any complex problem, but there is no one-size-fits-all solution. What these software packages lack is “company intelligence” — data that’s specific to the nature of a particular company’s problems and challenges, says Glenn Wegryn, one of P&G’s top data crunchers. Thus, companies like P&G must rely heavily on customized, project-specific tools developed in-house, as well as a cadre of data analysts to target particular problems.

Case Study

Every product at P&G requires a variety of materials obtained from hundreds of sources worldwide. Using OR techniques, Wegryn’s team analyzes which source is optimal for every product. “A lot of times, there are service and quality considerations,” he says. “We also measure whether a manufacturer really has the capability to deliver the materials at the quoted price.” For instance, retail clients of P&G spend $140 million per year on in-store displays for P&G brands in the United States alone, often buying the display from one vendor. By using OR to determine the best source via a Web interface, P&G now pockets nearly $67 million annually in cost savings and has slashed the order-and-delivery cycle for store displays from 20 weeks to eight.

source:-bnet.com