Posts Tagged ‘India’
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.
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.
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.
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.
LG stands for Lucky Goldstar – the product of a merger of two South Korean commodities businesses – but over the decades with a steady stream of innovative consumer electronics and home appliances, consumers concurred with the conglomerate’s backronym that Life is Good.
LG Home Appliances (HA), the arm of the Korean giant, which makes refrigerators, washing machines and vacuum cleaners amongst other such appliances, clocked a turnover of Rs 6,500 crore in 2011, and expects to close the current year with a 30% increase, taking the top line in the region of Rs 8,500 crore.
Market Leader in Refrigerators and Washing Machines
LG is currently the market leader in both washing machines and refrigerators as per Gfk-Nielsen. For 2012-13, LG is targeting a turnover of Rs. 5000 crore in refrigerator segment. LG will launch flagship products across the home appliances category which will help in strengthening its product leadership.
LG has launched 33 new models in refrigerators. In televisions too, it is targeting the No 1 position in the Flat Panel TV segment with a 30% market share.
Samsung – a concern for LG
In India, Samsung has been flexing its muscle locally and capturing more of consumer mind share – riding on its successes in the mobile space – and with it a bit of market share, too. Samsung’s aggression in the mobile space has rubbed off on its appliances, although LG’s strong equity in home appliances holds it in good stead.
LG’s dependence on white goods is also a cause of concern for the brand, unlike Samsung which has managed to earn its spurs as an as an innovative and bestselling mobile phone brand. Recently Samsung overtook Nokia as the world’s highest selling mobile maker.
In the last few years, Samsung is catching up with LG especially in refrigerators. The Indian appliance space is synonymous with LG and Samsung. Some brands manage to represent the category and that is the case with these two.
The Government of India (GOI) has passed a mandate that all cable services in the four metros be digitized by 30th June, 2012. From 30th June, the four metro cities will cease to receive analogue television broadcast signals. The target for complete digitization in urban areas is September 31, 2014 while the entire country is expected to achieve digitization by December 31, 2014.
Currently, the cable operators transmit the channels in analog signal mode which is very hazy. In a digital signal, the receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. There is a huge cost involved in digitization of cable signals and many cable operators are shying away from this kind of investment, barring few organized and large scale cable operators.
Meeting the deadline is very difficult
Following government directives broadcasters will relay only encrypted digital signals that will then be accessible to customers with set top boxes (STBs). However, meeting this deadline is just impossible. This deadline implies installing over 1.5 lakh STBs per day in the four metros. Currently, the number of daily installations in the four metros together is only 10,000.
Benefits to Viewers
Unlike the earlier scenario, wherein subscribers were forced to choose whole packages of channels even if they did not watch them all, in the new regime, they will be allowed to choose channels on a la carte basis. In other words subscribers will have much better choice at picking only the channels that they want. This will surely bring in price regulation for both the Direct To Home (DTH) & digital cable operators. Also, the Cable TV networks are now free to recover digitization costs from broadcasters through ‘Carriage Fees’. Earlier they were charging the consumers for it. Carriage fees borne by broadcasters are estimated to be around Rs. 4,000 Crores (US$ 752 Million) annually.
Impact on Viewership Ratings
One of the expected benefits of digitization is much better transparency on viewership. This is one of the reasons why the legislation involved has been so contentious. Many channels are highly creative with their viewership numbers. Most like to retain that freedom to stay fuzzy. With digitization, data on media content consumption is much more concrete.
Globally, in most countries, TV channels earn 70% of its revenue from its subscription and only 30% from advertising. In India, the revenue split is exactly the reverse, with 70% of the channel revenues coming from advertising. Digitization is expected to bring down carriage fees and reduce dependence on television rating points. TV Channels fighting for high TRPs to woo the advertisers will see a decline, with reduced dependence of revenues from advertisers. With HDTV providing more control to viewers to filter the content (esp. advertisements), there is a fear that viewers may chose to cut advertisements for an additional subscription fees.
This is a double edged sword. On the one hand, digital broadcasting can help launch high-quality niche channels that cater to a specific, paying customer base. The lack of Indian equivalents of the UK’s BBC and America’s Public Service Broadcasting Service, with their formidable non-fiction programming is frequently lamented.
Friction-free access to new channels can remedy this and chances are that as the medium evolves in the years ahead, the paucity of quality programming may turn out to be a matter of the past. But,on the other hand, this can end up as a new war for eyeballs. And that will lead to the same approach to content that plagues our print media: where readers often pay little to nothing to be fed dubious content. This move is supposed to democratically benefit all stakeholders in the value chain. Only time will tell: Will it benefit all equally or Will it lead to new power-players?
Scheduling deals with the question, ‘When should we advertise the product?’ The answer depends on many factors such as the marketing objective, product sales trend, competition, budget, etc. as we will see in the article.
Types of scheduling patterns:
There are three types of scheduling patterns broadly:
- Continuity – Advertise throughout the year and evenly throughout the year.
- Flighting – Advertise only during some months of the year
- Pulsing – It is a mix of both continuity and flighting, where you have a base amount of activity and you increase the media activity during some periods.
With significant amount of money being spent on media activities and increasing quarterly pressures, it becomes very important to get the best out of every rupee. It is important to understand how to schedule the advertisements for a brand or product. Some of the key factors that influence the scheduling pattern for a brand are as below.
The scheduling of an advertisement for a brand is most heavily influenced by what exactly is the marketing objective. For example, a brand launch (on its first year), the objective is to increase the awareness than to increase sales. So, the advertisement scheduling will be tuned towards increasing reach. For example, a typical target could be to reach 75% of the max TG through the vehicle. Similarly, if the objective is to increase sales through some consumer promotions, then the scheduling has to be planned in synch with the promotion time.
The scheduling strategy of when to advertise your product also gets impacted majorly by the target group (TG) you’re targeting and their viewership habits. For example, if your target group is male 25-40 years, then you may push more advertising on the weekends as the male viewership increases across specific channels on the weekend. So, a good understanding of how the TG consumes the media is very important to set the right scheduling strategy for the brand.
For most FMCG products, sales happen throughout the year, but some periods show significant increase in sales (blip in sales). For example, a brand like Pears gets sold more in the winter months of the year. In such brands and categories, you see an increase in advertisements during the respective seasons.
Besides looking at the sales trend of the brand, it is important to understand the purchase cycle of the brand. Is the brand bought at the end of the month as a monthly grocery purchase, or is the brand bought throughout the month or at the beginning of the month. It also depends on what pack-sizes are sold, for example, if larger packs are sold in Metros and smaller packs are sold in lower towns, and then your scheduling of advertisements should differ for the smaller towns and metros appropriately.
It is important to advertise at the time when your product has the highest chance of being sold. If you advertise your product, it is important to be present in the store. It is important for the marketer to work on the advertisement scheduling in accord with the distribution plan.
Another typical question could be: Should I advertise more in the stronger markets and leverage more? or Should I advertise less in the stronger markets and advertise more in the weaker markets?
Typically for any product or brand, some markets are more important than the other markets. So, typically your advertisement budgets are skewed towards some markets, which will affect the scheduling patterns for the brand.
It is important to closely understand the sales trend, media activity, and past scheduling patterns of the competitor. Another key question for the marketer is: Should I closely mimic the competitor scheduling pattern or Should I take a different approach?. For example, if you observe GSK’s Sensodyne and Colgate-Palmolive’s Colgate Sensitive Pro-Relief advertise mostly at the same time following a similar advertisement scheduling pattern.
If budgets are low for a brand, then the brand may prefer to drop the media activity for a couple of weeks and then be present with the threshold weights for some specific periods. As one understands, budget is an important parameter influencing any decision.
The above discussed parameters are some of the most common major factors that influence the scheduling strategy for a brand. Any comments from the media or non-media professionals on this regard are most welcome.
Before reading this article, just close your eyes zeroing your mind for a moment and recollect three television advertisements. Write down a few details of each of the television advertisements you could recollect.
Of all the numerous advertisements I’ve watched, I could recollect only three advertisements:
- The old Nescafe advertisement
- The recent Flipkart’s advertisement of office-going children
- The JK Cement advertisement
These are the only three advertisements I could recollect instantaneously. It is strange to think that I hardly could recollect any other advertisements. Now, close your eyes and recollect a few brands. I recollected a few brand names listed the following:
- Dairy Milk (chocolate)
- ICICI Bank
- Ford Figo
Also, if one wants to understand which brands do consumers associate with a category, then we have to ask the consumers to recollect advertisements w.r.t those categories. The above shouldn’t be mixed with this.
Clearly, the top of mind (TOM) set of brands are the above. I read through the list and tried to recollect the last seen advertisement in each of these brands. I could recollect the advertisements of all the above brands. Now, why couldn’t I recollect most of these advertisements in the first question? It is because the first question lacked a context.
This shows that a television advertisement on its own is generally of not much use. But if you provide a context to the consumers, then the television advertisements will help the consumers connect the brand with the context. Consumers going to the shop will subconsciously recognize the brand that they’ve watched it on television. This means if you are investing in television advertisements, you have to provide sufficient contextual support such as in-shop presence, BTL, distribution etc.
Until now, we spoke about two things: Advertising your product on television and creating a context offline. This helps the consumers connect the brand with the context. But what actually helps the consumer receive your communication in the first place.
To communicate something you need to first command the recipient’s attention
Consumers, as human-beings, switch on and off in various situations based on different factors. One of the key factors that make the consumers decide to switch on or off is Relevance. A consumer who is about to buy a car will suddenly switch on (becomes attentive) while watching an advertisement of a car. The same consumer 2 years back might be passive and switched off to advertisements of cars.
Also, anything different from routine generally catches the attention of people. For example, the Flipkart advertisement having elderly looking kids. Another example is the use of celebrities. Because consumers become attentive when they look at celebrities, usage of celebrities and other unique elements commands attention.
I’ve put celebrities and unique creative elements under one category because they are good in commanding attention. But they are not enough. Only uniqueness in the creative will help consumers remember the advertisement, but consumers will not remember the brand of the advertisement.
To communicate something you should be relevant to the recipient
The presence of unique elements or celebrities doesn’t make a communication relevant. But the problem is relevance is something that has to come from the consumers. I cannot shout in the media that I am relevant to you, hear me! For example, a consumer considering to buy a car finds the advertisements of cars relevant. Does this mean that to communicate to a target audience I have to wait for the consumers to feel my category relevant to them? No, in such cases you have to build category relevance to the consumers. You have to give them reasons why they have to use the category.
But, how does one build relevance? Relevance is a recurring theme. You build relevance to a category by relating the category to what is relevant to the target audience. For example, if you want to communicate something on conditioners, you have to make consumers relevant to the category. But the category is very nascent and consumers don’t feel a relevance to the category. So, in such cases you build relevance for conditioners by understanding what is relevant (1-level below) to the prospective buyers of the conditioners and connecting that (1 level below relevance) with the category. So, you come up with elements like softened hair, strong roots, etc which are relevant to the consumer and connect that to the category. This is building category relevance for effective communication. The recent TVCs on Colgate Sensitive Pro-Relief is also an example of the category relevance.
But what if the category is already a well penetrated category like shampoos or toilet soaps? As the category is already relevant, all brands clutter the consumer confusing him and he switches off to the category. This is where brand relevance comes into play. This means you have to make the consumer feel relevant, not by talking about the category, but by talking about the brand. Here you don’t talk about the category elements like softened hair, but you try to build relevance by distinguishing your brand such as natural, herbal, seeds of some plant etc. You have to give reasons to buy your brand and make your brand relevant. This is the true test of marketers on how well they can create the brand relevance – the brand associations, the aura of the brand, brand values, brand differentiation etc. Consumers have to feel a specific brand in the category relevant to them.
Most television advertisements today fail because they are not relevant to the audience and they failed to build relevance. The media is so cluttered today that advertisers struggle to draw attention first, and the very few that draw attention fail in being relevant to the target audience. So, television advertisements are an effective tool to build brand awareness and recognition. But it is a difficult task to build brand relevance using TVCs, because consumers are not ready (and too much clutter) to receive the differentiating factors that should make this brand relevant to them.
In my next post, I will write about how to build effective relevance and how we can connect relevance with the consumer decision making process.
Working Capital is the total of the amounts invested in current assets of the company. Net working capital results from the deduction of current liabilities from current assets; Working Capital Management consists of determining the volume and composition of sources and uses of working capital in such a way that would increase the wealth of stockholders. Working capital management is the management of current assets and current liabilities such that would result in the most desirable level of working capital and maximum company profitability. Inadequate working capital leads the company to bankruptcy. On the other hand, too much working capital results in wasting cash and ultimately the decrease in profitability.
Conventionally, it has been seen that if a company desires to take a greater risk for bigger profits and losses, it reduces the size of its working capital in relation to its sales. If it is interested in improving its liquidity, it increases the level of its working capital. However, this policy is likely to result in a reduction of the sales volume, therefore of profitability. Hence, a company should strike a balance between liquidity and profitability.
Refer to the ppt working-capital mgmt on Working Capital Management and how it affects Profitability.