“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..!!

Does Your “Retail Inventory-Management Processes” Need an Overhaul ?| ArcherPoint

As the Retail Industry adjusts to the needs of the #ChangingConsumer, stores must look at whether their #InventoryManagement processes meet those demands :

Identifying optimal inventory levels is integral to minimizing Losses & Maximizing Profits. Start by examining these three inventory management areas to find room for improvement :

1. Receiving and Tracking : Retailers can better track stock deliveries by gaining more visibility into their processes. Does your retail or warehouse manager know which purchase orders are outstanding and the expected shipment arrival date ? Are the orders going to the warehouse or the store ? Ideally, retailers should have the answers to these questions, and every aspect of their receiving and tracking..

It’s especially important to have clarity into one of the key-facets of the Receiving Process — location…When retail buyers or planners determine the quantity needed to replenish inventory at store locations, they must also decide the delivery location. Should the vendor send the inventory directly to the store, or should the product go to the warehouse to serve as safety stock for multiple stores ??

To determine where to send the inventory, consider THREE Scenarios :

First, for the vendor to send the product directly to the store, retailers must ensure that store management knows there are outstanding purchase orders and what to do with the inventory when it arrives.

Second, consider the shipping process to your multiple stores. If you have one truck that delivers to each of your 10 retail locations, it’s inefficient to ask your vendors to split the purchase order among those locations. Instead, ask the vendor to ship items to your warehouse, where the products will be sorted by cross-docking. That means warehouse workers receive the products at the receiving dock, where they’re immediately sorted and ready to be transferred to the stores. Essentially, the products pass through the warehouse instead of being stocked at the warehouse.

Third, say your buyer estimates that your stores will sell 1,000 items of a particular product, but the buyer doesn’t know the exact quantities each store should carry. In this situation, the vendor should ship the order to the warehouse. Later, when the reorder inventory point is calculated, you can issue a transfer order from the warehouse to the store.

2. Assist on the Store-Floor : Retailers can use mobile point of sale (POS) or mobile inventory tracking to better manage inventory and provide more accurate inventory information on the sales floor…!!

It’s important to know the difference between each. A mobile POS system is customer-facing, meaning it’s used to assist customers with checking out at the register, and includes some inventory status tracking features. Mobile inventory tracking is the mobile interface for managing inventory. It’s possible for mobile inventory apps to record and track quantity on hand, automatically reorder inventory items, display store pricing history for each item, and carry out other #InventoryManagement functions..

To determine which technology is best to manage inventory at your store(s), decide the primary role of your store employees. For example, consider equipping cashiers with mobile POS technology, and equipping other store associates with mobile inventory tracking devices to help them record and restock items..

3. Track inventory as it moves throughout the store: Retailers should think of their store as having multiple inventory locations. One area of the store should be a place for customers to pick items off the shelf, another area designated to hold special orders and a different area for the stockroom or backroom. Modern technology, like bar-code scanning or radio-frequency identification (RFID), can help pinpoint the exact location of inventory items…

Evaluating these THREE Areas of your #InventoryProcesses is “Vital to helping you to identify the Right #InventoryLevels” for your business..

After all, inventory-management plays an integral role in determining your Bottom-line & Profitability…!!

 

“How Sports & Fitness, Health-Club operators” can “Maximize” their “Equipment Investment” | Resourcebeat

“One of the biggest-expenses for a Sports / #Health-club / #FitnessFacility is “Equipment”...!! Maximizing the value of that investment is key to making sure it is money well spent—for the facility operators, for the members and for the facility’s overall image”….

With just a Few Simple-steps and a few minutes spent each day, #FacilityOwners & Operators can make sure that they are getting the most out of every piece of equipment in their Sports/Health-club/Fitness-center…!! When a New piece of equipment is installed in a fitness-facility, “it is bound to generate some excitement and buzz”

But do you take the time to properly introduce everyone to the new equipment ??

“Everyone” includes the members, club staff, personal trainers, maintenance team and anyone that walks through the club’s doors…Most manufacturers will send someone from their organization, either a sales representative, service technician or master trainer, to introduce club staff to the ins and outs of the product….They should be excited to show you all of the great features of the product. Some even offer product training videos on YouTube or their own website. Make sure to ask what resources are available to you…

Plus, the more in tune your staff is with the features of a product, the better they can engage members and get them excited about the new workout options. This offers personal trainers a chance to meet more members, and it shows your members that their well-being and fitness achievements matter to you…

Safety also is a consideration….To be inviting, equipment should not be too complex. But do you really want everyone hitting “quick start” on the innovative new product you just purchased ? Teach them how to use it properly and show them the vast options available to them…Members will get better workouts, try the different programs and see better results…

Daily Check-list :

You have a daily checklist of tasks to complete when you close for the night and open in the morning, right? Does that list include simple steps such as wiping down equipment, vacuuming underneath treadmills, testing Cardio-console buttons, or checking Strength-equipment cables & upholstery ? It should.

Just a few extra seconds spent at each piece of equipment might save you money in the long run with better maintenance, improved equipment function and limited liability because you will be ahead of any issues that might arise..

Regular Check-ups:

You take your car in for service. And I hope you schedule an annual physical for yourself…So why not do the same with your fitness equipment ?

Although all manufacturers require minimum maintenance to be done to qualify for their warranties, sometimes embarking on a comprehensive preventive maintenance program can seem daunting, especially if you have a large facility or multiple facilities to maintain..

If you are not sure where to start, check the equipment owner’s manual. And if you can’t find that, check the manufacturer’s website because most manuals are housed on their service pages. You can always check with your service technician, as most offer preventive maintenance programs so that operators can focus on the business side of their club. And, of course, you can check with the sales rep who sold you the equipment.

When daily, weekly, monthly and annual tasks are completed, you maintain the integrity of the club and the equipment. You limit club liability because you are ahead of issues. And the overall cost of ownership decreases because equipment repairs are done under warranty and parts are replaced before they do damage to the overall product.

Take a few extra minutes each day to inspect your equipment. It is well worth the time to protect your financial investment….

Repair vs. Replace :

Even if you are diligent about your preventive maintenance, even if your staff is keeping an eye on the equipment performance and you are up-to-date on your warranty work, all fitness equipment still has a finite lifetime. Although it varies by facility—depending on the amount of use, the condition of the equipment at the start and the overall quality of the equipment—group cycles last five to seven years, cardio equipment lasts seven to 10 years and strength equipment lasts 10 years or more…

But how do club operators know when they must stop with the preventive maintenance and repair and instead replace equipment ? It is a judgment call. Clearly, when it becomes a safety concern, it is time to replace. If you spend more time placing an out-of-order sign on equipment and more money fixing it than actually using it, it is time. If you have the money in your budget to replace it, then it is time…

A good preventive-maintenance program will provide the numbers that will tell you how much it costs to repair each piece of equipment, how often a piece needs attention and how often it takes to fix the product….!!

Keeping an eye on equipment means you can replace pieces as they need to be replaced, ensuring the club is current and members are happy. If you do a full replacement of all products at one time, keep your members in mind. Offer them an alternate club to work out in during the installation process or schedule new equipment to arrive after hours when it will not affect members…

In short, if it makes sense for your facility—for safety, member needs and your budget—replace your equipment. Then, follow the steps above to make sure that members and staff know how to get the most out of the investment…

A little knowledge will go a long way in making sure that “each equipment purchase” is “maximized to its fullest potential” for every Sports OR Health-club operator(s), providing them the best ROI…!!

“Flipkart & Myntra Merger Is a Done Deal” ; “Flipkart to Raise Another Round of Funding, before IPO” | M&A | NextBigWhat

” The great Indian E-commerce Wedding we’ve all been hearing about for long is done”….the Two companies have kept it under the wraps so far but according to our sources, the deal has been completed and integration between the two has begun…

Both Myntra & Flipkart will operate as separate brands. This was a major point of contention between the two companies as Myntra was keen on operating a separate brand. In between, acquisition talks had stalled due to this…Back in November 2013, before the deal talks were on, we’d written on why the two companies should explore synergies. The two companies danced for a while….And there was much speculation in the press..!!

We haven’t been able to confirm the deal size, but the cash and stock deal is expected to be over $250 mn in value. Flipkart is also out to raise another round of funding before it makes it big move to go for a public offering…

Married

In October 2013, Flipkart closed a $360 mn round of funding from investors including Dragoneer Investment Group, Morgan Stanley Investment Management, Sofina and Vulcan Capital and Tiger Global…Here are some of the details :

Common Investors + Margin Boost ?

Accel, a common investor in both Flipkart and Myntra, has been known to be a M&A friendly Investor. Take a look at the past:

  • Flipkart : LetsBuy
  • Myntra : Shersingh

For Flipkart, Apparel is the #NextBigWhat category to crack and the company has been trying to catch up with Myntra, which is a market leader in the category. Although apparel is a high margin business, the war between the Two would mean large discounts and paying a lot of money to Google.. for #SearchEngineMarketing, at the expense of investors..

Flipkart & Myntra : The Common Investors :

” Tiger Global, Accel Partners and Sofina are common investors in Flipkart and Myntra”….It would have ” cost them all a fortune if the Two had continued to battle it out while “Amazon” on one end and “Snapdeal” on the other” (Snapdeal recently raised $133.7 mn led by eBay)…..!!

And both Flipkart and Myntra are also notching up losses as their revenues go up..

” Myntra ” Revenues :

Myntra posted Rs 134 cr loss on a Top-line of Rs 212 cr for the year ending 31 March 2013…In the year before (2012), Myntra’s revenues were Rs 67 cr and losses were Rs 51 cr. Flipkart, on the other hand reported a loss of Rs 281.7 crore in the year ended March 2013, up from Rs 109.9 cr in the previous year.

Myntra closed a series F round in February 2014Table below shows how much each investor funneled into Myntra:

Investors

Total Amount Paid Incl. Premium

Tiger Global

Rs 31 Crore

IDG Ventures India

Rs 9 Crore

Accel Growth FII

Rs 9 Crore

PI Opportunities Fund – I

Rs 155 Crore

Sofina

Rs 99 Crore

Here’s a look at how sales and losses have grown at ” Myntra “.

    FY12 – FY13*

  FY11-FY12*

 

YoY Growth (%)

Sales & other income

Rs 2,124,917

Rs 671,614

216

Losses after Tax

Rs 1,347,626

Rs 512,631

162

* Indian Rupees in Thousand

Given that after Series F, there isn’t a lot of equity to play around with, “#Merger-withFlipkart is probably the only option” (there are very few other options for ” Myntra to explore a merger-synergy with”, now that ” eBay” is in bed with Snapdeal)..

Myntra Funding : Timeline:

  • February 2014 : $50 mn from Premji Invest,  Belgian Private equity firm Sofina and existing investors. At the time it was reportedly valued at $200 mn
  • February 2012 : $25 mn from Tiger Global, Accel Partners
  • November 2010 : $14 mn series B led by Accel Partners
  • November 2008 : $5 mn from NEA- IUV, IDG Ventures, Accel

This deal, we expect will happen at over $250 mn with Majority being Stock…Launched in 2007, by IIT alumni Mukesh Bansal, Ashutosh Lawania & Vineet Saxena, ” Myntra “ had started out as an online personalised merchandising solution to companies, before it revamped to its current model in 2011.

 

“DIPP India, to push for FDI in E-commerce” : “strategy to give an impetus to manufacturing” | by: Dilasha Seth | ET Retail

” The Department of Industrial Policy & Promotion (DIPP) will push for Foreign Direct Investment (FDI) in E-commerce with the New Government elected today (16th May’2014) as part of its strategy to give an impetus to manufacturing”…

DIPP held a stake-holders meeting on Thursday(15th May’2014), a day before the election results, to firm up its views on the issue. The current FDI policy does not allow foreign direct investment in business-to-consumer (B2C) E-commerce…!! Whereas such, 100% FDI is allowed in business-to-business (B2B) E-commerce…

The meeting was attended by 36 stakeholders, including “Amazon, Walmart, Google, Flipkart, eBay, CII, Ficci, CAIT, Fismi, Nasscom, KPMG”, among others. “It was to examine issues related to FDI in ecommerce. We feel that FDI is needed in the e-commerce segment to boost manufacturing in the economy. FDI in E-commerce is required for capital infusion in SMEs,” said a DIPP official…!!

DIPP will hold another meeting with the stakeholders in the next 10 days to formalise its view on the matter and present to the Next Government(New-Government). This push to FDI in e-commerce comes even as the exit poll forecasts a BJP-led government after the election. BJP has on the record said it is opposed to FDI in multi-brand retail.

 

“Twelve States, mostly Congress party led, had allowed Foreign Retailers to open Front-end stores in multi-brand retail “, which was opened to foreign investment amidst massive opposition. The new BJP-ruled government in Rajasthan has said it would reverse the Congress Government’s  permission Confederation of All India Traders (CAIT), which has vocally opposed FDI in retail and e-commerce, questioned the timing of Thursday’s meeting. “Why was the meeting called a day before the election results. DIPP could have waited for the new government to take charge,” said Praveen Khandelwal, secretary general, CAIT.

He added that they would vociferously oppose an inventory based FDI E-commerce model as it will affect the business of small local brick & mortar players…!!  The department is in favour of same riders for FDI in e-commerce as FDI in multi-brand retail except for the one related to geographical boundaries.

In the current FDI policy for multi-brand retail, the final decision rests with states. In the case of E-commerce, the policy will be a national one – retailers will be able to deliver goods in any state….” We cannot have geographical boundaries in E-commerce, let us be clear on that. You do not have that anywhere in the world,” said the official…

The DIPP, in the discussion paper floated in January, had raised the question whether retail sale under multi-brand retail (MBRT), should be restricted to states that have agreed to open front-end stores. The paper received over 100 comments.

Industry surveys suggest E-commerce could contribute as much as 4% of GDP by year 2020…!!

In the Thursday meeting , None of the MNCs had an issue with the sourcing rider. Walmart pointed out that it already sources about 95% from India while Flipkart said that it sources about 66% from India..!!

As per the FDI in single-brand retail policy, companies need to comply with a 30% domestic sourcing condition while in case of multibrand retail, they need to source 30% from MSMEs. Sources said DIPP secretary Amitabh Kant firmly supported FDI in e-commerce…

Foreign retailers like Amazon & eBay have been strongly lobbying with the Indian government to allow FDI in E-commerce. Some of India’s big E-tailers such as Myntra & Flipkart are already under investigation for possible violation of FDI policy.

While MNCs pushed for an inventory-based model, domestic retail and SMEs only showed comfort over a marketplace model… “As far as the market-based model is concerned, we have no problems, and rather feel that the government should assist us in taking advantage of it.

Whereas, the impact of an inventory-based model on small-scale enterprises needs to be studied,” said Anil Bhardwaj of Federation of Indian Micro & Medium Enterprises…!!

“Marketplace-Model(Infographic)” in Indian “Online Startups” landscape| by: Chaitanya Ramalingegowda,Subodh Kolhe | Your Story

” For the uninitiated, a ‘ Marketplace-Model’ is where a Retailer (Modern / New-age), simply creates the platform for sellers and buyers”…

This is in contrast to the standard inventory model, where the retailer owns the entire inventory that is listed on the website. Obviously, a marketplace model results in a more agile company since inventory, warehousing and fulfillment costs are borne by the seller directly.

Post mid-2013, various Marketplaces have emerged in India…Amazon, Flipkart, Quikr, OLX, Snapdeal, ebay, etc” are trying to create the marketplace ecosystem in India..

While a Marketplace Strategy may be a boon for some Retailers, it could be a bane for others. But how it affects a business depends on a number of variables.

MarketPlace.Model.in.IndianStartUps.Ecomm.graphic2

This includes the type of products one sells, the kind of market one is operating in, intensity of competition in a particular category, marketplace fees and restrictions, and a dozen more factors…

Many E-commerce players are slowly moving towards a marketplace model for various different reasons. Better inventory management, wide range of inventory or lower logistics support might be a few reasons for e-commerce players to shift to marketplace model. Starting a two-sided marketplace is becoming incredibly challenging with the growing competition in India.

Most marketplaces face the “chicken-and-egg” problem while scaling as interactions between buyers and sellers increase… Less buyers – more sellers OR more buyers – less sellers is a classic economics supply and demand mismatch problem.

Here are a few “key insights” we derived from our interactions with E-commerce/Marketplace Entrepreneurs :

  • 13% startups trust in getting users to rate for entries to democratically bring up great quality entries while 15% trust in seeding the initial network with very high quality entries
  • 33% of the E-Commerce and Classified startups consider Supply Chain Management as the most difficult problem to tackle
  • 41.03% of the E-Commerce and Classified startups also feel the heat of not good access to seed funding for their ventures
  • As users, 36% participants wish current market place model businesses to have better curation of entries (no fakes, no duplication) while 33% expect better search and discovery on their websites
  • 25.64% start-ups believe that organic SEO has the highest ROI
  • 26% startups believe that they can solve the Chicken-Egg problem by constantly curate and maintain genuine entries using technology while 23% startups get traffic by making the site free, making revenue on transactions
  • 18% startups believe in Google Adwords where as 13% believe in Facebook Ads when it comes to highest ROI
  • 11% believe in spending on content marketing where as 18% believe in online ad banners to increase startup’s visibility.

 

“India’s Trade (FTA)” pact’s queer “Pitch for Electronics, Appliance makers” | Business Standard

Around 70 % of Microwave Ovens sold in India are imported, mostly from Chinese manufacturers that make these cheap because they make too many. Also, India’s Duty-structure makes microwaves 15-20 % cheaper to import than manufacture here. Despite the Indian Rupee’s recent tumble.

The myth of India’s manufacturing prowess shows up starkly in consumer electronics Air-conditioners, Television sets, Set-top Boxes, Cameras, Music-systems, even Pencil Batteries. According to the Consumer Electronics and Appliances Manufacturers’ Association (CEAMA), 30-40 % of the over Rs 50,000-crore electronics and appliances sold in India are imported.

Free trade agreements (FTA), especially with Asean, the inverted tax structure and lack of government support have led to a surge of imports,” says a worried CEAMA secretary-general and a veteran in the business !!

He has reason to be worried. Around 65 % of all air- conditioners sold in India are imported and those that are not have a large import content. Compressors and indoor units of split air-conditioners are not made in the country. Only LG has a compressor plant here. “We have to import compressors because they are not available in India. Sales volumes in India do not warrant setting up compressor plants,” says Shantanu Das Gupta, senior vice-president of Whirlpool India. He points out that compressors constitute a quarter of the bill of materials for an air-conditioner.

 

Every second television set sold in the country has an LED or LCD panel, and a quarter of these are imported. Sony, which has off and on talked about manufacturing display panels in India, prefers to import these from its facility in Malaysia. Under a free trade agreement with the country, Sony has to pay a mere three per cent duty. “Manufacturing here is not viable,” says Kenichiro Hibi, managing director of Sony India…

Even those companies that assemble flat panel television sets in India add only 30 % value locally. The most expensive bit of these sets is the display panel, which has to be imported because there are no manufacturers in India. “While 95 % of our LED (panels) are assembled in India, 85-90 % of the components have to be imported because these are not available here,” says S Manish Sharma, managing director of Panasonic India.

A television manufacturing company executive says it takes $1 billion to set up a display panel plant, and technology is moving fast. It makes little sense to set up a plant in India because the market is not big enough. He gives the example of an Indian picture tube manufacturer that decided to invest in plasma technology just around the time these television sets were being phased out globally.

One reason for a weak component industry is the size of the market. In 2013, only 1.3 million microwave ovens were sold in India, for just over Rs 1,000 crore. Only 2-3 % of Indian households have air-conditioners.

Also, the government has made no effort to encourage local production. Domestic microwave manufacturers recently petitioned the government to allow them to import five key components at “zero duty”, instead of 7.5-10 %. In return, they promised at least 70 % of the ovens in the country would be made in India. But their proposal has met with silence from the government.

The commerce ministry has moved a proposal for a free trade agreement with China. That, say Indian consumer electronics companies, will cripple local production. China’s scale in manufacturing allows its companies to charge rock-bottom prices and could flood the Indian market. “Even Japan gave protection to its consumer electronics industry. But India opened it through free trade agreements and is now also thinking of China. The smaller companies will import. We, of course, have global operations, but the LCD panels that we make in India have 80 % imported components,” says Venugopal Dhoot, chairman of Videocon Industries.

In some areas, a nudge from the government would have helped. For instance, India’s broadcasting industry projects that the country will need over 75 million set-top boxes. Yet nearly Rs 12,000 crore will be spent on importing these from China, Taiwan and South Korea, among other countries. Local companies can make the boxes and match the Chinese price. But they must pay 12.5 % as value-added tax, which importers do not. Set-top box makers have petitioned the government but have had no response.

The issue is more acute in the Rs 10,000-crore home appliances market, dominated by small players that manufacture for large brands. As much as 30-40 % of components here are sourced from the grey market without paying duties. The government has not been able to stop the proliferation of the grey market. This is not only killing small appliance manufacturers but also the component industry that supported them.

India has become a dream market for electronics and appliance manufacturers as  consumers splurge on television sets, refrigerators and air-conditioners. It is already Sony’s fourth largest market worldwide, a target LG also hopes to meet. Yet, that growth is heavily dependent on imports, of finished goods and components…