FDI in Indian Retail–It’s officially political now!

 

The Committee of Secretaries (CoS) headed by Cabinet secretary Ajit Kumar Seth is likely to meet on July 22 to finalise the blueprint of the proposal for political clearance. One of the major issues to be discussed is whether the cap on FDI should be 49 per cent or be increased to 51 per cent. At the moment, 100% FDI is allowed only in Cash & Carry formats (which excludes agricultural produce such as rice & grain, fruits & vegetables), while upto 51% FDI is allowed in multi-brand Retail formats. Last week, the Department of Industrial Policy & Promotion (DIPP), the nodal agency under the Ministry of Commerce issued the proposed policy paper to State Governments for their thoughts and invited feedback and discussions. Notably, the reactions are as expected. While the ruling UPA (led by the Congress Party) is all for allowing Retail FDI, some of its allies including Trinamool Congress, Samajwadi Party and of course the BJP which is the main opposition party are up and against the proposal. The BJP said it would oppose the move in every forum. "We're not for FDI in Retail. We believe that in the long run this move is going to harm self-employment opportunities. FDI in Retail will also adversely affect the manufacturing sector. We will oppose it in Parliament and other forums," Opposition leader in the Rajya Sabha Arun Jaitley said.

The proposed policy states that Foreign Retailers can open their stores in cities with a minimum population of One million based on the 2011 Census; Of the 35 such cities in India, 10 are in states that are ruled by the BJP & Trinamool. 11 cities of the said 35 are in states that are ruled by the Congress. It is widely believed that the new policy should be allowed and tested in the top 6 cities, in which case Bangalore & Kolkata would be ruled out. That leaves with Delhi, Mumbai and Hyderabad (assuming that the State Governments would still be in power!) and Chennai (which is neither part of the UPA or the Opposition currently).  Which means the possibility of Retail FDI being tested would remain with Delhi and Mumbai – the political and financial capitals respectively of the country while Hyderabad with its limited exposure to Organized Retail possibly not getting much attention, also thanks to the ongoing Telengana agitation.

It is indeed quite well known that Delhi and Mumbai are the first two cities in the country to embrace anything new – from cars to culture, fashion to fun. Most of the Organized Retailers are either based out of these two cities or have their largest presence here. Indeed, Bangalore, Pune and other mini-metros are test markets for various consumer related products and services, but the money goes (as investments) and comes (as Revenues) clearly from these two cities. As of today, atleast 10% of sales across Organized Retailers would be coming from the two capitals. So, there is a lot at stake for now.

Having said that, it appears that FDI in Retail would not be a battle of fundamentalist or intellectual thinking but mere political stunts. It looks like a Chess Board, where the two parties, one that’s ruling and the other which doesn’t would make their moves and counter moves based on day-today impulsive rulings, rather than maintain a long-term view. If the current Opposition comes to power in the Centre after three years, then things would possibly get more tricky, atleast based on the statements issued by them which are mostly against allowing Retail FDI. I believe my previous column on FDI last year around the same time still holds good. The benefits or otherwise of allowing Retail FDI cannot be a debate that is undertaken within the confines of the Honourable Parliament. At the same time, I wonder if it should be in the public domain, lest it would attain the same fate of the recent drama surrounding the “Lokpal Bill”. I still feel that members of the society, which should be a good mix of consumers, shoppers, Retailers, Kiranas and Government Departments should come together and discuss this issue. Wishful thinking, I agree, But leaving the decision to the Bureaucrats and Politicians would be as good as ignoring the issue in itself.

As a consumer, as a member of the Organized Retail Community and as an observer of the society at large, I am as eager as many others on the outcome. Hope to see and hear positive things in the months to come!

Driving footfalls…

It has been the talk of the town for sometime now, the new BlackBerry Playbook, the tablet from Research In Motion.There are thousands of reviews online and I am not going to delve into it for now. I got my hands on it three weeks back (even before it was launched in India) when a friend of mine who had brought it from the US showed it to me. Pretty engaging stuff, with its plusses and drawbacks. But what interested me to analyse and write this column was an email which I received a weeks back from EZone, India’s largest electronics store from The Future Group. There were actually two, one for a pre-booking and another stating that the wait was over and the Playbook™ is Finally Here. Am sure the mailer would have gone to hundreds, or maybe thousands of email accounts and would have pulled quite a few to the store over the past few days. I myself visited a few stores of EZone and Croma (TRENT Enterprises, part of the TATA Group) over the past few days and the results were amazing! Of the six different stores that I went to in Bangalore, two didn’t have stocks – I was informed by the sales executive that the “Catchment” for that store was not expected to explore Tablets! Another store had just the Playbook and an iPad, there were no other Tablets from any other Brand. And at one of the largest showrooms of one of the Retailers, there were crowds across the store in every section and surprisingly, there was no staff to attend the curious seekers at the area that stocked “Tablets” although there were atleast 6 different brands which were available.  Shoppers explored themselves (none of them were functional since WiFi was not connected) and moved on – one could imagine how many “Tablets” they would have sold today!

Elsewhere in the world, in the US, you can collect boatloads of kicks™ in the kicks Reward Program and unlock awesome exclusive deals at your favourite stores. Walk into Target, Best Buy, Macy's, American Eagle, Sports Authority, Crate&Barrel, West Elm, Wet Seal and the largest Simon malls. Open the Shopkick™ app on your iPhone or Android phone in the entrance area, and wait for a few seconds. That's it! Your Shopkick app will reward you instantly. It's fun. You can get rewards at all 1,300 Best Buy and Best Buy Mobile stores in the United States, and at all Crate&Barrel and West Elm stores! And in many major cities you will find more stores with walk-in rewards, like Target, Macy's, American Eagle, Sports Authority Wet Seal and Simon Malls. Shopkick is adding more stores in more cities every month. Cool rewards like iTunes gift cards, Restaurant vouchers, Best Buy/Target/Macy's/American Eagle/Sports Authority gift cards, Facebook Credits, movie tickets, or if you go all out, True Religion jeans, a Coach handbag, or a 3D 55" Sony Bravia HDTV. And if you want to change the world, donate your kicks to 30 different causes! And all this, just to woo shoppers to walk into a Retail Store!

Look at the contrast. In one country, there are not enough sales staff to manage shoppers and potential customers who walk into the store. And in another scenario where shoppers are “paid” to just visit the stores! According to the Shopkick program, as you walk into the stores, there are specific sections where you get higher kicks™ and one can keep accumulating them. There are also certain products, which by mere scanning fetches additional kicks. I did try to download the Android app in my phone, but I got a message that the app was not applicable in my country!

What makes me wonder, is how Retailers need to woo shoppers to walk-in to their stores and convert them into buyers. While the first part is not so difficult in India – with less than 10% of the Retail Industry being organized, and there is no dearth of footfalls walking into Retail formats, it is indeed important for Retailers to focus on;

• Merchandise Availability – This would be a game changer between those who remain in the business and those who don’t…
• Customer Service – the Retailer might have the products, but if they are not showcased well to potential buyers, then the conversion is not bound to happen; and not just this time, even the next time too!

Sales are happening despite these, but its just a matter of time for shoppers to move to alternative avenues for shopping. An ASSOCHAM Report suggests that the expected market size of online shopping in India is about USD 2 Billion pa. Forget shoppers walking off to neighbouring stores, they may be shopping on their mobile phones and tablets sitting at the favourite Coffee Day outlets! And then, I would be writing a column on that trend, from a cafe indeed!

A deal is a deal…

Unlimited Idlis and Dosas for only Rs. 149 at the reputed Mr.Idli! Multiple varieties to choose from!

What intrigued me was the headline that came to me as a mailer from SoSasta.com, a product of Groupon which is the worlds’ biggest group-buying site. Groupon was launched in November 2008, created by Andrew Mason who is also the current CEO of the company whose former employer Eric Lefkofsky provided him $1 billion “seed money” to develop the idea. The business model is that the site offers “group coupon” and the deal is valid if a certain minimum number of users (as predetermined by the company) buy it within a particular timeframe. Usually, there is one big “Deal of the day” and it is informed to registered users by emails and SMS. The discounts usually range between 30-60% but can go as high as even 90% in some cases. The offers are proposed on Health & Beauty, Cosmetics, Eyewear and even at Restaurants, Pubs, Cafes, etc. The company, which was valued at $1.35 Billion in April 2011, is expecting to make $1 billion in Sales faster than any other business, ever. Below is the Menu Card of the offer that was sent to me by email. I called up to enquire how this works and I was informed that by paying Rs. 149 on the site, one will get a voucher which can be redeemed by the user for unlimited number of Dosas and / or Idlis from 9-11am at their store. The spokesperson whom I enquired said that they expect a person on a average to consume not more than 3-4 dosas, the original cost of which could be around Rs. 200, but this kind of promotion could go viral, and hence may attract enormous footfalls into their store, many of whom could be first timers.

Apparently, Groupon gets 50% of the price that’s paid by the buyer of the coupon and the balance goes to the Retailer. But that would depend on the marketing ability of the site and the retailer who negotiate their best respectively. Similar to Groupon, there are over 500 such sites world over and more than 100 sites in the US alone. In India, several sites such as SnapDeal, MyDala, Taggle, Koovs and many more have swarmed the market over the months. Since January this year, Snapdeal has been growing its revenues at over 100%, selling unused inventories of everything from sunglasses, wallets and even travel packages, totalling over 10,000 discounted deals everyday. At 25, Kunal Bahl had quit his cushy Microsoft job based in Seattle and even convinced his IIT Delhi batchmate Rohit Bansal to take a leap of faith in 2007. In a recent interview to The Economic Times, India’s leading business daily, he says "We sold about 2,200 Reebok Sunglasses in a day, at an 80% discount deal. About 400 packages to Kerala were sold in February. Our model is to go after unsold distress inventory," says Bahl who along with Bansal had to shell out $3,000 for buying the Snapdeal.in domain name — an investment that's paying off well.

Here is how Groupon works, as explained in a video placed on their home page.

Video Courtesy: http://www.groupon.com/learn

Some of the key benefits for Retailers to tie-up with such sites are as follows;

• Create new customers for a specific category / brand. The “deal” may appeal to first time users who may not have entered the Retail store / restaurant otherwise
• Sell off unused or distress inventory – one that most product retailers would carry at some point in time. Typically one would find them at discount stores in the suburban areas or outskirts of the city, but this model is even better as they can be shipped out of the warehouse directly
• Utilise the unused service time, typically at beauty salons, restaurants and pubs. What used to be Happy hours may be extended as “Happier hours!”
• Viral Branding – While the cost of discounting may seem ruthlessly high, it also acts as a brilliant way of advertising – Cloud advertising!
• Word of Mouth publicity is very high – typically works in colleges / office environments where people could share the deals and make purchases as a group. After all, shopping and dining is a fun activity and makes so much sense when done in a group. So, a set of 4-5 friends may all buy out coupons for unlimited F&B, so they all could spend a gala evening or may buy holiday packages as a group to enjoy over the weekend

So, what’s in it for Retailers after the second or third purchase or visit? Would such a business model be sustainable in the long run? Would consumer fatigue set in sooner than later? These are some questions that are best left unanswered as this column is published. However, I assure I will review this in a year from now again with results and feedback, but for now this is one model that’s going to drive innumerable footfalls to the Retail stores. If you are a Retailer, try talking to one of these guys and get your offer up and running, wait and watch the results. If you are a potential consumer, then just register yourself in one of those websites and look forward to some exciting offers soon. Whichever way, Happy Retailing…

Photo courtesy: sosasta.com