SHOP BIG...TALK MORE!!

In this competitive era, the corporate world is increasingly looking to squeeze in maximum possible benefits from their current set up of infrastructure and support services. If your reach is spread across the most diverse geographical locations within the country, you can leverage such potential into building newer opportunities for yourself ,here is an example of it.

Most of us must be aware as to how Indian Post Office has leveraged its widespread reach in distributing various kinds of financial products and services such as insurance, mutual funds, etc. Another such state-owned company that benefits from its diverse reach is SBI which has thousands of bank branches spread far and wide across the country.

In a most recent instance, Kishor Biyani’s Future Group has tied up with Tata Teleservices to venture into mobile telephony services under the brand name T24 (talk 24 hours).

The service, which will be sold through the Future Group’s retail outlets in 75 cities and 65 rural destinations in the country, is targeted at customers at its retail stores like Pantaloons, Big Bazaar and Central.

This is how it works – A customer at Future Group store will get 50 minutes free talk-time if he does shopping worth Rs.2501 at Pantaloon. The same spells out at Rs.90 minute talk-time for a spending amount of Rs.1501 in Big Bazaar.

Over here, let me provide you an example of being a loyal buyer at Reliance Fresh.They have a card system, where your day-to-day shopping amount gets accumulated into your card and you get certain bonus points based on certain specific amount of purchases made. These bonus points can in turn be converted into free shopping sums over certain threshold limit.

The above mentioned Future Group plan seems to be replicating the same model but with a double benefit opportunity. At first, a loyal customer from any of the Future Group stores is offered mobile telephony service and than free talk-time depending upon the shopping amount that the customer carries out. On the other hand, the Future group also gets to market a new product altogether to its customers in association with Tata Teleservices.

By doing so, it is able to market a service which is out-of-its context and couldn’t have been possible without massive investments in physical infrastructure. However, by acting as a mobile virtual network operator it is able to venture in an altogether new industry without blocking investment capital.

A customer may not be willing to ditch its current mobile operator. But, if he is getting some serious talk-time for free against his shopping with the Future Group, he may as well be tempted to retain an extra SIM card and use it as a spare one depending upon his convenience. In return, the company can hold on the customer as a loyal shopper at its stores.

FUTURE IS BIG!!

Will it work is the question!! 

RETAIL SECTOR-INDIA OVERVIEW

The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period. BMI further predicts that sales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's dramatic, rapid shift from small independent retailers to large, modern outlets. BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the fastest growing retail sub-sector and BMI forecasts that sales will reach US$ 6.18 billion by 2014, an increase of 88.5 per cent. China and India are predicted to account for almost 91 per cent of regional retail sales in 2010 and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual average of 14 per cent. India should experience the most rapid rate of growth in the region, followed by China. For India, its forecast market share of 13.9 per cent in 2010 is expected to increase to 14.3 per cent by 2014. Moreover, for the 4th time in five years, India has been ranked as the most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney in its 8th annual Global Retail Development Index (GRDI) 2009. India remains among the leaders in the 2010 GRDI and presents major retail opportunities. India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales through organised retail, meaning that the opportunity in India remains immense. Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent coming from organised retail, reflecting a fast-growing middle class, demanding higher quality shopping environments and stronger brands, the report added. Bharti Retail strengthened its position in northern India by opening 59 stores, Bharti Wal-Mart is expected to open 10 to 15 wholesale locations in the next three years, and Marks & Spencer is considering plans to open additional outlets in the next few years. Established retailers are tapping into the growing retail market by introducing innovative store formats. Spencer's Retail, More (owned by Aditya Birla Group) and Shoppers Stop (owned by K Raheja Group) already plan to expand. According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India', organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015. Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows between April 2000 and April 2010, in single-brand retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy and Promotion (DIPP). Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million for opening 50 premium watch outlets Helios in next five years to attain a sales target of US$ 87.31 million. "We are looking to open Helios outlets in Mumbai, Delhi, Hyderabad, Kolkata, Chennai, Pune, Ahmedabad etc in next 12 months," said Ajoy Chawla, Vice President (Retail), Titan. British high street retailer, Marks and Spencer (M&S) plans to significantly increase its retail presence in India, targetting 50 stores in the next three years. M&S currently operates 17 stores in India through a joint venture (JV) with Reliance Retail. Chinese retail major, Yishion has entered the Indian market and plans to have at least 125 points of sales, including exclusive stores and multi-brand outlets, across India by 2012. It will open its first exclusive store in New Delhi by September 2010. Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in India. Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—plans to invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of retail space in the country by then, according to a company spokesperson. Raymond Weil plans to invest US$ 883,665 in India during 2010, according to Olivier Bernheim, President and CEO, Raymond Weil. Policy Initiatives FDI up to 51 per cent under the Government route is allowed in retail trade of Single Brand products, according to the Consolidated FDI Policy document. Road Ahead According to industry experts, the next phase of growth is expected to come from rural markets. According to a market research report published in June 2008 by RNCOS titled, 'Booming Retail Sector in India', organised retail market in India is expected to reach US$ 50 billion by 2011. The key findings of the report are: Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015 Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent Driven by the expanding retail market, the third party logistics market is forecasted to reach US$ 20 billion by 2011 Apparel, along with food and grocery, will lead organised retailing in India

SABOL-GROWING BRAND

Coimbatore based packaged drinking water manufacturer Sabol Associatess is fast becoming a strong brand competing with big players like Aquafina,Bisleri,Kinley.Mr K.M. Senthil, Chairman and Managing Director, Sabol Associatess, Coimbatore, said the company, which entered the mineral water segment by launching `Sabols' packaged drinking water in 1999, had a 25 per cent market share.

While in the 20-litre jar mineral water segment, it is the dominant player in Tamil Nadu, in the bottled water segment (such as 500 ml-2 litres), it occupies the third slot in the State. The company has launched 500 ml Sabols Club Soda in Tamil Nadu, Karnataka, Kerala and Puducherry at a price of Rs 12 per bottle and will be entering the carbonated drinks and fruit juices market by the end of this month.

Some of the domestic brands have been squeezed out because they did not expand their product profile and market reach and some companies even chose to move into unrelated areas, losing focus. In the FMCG business, manufacturers should keep expanding and launch newer products to safeguard their market share.

Some of the weaker players sold out their businesses to the MNCs or simply allowed their business to wither.

STRATEGY

MNC's units suffered from high overheads and marketing expenses having one production unit for the whole state.

But smaller players could have smaller plants at different locations that would bring down the distribution cost and give them pricing advantage, which Sabol has been able to use for its advantage in its mineral water business.Sabol is expanding its product range by entering the carbonated drinks and juices business to begin this month and will be launching food products such as biscuits, noodles and even parathas subsequently.The water business seems to be only a platform for Sabol on which it would build its FMCG business' growth.