Archive for ‘Retail’


Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ

At the opening of Zaozuo’s first furniture store this month in Beijing, a shopper snoozed on a couch while others clambered onto wall-mounted shelves to take selfies perched in chairs.

Welcome to furniture retailing with Chinese characteristics.Online furniture startup Zaozuo Zaohua Zworks Ltd. opened the outlet in an upscale mall after hitting resistance from customers wary of buying bulky items without so much as a feel of the fabric, let alone a bit of shuteye.

Liu Yusi, a 33-year old human-resource executive living in Beijing, said the showroom is a good idea given that buying large pieces of furniture without a test drive can be a leap of faith, although she was a little disappointed there weren’t any beds on display. “Maybe the store is too small,” Ms. Liu said. “But I think a mattress is something you really need to lay on before you decide to buy.”

Zaozuo has tried to distinguish itself from competitors by letting customers vote on the design and style of furniture items at the prototype stage before they’re mass produced, a strategy it says reduces inventory and cuts cost. This is a Chinese adaptation of business models used by the likes of U.S. website — which conducts online polls of crowd-sourced T-shirt designs before producing winning entries – and by crowd-funding sites that have investors vote on ventures they’re willing to fund.

Zaozuo’s customers vote for the designs they’d like to buy. PHOTO: ZAOZUO, DON ARBOUR/THE WALL STREET JOURNAL

The approach has its skeptics. Guangdong Weiyuhua Furniture Co. says it thinks Zaozuo’s voting is a gimmick and questions whether selling furniture online is sustainable. “It targets a few rich people in cities like Beijing or Shanghai,” said company sales manager Li Songzhi. “Traditional furniture companies like ours have real stores all over China.”

With nearly 700 million online users, Chinese consumers are driving explosive growth in the e-commerce sector, undercutting traditional retailers and leaving new online ventures fighting for an edge. Zaozuo co-founders, Stanford business school graduates Shu Wei and Guan Zishan, say China’s struggling manufacturing sector needs a wakeup call as it battles rising debt and excess capacity.“

The old system is not working very well,” said Ms. Shu. “That was the starting point of our business model.”

One potential problem with the company’s voting system is possible voter fraud, says Travis Wu, China research director with consultancy Forrester Research Inc. “In China, everything is a bit tricky, and lots of people try to game the system,” Mr. Wu said. That could see designers tilt results toward their own models, for example, or allow competitors to steer Zaozuo into producing money-losing items, he said.

Another concern: with Zaozuo opening a showroom, it risks driving up costs and undercutting its advantage over traditional furniture makers. Mr. Guan says users must be registered before voting, the company watches carefully for unusual online activity and the new store is not a major investment.

Zaozuo, which attracted several thousand curious shoppers to its store launch on a recent weekend, sees itself inhabiting a competitive space between expensive designer brands and mass marketers like Sweden’s IKEA, a company that attracts its share of showroom lounge lizards. On any given weekend, entire families can be found snoozing on beds in Ikea’s massive showrooms, luxuriating in the air conditioning and enjoying the inexpensive food.

China’s fragmented furniture industry with around 5,000 large companies and combined revenue of 244.5 billion yuan [$37.3 billion] in 2015, up 16.1% increase from the previous year, is tradition-bound and due for a shakeup, say online companies. Internet furniture companies only command a tiny slice of the market but are growing rapidly. Privately held Zaozuo said sales are increasing by 40% annually although it has yet to break even. MZGF Furniture Studio Co., another online firm, said sales have been expanding by as much as 200% year on year in some months.

Zaozuo, which works with 50 Chinese factories and more than 80 European designers, has attracted $17.5 million in venture funding and hopes to eventually go public. Anna Fang, chief executive of venture capital group Zhen Fund, which has invested $1.3 million in Zaozuo, said prospects for the industry are promising but the startup may need to shorten delivery times, which range from three to 35 days. “Ikea can get furniture to you right away,” she added.At its store opening, Zaozuo said it tried to discourage shoppers from getting too comfortable on its furniture. “The customer might be comfortable, but the image is not that good for other customers who can’t feel the fabrics if someone’s sleeping on it,” said Mr. Guan. “Maybe they do it because they’re tired. Shopping can be very tiring.”

Source: Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ


Is India the Most Attractive Place for Retailers? – India Real Time – WSJ

India has leapt into second place in a ranking of the most-attractive developing economies for retailers compiled by Chicago-based consulting company A.T. Kearney.

The company assessed 30 countries based on economic growth, urban population and ease of doing business, among other factors. China topped the list for the second consecutive year, followed by India, Malaysia, Kazakhstan and Indonesia.

A.T. Kearney said India’s high growth rate, vast pool of consumers and new rules for foreign investors lifted the country up 13 spots in this year’s Global Retail Development Index.“Retail demand is increasingly driven by urbanization, an expanding middle class, and more women entering the workforce,” the A.T. Kearney report said. But it noted that not everything was rosy, saying India remains a “challenging and complex market” with infrastructure bottlenecks.

Some retailers and analysts said they were surprised at India’s sharp move up in the A.T. Kearney ranking.

A rule that requires foreign retailers to source at least 30% of their merchandise locally, for example, has led companies to rethink their big plans for India.

Wal-Mart Stores has shelved plans to open supermarkets in India saying the requirement is near-impossible to meet. French hypermarket chain Carrefour has also shut shop.

Swedish retailer IKEA is struggling to source domestically, as The Wall Street Journal detailed in this front-page story. And government officials said recently they don’t plan to exempt Apple from local-sourcing requirements.

Meanwhile, consultants and retailers are growing increasingly skeptical about the size of India’s middle class. Most of India’s population still lives under $2 a day; only a fraction of its 1.2 billion people can afford a Zara dress or a Starbucks Frappuccino.

A change in A.T. Kearney’s methodology could have boosted India’s fortunes. The company said it tweaked the metrics it used to calculate this year’s index, which “had a substantial impact on the rankings.

”For example, it evaluated countries with a population of over 5 million this year, compared with 3 million last year. As a result, some countries that were ranked highly last year – such as Uruguay in 2nd place, Qatar in 4th place, and Mongolia in 5th  place, weren’t analyzed this year.

Source: Report: Is India the Most Attractive Place for Retailers? – India Real Time – WSJ


India’s Bharat Petroleum Wants to Use Gas Stations to Bring E-Commerce to Rural India – India Real Time – WSJ

Bharat Petroleum Corp. Ltd., India’s lumbering state-run fuel company, is planning use its nationwide network of 12,800 gas stations to deliver online retail to rural India.

The oil refiner and retailer is hoping it can leverage its outlets and logistical staff across India to succeed as a latecomer to India’s ongoing online retail boom. It is upgrading its technology and logistics network to be able to sell farmers everything from fertilizer to smartphones.

The e-commerce push will begin December, with BPCL’s rural gas and cooking gas distributors starting to accept orders and payments online, said BPCL Chairman and Managing Director S. Varadarajan.  As early as next year, the company is also considering using its urban branches to sell and distribute groceries.

While the early movers in e-commerce in India such as Flipkart Internet Pvt. Ltd.’s, Jasper Infotech Pvt. Ltd.’s and Amazon Seller Services Pvt. Ltd.’s are still struggling to find cost-effective ways to reach the hundreds of millions of Indians who live outside the biggest cities, BPCL already has employees and properties throughout the country.

“About 30% of our retail outlets are in rural India,” Mr. Varadarajan said. Rural customers can shop online then “pick up stuff when they fill fuel at their local gas station.”

India’s state-run oil refiners are desperate to find new sources of revenues as the fall in oil price as well as increased competition from the private sector weigh on their sales.

BPCL’s retail ambitions are “a response to competition by improving margins,” said Deepak Mahurkar, head of PwC’s Oil & Gas Industry practice in India.

Analysts say that while BPCL does theoretically have unique access to much of India’s middle class, which uses its stations to refuel their cars and motorcycles, whether this traditionally slow-moving company can capture a corner of the rapidly-evolving online retail business remains to be seen.

BPCL has prime properties on the main streets and highways across the country, but few of its gas stations have the facilities or the staff to do more than pump gas. Many don’t even have running water in their bathrooms, much less the Internet connections, storage facilities and delivery technology a vibrant e-commerce company would require.

Diving into e-commerce would necessitate a big change in mindset for BPCL which is not used to worrying much about competition or consumers, said Anand Kumar Jaiswal, who heads the Centre for Retailing at IIM Ahmedabad, an Indian management school.

“I am really skeptical about it,” said Vishnu Kumar, an assistant vice president for research at Chennai-based broker Spark Capital Advisors (India) Pvt. Ltd.  “If I am a consumer I am not going to check with BPCL for a microwave.”

Even people within BPCL’s own network doubt the company can pull it off.

Sachin Shah, the manager of a company that delivers BPCL cooking gas cylinders to more than 20,000 customers in the southern city of Hyderabad, said the company will have to radically improve its logistics system to guaranteed delivery if it wants to sell more than gas cylinders and gas stoves

“If Bharat Petroleum doesn’t deliver, I will lose face,” he said.

BPCL’s Mr. Varadarajan said the company is confident it can deliver because it will use its best dealers and a new distribution system to get products to customers.

Source: India’s Bharat Petroleum Wants to Use Gas Stations to Bring E-Commerce to Rural India – India Real Time – WSJ


U.K.’s Marks & Spencer Is Aiming to Double India Store Count – India Real Time – WSJ

Marks & Spencer Group PLC said it is on track to double its store count in India in the next 15 months, an ambition that poses both risks and opportunities for the British retailer.

M&S has recently struggled in troubled markets such as Russia, Ukraine and Turkey and was forced to reconfigure its footprint in China, but India has emerged as a relative bright spot. Revenue climbed 23% last fiscal year.

“I think there is an instinctive understanding of M&S in India,” said the company’s head of international business, Patrick Bousquet-Chavanne.

M&S is in 21 cities in India so far, with a focus on large cities such as Mumbai, Delhi and Kolkata. Now, M&S is looking to deepen its exposure to India. It plans to open stores in less-developed cities, such as Vijayawada, Jalandhar and Vizag, during the current fiscal year ending in March, while also beefing up its footprint in larger cities.

The company—which operates in India through a joint venture with Reliance Industries Ltd., one of India’s largest companies—in early October will open its 50th store in India, in Mumbai’s Chhatrapati Shivaji airport.

Source: U.K.’s Marks & Spencer Is Aiming to Double India Store Count – India Real Time – WSJ


A Sneak-Peek Inside Gap’s First India Store – India Real Time – WSJ

Gap Inc. is going retro for its debut in India, wagering that its branded sweatshirts will be best-sellers thanks to their association with Bollywood.

“These will be the first to fly out from our store,” said Stefan Laban, senior vice president at Gap International, standing next to a wall of Gap-branded hoodies, shoulder bags and caps in the New Delhi outlet, which opens Saturday. “We’re especially going heavy on logos in India.”

A wall of Gap-branded sweatshirts gives the store a retro feel. Preetika Rana/The Wall Street Journal

The reason? Bollywood superstar Shahrukh Khan may have something to do with it. Fans of the actor went Gap-hoodie crazy when he sported the garment in 90s blockbuster, “Kuch Kuch Hota Hai.” The fact it wasn’t available in India added to the sweater’s cachet.

Oliver Kaye, who heads Gap’s business in India, says that hoodie wasn’t sponsored by Gap and credits the Indian actor for drumming up interest in the retailer two decades before it actually arrived here.

“India associates Gap with movie stars,” Mr. Kaye said. “There’s some amount of novelty attached to wearing a Gap shirt here.”

Another popular Indian actor, Kangana Raunat, wore a round neck Gap-emblazoned shirt in “Tanu Weds Manu Returns,” a romantic-comedy released earlier this month, further positioning the brand as aspirational for Indians. Ms. Raunat is expected to be the chief guest at the store’s opening this weekend. Gap says they didn’t pay her to promote the brand either.

Mr. Khan playing a college student in “Kuch Kuch Hota Hai.” Dharma Productions

Best known for its khaki pants and arsenal of denim jeans, the American retailer is playing up its colored pieces and bling for the Indian market. The company has been criticized elsewhere for a monochrome palette and is lagging behind fast-fashion players such as teen retailer Forever21 Inc. and Inditex Group Inc.’s Zara.

“Indians love color,” said Mr. Kaye,  pointing to a rack of shorts available in shades from fuchsia to aqua to florals. The designs were selected after hundreds of consumer interviews in India. Gap’s merchandise in India is priced between 799 rupees ($12) to 5,999 rupees ($94.)  That’s more or less in line with how it prices its garment in its home market in the U.S.

The company is focusing on color for the Indian market with saffron shirts…  Preetika Rana/The Wall Street Journal

…And fuchsia shorts. Preetika Rana/The Wall Street Journal

They’re also tuning up the bling with these sparkly tops.  Preetika Rana/The Wall Street Journal

The company has also identified a gap in the kids and babywear market in India. Nearly 40% of its store space is dedicated to its babyGap brand with everything from striped swimsuits for kids to hot pink sandals for toddlers.

“This space is extremely untapped,” Mr. Laban of Gap International said. “There’s really no competition in the Indian market when it comes to this segment.”

Gap is selling frocks and jumpsuits from its babyGap collection as it hopes to persuade parents to part with their cash. Preetika Rana/The Wall Street Journal

The company says it has spotted a gap in the children’s wear market in India.  Preetika Rana/The Wall Street Journal

Gap plans to open 40 stores in India in the next five years, with about five each in New Delhi and Mumbai. Arvind Lifestyle Brands, which brought Tommy Hilfiger and Calvin Klein to the country and now holds Gap’s franchise rights, expects the business to generate revenues worth one billion rupees ($156 million) by 2020. But quality real estate could be a challenge.

“There are very few quality malls in India. That’s definitely something we’re looking into as we plough ahead,” Ismail Seyis, who heads Gap’s franchise division, said. Real-estate consultancy JLL estimates that 70% of India’s 308 malls are struggling with anemic sales and high vacancy rates.

Gap comes to India six years after Zara and a few months ahead of Hennes & Mauritz AB’s planned autumn debut.

via A Sneak-Peek Inside Gap’s First India Store – India Real Time – WSJ.


Marks & Spencer to close five Shanghai stores, Asia head quits | Reuters

British retailer Marks & Spencer (MKS.L) has decided to close five stores in the greater Shanghai region following a review of its plans for China that will nevertheless see it stick to a commitment to expand into the country’s other large cities.

Clothes are displayed on hangers in an M&S shop in northwest London July 8, 2014. REUTERS/Suzanne Plunkett

M&S also said on Monday that Bruce Findlay, its regional director for Asia, was quitting the firm after less than two years in the role to take up a position with another retailer.

The company entered China in 2008 with a store in Shanghai, and it now has 15 in the greater Shanghai region. But it has struggled to make a major impact in a country that it said on Monday remains one of its priority international markets along with India, Russia and the Middle East.

For the long term the group is in the process of evaluating potential local partners to expand in China, a path taken by other British retailers such as supermarkets group Tesco (TSCO.L) and home improvements firm Kingfisher (KGF.L).

Updating on its plans for the country following a review announced last April, M&S said it would continue to invest in its existing flagship store portfolio with the complete modernisation of its West Nanjing Road store in Shanghai in the autumn.

However, five of its supporting stores in the greater Shanghai region will close by August. Some 60 jobs will be effected. M&S also plans to reduce the size of its Shanghai head office.

M&S said it has a firm intent to enter other cities such as Beijing and Guangzhou over the next year, while further expansion online would enhance its brand across China.

via Marks & Spencer to close five Shanghai stores, Asia head quits | Reuters.


Retail dilemma in India – nice malls are few and far between | Reuters

A severe shortage of attractive malls has made setting up shop in India easier said than done, crimping expansion plans for both foreign retailers such as Lacoste and domestic giants like department store chain Shoppers Stop (SHOP.NS).

A private security guard stands guard inside the premises of the MGF mall in New Delhi February 23, 2015.  REUTERS/Adnan Abidi

India’s searing heat, heavy traffic and cluttered pavements make malls the most popular option for urban middle class consumers looking for a day out. But many centres – despite having been built in the last decade – are struggling to draw shoppers or retailers because of poor design or because they are difficult to manage.

P.S. Puri, CEO of MGF Mall Management, which runs MGF Metropolitan, knows this all too well. Located in a posh district in the south of New Delhi, security guards and sales staff outnumbered shoppers last Tuesday evening in what was once a bustling mall.

It has restaurants but lacks popular attractions like a food court and a cinema. The sale of shop ownership piecemeal has made management difficult and now only one quarter of the space is occupied by fashion retailers – about the same amount that is vacant.

via Retail dilemma in India – nice malls are few and far between | Reuters.


Best Buy to sell China business, focus on North America | Reuters

U.S. retailer Best Buy Co Inc (BBY.N) said on Thursday it will sell its struggling China business, Five Star, to domestic real estate firm Zhejiang Jiayuan Group in order to focus on its North American operations.

A Best Buy store is seen in Niles, Illinois  near Chicago, September 23, 2013. REUTERS/Jim Young

The world’s largest consumer electronics chain didn’t disclose financial terms of the sale of the 184-store network, announced in a statement.

Best Buy has struggled to fend off Chinese rivals in a crowded market, as other U.S. firms have complained that operating in the country has become more of a challenge.

“The sale of Five Star does not suggest any similar action in Canada or Mexico. Instead, it allows us to focus even more on our North American business,” Hubert Joly, Best Buy’s president and chief executive officer, said in the statement.

Joly added that Best Buy would continue to invest in its private label operation in the country. Best Buy’s China operations accounted for around 4 percent of its sales in the most recent financial year, ended Feb. 1.

via Best Buy to sell China business, focus on North America | Reuters.


Wal-Mart Struggles to Crack Retail Market in India – Businessweek

As Indians celebrate the Hindu festival of Diwali, executives at Wal-Mart India don’t have much reason to cheer. The company is still waiting for its big breakthrough in India, a market it has been trying to crack at least since 2007. That’s when the American retailer teamed up with one of the top businessmen in the country, Sunil Mittal, to open wholesale stores in India. If all had gone well, that partnership with Bharti Enterprises was supposed to have led to consumer-facing stores, too.

A Wal-Mart store on the outskirts of Chandigarh, Punjab, India, on June 10

When then-Prime Minister Manmohan Singh in 2012 eased restrictions on foreign ownership in retail, Wal-Mart Stores (WMT) executives saw an opportunity in the world’s second-largest country. In September 2012, a Wal-Mart executive told Bloomberg News the two sides were in talks and retail stores were less than two years away.

Those discussions didn’t end well. Wal-Mart and Bharti Enterprises went their separate ways last year, dissolving the joint venture in October 2013. Wal-Mart bought out Bharti and took full control of the 20 members-only, cash-and-carry stores in India. After that, the company largely kept its India plans on hold: It’s been two years since Wal-Mart added new wholesale stores in India.

via Wal-Mart Struggles to Crack Retail Market in India – Businessweek.


Grocery retailing in India: A long way from the supermarket | The Economist

ON THE morning of Dussehra, a Hindu festival, Amar Singh is explaining why he stocks “exotic” produce, such as broccoli and iceberg lettuce, at his vegetable stall in Thane, a commuter city north of Mumbai. “I have to keep the customer in my grasp,” he says. Mr Singh has traded hereabouts for 20 years, and seems unperturbed by the supermarket chains whose branches have recently sprouted nearby. They are cheaper, he says, but they cannot match him on quality. As he speaks he sorts a tray of beans, discarding stringier ones. His assistant, Dabloo, has spent the early hours going through sacks of produce at a wholesale market to pick the best stuff.

The 10m-12m small traders like Mr Singh are a protected species. Complex and changeable rules governing foreign direct investment have made it tricky for rich-world chains to set up shop in India. They might count themselves lucky. India’s home-grown supermarkets account for only 2% of food and grocery sales and are struggling to make a profit. Revenues have not kept pace with rising rents. The Thane branch of Reliance Fresh, one of India’s big chains (see table), shut up shop recently. More closures seem likely. The bet made by the chains was that as India became richer, its consumers would abandon kerbside stalls and kiranas (small family-owned shops) for air-conditioned stores with wide aisles and broad ranges. Why has it not paid off?

In large part it is because supermarkets are not a compelling draw in terms of price and service. Most shoppers in India buy dairy products, vegetables and fruit either daily or every two to three days, and the traditional trade has a lock on these frequent purchases, according to research by the Boston Consulting Group (BCG). Its hold weakens a bit (and the appeal of supermarkets correspondingly tightens) on rich consumers and for less regular purchases: packaged foods; soaps, detergents and other groceries; and staples, such as rice and grains (see chart). But in general even affluent consumers prefer traditional stores, because they are closer to home, are usually open longer and offer credit to familiar customers. Many will deliver free of charge.

Traditional traders are also seen as cheaper. In fact, says Abheek Singhi of BCG, a full basket of goods is 3-4% cheaper at the supermarket, in part because it will sell a few vegetables and some staples as loss-leaders. Mr Singh’s stall sells tomatoes at 50 rupees a kilogram. In the local D-Mart, a low-frills supermarket, they sell for just 42 rupees. Yet Mr Singh has a fair claim to having the reddest variety. The chains ought to be able to offer keener prices on branded goods by squeezing their suppliers. But none of the supermarkets has enough muscle to push around Unilever or Procter & Gamble in negotiations. And India has a law that mandates a maximum retail price for packaged goods, which allows manufacturers a degree of control over retailers’ margins.

The supermarkets can offer a greater variety of groceries than the neighbourhood mom-and-pop store or stall-trader. But that is not as big a competitive edge as it may seem, says BCG’s Mr Singhi. Supermarkets compete with clusters of kiranas, which together can offer most of the same products. Next door to Mr Singh’s stall in Thane kiranas sell confectionary, fresh eggs and poultry.

via Grocery retailing in India: A long way from the supermarket | The Economist.

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