Kochi: The 9th edition of the Destination Kerala CEO Roundtable on the theme ‘Driving Kerala’s Retail Renaissance’ brought together retail business leaders Beena Kannan, CEO, Seematti; Alex K Thomas, MD & CEO, Baby Marine Seafood Retail Pvt. Ltd.; Deepak L Aswani, Chairman, Aswani Lachmandas Group and Co-Chair, FICCI Kerala State Council and Shibu Philips, Business Head, LuLu Shopping Mall, Kochi. The deliberations were moderated by Jose Kunnappally, Chief Editor, Destination Kerala business magazine.
Ever since demonetisation the retail industry in Kerala has been sluggish as per news reports. Whether it was GST implementation or the GCC crisis, we have numerous reasons why shopping seasons are not successful enough in Kerala. Now we are on the cusp of yet another shopping season and there is a lot of buzz in terms of retail renaissance happening across India and also in Kerala. This is the right time to discuss how we can take the retail surge forward in the State.
It is being said that Demonetisation and GST have helped organised retail and impacted the unorganised sector. How would you react to that?
DEEPAK L ASWANI: Demonetisation was a real shock to the economy and it took us about six to eight months to realise what was happening. The legal aspect of GST was not very clear. There was confusion about the existing stock. The crisis in the GCC further worsened the situation. When we look at recession, it is not only happening in India, but in other parts of the world as well. Take Dubai for instance, shopping has come down there to virtually nothing now. If we look at Singapore, they don’t shop now like the way they used to. There is a lack of confidence among the public as the interest rates for savings have come down. People don’t know where to put their money because banks have started literally to loot them.
Retail market is sluggish and a bit scary because small retailers are not able to cope with overheads while bigger companies manage to sustain somehow. The biggest jolt has come from e-commerce. They are undercutting us in the sale of even branded products. So today, it is difficult to sell branded products. We may have to go back to unbranded merchandise and get whatever margin we can.
BEENA KANNAN: Demonetisation and GST have affected all our production units very badly. They are used to not paying taxes and taxation was a big blow to them. The readymade garments manufacturing sector, which is my sector, has also been affected very badly. Fixing buttons, pins and novelties were all done in the unorganised sector so that the prices could be kept at the minimum. Actually, this sector has been suffering setbacks for the last few years, even before demonetisation. For instance, the embroidery segment was getting hit badly because of the slump in the US economy which made it difficult for clients there to make bulk purchases from India. Clients from the US, who used to be the best buyers before demonetisation, are now asking for low-cost items.
Has sales dipped even in shopping malls?
SHIBU PHILIPS: What we have noticed after demonetisation was that the first two quarters were affected. Now we are realising that retailers who are not able to understand the new trends in customer demand have been affected. We ourselves sell about 45 lakh fashion merchandise every year. And we have seen a 14 per cent growth in fashion merchandise we sell. Overall, the sales have registered an 18 per cent growth. In April this year, prices have decreased. There are some reasons for it. The basic factor is that globally people shop for two types of clothing – one is the office wear and the other is the ‘Friday Wear’. But these two types of wardrobes are not there in Kerala. People are not spending much on fashion. Shopping centres around the world are fast turning into ‘experience centres.’ Restaurants and F&B outlets are getting more space while the presence of fashion segment, which used to occupy about 70 per cent of the space, has decreased.
Secondly, you really need to be with the customer. Like in e-commerce, you need to assist the customer as they are looking for the best option. Retailers have to make their people professionals. I came to know from the owner of Lenskart that they are using AI and Robotics to aid customers. But the unorganised sector is not in sync with any of these new technologies. What will happen by 2020 is that we are going to have a $1.1-trillion retail economy. The share of e-commerce will be $120 billion while that of the organised sector will be much less at $63 billion. If you have to fight against e-commerce you really need to employ things they are using. Consumers will buy fashion merchandise from you if you have something different to offer.
Is it fair to say that sales in LuLu Shopping Mall is happening only in the food court and multiplex?
SHIBU: No. Sales is there across the best retailers. Many of my retailers are registering good sales and some of them are among the top 10 in the country.
Let me come to the tech business in this panel. Alex, you are the only one without a brick and mortar investment in the panel. How do you see demonetisation and GST?
ALEX K THOMAS: In the online space, demonetisation has not had much of an impact. If you see our data before demonetisation, we had around 80 per cent-plus cash on delivery. Now it has come down to 60 to 65 per cent. Earlier, we had to hand over cash collected from the customer to the hub and then to the banker. Now all these problems have been reduced. More digital penetration has helped us tide over the impact of demonetisation.
But it is surprising that a lot of people buying fish from traditional market didn’t move to Daily Fish after demonetisation?
ALEX: They have moved but they are fighting a big perception problem – ‘fresh vs frozen’. People think that the fish they get in the market is really fresh. Seldom do they realise that they come from Visakhapatnam, Mumbai or Odisha. What we do is try to bring them from Kochi. We have factories in Mumbai, Kozhikode, Kochi, Gujarat and Mangalore. We, however, take great care of the quality.
People think that they come from cold storage but it is not! We are supplying and exporting fish for the last many years. Seldom do people know that we have invested heavily in technology for freezing during processing and while supplying to retailers. So, as I said, it is a big perception problem that we are going through.
SHIBU: I think technology can help in a lot of ways. By scanning bar codes we can find the origin of a product and other related information. If you go to Alibaba’s warehouse in China you can get fish and find details like where does it come from and when was it caught.
ALEX: I can take the invoice number and trace the consignment using my flawless bar code technology and say when was the fish caught, where was it caught, who supplied it and even whether the pieces were cut from a 5 to 7 kg fish or 3 to 5 kg fish. We follow the same international standards while supplying our products to domestic market as well.
What has been the impact of GCC recession on retail in Kerala?
BEENA: All the NRIs are very careful. And the GCC countries especially UAE still remain wherever they were. They have not gone down or gone up. Dubai was sliding at one point and now you can see Dubai Mall is doing okay. But Mall of the Emirates is not doing that well and it is the same case with the other malls. Even there people buy less expensive things so how can they buy better goods from other countries.
So the impact is felt on summer NRK sales!
BEENA: GCC countries were always like that. There is a limit to the spending pattern of Dubai NRKs. They spend less compared to the NRKs from the US and the UK. But now spending by the US consumers has also dipped. However, UK NRKs have increased their spending.
DEEPAK: There is an underlying factor, the farther you are from your home, the more ethnic you get. You will find things which are not in fashion in India are still in fashion in the US or Europe.
But shop sales during Middle East summer have come down especially in markets like Kerala. Is it because of the GCC recession?
BEENA: Think about the availability. Everything is available across malls. Everyday somebody is putting up a sale. You cannot sell at normal price because you just buy it only for the sale. So the branded products are responsible. People have the tendency to buy during a sale. The products are available wherever they go. So the shopping spree has naturally come down because of the increase in availability. They can shop in Dubai, the US or Singapore, then why do they want to shop in Kerala.
How has the GCC recession impacted sales at malls?
SHIBU: Yes, there was actually a dip in sales but we could not feel it actually from our sales perspective last year. We have seen an increase in the arrival of foreign tourists. They are fashion conscious and they know the brand. But when they come to Kerala they prefer loose clothing which they consider as more Indianised.
DEEPAK: I would like to bring in another perspective as far as Kerala is concerned. Take Ernakulam for instance. Earlier, if someone wanted to buy something they will have to come to the city centre. Now Ernakulam itself has spread out into several shopping pockets. LuLu Shopping Mall is one example. In the meanwhile, what has happened is that you have the showroom of every leading brand across the State today. The population of Kerala is another factor. It is not growing as it should be. Retail space on the other hand has gone up. It is a case of 40-50 lakh sq.ft. of retail area for almost the same population. So it is only natural that sales get divided.
BEENA: Yes, more space and shops are available than what is required.
DEEPAK: The costs are going up. When you talk to small and medium retailers you come to know that many people are losing right now. They are somehow keeping their heads above the water.
How do you use technology beyond the transaction to understand the customers and what they want?
ALEX: Technology over the years has evolved. Today, we have reputed companies offering cloud services and this enables a lot of people to enter the technology space for doing business. It has become more affordable. Broadband data usage charges have also come down. All these have enabled businesses to focus on technology. When we talk about companies, we have to have a reliable ERP and a strong platform so that people can actually work in the online space. Again when it comes to technology, artificial intelligence (AI) is a big factor. AI has played a major role in terms of creating a lot of marketing tools. Whether it is online or offline, it gives tailored offers to the customer. It has helped a lot in marketing, remarketing and what not! But even in developed countries online penetrations is only 20 per cent. In India it is just 2 per cent.
SHIBU: At LuLu Shopping Mall, we employ AI, IoT and data analytics. Thus, we were well prepared for most of these issues which have cropped up. The day demonetisation happened we saw consumers switching to cards for shopping. Usually, 75 per cent of them use their card and that day it went up to 95 per cent. Paytm transactions saw a whopping 435 per cent hike.
When GST happened, 1500 vendors were working with us. We aligned them in 15 days with external help and ensured that more stores remained open. We also had to speak to big suppliers. But some suppliers pulled back the stocks out of the market while some others liquidated it. We ensured that stocks were available and stickers were changed. We suffered a 5 per cent loss but we still ensured that the customers had access to products. We need to do data analytics to ensure what we stock. Today, consumers will sit in the store and Google details about the product. AI is definitely needed because if you do not use it then you cannot predict. IoT is done because we can recognise a consumer from the number plate system, so we use that and push the offers back to them.
Ban on plastic and thermocol is something that has hit the retail industry. While it has its sustainability plus points, does it impact business?
SHIBU: It has not come into effect as badly as it has in Mumbai.
BEENA: Yes, the ban did affect us. At present, we are using plastic covers as per the government norms. We are environment friendly.
How serious is the threat from larger ecom players in a business like yours?
ALEX: I am actually from a very traditional business. We got into the fishing industry by setting up processing centres and then moved on to export. We have factories along the coasts. All these things cannot be replicated on e-commerce platform. Bigger e-commerce players can actually buy from us. There are definitely threats to this business in the form of processors. When we started off, there were very few stores. Now there are plenty of fresh fish vendors.
What are the big plans for the coming season, including Onam?
DEEPAK: For about five to six months a year, the business remains sub-par. That means whatever business we can have at full prices should actually happen in the good months. Now there are lot of sales being announced by brands. Initially it was during one end of the season. Now they have it twice a year, one in July and another in December. Moreover, there are many ‘no-reason’ sales. Sales are now offered at 50-70 per cent, some even at 90 per cent. This is the kind of false and unhealthy precedent being created.
Overall assessment about sales in the coming season?
SHIBU: In 45 days time there is football. So we are going to celebrate that. Ramdan is going to be a big month for us.
ALEX: Onam does not signify much in our sales.
Why did the Grand Kerala Shopping Festival not succeed?
BEENA: What were they doing after all? We were made to sell tickets and forced to keep our shops open till 11 pm. It was not organised properly.
DEEPAK: What had happened to GKSF was that it was managed by people who did not know what it was. It was a different form of a lottery. We have to buy coupons and give it to our customers. Were we getting returns? In many cases we did not even know who all have won the prizes. It has to be monitored in such a way that everybody is brought into the fold.
SHIBU: Like Dubai Shopping Festival the whole city should have been ready for it. Shopping, tourism and cultural side should have been ready for it. Here it was not like that. Moreover, malls were not part of it.
What is your outlook for 2018-2019?
DEEPAK: I am not that optimistic as the branded retail segment too has gone the FMCG way. Earlier, there was passion for creating new designs and fashion. Now everything has become a commodity. Everybody wants numbers. The moment manufacturing comes down slightly the vendor will approach another company or brand. Many foreign brands on single-brand platform or even multi-brand platforms are going to find their way into India. All this means that when there is more choice for the customer there is also going to be a division in individual sales. I don’t foresee any additional growth.
ALEX: People of Kerala have taken our brand more seriously because they have understood and accepted the change. Out of 100, 85 people eat fish. The demand is only increasing.
SHIBU: The customer needs to be pampered more. So we are putting in place lot of mechanisms. Suddenly when a consumer gets something as a benefit, he or she will have the urge to come back.
BEENA: Be it Ramzan or Onam, we are stocking up newest fashion and coming out with new designs. Everything is updated.