MxMIndia

Category: RETAIL

  • Petrol and rising prices may be downers but that doesn’t hold back consumers from their festive shopping Retailers enjoy festive cheer, report 50% spurt in sales

    No slowdown in shopping! Retail sales up 50% with Puja and Dassera

    By PRAMUGDHA MAMGAIN & SARAH JACOB

     

    Ms Shreya Gambhir, a 20-year-old architecture student in Bangalore, went into the Garuda mall last weekend to buy a watch, but walked out with much more. “While window shopping, I got tempted to buy a handbag worth Rs 1,975 from Accessorize,” she said.

     

    Shreya was among thousands of shoppers who braved rains, traffic jams and rising prices to flock to the high street and malls across metros and smaller cities, pushing sales of clothes and electronics goods in the first weekend after shradh by up to 50% more than last year.

     

    The consumer mood has reassured marketers who feared a slowdown in demand this season because of macro-economic concerns of rising prices and interest rates. “Robust sales during Onam and Durga Puja is an indicator of good uptake even in the forthcoming festivities,” Mr J Suresh, MD and CEO of Arvind Lifestyle Brands and Arvind Retail, said.

     

    The weekend sale was important because it was the first one after shradh – a 15-day period most people in the northern part of the country consider inauspicious for shopping – and preceded the beginning of Durga Puja, a mega festival in West Bengal.

     

    Consumer brands and retailers traditionally do 25-30% of their annual sales during the festival season, from September to early November. This time they were apprehensive due to signs of a slowdown. Headline inflation has been hovering at 10% despite the central bank’s aggressive monetary tightening through interest rate increases.

     

    It has pushed loan rates 3.5% in 18 months. Fuel prices have also been rising. Also, sales of cars had fallen for two consecutive months in July and August, after rising 25-30% for two years.

     

    So, overall, retailers had a lot to worry about, heading into the season. But the jump in sales during Onam comforted them and set the mood for Dusshera, Dhanteras and Diwali. And last weekend’s sales confirmed that inflation won’t impact festivities much. “We are a little surprised,” said Mr Sooraj Bhat, brand head of Allen Solly, a casual wear brand of Madura Fashion & Lifestyle.

     

    Incentives Galore

     

    The company had planned for 15-30% same-store growth in the festive season for its different brands, and it has already exceeded it. Allen Solly sales have increased 25-45%, he said.

     

    Mr Suresh of Arvind Brands, which posted over 50% sales growth during Onam, expects high demand to sustain in the North even after festivities due to winter shopping, while other parts of the country may witness a slowdown if economic environment remains bleak. Mr Kabir Lumba, MD of Lifestyle International, which operates chains Lifestyle, Max and Home Centre, and owns brands such as Splash and Bossini, said festival sales will be strong but the period after could be uncertain.

     

    Companies and retailers are offering incentives such as discounts, free gifts and interest-free finance schemes to enthuse buyers hurt by rising cost of food, fuel and loans, and they are backing it up with aggressive advertising campaigns.

     

    “We bought a lot of stuff during the end of season sale. Yet, we have come to see if we may find a good bargain in terms of festive discounts and free gifts,” said Mr Vishal Thakkar, who bought a mobile phone at 10% discount from retailer Vijay Sales at Atrium Mall in Mumbai.

     

    In Delhi, parking lots at malls such as DLF Promenade and Ambience Mall at Vasant Kunj ran out of space and there were long traffic jams at shopping centres where eating joints such as Mocha, Market Cafe and Smokehouse Deli were packed and retailers reported heavy walk-ins.

     

    “Of course, we are stung by high prices. But this is the festive season and we don’t mind spending during this period,” said Mr Abhishek Khanna, an IT professional, who was shopping at Delhi’s Khan Market. He wanted to buy clothes and home decor items.

     

    A sales executive at a Big Bazaar outlet at Rajouri Garden in Delhi says gift items including home furnishings, gifting and electronic items are driving sales at the store.

     

    One of the Lifestyle stores in Delhi reported up to 40% conversion rate, or percentage of visitors who buy from the shop. Retailers say walkins have increased 10-15% each day after Shradh. The action in Kolkata has peaked in the last two weekends with popular malls such as Forum, City Centre and South City reported up to 20% growth in footfalls and businesses over last year.

     

    Leading retail stores like Shoppers Stop, Fab India and Westside, and the old shopping areas like New Market and the hi-street stores in Gariahat were packed with shoppers. The average bill size of India’s largest retailer Future Group went up 20%.

     

    “While fashion always takes the lead during Durga Puja sales, this year a surprise growth driver has been the home segment,” Mr Manish Agarwal, business head (East), Future Group, said. Sales of furniture, curtains, home decor, bed sheets and carpets have grown by more than 50%, he said.

     

    Durable makers such as LG, Samsung and Godrej grew at a higher pace than last year as consumers splurged on flat panel televisions, digital cameras and hi-end home appliances.

     

    “We have already exhausted our inventory for 3D televisions, frostfree refrigerator and microwave oven. We expect similar rush for Diwali,” LG Electronics India Regional Head (East) Mr Ranjit Kumar said. Kolkata’s largest durable retailer Great Eastern witnessed 22% sales growth this year and did around 700 consumer finance deals a day in the last one month. While rain tempered footfalls across retail stores in Bangalore for a few hours on Saturday and Sunday evening, most families walked out with at least two shopping bags in hands.

     

    “We have had a steady flow of customers and expect it to continue with holidays over the next week,” a sales staff of Joyalukkas Jewellery store said.

     

    (With inputs from Neha Dewan in New Delhi, Writankar Mukherjee in Kolkata & Sagar Malviya in Mumbai)

     

    Source:The Economic Times

    Copyright © 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved

  • FMCG retail will hit $100 billion by 2025, notes Nielsen’s Consumer 360 report

    FMCG retail will hit $100 billion by 2025: Nielsen

    By A Correspondent
    Nielsen estimates that the country’s rural FMCG retail landscape will grow from $12 billion in 2011 to $100 billion by 2025, as it unveiled its Consumer 360 report in New Delhi on Tuesday. Prashant Singh, VP, Nielsen, said: “The rural mindset is open to consumption of newer, more contemporary food categories and as a result, drives consistent growth.”

    The research firm has identified four key trends that will drive consumption: premiumisation, consumers switching from commodity to brands, from indulgence to regular consumption, and acceptability.

    “While small-sized packages are vital for entry into the market, as purchasing power increases, rural consumers are increasingly buying larger pack sizes to share with family and friends,” said Singh. Indian shoppers will increase spends on FMCG at modern retail stores from $1.8 billion to $5 billion by 2015.

    Sales at modern trade stores are up 31% since last year across the country’s socio economic spectrum.

    Source:The Economic Times

    Copyright © 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Reliance Retail has big plans with retail with big-box hypermarkets

    Reliance Retail set to go big with big-box hypermarkets

    By Sagar Malviya & Chaitali Chakravarty

     

    RIL-owned Reliance Retail is buying real estate in 20 towns and cities to build big-box hypermarkets, moving beyond its earlier model of leased properties and small formats, as the conglomerate turns the spotlight back on retail under the new operations team hired from Walmart China.

     

    “We want to be a strong Indian retail player. The largest retail company in China is not Walmart or Tesco. It is Sun Art, a strong local company which owns around 200 hypermarkets,” said a senior company executive who added that the company has no plans of inducting an overseas partner even after foreign direct investment is allowed in the multi-brand retail sector.

     

    The focus on large-format stores of 60,000-80,000 sq ft, nearly the size of two football fields, and building stores on its own land, marks a shift from the company’s earlier strategy. When Reliance Retail had launched in 2006, it had signed up hundreds of properties for small-format stores – supermarkets and convenience stores – on lease. But, due to a combination of factors ranging from high real estate costs to supply chain issues, it had to shut more than 100 stores over the next few years.

     

    The company under the leadership of two retail veterans from China – Mr Rob Cissell, former chief operating officer of Walmart China, and Shawn Gray, former vice-president in-charge of store operations of the same company – has now for the first time decided to buy real estate and go for big-box formats. Typically, hypermarkets give consumers a choice of buying everything from soap to furniture.

     

    “We are buying land wherever there is scarcity of ready space, especially for our large-format stores. It will help in the long run as we don’t have to depend on rent inflation and its fluctuations,” Reliance Retail President Mr Bijou Kurein said without commenting on specific land deals.

     

    Six more hypermarkets by March:

    Reliance Retail has bought land parcels in Mumbai, Aurangabad, Kolhapur, Pune, Mysore and Madurai in the last few months, each measuring 1-1.5 acres, a person involved in the land deals said. The first big-box hypermarket opened at Santa Cruz in Mumbai last month and 10 days later a second one was opened in Pune. The company plans to open six more hypermarkets by March next year.

     

    The retail company at present runs around half-a-dozen hypermarkets under the Reliance Mart brand. But the company executive said the scale, the range of products, and the consumer experience in the new big-box stores will be totally different from the existing ones.

     

    “Big-box stores generate volumes and considerably higher realised margins. Reliance’s small-format model was unattractive as it was heavily dependent on fresh fruit and vegetables. It is not possible to manage the entire supply chain from the farm to the stores,” said Mr Harminder Sahni, MD, Wazir Advisors, a retail consultancy

     

    The Indian retail sector is growing 15-20% annually after a temporary lull of 2008-09 when the global meltdown slowed down growth and demand. Rising incomes, a growing young population and the scope to penetrate deeper into tier 2 and 3 cities are prompting many Indian and foreign players to enter the retail sector. Hypermarkets seem to be the best bet because they offer Western-style shopping experience, a wide variety of products and great deals to the consumer.

     

    After a slow beginning, Reliance Retail has now emerged as the country’s second-largest retailer after the Future Group with annual revenues of Rs 4,833 crore. Over the past few months, Reliance has accelerated store openings, brought in a management team from Walmart China and launched its first cash and carry store in Ahmedabad in August.

     

    Source:The Economic Times

    Copyright © 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved

  • Brands like Red Bull, Levi's, Pepsi targeting young urban audience during live gigs

    Red Bull, Levi’s, Pepsi etc target young urbans via gigs

    By Rahul Sachitanand

     

    If the celebrated Woodstock music festival of 1969 was to be held in India today, its billing of “Three Days of Peace and Music” would have to be tweaked to “Three Days of Pepsi and Music.” Live gigs are indeed the flavour with a young nation, and a host of lifestyle and consumer brands from Red Bull to Levi’s and Pepsi are pulling out every trick from the marketing manual to get their attention. The festive season is when live acts crank up the volume. In mid-November the second edition of the Bacardi-led NH7 Weekender in Pune spread over three days and six stages gave audiences a rare dose of multi-genre music, prompting international writers to compare it with the UK’s legendary Glastonbury Festival.

     

    The pace quickens by the year-end when the Sunburn extravaganza gets going on the beaches of south Goa, with brands like Lenovo and Colgate riding on the electronic dance music festival. “Live music is a great way to build our engagement with our customers,” says Bacardi India’s marketing head Arvind Krishnan. “We today have people willing to listen to new sounds and try new formats, helping the growth of live music. We want to ride this change.” Besides leading the NH7 event and bringing top acts such as electronics artiste Prodigy to India, Bacardi has also supported another event called Together Mix, which looks to push live music into the hinterland.

     

    Krishnan says, “Live music allows us to give our consumers a holistic brand experience.” Pepsi, for its part, believes it needs to be in every youth destination – live music is one of them. “We believe in constantly encouraging Youngistaan to follow their passions, live their dreams and change the game,” said Sandeep Singh Arora, EVP – marketing, cola, PepsiCo India in a statement.

     

    Across India, the live music event revolution is gathering steam. NH7 had over 25,000 people attending the festival, double the number a year ago, according to event organisers. There were more bands and larger stages too in keeping with an exponentially larger audience turnout.

     

    At Sunburn Goa the number of artistes is expected to double to 90 this year, while attendance too is expected to go from around 45,000 to around 100,000. In Bangalore, the cult live music event called Strawberry Fields, which focuses on independent and upcoming performers (it charges a minimal charge to bands and has no entry fee for attendees), is adding 500 to 1,000 people to its audience every year. And at the second edition of the Mahindra Blues Festival to be held in February 2012, thousands are expected to turn up in Mumbai to listen to five top international artistes, attend music workshops, eat blues brunches and browse through thematic displays.

     

    The world’s largest denim vendor Levi’s is one of the many brands eager to ride the explosive growth of live music in India. Recently it had indie (independent) folk fusion band Swarathma play for a group of blind children, as part of its “Go Forth” initiative to support meaningful causes.

     

    “We are hoping to raise awareness and support for a diverse range of pioneers around the globe. Swarathma performs free concerts for those who do not have access to live music, using music to raise social consciousness and bring hope to underprivileged people in India,” says a spokesperson for Levi’s in India. Another firm that is allying with live music is energy drink maker Red Bull, which engages with the music scene in two ways.

     

    All events are properties that are developed, planned and executed by in-house teams. For instance, there is the Red Bull Bedroom Jam, a platform for amateur bands to have a video shot by Red Bull and be a part of a live stage tour. The firm also works with festivals such as NH7 and Sunburn to reach out to its consumer base. “Red Bull strongly believes in working in playgrounds where talent needs support,” says a company representative. “India has a huge pool of live acts. Giving these bands platforms like Red Bull Bedroom Jam, Red Bull Music Academy Bass Camp allows these artists to truly expand their wings.” Red Bull takes pains to point out that these events are owned and operated by internal teams and are not just sponsored events.

     

    In contrast to the energy of Red Bull, brands are finding new avenues of growth in much more sedate confines. Across the dozens of halls or sabhas that host top Indian (mainly carnatic) music and dance shows during December and January, an increasing number of brands are looking to make their mark. While Chennai-based public sector banks such as Indian Bank and Indian Overseas Bank and the likes of Nallis Silks have been sponsors of events for years, if not decades, newer names such as Axis Bank, Hyundai, Airtel, Aircel and Vodafone have either established their presence-or plan to – during this month long season.

     

    The growth of live (and independent) music has compelled Sony Music to launch a label called Day 1, which hopes to be a broad platform for independent music in India. Under Day 1, there are two sub-brands, Folktronic (music with Indian influences) and Zomba (urban lifestyle music). “Independent music has reached an inflection point in India,” says Sridhar Subramanium, president, India and Middle East, Sony Music. “The internet and social networks have helped build a pool of talent and make it easy to build a community of listeners for them, in the absence of TV channels and radio stations which would traditionally play their music.” This growth in independent, live music has also made it more appealing to a broader section of brands, beyond the traditional staple of liquor and beverage makers these acts traditionally rely on.

     

    V G Jairam, a partner with Oranjuice Entertainment, a live music production house in Mumbai, says there has been a sharp growth in independent live music acts across India. “I think the indie space is booming. There is a sense of pride in the consumer to see homegrown bands and this is adding to the growth,” he explains. With growing awareness of emerging live music, music bands are also able to use the web to popularise their music at low or no cost. For instance, a recent show at Mumbai’s Mehboob Studio was almost entirely crowd-sourced. “Music is a powerful tool to connect emotionally with your consumers and get embedded in their minds,” he adds.

     

    Branding expert Harish Bijoor, who runs an eponymous consulting outfit in Bengaluru, says that any event that is youth-centric will have an umbilical connect with brands. While the mobile phones and services are perhaps the most ubiquitous of these items, several other categories including apparel, accessories, consumer goods and even real estate could leverage live music to make this connect, he says. As live music goes mainstream, brands should consider making select long-term and strategic investments in some of these properties, says Joji George, CEO of Percept Sports and Entertainment, organisers of Sunburn. “These associations are no longer a few hoardings and banners; they need to think beyond and invest in building destination events,” he says. George points to marquee events such as the Glastonbury festival and the Montreux Jazz Festival in Canada as models of live music development.

     

    Source:The Economic Times

    Copyright © 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved

  • Future Group, Lifestyle and Woodland clock record sales as Republic Day discounts help retailers bounce back

    R-Day discounts see shoppers flock to malls

    By Sarah Jacob & Ratna Bhushan

     

    Indian shoppers are back in malls, buying everything from food and furnishings to crockery and winter wear to make the most of the Republic Day discounts and end-of-season sales, raising hopes among retailers that demand will pick up over the next six months.

     

    India’s largest retailer Future Group posted its highest weekly sales last week while others such as department store chain Lifestyle and footwear maker Woodland reported high sales growth as heavy discounts helped retailers bounce back after a sales slump in the past two months.

     

    “This has been the biggest week ever,” Future Group Chairman Mr Kishore Biyani said. “It has set the pace for the rest of the year and we are changing our outlook for the year to positive,” he added.

     

    Future Group reported national combined retail sales of Rs 650 crore between Monday and Sunday (January 23-29), 25-30% higher than last year, as its 210 Big Bazaar and Food Bazaar outlets ran the ‘Sabse Saste 5 Din’ promotion offer and apparel and home products chain Central offered a flat 50% discount on 100 brands. Mr Kabir Lumba, MD of Lifestyle International, which operates Lifestyle and Max department chains, said sales have grown both year-on-year and sequentially.

     

    “A large chunk of sales in the second half (of the financial year) has come from discounted merchandise because of the depressed trading conditions in November,” he said. Lifestyle increased discounts to 50% on the Republic Day weekend from 40% end-of-season sales.

     

    But analysts warn the jump in sales does not necessarily indicate a revival in consumer sentiment because it is driven by discounts. “The increase in sales is not yet an indicator of whether consumer sentiment is back. The right picture would emerge after the Budget and state elections,” Mr Purnendu Kumar, senior VP (retail) at management consultancy Technopak Advisors, said.

     

    He, however, added that retailers can continue to offer discounts as long as there is high demand. “Markdowns in margins are budgeted by retailers as they expect to balance it out with higher volumes,” Mr Kumar said. Retailers such as Future Group, Reliance Retail and Shoppers Stop have seen a slump of up to 30% in November and December.

     

    Retailers Ride on Discounts

     

    Slowing economic growth, high inflation of more than 9% until December and consistent increase in interest rates for almost two years have affected consumer sentiment.

     

    Republic Day sales are part of the end-of-season sales, and usually extend across four weekends starting from mid-January. This year, several retailers, including Lifestyle and Spencer’s Retail, advanced the sale to liquidate stocks.

     

    Food Bazaar and Big Bazaar stores contributed the largest chunk of 65% to the record sales of Future Group during the Republic Day week, whose clothing store Pantaloon and furniture and home furnishings chain Home Town too ran regular price-off schemes during the week. “Food sales exceeded our expectations; followed by sales of crockery, furnishings and luggage. Sales of durables were marginally lower than our expectations,” Mr Biyani said.

     

    He attributed the sales to aggressive prices and promotional offers by the retailer. While Big Bazaar and Food Bazaar did not extend the discount period compared to the previous years, Central, Home Town and Pantaloon have been running promotions for a week extra compared to last year. Footwear and adventure gear maker Woodland posted 22-25% growth in the end-of-season sales period.

     

    “Although winter started later, the cold got more severe this year, resulting in even high-value jackets and sweaters flying off shelves in the discount period,” Woodland VP (strategy & planning) Mr Amol Dhillon said. The company intends to derisk from seasonal changes next fiscal by breaking down its autumn winter range with lighter sweaters in November and heavy-duty jackets in January, he said. Organised retail accounts for close to 5% of the overall $450-billion market.

     

    Tough times

     

    Mr Thomas Varghese, MD and CEO of Aditya Birla Retail and chairman of the CII National Committee on Retail, last week told reporters that the retail sector was facing challenging times and the past two months had been very bad for the industry.

     

    He attributed the slowdown to inadequate funding, lack of sufficient space for expansion and talent crunch. The sector grew 25-30% last year. “If we are to look at the current trend, we are in a challenging situation and 2012-13 also does not look like a great period as of now. It is going to be a period of cautious optimism,” he had said. With the economy slowing down, several companies are expected to temper hiring and lower increment handouts, which could add to the caution.

     

    While sales of packaged consumer goods have not been hit, food and grocery retailers said sales had slowed around 5-10% since November. One such retailer, who did not wish to be named, said consumers had even started substituting pulses with vegetables, which have become cheaper. Also, several food and grocery chains broke off ties with meal coupon companies such as Sodexo, which hit sales as several companies offer their employees meal coupons as part of salaries.

     

    Better days ahead?

     

    The sector is banking on foreign investment in multi-brand retail and private equity funding to fuel growth. Ratings agency Fitch, meanwhile, has assigned a stable outlook to the retail sector for this year, riding on sales growth-driven expansion and efficient working capital management.

     

    “Retailers could be exposed to economic headwinds, leading to a decline in consumers’ discretionary spending because of higher inflation and interest rates… However, sales growth, stable margins, efficient working capital management and flexibility to defer or tone down expansion plans are expected to result in a stable credit profile for Fitchrated retail companies,” it said.

     

    Fitch said margin pressures created by extended discounting periods to push volumes growth could be mitigated by price hikes and lower prices of raw materials such as cotton.

     

    Source:The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved