admin
April 23, 2012
Writankar
Mukherjee, The Economic Times
Kolkata,
April 23, 2012
Hair
stylist Jawed Habib, who runs a chain of more than 300 salons
across India, plans to take his venture global in a strategic
partnership with Procter & Gamble, the world’s largest consumer
goods company.
Procter & Gamble will not pick up equity in the venture, but will provide bridge financing and help identify locations as well as the kind of services to offer and how, said Habib who has finalised plans to set up three salons in London and one in Singapore.
"Our initial thrust will be Europe and we want a big presence in London and Paris," the chairman and managing director of Jawed Habib Hair & Beauty Ltd said. He said the company plans to open more than 50 salons abroad over the next two years. An email sent to P&G India regarding its business plans in this partnership remained unanswered.
But why would the maker of Pantene shampoo and Gillette razors support Habib’s global foray? Because his salons use P&G’s Wella brand hair colour and hair care products-a practice that his international salons will follow.
Experts feel it’s a good branding opportunity for P&G since consumers tend to show allegiance to brands that good salons use.
"For P&G, reaching out to consumers through Habib, who has attained an influential status among consumers, can be a smart way of building the brand," Devangshu Dutta, CEO of retail and brand consultancy Third Eyesight, said.
Habib plans to invest in his first set of salons abroad. He will use the franchisee route to expand. Habib says each salon will need an investment of Rs. 50-60 lakh.
Other Indian salons brands such as VLCC, Shahnaz Hussain, Blossom Kochhar and Naturals Beauty Salon too are expanding their business overseas. VLCC, for instance, recently announced plans to invest Rs. 50 crore to set up salons across Africa, the Middle East and Asia.
"The potential is much more in overseas markets, since consumers in matured markets like Europe spend almost 20-25% of their earning on grooming and beauty as compared to some 5% in urban India," said Habib whose salon chain reported a Rs. 50-crore turnover last year.
Habib is also launching a range of hair care products that he plans to roll out in the global salons. There will be 20 products, manufactured under third-party arrangement.
admin
April 21, 2012
Vishal Krishna, Businessworld
Bangalore, April 21, 2012
On
10 April, the Department of Industrial Policy and Promotion (DIPP)
under the commerce ministry issued a circular to clarify the grey
areas in foreign direct investment (FDI). While the note titled
‘Consolidated FDI Policy’ answered some key questions
around foreign investment in multi-brand retail, it also put a
question mark over the e-tailing business in the country.
The note says: “E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in business-to-business (B2B) e-commerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.”
So, e-tailing ventures should be business-to-business (B2B) to qualify for FDI. But in India, the bulk of the e-tailing business is centered around selling to the consumer, and not B2B. The foreign investments are also substantial. In 2011 alone, VCs invested close to $300 million in Indian e-tailing companies.
It is estimated that there are at least 220 such businesses, of which 50 per cent have received foreign funding from an angel or first round of VC investments. For example, Flipkart, which does multi-brand retailing of everything from books to mobiles, received $150 million from Accel and Tiger Global Management over three years. Companies such as Snapdeal and Myntra have also received foreign investment.
Interestingly, the 10 April circular per se is a reiteration of the 2010 circular. The government’s stand on the issue has remained the same, as is evident from its earlier notes. So how did India’s e-tailing companies manage to flout the norms? Since the nature of the back-end was not clearly defined, many of these companies attracted funding by creating a wholesale logistics or warehousing arm where 100 per cent FDI could be used. These logistics / warehousing companies would not have a website and they technically became the sourcing arm for the e-commerce business. But that too is a violation of the law because the e-commerce business is sourcing 100 per cent of the products from its trading arm, where only 25 per cent sourcing is allowed.
“There were investments made in the backend and that’s how the e-commerce business was structured,” says Devangshu Dutta, CEO of Third Eyesight.
However, some like Bharti-Walmart follow this rule. Bharti Retail’s 140 ‘easyday’ brick-and-mortar stores source only the stipulated percentage from Bharti-Walmart joint venture’s wholesale trading arm Best Price Cash and Carry. The same rule applies to e-tailing. Precisely the reason why Amazon entered India through a marketplace called junglee.com.
“One should read the press note before going and raising money from VCs,” says Amruto Basuray, CEO of babeezworld.com, a multi-brand baby products company.
K. Vaitheeswaran, founder and CEO of Indiaplaza.com, says that multi-brand retailing should be allowed to help the retail business. “Anybody who takes VC investment into the warehouse business and then supports a multi-brand e-tailing business has ignored the government note, which says that the website should itself be servicing B2B customers,” he says.
Analysts warn that if the government takes action against e-tailing
companies that flout the FDI norms, many of them will close down.
They can continue in business if they sell in the B2B category,
but it is unlikely as the business models of these companies are
streamlined to service individual customers and not small and
medium enterprises.
(This article appeared in the Businessworld issue dated 30
April, 2012.)
admin
April 20, 2012
Prince
Mathews Thomas, Forbes India
New
Delhi, April 20, 2012
All
Ajay Jain wanted was for people to buy his photographs. Though
he was an engineer and an MBA and had worked in various industries
ranging from IT to media, his passion lay in travel and photography.
But he was not able to sell enough of his pictures through exhibitions. So he started a gallery and started marketing it online. Yet, nothing really worked. That’s when the 41-year-old decided to transform the gallery in South Delhi’s Hauz Khas Village into a café with wi-fi, coffee, tea and cookies. The attraction was that all of it was free. Customers could just put whatever they felt like in a small box kept at the entrance of the tiny hangout with a dozen tables of different sizes and shapes. The box was kept in such a way that no one could see who was putting what in.
“I have got everything from a torn Rs 5 note to Rs 500 and dollar and euro bills,” says Jain.
The idea worked as more and more people came visiting and brand Kunzum began to gain popularity, both online and offline.
Kunzum Travel Café is four years old now and gets about 100 customers on a typical week day. The number swells to almost 200 during the weekend.
The “treasure box” at the entrance gets an average Rs 50 per cup of coffee or tea that Kunzum serves.
“The money covers my overhead costs that include staff salaries and electricity bills,” says Jain who bought the space three years ago.
Along with books and photos, he now has added more revenue streams—advertisements inside the café, ‘specialised’ travel services and events like book readings and movie screenings that can bring Rs 6,000 for a two-hour booking.
While Jain admits that he initially discouraged backpackers “who would laze around the whole day doing nothing”, his clientele has since filtered itself. Today his average customer is a well-to-do professional in the 20-40 year age bracket, loves travelling and alternative cinema (most of the movies screened at Kunzum fall into this category) and most importantly, has a conscience.
“I usually pay about Rs 100 to Rs 150 every time I visit Kunzum,” says Abhinav Maker, a 27-year-old lawyer who likes the cafe for its “homely feel”. In the one-off time that he didn’t pay, a “guilty-feeling” made Maker go back to Kunzum and compensate for “not being good”.
Martin Spann calls this the “social norm” reason that drives consumers to pay even if they can get away without shelling out money. In his study with colleagues Ju-Young Kim and Martin Natter—Pay What You Want: A New Participative Pricing Mechanism—the economist found that customers also paid “because they don’t want the business, which they like, to close down”. This, says the professor at University of Munich, is the “strategic reason”.
Jain is not the first one to bet on the honesty of customers to build a business and brand. In July 2007, musician Prince was initially ridiculed when he gave away copies of his album Planet Earth for free. But the ridicule turned to admiration when his 21 concert dates were sold out.
In similar success stories, in 2010 Humble Indie Bundle, a video game was distributed using the “pay-as-you-wish” model, raising $11 million in revenues. The success helped it raise $4.7 million from venture capital firm Sequoia Capital.
In India, the Annalakshmi food chain has for 26 years let its customers decide the bill in most of its outlets. But with volunteers as waiters and kitchen help, the hotel chain works on a not-for-profit model. Internationally, though, many food outlets, including Lentil As Anything in Australia and One World Café in the US have used pay-as-you-wish as a successful business model.
But traditionally, a business like Jain’s is limited by its inability to scale, says Devangshu Dutta of consulting firm Third Eyesight.
Adds Saloni Nangis of Technopak: “A few formats which are targeted at the premium niche audience would be fine, but extending this to a broad consumer base would be a challenge.”
Jain has been lucky until now. Hauz Khas Village, with its fashion studios and art galleries, attracts exactly the kind of crowd that Kunzum targets. More importantly, the café is surrounded by an affluent South Delhi neighbourhood.
The Kunzum community has 25,000 members across Facebook and Twitter, and includes subscribers to Jain’s online newsletter.
“It is a profitable business and am hoping to reach Rs 1 crore in revenue at the end of this year,” adds Jain. He is in the middle of developing travel-content applications that will be available on Kindle and iPad. That’s easy. The tricky part is scaling up. Jain is planning cafes in Gurgaon and Bangalore where rents are higher.
He says he has money stashed away to open more outlets but wants to perfect a business model that will survive on rental space. He is incubating a bigger play in travel services to be hosted from the café. “There are a lot of niche travel products that the mainstream travel companies don’t provide and we want to fill that gap,” says Jain.
He is also on the verge of franchising the Kunzum brand, with the first franchisee outlet expected to come up in Connaught Place, the popular shopping destination in the capital. That is perhaps the biggest asset that Jain has built by doling out coffee and cookies—the Kunzum brand.
(This article appeared in Forbes India Magazine of 27 April,
2012.)
admin
April 17, 2012
Meghna
Maiti , Financial Chronicle
Mumbai,
April 17, 2012
Futurebazaar.com,
the online retail venture of India’s largest organised retailer
— Future group is supplementing its business-to-consumer
(B2C) business with a business-to-business (B2B) initiative. This
marks a major departure from its initial B2C positioning.
The Kishore Biyani-controlled group aims to extend the concept of offering deals, leveraging centralised warehousing and inventory management and volume purchases to companies; in an effort to tap into the corporate gifting market. “We will offer companies a wide range of products and killer deals on orders such as 100 units of a LCD TV or jewellery from Navras (its jewellery retail venture) using our back end network. While we are putting in place the systems and infrastructure to offer companies online access to this specialised catalogue exclusively for them, we have already started selling gift vouchers which can be used across the Future group formats to companies,” said officials familiar with Biyani’s plans.
According to officials, Futurebazaar’s B2B vertical started by selling Rs 10 crore of vouchers per month and has now got a target of around Rs 40 crore per month to be achieved in a quarter’s time. Once the products are available, the turnover is expected to rise further, according to officials familiar with the plans.
“We will take wish lists from customers for products across categories and service them. The group has launched the site around a month-and-a-half ago. We are testing the water now,” said at least three senior company officials. When contacted via email, a Future Group spokesperson said the company was ‘unable to participate in the story’.
“The group is leveraging its strength in its stores for servicing a wider network. They will use the volume available across their physical formats too, to meet the demand,” said Devangshu Dutta, CEO, Third Eyesight, a specialist retail consultancy firm.
The initiative will offer a platform where its clients will be able to connect with it through the online B2B sales site and via a dedicated team of executives.
“This venture needs to have very attractive prices and low-cost delivery,” added Dutta.
Globally, specialised online B2B ecommerce sites have had a great success; it may be a while before retail giants such as Future Group make a success of it, said industry experts. “The group should stick to B2C since this format is their forte. B2B is a different ballgame altogether,” said Jagdeep Kapoor, CMD, Samsika Marketing Consultants.
The group set up Futurebazaar.com around five years ago and has recently been in the news for plans to sell a part stake in the venture. The site offers a whole assortment of merchandise including clothes, mobile phones, car accessories, home appliances, kitchen appliances, books, CDs, DVDs, gold, silver and diamond jewellery. It delivers products within three-four business days in over 1,500 cities in India, covering over 15,500 pin codes.
admin
April 15, 2012
Pia
Heikkila, The National
Mumbai,
April 15, 2012
An average apartment, basic amenities and interiors in need of modernisation, is for rent in Worli Seaface in Mumbai.
"The apartment is suitable for a family or company executives," reads the property agent’s blurb.
Monthly rent? A mere US$17,000 (Dh62,442).
It’s even worse for those Mumbaikars daring to dream of buying their very own home. According to various agents, anyone with a budget of less than half a million dollars for a small one/two-bedroom apartment will be priced out of south, central and west Mumbai all together.
That seems quite lot in a city that can’t even offer clean water for most of its residents, proper roads or parks suitable for children.
It seems every inch of this island city has a high price tag. Recently there were reports of 10 square metre slum shacks being sold for $40,000.
It’s a city with a property bubble about to burst.
"Although some level of correction did take place during the slowdown, market activity over the last year and a half and reports indicate that prices have once again escalated to their peaks, keeping most projects out of the customers’ reach," says Sachin Sandhir, the managing director of the Royal Institution of Chartered Surveyors (RICS) South Asia.
"There is now a high inventory of unsold flats in the city, the reason clearly being over-pricing. Since most larger developers have considerable holding capacity, they have remained unyielding on their asking rates and now seem to have overplayed their hand," says Om Ahuja, the chief executive of residential services at Jones Lang LaSalle India.
The situation is so bad it has created a standoff between developers and potential buyers, with each party waiting for the other to blink first.
"Developers are offering discounts on the bargaining table, but remain firm on their officially quoted rates since lowering them would signal to the market that the long-awaited correction has finally arrived. However, we are seeing some relenting from investors who are saddled with non-moving properties and are desperate to cash out," says Mr Ahuja.
Market watchers say investors seem to be prepared to take a short-term hit.
"Sentiment has been impacted due to inflationary pressures and rising interest rates, which are only now starting to come down marginally," says Mr Sandhir.
"Slower GDP growth rate projections; shortage to the tune of 85 per cent in property and construction professionals available today, as highlighted by a recent RICS research and high debt burden of property developers have also impacted investor confidence in the sector."
Elsewhere in the country, while prices are nowhere near Mumbai’s level even in the capital Delhi, potential home buyers are – it seems – staying at home.
"Overall, with interest rates rising and the cost of home loans becoming dearer, coupled with continued price escalations, oversupply has set into the residential market in areas such as Delhi and National Capital Region. While markets in the south look to be relatively stable," says Mr Sandhir.
So how did Mumbai become one of the world’s most expensive cities?
It has been bursting at the seams for years. The surface area of Mumbai and its suburbs is almost 500 sq kilometres, but only 90 sq km of it is usable, the rest consisting of forest, government-owned land, salt caverns or other unusable land, according to the property research firm Liases Foras.
It’s not a lot of usable space for a city of nearly 21 million people.
Mumbai is India’s densest populated city with 27,000 people per square kilometre, and the brokerage Anand Rathi Research says the city will need an additional 30 sq km of residential developments by 2021.
Every week thousands of people move to the city, in search of a better life. Mumbai is the country’s financial capital and therefore has the highest job generation, which is why demand – even for properties that would be perceived as irrationally priced in other cities – is more or less a given.
"In metro cities, there is a significant and ongoing growth of immigrant population as the metropolises remain economic magnets," says Devangshu Dutta, the chief executive of Third Eyesight, a consultancy in Mumbai.
"However, the supply scarcity is also partially artificial, some due to government policies on land-use and some due to the major markets being led by investor-held properties."
The Mumbai market has attracted a fair number of players and risk takers too.
"Developers are willing to pay the steep prices of plots or redevelopment rights in Mumbai because they expect correspondingly high profit margins. Because of the high profit margins, Mumbai also has traditionally had a disproportionate amount of speculative property investment," says Mr Ahuja.
"There are a number of individual investors who have a capacity to hold a property empty for long periods if they don’t get the benchmark rates for lease or sale. This is demonstrated by the thousands of apartments and commercial office spaces that are empty because the asking rates are far in excess of what seems affordable to an actual user," says Mr Dutta.
Then there is the problem with lack of land, an issue in most Indian cities but particularly felt in Mumbai, which is surrounded by the sea.
"In Mumbai, land for new projects is scarce and what is available is priced extremely high. This exerts constant upward pressure on the prices of residential units in most central and suburban locations," says Mr Ahuja.
The Indian government must act before it’s too late.
"Government should facilitate land supply, offer better enforcement and stricter monitoring mechanisms, establish targets and lay down action plans, build capacity of town planners and other skilled property professionals, streamline approval processes for housing projects, among others, all of which would help contain costs, thus relieving some pressure on developer margins for affordable housing," says Mr Sandhir.
The experts say buyers should be given help.
"Research must be undertaken to assess a prospective homeowners’ requirements, not only as a factor of size and cost, but also as factors of accessibility and connectivity to basic amenities," says Mr Sandhir.
"Thus ‘affordability’ which is a relative term with different connotations for different individuals, needs to be assessed at a much broader scale."
(This article appeared in The National on April 15, 2012.)
