“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…

“Asia & India’s Improving PMI Performance” “against China; The New Normal” | Asia Briefing

“ China manufacturing contracting, Asia expanding as regional demographic changes kick in…” 

HSBC’s “Purchasing Managers Index” (PMI) this month has raised a number of issues, not least the continuing China contraction. The Index, which is published monthly, features a number of primary manufacturing bases around the world, and is an opinion-driven piece on how purchasing managers view their local climate in terms of increases or decrease of orders. With a mean of 50 points being “neutral,” any figure posted below that represents a contraction, while any figure above that an expansion.

China’s contraction has grabbed the headlines, but it is the other Asian countries featured in the index – and especially India, Indonesia & Vietnam – that really catch the eye : All showed expansion.

This is part of an on-going trend and one that will continue indefinitely. HSBC’s comments concerning China are especially revealing: “January data signalled a deterioration of operating conditions in China’s manufacturing sector. This reflected weaker expansions of both output and new business. Firms also cut staffing levels at the quickest pace since March 2009.” This latter sentence means that China-based manufacturing plants HR departments are considering the slowdown to be more than a monthly blip – they are specifically reducing headcount to minimize on-going operational expenses. That is significant because laying staff off in China is an expensive business – China’s labour laws mean compensation has to be paid.

By contrast, India is showing rather more impressive data – the PMI for India reached 51.4 for March, while Vietnam reached 51 and Indonesia at 50.5. Granted, these figures are not spectacularly above the 50 point line, but given a weak global economy one would not expect them to be. Nonetheless, the fact that both India and Indonesia represent huge labour forces at work, and Vietnam is pursuing an aggressive approach to compete with China shows that these numbers are not just a regional whim. They are, I believe, becoming the new normal. We summarize the reasons why as follows :

CHINA – The worlds manufacturing workshop for the past twenty years, China has now gone over the hump of the optimum worker age in terms of the number of workers to dependents. This means that for each worker, there are increasing numbers of dependents to support – and China has the fastest growing number of elderly in the world. At present, some 200 million Chinese are over 60, a figure that will increase to a full 30 percent of the total population by 2030. China is also losing workers, another trend that will continue. These demographics alone are shaping the global supply chain.

Because of this, the Chinese government has been active in ensuring that the middle class in China becomes wealthy – and fast – in order for them to cater for and finance the new Chinese dependents. With an antiquated and meagre pension scheme, China is looking for the future middle class to finance its elderly and will be pressing traditional “Chinese” family values of piety towards the aged to encourage them to support this burden. Consequently, China has been increasing the minimum wage each year by between 15-20 percent, a situation expected to continue.

China’s middle class today is some 250 million. In just six years, by 2020, it will have reached 600 million, creating a gigantic consumer market along the way. At present, China’s age dependency ratio is still reasonably healthy at 36 dependents per 100 workers, however it is deteriorating fast and is expected to double by 2030. This means the products they will buy will not necessarily be manufactured anymore in China – the labour cost will prove too much. Existing manufacturing will stay – but the products required by the increase in middle class will be sourced and imported from Asia. Key Note : China lost 2.4 million workers in 2013, an accelerating trend.

INDIA – One of those sources will be India. Conversely, as China’s workers age, India’s are young – and it has a massive workforce that is still increasing. India’s age dependency ratio is currently 51.4 – higher than China’s – but is set to drop fast.

As India urbanizes, it too will take up much of the demand for global production. It needs too – and in doing so it also needs to improve its infrastructure. China meanwhile needs to keep its aged population happy and be able to provide them with affordable products – one of the primary reasons China has offered to pay for up to 30 percent of India’s total required US$1 trillion infrastructure bill to do so. As Indian infrastructure improves, that young dynamic coming into the labour force will keep wages low. Even today, a worker in Mumbai, one of India’s more expensive cities – will be attracting about US$200 a month – compared to US$760 in Guangzhou. Global manufacturing will increasingly find India attractive as a sustainable and young workforce, coupled with improved infrastructure, starts to kick in and take the weight off China’s shoulders as being the world’s global workshop.

Ford, as an example, have already moved their global production base to Gujarat. HSBC stated that Indian manufacturing moved into a higher gear in January 2014, as new orders expanded at the quickest rate in ten months. Concurrently, exports grew at a solid pace and manufacturers raised their production for the third successive month. The rate of output growth was the strongest in a year. Key Note : India gained 7 million workers in 2013, an accelerating trend.

INDONESIA – India won’t have it all its own way of course, and there is still a lot to accomplish there for the country to properly take advantage of its worker demographic dividend. An alternative is Indonesia, as Foxconn have realised by shifting their total China production of Apple products to Java.

Like India, Indonesia has a massive workforce all coming into the labour market at the same time. As HSBC noted, business conditions in the Indonesian manufacturing sector continued to improve at the start of 2014, and that incoming new business grew at the joint-fastest pace in the history of the PMI series. Additionally, the Indonesian government are prepared to make tax concessions to attract the likes of Foxconn, something that India is less willing to do.

Indonesia’s demographic dividend will see it hit a population of 350 million by 2030, with a favourable age dependency ratio to go with it. Couple with this, Indonesia is a member of ASEAN, which enjoys a Free Trade Agreement with China, reducing tariffs to zero on 90 percent of all products traded. Those future ipads, iphones and iwatches China’s aging population will be using will be manufactured in Indonesia, not China. Key Note : 60 percent of Indonesia’s population is under 30, and that ratio is increasing.

VIETNAM – Vietnam has been attracting manufacturing business away from especially South China for much of the past six years, and this is a trend that will burst into life at the end of next year. Like Indonesia, Vietnam is a member of ASEAN, however differs in that it has not yet fully implemented all the ASEAN free trade agreements at this moment. It is expected to do so by 31st December 2015, by which time all tariffs on 90 percent of products traded between China and Vietnam will cease.

With an average monthly salary of US$150 in Ho Chi Minh City, it will mean an explosion of manufacturing business heading for Vietnam from 2016 onwards – and most of that production with no import duties will be destined for the China market. Vietnam’s infrastructure is improving rapidly, and it shares a common land border with China as well as numerous nearby seaports.

Vietnam’s current labour force is about 49 million of which 45 percent are below 35. The workforce is growing at a rate of about 4 percent per annum. As HSBC note in their PMI report for March, Vietnamese manufacturing growth gathered momentum, highlighted by the strongest rise in output since April 2011, and the fastest rise in purchasing activity in the PMI history. Key Note : Vietnam will reduce its Corporate Income Tax to 20% by 2016 – 5% lower than China

These scenarios mean that the manufacturing onus is shifting away from China and to South-East and India. The demographics alone dictate this will happen, while the ASEAN-China free trade agreement encourages this trend even more.

The new trend of healthy PMI figures for Asia, and a decline in China is already underway, and will indeed become the New-Normal.

The only question is how manufacturers based in China and Asia will now adapt and re-position themselves to take advantage of these demographic changes, and where to shift production too..??

“Modern Retail Merchandising” : The Art of Mathematical Magic | by: Bhavna Chadha | ET Retail

 

In the broadest sense, “Merchandising” is any practice, which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase. How a product stands out on the store shelf often determines its fate in the Buying Decision Process of the customer.

Buying Decision process :

The retail store’s shelf is the final battleground for the consumer’s rupee. If it’s advertising that gets customers into the store, it’s merchandising that gets them to select one product over another , once they’re there. In fact, recent data from the Point-of-Purchase Advertising Institute suggest that 70 % of supermarket shoppers and 74 % of mass-merchant shoppers make their purchase decision inside the store. For many marketers, this strengthens the case that in-store merchandising just might be more important than media advertising. In-store merchandising is also the last chance to present shoppers with information about a product’s features, benefits, price, and positioning. 

The Merchandising Process :

The most important processes in , in-store merchandising are the following – 

Category management – This is becoming increasingly important to retailers. A manufacturer’s merchandising strategy, focused on its specific brands, might be at odds with the retailer’s, which is aimed at increasing sales–and profitability–of the merchandise category as a whole. Manufacturers that show how their merchandising efforts will contribute to the retailer’s objectives are more likely to win the retailer’s in-store support.

Category captains – Many retailers rely on the largest supplier in a particular category to help plan and manage the category as a whole. This tends to squeeze out smaller vendors.

Carrying out the program – Retailers are looking to shift more and more of the burden of putting products on display to manufacturers and their representatives.

Floor-ready merchandise – Larger retailers are trying to eliminate the time and cost involved in ticketing merchandise and otherwise preparing it for display.

Slotting fees are often an issue for new-product merchandising. Since new products are inherently risky, some retailers will demand an extra payment in exchange for making shelf space available.

Merchandisers Role : 

Major packaged-goods companies might have merchandising sales forces large enough to go into stores twice a week to freshen displays, deliver POP materials, and provide product information and training materials for retail personnel, but they are the exception, not the rule. Among the important services that a typical merchandiser can provide are :

  • Set up and maintain permanent merchandising displays such as end-caps, and other specialized fixtures for limited-period displays.
  • Make product presentations to retail customers and run sampling stations or demo machines for grand openings or other in-store events.
  • Monitor inventory and pricing of your products.
  • Check on and improve the number of facings and placement of your products.
  • Verify store compliance on paid-for merchandising display (such as end- caps) and merchandising materials (such as shelf-talkers or danglers).
  • Conduct on-site surveys of store customers.

Merchandising Strategy For Independent Retailers :

The critical strategic advantage of any independent retailer is the ability to focus on, and respond quickly to, customer needs, while providing a superior level of customer service and state-of-the-art product knowledge. In other words, independent retailers should avoid competing on the basis of price, because there will always be a competitor with larger, deeper pockets who will be able to undercut them. And they should look at the traditional model with a different view.

Tapping into “INDIA’S Local Hot-Spots” in the Global BAZAAR : B.O.P | Nielsen

More than 80 percent of the world’s consumers reside in emerging markets, and they account for nearly 65 percent of the world’s spending on fast-moving consumer goods (FMCG). What’s remarkable is that 60 percent of these consumers are located in rural or smaller towns. In addition, many of these markets have maintained their footing during the economic downturn.

In India, GDP growth has slowed from a high of more than 8-9 percent to the current rate of 5 percent as a result of the downturn. The country’s FMCG has also taken a hit, as growth has fallen to 10 percent this year from 18 percent in 2012. Growth isn’t slumping everywhere, however. In fact, the country’s rural areas are growing by leaps and bounds when compared against the metros.

India’s rural markets are massive, and the opportunity is unmistakable. Tapping into these areas, however, isn’t without its challenges. There are more than 600,000 villages, and granular data for many of them doesn’t exist, making the task of reaching the ones that offer the highest return more difficult. So the need of the day is market prioritization.

Not all brands, however, are benefitting from this huge opportunity. When Nielsen analysed more than 39,000 brands across the FMCG industry, we found that less than 10 percent were successful in the market. Upon closer examination, we found that one of the key factors behind the successful brands was a focus on the rural areas. And that focus led to 4x rural growth compared with metro growth.

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So how do marketers make the most of these markets, create effective go-to-market strategies and effectively tap the bottom of the pyramid ?

ENTER BIG-DATA & DATA FUSION :

The biggest challenge in front of marketers and researchers today is getting their heads around the dearth of data on these emerging market hotspots. The task lies in procuring data that sales teams can leverage and recognizing where marketers can set up distributor branches or deploy sub-distributor networks.

Big-data is the new normal, and our research shows that strategies like data fusion can effectively identify these hotspots and help marketers effectively tap them.

The first step in coping with big data involves evaluating all available data sets. The second step involves bridging the gaps across the data sources. Enter data fusion, a stop-gap process that estimates and integrates data across various sources. For example, Nielsen conducted a shop census to assess the FMCG potential of across 7,000 villages across India. There are more than 600,000 villages in India, and we can use the results from our shop census and statistical techniques to estimate the FMCG potential for all of these markets.

MAKE BIG DATA A BIG ANSWER : 

While rural regions of emerging markets are a low hanging fruit for the FMCG industry, marketers need to deal with the absence of data on these localities. To address this, marketers need to develop new ways to enhance their reach into these markets, such as data fusion, market prioritisation and technology integration.

The fact is that 65,000 villages (i.e., 10% of the total number of villages) are driving 60 percent of the total FMCG business in rural India. Market prioritisation can help marketers identify prospective buyers, bring down costs significantly and reduce uncertainty. This technique and tool can be applied across industries, markets and categories, making it an ideal way to effectively tap these hotspots in the global bazaar.

What’s remarkable is that 60 percent of these consumers are located in rural or smaller towns. These markets are massive, particularly as consumer awareness in these areas grows, disposable income within the middle class increases and society rallies around consumption trends. With these factors in play, these markets are only going to see unprecedented growth.

Prioritising Your Markets:

There are more than 600,000 villages, and granular data for many of them doesn’t exist, increasing the task of reaching the ones that offer the highest return. So the need of the day is market prioritization. So how do marketers make the most of these markets, create effective go-to-market strategies and effectively tap the Bottom of the Pyramid (read rural India) in such a situation ??