Franchise model, most effective in tapping rural retail market, but Pricing, a major challenge in e-commerce: experts speak

More than 90% of rural retail market is left to be tapped and franchisee-based model is proving to be the most efficient one in tapping this market, echoed retail experts assembled at Evolve, a two day summit on retail and e-commerce organized by Sir M Visvesvaraya Institute of Management Studies and Research (SVIMS), a leading Mumbai-based business school.

“Our experiments in places like Kalol (Gujarat) and Karnal  (Haryana) is so far proving  that it is effective to set up a single big wholesale unit in remote places and encourage residents in villages nearby to run franchisees by sourcing products from the unit. In this way, villages will have access to the best of the products available in cities. We are running about 15 franchisee outlets around our Karnal wholesale outlet and is proving to be very successful,” said Dipayan Baishya, Associate Vice-President, Strategy, The Future group, addressing the audience assembled at the Evolve summit.

Future Group will be providing the right brand, technical and training support for the franchisees to ensure uniformity in the look and feel of these stores. He said at the moment, it made little sense to operate fully owned retail shops in tier-iii towns and villages.

In addition to rural, the Future Group plans to step up franchisee based models, in the form of convenient stores in metros like Delhi, Bangalore and Mumbai as well. “Right now we have 100 franchisee-based convenient stores in Delhi and 200 stores throughout Delhi, Bangalore and Mumbai. We plan to expand to more than 1000 convenient stores in these cities in the next two years,” said Mr. Baishya.

This would be an alternative viable option as in the next 5-7 years as the city is expected to face shortage in the availability of land for retail expansion. Customization of products and services, to suit the needs of regional and sub-regional population will be the key to success, he highlighted.

Supporting Mr Baishya’s view, Dr BR Manjunath, Director General, SVIMS said that the retail market in India is too nascent and retailers need to invest a fair share of time and resources to study understanding the customers for the next five years, as customization of products and services has become too critical today. 

In 2011, Indian retail market was about $470 billion and is expected to touch $675 billion by 2016. By 2020, the traditional and organized retail industry is expected to touch $ 1.3 trillion.

Mr. Jerry Rao, e-commerce expert and Chairman, Value and Budget Housing Corporation, said, pricing is currently a major challenge in e-commerce.  The e-commerce companies charge any rate today for their services, which may be too low or too high. According to Mr Rao, there needs to be more research and studies conducted to arrive at a standard pricing mechanism for different kinds of e-commerce products and services. “Should an e-commerce arm of a retail company sell its products at lesser rate compared to products sold out of its physical outlets is still a dilemma. The retailer could pass on the benefits he saves on rentals, staff and AC, to his e-commerce customers. However, this could also have a demoralizing impact on its retail employees. Similarly, how much a telecom company should charge its customer for using specialized calls like knowing Rahukalam or astrology  is still unclear. Should it be one rupee, five rupees or ten rupees?”

According to Mr Jerry Rao with the advancement of technology, availability of real time data will enable services with time-bound requirement of a five Star hotel or an airline to fill the unoccupied suits or business class seats through innovative concepts like last moment auctions, targeting the right customer profile. This technology to predict consumer interest is gradually moving into physical retail space. Iris screening technologies are being used to study the time spent by a particular consumer at various spaces of the super market, time spent in searching spots of her interest, products her interest, which could be utilized by companies for prediction of her interests and engagement with her of.

According to Nitin Mukadam, founder, localbaniya.com and CRM expert, Customer Relationship Management aided by data analytics is going to be the game changer from now. Technology will enable procurement of timely data based on the choices of the customer, which can be effectively used for customer engagement leading to customer loyalty.

According to Mr Mukadam, the technology is growing in such a way that it is today able to exactly predict what the customer is planning to buy, which section of an e-commerce site she visits often, what are her areas of particular interests etc. E-commerce companies could utilize this knowledge for customizing its services for this particular consumer. According to Mr Mukadam, an e-commerce company could build right data-bases by extracting intelligent data from Google analytics, incentivize the customer to register and then later engage customers in constant dialogue and foster customer communities through social media.

Mr Rahul Jagtiani, Founder, Plush Plaza, India’s home décor site said that e-commerce and social media is making it easy for the start-ups to gain visibility. “New Search engine optimization and search engine marketing models, social media sites and You Tube are enabling new entrepreneurs to gain maximum visibility in no time. These advantages were never there for a generation back entrepreneur,” said Jagtiani.

Mr Kartik Jain, Vice-President, Infibeam, a leading e-commerce site, the emergence of social-cloud-mobile media is enabling e-commerce companies to give multiple services to different vendors on a cloud-based model. The cloud-based model is negating the need for multiple server farms and at the same time enhancing the scalability and efficiency of services. 

According to Mr Jairaj Hegde, Vice-President, Sherwin Williams, India, Indian retailers should focus heavily upon improving supply chain management and training of man power. Today, there is an increasing need to deliver highly customized products and services on a real-time basis.  Most retail enterprises falter because they do not recognize that it is the supply chain which ensures Customer satisfaction and delight

Vinayak Bhat, Country Manager, FactSet India observed that FDI is going to change the whole retail scenario in the country. He observed in the new regime, there is going to be more opportunities for domestic micro and small and medium enterprises, partnership opportunities through joint ventures, franchisees and strategic licensing, and more job creation. This may put pressure on the kirana stores to innovate. E-commerce growth will result into creation of supply chain infrastructure, mobile commerce, social media leverage etc.

D. Balasubramaniam, partner, Ecovis RKCA, said the big retailer should make an attempt to learn methods on customer relationship and service from the local kirana stores and adapt them at their level. He focused on the strengths of Kirana stores, and forecasted that the Kirana stores in India would reinvent themselves, most probably on Supermarket model, to meet the customer expectations.  Ultimately, the cash Management is easy for Kirana stores, as in most Indian cities, rentals are far higher than in the west, which is a disincentive for the Retail trade.

Is HR ready for growth in retail and e-commerce? The industry says no, while the institutes think otherwise. Mr Ravindra Gupta of Micro Retail said, “If in acquisition of talent, its management and development is not done right, there is a huge rate of attrition. Hence innovative techniques are needed to retain the employee hired.”

Mr Rakesh Vanarse, founder, Brandcepts Advertising, said the retail sector has the potential of bringing in millions of job opportunities in the country. There lies a huge training potential at the level of retail management and retail operations. This is an opportunity for B-Schools, and other education and training centres to come up with new courses on retail operations management. 

Helios in expansion mode

Helios, the multi-brand watch retailer from Titan Industries, plans to open another 13 stores in different parts of the country by the end of this fiscal. A wide range of latest designs across 20 international brands, including Tommy Hilfiger, FCUK, Fossil, Guess and Armani, ranging Rs 3,000 to Rs 48,000 would be available in the showrooms. By the end of this fiscal, Helios would have 50 stores in India and would open more such stores in future.

Landmark open to more brand tie-ups

Lifestyle department stores, Max Retail and Auchan hypermarkets will lead the growth for the $4.7-billion Dubai-based Landmark Group in India. Renuka Jagtiani, who spearheads the group's international business, said the target to achieve a billion dollar turnover from India is well on track with the addition of doughnut chain Krisy Kreme and the French hypermarket chain Auchan to its portfolio, reports Times of India. 

Jagtiani, who runs the business along with husband and Middle Eastern retailing czar Micky Jagtiani, said India clocked over Rs 3,000 crore in turnover last year with a growth of 30-35 per cent annually even as the group looks to bring more brands across different categories here. "We have been here for 11 years and as a group we believe in each one of our businesses. Grocery retailing has been important for us. Auchan is a great hypermarket partner with a track record of success in emerging markets so this part of the business will be significant for the group," said Jagtiani, vice-chairperson of Landmark Group. 

The group, which will be the franchise partner for the French retailer, aims to open 10-12 hypermarkets every year after it decided to discontinue its association with Dutch retail chain Spar. Jagtiani said if the Indian government decides to open up the multi-brand retail sector to foreign investment, it may look to change the ownership of Auchan iprovided both the parties agreed on it. The group has gone slow in its investment behind its fashion portfolio other than through Lifestyle and Max stores. "We are always on the lookout for brands and are open to associations, we are not limiting ourselves," said Jagtiani, who was instrumental in setting up the multi-brand fashion retail chain Splash. 

Landmark group franchises international brands such as New Look, Aftershock, Reiss and Koton in the Middle East as well as Bossini and Kappa in India. The group withdrew Springfield and Vincci from the Indian market during the 2008 economic downturn and cut back on expansion of other fashion brands, the report added. 

Krispy Kreme inks pact to open 80 stores in India

Krispy Kreme Doughnut Corp said Wednesday that it reached a deal with Citymax Hotels Pvt Ltd for the development of 80 Krispy Kreme franchise stores over the next five years in India.

Financial terms were not disclosed. The stores will be located across the south and west regions of India, the Winston-Salem, N.C.-based company said. 

Citymax Hotels is part of Dubai-based Landmark Group, one of the largest retailers in India and the Middle East. It operates food and beverage businesses, along with entertainment centers, Krispy Kreme said. 

Krispy Kreme donuts are currently sold in more than 690 stores in 21 countries. 

Last month, the company announced plans to open 35 of its stores in India over the next five years under a development deal with Bedrock Food Co. Those stores will open in various locations, including Delhi, Jaipur and Lucknow, the company said.