E-commerce in India
Posted on: February 16, 2013
- In: e-commerce | Retail
- 1 Comment
As per IAMAI, the current number of Internet users in India is around 150 million users (~50 million in Rural) growing at a CAGR (2010-12) of 40%. This number is expected to grow to around 300-350 million by 2015. This means 30% of India is online covering most of the Urban India, which is where 60-70% of the consumption happens in this country.
Youth are increasingly adopting e-commerce
India has the biggest youth market that is adopting technology quickly. Indian youth are comfortable using technology and are preferring to shop online. From books and apparel to FMCG goods, everything is being sold online today. The apprehensions of buying online are subtly fading away for the Indian consumers and online retail is showing positive signs for the future.
India online retail is growing at 35% which would take its value of around 3000 crores ($ 600 million) currently to around 7000 crores ($ 1.5 billion) in 2015. Some of the largest retailers in terms of unique visitors are – Amazon, Flipkart, Jabong, Myntra, Indiatimes, Snapdeal, and Homeshop18 (in decreasing order).
Great signs for online retailing:
- Indian online retail is growing at 35% though the overall size is only 3000 crores.
- Sites such as Flipkart have their apps loaded in 40-50% of the smart phones in India.
- As per Assocham, 58% of the online shoppers shop using debit cards inspite of the cash on delivery option.
- Increase in assortment in online retailing ranging from books, apparel, shoes, electronics, to specialized FMCG, furtniture, etc.
- Categories such as apparel have witnessed strong acceptance and growth in online buying
- Increasing time spent on smart phones in browsing online retail websites. In 2012, upto 20% of the traffic for Snapdeal came from smartphones.
Category-wise growth
According to Assocham, apparel and consumer goods are the fastest growing categories in e-commerce.
Source: Assocham and comScore
Browse offline, Buy Online
Consumers who are comfortable and convinced to buy online are popularly using the method of browsing items in the shop and then buying the item online. This is especially observed in books, shoes, electronics, etc. Consumers are reaping the benefits of both the trades (look and feel from the brick and mortar stores, and discount benefits from online) and this is an important clue for the retailers.
Online retail has made a dent in the $ 500 billion Indian retail market. However, there is a long way to go and it is a big task to even reach the modern retail market size of $ 30 billion. Indian consumers are simultaneously witnessing three revolutions – modern retail revolution, smart phone revolution, and e-commerce revolution. With FDI in retail, increasing smart phones and internet penetration there is strong optimism for the growth of all the three and how these three revolutions converge into a giant consumption basket.
Choice based Conjoint
Choice based Conjoint (CBC) is a research technique based on the observation that consumers always choose products among a set of products in the marketplace, and a simulation of it is the closest to the real consumer behaviour. CBC is a technique wherein the respondent is shown a set of concepts (with specifications) and is asked for his/her preferences. This technique hopes to simulate the tradeoffs that consumers make in their daily buying experiences; the tradeoffs could be among the attributes of the product or among the products and brands listed. This technique is generally used to understand the interaction among the attributes, and for pricing studies.
One needs to list down the attributes and the levels for each of the attribute. For example, to conduct a CBC to understand the importance of the features of a smartphone; an example of an attribute could be “RAM Size” and the levels could be 512MB, 1GB, 2GB or whatever options you would like to present to your consumers. The options should be as close to the actual product as possible and the attributes and the levels should be given an extra-ordinary amount of thought. CBC should ideally be done on a sample of around 300-600 respondents who are aware of the products and the category.
One of the issues I faced while deciding on the attributes and the levels is that it is a little on the easier side for a very functional product like a smartphone or a car, where you can easily distinguish between different engines or processors, (different features like power steering, windows, etc…). The features and levels in functional products are easily distinguishable and conceivable. On the other hand, for products such as biscuits, toothpastes, sanitary napkins, etc. I am not sure how well people can distinguish and conceive different product benefits in such categories where you know the product only by experiencing it.
History of CBC
Limitations of CBC
- Not all brands are equally known to the consumers, and there is a risk of popular brands mostly being preferred in a CBC study.
- CBC doesn’t take promotions and distribution into consideration, and it assumes that all brands are available and have enough media spends.
- It assumes that the consumer has the ability to buy the product.
- The number of questions involving different choice sets could easily increase, causing respondent fatigue.
Brand Price Trade Off
BPTO is a simpler version of a conjoint analysis where a set of brand/price combinations are shown to the respondent. As the respondent choses a particular brand, the price of that particular brand is increased and the consumer is again asked to choose among the new set of brand/price combinations. This technique helps us understand how the consumer trades off the brand and price, and what is the best price point or price band for your product.
The one biggest advantage of this method is its simplicity, while it has quite a few critics in the market. One of the disadvantages of BPTO is that consumers may become conscious and may start playing around with the lowest price, or consumers may be protective of their brand and may always prefer a brand and take it to unrealistic pricing levels.
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With increased exposure to global brands, latest internet communications, and desire for better lifestyle, the consumers today are looking to use the global, trendy, life-style oriented products and are demanding more in terms of the shopping experience, simplicity, quality products, and value.
The evolution of Modern Trade is just meeting the demands of these consumers and together causing rapid growth in modern retail. With increased exposure to Modern Trade, the consumer today is becoming more and more comfortable and loyal with Modern Trade. Nielsen says that a fifth of the Urban India Shoppers now regularly shop at Modern Trade stores. (refer http://www.indiaretailing.com/upload/ContentImage/Market_Research_pdf/NielsenShopperTrends110912.pdf)
Technopak forecasts that the penetration of Modern Trade in India will triple to about 15-20% in the nextfive years by 2018.
From the consumer point of view, modern trade results in:
- Consumers feel that they are smart buyers
- Increased availability of choice in brands and categories
- Promises better prices and value to the consumers
- Better quality products
- Enjoyable shopping experience with product and brand voyeurism
- Perceptual benefits of improved standard of living
Consumers feel smart as they have more control in Modern Trade
With increased brand choice, freedom to browse the products, and the visibility of deals and promotions, the modern trade consumer perceives his buying experience as a smarter way of buying things. It also leads to the consumer willing to experiment more, buying new brands and categories in the modern trade store. It is observed that the modern trade consumers look to buy large packs and aggressively look for promotions, trying to get more value out of every buy.
A family shopping experience with enjoyable product and brand voyeurism
The modern trade consumer is most likely to be accompanied by family and friends, and is not so likely to shop alone. It is increasingly seen that kids sit in the shopping cart, and the mother and father discussing about the product. This increases the fun in the buying experience and provides more opportunity for the retailers to increase the basket size and increase interaction with wide array of brands.
Moreover, the large displays, islands, and the strict arrangement of brands always make the consumers be voyeuristic of the brands and products. This makes them checkout products that were never in their consideration and drop it in the basket. Modern Trade consumers’ willingness to buy new products and niche variants is making manufacturers add high-end variants to upgrade the consumers.
The rise of mini-modern stores to meet the “modern consumer” needs
The Sarvodaya supermarket in Mumbai is an example of a growing trend of traditional stores adopting modern practices to meet changing consumer needs. There are about 100 such stores in Mumbai, and this trend is soon catching up in smaller towns too.
The future implications of Modern trade evolution are obvious as more and more consumers flock to the modern trade stores, and as more global retailers look to enter India after the FDI approval.
Wholesale market in India
Posted on: January 1, 2013
- In: Business | Channel Management | FMCG | Marketing | Supply Chain Management | wholesale
- 1 Comment
Wholesellers are none but middlemen who buy products from distributors (wholesale/retail) and sell them to retailers. In most cases, the retailers come to the wholesellers to buy products to replenish their stock. However, wholesellers may also sell to end consumers, but such sales are minimal.
In the Indian FMCG market, we have broadly two types of wholesellers:
1. Modern Wholesale stores such as Metro, Wal-Mart BestPrice, etc.
2. The neighbourhood wholesellers around the streets in India
Wholesale distributors buy in bulk (high volumes) bargaining low prices from manufacturers. Wholesellers in turn buy products in demand (what retailers ask for?) at low prices from wholesale distributors. Because of this reason that wholesale distributors are bulk buyers, it is generally seen that wholesale is cheaper than retail. But, it also depends on how many middlemen it passes through, as each middleman adds his margin to the selling price.
What’s in it for the retailer?
Few reasons why retailers buy from the wholesellers:
- No direct distribution of a brand to their stores
- Low margins by distributors
- Direct distributors dictating terms
- Better deals at wholesale
- To be aware of the high selling products and brands
Retailers also face some disadvantages in buying from wholesellers:
- Buying goods on immediate cash
- Transportation costs of the goods
- Wholesellers may not take back the unsold inventory/stock
What’s in it for the manufacturer?
The wholesale channel helps the manufacturers achieve sales from markets where they are not directly able to handle retail sales and their shipments. In a country like India, where 95% of the retail environment is unorganized, and spanning across millions of small stores, it is impossible to reach all the stores directly through your distributors.
Most companies will have strong direct distribution in cities like Mumbai, but as you go deep into India, the dependence on wholesale indirect channels increases. Most top selling brands and categories have a good amount of wholesale component. For example, a brand which is selling in Pan-India (across the regions in India) may have a wholesale component ranging from 20% to as high as 50-70% depending on the category/brand’s dependence on Rural India. It is obvious that most of the sales in Rural India happen through wholesellers. In Rural India, you will have strong wholesellers for every group of villages or in the nearby town, where retailers go and replenish their stocks.
Manufacturers would always like to have a higher contribution of retail sales to their overall shipments, as this helps them directly to control the nuts and bolts in the operations such as trade promotions and schemes, in-store visibility, relationship with retailers, pushing and increasing their assortment within the stores, maximising profitability, increased visibility of their sales, etc. The top FMCG companies are driving their direct distribution in Rural India as they mine the Gold at the Bottom of the Pyramid.
CENTURYPLY is undoubtedly one of the major furniture brands in India. Century Plyboard stayed away from TV advertising from the last four years, before it came back on TV with its new TVC on the World Anger Day – 28th Aug, 2012.
In this blog post, we shall evaluate this TVC from Century Plyboard and understand if it met its objectives. Please watch the TVC below.
TVC
Objectives:
Though Century Plyboard is a major brand in India and consumers trusted the brand, research suggested that it is not an aspirational brand in the eyes of the consumers. So, Century Plyboard wanted to build a campaign that brings out the brand as a “lifestyle brand” and truly make it aspirational. As we all know, for any brand, the ultimate apex in brand hierarchy is to be aspirational for its target group.
However, in process of making it a lifestyle/aspirational brand, Century Plyboard also wanted to communicate a key functional aspect – “durability of the furniture“.
Let us check the TVC on some of the key parameters.
1. Does it command the attention of the recipient? √
No doubt that the thrown car and the angry gorilla at the beginning of TVC attracts your attention, and is clutter-breaking among any group of advertisements. I would say 100 out of 100 for the Bates team for such a clearly clutter-breaking start for the TVC.
Great! Now that it got the attention of the consumer, it would have to be relevant and communicate the message.
2. Communication of Durability √
As the consumer watches attentively, the next scene that attracts attention is that the gorilla is not able to break the door and it enters the house breaking through the roof. As the gorilla lands on a dining-table, the dining table doesn’t break and the gorilla chases the person in the scene to the cupboard. Until this point, the consumer is still attentively wondering “what is the gorilla upto?”.
Now, as it turns out that the gorilla is the husband’s imagination of his wife’s anger, it brings out an element of empathy and fun making the whole commercial very enjoyable. The message in the background also re-emphasizes on the visual communication.
It is a great story with an element of suspense, and clearly communicating the durability of the furniture. I give 100/100 in the communication of the functional aspect “durability”.
3. Does it bring the Lifestyle/Aspirational element? Χ
Though the advertisement communicates the durability aspect, it communicates it in a raw manner and definitely doesn’t communicate it creating an aspiration for the brand. The point of concern is: is “durability” a differentiated factor among branded furniture or is it a hygiene factor where the consumer is looking for more than durability. This is why Century Plyboard as a brand should become a lifestyle brand and be more aspirational in the consumer’s mind. This helps to enhance the product portfolio and target the up-class consumers, together bringing in the brand aspiration.
The TVC clearly falls short in the aspect of creating aspiration. The commercial is definitely enjoyable and it has the brand recall with “CENTURY PLY” cards at the end of the ad. The advertisement would have been perfect, had the situation been that people don’t have much trust in its durability. However, the situation here is to somehow create an element of aspiration for the brand.
On the whole, it definitely does well on breaking the clutter, consumers will enjoy the ad, communicates the aspect of durability and increases the awareness of “CENTURYPLY”. However it falls short in creating aspiration.
Gross vs. Net
Posted on: July 22, 2012
Gross:
The term gross refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales.
Net:
Net (or Nett) refers to the amount left over after all deductions are made. Once the net value is attained, nothing further is subtracted. The net value is not allowed to be made lower.
Gross refers to the total and Net refers to the part of the total that really matters. For example, net income for a business is the profit after all expenses, overheads, taxes and interest payments are deducted from the gross income. Similarly, gross Weight refers to the total weight of the goods and the container and packaging. On the other hand, net weight refers to only the weight of the goods in question. For most food products, manufacturers print the net weight on the packaging for the benefit of consumers.
In economics, gross means before deductions (brutto), e.g. Gross Domestic Product (GDP) refers to the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). Net Domestic Product (NDP) refers to the Gross Domestic Product (GDP) minus depreciation on a country’s Capital (economics) goods. (The NDP is thus, in effect, an estimate of how much the country has to spend to maintain the current GDP.)
In accounting, for a P&L (Profit and Loss) statement, Gross profit, or Gross income, or Gross operating profit is the difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments. Net profit is equal to the gross profit minus overheads minus interest payable plus one off items for a given time period.
For a business, income refers to net profit i.e. what remains after expenses and taxes are subtracted fromrevenue. Revenue is the total amount of money the business receives from its customers for its products and services. For individuals, however, “income” generally refers to the total wages, salaries, tips, rents, interest or dividend received for a specific time period.
When income is represented as a percentage of revenue, it’s called profit margin.
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