Daily News Digest- 17th July'14

Thought of the Day:

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Following made the Headlines:

India:

• Green Nod for Adani SEZ: Adani Ports and SEZ, India's largest port operator, has received environment and coastal regulation zone clearance for its special economic zone at Mundra Port in Gujarat, reports Our Bureau. In January, Gujarat High Court ordered a shutdown of 12 out of 21 units in Mundra SEZ.

• Luxury Sector Sentiment Down 14% in July-Sept Qtr: The Luxury Industry Sentiment Index stood at 83.6% for the third quarter of this year, a decrease of 14% over April-June quarter, when it stood at 97.6%. According to Wealth-X, a global wealth intelligence and prospecting firm, the industry appears less optimistic for Q3, 2014 than it had for Q2. The report said that 35% of respondents expect their share of the Ultra High Net Worth market to either remain the same or decline.

• Zara Stays Cool & Trendy, Sales Zoom to Rs 580 cr: Average sales at outlets 45 cr per year, much higher than those of Louis Philippe, M&S and Levi's pain may have been dumped out of the FIFA World Cup in the first round four years after taking the crown, but Spanish fast fashion brand Zara, which opened its shop in India in 2010, continues its impressive run, having crossed 500-crore sales mark. Inditex Trent, the joint venture between Zara brand owner Inditex and Tata Group's retail arm Trent, clocked 43% annual growth in its sales for the year ended March 2014 at 580 crore, Trent said in its annual report released on Wednesday. “Zara’s merchandise is the main reason for its growth in India. The brand’s pricing and inventory rotation according to latest fashion trends have attracted consumers initially and they have stayed with the brand,” said Ruchi Sally, director at boutique retail consultancy Elargir Solutions. Average sales per store of Zara at about 45 crore a year is far more than top apparel brands such as Louis Philippe, Levi’s and Marks & Spencer, and even slightly higher than department store chains Shoppers Stop and Lifestyle. While Zara’s overall sales in India is higher than most of its global rivals, the number still trails its Italian peer Benetton, which has revenues of over 600 crore on a wholesale basis. In retail sales, including the mark-up of franchises and retailers, Benetton is a 1,400-crore-plus brand in India. Industry executives said Zara gets almost 65% of its sales from just four ‘star performer’ stores — two in Delhi and one each in Mumbai and Bangalore. “Zara store at Select City Mall in Delhi alone accounts for 20% of the company’s sales at nearly 100 crore annually,” an industry official said on condition of anonymity. “Rest of the stores located at Pune, Surat, Jaipur, Chandigarh and Chennai are dragging the overall sales down and is also bleeding money due to operational cost,” the person added. In terms of profits, however, Zara has been in the black from its first year of Indian operations by striking hard bargains with landlords and mall owners and keeping real estate costs in control. Most of Zara's back-end and merchandise sourcing are handled by Inditex while the Tata expertise is mainly for identifying real estate and locations.

• Apparel Brand Soch to Launch E-store: Ethnic apparel brand Soch is set to launch its own online retail store next month through which it will offer specialised services to attract customers. The eight-year-old brand is also integrating online elements into its brick-and-mortar stores. “We want to bridge the gap between online and offline. I believe it is only a matter of time before these channels merge,” said Vinay Chatlani, chief operating officer of Soch, a brand of MD Retail that also runs multi-brand outlet Favourite. Soch, which earned revenue of 175 crore last fiscal, started retailing on sites like Flipkart, Amazon and Fashionara last year and these portals already account for about 5% of its sales. Online retail is estimated to grow to $32 billion (over 1.9 lakh crore) in the next six years, according to a report by retail advisory Technopak. Multibrand online sites like Flipkart, Snapdeal, Amazon, Myntra and Jabong have captured a large chunk of this market. Brands like Soch are hoping that value-added services will attract buyers to their captive sites. Through its own site Soch will offer services like click-andbrick, where online buyers can pick up products from stores, allowing exchange of online purchases at stores or getting alternations done. It is also working on a mobile application. Other brands and retailers have also launched online sites of their own. For instance, Aditya Birla Nuvo, which manufactures and retails brands like Van Heusen, Louis Philippe and Allen Solly, runs Trendin.com. Shoppers Stop, Croma and Titan are others who have launched captive sites in recent years. “Earlier many brands thought online retail was just a fad,” said Pragya Singh, an associate vice-president at retail advisory firm Technopak. “We will see such initiatives from brands more often as they realise they can offer something distinctive and unique through their own portal,” Singh said. Soch’s Chatlani said his firm expects to earn 260 crore in revenue this fiscal with the online channel contributing at least 15% of sales.

• Travel Triangle Raises Rs 10 crore: Venture capital firm SAIF Partners is backing a Delhi-based startup which has built an online marketplace where travel agents hawk the best customised holiday deals. Travel Triangle, founded in 2010, has raised 10 crore in this round of funding. Travel Triangle founded by three graduates from the Indian Institutes of Technology curates holiday plans for customers on its portal Travel Triangle and then invites competing bids from agents. “What we have been able to crack is the need for personalisation,” said Sankalp Agrawal, chief executive officer of Holiday Travel Triangle who cofounded the company with school friends Prabhat Gupta and Sanchit Garg. The team raised angel funding from a dozen angels including technology entrepreneur Aneesh Reddy and former investor Abhishek Goyal in 2012. The latest round of funding will be used to expand its team to about 70 and to also build the technology platform. “The infusion will enable the company to create intelligence around pricing and user data besides our mobile strategy, “ said 28-year-old Agarwal. India has emerged as one of the world's fastest growing outbound travel markets, with the United Nations World Tourism Organisation predicting 50 million outbound travellers by 2020. For SAIF Partners, which has backed India’s largest travel portal MakeMytrip and travel search engine ixigo.com, this deal marks rising confidence in the next generation of travel companies.

• Aircel Launches 4G Services in 4 Circles: Aircel launched fourth-generation (4G) telecom services in Andhra Pradesh, Assam, Bihar and Odisha, becoming the second operator after bellwether Bharti Airtel to offer highspeed Internet in India, and increasing the value of its broadband assets that may be put up for sale. “The wireless broadband services offered will help customers transform their workplaces and homes into `smarter' entities,“ Anupam Vasudev, chief marketing officer of Aircel, said in a statement on Wednesday . He said the company's 4G services will be differentiated by its customised offerings and quick deployment. Aircel, majority owned by Malaysia's Maxis, bought 20 MHz of spectrum in the 2300 MHz band -used for 4G services based on TDD-LTE technology -across eight circles of Andhra Pradesh, Tamil Nadu, West Bengal, Bihar, Odisha, Assam and North East and Jammu & Kashmir in a government-held auction in May 2010. While 4G services offer download speeds that are 10 times faster than 3G, most companies have delayed their rollouts in this segment, even after holding bandwidth for over four years, due to the lack of mobile devices that support TDD-LTE technology and low customer awareness. Bharti Airtel's 4G services in some cities -mostly through dongles -have not met with much success.

• Mallya's KF Air is king of defaulters at Rs4,022 crore:Vijay Mallya promoted Kingfisher Airlines has emerged as the country’s top non-performing asset (NPA) after it failed to repay loans of Rs 4,022 crore borrowed mainly from state owned banks. It highlights the woes of lenders saddled with bad debt and in need to raise Rs 2.4 lakh crore over the next five years to meet the economy’s growing funding needs. At number two on the list is Winsome Diamond & Jewellery (earlier called Su-raj Diamond), which owes banks over Rs 3,200 crore, followed by engineering firm Electrotherm India (over Rs 2,600 crore). Together, the top 50 defaulters had outstandings of over Rs 53,000 crore at the end of December 2013, the period for which data was submitted to the finance ministry. There were at least 19 companies on the list which had outstanding amount of over Rs 1,000 crore. Public sector (PSU) banks recently submitted the list of top non-performing loans to the finance ministry, which then asked them to focus on these large borrowers to dispel the impression that lenders are going soft in recovering loans from the companies.

• For Flipkart, sexual wellness is big biz: Flipkart is all set to toy with sex. Prompted by the country's growing appetite for sexual wellness products, the country's largest e-tailer on Wednesday launched a new category, which will house products under different segments such as, pleasure enhancement, pleasure devices, sexual combos and kits, lubricants and condoms, among others. When asked about the scope of this segment in India, a Flipkart spokesperson said that sexual wellness is a Rs 1,000 crore category and is growing in double digits. “E-commerce as a channel fulfils a real need for consumers in terms of allowing them to shop for a selection of sexual wellness products from the privacy of their home. The market opportunity and the role Flipkart plays as a channel in the consumer's life is what prompted us to launch this category,“ the spokesperson said. Post launch, the Bengaluru-based e-tailer claimed that the category has been witnessing promising traction and it will launch more products soon. Flipkart said it would also pay special attention to the packaging of the products to maintain consumer privacy. “We recognize the need consumers have in terms of packaging and therefore we have ensured that the packaging is discreet. From a navigation/ display point of view, consumers' interests and sensitivities have been kept in mind. We have created an experience, which allows consumers to explore the products and order them from the privacy of their home, and ensured that they receive it discreetly as decided by them,“ the spokesperson said. India's conservative social norms discourage many marketers from making a hue and cry about adult products but the demand for a range of sexual-wellness products such as, handcuffs, edible G-strings, massagers, and pleasure enhancing devices, has been rising ever since various entrepreneurs across the country decided to set up online shops in the country's $13.5 billion eCommerce space. “The domestic market for adult sexual products is expected to touch Rs 8,700 crore by 2020. We have been witnessing 40% month-on-month growth. A lot of Indians are still shy to go to a brick and mortar shop and pick up something as simple as a packet of condoms or lubricants. Therein lies the potential for e-tailers,“ said Vinodh Reddy, founder of adult shopping website ohmysecrets.com However, most sellers are careful about what they call their products since there is a stigma attached to selling sex toys in the country that it is illegal. According to Reddy, there is no clear legal classification in India about sex toys. “You can import and sell them provided you make sure that the packaging and marketing material related to them is not vulgar or obscene. For instance, a dildo is termed obscene because it resembles a human organ, while the ones that don't, can be sold here without any issues.It's all about how you classify them. Unless we help people become aware of the category, these ambiguities will remain,“ he said.

• Dell targets $2 billion annual revenue after regaining top spot in PC market: Dell is looking at annualised revenue of $2 billion in India as it claws back the market share it had ceded to rivals during a protracted takeover battle which saw its founder Michael Dell come out with the winning hand nine months ago. "On an annual basis, we are now probably close to $2 billion from the Indian business operations. The explosion of growth in India is proof of our strategy," said Thomas Sweet, chief financial officer of Dell. Sweet is on his first visit to India after becoming the chief financial officer of the company earlier this year. In the first quarter of this calendar year, Dell regained its top position in the Indian PC market after it ceded the position to Chinese rival Lenovo in 2012. According to IDC, which tracks PC shipments, Dell had a 23.1 per cent market share in the first quarter of the year followed by HP with 20.1 per cent. "We reset ourselves about seven quarters ago and said that is probably not the right strategy and we need to participate in all price bands of the market profitably," Sweet, a Dell veteran who has been coming to India for over a decade, said in an interview with ET. Some experts, however, are cautious of this strategy, warning that the company should avoid government contracts which are a low margin play. "I believe there are portions of the low end of the market that can remain marginally profitable and supportive of other parts of Dell's business," said Dane Anderson, VP and Research Director at Forrester. "That said, I believe Dell should avoid competitive public sector deals where all the margin is squeezed out of the hardware sales in the hopes of relationship gains or seeds for other prospective business. This segment of the market is a race to the bottom and not an advisable strategy." In 2011 January, Dell's India business was at $1.5 billion on an annual basis. Several months later, Michael Dell took the company private to be able to take bolder decisions away from quarterly pressures. After an intense takeover battle, Dell went private in a transaction that valued the PC maker at $24.9 billion in October 2013. "We are not tied to the 90-day public company cycle you have in the US and having to defend your decisions on 90-day increments," said Sweet, who believes that the Indian PC market still holds promise for Dell. "They have been talking about the PC being dead for how long now. It's still the device people work with," contended Sweet. Dell is also making big bets on enterprise infrastructure, data security and mobility.

International:

• EBay revenue jumps 13 per cent despite worsening competition: EBay Inc posted a 13 per cent rise in quarterly revenue on Wednesday, as it fended off increasing competition from arch-foe Amazon.com Inc and a growing number of smaller niche retail websites. The company reported second-quarter revenue of $4.37 billion, versus $3.88 billion a year ago and the $4.38 billion that Wall Street had expected, on average. Gross merchandise value, a measure of ecommerce transactions across its main Marketplaces platform, grew 12 per cent, in line with or slightly better than analysts' forecasts. Shares in eBay inched 1.3 per cent higher to $51.35 after hours, from a close at $50.70 on the Nasdaq. Ebay's stock has fallen more than 8 per cent since April, hurt by a cyber-attack disclosed in May that compromised data for some 145 million customers, the departure of the highly regarded chief of PayPal, its fastest-growing division, and intensifying competition from both online and offline rivals. Apart from Amazon, physical retailers are investing to boost their online presence and eBay has to fend off a growing coterie of fast-growing retail upstarts that focus on specific categories such as home and apparel. On Wednesday, eBay forecast third-quarter revenue of $4.3 billion to $4.4 billion, compared with expectations for $4.4 billion according to Thomson Reuters I/B/E/S. For the second quarter, it posted non-GAAP earnings per share of 69 cents, a penny better than the average Street forecast for 68 cents.

• Novartis and Google to develop 'smart' contact lens: Swiss drugmaker Novartis has struck an agreement with Google to develop "smart" contact lenses that would help diabetics to track their blood glucose levels or restore the eye's ability to focus. The device for diabetics would measure glucose in tear fluid and send the data wirelessly to a mobile device, Novartis said. The technology is potentially life-changing for many diabetics, who prick their fingers as many as 10 times daily to check their body's production of the sugar. Success would allow Novartis to compete in a global blood-sugar tracking market that is expected to be worth more than $12 billion by 2017, according to research firm GlobalData. Diabetes afflicts an estimated 382 million people worldwide. Many people with Type 1 diabetes and some with Type 2 diabetes monitor their blood glucose level to help to manage their condition and reduce the risk of health complications such as amputation and blindness. Simon O'Neill, director of health intelligence at the charity Diabetes UK, said the field would "welcome any investment in new technology that might one day have the potential to make this easier for people or to offer them more choice". He added, however, that without knowing more about this technology "we have no idea how likely it is to develop into something that is routinely available or how long this might take to happen". The second element of the Google agreement is centred on presbyopia, in which ageing eyes have trouble focusing on close objects. Novartis hopes the lens technology will help to restore the eye's ability to focus, almost like the autofocus on a camera.

• Apple in $400m settlement over e-book price fixing: Technology giant Apple has agreed to pay as much as $400m (£233m) to settle a lawsuit into accusations that it colluded with publishers to fix the price of e-books. The settlement depends on Apple losing an appeal into a 2013 ruling that it violated anti-trust laws over pricing. That ruling found Apple orchestrated "a conspiracy with five publishers to artificially raise e-book prices". Apple has continued to deny that it engaged in any wrongdoing. "We did nothing wrong and we believe a fair assessment of the facts will show it," Kristin Huguet, an Apple spokeswoman, said. If approved by a judge, the $400m will go to consumers. Apple will pay an additional $20m in legal fees.

• Real Madrid 'most valuable sports team', says Forbes: Spanish football club Real Madrid has topped an annual Forbes list of the world's most valuable sports teams. The club, who won the Champions League in May, is worth an estimated $3.44bn (£2bn), Forbes said. The top three slots are occupied by football clubs, with Barcelona in second place at $3.2bn, and Manchester United third, with a value of $2.81bn. Forbes calculated the value of the teams based on equity, debt and stadium deals. MLB baseball team the New York Yankees were in fourth spot, valued at $2.5bn. In fifth place is NFL American Football team the Dallas Cowboys, worth $2.3bn.

• Amazon leaks Kindle Unlimited e-book subscription plan: Amazon appears to be preparing a new subscription service that allows subscribers to download as many Kindle e-books and audio books as they like. The firm uploaded images that indicate the available library would include more than 600,000 titles including the Hunger Games trilogy and the Harry Potter series. The discovery was first reported by the news site GigaOm. Amazon has now deleted the details, but they can still be accessed via Google. They state that the Kindle Unlimited service costs $9.99 (£5.80) a month and includes Kindle exclusives as well as titles from mainstream publishers. That makes it roughly the same price as Netflix's popular TV and movie streaming service, Many of the titles displayed on the short-lived webpage overlap with those in Amazon's existing Kindle Owner's Lending Library - a collection of 500,000 e-books available to subscribers of Prime, the company's fast-shipping service. However, Prime members can only borrow one e-book per month, and only one title at a time. Kindle e-books can be read via Amazon's own e-readers, tablets and smartphones as well as on apps for other manufacturer's devices. One industry watcher said Kindle Unlimited appeared to be a "defensive gesture".

• Violeta by Mango Launches in the U.S.: Violeta by Mango is targeting the American plus-size woman. The Spanish retailer launched the full-figure collection today online in the U.S. Violeta by Mango continues to expand with a 2014 target of 100 stores with an average size of between 3,700 and 4,300 square feet. Sales volume is expected to reach 50 million euros or $67.6 million, the company said. Since the launch of the collection in Spain earlier this year, the line has expanded into France, Germany, Italy, the Netherlands, Turkey, Russia and Saudi Arabia. The company said it has invested 20 million euros, or $39 million, in the launch. The key to the brand, which goes up to size 16, is the care taken in the technical pattern details from size to size and in being able to offer a high-quality collection for any time of day. The collection, with more than 1,000 designs, is aimed at the “demanding and fashion-conscious woman who wants to feel attractive and sexy,” Mango said. The 6-foot, 2-inch Australian model Robyn Lawley is the face for fall. The campaign carries the tag line, “It suits me and I like it.” For fall, khaki, crimson and a range of grays are the key colors. There are military-inspired pieces like parkas and cargo pants, leather items and rocker styles, with colors such as emerald green. Also in the collection are enveloping maxi sweaters and delicate and feminine dresses and blouses belted at the waist. Mango, which arrived in the U.S. in 2006, closed its 2013 fiscal year with turnover of 1.8 billion euros, or $2.49 billion, which represented an increase of 9 percent over 2012.

• California: Swimwear's Port of Entry: For a number of foreign swim brands vying to expand at retail, California is just the right fit.  To see how the Golden State measures up, consider the following stats. In terms of economic potential, it ranks eighth worldwide with a gross domestic product of $2.2 trillion, ahead of Russia, India and Canada. Plus, a coastline stretching 840 miles provides plenty of places to don swimsuits. Never mind the plethora of pools and resorts. Even in the dead of winter, the average temperature peaks at 69 degrees. All of which is conducive to an active lifestyle that, for better or worse, births new health and fitness trends constantly. Therein lies a vast consumer base. “For us, California is a great combination of local residents and travelers from around the world,” said Brian Lange, president of Vilebrequin’s Americas unit in New York, who oversees six stores in California for the Saint-Tropez, France-born brand. “We really have a great confluence of people who live there, people who have a second home there and people who, as tourists, travel around the globe.” Many high-end swim brands have found a home in California. Eres, the Chanel-owned brand that laid its retail foundation in Beverly Hills in 2005, told WWD in February that it sees potential in cities like San Francisco as it continues to roll out boutiques worldwide.