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                              Retail in Critical Care – The Impact of COVID-2019

                              April 7th, 2020 by Devangshu Dutta

                              Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.

                              A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.

                              Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.

                              Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)

                              On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.

                              Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.

                              The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.

                              The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.

                              So, what now?

                              Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.

                              Someone once said, never let a good crisis be wasted.

                              This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.

                              (This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”.?

                              Posted in Apparel, Branding, Consumer, Customer Relationship, e-commerce, Entrepreneurship, Food & Grocery, Food Service / Restaurants, Footwear, Health & Wellness, India, Lifestyle & Fashion, Luxury, Market Research, Marketing, Product Development and Design, Real Estate, Retail, Soft Goods, Strategy, Supply Chain, Technology, Textiles, Uncategorized | No Comments »

                              Retail 2020

                              December 17th, 2019 by Devangshu Dutta

                              SaleRemember the year 2000? After Y2K passed safely, that year some optimistic analysts predicted that India’s modern retail chains would reach 20 per cent market share by 2015. Two years after that supposed watershed, another firm declared that modern retail will be at around that level in 2020 – but wait! – only in the top 9 cities in the country. Don’t hold your breath: India surprises; constantly. As many have noted, “predictions are tough, especially about the future!” What we can do is reflect on some of this year’s developments that could play out over the coming year.

                              In many minds 2019 may be the Year of the Recession, plagued by discounting, but that demand slowdown has brewing for some time now. However, there’s another under-appreciated factor that has been playing out: while small, independent retailers can flex their business investments with variations in demand, modern retail chains need to spread the business throughout the year in order to meet fixed expenses and to manage margins more consistently.

                              To reduce dependence on festive demand, retailers like Big Bazaar and Reliance have been inventing shopping events like Sabse Sasta Din (Cheapest Day), Sabse Sachi Sale (Most Authentic Sale), Republic Day / 3-Day sale, Independence Day shopping and more for the last few years. In ecommerce, there’s the Amazon’s Freedom Sale, Prime Day, and Great India Festival, and Flipkart’s Big Billion Day Sale. This year retailers and brands went overboard with Black Friday sale, a shopping-event concept from the 1950s in the USA linked to a harvest celebration marked by European colonisers of North America. (The fact that Black Friday has a totally different connotation in India since the terrorist bombings in Bombay in 1993 seems to have completely escaped the attention of brands, retailers and advertising agencies.) Be that as it may, we can only expect more such invented and imported events to pepper the retail calendar, to drive footfall and sales. The consumer has been successfully converted to a value-seeking man-eater fed on a diet of deals and discounts. With no big-bang economic stimuli domestically and a sputtering global economy, we should just get used to the idea of not fireworks but slow-burning oil lamps and sprinklings of flowers and colour through the year. Retailers will just have to work that much harder to keep the lamps from sputtering.

                              Ecommerce companies have been in operating for 20 years now, but the Indian consumer still mostly prefers a hands-on experience. The lack of trust is a huge factor, built on the back of inconsistency of products and services. The one segment that has been receiving a lot of love, attention and money this year (and will grow in 2020) is food and grocery, since it is the largest chunk of the consumption basket. Beyond the incumbents – Grofers, Big Basket, MilkBasket and the likes – now Walmart-Flipkart and Amazon are going hard at it, and Reliance has also jumped in. Remember, though, that selling groceries online is as old as the first dot-com boom in India. E-grocers still struggle to create a habit among their customers that would give them regular and remunerative transactions, and they also need to tackle supply-side challenges. Average transactions remain small, demand remains fragmented, and supply chain issues continue to be troublesome. Most e-grocers are ending up depending on a relatively narrow band of consumers in a handful of cities.? The generation that is comfortable with an ever-present screen is not yet large enough to tilt the scales towards non-store shopping and convenience isn’t the biggest driver for the rest, so, for a while it’ll remain a bumpy, painful, unprofitable road.

                              Where we will see rapid pick-up is social commerce, both in terms of referral networks as well as using social networks to create niche entrepreneurial businesses – 2020 should be a good year for social commerce, including a mix of online platforms, social media apps as well as offline community markets. However, western or East Asia models won’t be replicated as the Indian market is significantly lower in average incomes, and way more fragmented.

                              As a closing thought, I’ll mention a sector that I’ve been involved with (for far too long): fashion. In the last 8-10 decades, globally fashion has become an industry living off artificially-generated expiry dates. A challenge that I have extended to many in the industry, and this year publicly at a conference: if consumption falls to half in the next five years, and you still have to run a profitable business (obviously!), how would you do it? Plenty of clues lie in India – we epitomise the future consumers; frugal, value-seeking, wanting the latest and the best but not fearful about missing out the newest design, because it will just be there a few weeks later at a discount. If you can crack that customer base and turn a profit, you would be well set for the next decade or so.

                              (Published as a year-end perspective in the Financial Express.)

                              Posted in Apparel, Branding, Consumer, e-commerce, Entrepreneurship, Food & Grocery, Footwear, Health & Wellness, India, Lifestyle & Fashion, Market Research, Marketing, Outsourcing, Product Development and Design, Retail, Soft Goods, Strategy, Technology, Textiles, Uncategorized | No Comments »

                              The Relationship between Consumers and Brands

                              April 17th, 2015 by admin

                              Panel Discussion moderated by Mr. Devangshu Dutta, Chief Executive, Third Eyesight at the Indian Retail Congress 2015 (17-18 April 2015). The panel included Mr. Manish Mandhana (Managing Director of Mandhana Industries with the brand Being Human), Mr. Sanjay Warke (Country Head of Toshiba India), Mr. Tanmay Kumar (Chief Financial Officer of Burger King India), Mr. Kinjal Shah (Chief Executive Officer of Crossword Bookstores) and Mr. Ranjan Sharma (Chief Information Officer of Bestseller India, with the brands Vero Moda, Only, Jack & Jones).

                              Retail India and Etail India conference - Manesar - 2015-04-17

                              Posted in Apparel, Branding, Consumer, Customer Relationship, e-commerce, EVENTS, Food & Grocery, Footwear, India, Lifestyle & Fashion, Market Research, Marketing, Retail, Soft Goods, Strategy, Textiles, Uncategorized | No Comments »

                              The Season of Opportunism

                              October 29th, 2014 by Devangshu Dutta

                              (The Hindu Businessline -?cat.a.lyst got marketing experts from diverse industries to analyse consumer behaviour during the last one month and pick out valuable nuggets on how this could impact marketing and brands in the years to come. This piece was a contribution to this Deepavali special supplement.)

                              Two trends that stand out in my mind, having examined over two-and-a-half decades in the Indian consumer market, are the stretching or flattening out of the demand curve, or the emergence of multiple demand peaks during the year, and discount-led buying.

                              Secular demand

                              Once, sales of some products in 3-6 weeks of the year could exceed the demand for the rest of the year. However, as the number of higher income consumers has grown since the 1990s, consumers have started buying more round the year. While wardrobes may have been refreshed once a year around a significant festival earlier, now the consumer buys new clothing any time he or she feels the specific need for an upcoming social or professional occasion. Eating out or ordering in has a far greater share of meals than ever before. Gadgets are being launched and lapped up throughout the year. Alongside, expanding retail businesses are creating demand at off-peak times, whether it is by inventing new shopping occasions such as Republic Day and Independence Day sales, or by creating promotions linked to entertainment events such as movie launches.

                              While demand is being created more “secularly” through the year, over the last few years intensified competition has also led to discounting emerging as a primary competitive strategy. The Indian consumer is understood by marketers to be a “value seeker”, and the lazy ones translate this into a strategy to deliver the “lowest price”. This has been stretched to the extent that, for some brands, merchandise sold under discount one way or the other can account for as much as 70-80 per cent of their annual sales.

                              Hyper-opportunity

                              This Diwali has brought the fusion of these two trends. Traditional retailers on one side, venture-steroid funded e-tailers on the other, brands looking at maximising the sales opportunity in an otherwise slow market, and in the centre stands created the new consumer who is driven by hyper-opportunism rather than by need or by festive spirit. A consumer who is learning that there is always a better deal available, whether you need to negotiate or simply wait awhile.

                              This Diwali, this hyper-opportunistic customer did not just walk into the neighbourhood durables store to haggle and buy the flat-screen TV, but compared costs with the online marketplaces that were splashing zillions worth of advertising everywhere. And then bought the TV from the “lowest bidder”. Or didn’t – and is still waiting for a better offer. The hyper-opportunistic customer was not shy in negotiating discounts with the retailer when buying fashion – so what if the store had “fixed” prices displayed!

                              This Diwali’s hyper-opportunism may well have scarred the Indian consumer market now for the near future. A discount-driven race to the bottom in which there is no winner, eventually not even the consumer. It is driven only?by one factor – who has the most money to sacrifice on discounts. It is destroys choice – true choice – that should be based on product and service attributes that offer a variety of customers an even larger variety of benefits. It remains to be seen whether there will be marketers who can take the less trodden, less opportunistic path. I hope there will be marketers who will dare to look beyond discounts, and help to create a truly vibrant marketplace that is not defined by opportunistic deals alone.

                              Posted in Branding, Consumer, e-commerce, Entrepreneurship, India, Marketing, Retail, Strategy, Uncategorized | No Comments »

                              India – A Growth Trajectory for Global Fashion Brands

                              February 14th, 2014 by Tarang Gautam Saxena

                              2013 has been a mixed year for retail in the Indian market with multiple factors working in favour of and against the business prospects.

                              Economic growth had slowed to 5% for 2012-13 (as per advance estimates by The Central Statistics Office, Government of India), down from 9.3% in 2011. The ray of hope is that the growth rate is expected to rebound to 6.8% in 2013-14. Spiralling inflation, with prices of some basic vegetables shooting up almost eight to ten times, distracted the consumers from discretionary spending. The year hardly saw irrational expansions by retail businesses as they primarily focused on bottom line performance.

                              While the Government of India liberalised Foreign Direct Investment (FDI) policy in retail in September 2012, international investors have been slow to respond and sizeable foreign investments have been announced only recently at the end of 2013.

                              The political environment also took unexpected turn with the success of Aam Aadmi Party (AAP) at the Delhi Assembly Elections held towards the end of the year. This may augur in a new era of politics driven by performance and results but in the short term it could restrict market access for international multi-brand retailers, as the AAP has declared their opposition to investment from foreign multi-brand retailers.

                              So is India still a strategic market for international fashion brands to look at?

                              FDI Policy – Clarifications and Impact

                              India’s Foreign Direct Investment (FDI) policy has come a long way with foreign investments now being allowed in multiple sectors including retail, telecom, aviation, defence and so on. The Indian government is now exploring the possibility of allowing FDI in sectors such as railways and construction.

                              The year 2006 was a significant year for international brands in fashion and lifestyle space as the Government of India allowed up to 51 per cent foreign direct investment in the newly-defined category of “Single Brand retail”. In September 2012 the Indian Government liberalised the retail FDI policy to allow foreign investment up to 100 per cent in single brand operations and up to 51 per cent in multi-brand retail albeit with certain conditions related to the ownership of the brand, mandatory domestic sourcing norms for both single-brand and multi-brand retailers and additionally certain investment parameters for the backend operations of the multi-brand retail business. The idea was to attract foreign investment in retail trading a part of which could flow into improving the supply chain while providing Indian businesses access to global designs, technologies and management practices.

                              Large Investments in the Pipeline

                              The investments flowed in slowly initially. Some of these have looked at converting existing operations, such as Decathlon Sports which was present in India through a 100% owned subsidiary in cash and carry business. The brand is converting its cash and carry business in India to fully-owned single brand retailing business.

                              But there have been some significant moves as well. A record breaking FDI proposal in single brand retail is the Swedish furniture brand IKEA’s, that had to apply three times since December 2012 before its’ proposed investment of €1.5 billion (Rs. 101 billion) received the nod from the Government. However, the proposal is reportedly still in the works, as Ikea looks to structure the business to comply with the laws of the land. And as the year came to a close the Government cleared Swedish clothing brand Hennes and Mauritz’s (H&M) US$ 115 million (Rs.7.2 billion) investment proposal. According to news reports the brand had already begun blocking real estate with the goal of launching its stores in India at the soonest.

                              While the initial response to the relaxation of FDI policy spelt positive inflow for single brand retail, there was no new investment forthcoming in multi-brand retail. The existing foreign multi-brand retailers present in India through the cash and carry format showed a marked lack of interest in switching to a retail business model. On the other hand Walmart, the only foreign multi-brand retailer having access to a network of retail stores through its wholesale joint venture Indian partner, Bharti Enterprises Ltd., ended its five year long relationship and has restricted itself to the wholesale business. Though the company cited that it was disheartened by complicated regulations, it was also caught up in its own corruption investigation as well as allegations that it had violated foreign investment norms. The sole bright spot was the world’s fourth largest global retailer Tesco proposing and getting approval for a US$ 115 million investment into the multi-brand retail business of its partner, the Tata Group. At the time of writing the precise scope of this investment remains unclear.

                              If you want the full paper please send us an email with your full name, company name and designation to services[at]thirdeyesight[dot]in.

                              Posted in Apparel, e-commerce, Footwear, India, Lifestyle & Fashion, Luxury, Marketing, Retail, Soft Goods, Strategy, Uncategorized | 1 Comment »

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