News As We Read - 9th Sep'13

Thought of the Day:

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India:

• Sony Dials Growth with Smartphone Push : Sony India expects its smartphone business to overtake the company’s flagship LED television division by the end of the current fiscal, a development aided by a series of product launches following the Japanese consumer electronics maker’s strategic change of focus in the country. Sales of Sony’s Xperia smartphones grew five times between April and August, compared with the year-ago period, while the company’s Bravia LED televisions posted a 20% growth, according to the company. The smartphone business already accounts for a fourth of the company’s revenues, up from just 10% in 2012-13, and is set to overtake the television business that contributes 35% to the total revenues, said managing director Kenichiro Hibi.

• ‘Modern Retailing Need Not Abandon Cultural Traditions’ : Sir Terry Leahy is the former CEO of Tesco, Britain’s largest retailer and the third-largest in the world with annual sales of £72.4 billon. During his 13 years at the helm, annual pre-tax profits cleared the 1 billon, 2 billion and 3 billion marks in succession, financial and customer marketing services were added to retailing and its market share in the UK grew from 20% to 30%. In addition Leahy established Tesco successfully in South Korea and Thailand. He introduced the Club Card and Tesco Direct and built a profitable and the biggest online food business in the UK. Leahy spoke to independent marketing consultant Kamini Banga in London about his time at Tesco, his views on Indian retail, and the importance of customer and employee focus. 

• Indian Ad World Finds New Yahoo Logo ‘Insipid’ : Unimaginative, insipid and uninspiring. These are some of the words Indian advertising fraternity is using to describe the new logo of Yahoo which is a part of its global makeover after 18 years. Capitalising on a 30-day campaign, during which Yahoo released one new logo every day, the final logo went live on September 5. Designed in-house by Marissa Mayer, CEO, Yahoo, and the design team Bob Stohrer, Marc DeBartolomeis, Russ Khaydarov, and intern Max Ma, the idea was be “Whimsical, yet sophisticated. Modern and fresh, with a nod to our history. Having a human touch, personal,” wrote Mayer in a blog post. Kathy Savitt, chief marketing officer, Yahoo, says, “We heard from users that our logo could better reflect the renewed energy and focus of the company. This new logo will align with our more sophisticated design aesthetic and captures where we are as a company and our aspirations for the future.” But the new logo and the makeover have left Indian ad land unmoved.

• Berggruen Hotels Targets to Break Even by Next Year : Berggruen Hotels, which has launched an upscale brand Keys Klub, is eyeing to reach a break-even by next year. The hotel group is funded by New York-headquartered proprietary fund Berggruen Holdings. “The revenues of Berggruen hotels have been growing at the rate of 80-100% and will continue to double year-on-year with our growth strategy. Keys Klub is the fourth Indian brand of Berggruen Hotels. In less than six years, we are expected to reach a break-even next,” Berggruen Hotels Managing Director and CEO Sanjay Sethi said. Berggruen Hotels has invested heavily during its initial years and is now looking at major expansion by choosing the asset light segment by including management and franchisee business models, he added.

• Walmart, Bharti head for split :World’s largest retail chain Walmart is unlikely to partner Bharti Group for its retail foray in India. The company, it is learnt, is in talks with other Indian firms to ink a new deal for deep-discount superstores in India. By month-end, Walmart is likely to announce its decision to pull out $100-million (`455 crore in 2010) investment made in a Bharti Group company Cedar Support Services for which it is facing a government probe for breaking rules. The pull-out will virtually rule out a potential partnership deal with Bharti Retail that operates front-end stores under the brand name Easy Day. Walmart is also examining options to call off its six-yearold 50:50 wholesale venture with the Sunil Mittal-led group which runs cash-and-carry stores under the Best Price Modern Wholesale brand. “We continue to review the guidelines and work with the government to understand the rules that exist for foreign direct investment,” a Walmart India spokesperson told HT in an emailed response. A Bharti spokesperson said the company does not comment on speculation.

• AirAsia India set to miss its December take- off deadline : Low- cost carrier AirAsia might have to defer the launch of its domestic operations to early 2014, as the process to procure an operating permit would take three months.Earlier, there was no such timeframe for completion of the process. But the Directorate General of Civil Aviation ( DGCA) last month issued an air operator certification manual, which stipulates that an application for permit must be filed at least 90 days before the date of intended launch of operations. Separately, the regulator has also listed out the tasks to be completed within the 90- day period. These include document evaluation and inspection and five review meetings with an applicant. According to sources, the procedures have been documented and the timeframe laid down following audit observations of the US Federal Aviation Administration. These new stipulations are set to affect the plans of AirAsia, which was targeting a December launch. The airline has yet to apply for an operating permit and it can do so only after securing ano- objection certificate from the civil aviation ministry. Also, the 90- day period is only an indicative time limit and the actual process can take even longer if formalities have not been completed. AirAsia would have ideally liked to start its services in December to gain from the peak- season travel demand in November and December, when strong passenger loads allow airlines to charge higher fares. But it can file a schedule to launch its services only after receiving the permit. Demand, as well as fares, tend to drop in the months of February and March. An AirAsia spokesperson said: “ The launch date fully depends on when we get permissions from the government.” Director General of Civil Aviation Arun Mishra said: “AirAsia’s CEO Mittu Chandilya met me two days back to discuss the airline’s plans. Their team is working on the documentation.

International:

• Myspace Founders Add Glitters to LA’s Silicon Beach : It is hardly uncommon for founders and employees of successful companies to cash in their chips and go on to start other successful companies. Perhaps the best-known example is PayPal, the Web payment service whose leaders went on to found and invest in a bunch of other companies  YouTube, LinkedIn, Yelp, Tesla  and to earn the nickname the PayPal mafia. More recently, the alumni of another Internet company a social network based in California have generated an impressive number of spinoffs. But what is notable about these spinoffs is that they have been generated not by a spectacular success, like PayPal or Facebook, but by a distant also-ran: Myspace. It is easy to forget that Myspace started before Facebook and could have been worth billions, but a variety of miscalculations and missed opportunities turned what was once a nearly $600 million company into an afterthought. By 2011, many of its users had abandoned it, the founding team had departed and its owner, News Corp., sold it for just $35 million. Yet from the ashes, a surprising number of startups have risen. 

• Retail Sales Probably Rose at Faster Pace : Retail sales probably rose at a faster pace in August as Americans bought more cars and trucks, a sign spending will help sustain economic growth in the second half of the year, economists said before a report this week. Purchases (RSTAMOM) climbed 0.4 percent after a 0.2 percent advance in July, according to the median forecast of economists surveyed by Bloomberg before Commerce Department figures on Sept. 13. Other figures this week may show a pickup in August producer prices and little change in consumer optimism this month.Industry data showing the strongest pace of vehicle sales since 2007 indicate job and wage gains, along with improvement in household wealth, are giving consumers the wherewithal to spend. The retail report is one of the last pieces of data before next week’s Federal Reserve meeting as policy makers consider whether to dial back record monetary stimulus. “There’s some momentum here,” said Chris Christopher, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Wage increases, even though they’re anemic, are outpacing price increases as long as those gas prices stay down. That gives consumers a little bit of spending power.”

• Japan's economic growth data has been revised higher : Japan has revised up its growth data for the April to June quarter, adding to hopes of an economic recovery. The economy expanded 0.9% during the period, compared to the previous three months. That translates into an annualised growth of 3.8%. The initial estimate of quarter-on-quarter growth was 0.6%. Japan has taken aggressive measures in recent months to spur growth in the world's third-biggest economy, after years of stagnation. "The moves by Japanese policymakers have fuelled optimism of a recovery, which has seen companies start to invest more," Martin Schulz of Fujitsu Research Institute told the BBC. "That is trickling down into the labour market and the real economy. The affect of that is now starting to show in the numbers," he explained.

• UK trade deficit doubles in July to £3.1bn : The UK trade deficit has doubled in July from the previous month, according to the Office for National Statistics. The gap between imports and exports for July, £3.085bn, was more than double June's trade gap of £1.256bn. It was also the biggest monthly deficit in trade since October 2012. The deterioration was partly due to a plunge in exports to countries outside the European Union. Exports to those nations fell 16% - the biggest monthly fall in more than four years. "Today's trade figures could be an early warning that the economy cannot depend on the strong support that it received from net trade in the first half of the year for much longer," said Samuel Tombs of consultancy Capital Economics. Recent data on the UK economy has pointed to gathering momentum. On Wednesday, a report showed that activity in the service sector hit a six-year high.

• Retail Stocks Slip on Wall Street : Retail stocks slipped on Wall Street today after the Labor Department’s monthly employment showed improvement in August, but quite as much as economists hoped. The S&P 500 Retailing Industry Group fell 0.3 percent, or 2.28 points, to 819.34, as the Dow Jones Industrial Average slipped a milder 0.1 percent, or 14.98 points, to 14,922.50. Fashion’s top gainer was Quiksilver Inc., which jumped 31.7 percent to $6.85 after the firm did better than expected in the third quarter. Profits fell 83.6 percent to $2.1 million, or 1 cent a diluted share, but adjusting for restructuring charges, earnings per share totaled 10 cents a share, well above the 4 cents projected by Wall Street analysts.

• New Stores Crop Up in Tokyo : After a quiet summer, the first week of September has brought with it a smattering of store openings in Tokyo. Monki, a younger, more street-oriented brand of Hennes & Mauritz, opened its doors in Harajuku on Friday. The location of the store is on Takeshita-dori, a street famous for being the long-time hub of Japan's youth culture and avant-garde fashions. It is located in a new building that will also house restaurants, cafes and shops by brands such as Spinns and Sanrio (purveyor of all things Hello Kitty). The two-story Monki store is decorated with silver metallic streamers, brightly colored railings on the staircase, and circular displays modeled after merry-go-rounds.