Retail Chronicles| August 16th-31st

RETAIL CHRONICLES Fortnightly Newsletter

| Volume 3 - Issue 3 |

16-31 AUGUST 2018

Pg 08

02 E-COMMERCE

LOVES DISCOUNT

04 'SOCH' THINKING DIFFERENTLY

Pg 02

Pg 04

Pg 10

Pg 8

06 iKEA & INDIA: THE

CHAI CONNECTION

08 V MART: MAKING

SEMI URBAN INDIA FASHIONABLE

10 Retail News at a Glance

Retail Lab SIMSR K J SIMSR, Mumbai

Contact: +91 8896732500, +91 8449248227 retaillab@somaiya.edu

Retail is a customer business. You’re trying to take care of the customer solve something for the customer.

And there’s no way to learn that in the classroom or in the corner office, or away from the customer. You’ve got to be in front of the customer.

Erik Nordstrom, President, Nordstrom Direct

E-COMMERCE LOVES DISCOUNT The month of august has approached and all the online retail giants have stepped up to attract the customers through attractive offers. With heavy investment poured into the retail industry by three Retail giants, Amazon, Flipkart and Alibaba backed Paytm mall, this year’s season sale is expected to be more competitive. This year in the month of March, Flipkart announced that it would build a 100 acre logistic park near Bengaluru. Ekart, a subsidiary of Flipkart plans to increase its warehousing and delivery workforce by three times by the year 2021. These are good signs for the blooming online retail industry of India.

By Piyush Sinha

Last year Flipkart crossed the $1.5 billion mark with respect to Gross merchandise value and according to a senior executive, the company expects a rise in 80% sale during the Big Billion Days compared to the previous year. The company meets one month target in just 4-5 days. What is special in these days which attract customers like swarms of flies? The answer is discount. We can see a variety of product discount which even range to 95% of the MRP. Let us study go through this discounting strategy from the seller point of view. Suppose a new product is launched, the cost of the product is Rs 500. The MRP is fixed at Rs 1500 and it is being sold at Rs 1200 offering a discount of 20%. When the product is few months old it is being sold at Rs 900 giving a discount of 40% during the weekend sale. When the product is too old and approaching the end of their cycle, it is being sold at Rs 600 giving a discount of 60% to its customers.

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The new businesses are getting affected the most because of heavy discount offered by big players in the retail. It will be a surprise for many that all the big online retail giants are still running through losses and the biggest cost which they incur are the discount cost. These discounts seem to be very attractive to customers but in reality they are sweet poison.

And these stocks are cleared during the annually or semi annually sales like the Big Billion. One thing is common in all the cases that is discount. Are we living in an era where offering discount is the only way to attract customers?

We can expect in the near future that the companies can even offer money to the customers for using their product. We are living in a discount competitive market where young entrepreneurs and their ideas are buried under the rich discount affordable companies. The biggest loser in this race is the customers.

Why are sellers more inclined to sell discounts rather than selling the product? If a company thinks that by offering discounts they are creating brand loyalty among the customers then they are living in a fictitious world. Customers will choose that brand which sells at a lower price offering attractive discount. Consider a real life example, If Ola is pricing lower than Uber on a particular day, how big Uber fan you may be you’ll choose Ola without hesitation. You will choose discount over Brand. The current scenario is that promo code has become a pricing strategy not just promotion.

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"Soch" - Thinking differently

By Bharat Gupta In an age where brick-and-mortar retailers are wrestling with issues of creating lasting value and relevance, there are some homegrown retailers who are aiming for a pan India presence by offering the best to their customers. One such regional retailer is “Soch”. Launched in 2003 by Vinay Chatlani, Soch began as a multi-brand clothing store. The brand began with five outlets and, following Chatlani’s decision to create a separate storefront for the private label they created, the business began to expand.

The brand is rather quick to adopt retail technologies at its stores to cater to tech-savvy customers of today. To further enhance its ability to showcase its products, the brand has now installed video walls across its stores to digitize its catalogues. This helps the customers to visualize the look of the merchandise available and they can make an informed choice of buying. Soch is the first ethnic wear brand in India to start video cataloguing for their merchandise and they do 4050 catalogues a year, of which 6-8 are for each product category. Video walls with price displayed, has really helped them to showcase their casual and everyday wear too.

They have also implemented the Omnichannel strategy in 10-12 stores on a trial basis, which means if a customer comes to any Soch store, he can choose from 400,000 to 500,000 garments across the eco-system of Soch – including from their warehouses – instead of just the couple of thousand in one store. This helps in consumer delight and satisfaction as they have such a huge variety to choose from. In the same stores, they also give the consumer the option of ordering online and picking up merchandise from a store if that is convenient. If not, they deliver the products to the consumer, at his doorstep.

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Being an ethnic wear brand, Soch boasts of creative excellence as its unique selling point. What differentiates Soch from the rest of its competitors is the way the brand thinks differently about its business. Even for its end-of-season sale, Soch takes the early flight out. It announces its sale at least a week or two before the rest of the industry.

That ensures that it gets advertising space prominence and also brings customers with a loaded wallet — it being the first sale of the season.

Probably goes to show that competitive advantage need not necessarily be restricted only to the merchandise on display.

They also engage the customers by taking valuable feedback on product, service, etc. and connect back with them at the time of new arrivals and new store openings.

"Soch" - Thinking differently Chatlani’s continuous efforts have helped them to understand and decode the ever-changing consumer’s behaviour and needs. The position of “Soch” in the market today is because of the wise business decisions and sharp understanding of it’s consumers. Constant monitoring of customer behavior and buying patterns through data helps the brand in understanding them better, which also helps it to keep innovating with its product line, pricing and even zoning and layout changes.

The brand has 100 EBOs and 47 LFS stores currently operational in the country. It is now looking to increase its pan India footprint by tapping the more unrepresented markets like tier-II cities, while at the same time, enhancing its presence in major metros as well. The South and West region have been traditional strongholds for Soch, the growth roadmap ahead not only includes reinforcing its hold there, but also actively developing a North and East footprint with its entry into NCR. They are also looking to enter international market this financial year which includes Middle East, South East Asia, Mauritius and Sri Lanka.

Thus, Soch is a brand which is an example of a perfect blend of online and offline marketing, as in this ever changing world full of customers with various types of demands, their needs can never be fulfilled using a single technique- online or offline and the strategy adopted by Soch to balance the online and offline marketing is something every other retailer can revamp.t

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Ikea and India the Chai Connection

by Sagar Anam

11th August, 2018, Hyderabad-One of the most crowded cities of India, saw an unusual crowd in Hypercity area- neither did any tree fell down, nor was there any vehicle that broke down- it was the IKEAMania.IKEA- Sweden based world’s largest Furniture, home accessories and Kitchen Appliances Retail Chain recently opened its first outlet in Hyderabad-India.IKEA was founded in Sweden in 1943 by Ingvar Kamprad, who was just 17-year-old then and now, has been listed in Forbes 2015 in the top ten richest people in the world. IKEA has 415 stores across the globe in 49 countries, as of Nov 2017.

The word IKEA stands for Ingvar Kamprad Elmtaryd (the farm where he grew up), and Agunnaryd (his hometown in southern Sweden).

IKEA started as a mail-order sales business and began to cell furniture in 1948, with its first MobelIKEA store opened in 1958, in Älmhult, Småland. The first store opened outside Scandinavia was in Switzerland, in the year 1973. Later in 1973, there were stores opened in Japan, Australia,Canada, Hong Kong and Singapore.

The journey of IKEA coming to India is an interesting one- how did a cup of Masala Tea bought IKEA to India: In 2012, the CEO of IKEA- Juvencio Maeztu had come to Delhi as he had appointment

with FRRO (Foreigners Regional Registration Office) and he needed a passport size Photograph for the same.

Thus his driver drove him through the streets of NCR, until they landed up on one of the many hole-in-the-wall photography studios. The studio was run by an old man. The CEO was in hurry as he did not want to miss the FRRO appointment and thus he asked the old man “Can you take my photo?”

He replied “Yes,” “How long will it take?” Maeztu asked hesitantly “Five minutes,” the man said.

The photo was clicked, but the printing of the Photos went on for some more time, to which the old man said that it was because the printer was old and dusky. But he was quick to offer him – “Masala chai?” he asked.

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“No” came the curt reply. Even as the man struggled with the printer, he kept persuading Maeztu to drink a cup of chai. An exasperated Maeztu gave him a brusque, “No” The Photographer then said to him, “Sir, what’s the point of life if you cannot enjoy a masala chai for five minutes?”

That was the time something clicked to Maeztu- he felt some connection with the Tea and the man. He approved of having a tea took a seat and drank the Masala Chaay. The conversation between the old man and Maeztu went on for over an hour that day.

He may have missed his FRRO appointment, but Maetzu says, “That was the moment I connected with India. It was a turning point.”

He had finally found a home away from home .

This is what Meuztu had to say about IKEA’s relationship with INDIA: “We are here for the long term. We think of 100 years when we think of our strategy. I have taken no shortcuts. More importantly, I have had no pressure (from the headquarters) to take shortcuts. In the next 100 years, the sheer size of India makes it important. There are other super big reasons. India is challenging us to find better ways to do business-this is a market you need to learn and not come into with an attitude that you know everything”.

IKEA has a vision of opening 25 stores in India with 20,000 employees by the year 2030 and the next stores to be set up in India is planned in New Mumbai, Bangalore and Gurgaon.

Thus only a cup of masala chay and the old man’s wisdom played a major factor that bought IKEA to India.

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V-mart: making semi urban India fashionable

by Subham Thakur Fashion brands in India - Allen Solly, Zara, jack & jones, lee copper, flying machine and many more, You have seen all of them in big market cities or malls and their flashy advertisements. Their prices, always has deep impact on your pocket. Ever wondered why they all target the metro cities only? Because no brands wants to be perceived as brand for common man. What if I tell you that there is actually a brand who wants to be perceived as brand of common man of India, answer is v-mart.

With background in printing and packaging business chairman and managing director Mr. Lalit Agarwal decided to plunge in to the retail sector and in 2002 he registered company as Varin commercial private limited. Then in 2003 they opened their first store in Ahmedabad Gujarat, after that in in 2004 in New Delhi. Further in 2006 they have crossed 1 lac sq.Ft. retail space and subsequently renamed to v-mart retail private limited.

V-mart has 179 stores across 149 cities in 14 states and union territories, with a total retail area of 1.5 million sq. Ft. (139354.56 sq. Meter). Stores are located in prime states/cities such as Bihar, Chandigarh, Gujarat, Haryana, Jammu & Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh. They are among the pioneers in setting up modern ambiance stores or large retail malls across various small towns and cities like including Sultanpur, Ujjain, Motihari and more.

V-mart is a complete family fashion store that provides its customer’s true value for their money. V-mart offer their customers a great shopping experience each time they visit vmart store by offering a vast range of products under one roof.

Maintaining high standards in quality and design, v-mart offers fashion garments at down-to-earth prices and over a period of time has emerged as the destination of choice for bargain hunters and the fashionable alike.

V-mart primarily operate in tier ii & tier iii cities with the chain of “value retail” departmental stores. Stores cater to the needs of the entire family altogether by offering apparels, general merchandise and kirana goods.

“Price less fashion” is the main motto through which v-mart believes in providing the latest trends to the upwardly mobile Indians at the best possible price.

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The company made a stock market debut in February 2013, by allotting equity shares at price of Rs. 200 per share. In past five years, it zoomed 1403% from Rs. 160 against 76% surge in the benchmark index. Currently, the market capitalization of v-mart retail ltd. Stood at Rs. 42.19 billion against Rs. 2.87 billion as on May 16, 2013. Its share price in NSE is 2890.10 rupees and in BSE it is 2890.35 rupees (3:30 pm 13th august 2018).

Currently they’ve started their new campaign with name “vmart Jahan fashion Waahi” with their brand ambassadors’ Ayushmann Khurana & Bhumi Pednegar. In 2016 they’ve created a campaign named “the face of v-mart” for child models and give chance to be face of v-mart.

While speaking of goodwill they are in many corporate social responsibilities like helping blind people, helping poor school students under class 10th to achieve their education.

Project Saksham, in a first initiative of its kind in India, the major retail chain has joined hands with Saksham charitable trust to make available braille and other assistive & utility items across its stores on no-profit, no-loss basis to empower visually challenged persons. Gifting a child the will and the skill to read is one of the most empowering contributions one can make towards nation building, v-mart is doing exactly same with project re-advantage. Project Ujjwal Bhavishya, v-mart has teamed up with friends union for energizing lives (fuel) an NGO with the main aim of encouraging students to pursue their higher education in semi urban and rural areas. The scholarship amount of Rs. 10,000/- per student will support the study fees that would require finishing XI Std. .

The students from underprivileged families in UP, Bihar and other northern states of India will be selected on the basis of their high scores in std.10. How can we forget about their contribution in Nationwide “Swatch Bharat Abhiyan” they started their own “Swatch Gorakhpur Abhiyan”.

V-mart appointed Mr. Samir Mishra as their new COO, prior to joining in V-mart Mr. Mishra has worked in Pantaloons. “With Samir’s people-focused leadership style, industry expertise, and market understanding we will continue to grow and strengthen our footprint while maintaining our position of being dedicated to bringing quality fashion to aspirational middle class consumers,” said Lalit Agarwal , CMD-V-Mart Retail.

With their vision “To create value and make their ecosystem proud” and with mission “To Care for customer aspirations, discover and nurture talent, sustained ethical growth for stakeholders and harness vendor relationships.” V-mart will continue to grow further with leaps and bounds and will try to make our semi urban cities more fashionable.

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Retail News at a Glance Flipkart outpaces Amazon in sales growth by jumping to roughly 50% as compared to Amazon's 35-40%.

Amazon invests another Rs 2,700 crore in India business, bringing its total investment in India till now to 4 billion $.

Ikea’s sofas, spoons in demand as 1st India store of 4,00,000 square foot opens in Hyderabad.

OnePlus sees Amazon as its largest channel.

Sachin Bansal plans up to $ 1 billion VC fund in life after Flipkart.

Facebook expected to play bigger role in influencing fashion purchases in India.

Future Group’s Cover Story brand eyes Rs. 100 crore in sales this year.

Amazon takes on Paytm, Flipkart’s PhonePe, pumps in Rs 230 crore in Amazon Pay

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Our Team Content Head

Raveena Gupta

Junior Team Ayush Pangoria Bharat Gupta Piyush Sinha Sagar Anam Shubham Thakur

Retail Chronicles is a bi-monthly newsletter of Retail Lab, the Retail committee of KJ Somaiya Institute of Management Studies & Research, Mumbai. Images used in Retail Chronicles are subject to copyright.

Design Head Debashish Sarmah

Design Team Ayush Pangoria Sachin Ghosh Shiva Tadas Surabhi Upadhayay /retaillabsimsr

K J Somaiya Institute Of Management Studies & Research, Mumbai

@Retail_LAB

retaillab.simsr@somaiya.edu

retail_lab

+91 8896732500 +91 8449248227