“Modern Grocery Retail” & the Emerging-market consumer : A complicated courtship | McKinsey

In some “Emerging Markets”, the response to “Modern Grocery” formats has been tepid. What’s a Modern-Grocer to do ??

20 years ago, Modern Grocery Retail appeared poised to conquer every consumer market in the world. Ambitious European grocers, having blanketed their home countries with Supermarkets and Hypermarkets, began setting their sights on growth both within and beyond the continent. They held particularly high hopes for China, India, and other emerging markets, where fast-rising consumer spending seemed to presage an unprecedented demand for gleaming new stores with large assortments, wide aisles, and bright lighting.

In the 1990s, the term “modern grocery retail” was essentially a proxy for a small group of multinational grocers including Ahold, Aldi, Auchan, Carrefour, Costco, Lidl, Metro, Tesco, and Walmart…It was widely presumed that these retailers’ entry into any market would lead to the demise of the traditional trade—the family-owned grocery chains, small independent stores, and informal merchants that at the time accounted for the vast majority of grocery sales in emerging markets. The prevailing expectation was that although there would be local differences due to cultural specificities, in every country the retail landscape would eventually consist of a combination of modern formats: full-line supermarkets and hypermarkets, convenience stores, and discounters..

These assumptions have been proved wrong. Global grocery giants are struggling to grow profitably in many emerging markets… whereas, Traditional trade has proved remarkably resilient…And the market and channel structures taking shape in individual emerging economies are distinct from one another, following no obvious pattern.

Why did this happen? What, if anything, did multinational grocers do wrong? And what does it mean for the future of modern retail in emerging markets?

The Hypermarket’s shortcomings:

To understand the disparity between early expectations and the current reality, it’s useful to examine the roots of the two quintessential modern-trade formats: the supermarket and the hypermarket. The hypermarket in particular—whether in its European form (in which food anchors a massive selection of nonfood items) or its North American one (the “supercenter,” which represents the successful injection of food and grocery into a general-merchandise discount store)—was widely regarded as unbeatable. By offering tens of thousands of products in an immense building just outside or on the edge of a town or city, a hypermarket could operate at a level of productivity that other grocery formats struggled to match. Hypermarket operators passed on these efficiency gains to consumers in the form of lower prices, which served to reinforce hypermarkets’ advantage.

In their first forays into other developed markets abroad, major retailers relied heavily on the hypermarket format. When French retailers Auchan, Carrefour, and Promodès opened hypermarkets in Spain during the first years of Spanish economic reform, they quickly captured a large fraction of that country’s overall grocery sales and dictated the market structure that remains in place to this day.

Expansion across Europe was an exciting growth prospect, but even more enticing to retail leaders and investors was the growth potential of emerging markets. Over the years, that potential has become even clearer: by 2025, we expect emerging markets to account for $30 trillion in consumer spending, or nearly half of global consumption.

When multinational grocers entered emerging markets, they again relied on the grocery formats that were working so well in the developed world. But, in retrospect, it’s clear that the countries in which the hypermarket prospered had several characteristics in common: good road networks and high or fast-rising car-ownership rates, a large middle class that enjoyed decent wages and stable employment, and a high proportion of rural and suburban households with enough room at home to store groceries bought in bulk. Also, those markets had grown to maturity at a time when many women didn’t return to work after having children and therefore had time during the day to drive to and from the store. The hypermarket format draws heavily on consumers’ time, ability to travel, and storage capacity…

In Emerging Markets, retailers encountered an entirely different context. Consumers were less affluent and lived in urban areas; many didn’t own a car, couldn’t afford to travel to and from a relatively far shopping destination, had no room at home to store purchases, or all of the above..

A new respect for localism:

Further complicating matters, emerging markets weren’t just different from developed markets; emerging markets also differed from one another in nontrivial ways. That was true in the 1990s and it remains true today. Based on our research—which involved in-depth study of the retail sector in ten developing countries in Asia, Eastern Europe, and Latin America, as well as interviews with more than 20 local retail and consumer experts and analysis of channel-growth data in these markets—we’ve developed a perspective on the factors that have hampered the growth of modern trade in emerging markets.

On both the demand side (what customers want from retailers) and the supply side (the means by which retailers can deliver what customers want), different factors shape the retail ecosystem in each country. Together, these factors produce wide variability in the level of modern-trade development in countries around the world (Exhibit 1).

On the demand side, for instance, food-shopping habits have turned out to be largely localized and deeply entrenched. Emerging-market consumers tend to prepare their own meals and cook more than their peers in developed markets do, and they are accustomed to shopping at open-air market stands or small neighborhood grocery stores that offer a familiar selection of fresh food and household staples. They don’t necessarily perceive customer service at modern retailers as superior to that of the traditional trade. Customers of India’s kirana stores—small, family-owned retail shops in or near residential areas—already benefit from personal service from the store owner, free home delivery, and credit and cash rebates if they remain loyal..

On the supply side, a big factor is the informality of traditional trade: many small retail businesses rely on unpaid labor from family and friends, pay no rent because they own their storefronts, and don’t pay corporate taxes. Modern retailers cite this informality as a major challenge when competing with local retailers. A European hypermarket chain found that its considerable operating-cost advantage from better sourcing and supply-chain processes was canceled out by the fact that it was paying taxes while local competitors were not..

Another major factor affecting modern trade is public policy. India’s restrictions on foreign direct investment have limited the growth of modern retail there; in China, by contrast, city governments are assessed on the level of economic activity and foreign investment they attract, which makes them biased toward supporting modern trade. As a result, modern-trade penetration in China’s largest cities has grown significantly over the past 15 years..

A further supply-side factor in emerging markets is the fragmented supplier base, which places a natural limit on the benefits of scale. A retailer can’t source products as efficiently as it would in a mature market because it must buy from a complex network of regional and local entities. And even retailers with a national buying team won’t easily find national manufacturers who are eager to partner with them—a point we pick up on later.

Incumbent advantage is yet another powerful factor shaping retail ecosystems. Today’s market dynamics tend to become tomorrow’s market structure—so, for example, in markets in which a highly efficient wholesale system serves the traditional trade, it becomes much harder for modern grocers to gain a foothold. That said, wholesalers can also be vanguards of modernization. In Turkey, for instance, some Bizim Toptan stores have developed a substantial retail business. These wholesalers-cum-retailers illustrate the fact that ecosystems in emerging markets are partly shaped by players that can concentrate and coordinate a critical mass of what otherwise is a complex set of routes to market..

“Seven” strategic levers for success:

In parts of the world where the market structure is itself still in a formative stage, retailers need a bespoke strategy. Our research and experience suggest seven strategic levers that lead to success in emerging markets. These levers—having to do with delivering what consumers want, working effectively with other players in the ecosystem, and generating lasting productivity advantages—reflect perennial concerns for retailers everywhere, but they are especially critical in helping retailers secure a profitable future in the world’s fastest-growing economies.

The levers are by no means comprehensive. For one, they don’t touch on digital technology, which may well be just as important in emerging markets as in developed ones; indeed, rapid adoption of smartphone technology may allow emerging markets to leapfrog more mature markets and reconfigure the value chain farther upstream (for example, by giving smaller suppliers direct access to national and even global markets). Rather, we draw attention to areas that we believe require deliberate action in emerging markets-

1. Prioritize proximity.

2. Keep prices low—and make sure consumers know.

3. Obsess over productivity.

4. Make the business case to manufacturers.

5. Educate policy makers on the benefits of modern trade.

6. Consider partnering with the traditional trade.

7. Adopt a city-based strategy.

For any modern retailer, success in emerging markets isn’t guaranteed. Our research confirms the complexity and local specificity of market development and the degree to which it depends on initiatives taken not just by retailers but also by governments, manufacturers, wholesalers, and others in the local retail ecosystem. International retailers thus need to become experts at local tailoring. That said, operating in emerging markets still unquestionably requires excellence in core retailing competencies: marketing, merchandising, supply-chain management, and talent development, to name just a few…

Modern Retailers that excel in all these areas in the context of markedly different emerging-market structures will, in a sense, have conquered the world..!!

How “Indian QSRs are going social ? ” | by: Nusra | Restaurant India

Indian Quick Service Restaurant (QSR) segment has seen many New Brands making inroads into the market…Indian QSR market has remained largely unaffected by the economic slowdown and touched nearly around $50 billion from Rs $35 billion in 2013. The segment is growing at a very fast pace…!!

Brands on demand:

Indian fast food majors like Cafe Coffee Day, Yo! China, Haldiram’s, Nirulas, Sagar Ratna and Bikanervala have met all the global necessities to meet the demands of the local customers, who are becoming an adaptor of global QSR outlets. Not only this, the regional QSR chains like Shiv Sagar, Bangs and Ammi’s Biryani created a milestone in competing to their foreign counterparts, but have also adapted their strategies on how to target the over growing demands of their customers..

Meanwhile, we have seen that, global players have tweaked their menu keeping in mind the taste and preferences of Indian customers. We have seen that major global QSR chains, which are entering India, have to localise their offerings before establishing themselves here..

Indian chains have now realised that people here are rushing towards convenience and value that these QSR chains offer and there is a wide gap in the market in terms of authentic Indian Cuisine being served in a quick service format and thus, they ventured into Indian QSR segment to address the local customers with its Innovative concept.

“The Usp of Hello Curry is ‘Indian Food with western quick service efficiency’, many of the QSRs present nationwide today are catering a niche with western products. Hello Curry will be unique with its positioning as the first QSR with complete range of Indian cuisine,” says P Sandeep, Co-Founder, Hello Curry..

Placing it Right :

Quick service is one of the challenges Indian QSR players are facing with Indian food, as the main preparation itself takes 15 to 20 minutes for preparing a dish. The restaurants have to innovate on processes and technology to develop ways to serve a customer flat in 2 minutes across the counter or 30 minutes in case of a home delivery.

After years of learning from global players, Indian QSRs are now quick to adapt to social media. They are now trying their hands at cracking the social recipe to success by posting new recipes on Facebook and Twitter or promoting it through Instagram and they are becoming quite close to cracking the code of the social marketing strategy which entered India via global route.

“As we are all young entrepreneurs, we are from the tech world of today. Hence, social media is one of the biggest assets of marketing. We are available on Facebook, Instagram, Zomato and we are connecting our consumers through WhatsApp. We are also doing PR and media activities, but I am not in the mainline PR advertising because I believe that word-of mouth is the best tool for advertising, where food works as a marketing tool itself,” says Sachet Shah, Go Panda (one of the partner).

While many international chains have set its footprint across the country, the Indian home grown chains have fought bravely to catch up with them. Cafe Coffe Day, Yo! China and Haldiram’s have set the traditional scene in India and are also leveraging social media by rightly placing themselves in the social gathering.

“There are many reasons for the success of our restaurant. But the major reason is that we operate in the Chinese food segment, which is the most desired cuisine among youth as they are the main consumers today. When we talk about eating out trend, I think we are operating in a segment which is massively catering to the youth. We create fun at our restaurant, we are value for money restaurant, our restaurants are trendy, we offer innovation and are present at the right location. The strategies help us gain an edge over others. We are here for 11 years building brand because brand brings consistency and the ability to stay requires time,” shares Ashish, MD & Co-Founder, Yo! China.

Thus, we can say that the growing trend in the QSR segment is becoming more of a social engagement rather than restaurants coming up with new products and keeping it to their specific target group…!! 

The “State of Strategy Today” : Good strategy is worth doing well | A.T. Kearney

In a study performed, we found a strong correlation between a company’s total shareholder returns (TSR) and its planning horizon…Those with longer horizons saw stronger returns than those with shorter…!!

We were not surprised then when our latest strategy study found a similar correlation. Only this time, the comparisons are between successful and unsuccessful strategies. Of companies with longer strategy cycles—five years or more—85 percent see beneficial results. For companies whose strategy cycles are less than five years, 53 percent are successful. Interestingly, there is little difference between companies that take an ad-hoc approach to strategy (46 percent) and those with planned strategy cycles of less than five years (47 percent)…

This last point is reassuring, as it suggests that a properly executed strategy is worth pursuing. Just 6 percent of companies have strategy cycles of more than 5 years. It can be argued that strategy cycles are more important in today’s competitive environment or, as one study participant says, “To succeed today, we need to innovate, and innovation requires strategy and commitment. So it makes sense that committing to a strategy over time results in success over time”…

Strategy is more difficult now..When working on consulting engagements, our clients sometimes complain that it’s much harder now to craft powerful and easy-to-communicate strategies. “Strategy formulation and deployment is a complex, moving target,” explains one CEO. Another blames the difficulties on what she calls “an ever-changing business environment that requires spending more resources on strategy.” Our study findings reflect the same frustrations: 62 percent of business executives say strategy has become more complicated over the past decade, and 74 percent say complexity forces them to spend more time and effort on strategy formulation. Yet, despite these increased efforts, 46 percent of strategies fail to meet expectations..

Interestingly, C-suite executives are much more optimistic about the effectiveness of their companies’ strategies than those in management…Indeed, 81 percent of executives believe their strategies are meeting or exceeding expectations, while 48 percent of those at the management level are less optimistic (see figure 3). Further, this C-Suite misconception is even greater for companies that are lagging their peers as almost 100 percent of executives believe their strategies are working just fine, while management is much more skeptical..

Agility to the rescue – maybe It is commonly accepted that today’s business environments are fast changing and dynamic, and much more so than just a few decades ago. These tumultuous conditions have caused some executives to question whether strategy is even possible anymore. Isn’t a strategy outdated before it can be implemented? Aren’t we better off to focus on agility in order to capitalize on emerging trends faster than peers? These are some of the questions we heard. We put this thinking to the test with surprising results: More than 80 percent of global executives consider agility as important, or more important, than strategy when it comes to securing a company’s future success. And only a slim 19 percent believe a strategy-induced competitive advantage is still possible (see figure 4). In the minds of business leaders, it appears that strategy is failing…

figure4

However, a deeper dive into the survey data finds that “agility as a substitute for strategy” notion is flawed. We wonder if it isn’t simply a self-fulfilling prophesy :  Those who believe agility is the foundation for success have failing strategies, while those who believe strategy is a source of competitive advantage, have exceptionally successful strategies. The more interesting question, which begs further investigation, is in which direction the causality flows: Do companies have trouble formulating and deploying strategies and so turn to agility? Or, does a focus on agility as the answer to today’s challenges lead to the demise of strategy? Does a string of successful strategies mean strategy is the answer to all that ails an organization ??

What’s to blame for strategy failure?

Judging by the responses of our study participants, strategy failure is an emotional topic. One participant puts it this way : “In large organizations, strategy formulation is too complex and too top-down, leaving the rest of the organization to play catch up. And before they can do so, the next strategy is being rolled out.” Another says: “Strategic planning often takes place in an ivory tower by individuals who haven’t a clue what happens at the implementation level.” These and other comments suggest that the interface—the handover—between strategy formulation and deployment is to blame for failed strategies. Our findings confirm this. When asked to identify the trigger of a failed strategy, 7 percent of executives point to formulation, 6 percent point to deployment, and 86 percent say it is a mix of the two (see figure 5)..

figure5

Strategy formulation: What goes wrong?

If there is ever a need for knowledge, experience, and preparation, it is during strategy formulation. When asked about their strategy formulation failures, most executives complain that it is an insufficiently inspired, unrealistic, impractical, and detached process :

  • Lack of understanding of future trends (88%)
  • Little understanding of internal capabilities (87%)
  • Too much top-down approach (84%)
  • Not enough logical thinking (84%)

One interesting finding is the conflicting perspectives about the role data analysis plays in a failed strategy formulation process. Some blame “too much data analyses” while others say there is “not enough data analyses.” The reasons for the different views depends on the participants’ backgrounds. For example, many in the too-much-data group have firsthand experience in data analyses of the “boiling the ocean” type—in which substantial efforts yield few real insights. The other group is accustomed to formulating strategy using strategy statements that are not backed by sound financial justification or based on quantifiable competitive opportunities..

Several study participants consider secrecy an issue…“The C-suite is afraid competitors will learn our strategy and so do not involve middle-level managers as much as they should in developing the strategy,” explains a manager. “Clearly, keeping our organization as much in the dark as our competitors about our strategy is not a fast lane to success”..

Strategy deployment: What goes wrong?

Many of the reasons for failed strategy formulation are also attributed to failed deployments. For example, a strategy might be too ambitious and broad for the organization, too narrow to cope with the full breadth of changing market conditions, or deployed from an impractical top-down perspective. “Strategy deployment is now our greatest challenge,” explains a CEO. “Market conditions require a more aggressive strategy, but execution has not changed.”

Not surprisingly, reasons for failed deployments have more to do with the handover between strategy formulation and deployment:

  • Lack of internal understanding of the strategy (90%)
  • Lack of internal capabilities to execute the strategy (90%)
  • Lack of ownership (86%)

This makes for bewildered, disenfranchised, overwhelmed, and under-supported deployments. As one manager admits, “We underestimate the combined effects of overlapping initiatives on the same group of people”..

Gauging the future –

Study participants largely agree that a better understanding of future trends is a prerequisite for sound strategy formulation: “Our strategies fail at the development stage because we do not accurately determine where the market is heading in the next three to five years.”

Not surprisingly, over the last decade many companies have increased use of future-focused tools such as fore-sighting, trend analyses, and scenario planning (see figure 6)..

Organizational inclusiveness –

Involving the organization in strategy formulation resolves the handover issue between formulation and deployment. “Strategy that doesn’t make it out of the boardroom isn’t really strategy,” admits an executive. “Attempting to make it purely process-driven overlooks the importance of the ‘goodwill’ factor—the people who actually deploy the strategy because they buy into it, and not just because it is their job to deliver it.” Our findings break down this thinking into a number of distinct points. At the base, is the conviction that involving more people with firsthand experience in dealing with markets, customers, competitors, processes, and suppliers makes for better and more practical strategies.

“Bringing in a general workforce opinion helps management make more informed decisions,” says a manager. “All levels of the organization can contribute to strategy formulation and implementation. Middle management and the workforce provide practical input.” Organizational involvement is also essential for making strategies sufficiently ambitious. As one executive says, “The most important area for innovation in achieving goals and targets are the skills and knowledge of staff. Without these, the top-down approach is doomed to mediocrity.”

Our findings back up these observations : Two thirds of companies that pursue meaningful organizational inclusion in strategy formulation have successful strategies. Yet, involving the workforce doesn’t just make strategies better and more practical, it also lays the groundwork for engaging the right people in strategy deployment: “We involve our people at all levels in strategy development and find that innovation and diversity of ideas are pluses, both in adopting change and in people acting as change agents. An engaged individual is more resourceful than one who is simply employed.”

Organizational involvement is not a panacea. It provides innovation and practicality and, while it does not really affect speed, it does make things more complex (see figure 7). As one CEO says: “Consultation can be a bit of a pain and slow down a good planning operation, but the results following the consultation can make the extra time well worth it”..

figure7

Strategy needs to be led- 

not just decided on Despite the virtues of organizationally inclusive strategy formulation, the complexity that accompanies it can be an issue. For this reason, inclusive strategy requires top-down leadership, with top management establishing the ideas, ground rules, organizational teams, and direction that are critical for middle and lower management. Strategy, at its best, becomes less of a decision and more of a direction to inspire the organization to follow—not once, but on an ongoing basis.

As one CEO says : “Strategy & Leadership go hand-in-hand, you can’t have one without the other”…!!

“Global Luxury Brands” : Why India matters ? | by: Sapna Agarwal | Livemint

A look at the issues related to the potential of the ” Indian Luxury Market “, estimated to be worth $14 billion a year..!! 

A large and growing middle class in India is not only buying luxury goods and services but, inevitably in an Emerging Market the size of India, is also redefining the luxury market..

There’s an image of India—one that has persisted despite being a cliche—that is contoured by contrasts: Maharajas on the one hand, in full regalia and motorcades of Rolls Royce limousines, and poverty and hunger on the other. As India of the 21st century aspires to rank among global manufacturers and service providers, the luxury that once defined the Maharajas is a matter of widening aspiration, too..

The national airline—whose mascot was the Maharaja—no longer carries just the privileged few to the Swiss Alps and other luxury holiday destinations. A large and growing middle class in India is not only buying luxury goods and services but, inevitably in an emerging market the size of India, is also redefining the luxury market. But while India tops the list of tomorrow’s markets, it is yet to make it to the top in the priority markets list of luxury marketers..

What will it take for luxury marketers to tap into India? And what will it take for India to realize its luxury potential to the maximum? Experts and marketers gathered at a two-day Mint Luxury Conference in Mumbai on 31 October and 1 November to discuss some of these issues and challenges. Firstly, the definition of the Indian luxury consumer needs to change—start with banishing that cliched image of the Maharaja. “Luxury cannot be limited to just the very top or 0.01% of the population,” says Abheek Singhi, senior partner and director, Asia-Pacific leader-consumer and retail practice at consulting firm The Boston Consulting Group.

He estimates the Indian luxury market to be worth $14 billion. But for a country with a population of 1.2 billion, there are just 117,000 people who are classed as ultra-rich—people who have family wealth of over Rs.25 crore or earn Rs.3-4 crore a year, says a July report by Kotak Wealth Management. This segment of consumers prefers to do their luxury shopping abroad. In the local context, luxury denotes brands that globally are a notch lower than the finest, appealing to a wider audience of the top 1%, 5% or even 15% who have the aspirations and the money to buy them, said Singhi..

To grow the luxury market, “marketers selling in India need to be innovative and reach out to new consumers”, says Sanjay Kapoor, managing director of Genesis Colors Pvt. Ltd, parent of Genesis Luxury Fashion Pvt. Ltd whose portfolio includes brands such as Bottega Veneta, Burberry and Canali. According to Kapoor, luxury marketers need to continually “upgrade” consumers used to buying premium to luxury goods and services. “It’s a continuous process of educating people about brands to grow the existing business,” says Kapoor. Adding new brands and opening new stores is the business part of the same process..

There are FIVE Luxury Consumer Segments emerging in India, says Singhi : Classpirationals, who want to blend in with the classes; Fashionistas, or Trendsetters; Experiencers who love travelling, wine tasting, etc.; Absolute Luxurers for whom luxury is about exclusivity and customization; and Megacitiers—part of the global elite..

As such, the Indian luxury consumer is spread across the metros, tier-I and tier-II cities. “Close to 40% of the Indian luxury consumers are living outside of metros and shop on their travel overseas or in the metros,” says Singhi..

Firms seeking to expand in India speak of infrastructure challenges. For instance, India got it’s first luxury mall—DLF Emporio—in south Delhi in 2007. Now, there are just two more luxury malls in the country. “The biggest impediment to the development of the luxury market is the lack of infrastructure and an environment,” says Rahul Prasad, managing director (Asia-Pacific and Middle East), Pike Preston Partners Ltd, a boutique advisory firm on mergers and acquisitions in the fashion and luxury segments..

Meanwhile, with the new National Democratic Alliance (NDA) government in India, businesses are hopeful regulatory hurdles will be resolved. “The new government’s approach has energized a number of companies, including multi-brand retailers and international retailers..,” says Pierre Mallevays, founder and managing partner of Savigny Partners LLP, a corporate finance advisory firm focusing on the retail and luxury goods industry..

At the Mint Luxury summit, Nirmala Sitharaman, commerce and industry minister, agreed to look into the requirement of 30% sourcing from domestic companies for single-brand foreign retailers who are allowed to invest 100%..

The challenges remain daunting. According to Armando Branchini, vice-chairman of the Altagamma foundation, a conglomerate of several high-end Italian companies, there are 17 Italian luxury brands in India at the moment, a number that has remained unchanged since 2005..

British luxury brands are focusing their efforts in other markets such as China, says Charlotte Keesing, director at Walpole British Luxury, a consortium of British luxury retailers like Jimmy Choo, Harrods and Burberry. Eight years ago, India and China both were on the long-term radar of luxury product marketers..

Today, China has become one of the biggest growth drivers of such products, and India is yet to take off…“ There are only 18 of 90 British luxury retailers present in India today and less than a dozen are looking at entering the market in the next two years,” said Keesing…

“Mall Management” – The “New Success Mantra” for Malls In India | Realty Plus

The Indian #RetailMarket, has gone through a prolonged (and sometimes painful) process of transformation…With rapid development across the country, India has witnessed the emergence of a well-entrenched mall culture over the past decade….However, there are several malls in the country which are faring less than well…

Failing Malls – A Growing Problem :

The not insignificant number of under-performing malls in the country definitely gives rise to concern…There is no dearth of instances where #MallDevelopers, have scrapped the entire blueprint and business model and converted their malls into office spaces. The reasons for the lack of success of these malls vary..

Some of the challenges that the developers of these malls have not been able to address are providing for adequate parking and scientific people movement within the malls, coming up with a dynamic plan for upgrading facilities, attracting a suitable tenant mix and proper positioning..

Success Ingredients : 

There is now a distinct need for mall developers to introspect on the factors that contribute to either the success or failure of a mall. For instance, there is an increasing awareness among mall developers that leasing mall spaces as opposed to selling them is the way to go. Malls in which spaces are individually sold (or ‘strata sold’) tend to suffer from the absence of proper mall management – which is now the acknowledged fulcrum for success, regardless of how large or well-conceived the mall is.

There are basic parameters that mall developers must keep in mind at the very conception and design stage of their malls. Location is, of course, a vital ingredient for the success of any mall. Approach and accessibility, especially in terms of proximity to the key centres and ingress and egress of the mall, are equally important..

The mall must have adequate facilities and provide retailers with good accessibility to their stores, space for storage and staff utilities. Very importantly, it must get the parking equation right…

Untangling the Parking Knot :

A mall that does not provide sufficient and properly planned parking in India is headed for disaster. In India, the issue of parking is a challenge to both mall owners and customers. Creating parking facilities when the cost of land is high is a very capital-intensive decision for a mall developer. This is especially true if such measures are attempted to be enhanced in retrospect. As a general guideline, developer must provide parking while keeping the size of the mall in mind. The decision on how much is needed and how much is sufficient is a critical one.

Rotation of parking slots is another important function, as malls experience more footfalls on weekends, during which customers spend more time in malls. Parking must not become an issue in high traffic periods. If a mall cannot provide enough conventional parking, it must have innovative parking facilities such as multi-level and/or automated parking systems.

Since convenience is of prime importance in a mall, the access and exits to car parking is yet another factor besides the parking area itself. The more successful malls even provide valet service to attract more patrons by providing them with more ease of access.

While the future may bring malls that have public transport connectivity, we are not quite there yet. Metros and buses connecting directly to malls can bring down the usage of personal cars, and play a major role in be dealing with challenges such as parking and increased traffic. Until then, mall developers are constrained upon to make the most of existing infrastructure.

The Mall Management Solution :

The baseline philosophy behind the creation of any mall is that it must be a place that continually attracts people into its premises, keeping them engaged and tempting them to stay for longer periods. This cannot be done just by providing a massive number of shops. Today, Indian mall visitors expect various entertainment options and engagement mechanisms, as well. Malls cannot be just shopping complexes – they must be one-stop family destinations. If they fail at this, they invariably fail completely..

With these and other reasons why malls can potentially become under-productive and sub-optimal, mall developers are now discovering that professional mall management can be a catch-all solution. In fact, one of the most common causes for the failure of malls is that they were are not professionally managed and promoted. High-grade mall management is the single-most reason why some malls have managed to perform well even during the worst periods of economic distress..

Professional mall management is about a lot more than just keeping up the facilities in a #ShoppingCentre…It is about strategizing and implementing success formulae that have been specifically tailored to the mall. Often, a professional mall management firm can undo a significant amount of ‘done damage’ by reinventing the mall’s positioning, facilities and operations almost from the ground up..

Significantly, a mall management agency can result in operating costs reducing by between 5-7% in an up-and-running mall, and by up to 10% if it is engaged at the very inception stage. However, the cost-saving element is just one side of the story. With the implementation of professional mall management, even a languishing mall can be realigned into a destination that provides the needed success ingredients – and an overall ‘experience’ for customer..

A #MallManagement Agency can Re-engineer the shopping complex’ parking arrangements, tenant mix and internal customer traffic, and also assume the responsibility of promotional activities. Simultaneously, such an agency will ensure optimal staffing solutions and keep all facilities within the mall running flawlessly..

Not surprisingly, more and more Indian mall developers are now adopting the mall management mantra as a one-stop solution to ensure that their investments reap the best possible returns for them…!!

“South India’s Real-Estate Hotspots” for Investments | by: Juggy Marwaha | Realty Plus

Until only recently, the South Indian Real-Estate Market was known as highly price-sensitive, with buyers primarily focused on the Affordability quotient…!!

Developers had to adopt a strategy to entice potential end-users and investors by offering their products in the right price band. However, with more and more foreign companies establishing their back offices in prime locations of South Indian cities and offering power jobs to the local populations, the South Indian economy has witnessed rapid growth over the last few years. This has visibly reflected on their real estate markets, as well..

Of late, the most important South Indian real estate markets – Bangalore, Chennai, Hyderabad and Kochi, have been faring very well. This dynamic was evident even when the nation was going through a phase of low sentiments. While the burgeoning IT sector in these cities is the main reason behind the real estate boom in these cities, some of them also have a rapidly strengthening industrial base which is further augmenting real estate demand..

Bangalore :

The commercial office leasing trends in Bangalore clearly reflect that the city is topping all others in terms of space and job creation. IT, ITeS and retail are driving employment creation in the city. Bangalore is expanding in all directions, and with most phases of the Metro on track in terms of deployment, Bangalore has emerged as one of the best investment destinations for affordable, affordable luxury and luxury segment housing.

North Bangalore has seen residential prices doubling in the last 4-6 years, and many other pockets have witnessed good appreciation as well. Brigade Gateway, one of the best integrated townships in Bangalore featuring the World Trade Centre, a mall and a 5 Star hotel, was launched at a price of Rs.5,000/sq. ft. about 4-5 years back and is now transacting at above Rs. 10,000/ sq.ft.

There are numerous such examples wherein reputed developers and landmark developments have been instrumental in prices doubling and going even higher in the last 4-6 years. The finest developments in Whitefield by Sobha, Brigade, Prestige, Total Environment and Chaitanaya have practically doubled in terms of capital values in the last 5 years.

Chennai:

Residential property prices in Chennai have escalated the fastest among the cities in India, witnessing an appreciation of almost three times of what they were in 2007. However, Chennai still faces supply constraints in its prime locations in terms of new and organised development..

Traditionally, buyers in Chennai were hesitant to move to the suburbs, as the options available in the key pockets were highly priced. Very similar to the cities like South Mumbai, Delhi and Kolkata, buyers in Chennai are very particular about address and pin code value. As the city is in expansion mode with the rapid development in Chennai’s social and physical infrastructure, the suburbs and extended suburbs such as Velacherry, Peringudi and OMR belt are witnessing an upsurge in its property prices with corresponding demand.

Areas like Ayanavaram, Virugambakkam, Nungambakkam and Ashok Nagar have recorded the maximum appreciation. With limited supply and few organized developers in Annanagar and Kilpauk, end-users and investors are finding prices attractive in these neighbouring areas. With noted developers such as Chaitanaya, Vijayshanti and Arihant-Unitech active in these areas, there is a steady increase in demand.

The Central business district of Chennai, Nungambakkam, has managed to maintain the highest appreciation values with only few organized developers active in the area. However, with the Metro rail route passing through Ashok Nagar and with host of reputed and local developers’ active along the belt, a considerable amount of demand has shifted to this micro-market.

This is because of the presence of large commercial and entertainment-shopping establishments such as Phoenix and Forum and the availability of adequate social and physical infrastructure such as quality educational institutions and hospitals have proven beneficial in garnering demand from end-users and investors.

The three key growth drivers of IT / ITES, automobile manufacturing and education sector are instrumental in driving the job creation in Chennai. The price appreciation in specific pockets forecasts to be extremely good over the next 12-18 months. Some of the projects which are garnering attention from end-users and investors are Falling Waters in Peringudi, Oceanique on ECR Road, Embassy Residency and Pristine Acres in OMR.

Hyderabad:

Taking in consideration the current prevailing prices, developers have very little room for profit. Properties here are value buys in all respects, and one cannot go wrong with buying into quality projects at the current price levels with an investment horizon of 3-5 year. The Telangana agitation was the primary reason for the stagnation of prices in Hyderabad.

While Hyderabad’s average prices may reflect stagnation, there are multiple exemptions to this rule. A few such instances are Jayabheri’s Orange County, which has seen 33% absolute appreciation within a horizon span of 3-4 years and Jayabheri’s Silicon County, which has almost doubled in the last four years. Aparna’s Sarovar Grande has seen about 43% absolute appreciations in the last 12-15 months.

Good projects by reputed developers have shown very robust capital appreciation in the city. Though Bangalore and Chennai has clocked better appreciation values, Hyderabad by no means has lacked appreciation growth – it has merely been selective.

The socio-political and economic scenario is now far more favourable for the real estate sector. Hyderabad’s real estate market is likely to grow at a relatively faster pace to give renewed competition to cities like Bangalore, Chennai and Kochi. In the mid-to-long term, investor confidence in Hyderabad real estate will emerge in force once more. Companies like Facebook, Google and Apple have long-standing plans to expand their bases in Hyderabad – a factor which will work in favour of faster appreciation.

One of the hottest emerging locations is Vijaywada, where land prices have increased by almost 300% because of speculation. This renders Vijaywada unviable for residential projects over the short term, but a price correction from the speculative levels in anticipated over the next one-and-a-half years. After that, many more corporates will move into Vijaywada, thereby boosting residential demand as well.

Kochi:

Kochi is an emerging metropolis where modern urban lifestyles are merging with the city’s traditional framework. During its initial realty boom, Kochi grew exponentially, with more people migrating to the city and consuming even the outlying catchments of Kakkanad, Palarivattom, Vytilla, Edappally and Kadavanthra.

Development of IT/ITES projects such as the Kochi Smart City and initiatives to channelize traffic and improve connectivity – such as the Mobility Hub at Vytilla – have fuelled the current real estate boom, with more and more developers cashing in.

The days when builders in Kochi focused only on affluent buyers are over. The Kochi residential real estate market is now replete with affordable housing projects, which account for about 60% of the total housing development in the city. The soaring land prices have made it difficult to own or build independent houses, which were once the most popular configuration in Kochi. There is an increased demand from the emerging mid-income segment that wants homes packed with amenities at affordable prices.

The demand for budget housing is so strong that supply has penetrated even the poshest areas. The prime localities that offer luxury multi-storey apartments, such as Marine Drive, are seeing the arrival of affordable and mid-income housing projects in the vicinity to the more expensive waterfront apartments and villas.

While the global recession in 2009-’10 impacted all markets across the country, there was no decrease in Kochi residential real estate between 2012-13. Kochi is an investor market with many investments coming in from the Gulf via NRIs. In most cases, flats in new projects are sold out to the tune of 80% very quickly, but less than 20% would be actually occupied.

Luxury apartments on Marine Drive were quoted at Rs. 3800-4000/sq.ft in 2008-’09. Now, the rates for premium apartments in this area have almost doubled. Mid-range apartments by local developers are usually sold out by upto 90% of the inventory over a period of 1.5-2 years. The apartments in non-prime areas need to sell at price tags of upto Rs. 70 lakh….!!

“Ripe for Grocers”; The Local Food Movement | Consumer Products & Retail | A.T Kearney

Grocery shoppers today want local food—and they are willing to pay a premium for it…Our second annual study of local food market examines this growing opportunity for Retailers..!!

Walk through the produce section of Whole Foods and you’ll see on the signs, as prominently placed as any other information, the state of origin for its fruits and vegetables. With its Local Loan Producer Program, which provides roughly $10 million in low-interest loans to independent growers, Whole Foods has made a bet that local foods are not just a passing fad in buying habits but indeed a new reality for grocery..

Our second study of shoppers’ local food buying habits bears out the optimism about the “locavore” movement. The study finds that local food is fast becoming a necessity for attracting and maintaining customers. A growing number of shoppers, seeking more sustainable foods and hoping to help the local economy, say that the availability of local food is an important factor in what they buy and where they buy it. And, importantly, more shoppers say that they think more highly of retailers that carry local food and have even considered switching retailers to find better local selections. For big-box retailers and other national chains, there is plenty of work to be done to incorporate local foods, as the market remains dominated by farmer’s markets and specialty retailers..

We recently surveyed more than 1,000 U.S. shoppers to examine the strengths and weaknesses of large grocery retailers compared to other formats when it comes to local food. This study builds on our first report on the local food market, which was released in 2013..

Local Food: A Necessity to Compete:

Unlike organic food, there is no universally accepted (or legally binding) definition of local food. Although Congress passed an act in 2008 that defined “regional” and “local” food as being transported either less than 400 miles from its origin or within the same state, most definitions are less precise. At a more basic level, local food typically involves smaller farms located close to where their produce is sold.

Local food is quickly transitioning from one small way grocers can stand out to a component of the shopping experience that buyers expect. Sales of local food have increased an estimated 13 percent per year since 2008, and are now worth at least $9 billion.

Our study highlights several major trends:

Local food remains important for shoppers..More than 40 percent of respondents say they purchase local food on a weekly basis, and another 28 percent buy local food at least once a month. Most say that local food helps the local economy (66 percent) and brings a broader and better assortment (60 percent). Another 45 percent say it offers healthy alternatives to customers. It is clear that retailers offering local food can positively influence customer perception..

Local food awareness and price perception have improved..Sixty-eight percent of respondents (up 3 percent from last year) say they are aware that their supermarket of choice offers local food. Seven percent (down from 11 percent) believe their supermarkets do not offer local food; of this group 34 percent are considering grocers because of this.

Similar to last year, shoppers indicate their primary reason for not buying more local groceries is lack of availability at their retailer of choice (see figure 1)…This year, however, only 47 percent of respondents say availability is the primary reason they do not buy local, down 10 percent from last year, which underlines growing awareness of local selections. Dividing our respondents by region, the western United States has the lowest availability concerns (43 percent), compared to 48 percent in the Northeast and South and 50 percent in the Midwest..

Availability is the main reason shoppers do not buy more local food

Price perception has improved as well. Only 31 percent of respondents say that local products are too expensive, down from 37 percent last year, with the West and South reporting the best prices. Only the Mountain region cites price as a more important deterrent than availability..

Leaders are differentiating on “fresh”..Our survey respondents said that when they buy groceries, freshness is far and away the most important purchasing criteria (60 percent), followed by price (30 percent). Local sourcing is a powerful way for retailers to demonstrate their products’ freshness, as 30 percent of respondents do not differentiate between fresh and local..

This is particularly evident in specific categories: Many consumers want both fresh and local in categories such as fruits and vegetables, prepared foods, meat, fish and seafood, dairy and eggs, and bread (see figure 2)…While convenience ranks highly for frozen and canned foods, this is less of a factor for fresh categories (aside from prepared foods). Other factors, such as health impact, organic, and taste are generally consistent across categories..

Freshness is an important decision factor for buyers in many food categories

Shoppers are willing to buy local food—and pay more for it..Seventy percent of consumers say they will pay a premium for local food, the same number as in last year’s survey. However more of those consumers say they are willing to pay a bigger premium—one-third (compared to less than one quarter last year) say they would pay 10 percent more. Our findings indicate that more people are willing to pay extra for local food than they are for organics. Still, buyers don’t have unlimited budgets for local food, which still makes up the minority of their shopping baskets. Thirty-seven percent say high prices are preventing them from choosing more local food options..

To gauge interest in local foods for specific products, in this year’s survey we asked respondents how much more they are willing to pay for locally sourced versions of some specific products. More than half would pay 15 percent more for local strawberries, baguettes, eggs, and chicken. On the other hand, the majority of respondents say they would not pay more for local frozen green beans or lasagne..

Locally sourced food has broad-based appeal, with spikes in key customer segments..

While local food has wide appeal for a host of reasons, some customer segments are more inclined to buy local food and pay more for it. As local food costs more and is often positioned as a premium product, it is not surprising that income level is a strong predictor for buying local. Seventy-five percent of high-income earners in our survey are willing to pay extra for it..Overall, the value of local food has increased in high-, medium-, and low-income segments compared to last year. Thirty percent of low- and medium-income workers will now pay up to 10 percent for local, while almost 20 percent of high-income earners are willing to pay more than 10 percent, twice the number as last year..

Respondents from rural and small communities, which are closest to where food is grown, tend to be willing to pay more for local food than those from larger cities. High-income earners in small towns are, on average, willing to pay 10 percent extra for local food, compared to about 5 percent for residents in large cities. There are some broad regional differences when it comes to buying local food across the country, from a 5 percent premium in the Southeast to a 7 percent premium in the West and in the Northeast. The share of local food purchased in the typical shopping basket is also highest in these regions (particularly on the west coast), compounding the regions’ attractiveness for local food retail. The Pacific Coast region leads the pack with 27 percent local food in a typical basket, followed by the Northeast at 22 percent. The Southeast has the lowest rate, with local food making up 16 percent of a typical basket.

Large supermarkets are still struggling to gain customer trust..Big-box stores and national supermarkets are the most common places our respondents shop for food, yet they (along with online grocers) rank well below farmers markets, specialty supermarkets, and local supermarkets when it comes to customer trust. The correlation between fresh and local is further explained by consumer response to which retailers were most trusted to provide fresh foods. Again, farmers markets and specialty supermarkets are considered most trustworthy, followed by locally owned supermarkets, national supermarkets, big-box and online grocers. As we noted in last year’s report, many customers believe that retailers tailor the term “local” to their advantage with little transparency into how they define it. Fruits and vegetables harvested hundreds of miles away are often still declared local, which has drawn criticism from small farmer organizations—and skepticism from buyers..

Recommendations for Food Retailers:

This year’s survey results reveal that big-box and national retailers still lag in customer perception when it comes to providing high-quality, affordable fresh and local foods. What can these retailers do in the short term to refresh their local food strategies ?

Tap into the market for “fresh”..Freshness is a primary factor in grocery shopping decisions—in fact, in last year’s survey respondents rated this higher than price. Large grocery retailers lag their smaller rivals and farmers markets relative to both price and quality perception when it comes to “local” and “fresh.” Given that our research has found a strong correlation between fresh and local, large retailers can build awareness of their fresh products simply by sourcing and marketing local more effectively—particularly in categories such as produce, meat, bread, and dairy..

Test local autonomy over merchandising and sourcing..The local food leaders we identified in our research have given local managers more autonomy to make local food buying decisions. For example, H-E-B in Texas and Wegmans on the East Coast allow local managers to build their own sourcing relationships with local farmers and merchandise these offerings as they see fit. The local autonomy model optimizes quality, freshness, and availability—three critical elements for success in local we have identified in our consumer research. These factors, combined with customers’ increasing willingness to pay for local offerings, can offset the potentially higher costs from the loss of efficiencies such as standardized processes and centralized buying..

Consider a direct supply chain model..There are three primary supply chain models grocers use to source local food, each with its advantages and disadvantages. Wholesale is perhaps the most difficult model to control for quality and freshness; however, it provides simplicity and access, which is likely why Amazon Fresh uses it. Many large retailers use brokers to source local food on a national level. C.H. Robinson, the largest such broker, continues to build numerous sourcing relationships with local farmers across the country.

A third model—establishing direct relationships with independent growers in the region—is generally the costliest but may prove the most effective. The direct supply chain model optimizes availability, quality, and freshness and provides maximum sourcing transparency to the consumer. As shown in the example of Good Eggs in the sidebar on page 3, some upstarts are using this model to upend the traditional grocery supply chain..

We recommend national retailers begin piloting the direct supply chain model on a region-by-region basis, initially as a complement to broker and wholesale market relationships. As quality and freshness emerge as differentiators in local food, direct supply models will be critical for long-term success..

Going Local:

The local food movement has shifted from talked-about trend to burgeoning opportunity for large grocery retailers. However, the window of opportunity is small—there is little time to waste convincing customers that you can provide high-quality, fresh local food, especially considering how much competition is emerging in this space..

It may take some outside-the-box thinking—in particular giving local stores more autonomy and using a more direct supply chain model—but those moves will help make an immediate impact and build longer-term growth advantage in this highly competitive market..!!