A supply-chain company with focus on e-commerce solution, Gojavas, has appointed Sobhit Jain in the senior leadership team as general manager to strenthen its leadership skills. He comes with about 12 years of experience in supply chain spread across management consulting and industry.Prior to join Gojavas, Sobhit worked with Accenture strategy where he was a principal in the supply chain consulting practice. In Accenture, he worked for clients across FMCG, telecom, metals and others advising them on supply chain strategy, future ready operating model, logistics cost reduction and network optimisation.“We have expanded our network in the last quarter. Currently we are strengthening our leadership team to consolidate our recent growth and Sobhit’s addition in the team is in line with that objective. We will be hiring more key resources for senior leadership roles in the coming months," said, senior official from Javas.He worked with Glaxo Smith Kline Consumer Healthcare and Ranbaxy Pharmaceuticals in various supply chain roles. He has done an MBA in operations and supply chain from National Institute of Industrial Engineering, Mumbai.
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Gold Lions drought continues for Indian entries at Cannes, writes Hita Gupta BBDO India bagged the Grand Prix in the Glass Lions category for its ‘Touch the Pickle’ campaign for P&G’s Whisper brand. This is India’s first Grand Prix in six years at the Cannes Lions International Festival of Creativity. Glass Lions is a new category that was introduced this year, in partnership with Facebook COO Sheryl Sandberg’s LeanIn.Org. It recognises work that implicitly or explicitly addresses issues of gender inequality or prejudice. BBDO India also won a Glass Lion for its ‘Share the Load’ campaign for P&G’s Ariel brand. But the drought for Gold trophies continued for India on the second day of Cannes Lions 2015. Indian agencies secured one Bronze at Media Lions, and two Silvers and three Bronze at Outdoor Lions at the 62ndedition of the world’s largest festival of creativity. There were no winners in PR Lions despite its three shortlists. At Media Lions, India had eight shortlists but only the Glass Lions Grand Prix winner BBDO India’s ‘Touch The Pickle’ campaign secured a Bronze. BBDO India was the lone winner from the country across 80 awards that were given for the category. In the Outdoor Lions category, six awards from a total of 131 were given to five agencies from India. McCann Worldgroup India was leading with two Silver Lions. McCann received one Silver Lion each for its Dish TV campaign for Essel Group titled ‘Basement’ and also its three-ad campaign series - Basement, Sofa and Puddle. Creativeland Asia joined the Silver league for its client Reckitt Benckiser's Durex RealFeel condoms campaign - Heart, Gut and Brain. Grey Worldwide India, DDB Mudra and Ogilvy & Mather secured one Bronze each taking the awards tally under Outdoor Lions to six. Grey Worldwide’s Bronze was for its campaign for DHL while Ogilvy & Mather’s was for its Soundwave campaign for Puffin. DDB Mudra closed the awards for the day with two of its winning entries - Automatic Distance Control and Bi-Xenon Headlamps for Volkswagen. Among India’s most celebrated campaigns, Unilever India's Kan Khajura Tesan was also awarded a Bronze Lion under Creative Effectiveness. The entry was submitted by Lowe and Partners Worldwide London but was conceptualised by its team in India - Lowe Lintas and Partners India. From the total of 17 Lions given in the category, the Kan Khajura Tesan campaign was the lone winner from India.
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All it took was an open letter and a few Tweets for American singer Taylor Swift to bring Apple Music to its knees. The company, which will soon be starting a new service AppleMusic, has decided to pay the artists during the three-month free trial period and even beyond. Can the same happen in India? We will come to that in just a bit. Apple Music launches on June 30. In the US, it is priced at $9.99 per month for one person or $14.99 for families. In India, though the pricing is not official, or whether Apple Music will be launched simultaneously on June 30, some reports suggest it will and it will be priced at Rs 120 per month for one person or Rs 180 per month for family or six users. Apple Music includes a radio station with personalized playlists and a choice from millions of songs on demand. The service includes a live radio station called Beats 1, tools to find curated playlists or individual songs, offline listening and a social music network on which users can comment on music and share it. In addition to iOS devices, the service will also be available on Macs and even on Android, later this year. Now let’s turn to India. There are over 230 FM stations, 800-plus television channels and crore of Internet buffs who access music online. While royalties are getting paid to the film’s producers or the music companies, are the singers getting their due? Let me ask you about ISRA or Indian Singers' Rights Association? I bet many of us don’t even know what it is. But some of us do. It is around two year old society of Indian singers, as the name suggests. According to its website, ISRA aims to administer and control the exploitation/ utilisation of singer performances and collects Royalties as per Section 38A of the Copyright Act, 1957 and then distribute the Royalties to its member singers. Ashish SinhaISRA has also listed an elaborate rate plan across mediums. For example: If a singer’s songs are used by a broadcaster of Music-based TV Show/Programme, the Royalty shall be Rs 25,000 per song performance (even if it is part of a song). Similar rate is applicable for a non-music based TV show or serial. And for Broadcast to the public of the performance of a singer on a Music Channel, the Royalty is pegged at Rs 5,000 per hour or 5 per cent of the gross revenue of the Channel for that TV, whichever is higher. Royalty is similarly fixed for mediums like radio, internet, hotels, commercial establishments, commercial vehicle, and Public events among others. So far so good. But privately, singers say that getting a broadcaster or a commercial establishment to pay the royalty on playing their songs is an extremely difficult proposition. In fact, only last month a delegation of singers including Sonu Nigam, Kavita Krishnamurthy and Pankaj Udhas, among others, had met Union information and broadcasting Minister Arun Jaitley seeking his intervention. They wanted to ministry to direct certain broadcasters to "stop violations of the Performer's Right", in line with the provisions of the Copyright Act. As per the provisions, which have been introduced retrospectively, lyricists and singers should get 50 per cent royalty on any commercial use of their songs. In fact, according to Sanjay Tandon, the MD of ISRA, not even one TV channel or radio station is paying any royalty to any singer. As per the amended Copyright laws, royalty can be collected on original songs played commercially by any media, including ring tones by telephone companies, call waiting music, any songs used in any manner by any commercial establishment etc. And the law covers songs going back in time almost half a decade. So when Taylor Swift said the Apple Music plan was "unfair", arguing Apple had the money to cover the cost, the company obliged by announcing to the world it will pay for the trial period too. We wonder when that will be the case for our own singers? May be very soon! ashish.sinha@businessworld.in
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Besides the benefits to customers, e-commerce as a business model has several advantages over traditional retail models, says Vipul Parekh The world was a different place when we started our first e-commerce venture Fabmart in 1999. Internet connections were few and far between, and ran mostly on flaky dial-up lines. People distrusted an “invisible retailer” and were unwilling to use their credit cards online.Today, with more than 30 crore people connected to the Internet (thanks in large part to smartphones), secure payment systems, and increased willingness to transact online (thanks to IRCTC and other websites), the e-commerce industry has truly taken off. In addition, people are increasingly strapped for time, and value the convenience offered by e-commerce companies much more than they perhaps did a decade ago.Besides the benefits to customers, e-commerce as a business model has several advantages over traditional retail models. First, rentals constitute a significant chunk of the cost base for a traditional retailer given their need to be present in locations with high footfalls; e-commerce companies, on the other hand, can have their warehouses in relatively faraway locations with cheaper rentals. Second, for people in smaller cities and towns (home to more than 50 per cent of the retail market) with the same aspirations as those in large cities, e-commerce offers access to a much greater range than traditional retail.Third, e-commerce companies can have centralised control over inventory, which allows superior operational efficiency and also curtails shrinkage (loss of inventory due to inefficiencies and theft). Fourth, e-commerce companies have the ability to use data and analytics to help customers make better purchase decisions. Fifth, many e-commerce companies operate as marketplace models, which significantly reduces the need for inventory and associated capex. While e-commerce companies have structural pluses over traditional retail, there are some key success factors for them that are worth keeping in mind:=Merchandising skills to enable them to buy the right products at the right time from the right place, and the ability to set and control quality standards. BigBasket.com carries more than 15,000 SKUs today and ensures that each is delivered at the right price and quality requires strong processes and capabilities in the team.=Supply chain management skills to manage a fragmented and varied supply chain for procurement and same day/next day delivery for customers across the length and breadth of the country.=People management skills to manage, recruit, train and motivate blue-collar workforce that works in the warehousing and delivery of the orders.=Technology skills to ensure that they are able to consistently offer customers a great experience while buying online and to keep them current with rapid technology changes, and also to lay the foundation for processes within the company.With all the news of funding in the sector, there is some concern whether seemingly sky-high valuations are justified. While it is hard to answer this definitively one way or another, a few facts keep me optimistic. In the US, after all these years, e-commerce constitutes only 4-5 per cent of the retail market; on the other hand, in China, the e-commerce industry constitutes nearly 10 per cent of the overall retail market. I think India may follow the trend of China rather than the US.We still have a lot of runway left. Internet penetration is still at less than 20 per cent in India versus over 50 per cent in China, and only 10 per cent of Indian Internet users are online shoppers versus close to 50 per cent in China. It is also no coincidence, in my view, that for Amazon, India was the fastest international market to clock $1 billion in revenues. Overall, I am confident that the best days of Indian e-commerce are yet to come. The author is co-founder of online grocery store BigBasket.com(This story was published in BW | Businessworld Issue Dated 13-07-2015)
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The future lies in multi-channel retail that blends the benefits of real world retailing with virtual or digital interfaces, says Kishore BiyaniAmongst the biggest shifts of the last decade has been the ‘consumerisation’ of digital technology. From being confined to certain industries and research labs, digital technology has become pervasive. Technology has shrunk time and consumers now demand more convenience, customisation and consistency.The last couple of years have seen a large number of etailers built solely around technology-enabled web or mobile interfaces. One presumes that the increased use of technology will either improve efficiency and reduce costs for the business or that the consumer will be willing to pay a premium for the convenience that technology-enabled services offer, or both.Yet, evidence suggests that neither of these transformations has happened in India. Consumers will not pay extra for the convenience of ordering from home and being delivered at the doorstep. Barely anything sold by pure digital retailers aren’t discounted. The core proposition of these firms is deep discounting to the extent that it scares away brand owners who fear losing their brand salience. Even a subscription model similar to Amazon Prime, so popular in the US, has been tried and quickly withdrawn. On the other hand, millions of customers come to experience the real markets, cherish the happiness of having the product in hand and pay the price for this experience.It is evident that costs incurred by virtual retailers are significantly higher. The cost of delivering from central distribution hubs to the doorstep of consumers, the size and scale of the offices and warehouses required and the customer acquisition costs far exceed the costs associated with running a store within four walls.It is therefore not surprising that the mindshare occupied by virtual retailers (VR) is much higher than their marketshare. The Mobile and Internet Industry Association estimates that online transactions will touch Rs 1,00,000 crore by the year-end. However, virtual commerce will account for only 24 per cent of it, with the bulk of spends being in travel, financial services, media, classifieds, etc. Of the Rs 24,000 crore worth of merchandise sold, more than half is accounted for by mobiles and laptops which are low margin businesses. The larger real retailers are close or comparable to the size of the entire virtual commerce business in India.The growth of VR is not led through own brands or products or by achieving operational efficiencies or scale. It is entirely led through reducing the prices of products subsidised by the investments made by foreign companies. On the other hand, real retailers face severe restrictions in fund raising; especially foreign funds.The future lies in multi-channel retail that blends the benefits of real world retailing with virtual or digital interfaces. More than half of VR sales come from 2 or 3 cities; Delhi-NCR accounts for the lion’s share. Barely any courier company services more than half the pin codes in the country. Future Group alone is present in 244 cities and our logistics networks catering to these stores cover almost 13,000 pincodes. By treating our stores as both distribution and delivery points, logistics costs for a multi channel retailers like us will be less than one-fourth of costs incurred by a pure play virtual retailer.Role of technology in business cannot be denied. Real world retailers manage thousands of transactions every minute, source and transport tonnes of goods every day and operate networks that span the length and breadth of the country. These are possible because of a credible technology backbone. To replicate such technology for a front-end consumer interface is only a function of finding the opportune time and optimum investment that can deliver benefits to all stakeholders. The author is founder & CEO, Future Group(This story was published in BW | Businessworld Issue Dated 13-07-2015)
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Sure eTailing is growing by leaps and bounds. But eTailers are booking more losses than profits. Deep discounts and returns are a downward spiral they can’t pull out of by Vishal Krishna & Abraham C. MathewsThis scene repeats every day. Every morning, trucks loaded with crates of unsold and damaged goods returned by e-commerce companies and other retailers are brought to a 2,00,000 sq. ft. warehouse of Reverse Logistics (RLC) at Tumkur Road in Karnataka. These goods are then cleaned up, refurbished and then sold on RLC’s stores and website greendust.com.How much of e-commerce sales end up in warehouses? Hitendra Chaturvedi, founder and chief executive officer of GreenDust, says that it could even be upwards of 24 per cent as compared to the international norm of 12 per cent. Large eTail companies such as Flipkart, Snapdeal and Amazon are Chaturvedi’s clients. This is just a little glimpse of the back-end of India’s booming e-commerce industry. And the buzziest, within the sector, is eTailing, or the sale of goods over the Internet.The e-commerce sector, though miniscule, is rising fast. So fast that all eyes are trained on it. According to a PricewaterhouseCoopers (PwC) 2015 report on e-commerce in India, the sector has grown by 34 per cent CAGR (compound annual growth rate) since 2009 to $16.4 billion in 2014, and is expected to touch $22 billion in 2015. eTailing, which comprises online retail and online marketplaces, is the fastest-growing e-commerce segment; it has grown at a CAGR of around 56 per cent between 2009 and 2014. PICTURE PERFECT: CEO of Amazon Jeff Bezos (L) and Managing Director of Amazon India Amit AgarwalPwC pegs the size of the eTail market at $6 billion in 2015 with books, apparel, accessories and electronics constituting around 80 per cent of product distribution and sales. Compared to India’s huge retail industry, which is $550 billion according to Ernst and Young, eTailing is miniscule and will only account for 3 per cent of the trade by 2020. In comparison, the share of eTailing in China today is 8-10 per cent of its retail economy. It’s no wonder that though it is small today, eTailing in India is seen as a goldmine of opportunities.Despite deep discounting of goods and mounting losses, investors are still keen on investing in eTailing and e-commerce businesses. And so is the valuation of such ventures. Paytm sold a 25 per cent stake to Alibaba Holdings recently for $575 million, valuing the company at $2.4 billion. Broadsheet reports say Snapdeal is in talks with China’s electronic-parts maker Foxconn and Alibaba to sell a 10 per cent stake to them jointly for $500 million, valuing the eTailer at a mind-boggling $5 billion.But there is something wrong. The simple logic of the rat race between Flipkart, Snapdeal and international competitor Amazon is this: Offering a spectrum of goods at the cheapest prices with easiest terms of delivery and returns to keep your customer base expanding at geometrical progression, and then leveraging the ‘customer real estate’ to get in the next set of investors. This money is used to offer higher discounts. And once the consumer is ‘ensnared’ to eTailing practices, prices will be restored to ‘normal’ levels, and you have a good business going.What if the investments stop, and with them, the discounts. Plus, there’s a legal minefield lurking with respect to the country’s foreign direct investment (FDI) norms. So is it already a bubble waiting to burst?Bitten Too MuchThe last few years have spawned a variety of entrepreneurs, who plunged into this digital revolution. Both Flipkart and Snapdeal acquired about 10 companies in 12 months, spending $500 million.break-page-breakOther marketplaces that have raised large sums of money are Urban Ladder, which raised $77 million (Rs 493 crore), Shopclues (Rs 746 crore) and BigBasket (Rs 278 crore). “It is still early days for the e-commerce industry, but the business is no doubt here to stay,” says Sanjeev Aggarwal, co-founder of Helion Ventures.Unfortunately, acquiring consumers and weaning them away from the normal retailing practices have been expensive business for eTailers because they are compensating the seller for discounts. One estimate put the losses suffered by the big three as follows: Flipkart lost Rs 2.23 for every rupee earned; similarly the loss for Amazon was Rs 1.90, and for Snapdeal, it was Rs 1.72.Data acquired by BW|Businessworld from Accounting and Corporate Regulatory Authority (ACRA), Singapore showed that Flipkart suffered a loss of Rs 1,028.9 crore on a turnover of Rs 2,937.7 crore in FY14. Losses had doubled from the year before. In FY13, Flipkart’s loss (before taxes) was Rs 544 crore on a turnover of Rs 1,163.1 crore (see Black Hole). Sources say Snapdeal had suffered losses worth Rs 530 crore in FY14. Meanwhile Flipkart, Amazon and Snapdeal together have spent Rs 9,774 crore on reverse logistics and discounting in the last financial year to acquire customers, as explained later. Some believe that the online business models work because there are no rental costs. Remember what killed the organised retail boom in the previous decade? It was discounting and rental costs. Unfortunately, e-commerce has followed the same route today. Though most eTailers do not own physical stores, but Snapdeal, Amazon and Flipkart spend upwards of Rs 350 crore each every year on marketing and advertising to acquire the new real estate called the ‘consumer’. That apart, they are also paying rentals in maintaining warehouses. Last checked, each of the big three maintained at least 10 large warehouses at a huge rental cost.The vast monies spent to acquire customers through deep discounting remind us of the halcyon days of the brick-and-mortar retail boom between 2003 and 2009. During that period, it is estimated that upwards of $5 billion (Rs 30,000 crore) was pumped in by retailers. Many of them, such as Provogue and Subhiksha, ultimately shut shop because of high-operations cost that included rentals and inventory cost. Others, such as Future Group and RPSG’s Spencer’s Retail, kept afloat by restructuring and incurring heavy debt. Flipkart, Snapdeal and Amazon did not respond to questions raised by BW|Businessworld through email on the challenges they are facing today. Alibaba picked up 25% in Paytm for $575 million, valuing the company at $2.4 billion (Photograph: Shutterstock)For the fledgling e-commerce industry, it is probably a case of having bitten off too much, too soon. India promises a market of more than a billion customers; the industry hopes it is just a matter of time before the customer warms up to the idea of using smartphones to shop. Except, India isn’t really the homogenous stereotype as the marketing gurus like to think, where a huge customer base automatically translates into profits.However, Sachin Bansal, co-founder of Flipkart, believes that the online platform creates so much data that cultural diversity is at the heart of the game. He says that technology, including data analytics, can change the way a region is being served with the help of real data collected from the browsing habits on phones. He is optimistic that the next step is going to be hyper local, and places more emphasis on the growth of mobile shopping.Ghost Of Back-end LossesWhat Sachin Bansal’s optimism hides is the fact that eTailers are paying big time for inventory on behalf of their associate distribution companies. These distribution companies are exclusive to each marketplace. Amazon works with CloudTail and Flipkart works with WS Retail. These companies generate 40 per cent of the deliveries for their eTailers. FDI rules (from 2010) state that not more than 25 per cent can be sourced from an associate company. The rule was scrupulously followed by the now defunct Bharti and Walmart partnership; but the same cannot be said of the eTailers. In the case of Bharti Retail, it sourced only 25 per cent from Walmart’s wholesale business in India — Best Price Cash and Carry.The inventory costs for eTailers are the root cause of the losses along with discounts. Company sources say that today there is enough evidence of the losses, and it remains a permanent feature of this business. Retail is a cash-burning business and has the lowest margins, say about 4 per cent. Of the 195 million deliveries made, till FY14, by the big three eTailers, 23 per cent of the products were returned, with Rs 6,900 crore borne as the reverse logistics cost by these companies (see Shoddy Shipments and Bleeding Profusely). About 35 to 40 per cent of the total returns were from associate distribution companies, and the rest were from registered sellers. Inventory is maintained for distribution companies and this amounted to Rs 2,462 crore. Two reputed brand heads of big marketers — Puma and Samsung — preferring anonymity told BW|Businessworld that their contracts with Flipkart, Amazon and Snapdeal included a limited return clause. That is, if customers returned products for whatever reason, the vendor will accept only 5 per cent of the returns. The eTailers take the risk for returns above that level.Now for discounts: an average of 20 per cent is borne by these three e-commerce giants; they pay sellers to make good on discounts. This number rounded up to Rs 7,312 crore in FY14. Now add the returns cost of Rs 2,462 crore to the cost of maintaining discounts at Rs 7,312 crore, and this totals to a whopping Rs 9,774 crore as their losses only from discounting and reverse logistics. Everyone would be happy if new and existing investors keep the money coming and the discounts flowing for the next 15 years. But is that realistic?Regulatory Warning SignalsThere are warning signals. In May, minister of state for commerce and industry Nirmala Sitharaman told the eTail industry that relaxing of FDI rules will not happen till the government’s ‘Make In India’ campaign spurs domestic manufacturing. FDI rules currently put the onus on states to permit foreign investors in retail outlets that sell multiple brands. Most states have so far resisted.break-page-breakThus, Amazon is a marketplace in India. However, according to its submissions during a hearing before the Authority of Advance Rulings for Indirect Taxes, in 2012, Amazon said it would provide two types of services in India: A front-end online platform to facilitate merchants, and the second would be to provide logistics support in relation to the goods sold by the merchants. The details are where things get murky. The order at warehouse: Amazon unbundles wholesale packages into individual retail packages, sometimes sorting the packages if the wholesale package includes different items. It then wraps them with required protective material, and bundles products when two or more items are to be sold together. Arguably, going by this, Amazon is more than just a neutral platform. It takes up a much more active role in the sale procedure. Logistics is not limited by the FDI rules, but when combined with the online platform, like a shop-in-shop, for multiple vendors and moving the product through warehouses, it replicates a Central or a Shoppers Stop.This muddies the companies’ usual rhetoric about being just a marketplace. The point is if there’s ‘transfer of risks and rewards’. R.Muralidharan, senior director for Indirect taxes at Deloitte, says: “If only the companies have contracts that oblige them to take ownership of goods at any point, then it will be difficult to argue that risks and rewards have not been transferred.” Once that is established, tax implications would change and they would fall foul of FDI rules. The Enforcement Directorate has been investigating Flipkart for similar violations since 2012, for its relationship with WS Retail, which sells more than a third of its products. WS Retail was sold to private investors to alienate the ownership from Flipkart’s management. How independent is it really?“Regulators will ask e-commerce companies to come out with a clear idea of their business; whether they are a technology company, a market place, or a logistics business,” says Ganesh Prasad, partner at law firm Khaitan and Co. He says regulators will go after the tax liability of these companies and not valuations. “Things like the origin of the product and where, in which state, should the tax be collected will need clarity,” adds Prasad.And then, there is lobbying by brick-and-mortar businesses for a level playing field for raising foreign money. “The current protectionist policies are leading to an imbalance in the market, as the players exploit the gaps in government policies,” says Vikas Agarwal, general manager (India), One Plus, a Chinese electronics company.Defending these eTailing practices, Sachin Bansal of Flipkart, said on the side lines of a press conference: “The business has seen phenomenal growth. The capital raised, so far is being used to better technology and offer the best to the customer.” Bansal’s counterpart at Snapdeal, Kunal Bahl, agrees with him on the growth of the business. “The younger generation’s propensity to shop online is clear, for the future, and smartphones are a great way to engage with them.” But both agree that regulation was something that all e-commerce companies had to cope with and were struggling to seek clarity in the long-run.The tax issue too is being debated vehemently by the state of Karnataka. Last year, local tax authorities stopped sellers from trading, especially Amazon, from warehouses operated and managed by eTailers. The tax authorities’ case was that eTailers should collect tax on behalf of sellers. The eTailing companies, on the other hand, did not want to follow such direction because it would bring them in direct conflict with FDI regulations, which does not allow multi-brand retailing. The status quo continues to this day with no settlement in sight.Long-term ValueRegulatory hassles have not dissuaded investors. In fact, there is a glut of foreign money chasing a few e-tailers. The Russians (DST Global), the Americans (Tiger Global), the Japanese (Softbank), and the Chinese (Alibaba) are on the prowl. Every acquisition has been at an eye-popping valuation. So far, Rs 9,774 crore has been spent on servicing 36 million regular consumers, and the industry will need a further Rs 27,000 crore to acquire 100 million regular customers by 2018. The target for the VCs has always been the number of consumers their ‘investee’ companies can acquire and not the number of sellers who came on board. Flipkart, Amazon and Snapdeal have only 10 per cent of their total 1,00,000 registered sellers, as regular merchants.“It is quite possible that the liquidity in the global funds, and the promise of the Indian eTail story is driving the prices up to unreasonable levels,” says Aviral Jain of valuation firm American Appraisal, a division of Duff & Phelps. “The premise of e-commerce valuations in the US is customer loyalty, says Jain. In India, however, the challenge is that the loyalty is absent and survival until consolidation is the key, he says. In India we are loyal to prices, thus making discounts de rigueur.break-page-breakWith extensive experience in e-commerce industry and related investments, Shinoj Koshy, partner, Luthra & Luthra, says: “E-commerce players are not in the business of handing out discounts. What they are interested in is altering consumer behaviour by weaning customers from traditional brick-and-mortar outlets. Once a habit has been formed, then discounts will get rationalised and services are likely to come at cost. An indication of what is to come is paid services at Flipkart First and Amazon Prime.”Investors’ Waiting Game“That the customer is going online is true. But like any retail business, it requires capital to sustain operations,” says Vinay Parekh, CFO and co-founder of BigBasket.com. He says the industry needs long-term capital to build trust with consumers and offer the best services. Big Basket delivers grocery in six cities to 20 million customers every year. Perhaps, they are the only ones who have not spent heavily on acquiring customers. Paytm, which has harboured an ambition of making it big in eTail, plans to bring on board a hundred thousand sellers by end of the year, and bring in one million Chinese sellers.“These goods, ordered on our app or website go to our delivery centres and do not remain in there for long,” says Amit Lakhotia, general manager of Paytm wallet. He adds the opportunity to bring Alibaba’s merchants was enormous and could supplement the revenues garnered from the online wallet business. Logically, everyone is betting on the fickle smartphone user. However, the average Indian (600 million Indians under age 40) is still not using the smartphone for regular transactions.Not being able to acquire customers is beginning to glow in the darkness. These companies do not generate cash from operations, which is the lifeline of a company. The accounts filings with the Registrar of Companies, in India, show serious losses. The trio of Flipkart, Amazon India and Snapdeal posted losses totalling Rs 1,300 crore (Amazon Rs 320 crore, Snapdeal Rs 264 crore and Flipkart Rs 716 crore) in 2013-14. Can one of the three rivals afford to turn off the discount tap without losing their market share?On the other hand, a synchronised move to do away with discounts, when they have a firm control of the market, is sure to earn the censure of the Competition Commission of India.Will Investors Stay?The eTailers are at the mercy of investors who have different timelines for closing their funds. Most of them will begin exiting by 2018 and the top two Indian eTailers must create a sustainable business by then. The total share capital of Flipkart was $3.2 billion (Rs 20,000 crore) and it has already eroded by Rs 10,288 crore. Flipkart has not been generating cash from its operations and its negative cash flow stands at Rs 592 crore. Similarly, Snapdeal too has not been generating cash, and carries on its shoulders a negative cash flow of Rs 300 crore on the Rs 6,000 crore it has raised so far.When fresh money stops coming, do these home grown eTailers have the fundamentals to remain afloat? Or will they become victims of a fire sale by investors offloading to private equity funds, who usually take long-term bets. Private equity seems to be the only option. Flipkart registered in Singapore has 148 investors. Many of them are pension funds of Xerox Corp, ConAgra, Rio Tinto and Shell. Seeing Flipkart’s downward spiral, how long will they wait before exiting?Sanchit Vir Gogia, CEO of Greyhound Knowledge Group, says most investments were made between 2013 and 2014; so funds may want to exit before 2018-19, since VC fund cycles last only for five years. Institutional investors look for an exit by either selling back to the promoter, or to another investor or to the public through an initial public offering (IPO). An Indian IPO looks remote when there are no profits on the horizon. Making new investors pay more than the current valuation could be a tough ask.That is when things get tricky. Devangshu Dutta, CEO of Third Eyesight, a retail consultancy, says that these businesses, like any retail business, will not make money in the short run, but like steel or infrastructure businesses, these would take a 15-year cycle to make money. India’s home grown eTail companies are expectedly worried because by committing $2 billion to their India foray, Amazon has neutralised the advantage Flipkart built over the last five years. Today, they compete as equals.There are the long-term hopefuls. “Global investors will back these companies, and will bailout existing funds, because India is the largest consumption market,” says Ganesh Prasad of Khaitan and Company. The investors may lead yet another large round of funding, he says.“When you have the money, raise funds,” says Aviral Jain of American Appraisal. But what if your business model itself is flawed? Then the next round of funding becomes difficult. One will have to wait and see if the investors blink. Warren Buffett put it thus: “Only when the tide goes out, do you discover who has been swimming naked.” vishal@businessworld.in; @vishalskrishnamatabrahamc@gmail.com; @ebbruz(This story was published in BW | Businessworld Issue Dated 13-07-2015)
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Digital Cable will create additional 6 Trillion in revenue platform for Indian Film and TV Industry, says Ashish KaulPay-Per-View ( PPV) on digital cable will be the biggest wave to hit India entertainment Industry. The in-market revenue for C&S market is likely to cross Rs 6 trillion crores by the end of 2016-17. For the first time post Gulf War over 20 years ago,the revenue landscape has radically changed and will continue to do so at least for next 24 months amidst serious challenges from rival DTH brethren. The Industry is undergoing a metamorphosis on various fronts. First step is to accept that the business has shifted to consumer domain and driven entirely by consumer marketing benchmarks. The digitisation has opened a whole new world of revenue opportunities that didn't exist before thus creating a win-win situation for LCO’s , MSO and Broadcasters together. Industry is on a precipice and it can either emerge as the largest consumer services and VAS driven as the largest VAS revenue aggregator in the world or lose out to DTH. With Industry size expected to touch 120 Million C&S consumers by the end of 2015-16 significant revenues will be driven by Value Added Services (VAS) which will push the revenue over Rs.6 Trillion Crores with PPV, exclusive server based content, events and broadband among other peripheral streams contributing over Rs. 52 billion in the DAS areas alone. Digitisation has opened a whole new world of advertising opportunities for FMCG industry which will benefit tremendously from C&S reach into the hinterland. Digitisation empowers MSOs and LCOs together to offer services to advertising industry region and language wise. Nearly Rs 1000 crores will be contributed by PPV from Bollywood considering 80 per cent of the releases do not cross 7 days ( and over 400 movies languish unreleased annually) and largely are removed between two major releases. Digitisation offers the single largest revenue opportunity for Bollywood premiers for Tier 2 & 3 movies and specially the regional movies. Digitisation will pave way for creation of of a whole new regional and niche content Industry in Mumbai which traditionally has been a bastion for Hindi content. Digital cable will bring unparalled value in comparison to TRP laced TV environment and will emerge as the most credible and value based advertising platform poised to garner a significant share of over $1.2 Billion TV advertising opportunity. Nearly Rs 1,000 crore will be contributed by PPV alone by end of 2016-17 from Bollywood considering 80 per cent of the releases do not cross seven days and largely are removed between two major releases. Digitisation offers the single largest revenue opportunity for Bollywood premieres in Tier 2 & 3 towns, especially regional movies. Over 400 movies languish unreleased every year, and an equal number of movies don’t see more than two days in the box office. Between the two Fridays regional cinema has been lying dead and now with digitization creating channel capacities in excess of 500, will create opportunities for regional movies and content to debut and earn money. Digitisation will pave way for creation of a whole new regional and niche content industry in Mumbai which traditionally has been a bastion for Hindi content Broadcasting Industry in India can not survive without LCO’s as an integral backbone and invaluable business partners. As a matter of fact the role of LCO will undergo a radical transformation and aid in introducing multiple products & services and generating revenues. Branded content, niche server based channels and city events will usher in the real DAS for the Industry and consumers alike. National / Local ISP services with VAS will be an game changer to move ARPU from Rs. 150 approx ARPU to Rs. 500 and beyond. I believe the entire Industry realizes the importance of ISP push which off course will need investments for strengthening ground infrastructure, however, with LCO MSO combine partnerships ISP capabilities will bring in the required thrust. Over a period of time DTH will find it difficult to compete with digital cable on multiple accounts. Technologically, digital cable is a far superior variant of digital in-bound entertainment; DTH can not offer even remotely the far higher no of channels, VAS, ISP among many other features. Digital cable marginally defeats DTH in a highrise metro environment, torrential / costal weathers and unmatched HD quality due to bandwith advantage. Where a DTH operator will struggle to offer channels in two digits a digital cable operator can offer almost all channels in true HD. Furthermore, Digital cable offers uninterrupted entertainment as against DTH due loss of signal in agitated whether conditions. ‘Aandhi Baarish ya Toofan Digital cable hamesha aapke saath !”. Industry is on a precipice and it can either emerge as the largest consumer services and VAS driven as the largest VAS revenue aggregator in the world or lose out to DTH. It is not only the revenue from traditional VAS elements but also innovative peripheral revenue streams like SMS, barker channels and exclusive network specific channels that will contribute to enhanced ARPU and importantly act as brand flankers for the discerning consumer. Broadband services have been on a back-burner and now is the time to bring these services on. The Digital cable Industry is entering into the era of 'household acquisition' and deploying the magic of triple play / bundled solutions. The rainbow has emerged and now it is for the Industry to paint it black or blue. (The writer is a media and entertainment professional with over 20 years of experience in managing global media & entertainment businesses. He is currently Business Head of a transnational conglomerate. The views are personal.)
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The e-commerce companies like Flipkart and Snapdeal continue to run in losses. Are heavy discounts and high degree of returns the way to run e-commerce, asks Vishal KrishnaFlipkart and Snapdeal are the flagbearers of the Indian e-commerce boom. Along with Amazon India they have make over 2 crore deliveries per annum. This number is only going to grow provided they have capital supporting the heavily discounted industry which also has a high degree of returns. The reader should see this profit and loss account and judge for himself. Is this the way an e-commerce company can be built? Crores of rupees have been spent in acquiring customers. If this trend continues, we see that the Indian ecommerce business will consolidate by benefiting only the investors and not the consumer. We at BW|Businessworld pitch for long term capital to support the Indian businesses. Meanwhile, let us look at their current state of affairs. We present to you the P&L of Flipkart as a basis for judging the ecommerce business in India.
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Jain Irrigation Systems' fruit and vegetable processing division has launched its IQF plant in Jalgaon, Maharashtra. The IQF plant incorporates both Individual Quick Frozen (IQF) and Block Quick Frozen (BQF) technologies and has 40 TPD IQF capacity and 16 TPD BQF capacity. The IQF plant is designed to handle around 60,000 MT of fruits like mango, banana, pomegranate, papaya, jamun, strawberry, sapota, etc. annually.The IQF plant incorporates both Individual Quick Frozen (IQF) and Block Quick Frozen (BQF) technologies and has 40 TPD IQF capacity and 16 TPD BQF capacity. The IQF plant is designed to handle around 60,000 MT of fruits like mango, banana, pomegranate, papaya, jamun, strawberry, sapota, etc. annually.The plant has all quality standard certifications like BRC, ISO 14001, OHSAS 18001, ISO 50001, Halal and Kosher. The products from this IQF facility would be exported to US, Europe, Japan, Australia, New Zealand, Middle East from which the company expects to earn Rs 100 crore in foreign exchange annually.Jain Irrigation Systems Limited (JISL) has more than 10,000 associates worldwide and revenue of Rs 60 billion. It has manufacturing plants in 28 locations across the globe. It is engaged in manufacturing of Micro Irrigation Systems, PVC Pipes, HDPE Pipes, Plastic Sheets, Agro Processed Products, Renewable Energy solutions, Tissue Culture Plants, Financial Services and other agricultural inputs since last 34 years. It has pioneered silent revolution with modern irrigation systems and innovative technologies in order to save precious water and has helped to get significant increase in crop yields, especially for millions of the small farmers.
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The current ad ‘war’ between Snapdeal and Flipkart too revolves around creating a buzz in Twitter, with #AchhaKiya and #YahanSeKharido. Others have also jumped in, writes Manish Kumar PathakE-retailing giant Flipkart is back with its big app shopping days. This app specific sale, is seen a concerted effort, to shift away from desktop to an app specific market. Myntra, which is now a Flipkart owned company, has already become an app only platform, and it will be very interesting to observe, if the parent company too treads that path. However, the build up to this day has been very interesting, with extensive advertising, hogging both print and visual mediums. The #AchhaKiya slogan created quite a buzz. There is another development that merits a vociferous mention. The billboards are replete with the twitter slogan of Flipkart. Nothing out of the ordinary so far. Matters become interesting, when the riposte posted by Snapdeal is both a jibe and also a marketing stunt to attract audiences towards its own sight. The hoarding is placed strategically below Flipkart's, and is a concentrated effort, to put forth continuity in the message, and lure the audience away. Although Snapdeal is offering a dead bat towards the query dished out regarding this particular stance, which is a form of ambush advertising. Ambush Advertising is new term; a technique that helps raise awareness about a brand in an inconspicuous manner. Ambush marketing appears in numerous ways, but they have one definite purpose to serve, which is to generate curiosity without having earned the rights by paying to be a sponsor. The trait that stands out when it comes down to ambush marketing is that very often this is unforeseen. Smaller companies, who are still in their infancy, and companies which do not have enough financial strength employ innovative ways to brand its own products, not by becoming official sponsors, but by resorting to novel ways that helps in their visibility. Since, they have nothing to lose in such cases, any attention they receive, the better it for the brand. In the contemporary scenario, when use of social network plays a massive role in determining the success of any venture, the brains behind ambush marketing will have to keep in mind this domain also. A bit of humour coupled with aggressive push towards creating a foothold will definitely attract eyeballs. This current ‘war’ between Snapdeal and Flipkart too revolves around creating a buzz in Twitter, with #AchhaKiya and #YahanSeKharido, designed specifically to outwit each other, and make it a trending topic. Apart from this, the out of home marketing strategy too forms a pivotal point in creating visibility. How strategic is the placement of hoardings, and how observable is it to people commuting outside? Others have joined the bandwagon! Coupon Dunia, does not want to shy away! OLX does not want to let go this opportunity too!And paisabazaar, certainly offers a lucrative proposal. Not very long ago, there was another jostle, but this time in a different sector altogether. OYO Rooms, India’s largest network of technology enabled rooms, during the launch of their app, faced a belligerent marketing stint by rivals ZO Rooms, when they put up signboards and standees. This battle has begun in India, and it will be very interesting to observe, if the audiences will be taken for one hilarious ride. Who sells will depend a lot on who will make people smirk?
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