News As We Read- 17th July'13

Thought of the Day:

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Following made the Headlines:

India:

• A Monsoon of Reforms Brings Relief for Economic Drought: The government on Tuesday delivered on its promise to relax the foreign direct investment (FDI) regime, allowing 100% foreign ownership in the telecom sector and in defence on a case-by-case basis, but fell short of expectations raised by the Arvind Mayaram committee. Limits in aviation and multi-brand retail remained unchanged and there appeared to be considerable discretion in defence, where even 100% FDI seemed to have been allowed in theory but only if the investment resulted in state-of-the-art technology coming into the country. The defence ministry will determine what is state of the art. Billed as one of the fastest decisions on the policy front, from conceptualisation to final implementation, the government hopes to give effect to the decisions taken on Tuesday by Prime Minister Manmohan Singh and his colleagues after the cabinet formally approves the new FDI norms within the next few days. “Wherever we have made changes, a cabinet note will be moved immediately and will take up all of them. Decision stands taken,” Commerce and Industry Minister Anand Sharma said. “The decisions have been taken by consensus and the cabinet note will be moved immediately, after which the new norms will be notified,” Sharma said, even as the UPA readies to face a stormy monsoon session beginning August 5. In sectors such as petroleum and natural gas and stock, power and commodity exchanges, the limit remains unchanged at 49% but approval from the Foreign Investment Promotion Board (FIPB) will not be needed. The FDI limits have been raised for asset reconstruction and credit information companies at a special meeting convened by the prime minister on Tuesday after a series of deliberations held by Finance Minister P Chidambaram and Sharma, who discussed the new norms with cabinet colleagues to achieve consensus before the crucial meet. The government did not bite the bullet on multi-brand retail — a political hot potato that even tested the government’s strength through a vote on the floor of Parliament last year — refusing to raise the limit to 74% as suggested by the Mayaram committee.

• Marketing Guru Kumar to Steer Tata Strategy: Tata Chairman Cyrus Mistry, who is recruiting top talent to helm the various businesses and functions of the sprawling group, has tapped one of the world’s foremost marketing strategists to head strategy for the 5.05 lakh crore empire. Nirmalya Kumar, London Business School professor and top-notch marketing strategist, is joining the Tata Group from August 1 this year. He will report to Mistry and be responsible for strategy at the group level. Consultant, coach, speaker and author, Kumar is the professor of marketing and co-director of the Aditya Birla Centre at London Business School. He is a key proponent of the three Vs of marketing — valued customer, value network and value proposition — which was explained in detail in his book, Marketing as Strategy: Understanding the CEO’s Agenda for Driving Growth and Innovation. An art aficionado, Kumar graduated from the Calcutta University in B Com before doing his MBA from University of Illinois Chicago and PhD in marketing from the Kellogg Graduate School of Management. His personal homepage at the London Business School website says he is the custodian of ‘among the largest known private collection of paintings of Jamini Roy and Rabindranath Tagore’. Kumar declined to be drawn into a discussion on his plans, referring all queries to the Tata Group. Mistry has been quietly putting together his team after taking over from Ratan Tata last year. He has replaced two group-level units that reported to Tata, with one group executive council. Three senior executives, with expertise in different key functions, have already taken charge in the past one-and-a-half years.

• Brands Cash In On Twitterati’s Appeal, Sign Social Media Deals: An Indian health portal is close to signing a special endorsement deal with Bollywood actress Priyanka Chopra, not for her strikingly good looks but for the 4.2 million followers that she has on Twitter. She will tweet about the portal. Celebrities in India, like their counterparts in the West, have started including social media like Twitter and Facebook in their brand endorsement contracts or are getting paid separately for tweeting about brands, as marketers scurry to reach their online fan base. Several big and small celebrities and sports stars including Chetan Bhagat, Anusha Dandekar, Shruti Haasan and Unmukt Chand have already started raking in the moolah through social media deals with brands, while others such as cricketer Yuvraj Singh are close to such contracts, their managers say. “Twitter is a very big aspect of a celeb’s reach. Sponsored tweets are certainly gaining traction in India,” says Bunty Sajdeh, chief executive officer of Cornerstone Sport & Entertainment that manages endorsements for celebrities and sportsmen like Sonakshi Sinha, Virat Kohli, Prabhu Deva and Sania Mirza. Sajdeh says he has had discussions with brands on including social media in endorsement contracts but he always insisted that it should be separate contract and a separate discussion. Social media contracts, which include Twitter, Facebook, blogs, Instagram and websites of celebrities, cost a brand up to 25% of a traditional endorsement contract with a celebrity.  Vinita Bangad, founder of Krossover Entertainment that manages Priyanka Chopra and Shah Rukh Khan, while confirming Chopra’s social media deal says, “Talks are on with a few more brands.” In the past, Krossover Entertainment helped VJ Anusha Dandekar ink social media contracts with ITC and Crocs shoes. Anusha tweeted about Crocs shoes with pictures while the brand on its Facebook page also made sure that her association was hyped up.

• Marketing Blitz, Discounts Fail to Sustain iPhone Sales in India: Smartphone maker Apple has seen a sharp fall in its India sales during the first three months of 2013, a trend that analysts say might persist as the California-based company looks to make deeper inroads into world’s third-largest smartphone market. Sales in India had soared soon after the November launch of iPhone 5, the latest iteration of Apple’s smartphone. In an uncharacteristic move, Apple followed up with a sustained marketing campaign, advertising discounts schemes and monthly instalment options for customers in India, where its phones are seen as too expensive. “The October-December quarter was an exceptional one for iPhone, but that hasn’t been the case since then,” said Manasi Yadav, who tracks India’s smartphone market for researcher IDC. According to IDC data, iPhone sales have been on a downward trend after the robust sales in response to the marketing campaign and financing schemes. Between January and March, Apple sold some 120,000 iPhones in India, down from the 230,000 in the October-December quarter of last year, according to IDC. That translated into its share falling from4.7% to 2.1%. In India, Apple faces competition from South Korean rival Samsung as well as local brands such as Micromax and Karbonn, all of which are among the top three in terms of market share.

• Planet Fashion Eyes 20% Growth in Revenue: Planet Fashion, a retail initiative of Madura Fashion & Lifestyle, on Tuesday said it expects 20% growth in revenue during the current fiscal to 361 crore. “We expect our revenue to grow by 20% to 361 crore during the current fiscal... last year our revenue was 297 crore,” Planet Fashion COO (international business & trade sales) Shoaib Farooqi said. Aditya Birla Group firm Planet Fashion that operates on franchise basis has 180 stores across the country and plans to expand it to 200.

International:

• Yahoo revenue falls on slow ad sales: Internet giant Yahoo continues to struggle, reporting declining ad revenue in the second quarter of 2013. The results were the first since the company acquired blogging platform Tumblr for $1.1bn (£73m) in June. Profits were $331m, up 46% from the same time last year. The rise was due mostly to the company's investment in Chinese ecommerce site Alibaba. Display advertising revenue fell 13% in the quarter, while search revenue was down 9%. Chief executive Marissa Mayer, who celebrated one year at the company on Tuesday, chose to ignore the continued revenue slide. Instead, she hailed the company's relentless release of new mobile offerings. "We reached a pace of launching a new product almost every week," said Ms Mayer during a webcast to discuss the company's earnings. "As you can tell, we've been busy." Reaction on Wall Street was muted, with shares falling 1.7% on the news.

• MasterCard's David Rich on Marketing to Mellenials: “Purchasing behavior is the best predictor of purchasing behavior,” said David Rich, vice president, MasterCard Information Solutions, MasterCard Advisors, who discussed the challenges of marketing to the Millennial generation, or those aged between 16 and 33. According to the U.K.’s Office of National Statistics, there are 15 million Millennials in the U.K., and they outnumber baby boomers. In the U.S. there are 78 million, and they too are greater in number than the boomers. Rich referenced a Boston Consulting Group study of the Millennials that broke them down into six subcategories, showing that a one-size-fits-all approach will not always be successful in targeting this, or for that matter, any other generation. “When you are looking through your purchasing data, it ought to drive some insights. “Where is your customer spending outside of your brand? Are they spending more or less with the competition? Are they loyal?” he asked. “Being able to identify that is a real key aspect of how you might want to identify cross-sell activity, retention activity; it might help frame the type of promotion you want to provide, to whom you might want to promote that and at what price point. This is about driving up ROI.”

• Les Copains Names Luca Bertolini CEO: For the first time, Les Copains has a chief executive officer: Luca Bertolini, previously general director of the brand. The new post is in line with founder and chairman Mario Bandiera’s strategy to restructure Les Copains’ parent company, BVM SpA, based in Bologna, Italy. “This is not a step back for Bandiera, but one forward in an effort to create a team that will flank him in the management of the company in a more complex and global scenario,” said Bertolini, adding that Bandiera will be more focused on image, products and relations with designers. Bertolini, who joined the company a little more than a year ago, will be in charge of supporting growth and expansion around the world. Les Copains is designed by Alessandro Dell’Acqua. Bertolini began his career in the fashion industry at Maska in 1987 and, among other experiences, founded luxury licensing firm Jaya Srl, which produced for brands such as Mila Schon, Ungaro and Fuchsia. Since his arrival at the brand, Bertolini has reviewed the group’s operations and restructured its commercial structure. The focus has been on increasingly expanding sales outside Italy, which are expected to account for 85 percent of revenues in 2013. Consolidated sales in 2012 totaled 63 million euros, or $80.6 million at average exchange, up about 8 percent compared with the previous year. In the first half, the spring collection showed a 13 percent increase compared with the same season the previous year. 

• E-commerce Comes of Age in Japan: Japan has been far from an early adopter when it comes to online shopping. Slowly, though, as consumers become increasingly open-minded about buying clothes and accessories over the Internet, the country’s major e-commerce players are vying for a piece of this growing market. E-commerce pioneer Rakuten, which operates storefronts for businesses and individuals and runs an auction portal similar to eBay, is stepping up its fashion component to compete with newer competitors like Zozotown and Magaseek. Another newly launched mobile platform, called Origami, combines elements of e-commerce, social networking and traditional shopping, and is targeting tech-savvy shoppers. “Even though the [market in physical stores] has been flat, really, for fashion, the e-commerce market is growing. The question is, how we can accelerate the growth to be, at a minimum, equal to other developed countries?” said Takayuki Iwao, an executive officer in charge of Rakuten’s fashion business. He estimated that e-commerce accounts for just 4 percent of Japan’s fashion market, while it is closer to 10 percent in countries like the U.S., the U.K. and even South Korea.

• Swiss Watch CEO Lauds Competition Ruling: The head of Swiss watch brand Frédérique Constant on Tuesday praised a decision by Switzerland’s competition regulator to reject an agreement that would have allowed Swatch Group AG to cut back on deliveries of key components to rival watchmakers. Peter Stas, co-founder and chief executive officer of Frédérique Constant, said the ruling would give independent brands time to continue developing their own mechanical movements, or calibers, and prevent them from having to seek foreign suppliers for essential regulating mechanisms like high-tech hairsprings. “We feel it is the right decision for the Swiss watch industry on a number of levels,” Stas told WWD via e-mail. “It creates at least temporarily clarity and stability after an acrimonious fight within the Swiss watch industry.” With the exception of Swatch Group, leading industry players have yet to react to Friday’s announcement by the Swiss Federal Competition Commission, or Comco, that it has rejected an agreement struck between its Secretariat and Swatch Group. Nick Hayek, ceo of Swatch Group, said he regretted the ruling, which allows Swatch Group in principle to continue cutting its delivery of mechanical movements in a gradual way and under certain conditions, but halts any reduction in the supply of assortments. Frédérique Constant was one of nine companies that appealed a temporary decision by Comco in 2011 authorizing Swatch Group to trim its supply of parts. They argued the sudden reduction in supply could put smaller brands out of business, but the Federal Administrative Court in Bern rejected the appeal in December 2011.

• Target, Toys R Us look to pop-up shops to boost back-to-school sales: Retailers including Target, Toys R Us, JanSport Apparel and Bed, Bath & Beyond are boosting their use of back-to-school pop-up shops this year, setting up at locations including vacant mall storefronts and college campuses and offering pared-down selections of notebooks, clothes and other popular items.