News As We Read- 9th July'13

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Following made the Headlines:

India:

• Food Security Plan to Debut as Rajdhani Brand: Congress-ruled Delhi and Karnataka will take the lead in kicking off the populist food security law, starting with the poll-bound national Capital on August 20, the birth anniversary of Rajiv Gandhi, Food Minister KV Thomas told ET. In a candid interview, he also defended the decision to promulgate an ordinance for the ambitious welfare programme championed by Sonia Gandhi. He said the government had no choice as BJP, which had obstructed Parliament in the past when the bill should have been discussed, was neither prepared to advance the next session of Parliament, nor could it guarantee a discussion on the matter when the House is convened. Thomas also said Agriculture Minister Sharad Pawar was “100% in favour” of the new law, although he had suggested that the food security law must be accompanied with productivity boosting measures and technologies such as genetically modified (GM) crops. He said states had the key role in implementing the new law. “This is the beginning. Today I discussed this with Sheila Dikshit. She proposed that by August 20 we will implement the food security law. Karnataka is also ready.” But Thomas said he did not know what the BJPruled states were planning. The food security law is widely seen as a key poll plank for the ruling Congress party for the next general elections due in 2014, but Thomas said the decision was in line with his party’s known position. “People know that the UPA is pro-poor. It is a huge responsibility. It has nothing connected with the elections. Let the people of the country assess and analyse it. Indian voters are very intelligent.” Thomas said the UPA government had consulted every political party, and cabinet ministers were given the responsibility to talk to various parties.

• With Discount Counters Open, It’s a Retail Rush at the Malls: On Sunday there was a long queue of cars waiting on the driveway of the Phoenix Mills mall in Mumbai’s Lower Parel where there was no space left for parking as shoppers thronged the mall to splurge on end-of-season sales that started in the weekend. Sales in the first three days rose 20-40% from last year’s discount season for most brands as deep discounts and pent-up demand brought consumers out in full force, while top retailers such as Zara, Pantaloon and Westside clocked anywhere between 60% and 200% jump in sales. “This is unprecedented…I have never seen anything like this during any sale season,” says Rajendra Kelkar, senior centre director for west at High Street Phoenix that operates three malls in Mumbai and Pune. He says two lakh people descended on the firm’s Pune mall on Sunday, double that of usual holidays and weekends. “This is happening in a city like Pune that has 60 lakh population and 40% of that is below poverty line,” he adds. Kelkar says sales rose 40-50% year-onyear in all its three malls. Coming at a time when the country is battling economic woes on many fronts including rising inflation and a sharply sliding rupee, the sudden surge in demand has come as a surprise.  “Such a response is really surprising as the markdown or discounts offered by retailers were lower than last year,” says Nirzar Jain, vice-president at Mumbai-based Oberoi Mall that reported an average sales growth of 40%. “While the footfalls were not substantially higher than last year, the conversion rate or actual people buying were higher this time,” he said. Retailers attribute the surge in demand to a trend among consumers to hold back their purchases for the sale season that they see as bargain shopping. “Consumers are doing planned purchases very well these days,” says Pushpa Bector, head of leasing at DLF Utilities that operates malls in Delhi’s Saket and Vasant Kunj neighbourhoods. “For example, if anyone has to buy three pairs of jeans a year, he or she finds it worthwhile to wait to shop for that during discount seasons,” she says. At Select Citywalk mall in south Delhi, brands that have gone on sale including Zara, French Connection, Mango, Pantaloons, Calvin Klein and Swaroski have mopped up four times revenues on their first day of sale compared to their daily averages. Tommy Hilfiger outlet in the mall clocked sales of 20 lakh on the first day, a one-day record sale for any of its store in the country, a person with direct knowledge of the matter said. The Zara outlet in the mall saw maddening crowd and sales zoomed to 96 lakh on the very first day of the discount sale. Across the town, at Pacific Mall in west Delhi, Zara clocked 65-lakh sales on Day 1, 15% more than the first day sale of last year. In the first three days, the anchor tenant has accumulated 2.18 crore, 20% more than last year. Ditto is the case at Mumbai’s Infiniti Mall where Zara made 1.7 crore in the first three days, while Mango, Westside and Pantaloon had sales ranging from 6.5 lakh to 20 lakh per day, according to industry insiders.

• WALMART INDIA’S FIRST OUTLET MAY OPEN IN 2016: Wal-Mart’s India expansion is stalled. When India announced last September that it would allow foreign supermarket chains to take majority ownership of their local operations, it marked a victory for Wal-Mart Stores, which had spearheaded efforts to open the market and said its first retail store would open within two years. Now, two sources within the Bentonville, Arkansas based company’s Indian unit say it is unlikely to apply for its first retail store licence before March 2015. The company has said it needs a further 12 to 18 months after winning government approval to open each store, which means its first retail outlet in the country would open in 2016 at the earliest.  Meanwhile, Bharti Enterprises, its local partner in an existing wholesale business, is reconsidering its commitment to their joint venture given the heavy investment requirement and distant prospects for returns, four sources with direct knowledge of the matter said. Bharti denied that it is looking to exit the tie-up and said it remains fully committed to the joint venture, and a Wal-Mart spokeswoman declined to comment on what she called speculation. The latest developments stem from an ongoing internal bribery probe relating to its Indian operations, still-evolving rules governing foreign participation in India’s retail sector, and national elections due by May 2014 that could result in the controversial retail reform being reversed —and any newly opened supermarkets being shut — the sources said. The delay and faltering partnership mean Wal-Mart may miss out on the “first-mover” advantage in a country considered the last great frontier for global retailers. If Bharti pulled out, Wal-Mart would be forced to find a new partner from a tiny pool of large local retailers to meet the requirement that a local firm owns 49% of the business. On June 26, Wal-Mart announced that Raj Jain, who led its India push for the past six years, had left the company. The world’s biggest retailer named Ramnik Narsey, who recently joined the company after heading the Indian operations of Australia’s Woolworths, as interim India chief, without explaining the change. Jain did not answer repeated calls to his mobile phone and the company declined to make Narsey available for comment. Narsey headed the consumer electronics wholesale business of Woolworths in India for fifteen months, before it was sold to the Tata Group, offering little insight into what his appointment might mean for Wal-Mart's India rollout.

• Exporters Bring Luxe Touch Home with Own Labels: Exporters long used to supplying to global brands such as Calvin Klein and Clarks brands are launching their own labels at home, finding patrons among Indians with a taste for luxury and the willingness to pay for it. So a number of ventures are creating homemade brands for goods such as made-to-measure men’s apparel, hand-finished footwear and customised home furnishing, drawing on skills honed by years of selling bespoke products to luxury brands in overseas markets. “Indian men do not have quality options for tailored apparel and we knew it was a major gap,” said Gautam Golchha, founder of Silver Crest Clothing, a 15-year-old export house whose clients include Ralph Lauren, Calvin Klein and Hugo Boss. Last year, Golchha, 43, launched made-to-measure men’s brand Tailorman in partnership with internet entrepreneur Vidya Natraj. Having cofounded online jewellery store Bluestone Natraj had noticed a lack of premium online stores that offered luxury apparel for men. “I realised that especially for suits there is need for a robust manufacturing system, something I already had,” said Golchha, who is expecting the new venture to earn 100 crore in revenue by fiscal 2015. Experts said the fast-growing domestic retail market, valued at $490 billion (about 29 lakh crore), is a big draw for entrepreneurs like Golchha who in the past were content to run export houses. Also, the luxury market in India is expected to grow at 25% to $15 billion (. 90,360 crore) by 2015, according to a recent Assocham-YES Bank study. “The Indian retail market is getting segmented. Segments such as luxury and organic are emerging and exporters can now cater to them,” said Pakhie Saxena, an associate director at retail advisory firm Technopak. Four years ago, Manojna Tarin, whose family runs Kerala-based textile export house Hindustan Textiles, launched Eshana. The venture retails bed linen and customised home textiles and will soon offer a line of organic textiles. Tarin believes that upper middle-class consumers are now keenly aware of quality. “They understand concepts like high thread count and invest in the interior design of their homes,” said the 28-year-old who gained global attention recently when the Duchess of Cambridge, Kate Middleton, carried a blue cotton bag with an elephant appliqué designed by her. 

• Premji invests ₹ 75 crore in Tata Capital: After his bitter experience with Subhiksha Retail, Azim Premji, the billionaire chairman of India’s third largest information technology services company, is now playing it safe by investing in well- known brands. Premji, in his personal capacity, is now understood to have invested ₹ 75 crore in the preference shares of Tata Capital. The investments in these ‘non- voting preference shares’ have been made through Premji’s private investment arm, PremjiInvest and the Azim Premji Trust which finances his not- for- profit activities. On being asked, a senior official of Azim Premji Trust declined to comment. An email query sent to Prakash Parthasarathy, the chief investment officer at PremjiInvest did not evoke any reply. Sources, however, said “ it was a routine investment by Premji and his family investment business, which he continues to do”. In July last year, Tata Capital Financial Services, the financial services arm of the Tata group had gone for a private placement of one million compulsorily redeemable preference shares. These shares, of face value ₹ 1,000 each, were being placed at a premium of ₹ 500 a share. According to Tata Capital’s annual report, Azim Hasham Premji and Azim Premji Trust jointly own 24.2 per cent of the preference shares as on March 31. PremjiInvest is a one billion investment fund owned by Premji. Among others, it has invested in companies and organisations such as Manipal Education, National Stock Exchange and Carnation Auto. After its investment in Subhiksha Retail went awry, PremjiInvest is now engaged in a protracted legal battle. On the other hand, Azim Premji Trust is an irrevocable trust which finances various activities of the Azim Premji Foundation. In February this year, Premji had transferred 295.5 million equity shares, representing 12 per cent of the total shares of Wipro Ltd, to the trust, worth ₹ 12,300 crore.

International:

• Target founder dies at 88 after building company from family store: Douglas Dayton, who in 1948 took over the downtown Minneapolis department store his father started and by 1962 had launched the first Target stores, died Friday at 88 after a long battle with cancer. "Doug was instrumental in helping to guide the strategic direction of Dayton Hudson Corporation for many years and institutionalize the values that are at the heart of Target Corporation today," Target President and CEO Gregg Steinhafel said.

• Design is King for Impulsive Asian Shoppers: Nielsen: Asian consumers are more inclined to shop impulsively and pay extra for designer goods than people from other regions, according to a study by market research firm The Nielsen Company. Forty percent of shoppers from the Asia Pacific region say they often buy on a whim things they don’t need, compared to about a third of global respondents, Nielsen found in a survey of more than 29,000 online consumers in 58 countries. Sixty-one percent of Asians are prepared to spend more on designer goods than for similar unbranded items, exceeding the global average by 17 percentage points, according to the researcher. “Indians and Chinese are among the most impulsive and brand image-driven shoppers,” Nielsen said in the report. With clothing and shoes, design is the most important purchasing factor for about half of respondents from the Asia Pacific region, Nielsen said. North American and European consumers are mainly driven by price, the researcher said. Almost a third of Asian shoppers get information about jewelry and clothing online, whereas their counterparts from other regions depend more on visits to stores, the study showed. Middle Eastern, African and Latin American consumers rely most on professional advice, Nielsen said. North American shoppers are the least swayed by professional recommendations, the study said. The data show that “a one-size-fits-all approach doesn’t work,” Nielsen said in the report. The survey was conducted between August 10 and September 7, 2012 and polled claimed purchasing behavior. No margin of error was given.

• U.S. Retail Stocks Hit New High: U.S. retail stocks hit an all-time high in midday trading Monday as the first full week of the second half of the year began on a nearly universally strong note. The S&P Retail Industry Group Index rose 11.98 points, or 1.5 percent, to 821.68 after hitting its highest point ever, 822.33, in the final hour of trading. The major indices rose less robustly, with the Dow Jones Industrial Average up 88.85 points, or 0.6 percent, to 15,224.69 and the S&P 500 ahead 8.57 points, or 0.5 percent, to 1,640.46. Gains were spurred by optimism about the earnings season ahead and by the continued effect of a strong employment report prior to Friday’s abbreviated trading session. The markets also benefited from merger and acquisition interest, including The Jones Group Inc.’s reported retention of Citi to pursue a possible sale and LVMH Moët Hennessy Louis Vuitton’s acquisition of an 80 percent stake in Loro Piana for 2 billion euros, or $2.56 billion at current exchange. Shares of Delia’s Inc. continued their recent momentum, rising 9.6 percent to $1.26, followed by Jones, up 7.6 percent to $15.75, and The Bon-Ton Stores Inc., ahead 5.1 percent to $20.72. Earlier in the day, European stocks digested Friday’s U.S. jobs report with enthusiasm. Frankfurt’s DAX led the way, up 2.1 percent to 7,968.62, followed by the CAC 40 in Paris, which rose 1.9 percent to 3,823.83. Milan’s FTSE MIB grew 1.7 percent to 15,799.62, while London’s FTSE 100 advanced 0.4 percent to 6,450.07. The pound traded at $1.51 against the dollar, while the euro fetched $1.31.

• U.S., EU Begin Free Trade Talks: The U.S. and European Union launched free-trade agreement talks here on Monday as the world’s two biggest trading blocs hunkered down to try to overcome long-standing differences to create billions of dollars in new two-way trade. The Trans-Atlantic Trade and Investment Partnership has major implications for imports and exports of fashion goods. In addition, one new trade dispute involving U.S. jeans makers selling to the European market could create some initial friction as the two sides meet this week. In fact, there had been talk of a postponement following the NSA leaks in the U.S. “In TTIP, we have the opportunity to accomplish something very significant for our economies, for our relationship and for the global trading system as a whole,” said U.S. Trade Representative Michael Froman. “We have an opportunity to spur growth and to generate significant increases in the already substantial number of jobs supported by trans-Atlantic trade and investment.”

• Net-a-porter Blends Art With Fashion: Art isn’t just for walls anymore, thanks to Net-a-porter’s new bespoke collection. For the Art Capsul project, Stacy Engman, chief curator of contemporary art at The National Arts Club in New York, picked five artists — Marina Abramovic, George Condo, Terence Koh, Vik Muniz and Mickalene Thomas — and gave them carte blanche to create made-to-order garments available through the online retailer’s personal-shopping service. “It is the first time this has ever been done,” Engman told WWD, speaking at Paris’ Palais de Tokyo museum, where the pieces were displayed on Wednesday, during couture week. Order-taking started then, too. “I’ve asked artists to conceive of garments that reference their artwork [and] that is entirely by them,” she continued. “There is no pairing with a fashion designer.” None of the artists had created clothes before. Each submitted a detailed sketch of what they wanted to create. “To me, it was really important to have different genres represented, because it was such an experiment,” said Engman. “But I think they all show how versatile they are.” Muniz is best known for his photography and Condo as a painter. Multimedia artist Thomas’ piece sprang from Fifties ballgowns.

• Barnes & Noble chief executive William Lynch resigns: The chief executive of US bookstore chain Barnes & Noble, William Lynch, has resigned amid a continued drop in sales of its Nook e-books and devices. His resignation comes just days after the firm reported that sales in the Nook business fell 34% in the fourth quarter, from a year earlier. That saw its overall losses more than double to $118.6m (£77m) in the period. The Nook e-reader was launched in 2009, but has failed to take on the Amazon's Kindle in the growing e-books market. "Lynch was highly instrumental in making Nook a centrepiece in Barnes & Noble's broader operational strategy," said Alan Rifkin, an analyst at Barclays. "With this announcement, Barnes & Noble is, in our view, signalling that it is attempting to reduce its dependence upon the Nook."