Making Brick & Mortar Stores ” matter in a multi-channel world ” | McKinsey

As the role of the brick-and-mortar store evolves, retailers will continually have to refine how they use their real estate…!!

For decades, the retail industry has followed the same straight forward formula for growth: open new stores. By replicating a proven store format in a new catchment area, retailers could reliably enlarge their customer base and count on healthy increases in sales.

But the world has changed. More than half of consumers now research their retail purchases online, making purely in-store purchase decisions the shrinking minority. In many categories, e-commerce has dramatically lessened the need for physical stores. “Virtual space”—which we define as the floor space that would be required to generate the sales volume that online retail now accounts for, at a sales density equivalent to the industry average—is expanding at a staggering rate. In this new world, what is the role of the brick-and-mortar store?

Many retailers find themselves struggling with the question and saddled with more real estate than they know what to do with. After all, their property departments are geared up for expansion and acquisition. Their finance departments have traditionally focused on reaping investment returns from stores and tend to be jittery about investing in new and unproven technologies. On the flip side, their e-commerce directors are frustrated by this lack of understanding of the pace and mind-set such companies need to become digital winners.

To position themselves for success in a multi-channel world, retailers would do well to take a disciplined approach that begins with a reassessment of the role of the physical store. We recommend a FIVE-step approach we call STORE : starting with a clear vision for the future role of the store, tailoring categories and formats accordingly, optimizing the store portfolio using forward-looking analytics, reinventing the in-store shopping experience, and executing systematically across channels…

The incredible shrinking footprint: 

The effects of online migration in the retail industry are evident in every category. In the United States, apparel retailer Gap closed more than 250 stores in 2013; department-store chain Sears closed almost 200. Walmart’s new stores are about a third smaller than they were five years ago…!!

Online retail has affected more than just physical floor space. Amazon, for one, has put intense pressure on retailers’ top and bottom lines by having key items priced 13 to 20 percent lower than average, an assortment 17 times larger than the average retailer’s, and a cost base that is 3 to 4 percent lower than brick-and-mortar competitors’, all while achieving the highest customer-satisfaction scores in the industry. The combined effects of Amazon and other online retailers have rapidly hurt traditional retailers’ return on invested capital, as fewer sales flow through existing physical assets.

Many retailers’ instinctive response to these headwinds has been to close under-performing stores and to look for operational efficiencies, but these moves only buy time—they can’t fully close the performance gap…“Shrinking to greatness” is not the answer.

A framework for change: 

Shifting from a store-focused approach to a multi-channel mind-set requires retailers to change their traditional frames of reference and ways of working. As consumers increasingly shop across channels, terms like “convenience” and “efficiency” take on new meanings. Customer expectations are rising: for instance, customers now expect price consistency across channels, the ability to buy online and pick up or return in store, and a range of payment options. Price transparency puts pressure on retailers to develop ultra-efficient operating models. The wealth of online information available to consumers raises the bar for in-store service and expertise.

But let’s be clear: the brick-and-mortar store is not dead; it just plays a different role now. In fact, in a multi-channel world, physical stores can provide a competitive advantage… Some multi-channel retailers have seen growth in their online sales and penetration among consumers who live near their stores. In several sectors, “click and collect” is proving a popular and increasingly efficient means of serving the customer. More than 50 percent of Walmart’s online sales and around 40 percent of Best Buy’s already are picked up in stores. Best Buy’s store-within-a-store partnerships with Microsoft, Samsung, and other suppliers capitalize on manufacturers’ need to show off their products in a physical retail environment. Former online pure plays such as Oak Furniture Land and sofa.com have opened physical stores that now generate as much as 60 percent of sales.

Some retailers are now reshaping their store networks in response. One approach is to lead with a handful of flagship stores—which essentially become a marketing and service channel for the online business—supported by numerous smaller outlets that offer convenience and a curated product offering.

In light of rapidly evolving technology and consumer behavior, we believe retailers that take a forward-looking view and heed the following five imperatives can position themselves for multi-channel success.

Start by Redefining the role of the store:

The first question that retailers should ask themselves at the beginning of their store-network transformation journey is, “What role will my brick-and-mortar stores play in a multichannel world?” To answer the question, retailers must find out what their customers truly care about. They need to know which aspects of a store matter most to customers and what purpose a store serves for them:

  • Convenience and proximity.
  • Efficiency
  • Inspiration
  • Instant gratification.
  • Discovery of a solution, information, or service.
  • Entertainment and social interaction.
  • Experiencing brands and products.

 

Economic considerations are important as well. For each of the purposes above, retailers should ask, “How can stores do this profitably?” There may be more than one answer and therefore more than one winning store format. In any case, the agreed-upon role (or roles) of the store should dictate every decision about the store operating model: location, assortment, staffing, supplier funding, employee training, and so on.

Tailor categories and formats accordingly:

Customer priorities and store economics should next become critical inputs into ongoing category reviews, to ensure that assortments and space allocations are continually optimized for a multichannel world.

Format decisions should also be driven by customer needs and priorities. Some retailers are adapting their store formats to the tastes and preferences of certain customer segments. Macy’s, for example, has embarked on a major effort to court millennials: it has launched more than a dozen segment-specific brands and created “destination zones” for millennials in its stores.

Optimize the portfolio using forward-looking analytics:

The next step is to re-evaluate the store portfolio through a multichannel lens. Leading retailers regularly analyze correlations between sales performance and catchment data to identify promising locations for new stores and to figure out the winning formula for top-performing stores; they examine factors such as population density, income, competitor presence, and average tenure of the sales staff. This is a valuable exercise, but in a fast-changing business environment, it’s not enough. Retailers must look ahead: they must extrapolate the impact of macro and industry-wide trends on the store network’s economics and operating model. And they must understand the impact that channels have on one another. One retailer that already had 100 unprofitable stores in its network found that another 100 would be in the red within three years given competitor trends and the shift to e-commerce.

The most forward-thinking retailers use analytical tools and techniques to reshape their entire store networks. They use financial and geospatial modeling to highlight not only where stores should be opened but also which should be closed, resized, or reformatted.

Re-invent the in-store shopping experience:

Creating the store of the future will mean overhauling the in-store customer journey, in part by using new technology to make the shopping experience as seamless and easy as possible. Some retailers simply copy the in-store moves of multichannel champions such as Apple and Burberry or equip sales staff with iPads to give their stores an updated, high-tech look. But cosmetic changes alone won’t result in lasting impact. A multichannel mind-set must be embedded in the store design and in employees’ new ways of working.

Retailers should prioritize the basics: again, focusing on what matters most to their customers and enabling multichannel shopping (for instance, by establishing fast-pickup counters for online orders) while being ruthless about taking costs out of the things that customers don’t care about.

Execute systematically across channels:

Change of this scale is not easy and affects many functions across the organization. Some retailers make the mistake of developing a store-network transformation plan that extends past 2020, by which time parts of the plan will probably be obsolete, or else they embark on a massive change program that will take so long to roll out that it will be out of date before it is halfway done. Retailers are typically better served by developing a detailed plan for the next 12 months and a high-level road map for the next three years.

Pace and flexibility are critical. “Gold plating” an entire store takes too long and tends to be expensive. Retailers should instead test new ideas quickly, and they should pilot individual aspects of store design to figure out specifically what is working and what isn’t.

Of course, capabilities and organizational design, both at headquarters and in individual stores, must evolve as the network evolves. Retailers should ask themselves: Does the organizational structure support the new network size and role? What would it take to shift the mind-sets of the property team away from a focus on opening new stores and toward making better use of existing space, introducing and refreshing store concepts quickly, and even scaling back on real estate? the store of the future should allow shoppers to move seamlessly across channels…Store staff should be well trained and comfortable in directing customers to the right products, both offline and online.

The logistics and store teams should work hand in glove with the online team to ensure that orders are fulfilled efficiently and to get products to consumers quickly….!!

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

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

Brands on demand:

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

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

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

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

Placing it Right :

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

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

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

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

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

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

“The Retail-Revival” : Succeeding with a “Store-Led Strategy” | BCG

A Store-Level Focus Can Transform Retail Chains Faster and Yield real results..!!

A bottom-up approach is entirely appropriate for retailers that find themselves struggling to make meaningful performance gains. Unlike what’s typical in many other industries, symptoms of sub-par performance in retail are readily detectible by both retail experts and customers, and those customers are able to provide immediate feedback..

Of course, #RetailTransformation is not simply a matter of “walking the store floor”…Although the physical demonstration of engagement is important, it is insufficient to effect lasting change…BCG has found that big performance gains are possible when executives are ready and willing to drive an integrated store-first change program that fits within the existing business model: that is, there are no additional capex requirements and no major changes to infrastructure…

Significant Results Within Months :

The results can be impressive. In BCG’s work with retailers worldwide, we have seen noticeable increases in store traffic that have, in just a few months, translated into a 5 percent lift in like-for-like sales and consistent profitability. Customers will almost certainly see cleaner and tidier stores with neat, well-stocked shelves, up-to-date price tags, fresher fruit and vegetables, and cheerier, more helpful employees..

Such results can be seen in a large Asian retail chain that successfully piloted and rolled out new operating practices. Guided by a store-led initiative, the chain boosted sales per square foot by more than 14 percent inside nine months, and it showed a profit for the first time in five years. We have observed comparable results in Europe and North America. One large European grocer gained a full percentage point in market share in its hotly contested market within six months..

The essence of such change initiatives lies in the deliberate, choreographed coordination of three concepts that previously had been used only selectively, in isolation, or outside the framework of a sustainable, system-wide change effort..

Anchoring the effort is the “Transformation SWAT team”—a carefully selected group whose job is to lead and embed sustainable change. Unlike typical change-management teams, these SWAT teams include high-potential middle managers who have a deep understanding of commercial and operational realities..

The second element is “stores of learning”—a small selection of representative stores that serve as centers of excellence. The goal is to rapidly pilot new operational and commercial practices, provide a visual look-and-feel trigger point to improve team culture, and to educate, inform, and excite senior store operators. The third element is fast rollout across the chain, spearheaded by the store operators themselves..

We’ll examine each of those transformation levers after a brief look at the context of retail challenges today…

Inverting the Business Pyramid :

Successful retail leaders are all “fluent in floor.” They can discuss, with authority, stockout rates in each store. They have a good sense of how customers are helped in stores. They’re likely to have ridden in a supplier’s truck, so they’ve seen how products are sorted, packed, and loaded at the distribution center—and how efficiently products are unloaded, unpacked and stocked at the stores..

That kind of store-led approach is needed to resuscitate grocery and mass-retail chains whose performance is sagging and that face tough online competition and upstart specialists. Yes, top-down approaches are entirely appropriate for macrostructure decisions—how many stores are needed in the region, say—but increasingly, executives need to be directly in touch with employees and shoppers. They need to see stockouts and untidy shelves for themselves and to understand the root causes of those problems. Put simply: it’s necessary to turn the traditional business pyramid on its end. (See Exhibit 1.) This inverted model isn’t simply about a change in operation; it involves a new cultural paradigm that motivates employees to deliver results because they want to—not because they’re told to…

exhibit

Why Store-Led Change Is the Way to Go:

Store-led change involves testing and fine-tuning a series of interventions in a selected group of trial stores with an eye toward immediate impact. Senior managers can see the potential of the interventions and be confident that they will work. After that test phase, the interventions with the most impact are rolled out rapidly, in disciplined, systematic ways, to the whole chain. Each performance gain supports the funding of the next stage in the roll-out, funding the transformation through its early stages and eliminating the need to “go back to the well” for financing.

Store-led change also means developing a cross-functional approach, improving and building capabilities for the long term. This approach enlists not only the executives from commercial and operational leadership but also the store managers, along with representatives from support functions such as finance, IT, and human resources..

The THREE Cornerstones of Store-Led Change: Let’s examine what makes this approach work well.

A transformation SWAT team must lead the necessary changes. This group’s primary responsibility is to align the business structurally with the interface to the shopper; the SWAT team’s charter makes it accountable for achieving that objective and for piloting the necessary commercial and operational processes. The team is the spark and the propulsive power behind the store-led transformation effort.

To explain what the SWAT team is and does, it helps to explain what it is not. It’s not a group of “the usual suspects” from the executive team—talented but extremely busy leaders who would have to find time to lead the change initiative as yet another in a long list of projects. Instead, the SWAT team comprises motivated, proactive managers hand-picked for the duration of the change effort. It is critical that they be drawn from many operations and functions. Unlike many conventional top-down change teams, which often splinter quickly into functional hammers seeking nails, the SWAT team assumes and retains a function-agnostic stance that better serves the stores’ needs..

The approach also means that the SWAT team members can bear down fully on the change tasks. It is the perfect crucible for learning and leadership development: top managers soon see which team members are set for stardom..

The team’s members—high-potential middle managers, together with senior managers who are, in most cases, three levels below the CEO and are proxies for each top-management role—are tasked with selecting the test stores and deciding on the duration of the tests. Then, with input from the stores, the team develops a series of operational and commercial interventions that are designed to stimulate and sustain growth in sales and profitability. The team also liaises with the retailer’s regional and central teams to make sure that they are on board and to seek specific technical input and support as required..

It’s the SWAT team’s job to validate and approve the interventions using a proven business case or strong recommendation, and to design, develop, and secure approval of a detailed rollout proposal. The team also oversees the chain-wide implications of the program and remains accountable for the successful implementation of the transformation and for its financial success..

Stores of learning allow for safe experimentation. The stores-of-learning idea is essentially an incubator model in which a select few stores are designated as centers for experimentation and learning. With this approach, the proposed change levers—or interventions—are less likely to be caught in organizational treacle. This type of activity creates short-term value and provides the required funding for the more significant structural changes that will be needed to win in the medium term..

The fundamental concept isn’t brand-new, but it is new for retailers to run individual interventions in specific stores, measure the results, and then aggregate those results back in the stores of learning. And it is novel to ask the store teams to determine the priorities for change and to involve high-potential managers in the effort. Their involvement almost always accelerates the change effort..

We have identified FOUR Main Categories of intervention that collectively make a difference:

A Winning Culture – This intervention involves listening and learning from the store teams, helping them by reducing unnecessary work, communicating clearly with recognition and rewards, clarifying accountability and expectations, and creating values that resonate with the store teams and can become part of their everyday jobs. Little things add up: the more that retailers make job duties and expectations crystal clear and consistent, the better. The more that pointless work is minimized, the better employees like it. And the more that they’re listened to—and their ideas acted upon—the more they’ll be vested in the life of “their” stores..

Customer Focussed Opeartions – This intervention focuses on sales rather than waste, improves visibility of daily and weekly performance, prioritizes product availability, emphasizes cleanliness and queue reduction, and addresses labor scheduling. There is enormous potential here: these are the factors that shoppers notice right away. For instance, one grocery chain reduced the numbers of SKUs in some categories by as much as 30 percent and saw a 20 percent lift in category sales in some cases..

The Right Range at the Right Price – Here, the emphasis is on opportunities to improve merchandising impact; upgrade the quality, freshness, and value of items in departments such as fruit and vegetables and bakery; make progress with price laddering or private-label initiatives; and strengthen and simplify promotions. Another retailer that followed a store-led approach cut its numbers of promotions by almost a third, boosting sales growth and store productivity..

A Differentiated Look and Feel – The goals are for the stores to have open and welcoming entrances, clear sightlines and obvious navigation inside the store, legible communications about value and quality, well-planned category adjacencies, and effective macrospace allocation. At one retailer, a floor-up focus enabled the transformation team to quickly improve sight lines by lowering shelf heights, using large signage to improve customer navigation, and placing categories in more logical sequences..

The stores-of-learning concept turns the whole organization—not just store operations but everything from merchandising, marketing, and supply chain to IT and HR—into a laboratory..

Rapid rollout has an immediate impact. To deliver top-line sales growth fast, the transformation project must transition rapidly from stores-of-learning pilot status to a scalable rollout across the whole chain. (See Exhibit 2.) Many of the interventions can be activated immediately, delivering quick impact on customer and team morale and yielding sales gains that range from 3 to 12 percent..

exhibit

The reason why rapid roll-out works so well is that it is led by the stores. It is common for retailers to feel that the process should be led by the organization’s center. However, we have consistently observed that a regionally dispersed model—in which stores of learning serve as “universities for change”—results in more accurate, consistent, and sustainable results precisely because it is operator led..

Some interventions are immediately scalable: with product availability, for example, simple interventions in store procedures and in accurate measurement give immediate results. In the case of one retailer, we saw a 1.5 percent improvement in shelf availability. Other interventions require more fundamental organization design changes: for instance, promotional execution and supply-chain delivery windows can yield strong returns but only after several central functions have rejiggered their operational procedures..

Roll-out has to be systematic, led by the stores’ operators and guided by a clearly communicated methodology…Two Roll-out techniques work well :

  1. Keeping the stores of learning close together so that results are seen and best practices can be shared and acted on quickly
  2. Enabling the first store of learning to support and train a carefully designated group of other stores—perhaps those served by the same distribution center or that are located in the same metropolitan area—so that the roll-out requires a very light touch from headquarters

In turn, the first groups of stores that take part in the roll-outs train the next groups of stores until the roll-out is complete. Done right, the momentum of the roll-out is palpable and energizing in itself..

Now is the time to get back to the basics of retail—one store at a time. By tapping the energy, courage, and commitment of a transformation SWAT team—first, in the selected stores of learning—and mapping and rapidly implementing rigorous roll-out strategies, retailers can look forward to the kinds of performance gains that their shareholders have been expecting all along..

If they truly understand the business from the Store-Level upward, #Retailers can more easily jump-start their transformations…

A choreographed approach, featuring the coordination of the THREE Store-led Concepts described in this article, is what is needed to deliver quick, positive impact, creating the breathing room—and generating the funding—needed to galvanize other crucial transformation initiatives….!!

“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..!!

Overall “Mall vacancy in India”,maintains status-quo at 14.5% | Realty Plus

According to Cushman & Wakefield’s latest Retail reports, the overall #MallVacancy, levels across the top eight India cities remained stagnant at 14.47% in Q2 2014, which was recorded around 0.4 percentage points lower compared to Q1 2014…Amongst the top eight cities, Pune witnessed sharpest decline of 2.5 percentage points due to healthy leasing activity and no new mall supply. Ahmedabad, Chennai and Bengaluru also recorded drops of 0.4 percentage point each due to moderate demand for quality mall spaces from apparels and food and beverages (#F&B) retailers…Hyderabad witnessed a rise of 1.1%, in mall vacancy in the same period.

Q2 2014 saw the addition of 370,000 sq ft of new mall space, which was similar to that received in the previous quarter. The supply comprised of 250,000 sq ft in one mall in NCR and the residual 120,000 sq ft in an operational mall in Kolkata. As many as six new malls planned for Q2 2014 witnessed the deferment to the second half of the year, which together accounted for 2.33 million square feet (msf)…

While three malls measuring 700,000 sf in total were delayed in Bengaluru due to approval delays, slower construction pace in tandem with low leasing led to deferment of one mall each in NCR, Pune and Hyderabad, measuring 700,000 sf, 430,000 sf and 500,000 sf respectively.

Sanjay Dutt, Executive Managing Director, South Asia Cushman & Wakefield, said, “The retail and retail real estate markets are still going through a period of uncertainty. Currently, we are witnessing stagnation in the demand-supply dynamics as mall supply is being deferred and existing vacancies remain more or less stable. Whilst everyone is aware of the huge potential that exists for organised retail in India and domestic and international retailers are keen to expand their presence in the country, they are awaiting the conducive conditions to do so. The real estate sector has been maturing to provide better quality spaces and adopting best practices to cater to retailers needs. However, macroeconomic conditions and not just the sentiments need to improve further to encourage consumer spending and the government needs to address the uncertainty that exists with respect to its policy stand on FDI in retail. The RIET’s for commercial properties post successful listings, would potentially open up for shopping center portfolio listings, giving much needed exit route to the developers & investors. This would encourage shopping centre developers to create much needed quality organized retail space at locations that matter. The overall infrastructure to support retail trade such as transportation and logistics too need to improve substantially for the sector to kick in to its next phase of growth.”

According to C&W, mall rentals remained stable across most cities except Bengaluru, Chennai, Mumbai and Pune where a few micro markets depicted rental variations. In Bengaluru, the sharpest rental decline of 13% was noticed in Mysore Road where lower trade densities impacted rentals adversely. Similarly, Cunningham Road in Bengaluru also witnessed lower demand leading to a 10% dip in rentals. On the other hand, Goregaon in Mumbai witnessed a 10% increase in mall rentals due to healthy demand from retailers. In Pune, Hadapsar also witnessed a positive trend in leasing leading to a 9% uptick in mall rentals. In Chennai, almost all mall micro markets witnessed a rental decline from the last quarter due to weakening demand. The sharpest rental dip of 9% came in Chennai-Western where lack of new mall supply hampered retailer demand for this location. Mall rentals in Hyderabad, Ahmedabad and Kolkata remained stable.

In Pune, JM Road witnessed the highest rental appreciation of 9% due to high demand from fashion and lifestyle retailers. Vashi in Mumbai also witnessed similar rental appreciation due to high interest from apparels and F&B retailers. In Chennai, lack of optimum sized retail spaces led to a 7% decline in main street rentals. Anna Nagar 2nd Avenue in Chennai also witnessed a 7% dip in rentals from last quarter as ongoing infrastructure projects curtailed footfalls. All main streets in NCR, Ahmedabad, Hyderabad and Kolkata recorded stable rentals during this quarter. Vittal Mallaya Road in Bengaluru witnessed a 4% rental drop in wake of dearth of optimum-sized retail spaces and already high rentals commanded by this established main street.

During H1 2014, Bengaluru witnessed no new mall supply; this was primarily owing to the delay in approvals, which led to the deferment of upcoming supply. Meanwhile, the city mall vacancy level registered a dip of 0.4 percentage point and was noted at 7.1% towards the end of Q2 2014 due to the absence of new mall supply and moderate demand from apparels, F&B, footwear and electronics retailers. Although most locations in main streets and mall micro markets recorded stable rental trend this quarter, select main streets and mall micro-markets registered a drop in rentals. Whilst Cunningham Road and Mysore Road mall micro markets witnessed a decline of 10-13% in rentals in the wake of weak trading activity; Bannerghatta Road mall micro market recorded a drop of 3% in order to keep rentals competitive and attract newer brands. Main streets of Brigade Road and Vittal Mallya Road observed a drop of 3-4% in rentals due to limited availability of options with optimum sized floor plates. Going forward, Cunningham Road and Mysore Road mall micro markets may experience further downward pressure on rentals. On the other hand, established main streets such as Indiranagar 100 Feet Road, New BEL Road, Kamanahalli Road and Koramangala 80 Feet Road may witness an upward rental bias owing to healthy enquiries from apparels, F&B, electronics and jewelry brands.

In H1 2014, Chennai did not witness any new shopping malls becoming operational and this led to a marginal decline of 0.4 percentage points in vacancy, which was recorded at 5.9% at the end of this quarter. Cautious sentiments and limited transactions led to a dip in mall rentals across all micro markets. Chennai-Western saw the sharpest decline with a 9% drop owing to the ongoing infrastructure projects, which curtailed footfalls and demand. Amongst main streets, strong demand from jewelry retailers for Usman Road- North and Usman Road- South led to a 4% rental appreciation for these locations. However, no availability of optimum sized floor plates in Cathedral Road-R.K. Salai led to a 7% rental dip for this micro market. Enquiries from jewelry retailers for select main streets near CBD remain high but Anna Nagar-2nd Avenue may witness a negative rental bias due to lack of demand caused by the ongoing metro work. Paucity of quality mall space and low demand may lead to stagnant vacancy levels and rental decline across most micro markets.

The mall stock in Hyderabad remained stable in Q2 2014, with 500,000 sf mall space deferred to the next quarter. Q2 2014 witnessed a rise in vacancy by 1.1 percentage points and was noted at 8.22%. Established main streets such as Himayathnagar, Banjara Hills, Jubilee Hills and Kukatpally witnessed an increase in demand from retailers, belonging to apparels, footwear and F&B categories. In the interim, enquiry level for electronic and apparels brands increased in peripheral locations such as Attapur and Kothapet. Whilst mall and main street rentals remained stable, next quarter the city is likely to witness infusion of 500,000 sf of mall space in Kukatpally micro market, which will put a downward pressure on the rentals.

Kolkata witnessed 120,000 sf of mall supply during the first half of 2014 and the overall city mall vacancy increased marginally by 0.07 percentage points. Limited transactions and moderate demand for retail space was recorded. Owing to lack of availability of quality retail space on main streets, malls witnessed more demand compared to main streets. Central and East locations continued to see majority of the leasing activity in both malls and main streets owing to churn and ready catchment. The first half of 2014 witnessed leasing activity predominantly from the apparels segment but rentals remained stable in both main streets and malls.

The first half of 2014 did not witness the opening of any new malls in Mumbai. Despite no new supply, churn in malls led to overall mall vacancies increasing marginally by 0.06 percentage points to 15.4%. During Q2, healthy demand led to mall rentals at Goregaon and Vashi appreciating 10% and 5% respectively while high vacancy levels in malls in Bhandup resulted in developers reducing rentals by 5% to attract retailers. Limited churn kept mall rentals stable in all other locations of the city. Main streets in Mumbai witnessed vibrant leasing activity with domestic and foreign retailers in the apparels and F&B segments actively expanding their presence at locations like Vashi, Lower Parel, Andheri and Linking Road. Owing to high footfall and thriving retail demand in Vashi, strong interest of retailers led to rentals appreciating by 9%. Mall rentals at select locations such as Lower Parel and Malad could appreciate due to higher demand for quality space. Main streets are also expected to witness improved leasing activity in the coming months. Increasing demand for space in main street locations such as Linking Road, Borivali and Thane could lead to increase in rental values.

Delhi-NCR witnessed one new shopping mall measuring 250,000 sf become operational with 60% occupancy levels in H1 2014. Amidst moderate interest among retailers to foray into new and emerging locations, developers continued with slow pace of construction deferring completion of malls. During Q2 2014, overall mall vacancy was recorded at 13.5%, which is 0.06 percentage points higher due to the influx of new mall space. With balanced demand supply conditions, rentals remained stable across all mall locations.

 

“Building a Luxury-Brand Image” in a Digital World | INSEAD

Luxury Managers often see #DigitalMedia, as a threat, worrying that mass appeal will take power away from the #Brand. But digital channels offer powerful connections with customers and closer integration with their ecosystems.

“Hermès has no desire to become “masstige” (a mass producer of prestige goods) said the company’s CEO Patrick Thomas in 2009, despite two-year waiting lists for its famous Birkin or Kelly handbags at the time. The luxury brand maintained that it did not want to dilute the brand image and compromise on quality in the interest of short-term profits…

Such a dilemma is par for the course in Luxury and is also applicable to the digital presence of the companies in the industry: How to maintain demand and a big customer base while remaining exclusive? This is all the more important as #DigitalChannels, “expose” brands regardless of whether they want to or not, through the hundreds of thousands of press articles, comments and pictures that are posted daily about #LuxuryBrands…If Brands do not embrace digital media, they risk being shut out of conversations about their products..

Hermès has resisted selling any of its “core”, highly sought-after collections online, and the company emphasises that its brand website is more of a channel for consumers to explore the world of Hermès, from its seasonal inspiration, to its heritage, art and museum collaborations and exhibitions. The same is seen on the company’s Facebook page…#Hermès, has also embraced the mobile app channel but only with their Silk Knots app that educates consumers on how to vary their scarf tying techniques.

Since digital attracts a much younger demographic not necessarily seen in physical stores yet, educating customers and other stakeholders about the brand’s DNA and what it seeks to represent is central to building the future generation of customers whose spending power will increase with age. Such approaches also entice them to the exclusivity of the store. To successfully engage people on digital channels while maintaining “distance” from the mass market, brands must answer two key questions: first, how to coordinate offline and online efforts to offer the best multichannel experience? And second, how to build an exclusive image online?

How to marry Bricks and Clicks ?

Luxury and fashion brands built their brand promise through a unique in-store environment and intimate personalised service that they can hardly transfer to the online world. So how should luxury brands marry bricks with clicks? Critics within the industry are often opposed to bringing clicks to bricks, arguing that the former endangers the later by cannibalising sales and potentially threatening the brand image by making the brand more accessible through online channels and social media.

While these dangers exist, deserting digital media would be even more problematic and would leave room for rivals to build awareness and competition, and prevent the brand from actively engaging with customers and responding to critics. In fact, brands that have been very successful so far have focused on maximising the synergies and complementarities with physical stores..

For instance, multi label boutiques like Lane Crawford and Neiman Marcus that have long started their #E-commerce sites, do encourage and enable customers to pick up their e-purchases in store, or visit a store for exchanges or refunds. It is a way to drive double footfall and traffic both online and offline. The key differentiating factor of luxury brands is and will remain the store experience and customer service, hence many luxury brands feel that a consumer needs to ultimately walk into a store to experience this, in order to gain “true” customer loyalty in the long-term. In sum, digital engagement should be seen as a way to leverage an additional consumer touch point, rather than jeopardising existing sales.

Second, inherent to the notion of luxury is that it supposes to create a distance between the brand and its customers  to create the dream…But this is in direct contradiction to the notion that social media and digital channels connect people with one another and lower the barriers to entry.

How to build a Prestigious Image?

The power of image relates to how a brand can increase its brand awareness and value by embracing and leveraging different digital channels to reach consumers.  It is further complicated when different consumer groups choose different digital channels.  Between Facebook, Twitter, Instagram and blogs, certain brands have compartmentalised their reach differently. This gives consumers the choice of which platform to be engaged with depending on which resonates most strongly with their lifestyle and desires, and also gives the opportunity for brands to intelligently use browsing data in order to more effectively target specific demographics.

The Burberry Facebook page for example, is very product driven, and lists many smaller accessory pick up items like wallets, clutches, sunglasses, versus their higher end exotic lines. It also features more of the brand’s music influences, which is not seen on its Twitter and Instagram accounts. The company’s Instagram account is much more “backstage” driven, with scenes of London; behind the scenes photo shoots; and live pictures from runway shows. This appeals to the slightly more visual and artistic customer who craves instant gratification from staying updated and plugged in real-time. The Mulberry blog, or journal is much more lifestyle-driven, and posts much less product, but more on styling influences, travel stories, events and even food recipes.

By giving people the opportunity to give their own representation of brands online, the Digital Revolution has led to much more fragmented, bottom-up, multifaceted #BrandBuilding…In turn, this requires that #LuxuryCompanies step up and strategically engage in image building with #Customers, and use digital platforms as a springboard for engagement and sales…

“Large Mixed-use Retail Schemes” are the Most-Desired Style of Projects in Indian Real-estate space | ET Retail

Malls in India and elsewhere are increasingly becoming #LifestyleDestinations, posing challenges for #MallDesigners, as they need to create retail properties that engage, are cost efficient and sustainable…From mixed-use developments to family entertainment centres (#FEC) to streets and squares–such as those in Dubai–mall designers are constantly trying to innovate with #RetailFormats…Head and director of UK-based mall design firm, spoke on the latest trends in mall design…The company has designed #ShoppingCentres, in India such as DLF Place in Saket, Delhi, Phoenix Mills in Mumbai and Pacific Mall, also in the National Capital Region(#NCR)..!! 

Going by your experience of designing malls in India and abroad, what are the latest trends internationally that define shopping complex properties today?

The latest trends which we are seeing reflect the changing Global #RetailLandscape…#Consumer Demands are shifting because of the growth of #e-commerce, and designers must now create retail developments which entice shoppers beyond shopping. Creating a retail environment that is as much about leisure, as it is about retail, is essential..

Retail environments need to be in tune with and fully embrace developing lifestyle choices. Visitors should be able to enjoy a much broader experience, rather than be limited to simply shopping alone. Benoy is seeing many more mixed-use developments, which incorporate retail alongside other elements such as residential and commercial offices. These can become iconic structures that also encourage a variety of activities in the shape of leisure offers, entertainment and dining, and which ultimately create a destination. Any great mall design should also be flexible and adaptable so that it can compete with future competition, which employ the most advanced technology.

What kind of retail format has the highest demand in India, according to you– kiosks, speciality retail formats, large size formats etc.

The larger mixed-use retail schemes are the most desired style of projects in India at the present, but there is not a prevalent style or format for retail. Our schemes illustrate a mix of unit types, creating a balanced retail offer. Moreover, because India is so large and diverse, it is hard to define one style of retail design which will be successful and attractive to all areas of the country.

Always approaches India as a continent rather than a country due to the sheer magnitude of the market…The firm understands that what works well in one city may not necessarily translate to another in terms of look, feel and scale. As a country with a wide range of people, finance and consumerism, it is imperative to understand who the regional client is. As designers, Benoy is also very mindful of the natural surroundings and the history of the city.

When it comes to controlling costs of mall construction and design, how can a mall developer cut down on the expense of designing a mall yet make it more consumer friendly?

In other parts of the world, there is a defined trend towards retail developments that are either enclosed malls with natural ventilation strategies or which are open to the environment. Both allow the developer to reduce initial capital expenditure and ongoing running costs, particularly where mechanical conditioning is concerned. Of course, these strategies are not applicable in all parts of the world, yet even in Dubai, a part of the world with an aggressive environment during its summer months, there is a new wave of ground breaking open street developments – streets and squares, if you like – that are setting new benchmarks in sustainable developments. So in parts of India with a benign climate, such strategies should have a role to play.

Also seeing an emphasis of simplification of development so that the nature of the construction is cost efficient. That is not to say that developments should be visually bland or banal, rather that the architectural solution hides an efficiency of construction.

What is the contribution of the mall developer when it comes to facilitating a mall design and construction? Do you think Indian mall developers are up to the mark in that respect ?

Is seeing a wide variety of retail developments across all parts of the Indian retail scene. Of course, like elsewhere in the world, not all projects are world class, but there is a fast developing industry which is devouring new ideas and strategies.

In this, the developer is key. Despite the importance of the statutory authorities, the developer controls the funding, design and construction streams like the conductor of an orchestra. Their role is crucial in setting the tone and direction for any project.

Which international trends that have been extremely popular can be adopted in India according to you?

India is becoming an extremely popular market for foreign companies because of the opportunities on offer…This has led to a highly competitive environment, which is fantastic for driving growth but does highlight the need to have an established brand that sets you apart from your competitors. The recent global downturn has led to developers spending more wisely and they are becoming more selective about the partners they identify as bringing the most value to developments. As designers, it is essential that we offer beautiful schemes that are commercially viable.

Internationally, the rise in dining as an important component of any development has been well documented and it is an important trend that will define the nature of Indian retail developments over the coming years. Out will go standard, run-of-the-mill food courts to be replaced by higher-quality food villages and individual restaurants – dining will be an important anchor..

What are some of the top observations on Indian shoppers according to your psychographic studies?

As an #EmergingMarket, India has the advantage of being able to look to other countries and evaluate what works well. India, therefore, has become a platform for some of the most ambitious designs currently being actioned and offers one of the most exciting retail environments…

Shopping in India is therefore no longer a requirement, rather a choice – a leisure activity – has observed that Indian shoppers take great pleasure in the social aspects of “#RetailTherapy”…Whether Indian shoppers are couples, groups of young people or families, the social aspect of shopping is important and will continue to become more important over the coming years…!!

“Flipkart vs Amazon” : “How they Stack up in India” | VCCircle

” Amazon chief Jeff Bezos says that at the current scale and #GrowthRates, India is on track to be its fastest country ever to reach $1 billion in Gross Sales…”

The big daddy of #OnlineCommerce, in India hit a new milestone bagging a record $1 billion in Fresh #Funding…In less than 24 hours of this announcement, the one thousand pound Gorilla of selling things online, Amazon followed it up with $2 billion in Fresh Investment commitment in India…!!

Mind you, in the #ServicesBusiness, paying salaries to employees and adding human skill set are also considered investment and with both firms employing thousands, a good chunk of this money could be simply about paying wages (though Flipkart has said it’s looking much beyond using investors’ money to burn in existing operations)…Moreover, this could also include the imputed value of discounts to be offered to consumers…

Nevertheless, the numbers are huge and have just raised the decibel levels in the Indian #E-commerce, sector…Here we attempt to glance at how Amazon & Flipkart, are stacked against each other when it comes to India in terms of some comparable Metrics and other Features….!!

Products on offer:

Amazon claims that in just over a year it had pooled in vendors to offer as many as 17 million products on its site. It has not clarified whether this represents #StockKeepingUnits or #SKUs, but that is what it most likely means…#Flipkart, which has been in operations for almost seven years now, looks to be on a weak wicket here as its latest communication says it stocks over 15 million products. #Snapdeal is far behind with over 5 million products…!!

Indeed, what really matters is how much they are able to sell, but in terms of offering to the #Consumer, Amazon seems to have done a much better job and far quicker too..

#Amazon, does not share finer details about how many users it has in India ; so that one is not comparable…Flipkart, in contrast, says it has 22 million registered users clocking over 4 million daily visits and is delivering 5 million shipments a month, which in itself is huge…

Who Sells More ?

Flipkart said early this year it has hit the milestone of $1 billion #GrossRrevenue (#GrossMerchandiseValue or #GMV) run rate (which means based on monthly sales on its site it is set to cross $1 billion in GMV over the next 12 months (though its latest official communication erroneously says it has become the first Indian e-com firm to hit $1 billion in GMV)…

Amazon, though public listed, does not share India-specific numbers but its founder and chief Jeff Bezos has just said that at the current scale and growth rates, India is on track to be its fastest country ever to reach $1 billion in gross sales. It is estimated that it took it years to cross the revenue benchmark even in China, where it has been present since 2004 and another market dominated by local giants…But it would be fair to assume that Flipkart currently outsells Amazon..

Interest in Virtual World:

This one is somewhat superfluous but we look at it to get some additional insights. Rather than looking at Alexa (which is dismissed by many as not too accurate) or comScore (which we don’t have access to), we considered Google Trends to see how the two sites stack up against each other…

As the graph shows, Flipkart has been under the radar for over five years but really took off only three years ago and with momentary blips has been on an ascend. Amazon has been growing at about the same pace as Flipkart after its launch in June 2013… However, it seemed to have gained pace in April this year and surpassed Flipkart and though the gap has narrowed since then, it seems to have stayed at the top this month too.

Amazon Prime vs Flipkart first:

Not much of a comparison really, as Amazon Prime, the paid membership programme of Amazon, is not yet present in India. However, Flipkart has got a head start with launch of its own version of the premium membership last month. Though its benefits are limited to one vendor (more on that later), it manages to stand up against Amazon’s Fulfilled by Amazon service under which consumers are already getting free deliveries for majority of products sold on the platform.

Flipkart First (at present in a free trial period for randomly chosen members) is currently limited to free or subsidised delivery benefits for a section of its product assortment besides an early access to hot products.

Where the battle may be won, however, is other bling factor in terms of digital content strapped for free. Amazon already offers such content for its Prime members and early this year paid a bomb for a package of shows from HBO which now comes free to its premium members. It also offers movies, music on the go and free e-books for its Kindle users as part of the membership.

Flipkart has got the platform to redo this. But having tried and exited digital music store it would be a challenge for it to sew such content deals going forward…It remains to be seen by when Amazon would roll out Prime membership in India.

X-Factor:

One crucial thing in the e-com war could be the key vendor on the sites. In the case of Flipkart it is WS Retail, which used to be the in-house and sole seller through the platform before it turned a marketplace early last year. This firm is owned by an angel investor and employees of Flipkart, to comply with FDI norms. However, this is a key player for Flipkart….Although, the breakup of sales from WS Retail and other vendors is not in the public domain, it is estimated that the bulk of its sales are through this vendor (it also happens to be the partner for Flipkart’s run away hits like Motorola Moto series of handsets)…WS Retail also happens to be a key spoke in its Flipkart First offering, at least for now…

Amazon is still dependent on its third-party vendor base to sell in India. However, it has reportedly sealed an unconventional deal with Catamaran Ventures, the private investment arm of Infosys co-founder N R Narayana Murthy. Catamaran is holding a majority stake in a venture which is supposed to work at the back-end of operations for Amazon in India. However, this is seen as the first step for preparing groundwork for Amazon to start selling in India on its own as and when (as anticipated soon) multi-brand online retail is brought on par with offline retail in terms of FDI norms.

This could really pump up the activity for Amazon and take the competition right to the door steps of Flipkart….!!

Apparel:

Flipkart has strengthened its apparel vertical, one of the juiciest part in terms of margins by acquiring Myntra early this year. Although Amazon also has launched apparel section, Myntra provides a strong positioning and vendor base to Flipkart which can be important going forward.

Myntra remains a separate site but its chief is now involved in strategy making for Flipkart’s own apparel vertical and that can help the firm boost sales from this segment going forward.

To be fair, Amazon may well acquire a Myntra rival (say, a Jabong, for instance) to plug this gap that would be dependent on nifty deal structuring.

Reviews, #VendorServices, Fulfilment Centres:

One differentiator for Amazon globally is its enviable consumer reviews, which helps a prospective buyer to decide in their purchase decisions. Flipkart too has built a strong review database and in many cases has a far comprehensive review section compared with Amazon’s Indian marketplace.

If customer acquisition was key metrics to focus for Flipkart or for that matter any internet commerce firm to begin with including Amazon, now add vendor acquisition to it.

The future pace of growth for both be partly if not fully dependent on how fast they add sellers to their platforms. A factor determining this would be how smooth Amazon or Flipkart offer to get their products to the consumer. This would in turn be dependent on the fulfilment infrastructure and logistics services offered by the two firms. Both Amazon and Flipkart have their own logistics units unlike many other horizontal e-tailers in India and vendor addition could be based on who takes the minimum fee or cut from the sale of products on the site. This is where the money aspect comes in where the fresh funding announcement of Flipkart and additional investment by Amazon make them even-steven.

Meanwhile, Amazon has just announced FIVE New #FulfilmentCentres, in India which would take total such facilities to seven in the country…Flipkart has FOUR such Centres at present and is also looking to expand the number…!!

We will get more insight on how the two firms are performing a couple of months down the line. So watch out this space for their actual revenues and growth in numbers…!!

“India Retail-Property Market” Overview | by: Vivek Kaul | ET Retail

The Retail #RealEstateMarket, in India has developed steadily over the past decade as the quality of stock improves and local developers realize the importance of Modern #ShoppingCenter Management, such as zoning, branding, marketing and promotions, as well as the all-important strategy of following a pure lease model instead of the earlier practice of divesting units to individual investors… This evolution has led to the creation of a number of high quality shopping mall developments in the major cities of Delhi, Mumbai and Bangalore which have set the benchmark for future retail schemes..

The adoption of rental models (such as revenue-sharing) has provided support to retailers in India seeking to establish themselves in the market, and has also enabled shopping mall developers to attract international and domestic retailers to set up flagship stores…!! 

Retail Real Estate Supply: 20072014 (P) : CBRE Research

In the run-up to the global financial crisis of 2008, around 300 new shopping centers were scheduled to be completed in key cities across India. This pipeline was decimated by the credit crunch, however, leading to a shortage of modern retail estate stock. In 2011, the development pipeline sprung back to life as construction work resumed on a number of projects. At the end of 2013, the supply of modern retail space across the country’s seven largest cities stood at about 54 million sq. ft. Around 70% of this space was in New Delhi, Mumbai and Bangalore…

Leading cities including New Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad and Kolkata have all seen a steady rise in retailer enquiries in recent years. Shopping mall rents in prime sub-markets of New Delhi have witnessed growth, while values in high streets have increased in Mumbai, Bangalore and Pune. Transaction activity as well as sizes are expected to increase on the back of an increase in consumer spending and expanding mid-income purchasing power. In Mumbai, premium international brands continue to focus on affluent southern parts of the city; but the lack of quality retail space remains a major challenge to growth. Despite the scarcity of quality supply, most retail chains continue to launch their first Indian store in Mumbai and New Delhi usually in a street shop or mall before expanding elsewhere. Even as domestic big box retailers gradually expand to tier II locations, the major foreign brands remain primarily focused on tier I cities.

New supply is steadily coming on stream in the NCR, and will provide opportunities for retailers to operate in an organized retail environment. High street formats continue to dominate the retail landscape, while most luxury retailers prefer to operate from five star hotels and premium malls. Bangalore has a large quantum of organized retail supply in the pipeline which will provide retailers with further opportunities for expansion..

Amongst #RetailCategories, international #F&B outlets have continued to expand in 2013 both at the fast food and fine dining ends of the market. Luxury retailers remain focused on tier I locations but continue to refine their strategy and product offering for the Indian market, which in selected cases has seen them consolidate and reduce the size of some stores. Fashion and apparel remains a high growth sector and major apparel brands from the US and Europe continue to seek opportunities to enter or expand in major markets across the country, including certain tier II locations…

Lack of Quality Retail Real Estate Impedes Market Entry by Global Retail Giants:

There is approximately 54 million sq. ft. of retail stock in India spread across leading metropolitan cities and their surrounding regions. Even after the steady growth in supply of organized retail space over the past ten years, however, retailers of the size of Ikea often find it challenging to secure space in a prime mall in any of these cities. This is essentially because the majority of retail space developed in India to date lags behind global standards, and does not provide the quality, ambience, design, services or post-construction maintenance that global retailers are accustomed to. This is one reason why out of the more than 300 malls in the country, only a handful can be described as successful retail projects. These include Select CityWalk, DLF Emporio and DLF Promenade in South Delhi, Ambience Mall in Gurgaon, Inorbit and High Street Phoenix in Mumbai, and Forum in Bangalore. The total size of these successful malls is just 45 million sq. ft. About 31% of the upcoming supply addition is expected to be centered in smaller cities such as Pune, Chennai, Hyderabad and Kolkata over 2014, with approximately 1011 million sq. ft. of organized retail supply lined up across leading cities..

According to research estimates, India will require an annual supply of about 20 million sq. ft. of organized retail space in order to sustain growth in the sector. This will necessitate a concerted effort from developers to construct successful shopping centers to global standards. However, domestic developers are still in the middle of a steep learning curve with respect to undertaking shopping center development. Many developers view shopping centers simply as another asset class, no different from building offices or housing units. In fact, shopping centers have an organic and perpetually changing quality that needs to be planned, developed, owned and managed as a single property..

It is in this context that the role of global #RetailChains, such as Tesco and Ikea will be crucial….These retailers possess extensive experience of running successful retail stores and properties in markets like the US, China, Europe, Middle East and South East Asia, with local partners to create successful shopping formats..

By utilizing this knowledge they will be able to help usher in a revolution in the development of organized retail real estate in India..

“Closure of Bad-Assets”, “shelving of Mall-Projects” pose “challenges for Domestic & Global Retailers” to expand business in India | ET Retail

International Retailers are finding it difficult to get Quality Retail-Spaces, in Top-Indian cities even as several Malls across major-markets are lying mostly vacant because of Poor Standards..!!

” Demand for Quality #MallSpace, is soaring with #InternationalBrands, posting a healthy jump in their year-on-year revenues. However, we are seeing many bad malls shutting down and mall projects in early stage of planning are being shelved,” said Limaye, head of research and real-estate intelligence service at JLL India..

According to a recent CBRE report, out of the more than 300 malls in the country, only a handful can be described as successful retail projects as 40% of the total available malls are bad assets and have over 50% vacancy. Most malls lag behind global standards with some of them spread across just 4-5 million sq ft, it said..

” Over 60% of global retailers already have a presence in India but the lack of quality retail space and legislative issues have been an impediment to the spread of organised retail in the country,” said Magazine, managing director of property consultant CBRE South Asia. This has posed challenges for global brands like Abercrombie & Fitch, Topman Top Shop, Ralph Lauren Polo and Uniqlo that have lined up to enter the country…!!

While some brands are planning a greater presence in high streets and co-location, others are penetrating into tier II and III towns to keep their expansion intact till March 2015 when real estate analysts foresee a void in mall expansions…

” We still make good of shortage of quality malls through standalone high-street stores,” said Vasanth, Executive Director at Max Fashions….He said the retailer, which has seen 15%-18% growth in like to like sales this year, plans to open 30 stores annually..

A senior executive from an international brand that is yet to launch operation in India said besides malls there is lack of quality space on high streets as well. Some developers are expected to revamp existing malls to accommodate retailers looking for global ambiance, this person added..

According to JLL India, Average Absorption of #MallSpace, has halved from the peak of 10.7 million sq ft in 2011…The Total #MallSupply, also “dropped to 5.7 million sq ft in 2013 from 13.8 million sq ft in 2011..”

Industry experts say many brands are focusing on tier II and III towns. “In the next few years, modern retail is expected to grow 50% to 60% per annually in tier II and tier III cities, compared to only around 30% in the metros,” said Joshi, AVP marketing at Pioneer Property Zone. Marks & Spencer has entered secondary cities such as Kochi, Kanpur and Surat..

” With new retail sites opening, we plan to enter new cities like Guwahati and Mohali, even as we expand in the cities where we are already present,” said Nair, managing director at Marks & Spencer Reliance Retail India….The firm has introduced Marks & Spencer Lingerie & Beauty store format that trade from a smaller footprint…Nair said the retailer, which reported 42% jump in sales last year, targets a total of 100 stores by 2016 including M&S Lingerie & Beauty stores…!!