Indians love their chai — homemade, roadside or from a posh tea parlour. Besides giving that kick, tea also helps in breaking the ice in awkward situations. Hindustan Unilever has been exploring this idea in its latest campaign for Brooke Bond Red Label tea. In its last ad film, it had an elderly Hindu couple bonding with their Muslim neighbour over a hot cup of chai.The latest ad , conceptualised by Ogilvy & Mather, shows a live-in couple getting a surprise visit from the boy’s parents. In this situation, a hot cup of tea, made just the way the parents like it, takes away the tension.Explaining the concept, Kainaz Karmakar, executive creative director (ECD) at O&M says, “Starting last year, we moved the Red Label proposition to the bonds that are strengthened over a great cup of tea. The core idea is encapsulated by the tagline — Swaad Apnepan Ka.”Harshad Rajadhyaksha, ECD at O&M, adds, “The heart of the campaign is the same as the earlier ad about the neighbours — the role of tea in dissolving awkwardness remains consistent across both the films.”(This story was published in BW | Businessworld Issue Dated 13-07-2015)
Read More
Google’s latest study of consumer behaviour shows that on average, people turn to their phones as many as 150 times a day, making the ‘mobile-first’ phenomenon a reality that impacts all aspects of life, and of business. The global study titled Consumer Barometer puts a lens on the several purposes that mobile phones serve. Simon Kahn, chief marketing officer of Google, tells Shubhi Tandon how brands can best leverage mobile for marketing.The latest figures on consumer behaviour show Google has narrowed the conversation down to moments that brands can relevantly integrate themselves in, terming these as ‘micro-moments’. Such moments can be broken into four categories: ‘I want to know’, ‘I want to go’, ‘I want to do’, and ‘I want to buy’. “These reflect the intent to do something. These are times when consumers need to learn, discover, watch, find, or buy something and they reflexively turn to the closest device, to act on that need,” says Simon Kahn, chief marketing officer, Google.The growth of smartphones, especially in Asia Pacific, has a key role in the trends that Google identified in formulating marketing strategies for the region. Kahn reiterates that Asia is fast growing as the digital centre of the world with a high number of mobile-first markets coming from the region. Asia’s embrace of the smartphone has made micro-moments more important to marketers here.RelevanceThe ‘I-want-to-do’ moments are rooted in intent to achieve something, where in most cases a brand or service is relevant to the consumer. Kahn elaborates, “I-want-to-do moments are those when a consumer wants to know something specific as to how to curl hair, fix a bike, or bake a cake. These moments can be incredibly valuable for brands and there are more of these moments in Asia than in the West.”Videos play an important role here. Unilever India recognised this when it created its ‘Be Beautiful’ YouTube channel — a hub for beauty tips and tutorials — and Nestle also tapped into this behavioural shift by featuring cooking videos on its channel.On the other hand, the ‘I-want-to-buy’ moments describe those times when consumers pull out a smartphone to compare prices or look up reviews — even when shoppers want to buy offline.But mobile isn’t just about e-commerce as consumers also turn to their phones for local information to find a gym or restaurants, and when they do this in Asia they want answers fast. “These data points are only reminders of how mobile has transformed consumer behaviour and how that is, in turn, interesting and transformative for marketers. Consumers are expecting immediacy and relevance,” says Kahn.Adding ValueKahn explains that brands can be present in a consumer’s life in interesting ways in the course of the various I-want-to moments. “There are two important things here. First, brands need to understand that intent matters more than identifying the consumer, and conversion matters like awareness. Second, there is a need for the right mobile assets in addition to right advertising assets.”His advice to marketers is to fully adopt the best practices so brands can relevantly be present in a consumer’s life, and add value, creating a meaningful place for themselves.“Consumers are expecting intelligence from devices. With voice search, various environments are created that need to intuitively understand what a consumer wants. The consumer is putting faith in the device to guide in situation such as routes or general queries, and that is the opportunity for businesses,” sums up Kahn. shubhi@businessworld.in;@shubhs78(This story was published in BW | Businessworld Issue Dated 13-07-2015)
Read More
The presence of Irrfan Khan in the movie, as Simon Masrani, the owner of the dinosaur park, adds to the attraction of the story for Indians, says Manish Kumar PathakThe roaring dinosaurs are back; back with a spiteful vengeance, and have roared past all existing records. The film has become the biggest movie in history, as it has nudged past Avengers’ collection of $207.4 million by raking in $209 million in the opening weekend itself. So what has gone right, and why is this monster on the rampage? The biggest reason that stands out will have to be the timing of the release. After all the sympathy and emotions that were attached with “Fast and Furious :7” and after the anticipation slowly eased down over “Avengers: Age of Ultron”, the movie was shrewdly placed in this month, where there are no other big ticket projects lined up. The legend of Steven Spielberg can never be undermined, and can never be overshadowed. But since Spielberg was unwilling to bear the troubles of going through the same testing process of direction again, Colin Trevorrow, an upcoming director was assigned the task. And has he outdone Spielberg? Well this question is best left unanswered. 23 years, have passed since Jurassic Park opened its gates and allowed dinosaurs to run amok, tearing, killing, and create hysteria everywhere. This long time span, has seen audiences evolve, and being more receptive to on-screen violence. So, then there is no apprehension about children or minors being kept away from potentially nerve-wracking scenes. Dinosaurs ripping people apart is more an adventure than a discomforting sight, and families like to witness this ride closely huddled together. Actors who have won the trust and who have enjoyed success with franchises are a select few. After his considerable success with “Guardians of the Galaxy”, Chris Pratt has taken huge strides in establishing himself as one for the future. His wit, the action-sequences, the ease of changing moments in the movie, all have proved that he has an uncanny ability to gauge the mood of the audience and slowly waddle into their imagination. There are also other factors, like dinosaurs having feathers, exposing the dinosaurs to sunlight that helped the audience to get a hang of more intricate details about the body structure, which helped them look more natural. For the Indian audiences however, there was another focal attraction. This was the presence of Irrfan Khan in the movie, as Simon Masrani, the owner of the dinosaur park. The acting prowess of Irrfan is unquestionable, and his new avatar did offer a mouth-watering prospect, as he has already appeared in other Hollywood movies like The Namesake and The Darjeeling Limited. Then came the much acclaimed Life of Pi and the Amazing Spiderman which has had huge box office successes. This move helped the movie to build a more global star cast which ultimately had a bearing on the outreach and collections. Indian movie industry is evolving at a rapid pace, and many more actors are now getting offers elsewhere too. The future lies here, as this amalgamation of east and west most certainly will be a win-win situation for all concerned. We, as the audience can only hope that this roar does not subside anytime soon!
Read More
Audi, the German luxury car manufacturer, on Thursday (18 June) introduced its incredibly popular Audi Q3 in a brand new avatar. Since its market launch in 2012, the Audi Q3 has been the most successful model in its segment and the new Audi Q3 ups the appeal with a refreshed design and technical innovations. Priced at Rs 28,99,000 onwards (ex-showroom New Delhi and Mumbai), the new Audi Q3 is available at all Audi dealerships across India. “It’s no secret that the Audi Q3 is one of the most popular models in our product portfolio. The car has been a winner ever since its launch and still excites the young achievers. However, Audi believes in constant innovation and improvements and we are happy to bring the new Audi Q3 to our Audi enthusiasts. We are confident that the new Audi Q3 will bring in many new members to the Audi family much like it did since its launch and will further strengthen our dominance in the compact luxury segment in the land of quattro - India,” said Mr. Joe King, Head, Audi India. “The new Audi Q3 is our fifth launch for this year, after the Audi R8 LMX, the new Audi TT Coupé, the new Audi RS 7 Sportback and the Audi RS 6 Avant. We plan to launch ten new cars this year, which will include at least one new car in each segment of our comprehensive product portfolio. We have some more surprises in store and are gearing up to launch some exciting new models, “added King. The new Audi Q3 now comes with the MMI® Navigation System and Parking System Plus with Rear View Camera. The new Audi Q3 is also equipped with the Audi Sound System. The infotainment system includes Audi Music Interface, a 20 GB Jukebox, two SDHC slots, Bluetooth Connectivity and Streaming.Audi Q3 Photo Gallery
Read More
India's oldest and most distinguished IT firms are doing what would have been almost sacrilegious a few years ago - holding coding marathons to develop innovative fixes and deploying "commando" units to resolve clients' IT woes within hours.Infosys, Wipro and other Indian IT giants, which rose to prominence during the outsourcing boom in the 1990s and 2000s, have struggled to keep pace with mushrooming start-ups. The rate of revenue growth has more than halved since 2011-12, partly due to the emerging competition.Those young set-ups say they go beyond cookie-cutter solutions and argue that they do the job more quickly and for less. They also attract the crème de la crème of India's engineering graduates with their culture of bubble chairs, breakfast bars and table tennis at work, in a way that the corporate, straight-laced atmosphere of the country's IT trail blazers struggles to.Client demands are similarly changing in India's $147 billion IT outsourcing industry. Major telecoms, retail and banking firms want more than an outsourced help desk, and now demand everything from help solving a server crash overnight to help building an app, industry veterans say."When people around you change, moving from a very process-defined model to a much more agile model, it is definitely making a dent in everyone's thinking," said Sanjiv Kovil, Wipro's chief technology officer.To deal with this, Wipro, for example, has set up small "commando force" units that help get swift solutions by copying a startup environment where small teams move fast. India's third-largest IT services provider has also introduced gaming-like training sessions and so-called hackathons to solve both fake and real client problems."It is not the wild west - there is a method to the madness. We have kind of defined the boundaries, but within that we have allowed for a lot of flexibility," Kovil said.Earlier this month Infosys - long known for its inflexible rules of employee decorum - did away with a formal dress code. The company had already relaxed rules that stopped workers from accessing social networking web sites at work.At Tech Mahindra, associates and mid-level employees can win quizzes and contests to spend a day with the CEO and exchange ideas, a practice that industry veterans say was impossible to imagine even a few years back.Bearing FruitThere are some early signs the more flexible approach is yielding dividends.Tech Mahindra said it won a contract last month to build an electric vehicle charging system for the city of Ontario, Canada, because its flatter structure had allowed the manager responsible to decide alone and move fast with his bid.To be sure, it is hard for large IT companies, with an army of thousands of employees, to change overnight. Yet, steps as small as implementing a casual dress code and allowing employees to use their own tech devices mark a major cultural shift in an industry that still relies heavily on manpower to win business."These changes are cool. I like that they have finally decided that we are adults," said one young Infosys executive who has spent seven years with the firm, declining to be named."But the real changes are different - for example, giving smaller teams more authority, that makes more of a difference. That is happening, but slowly."For now, even small changes should at least help retain the sector's traditionally fickle talent."(Young graduates) have access to overseas travel, they are spending time with customer organisations abroad and they are looking at that culture. So they are questioning their organisations," said Asheesh Mehra a senior Infosys employee who quit earlier this month to start his own company, Antworks.(Reuters)
Read More
s the telecom sector is stepping up with the launch of 4G technology, India’s largest telecom service provider Bharti Airtel still holds its market leader status in terms of consumer base and in broadband services. A report by Credit Suisse says Bharti Airtel which has already launched 4G services in various circles, is best positioned to respond to the upcoming launch of services by Reliance Jio Infocomm. "Bharti clearly has the lead among incumbent operators on 4G deployments, and is probably best positioned to respond to the upcoming RJio launch," the report said. Bharti Airtel soft-launched 4G/LTE services in Mumbai and a few other cities recently. This comes more than three years after its 4G launch in Bangalore in 2012. The report, however, said given the scale of investments, network capacity size and differentiating investments (spectrum/fibre backhaul, etc.) made, it believes even Bharti's numbers could come under pressure in the next couple of years. The year was quite eventful for the country’s biggest telecom service provider Bharti Airtel. In the spectrum auctions conducted in March, the company successfully renewed 900 MHz spectrum in six circles. The company also won additional 900 MHz spectrum in key leadership circles, added to its existing 1800 MHz and 2100 MHz spectrum in 7 circles, and won 2100 MHz spectrum for 3G services in 6 new circles. This will enable the Company to provide world class voice and data services to its customers across 2G, 3G and 4G technologies. In the recent spectrum auction conducted by DoT spectrum worth Rs 109,875 crore was bought by seven telecom operators, with Airtel alone acquiring spectrum worth Rs 29,129 crores.Of this, Rs. 17,618 crores has been spent on the renewal of existing spectrum while the balance Rs 11,511 crore has been spent on procuring new spectrum. The company which has its operation in 20 countries continued to invest on up-gradation and expansion of network sites. By the end of the quarter, the company had 146,539 sites in the country. Out of the total number, 33.3 per cent are 3G sites. With 48,825 3G sites, Airtel has the largest 3G network in India. Finances For the year ended March 31, 2015, the consolidated total revenues for Bharti Airtel amounted Rs 92,039 crore, EBITDA at Rs 31,452 crore and Net Income ended at Rs 5,183 crore, up by 86.9 per cent from last year. Mobile Data revenue at Rs 2,324 crore registered a growth of 70.4 per cent Y-o-Y in India, uplifted by increase in usage per customer by 41.2 per cent and Data customer base by 30.3 per cent. Advantage Airtel As the sector is gearing up for the 4G battle Airtel has the advantage of having the largest consumer base. As of now total number of wireless broadband subscription stood 83.68 million. Bharti Airtel (20.58 million) leads in this segment too, followed by Vodafone (19.37 million) and Idea Cellular (14.52 million), Reliance Communications Group (7.83 million) ranks 5th below BSNL (8.92 million).The Company’s 3G services are now available in 9,951 towns and 4G in 17 towns, largest in the country.(Arshad Khan) Its announcement of strategic collaboration with China Mobile under which the two companies will work towards the growth of the LTE ecosystem and evolving mobile technology standards to enable delivery of world-class affordable services to customers.
Read More
Ajay Singh, the man who had co-founded and last year rescued a collapsing Spicejet, is on a roll. He claims to have cleared all debts of the company in just three months since his takeover in December last year. Speaking to BW |Businessworld's Monica Behura, Singh says that the company is undergoing a corporate restructuring. Clearing off debts, a leaner management, expansion of fleets and hiring back people who left during the Maran times is right on his agenda. What brought you back into SpiceJet?It was both an emotional and rational decision but most importantly it was the national perspective that convinced me to join SpiceJet. With fewer players, brands are visible and any airline failure such as a shutdown gives a bad name to country’s aviation industry. Did it make any business sense for you to take on the ailing SpiceJet?Macro economic climate like low oil prices helps growth. With Modi government in power, I was convinced of a higher economic growth trajectory which is bound to have a ripple effect on all sectors including aviation. There is a growth potential to help that one per cent of population that flies in planes and its number is bound to grow. Before joining SpiceJet, were you privy to the book of accounts? How different was it from the time you founded it in terms of financers, reserves, management? It was only in December, after the commencement of dialogue that I looked into the matter. I was given a 30 day interim period and in between that I saw the books. It was a big hit for me. When I left the company in 2011 it was making profit, it had reserves but when I joined back, its balance sheet had accumulated huge losses. Its liability had surpassed its assets and financial condition was not healthy. What led the company to such a financial crisis? What was harming it the most? Deviation from low-cost flights which made the company grow was one of the main reasons. Shift from focuses such as trying to reduce the cost of operation was lost. The moment I stepped in I opened stations which were disproportionate to the number of planes we had, and we also opened low-cost flights with exciting deals. Why do you think the Marans failed and what was the failure cost of the airline? Firstly, I think the airline deviated from its principles of trying to reduce cost on a regular basis. You have to keep knocking down costs which I didn't think was the focus under the Maran leadership. Secondly, in terms of revenue, there was a lot of dilution of revenues by having promotions which were not designed as well as it should have. Thirdly, I think they went more for spread, in terms of opening up of large number of operations as opposed to having higher frequency. Fourthly, the airline was functioning under an absentee leadership because the Marans were not physically present here. I think airline being a very competetive space, you can’t afford a hands off deal. It is a combination of factors that led to the failure. With almost six months in office, how does the balance sheet of Spicejet look like now? Ever since I joined I’ve cleared all the statutory debts and every single rupee of bad debt, all employee salaries are up to date and oil companies are paid. The company has turned upside down since its inception in 2005, the company was based on the premise that it will not take credit rather discount from the oil companies, but Maran had sought credit from the PSB’s. Right now we are on a recovery zone and it is always tough to recover after a shutdown. Given your connections , did you receive any government help? Nobody wanted another Kingfisher, nor the government, the stakeholders, investors, or the aviation industry. Kingfisher and Deccan Airlines were irresponsible. They got a lot of money as debt which was much higher than their revenues and ultimately consequences are known by everyone. Air India too incurs losses but it is written off by government expenses. It creates an imbalance, there has to be a coherence of policies and this government is aware of it. Yes, we did the civil aviation ministry for advice and they supported us morally which was important. As for oil companies, we asked for discount which was provided to us. There were certain allegations regarding transparency in the acquisition. How would you justify it? I would like to clear that we acted as per SEBI law who duly protected the small investors with this acquisition just because some people (referring to Subramanium Swamy) are not happy with the law the way it is then the law should be changed. Where have you raised the Rs 550 crore from that you’ve invested till now? What is the investment required for turning around SJ? Where is going to come from? Any more investors coming aboard? This money has come from a mix of investors and banks. We are getting a lot of funding offers from various players like private equity, debt providers, hybrid products and even foreign airlines. We will choose the mode of investment that comes at the lowest cost. If any further dilution of stake is needed, that will be done at better valuation. Our improved performance will reflect in our stock price. We would need another Rs 500 crore for complete revival of the company. What about the Rs 1500 crore that was talked about? Yes, it was because initially we didn’t knew the amount to clear the liability. From some portion of the fund and by the cash flow, liability was paid off. At present our cash flow is strong. From December no flights have been cancelled. Has the operation increased or has it come down? 190 flights per day from December has been increased to 230 today. My first order in business was to bring stability in operation. We have started operating in airports like Jabalpur, Dehradun, Amritsar but our basic remains same, higher frequency in few stations. So now, can it be said that SpiceJet has cleared all its debt and recovered from the financial burden? Yes, we have cleared all the debts by the intrusion of money we brought in and paid some by cash flow. Big vendors such as Lessors t has been paid off fully. Besides cost-cutting what are the business plans for revival – we hear of SpiceJet leading a low-fare war, which gives cash flow, but is debilitating in the long run. Also, major effort for ‘on-time’ and operational efficiency. Anything else? It is completely wrong. Promotional sales are a part and parcel of low cost airlines world over. They enable people, who have never flown before, to take to the skies. However, they should not be indiscriminate and revenue-dilutive. We have achieved high load and yield factor in months of Feb, March and April. We will continue to look at reducing costs ways to increase our revenue through our launch of products like SpiceJet Assurance service among others. What about your contract with bombardier? What are your plans for fleet increase? We are renegotiating our 20-25 contracts with Bombadiers to bring the cost back in line,” asserts Singh who is looking order a large number of aircrafts by October. Reports are that top management body is leaving SpiceJet? What would you like to say in this matter? Yes, the CCO and head of HR have left the company reasons which I cannot disclose. We are having some structural changes at the top level which you will know in near future. Right now our core team consists of very experience people. Given that Vistara and Air Asia have steeped in the market, how you feel things have changed in the last five years? As of now they are small players. There is a scope for growth for everyone. Talking about development of airports by government’s PPP programme, what is your view? Government should invite tender for raising the infrastructure of airports. Company which agrees to the work with minimum amount should be given the charge. Smaller airport development is very necessary for the development of aviation industry. What is the revival scheme based on?Simple, stick to the basics.
Read More
India's retail sector is likely to touch $ 1.2 trillion by 2020 from the current level of $ 550 billion, helped by a rapid growth in the e-commerce market which will grow to over $ 100 billion during the period, according to industry body CII. “E-commerce is driving thoughts of customers and retailers but that does not mean brick and mortar channel is going to be killed. Retailers will have to innovate their business model to reach the customers and to meet their aspirations,” Adesh Gupta, Chairman, CII Retail 2015 and Promoter, Liberty Group said. “It is expected that India’s e-commerce market will grow from $ 2.9 billion in 2013 to over $ 100 billion by 2020...The online retail can reach smaller cities much better than offline channel, giving it a bigger advantage. Collaboration between both organised and unorganised retail companies could be the real game changer,” he added. Agreeing with Gupta, Somany Ceramics CMD Shreekant Somany said, “e-commerce is probably creating the biggest disruption in the retail industry and this trend will continue in the years to come...Partnering is the best way out.” According to a report titled ‘The Indian Retail Medley’ while organised and online retail will grow multi-fold, unorganised retail will continue to dominate the sector. (PTI)
Read More
The Indian Premier League (IPL), is one of the biggest cricket carnival the world over. Currently in the final stages of the eighth edition, the tournament has with its mix of cricket, politics, Bollywood and razzmatazz grown, and continues to capture the imagination of the cricket fraternity the world over. From providing opportunities to fringe players not only from the Indian domestic circuit, it is also proving to be a much needed platform for players from all around the globe. After years of apprehension, the purists too are applauding the merits of this tournament, and the way it is helping in honing the skills and temperament of the players. Although the IPL has shown the way forward to many leagues sprouting all over the world namely the Big Bash League in Australia and the Caribbean Premier League in the West Indies, the organisers can still learn from popular leagues from other sports that have sustained their popularity for a long time. There is no dearth of money in the league, the market is on the rise, and the penetration is growing. Hence few modifications can be made in accordance with the contemporary trends. As an audience, these suggested changes can be more exciting, and more on the same pages with Football and Basketball Leagues. 1. There should be more than one home stadium for every team. This will help in penetration into the not so often ventured places, and the IPL can help in casting away isolation many state associations currently perceive. The massive audiences we see at non-traditional venues should be an indication of the market willing to be tapped. 2. Introduction of different home and away jerseys. The playing kit in the IPL has always been subject to mockery and ridicule. Introduction of different home and away jerseys for each team, can help in easing out the criticism, and can also create a better fan bonding, as home jerseys in home conditions are bound to create more euphoria. 3. The system of players being released on loans. The rule of playing only four overseas players, has resulted in many quality players being benched for a good chunk of the season. Even Indian players who are International discards do not find themselves featuring regularly in the playing eleven. The system of mid-season transfers that is so popular in the Barclays Premier League in England and many other football leagues around the world should be introduced. This will help struggling teams who did not get it right at the auction table resurrect their playing squads. 4. Introduce The LED bails The recently concluded World Cup had one prominent talking point. The use of LED bails, that lighted up every time the ball hit the stumps. This not only made decision making easier, but also provided a dramatic viewing experience. 5. IPL should go global The success of the IPL when it was held in the United Arab Emirates, and in South Africa should enable organisers to consider shifting one part of this long tournament to other countries, that will widen the audience base, and rope in more international investors.
Read More
The brick and mortar industry in India is finally sailing with the wind at its back. Extreme competition put up by online retailers in raising funds has led to the consolidatation of the industry. Thanks largely due to foreign investment regulations which fundamentally do not allow access to foreign funds, except in a few states, brick and mortar companies need to merge to compete. The online retail industry has raised over $4 billion, in under two years, which is a large investment and it is more than what retailers like Future Group or Aditya Birla had raised in such a short span of time. Today Future Retail, owned by the Future Group, has merged with Bharti Retail, owned by Bharti Enterprises, to create one of the largest food and grocery businesses worth Rs 14,000 crore. This clever move from Kishore Biyani adds value to the whole deal because Future Group has also partnered with Amazon, the global online retailer which works on a market place model in India, to sell products on their platform. Amazon harbours hopes of penetrating the food and grocery business in India. This merger, between Future Retail and Bharti Retail, will allow Amazon to reach consumers in over 243 cities. Earlier this week, the $28-billion Aditya Birla Group merged its retail businesses, Aditya Birla Nuovo and Pantaloon Retail, to create the largest apparel retailer in the country with Rs 12,000 crore in revenues. Why Is A Merger Necessary?Consolidation will create synergies across tier 1 and 2 cities and other smaller towns. It will result in easy access to foreign funds and will reduce the logistics costs involved in serving stores across the country. According to Ernst & Young, the retail industry in India is $550 billion of which only seven per cent is organised. Compare that with the e-commerce industry and it is only $4 billion today or Rs 24,000 crore. PWC expects this business to grow to a Rs 100,000 crore business by 2017. Brick and mortar companies have merged to also engage consumers on this platform. This merger of Bharti Retail and Future Retail will create a company that has an omni channel strategy and will compete with the likes of Reliance Retail, Shoppers Stop and the Landmark Group. Reliance Retail, owned by Mukesh Ambani's Reliance Industries, is the dark horse here and has hit the Rs 10,000 crore in sales mark. Sources say that Reliance too is experimenting with an e-commerce platform, of its own, to create an omni channel sales and consumer engagement platform. This move opens up a few questions whether we will see megers between established players like Shoppers Stop, Trent and the Landmark Group or whether we will see all these companies strengthen their omni channel retailing strategy by integrating ecommerce platforms with their offline stores. A classic example is what the $72 billion global retailer, Target, is doing to integrate brick and mortar stores with their ecommerce channel (Right On Target) in the USA. Analysts told BW-Businessworld that working on an omni channel strategy is the only way forward for brick and mortar retailers. Younger people or the millenials are shopping on all platforms and will eventually create an equilibrium out of the current chaos in five years. Therefore making it important for companies to focus on online stores, new logistics and delivery modes along with smaller stores with focused inventory. In the current regulatory set up, this kind of structure will not happen because accessing capital from Indian banks alone cannot sustain the brick and mortar industry. The top three e-commerce marketplace companies have been able to raise big money consistently and have been backed by global funds because 100 percent FDI investment is allowed in wholesale and logistics businesses. The final question, that one must ask, is whether global funds would invest in brick and mortar retailing if the regulatory environment changes. Foreign direct investment (FDI) is allowed in multi brand retailing only in a few Indian States. Only Trent's Star Bazaar, which has partnered with UK's Tesco PLC has managed to retail, across India by registering different corporate entities, in each State, where FDI is not allowed. Regulation is finally driving consolidation. Competition from online companies will get tougher. While brick and mortar retailers grapple, over the restrictions of the FDI policy to raise money, they will also have to compete with the expanding ecommerce market place businesses in acquiring consumers. Snapdeal, Amazon and Flipkart have been able to raise money and have also managed to connect over 300,000 sellers on their platform. One must treat this number with caution because only 20 per cent maybe active sellers on market places. Still, they have spent over Rs 1400 crore in TV advertising to get more customers on board. Also the valuations driven by their asset light business models have eclipsed every other business out there. That said, they do manage inventory for returns and for products with exclusive tie ups. Flipkart gets 40 per cent of its business, in shipments and not value, from WS Retail, which is it's organically grown logistics firm. Consolidation: The Name of the GameThe merger with Bharti Retail will create two companies: Future Retail and Future Enterprises. The former will operate the retail business and the latter will manage investments and company assets. This will split Future Retail's debt burden, of Rs 3500 crore, in to two companies. Future Retail will handle Rs 1200 crore and the rest will be borne by Future Enterprises. This deal is also synonymous with Kishore Biyani's business acumen. He had earlier, in 2012, had pared debt of Rs 8,000 crore to Rs 4,020 crore by demerging Pantaloon Retail into two entities called Future Retail and Future Lifestyle Fashion. He also managed to sell several group companies along with the flagship company Pantaloon, which was sold to the Aditya Birla Group for an undisclosed sum. Aditya Birla took over a debt of Rs 800 crore and infused Rs 800 crore through debentures. Kishore Biyani, Founder and Group CEO, Future Group said, "Bharti Retail’s strengths and network compliment Future Retail's business. It will bring us closer to millions of consumers." The combined entity will have over 570 retail stores in 243 cities with operational retail space of over 18.5 million square feet. It will operate 203 Big Bazaar and ‘Easyday’ hypermarkets, 197 Food Bazaar and ‘Easyday’ supermarkets, and 171 other stores comprising Home Town, eZone, FBB and Foodhall. “We are delighted to announce this partnership, which brings together the strengths of the two companies and provides a strong platform for future growth," says Rajan Bharti Mittal, Vice Chairman, Bharti Enterprises. The shares of Future Retail rose by 12.50 points, a 10.80 percent growth over the previous days close, to Rs 128.20 on announcement of the merger. India is going to see so many hybrid business models that will increase shareholders. But the value is going to be cashed in by a few companies, be it in online or offline retailing, and many such companies are needed to distribute wealth evenly. Sadly only the technology businesses have managed to create value evenly in terms of shareholder wealth.
Read More
