Retail Chronicles September 01st to 15th

RETAIL

CHRONICLES Fortnightly Newsletter

02

HUL: Pioneer of the Rural Retail Market

06

Netflix to HotstarIs the idiot box in its last stage?

08

Recent Technologies trends in Shopping Experiences Retail News

01-15 OCTOBER 2018

Pg 02

What is new in Flipkart Walmart deal

04

11

| Volume 3 - Issue 6 |

Pg 06 Pg 04 Pg 08 Pg 11

Retail Lab SIMSR K J SIMSR, Mumbai

Contact: +91 8896732500, +91 8449248227 retaillab@somaiya.edu

Your customer doesn't care how much you know until they know how much you care!

Damon Richards Entrepreneur, DJ & Musician

What’s new in the Flipkart - Walmart Deal? By SHUBHAM THAKUR

Last month on 18 th august when Walmart announced their investment in India’s largest Ecommerce website Flipkart. That decision was not welcomed by Indian traders, their association – Confederation of all India traders (CAIT) filed case against them. They accused Walmart that they’ve violated the norms of investments in marketplace based e-commerce according to the Press note 3, FDI act 2016.

When CAIT appealed in the National Company Law Appellant Tribunal (NCLAT) against Flipkart – Walmart and asked them to explain about their way of doing business in India. The NCLAT, which is also the appellate authority for the Competition Commission of India (CCI), has asked Walmart International Holdings Inc. to file its reply before it by September 20, 2018. It has also given CAIT a go ahead to dig deep for finding more and more proofs regarding malpractice that they have claimed that accused were involved in.

But last month, while clearing Walmart’s acquisition of Flipkart, the CCI observed that complaints about the deal violating FDI rules “may merit policy intervention but that did not fall into this category, and it is likely to not have any adverse effect on competition in India” and that way they have cleared that deal. The deep discounting practices that was the main acquisition in the case earlier was not the matter of present. It is already prevalent in market, so asking question on their business policy doesn’t make sense here.

On replying to CAIT Walmart recently announced that it had complied with tax obligations of its $16 billion acquisition in Flipkart but they didn’t specify the amount which they have paid as tax.

The Authority has given 7 th sept as last date for depositing remaining amount as Withholding tax on deal amount that Walmart paid to shareholders of Flipkart.

02

Withholding tax or retention tax is an income tax to be paid to the government by payer of the income rather than by the recipient of the income. Here this withholding tax pertains to the capital gains made by Flipkart shareholders.

According to the provisions by of the Income Tax Law, Walmart had to deduct withholding tax on payments made to sellers and deposit it with Indian authorities on the seventh day of the subsequent month, which was 7th Sept 2018.

There are 44 shareholders that Flipkart has and among them Softbank, Naspers, Venture fund Accel Partners and eBay are significant ones. Co-founder Sachin Bansal also sold his stake to Walmart.

Long term capital gain tax is levied at 20% for the shares sold by foreign investors after 24 months of purchase. However, the law also provides for a taxpayer to pay at a lower or almost zero rate if he is eligible for benefits under the Double Taxation Avoidance Agreement between India and the country from where the investment was directed. The Income Tax department has been reviewing section 9(1) of the IT act, which deals with Indirect transfer provisions, see if the benefits under the bilateral tax treaties with countries such as Singapore – Mauritius, could be made available for foreign investors selling stakes to Walmart. Singapore registered Flipkart Pvt Ltd holds majority stake in Flipkart India.

Now tax officers would look into taxes deposited by Walmart for every shareholder who sold shares in Flipkart. In case of a discrepancy the Department would write to Walmart seeking its response for failing to deposit taxes.

Douglas McMillon President, CEO and Director at Walmart Inc. said they are learning a lot from retail market all around the world and especially from China and India. There is tremendous amount of opportunity in these markets. If it had been some other smaller market, they would have been passed decision of funding but it is India. Moody’s VP Charlie O’Shea had earlier said that as Flipkart is expected to generate meaningful losses for at least next few years, this is clearly investment of Walmart for future.

Reference: https://economictimes.indiatimes.com/industry/ services/retail/flipkart-buy-may-impactwalmarts-net-income-thisfiscal/articleshow/65740188.cms https://www.livemint.com/Search/Link/Keyword/ Walmart%20Flipkart%20deal

03

HUL: Pioneer of the Rural Retail Market -By Bharat Gupta It is said that India is not composed of a few hundred cities, but of few thousands of villages According to the provisional data released by Census India, the population of India is 1.3 billion Comprising rural and urban population that is 68.84% and 31.16% respectively. A vast majority of The retail market in rural India is highly the country’s population resides in rural areas. fragmented and mainly dominated by small and Today, the retail sector is witnessing exponential Independent traditional shops. Following are Growth with retail development taking place not some major retailers, who are, at present, only in major cities and metros but also in Tier-II and Tier-III cities including the rural and semi-urban catering to a Rural segment of India, Future areas. With organized retail increasingly Taking off group and Godrej’s joint venture Aadhar, ITC’s in India, retailers are fast penetrating rural markets Choupal Saagar, DCM’s Hariyali Kisaan Bazaar, with different models to serve the Shoppers of rural Triveni Khushali Bazaar, and Mahindra & and semi-urban India with many innovative ideas Mahindra’sShubhlabh. Particularly in Asia, like smaller size products that Appeal to this Unilever has pioneered a number of innovations segment. that it has exported to other Regions in its focus on addressing rural market opportunities. Rural continues to be a key area of Focus for them.

During the (2013-14) year, they reached out to 8,500 villages across India, with an ambition to improve the health and hygiene of children, through school contact and mohalla (neighborhood) programmes. Also, they significantly stepped up investment in digital media, which is expected to be the media channel of the future.

04

J

Also, they significantly stepped up investment in It was launched in October 2013 in Bihar and digital media, which is expected to be the media Jharkhand and the service was expanded in other channel of the future. As for rural markets, HUL parts of India. To enjoy the content of the channel the audience has to give a missed call on the toll free has since 2009 tripled its reach in these areas, where it plans to further Expand and strengthen itsnumber 1800-30- 000-123 and in a few seconds the business by adopting the following strategies: with caller receives a call back from the channel offering 20 Minutes of free popular Hindi content. “Khushiyon ki its Shakti initiative, Hindustan Unilever Limited Doli” is a rural marketing initiative launches in three (HUL) pioneered the concept of Training local states – Uttar Pradesh, Andhra Pradesh and women as rural sales agents who sell Unilever Maharashtra. The main objective of the campaign is to products door to door in their communities.

According to the report, HUL primarily enhanced reach out to media dark villages with HUL brand messages and to engage with Consumers deeply to its direct retail Presence in rural areas, adding rapidly change brand adoption metrics. The main aim 17,000 Shakti Ammas (female distributors) in is to change Attitudes of the rural mass to inculcate 2013-14. HUL is also driving the ' perfect village' initiative, through which consumers good personal hygiene and through this create Greater preference for the company brands by are Educated about categories such as association to daily hygiene habits. Underlying HUL’s conditioners, face-wash, body lotions, fabric Conditioners and liquid hand-wash. Kan Khajura success in rural India is a program that requires managers to spend a Month during their first year Tesan, India’s first free and on-demand living in a village. They see how rural consumers live, entertainment mobile radio Channel owned by and Get a firsthand perspective on their needs and Hindustan Unilever Limited. aspirations. That personal experience gives them insights that they could never gain from reading reports or conventional market Visits.

Thus, it can be considered as a beginning of a new era in retail sector of the rural market. With HUL being a pioneer, other companies to follow it’s footsteps to penetrate in the rural context of the retail industry. The competitors of HUL should realize that urban markets are becoming saturated – competition there is growing ever-more fierce. Forward-looking companies like Unilever cultivate an inclusive growth strategy that considers rural consumers as part of their Plans for growth.

05

Netflix to Hotstar- Is the Idiot Box in its last days?

By Sagar Anam “Kyuki Saas Bhi Kabhi Bahu thi‌â€? yes the same tone Does this indicate end of the traditional which is reciting in your mind used to be heard at television watching? .

10pm from every house in India in the last decade.

Have we truly reached a point where online Now the times have changed and the tones also, a video is replacing traditional broadcast different tone for every individual, all thanks to the television? online video streaming sites such as Hotstar, Netflix, More than 55% of people watch 2 hours or Amazon Prime, Voot, etc. more of online video streaming, with more Since its start in the year 2015, just in 3 years, than 11% of them watching more than 10 hotstar has increased its customer base to 75 Million hours. But this does not mean that people Subscribers, which is the 24% of the people using have started using online content as a the Internet in India; this also includes those who substitute to the TV. For most people, it is access the internet only for basic necessities like nothing more than an add-on to their whatsapp and facebook. traditional television experience. For most of The reason is the independence to watch whatever the people in US, these 2 hours are an add-in you want, whenever you want, wherever you want to their traditional TV watching of 5 hours a and that too with minimal ads. day.

Not only hotstar which is launched by Star network, below is the list of the channels that have also opted for online streaming: The transition from TV to online streaming Voot - Viacom 18 depends on following three factors: Alt Balaji- Balaji Telefilms The consumer behavior: people want to Sony Liv- Sony Entertainment watch traditional television content wherever Ozee- Zee Entertainment they are, on whatever device. But the Netflix demand for television content anywhere is Amazon Prime also a byproduct of how intrinsic the All these Apps and sites account for almost 44% of smartphone and mobile data have become in the advertising industry, which is even more that the our lives. budget spent on the TV ads in US.

06 11

The Business Model: the content makers are transforming their content from solely dependent on the Ads to a subscription based model like amazon prime and hotstar premium.

Delivery Capabilities( The Broadband Speeds): A major role in the success of the online streaming is dependent on the internet speeds- more the speeds, more will be the viewers- rather, lesser the speed, the number if customers will keep on decreasing, Considering the Indian scenario, the speeds were not up to the mark unless Jio came into picture and that is when the online streaming market started gaining high volumes of customers.

Thus it can be said that the decline in the traditional TV has already begun; according to a study, only 12% people in the US wanted to never cut off their cable connections, meaning 88% of the people want to cut off their connections, provided all the above points are satisfied, but as that is not the case with most of the countries in the world, including US and China, we still have got quite a few years to go before the online video streaming completely replaces the traditional TV experience.

.

07 11

Recent Technological Trends in Shopping Experiences Instant Gratification! Nowadays, we come across this word very often.

Instant Gratification is something the new retail industry is aiming to give its customers. The new trends in the retail market clearly show the direction in which the retail industry is progressing. The retail sector is mainly concerned with shopping experiences, which are made more enthusiastic and helpful with the help of new technology.

The growth of the digital technology has altered the face of retail dramatically within recent years. The Internet has completely evolved new methods to buy and sell the product.

Though many of the retailers are yet to be in the mainstream and lack in creating technologically rich shopping experiences, the virus of going digital is spreading fast. Bricks-and-Mortar stores being essential, many retailers have used technology to create unique shopping experience reducing the time required for the shopping and giving the best fitted personalized product for customers.

BY- ONKAR JOSHI

Similarly, due to the exponentially increasing number of buyers from the internet, giants in that sector are also looking for innovative ways of creating experiences.

Technology is at the foundation level of all these advancements, why not discuss some trends in shopping experiences which are completely made possible by technology?

08

Visual Search: Machine learning is actually very helpful in developing this unique type of search. In visual search, instead of searching the query by typing it, customers can click a photo of what they want and search the related products.

Systems recognize the patterns such as shape size color, pattern or texture of the product shown and then searches it from its database to provide product results which are closely related to the product.

This is becoming extremely beneficial while searching the clothing products online and buying it. It is mainly suited to retailers with a very large inventory and the large variety of products. It makes the exact product available to the customers in a very short time reducing shopping time.

Augment Reality: Now imagine you are searching the products online and products are visible in 3D. You can view the product in and out, from all the sides and then purchase it.

This might seem impossible to those who are imagining this for the first time but some brands are actually offering this. The reach of this technology is yet at the primary stage but it has a great scope in the recent future.

Some of the salons are also inculcating this in their web locations where customers can actually try different hairstyles and then approach physical locations to actually have it. This whole experience has created the potential for growth in the salon industry.

Many salons have started to sell the whole experience instead of selling a particular haircut.

09

Personalized and predictive experiences: Salesforce’s 2017 State of marketing report says that 50 percent of the customers are likely to switch their brands when the brands they use do not satisfy their personalized needs from brands.

Considering the facts brands are now offering more personalized products for the customers. This can be often used in food and clothing industry, where customers require more personalized products for themselves because of varying tests Nowadays, new companies are using predictive modeling, machine learning and artificial intelligence to predict the customer behavior, generate right on target marketing and product recommendations.

Curated Subscription services: Nowadays, the Tailored experience is what expected by the customers in the market. These services are also tailored according to the customer needs. Retailers which use traditional practices are also now jumping into the trend. They are providing a new avenue for product discovery and improving shopping experiences. .

Besides these, the use of Chatbots and face based buying is also coming under the recent trends in shopping experiences. Chatbots are used for the instant help of the customers who are searching or buying through online stores.

Considering these trends one can instantly say that things are not remained constrained for shopping but they are gone beyond it.

Retailers focus is shifting from only product-oriented marketing to creating an extraordinary experience for the customers. Retailers are developing the systems which can deliver unique experiences to customers in terms of products and services.

All these experiences are creating more interest in shopping and making it easier for the purchase of products. No doubt Inculcation of the new technology will take the shopping experiences in the retail market to the new level.

10

Retail news at glance Future Enterprises acquires 55% stake in LivQuik Alibaba's Jack Ma to open institute for tech entrepreneurs in Indonesia Xiaomi plans to float a NBFC in India, to soon seek RBI approval Flex threatens to quit India over red tape Kingfisher launches first non-alcoholic drink Radler Amazon is eliminating bonuses, stock awards to help pay for raises Flipkart, Amazon likely to sell $1 billion of smartphones during sales

11

Our Team Content Head Raveena Gupta

Junior Team

Retail Chronicles is a bi-monthly newsletter of Retail Lab, the Retail committee of KJ Somaiya Institute of Management Studies & Research, Mumbai. Images used in Retail Chronicles are subject to copyright.

Bharat Gupta Sagar Anam Shubham Thakur

Design Head Debashish Sarmah

DesignTeam Ayush Pangoria Sachin Ghosh Shiva Tadas Surabhi Upadhayay /retail absimsr @Retail_LAB retail_lab

K J Somaiya Institute Of Management Studies & Research, Mumbai retaillab.simsr@somaiya.edu +91 8896732500 +91 8449248227