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India: Traditional vendors still dominate
By Amy Kazmin in New Delhi

Published: April 20 2010 16:55 | Last updated: April 20 2010 16:55

New Delhi’s popular Defence Colony market is a busy cluster of family-owned stores, crammed
floor-to-ceiling with home-grown daily staples and random imported foods, such as olive oil and
pasta.

But the posh neighbourhood now has a new option: Nature’s Basket, a sleek gourmet food store
started by Godrej, the Indian consumer products giant.

Inside, fresh bagels and carrot raisin muffins lie in wicker baskets; imported brie and manchego
beckon from the cheese counter; and shelves are laden with foreign biscuits, sauces and cereals.

Such treats do not come cheap, with customs duties of some 35 per cent on imported food
putting them out of reach of all but the most affluent. Yet with eight stores in Mumbai, India’s
financial capital, and two in Delhi, Nature’s Basket believes it has found a formula for success,
with more outlets planned for Delhi and Bangalore.

“Our clientele is quite niche – people who have studied abroad, or the new class of Indians who
travel,” says the supervisor of the Defence Colony store.

Nature’s Basket is one of many Indian retail chains springing up, as large Indian corporations,
and smaller entrepreneurs, try to tap what US-based consultancy AT Kearney has identified as
the world’s most attractive developing country for retail investment.

“The time to enter India is now and in the next few years,” says Debashish Mukherjee, an AT
Kearney principal in New Delhi.

“If somebody is going to look at this country 10 years hence, the potential will still be there, but
the early mover advantage will diminish significantly.”

Today, even affluent urban Indians still do most of their shopping from traditional vendors,
including pushcarts peddling fresh fruit and vegetables, or other household goods, down quiet
residential streets, busy evening markets, or small family-owned dry goods stores.

But that is slowly changing, with Indian companies’ initial forays into organised retail – a
business still largely off-limits to foreign companies.

“Today, what we have is a large degree of experimentation around formats, private labels,
business models, pricing and the cost side,” says Mr Mukherjee.
The Tata group’s retail arm, Trent, operates Westside, a department store with 41 outlets in 22
Indian cities; and Landmark, a book shop chain with 13 stores.

In groceries, Tata, with technical support from UK’s Tesco, runs the hypermarket Star Bazaar,
which has three outlets in Mumbai and one each in Chennai and Ahmedabad.

Mukesh Ambani’s Reliance Industries has set up Reliance Fresh, neighbourhood convenience
stores, while Calcutta-based RPG Enterprises, with core interests in power and industrial
products, has established Spencer’s Retail, a 250 store multi-format chain with both
hypermarkets and convenience stores.

Bharti Enterprises, which owns India’s biggest cell phone company, has set up Easy Day, with
technical support from Wal-Mart, with which Bharti also has a 50-50 joint venture for a cash-
and-carry business.

India’s biggest retail company is the Future Group, which operates about 1,000 stores in multiple
formats, including its own hypermarket Big Bazaar, Pantaloon’s, and its Central shopping malls.

Yet so far, most Indian companies have found retail pretty tough. After an initial rush of
openings, many have been closing stores, especially those in expensive real estate, and trying to
iron out supply chain woes.

“None of these guys had any experience of retail, so they had a steep learning curve,” says
Raghav Gupta, president of Technopak, a retail consultancy. “If you look at retail as the
equivalent of a water tap, you have to have a pipeline, a filtration plant and water source behind
it to provide water through that tap. Here, a lot of people put the taps in place… and had buckets
of water behind it.”

So far, large foreign players such as Wal-Mart, Tesco and Carrefour, have been kept on the
margins by New Delhi’s ban on foreign direct investment in so-called “multi-brand retail.”

However, Wal-Mart, in a joint venture with Bharti, has started cash-and-carry stores – a business
open to foreign investment – with other foreign players soon to follow.

“It gives international players valuable experience of Indian customers,” Mr Mukherjee says.

Although foreign investment in front-end retail remains contentious, Mr Mukherjee says that the
government will eventually be forced to open the sector, as Indian companies run out of capital,
after their difficult initial years.

“I think all the domestic players have burnt up a lot more cash than they thought they would,”
says Mr Mukherjee.

“The government or existing players will realise they need more capital, and that capital is not
going to come from inside India.”
Indian stores in search of drama
By Amy Yee

Published: December 30 2008 02:00 | Last updated: December 30 2008 02:00

When Kishore Biyani tried a "clean Italian look" of glass and minimalist lines in one of his Big
Bazaar stores, he was surprised by the effect on his customers - it drove them away. The sleek
section of the store remained empty while the rest of the shop bustled.

Mr Biyani, head of the Future Group, India's largest retailer, realised the decor was intimidating
and alienating the middle-class Indian consumers who were more used to crowded bazaars and
shops.

"You need hustle and bustle," says Mr Biyani. "The Indian model of shopping is theatrical. There
is buzz and haggling. If you have wide aisles you have a problem."

Mr Biyani's Big Bazaar "hypermarket" stores, which are India's closest equivalent to Wal-Mart,
are clean, air-conditioned and well lit. But they have deliberately narrow aisles and overflowing
display bins that simulate the feel of open-air markets common in India.

Drama and theatre are important elements in Mr Biyani's stores, which also include the
Pantaloons and Food Bazaar chains. At one store in a Mumbai shopping mall, dance music
popular in Indian nightclubs blasts from loudspeakers while customers jostle to reach the best
goods.

Modern retail stores are relatively new to India, so Mr Biyani and other retailers are having to
adapt to the evolving shopping habits of Indians. The biggest mistake that retailers make is
thinking that "just because you have set something up people will come", says Anirudha
Mukhedkar, chief executive of Restore Solutions, a retail consultancy in Bangalore.

Shopping in so-called organised stores accounts for only 4 per cent of India's $322bn (£218bn)
retail industry but this share is expected to grow to 22 per cent of $427bn by 2010, according to
the Federation of Indian Chambers of Commerce and Industry.

Unlike their struggling counterparts in the west, India's retailers are looking at an attractive
growth market. But getting it right will be tricky, given the country's diverse population and
distinct regional cultures.

Understanding India's wide diversity - socio-economic, religious, regional and linguistic - is key
to that strategy. "When you say Indian consumers, there are at least 10 Indias," says Mr
Mukhedkar.
Cultural preferences vary widely between regions. For example, types of rice and how people
buy it differs in the north and south, says Harminder Sahni, managing director of Technopak, a
retail consultancy based in Delhi.

In the north, rice might be sold in open sacks so consumers can inspect the goods. But in some
parts of the south, rice is a common staple sold in sealed packets.

Store lay-outs will also vary according to region. In big groceries in Kolkata, eastern India, and
other coastal cities, fish is a staple sold in the vegetable section, whereas it is categorised with
meat in inland areas.

Because of these distinct regional tastes, retailers "don't look at India as India", says Mr Sahni.
"They pick a region or market or city . . . The first two years might be in one city." He says that
most do not have ambitions to open pan-Indian stores: "Many start in one part of India and just
stick to that."

The Future Group has found another way of capitalising on regional variations: it has 72 annual
promotions linked to local festivals. The company says the Big Bazaar store in Bhubaneswar,
capital of the backwater eastern state of Orissa, took the group record for a single day's turnover
after promoting a sale linked to a festival.

William Bissell, managing director of Fabindia, a chain of upscale boutiques that sells clothing
and housewares, says "every store has to offer a different mix. That's why retailing in India is so
complicated".

Mr Bissell notes that Fabindia, founded in 1960, has an inventory of 200,000 items to cater to
consumer tastes that vary dramatically across regions. "Any retailer will say that is crazy," says
Mr Bissell. To manage its enormous inventory, Fabindia has installed an IT system to track the
flow of goods at nearly 100 stores in India.

Capacious western-style malls are also cropping up, especially for luxury goods. But when
catering to the mass consumer, "it makes sense to have smaller stores with more workers", says
Mr Mukhedkar of Restore Solutions.

He points out that India's cities command some of the highest real estate prices in the world but
labour costs are among the lowest. Packed shelves are also preferable to give the consumer a
sense of abundance and choice. "If a shelf can take 50 things, try to fit in 75," Mr Mukhedkar
advises. "Density per square foot has to be as high as possible."

For practical reasons, Mr Bissell favours smaller stores. He dismisses the notion of a 100,000 sq
ft Ikea-style store in India, except where "enormous" volumes might justify high maintenance
costs. "At 40 to 44 degrees in the summer I'm going to have to air-condition the whole thing.
That would be an environmental disaster." And it would be too expensive, he adds, in a country
where electricity rates are high, and power cuts force many businesses to buy costly diesel-run
generators.
The biggest misunderstanding about retail in India, says Mr Bissell, is that Indians consume as
copiously as westerners. Instead, Indians are more selective, value-conscious and price-sensitive.
Mr Sahni of Technopak agrees. In a grocery store, an Indian consumer will not fill up a trolley as
is common practice in the west. "Indians will shop with a basket. Below a certain income level,
people won't want to spend so much with each transaction." Smaller refrigerators and limited
storage space at home are also factors. "People will buy more frequently and in smaller packets,"
says Mr Sahni.

But some aspects of retail in India are more abstract. To stay attuned to India's pulse, Mr Biyani
has a special unit devoted to tracking the country's social trends to incubate ideas for new store
brands and strategies.

The "Future Ideas" group includes sociologists, interior designers, graphic designers and other
cultural experts. One of their biggest tasks is analysing the changing tastes of Indian youth.

With more than half of India's population under the age of 25, understanding their consuming
habits and aspirations is a priority for the Future Group. "India is still family-centred, and young
people influence purchases," says Mr Biyani. But by far his biggest challenge as a retailer is
managing the speed of change in India.

"How do you make an organisation that is not permanent in thought, structure or design?" asks
Mr Biyani. "Retail in the next five years will be different. Nothing is permanent."

Why crowded neighbourhood shops still enjoy the upper hand

Big, modern stores are not guaranteed victory in India's retail revolution. Tiny, crowded hole-in-
the-wall neighbourhood shops do have advantages over their "organised retail" counterparts.
Small shopkeepers often know their customer personally, offer free home delivery, let customers
order by phone and keep a tab.

"I had a grocer in Mumbai. I never saw him but the service was fabulous," says Anirudha
Mukhedkar, chief executive of Restore Solutions, a retail consultancy in Bangalore. "I ordered
over the phone and I would pay him at the end of the month. He didn't have to have a large
store."

Indian customers traditionally favour personal service and "not a cold-blooded transaction".
Retailers in India should think about "how to personalise and bring a degree of warmth to the
transaction", says Mr Mukhedkar. "If retail wants to get its act right, it needs to go back to
basics."

Kishore Biyani, chief executive of Future Group, India's largest retailer, also retains some of the
basics of shopping in India. Mr Biyani is known for creating the atmosphere of an open-air
bazaar in his sprawling hypermarkets. His Big Bazaar stores have narrow aisles, overflowing
bins and loud music.

"In India, theatre is always there in selling," says Mr Biyani.
Shop therapy
By Joe Leahy

Published: May 27 2009 15:15 | Last updated: May 27 2009 15:15

When UK retailer Marks and Spencer opened its first flagship store in Mumbai in partnership
with India’s Reliance Industries, it could hardly have done more to promote the occasion.
Bollywood actress Prachi Desai joined Mark Ashman, chief executive of Marks and Spencer
Reliance India, along with Sir Richard Stagg, New Delhi-based British high commissioner, to
inaugurate the store on the outskirts of the city.

“The store is bigger than other Marks and Spencer stores in Mumbai so offers a wider range than
ever before,” gushed Ms Desai in the marketing blurb.

The tie-up between M&S and Reliance, India’s largest private sector company with aspirations
to become the country’s homegrown version of Wal-Mart, the world’s largest retailer by sales,
comes at a landmark time for the country’s retail industry.

If government reforms announced this year can be taken at face value, foreign direct investors in
the sector will be allowed unprecedented access to the so-called “multi-brand format”: stores
selling goods under more than one brand, such as supermarkets, hypermarkets and department
stores.

But in India, any reform of the retail sector is politically sensitive. The market is dominated by
12m-15m small shopkeepers as well as countless street hawkers, who are bitterly opposed to
competition from chain stores. This has left foreign investors holding their breath over whether
the reforms mean their day has finally come or the rule changes are simply too good to be true.

At present, India allows foreign investors to enter the wholesale end of the market and to operate
single brand stores, such as those selling luxury goods like Gucci or Prada. No foreign
investment is allowed in front-end stores selling a variety of brands – a rule that has ensured that
foreign chains such as Wal-Mart or Carrefour cannot set up shop.

But earlier this year, the government quietly slipped through a rule change that allows foreign
investors to own up to 49 per cent of a holding company, even if this company owns subsidiaries
in industries where overseas investment is restricted.

Analysts believe this means foreign investors can now enter formerly prohibited areas, such as
multi-brand retail, if they can find a co-operative Indian company willing to act as a silent
partner.

“Firms can create two-tier structures that could make many domestic players silent partners
while the big brands look after the front-and-back end businesses,” says Arvind Singhal,
chairman of Technopak Advisors, a consultancy.
For large retailers, the promise of the Indian market is hard to ignore. Sustained growth in gross
domestic product since 1991 has made the country’s once-moribund economy the 12th largest in
the world. Technopak estimates Indians spend about $400bn on private consumption a year, a
figure that is expected to rise to $535bn by 2013. But corporate-chain retailing still accounts for
only 5 per cent of the market.

Unsurprisingly, the rapid growth of consumption in India has led to a flurry of interest from large
corporations, both foreign and domestic. Wal-Mart in 2007 partnered domestic group Bharti
Enterprises in a plan to launch 10-15 cash-and-carry stores.

Last year, Tesco, the UK’s biggest retailer, announced it would open cash-and-carry wholesale
outlets, which are allowed under India’s restrictions, and signed up with the India’s Tata Group
to support its fledgling Star Bazaar hypermarket format.

The UK company will invest £60m ($114m) in the coming two years to build three cash-and-
carry outlets in Mumbai, Delhi and Bangalore, which will supply food and other products to
local family-run stores and restaurants.

France’s Carrefour is also interested in launching a wholesale operation in the country and has
been shopping around for partners.

The leading forces on the domestic front include Reliance, which on its own has rolled out more
than 600 of stores selling fresh produce and groceries in less than two years, and another
conglomerate, Aditya Birla, which has 500 stores under the More brand.

Another actor in the sector is Kishore Biyani, who is arguably India’s biggest retailer with
hundreds of stores ranging from supermarkets to fashion outlets. “Indians are consuming much
more than they were before and they will consume much more than they are now in the future,”
he says.

Mr Biyani says that while electronics stores are proving highly profitable, shops selling fresh
produce are finding it difficult to compete with small shopkeepers or street hawkers who do not
need to pay the expensive rents modern retailers do.

The growth of modern retail in India has faced determined opposition. India FDI Watch, an
activist group that champions the rights of the small shops, has helped organise demonstrations
against large foreign companies and the biggest domestic retail chains such as Reliance. The
group has staunchly opposed the entry of foreign retailers even into the wholesale cash-and-carry
business, through its campaign, “A Movement for Retail Democracy”.

FDI Watch says large retailers compromise not only the interests of small shopkeepers and
hawkers but also of farmers by gaining a monopoly over the purchase of fresh produce and other
goods. It has called on the government to cancel the Wal-Mart-Bharti and Tesco-Tata tie-ups.

“The government must … not make a mockery of its present ban on FDI in retail and save
millions of small retailers and hawkers who are being hit hard by penetration of corporate stores
in the neighbourhood,” Dharmendra Kumar, convenor of the campaign, said in a statement after
Tesco and Tata formed their alliance.

Opposition to large retail has become so heated that Reliance was forced to put on hold its
expansion plans in Uttar Pradesh, India’s largest state, after some of its stores were attacked.

Politics is not the only problem for India’s retail sector. The global economic crisis has also
dampened the willingness of consumers to spend. A recent survey by KPMG, the professional
services group, found that retailers were reporting fewer “footfalls” or visits by customers to
their stores.

“With third quarter growth numbers for the fiscal year ending March 2009 at 10-12 per cent as
against 35 per cent the previous year, the happy grins are fast turning into nervous smiles,” the
report said. “While the sector is still registering decent growth, the heavy investments made
during the boom period may weigh the retailers down.”

This tight liquidity situation might be one reason for the government’s recent liberalisation of
FDI rules. Ironically, one of the first to take advantage of the changes was a domestic company,
Mr Biyani’s Future Group, which formed a holding company structure that will reportedly be
looking for funds from foreign investors.

“This infusion of funds should help the established players get much-needed funds,” says
Shubranshu Pani, managing director of retail services at Jones Lang LaSalle, the property
consultancy.

He says this and falling rents should help the industry through the present tough patch – the cost
of prime retail space in Delhi and other cities has fallen 20-30 per cent in the past six months.

“This is good news for retailers as they can turn around some of their unviable stores,” says Mr
Pani.
A complicated journey from farm to table
By Amy Kazmin

Published: August 6 2009 03:00 | Last updated: August 6 2009 03:00

At Dharmavir Singh's mango orchard, hired labourers drift around, harvesting the raw, green
fruits that hang in abundance from the leafy branches.

The 20-hectare orchard, about 80km from New Delhi, is a disorderly, forest-like jumble; the
trees of varying sizes are planted in no discernible pattern. Some, planted by Mr Singh's father,
are towering after six decades without any pruning. Others are smaller, making it easier for
workers such as 25-year-old Manoj Kumar - who scrambles into the trees without a ladder - to
reach the prized fruits.

Once his mangos are picked, sorted and boxed, Mr Singh sends the truckloads of fruit to traders
at Delhi's huge Azadpur Subzi Mandi, the busy open-air hub of an informal but sophisticated
network that distributes mangos - grown commercially in only a few parts of India - all over the
country.

Each morning, sample boxes from each lot are laid out to be inspected by potential buyers: large-
scale regional traders and exporters, who buy by the truckload, and the skinny men in sweat-
stained clothes who buy a few boxes for their fruit carts to push through the city's
neighbourhoods. The traders - or commission agents as they are formally known - auction the
mangos in their custody, earning 5-8 per cent commission.

At the height of the mango season, more than 60,000kg of the fruits pass through Azadpur, south
Asia's largest wholesale fruit and vegetable market, each day. The agents who facilitate the trade
earn huge profits with little risk since they never take possession of the mangos and put up no
working capital, except for a nominal rent for the market stall.

In theory, the interests of farmers are protected through transparent public auctions at the market.
In reality, however, many deals are negotiated secretly through an elaborate system of hand
signals between the traders and buyers, who hide their hands behind towels. The traders are thus
able to increase their margins and keep the farmers in the dark about the true market value of
their mangos.

But in the past two years, Mr Singh and some of his fellow growers in the mango belt in the
northern state of Uttar Pradesh have begun selling some of their produce to a new buyer: Bharti
Del Monte, a joint venture between Del Monte Pacific, the Philippines-based food company, and
Bharti Enterprises, the Indian conglomerate.

Bharti Del Monte's long-term aim is to boost India's mango exports, but for now the company is
buying them for Easy Day, Bharti Enterprises' wholly owned retail chain, which operates 27
stores in the northern states of Punjab and Haryana, and has plans to open many more in the
coming year.

So far, the quantities actually bought by Bharti Del Monte are a minuscule proportion of India's
huge mango trade. But the method of direct outreach to farmers by the company is a harbinger of
the kind of relationship some analysts say the country needs to strengthen its agricultural sector.

Agriculture accounts for about 16 per cent of India's gross domestic product and involves about
150m families, most of which struggle with small landholdings, limited resources for investment,
lack of education and deep poverty.

Productivity in the sector is far below its potential; huge amounts of food are lost each year
because of spoilage, and farmers are grappling with serious long-term challenges such as the
rapid depletion of local water tables.

For Mr Singh, the relationship with Bharti Del Monte is already bearing fruit. The company pays
slightly more than the market price - an "incentive for quality", one technical adviser says - and
handles all the transport costs, unlike market traders, who pay nothing for transport.

More significantly, rather than just buying mangos like traditional traders, Bharti Del Monte has
seconded technical experts such as 26-year-old Amit Jot, a horticulturist, to advise farmers on
how to boost productivity through pruning, more carefully timed application of fertiliser and
pesticide and other techniques.

"Our output has increased 30 per cent in two or three years," says Mr Singh. "It's all by using
scientific methods."

But India's powerful networks of fruit and vegetable traders are none too happy with such forays
into farmers' fields. They are at the forefront of resistance to corporate involvement in India's
retail produce sector, which they see not just as a threat to millions of small shopkeepers but as a
challenge to their role in India's distribution networks.

The power of the traders was illustrated two years ago in the state of Uttar Pradesh, when
Mayawati, the chief minister, ordered Reliance Fresh, the retail arm of Reliance Industries, to
shut 10 brand new supermarkets in the state.

That edict followed protests by produce traders who were un-happy at the government policy of
allowing corporate retailers to purchase direct from farmers. In addition, Ms Mayawati also
rescinded an order that would have liberalised the fruit and vegetable trade within days.

In West Bengal, too, traders have mounted fierce resistance to companies such as Metro Cash
and Carry, the German wholesaler, Spencer's, the retail brand of India's RPG, and Food Bazaar,
part of the country's Future Group, which have bought direct from farmers.

The traders have won high-level national support, casting themselves as farmers' shields against
exploitative corporate interests. In June, a parliamentary committee on large-scale investment in
the retail sector warned of dire consequences if Indian or foreign companies were allowed to buy
fruit and vegetable direct from farmers.

"Procurement centres constituted by big corporates for making direct bulk purchases would
initially pay attractive prices to farmers, and cause the gradual extinction of mandis [village
markets] and regulated market yards," the report warned. "Then on the strength of their
monopolistic position, farmers would be forced to sell their produce at rock bottom prices."

Many agriculture experts dis-agree. They say traditional traders already exploit vulnerable
farmers, misleading them about broad market conditions, lying about the true price their produce
has fetched and using old-fashioned scales to weigh produce quickly and imprecisely.

Ashok Gulati, Asia director of the International Food Policy Research Institute, a non-
governmental organisation, argues that direct links with retail companies could reduce the price
risk for farmers, help them move into higher value crops and provide technical support to coax
better quality produce from their limited landholdings.

"If you look at the existing market system, things are not very much in farmers' favour," he says.
"Farmers only get between a quarter and a half of what the consumer pays."

In Malerkotla, one of the poorest regions of Punjab, India's agricultural heartland, Bharti Wal-
Mart, a joint venture with the US hypermarket chain, is working with small vegetable growers
supplying Easy Day stores in the city of Ludhiana. As part of the relationship, two advisers with
masters degrees in agriculture are spending the year in Malerkotla demonstrating new techniques
and closely supervising the crops of about 60 extremely poor families with small landholdings
and almost no formal education.

In spite of the intensive technical support, the farmers are not required to sell their produce to
Bharti Wal-Mart. Instead, when Easy Day stores need fresh vegetables, Bharti Wal-Mart notifies
the farmers a day in advance of its requirements and the purchase price, which allows the
growers to decide whether to sell to the company or to local market traders.

"In around 20 or 30 per cent of the cases, they say 'no' as they have got a better option," says
Mukesh Madhukar, deputy general manager of agricultural development at Bharti Wal-Mart.
"They can take an informed decision."

Yet Mr Madhukar, who spent years working with contract farmers growing potatoes when he
was employed at Pepsi, believes that such relationships could transform India's rural landscape.
He argues that the savings would allow the company to provide greater technical support to
farmers, pay them a higher price, earn the company a profit and still keep prices competitive.

"We are not trying to be traders," he says. "We are trying to [ensure we receive] good materials.
Instead of giving 6 per cent to the traders, I'd rather spend 5 per cent on agricultural extension
work and keep 1 per cent for myself. This is basically about creating value for both the farmers
and the company."
For now, fledgling grocery chains such as Easy Day and its rivals are far too small to have a
transformative impact on agriculture. The quantities of produce moving through retail chains are
too small to absorb all the vegetables produced by the relatively few farmers with whom Bharti
companies are working. Even investing in modern cold storage facilities or refrigerated trucks
does not yet make financial sense in an extremely price-sensitive market.

That may change eventually - if organised retail chains can grow to a larger scale - but as
companies struggle to build retail businesses in the face of high real estate costs, restrictions on
foreign investment and regulatory difficulties, the traditional fruit and vegetable traders look set
to dominate India's mango trade for many seasons to come.
No marketplace like home
By Amy Yee

Published: April 7 2008 21:53 | Last updated: April 7 2008 21:53

While he was living in New York several years ago, Sankarson Banerjee tried to convince his
mother in Kolkata to replace her broken television. But the process was too intimidating for his
mother. So during a trip home, Mr Banerjee went to a store and bought her one himself.

The experience of buying products for family back home is familiar to millions of Indians living
overseas. Mr Banerjee was convinced that the shopping process could be far smoother and faster.
“If I’m only in India for seven days, there is no time to do research. I don’t know where to buy
things in Kolkata. I don’t even know Kolkata any more.”

Today Mr Banerjee is chief executive of Futurebazaar.com, the online shopping website of
India’s largest retailer, the Future Group, which hopes to become India’s Amazon.com.

The one-year-old website generates more than 90 per cent of its sales in India on thousands of
items from mobile phones and televisions to frying pans and steam irons. Products are delivered
to customers within days from warehouses spread across India.

But after Future noticed a size-able number of international credit cards being used at its stores,
Futurebazaar.com decided to target Indians living in the US and UK. It encourages these people
to register on its site.

Mr Banerjee reckons that overseas Indians buying items for relatives in India could account for
20 to 30 per cent of Futurebazaar.com’s business next year, which would translate into sales
worth up to $18m . There are between 20m and 25m Indians working and living overseas, a
diaspora that “offers huge potential as a catalyst for India’s economic growth and ongoing global
economic integration”, according to a 2006 JPMorgan report.

The retailer is one of a growing number of companies, from banks to carmakers, that have set
their sights on “non-resident Indians”. Indian telecom group Reliance Communications has sold
1.5m phone cards in the US, the UK and Australia, mainly to NRIs who want to call India.

Large banks offer “NRI services”, which include money transfer and special bank accounts.
India is the world’s largest recipient of remittances from overseas workers, ahead of Mexico and
China. Remittances to India surged to $26.8bn in 2006-07 from $2.1bn in 1990-91, according to
the World Bank.

Remittances to India are a big growth area for Western Union, the financial services company,
which has been offering money transfer services since 1871. The number of outlets in India
surged from 3,000 in 2001 to 50,000 outlets at the beginning of this year, and the group plans
further aggressive expansion.

Money transfers are a significant boost to the Indian economy and encourage its residents to
spend on everything from education to consumer goods. According to the World Bank, every
dollar transferred to a developing country contributes three dollars to its economy, partly by
encouraging entrepreneurship and investments by the recipient households.

While money sent home is important to the economy, Indian carmaker Maruti Suzuki
encourages NRIs to buy goods in India for their relatives rather that send remittances for them to
spend.

Jagdish Khattar, who retired as Maruti’s managing director last year, conceived of the idea over
dinner with some Indian financial analysts living in New York. When they learned that monthly
payments for a small car would cost just a couple of hundred dollars, one analyst considered
buying a vehicle for a nephew as an incentive to study at college.

“So many Indians overseas are doing well. They would like to give their families a car,” Mr
Khattar told the Financial Times last year. “It takes away that guilty feeling.”

The country’s largest carmaker in 2006 launched a website for overseas Indians to order cars in
rupees and get them delivered to a relative’s doorstep from a local Maruti dealership. The
scheme, dubbed Dil se, Hindi for “from the heart”, offers warranties, maintenance and other
services to ease trepidation about buying a car online.

So far Maruti has sold about 3,500 cars online, a drop in the ocean compared with its annual
sales of about 675,000 vehicles. But it hopes to use this side of the business to increase its global
reach. Online car sales have come from 52 countries, reflecting the wide reach of the Indian
diaspora.

Futurebazaar.com is initially focusing on Indians living in the US, the UK, Canada and Australia.
Between 1.5m and 2m Indians live in the US alone.

In those countries the younger generation of Indians “enjoy a high lifestyle”, says Mr Banerjee.
“They feel guilty about it and want to buy things for their parents.”

This kind of proxy spending makes sense for another reason. “Parents feel that consumption
expenditure is not something they do. Twenty years ago incomes were low. It is culturally
difficult for them to consume, so their children do it for them.”

The effort to reach overseas customers requires focused marketing such as translating
promotional materials into regional languages. Western Union runs advertisements in Indian
languages such as Malayalam, Tamil and Punjabi in places such as Saudi Arabia, the United
Arab Emirates, Kuwait, the US and Singapore.
The company also sponsors big cricket and field hockey matches and uses product placement in
Bollywood films. Western Union’s signature yellow logo appeared in last year’s Namaste
London.

Maruti runs advertisements on websites used by Indians, such as matrimonial portals and sites in
local languages such as Gujarati or Malayalam, as well as in local newspapers read by Indian
communities abroad. These include the Khaleej Times in the Middle East and India Abroad in
the US.

Futurebazaar.com, which expects to open a US subsidiary this month, has been targeting Indian
communities by passing out fliers at a large Indian grocery in Edison, New Jersey, a city with a
large Indian population.

It also sponsors events that attract large numbers of overseas Indians, such as annual regional
festivals in the US. A big Bengali mela (gathering) is held in a different US city each year and
attracts up to 40,000 people.

Futurebazaar.com might also market at conferences hosted by major Indian business and
university associations, such as The Indus Entrepreneurs, whose networking events are attended
by thousands.

Most of all Futurebazaar.com relies on television and print advertisements and marketing within
India, where they are considerably cheaper than in the west. The hope is that potential recipients
of goods in India will tell their sons and daughters overseas about the ease of buying online.

“If your mother tells you it is a good idea to go to Futurebazaar, you will,” says Mr Banerjee.

Marketers who speak the many languages of the Indian diaspora

Marketing to the Indian diaspora is “very tricky”, according to Sankarson Banerjee, chief
executive of Futurebazaar.com. “When you say NRI [non-resident Indian], there is not one single
kind of market.”

Indians who migrate to the Middle East for low-skilled work in construction are a different
demographic from those who take white-collar jobs in the US.

Western Union, the money transfer company, tailors marketing and advertising for the Indian
communities in particular regions.

The large flow of migrants from Punjab state tend to go to the Gulf countries, the US and UK;
from Andhra Pradesh to the US, the United Arab Emirates and Saudi Arabia; from Tamil Nadu
to Singapore, Malaysia and the US; and from Kerala to the Gulf.

Accordingly, Western Union’s advertisements in Gulf countries where some 3m to 4m Indians
reside are in Punjabi or Malayalam (the language of Kerala). Its marketing to Singapore and
Malaysia, which together count about 1.1m Indians, is in Tamil.
There's no marketplace like home
By Amy Yee in New Delhi

Published: April 8 2008 03:00 | Last updated: April 8 2008 03:00

W hile he was living in New York several years ago, Sankarson Banerjee tried to convince his
mother in Kolkata to replace her broken television. But the process was too intimidating for his
mother. So during a trip home, Mr Banerjee went to a store and bought her one himself.

The experience of buying products for family back home is familiar to millions of Indians living
overseas. Mr Banerjee was convinced that the shopping process could be far smoother and faster.
"If I'm only in India for seven days, there is no time to do research. I don't know where to buy
things in Kolkata. I don't even know Kolkata any more."

Today Mr Banerjee is chief executive of Futurebazaar.com , the online shopping website of
India's largest retailer, the Future Group, which hopes to become India's Amazon.com.

The one-year-old website generates more than 90 per cent of its sales in India on thousands of
items from mobile phones and televisions to frying pans and steam irons. Products are delivered
to customers within days from warehouses spread across India.

But after Future noticed a size-able number of international credit cards being used at its stores,
Futurebazaar.com decided to target Indians living in the US and UK. It encourages these people
to register on its site.

Mr Banerjee reckons that overseas Indians buying items for relatives in India could account for
20 to 30 per cent of Future-bazaar.com's business next year, which would translate into sales
worth up to $18m. There are between 20m and 25m Indians working and living overseas, a
diaspora that "offers huge potential as a catalyst for India's economic growth and ongoing global
economic integration", according to a 2006 JPMorgan report.

The retailer is one of a growing number of companies, from banks to carmakers, that have set
their sights on "non-resident Indians". Indian telecom group Reliance Communications has sold
1.5m phone cards in the US, the UK and Australia, mainly to NRIs who want to call India.

Large banks offer "NRI services", which include money transfer and special bank accounts. India
is the world's largest recipient of remittances from overseas workers, ahead of Mexico and
China. Remittances to India surged to $26.8bn in 2006-07 from $2.1bn in 1990-91, according to
the World Bank.

Remittances to India are a big growth area for Western Union, the financial services company,
which has been offering money transfer services since 1871. The number of outlets in India
surged from 3,000 in 2001 to 50,000 outlets at the beginning of this year, and the group plans
further aggressive expansion.

Money transfers are a significant boost to the Indian economy and encourage its residents to
spend on everything from education to consumer goods. According to the World Bank, every
dollar transferred to a developing country contributes three dollars to its economy, partly by
encouraging entrepreneurship and investments by the recipient households.

While money sent home is important to the economy, Indian carmaker Maruti Suzuki encourages
NRIs to buy goods in India for their relatives rather than send remittances for them to spend.

Jagdish Khattar, who retired as Maruti's managing director last year, conceived of the idea over
dinner with some Indian financial analysts living in New York. When they learned that monthly
payments for a small car would cost just a couple of hundred dollars, one analyst considered
buying a vehicle for a nephew as an incentive to study at college.

"So many Indians overseas are doing well. They would like to give their families a car," Mr
Khattar told the Financial Times last year. "It takes away that guilty feeling."

The country's largest carmaker in 2006 launched a website for overseas Indians to order cars in
rupees and get them delivered to a relative's doorstep from a local Maruti dealership. The
scheme, dubbed Dil se , Hindi for "from the heart", offers warranties, maintenance and other
services to ease trepidation about buying a car online. So far Maruti has sold about 3,500 cars
online, a drop in the ocean compared with its annual sales of about 675,000 vehicles. But it
hopes to use this side of the business to increase its global reach. Online car sales have come
from 52 countries, reflecting the wide reach of the Indian diaspora.

Futurebazaar.com is initially focusing on Indians living in the US, the UK, Canada and Australia.
Between 1.5m and 2m Indians live in the US alone.

In those countries the younger generation of Indians "enjoy a high lifestyle", says Mr Banerjee.
"They feel guilty about it and want to buy things for their parents."

This kind of proxy spending makes sense for another reason. "Parents feel that consumption
expenditure is not something they do. Twenty years ago incomes were low. It is culturally
difficult for them to consume, so their children do it for them."

The effort to reach overseas customers requires focused marketing such as translating
promotional materials into regional languages. Western Union runs advertisements in Indian
languages such as Malayalam, Tamil and Punjabi in places such as Saudi Arabia, the United
Arab Emirates, Kuwait, the US and Singapore.

The company also sponsors big cricket and field hockey matches and uses product placement in
Bollywood films. Western Union's signature yellow logo appeared in last year's Namaste London
.
Maruti runs advertisements on websites used by Indians, such as matrimonial portals and sites in
local languages such as Gujarati or Malayalam, as well as in local newspapers read by Indian
communities abroad. These include the Khaleej Times in the Middle East and India Abroad in
the US.

Futurebazaar.com, which expects to open a US subsidiary this month, has been targeting Indian
communities by passing out fliers at a large Indian grocery in Edison, New Jersey, a city with a
large Indian population.

It also sponsors events that attract large numbers of overseas Indians, such as annual regional
festivals in the US. A big Bengali mela (gathering) is held in a different US city each year and
attracts up to 40,000 people. Future-bazaar.com might also market at conferences hosted by
major Indian business and university associations, such as The Indus Entrepreneurs, whose
networking events are attended by thousands.

Most of all Futurebazaar.com relies on television and print advertisements and marketing within
India, where they are considerably cheaper than in the west. The hope is that potential recipients
of goods in India will tell their sons and daughters overseas about the ease of buying online.

"If your mother tells you it is a good idea to go to Futurebazaar, you will," says Mr Banerjee.

Marketers who speak the many languages of the Indian diaspora

Marketing to the Indian diaspora is "very tricky", according to Sankarson Banerjee, chief
executive of Futurebazaar.com. "When you say NRI [non-resident Indian], there is not one single
kind of market."

Indians who migrate to the Middle East for low-skilled work in construction are a different
demographic from those who take white-collar jobs in the US.

Western Union, the money transfer company, tailors marketing and advertising for the Indian
communities in particular regions.

The large flow of migrants from Punjab state tend to go to the Gulf countries, the US and UK;
from Andhra Pradesh to the US, the United Arab Emirates and Saudi Arabia; from Tamil Nadu
to Singapore, Malaysia and the US; and from Kerala to the Gulf.

Accordingly, Western Union's advertisements in Gulf countries where some 3m to 4m Indians
reside are in Punjabi or Malayalam (the language of Kerala). Its marketing to Singapore and
Malaysia, which together count about 1.1m Indians, is in Tamil.
Property price threatens Indian retail sector
By Amy Yee in New Delhi

Published: June 18 2008 03:00 | Last updated: June 18 2008 03:00

The head of Pantaloon, India's leading retailer, has warned that high property prices in big Indian
cities is threatening the country's burgeoning retail industry and adding to the pressures brought
on by soaring construction and labour costs.

Kishore Biyani, chief executive of Pantaloon, told the Financial Times: "At current property
prices, you can't exist in the modern retail business.

"Either productivity has to increase significantly or rent has to come down."

Rents in the main Indian cities such as Delhi and Mumbai are among the highest in Asia, in spite
of the poor infrastructure and uneven quality of properties.

Rent for prime retail space in Delhi is $1,146 per square metre a year , according to Jones Lang
LaSalle, the real estate adviser.

Prime retail space in Beijing fetches $951 per square metre a year.

Rising steel and cement prices have boosted construction costs of shopping malls in India by as
much as 40 per cent over the past two years, said Mr Biyani, who pioneered "organised retail" in
the country a decade ago.

Running offices, supply chains and back-end technology systems have also become more
expensive as costs in India rise.

He said: "Volumes become very important. For anyone who starts at a smaller scale, the
pressures become much higher".

Some relief could be on its way as retail rents soften. A correction in India's property market is
already happening, said Mr Biyani. He also said Pantaloon was more insulated from the shock of
high rents than new rivals because it signed many of its leases before prices increased.

But Mr Biyani predicted many of the shopping malls under construction across India would fail
because of miscalculations on size, tenant mix, location and management. "There are too many
coming up. People's understanding of how consumer space works is not there so there will be
casualties," he said.
Yet Mr Biyani said plans that Pantaloon laid out in 2006 to invest $1bn and expand retail space
ten-fold by 2010 are on track.

Mr Biyani unveiled his expansion plans shortly after Reliance Industries, the Indian
conglomerate, launched a $5.5bn fresh grocery chain in 2006.

Organised retail, or formal shops, account for just 3 per cent of India's $322bn retail industry.

Mr Biyani has also been steadily launching new speciality stores focusing on books, electronics,
accessories, furniture and home décor, in addition to his core fashion and hypermarket brands
Pantaloon, Central and Big Bazaar.

The company has begun offering "financial supermarkets" within its stores that offer credit
cards, insurance and mortgages.

Future Group, Pantaloon' parent company, has formed several joint ventures, including Staples
the US office supply store and Generali, the Italian insurer.

Others are clamouring to get into India's nascent organised retail sector. Wal-Mart and Bharti,
owner of India's largest mobile phone operator, forged a joint venture in 2006 that has yet to
launch.
Mall monument to India’s consumer class
By Joe Leahy in Gurgaon

Published: December 22 2007 00:54 | Last updated: December 22 2007 00:54

What in a few years will be India’s largest shopping mall today is a kilometre-long, three-storey
deep hole in the earth marked with a billboard the size of a tennis court.

By 2010, the “Mall of India”, in what is now the dusty New Delhi satellite city of Gurgaon, will
comprise 4.5m square feet of gleaming retail space, more than double the size of the biggest
existing mall in India. It will boast 9,000 parking spaces and be connected to the New Delhi
metro by its own light rail system, the first of its kind in the country.

It may not be ready in time for Christmas but the Mall of India, which is being constructed by
DLF, the country’s biggest property developer, will be the greatest monument yet to India’s
emerging consumer class, a generation as addicted to spending as their elders were to thrift.

“There is a paradigm shift in Indian retail,” says Rajeev Talwar, group executive director of
DLF. “India’s growing prosperity – the large population of under 25-year-olds who have grown
up in an economy that is booming – means that lifestyles and shopping habits are shifting in
favour of malls.”

Despite having more than 1bn people, India had just six malls covering 1m sq ft of space in
2002, according to Jones Lang LaSalle Meghraj, a property consultancy. By the beginning of
2007 that had risen to 90 malls covering 19m sq ft. It is expected to rise threefold next year.

Driving the growth is a rapid rise in middle-class salaries and the emergence of a high-income
class, with 1.6m households earning more than $100,000 (€69,000, £50,000) a year. Aside from
Mall of India, DLF is building a “super luxury” mall in Delhi, the Emporio, that will feature a
10,000 sq ft “watch zone” displaying the world’s most expensive time pieces.

Complementing India’s retail phenomenon is an exponential increase in consumer credit. “The
Indian consumer today is less shy about borrowing,” says Sanjay Nayar, chief executive officer
of Citigroup in India.

The rise of so-called “organised retail” is also critical to the mall boom in India. Corporate
chains today have a tiny share of India’s $300bn-plus retail business but this is set to rise to
about one fifth of the market within five years, according to estimates from Technopak, a
research and consultancy firm.
For Sejal Acharwya, an office worker in Mumbai, the advent of malls has meant being in greater
touch with fashion. “If you go to the mall, you know what’s happening in the city, what’s in and
what’s out,” she says.

Analysts caution, however, that plenty of hype is accompanying the boom. In a recent report,
Jones Lang warned that “over 90 per cent of the current and planned shopping mall stock falls
below international quality in terms of specification and design”.

The infrastructure surrounding malls is also a problem – many can only be reached via pot-holed
roads through slums.

Government restrictions on the entry of foreign retailers, most visibly on groups such as Wal-
Mart, Carrefour and Tesco, means developers may struggle to find enough deep-pocketed
tenants to populate their malls. The world’s biggest retailers also carry some baggage after bad
experiences in other emerging markets.

“There are multiple retailers who don’t want to franchise in India [because] they’ve been burned
in places like Russia and China,” says Vincent Lottefier, chief executive officer of Jones Lang in
India.

Local retailers are rushing to fill the void. Sankarson Banerjee, an executive with India’s largest
retailer, Pantaloon, says the group has doubled and tripled the number of its “Big Bazaar”
supermarkets but still faces queues outside its stores.

On sale days, the hordes of shoppers have become so unmanageable that executives at Future
Group, who own Pantaloon, have been studying crowd control techniques used at temples during
festivals – still the biggest crowd pullers in deeply religious India.

How to deal with those holidays is another issue for retailers. There are 51 public holidays
celebrated in India, but only a few are marked nationally. The majority are observed by diverse
ethnic and religious groups at different times – one district in a large city like Mumbai might
celebrate the Muslim holiday of Eid, the next district the Hindu celebration Diwali – making it
fiendishly difficult for retailers to time their sales.

To get around this, the Future Group invented two sales days of its own, one each on India’s
Republic Day and Independence Day holidays. “These are the only days when everybody is
guaranteed to be on holiday,” says Mr Banerjee.
The Big Four
By TN Ninan, editor and publisher of Business Standard

Published: December 5 2006 04:59 | Last updated: December 5 2006 04:59

Check the Fortune 500 listings, and you will find that the largest companies in the world tend to
be in five or six key businesses: energy, automobiles, telecom, IT, banking and retailing. If you
want to know who in India is positioning himself right, check which business group is where and
you will get the answers.

Let’s start with the sector that is seeing a lot of the action just now - retailing. Mukesh Ambani
has opened his account here, and now Sunil Mittal has tied up with Wal-Mart. Tata has a
smallish operation in Trent, and reports suggest that the group may be thinking of a bigger play
soon. One report also says that Tesco, on the rebound from failed negotiations with Mittal, might
tie the knot with Kumar Mangalam Birla. That accounts for the Big Four of Indian business.

Look next at telecom, which has been the big story of recent years, and it should not surprise that
the list is no different: Ambani (Anil, this time), Tata, Birla and Mittal. In energy, it is Ambani
(both brothers now) and Tata. In automobiles, the biggest Indian player is Tata. The industrial
houses are barred from banking, but the Big Four are active in the financial sector: Tata, Birla
and Ambani are all leading players in insurance and mutual funds, while Mittal as the latest
arrival at the top has not had the time yet to spread his wings.

In IT, once again, Tata is the biggest. It only underlines the dominance of these four industrial
groups (five, if you count the Ambanis separately) when you realise that all these are sunrise
sectors that have seen either their private sector birth or rapid expansion in the last decade.

Are we looking at a tiny corporate elite capturing the bulk of the business opportunities in an
economy that has begun to flower, and should that be a matter of concern? It would certainly
seem that way if you look at some of the pointers: four of the seven companies with the biggest
market cap belong to these groups, and two of the remaining three are from the public sector!
The Big Four (or Five) account for between a fifth and a sixth of the total value of Indian
companies, and about a third of the total wealth owned by India’s 400 billionaires (that is
without counting Ratan Tata, whose personal holding in his group is nominal). Between them,
they probably also account for more corporate wealth than the combined value of all the
companies owned by the Government of India.

Having pointed out all this, I would argue that there is no cause for worry. First, all the markets
in which these players operate are competitive, and there is no real evidence of collusion or price
gouging by exploiting market power.
Second, there is no shortage of fresh entrepreneurial talent that is able to compete and emerge
into the sunshine. Sunil Mittal is himself a prime example of this, as he has competed
successfully against both Tata and Ambani in telecom, but there are others: Anil Agarwal of
Vedanta, Tulsi Tanti of Suzlon, KP Singh of DLF (watch his market cap once he lists), the
software icons in Infosys and Wipro, Mahindra, the Dhoot brothers …

Indeed, the whole point of India’s billionaires is that the vast majority are first-generation
entrepreneurs - people like Kishore Biyani of the Future group, which is into retailing, and
Jignesh Shah of the Multi-Commodity Exchange, who has just become India’s youngest, first-
generation dollar billionaire.

None of this speaks of dominance to a degree that it becomes detrimental to the rest of the
system, or harmful to others. In any case, the Indian economy is now more open to the world so
national dominance is not important beyond a point because more and more of the global giants
are here: Suzuki in cars, Hutch in phones, IBM in software, Citi and HSBC in banking. Indeed,
the majority of big consumer brands in the country belong to large, international firms. In other
words, let the hounds run.

				
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