Retail chains adopt prepaid cards to retain customers

Prepaid cards have become the latest retail tool to keep consumers hooked to brands. They offer convenience and safety, because customers don’t have to carry cash, and they often come with a variety of offers, including discounts.

Brands like Café Coffee Day, Pizza Hut, Provogue, Kaya, Fastrack, Gili and a host of others have launched prepaid cards. A prepaid card works like a debit card with a PIN number that can be redeemed at the brands’ outlets. The cards in India are based on the closed loop model — that is, they can be redeemed only at the brand’s stores. “When I have money loaded on the card, the tendency to come to the same place is higher,” says K Ramakrishnan, marketing president at Cafe Coffee Day. The brand’s card Cafe Moments, launched this month, offers a 5% bonus on cards with a value of Rs 100 to Rs 499, 7% on Rs 500 to Rs 999 and 10% on Rs 1,000 and above.

A prepaid card obviates the need to pay cash every time, and it also enables faster accumulation of bonus points or other offers. Prepaid cards in India are currently being used more as gift cards. Some brands have used it to launch a promotion or a service. What the prepaid gift card did for Kaya was to generate incremental walk-ins,” says Suvodeep Das, marketing head at Kaya Skin Clinic. In Kaya prepaid cards, currency can be reloaded in multiples of Rs 500 to up to Rs 2 lakh. Kaya sells about 250-300 gift cards a month.

Global Prepaid Exchange recently estimated that the size of the organized prepaid gift card and gift voucher market in India is Rs 2,000 crore and would grow to Rs 8,000 crore by 2015. “The acceptance of gift cards in proportion to vouchers has increased significantly,” says Pratap T P, chief marketing officer at QwikCilver Solutions, a provider of prepaid card solutions.

However, Devangshu Dutta, CEO of retail consultancy Third Eyesight, says growth in prepaid cards would be restricted by the fact that they can be used only at a particular brand’s outlets. “Also, a customer cannot claim the minimum residual value in the card. He will have to top it up to redeem it,” he says.

Retail majors in rightsizing mode

IN A bid to maximise sales per square feet, Indias frontline retailers are increasingly looking at ways to restructure their stores. Leading players like Future Group, Spencers Retail, Shoppers Stop and Vishal Retail plan to rightsize their stores and replace slow-moving categories with speciality formats under the shop-in-shop model.

Retailers feel such an approach will also help them improve gross margin returns per sq ft in the present environment when same store sales growth is quite weak. A shop-inshop approach helps increase revenue per sq ft. It enables best utilisation of space and is a good way to do away with excess space and reduce space for categories which are not doing well, Future Group CEORetail Rakesh Biyani told ET.

Future Group plans to offer a wider choice in large-format stores like Big Bazaar by setting up speciality zones under the shop-in-shop model. This approach provides consumers with a wider choice. We have a similar model for the Pantaloons outlets in the East and may replicate it elsewhere, Mr Biyani said. Shoppers Stop recently tied up with Cafe Coffee Day to manage cafes within its stores. It is an ongoing process to maximise returns, said managing director BS Nagesh. The most common categories where retailers are looking for shop-inshop outlets include food and beverage, saris and areas which have more customerconnect requirement like cosmetics, personal care products, fine jewellery and salons, says Retailers Association of India CEO Kumar Rajagopalan.

Spencers Retail, which is presently rightsizing by cutting down on 20% of its retail space, also plans to focus on shopinshops. In a slowdown, shop-in-shops are the best way to leverage domain knowledge of speciality players and maximise returns. Such outlets will be set up through our groups speciality formats like Books & Beyond, Mera World, Music World as well as in collaboration with other players, Spencers Retail marketing head Samar S Sheikhawat.

Vishal Retail group president Ambeek Khemka said the retailer too is restructuring its 171 stores nationally. We have already completed the exercise for 35-odd stores and the results are encouraging. In fact, small and regional brands are lapping up the opportunity to follow the shop-in-shops model, he said.

Economic Times: Writankar Mukherjee & Sreeradha D Basu, KOLKATA

FALLING rentals help retailers expand

FALLING rentals are proving to be a boon for a cross-section of businesses which, for a while, had to defer their expansion plans in various cities on acount of high rentals.

Cafe Coffee Day (CCD), ethnic apparel wear Biba and Samsonite, are some of the players looking to expand in Tier-I cities. High rentals were a stumbling block in most locations. That has changed now. “On an average, we have managed to bring down rents by about 15-20%. There have been instances where the reduction has been as much as 50%,” says Samsonite director (global) Ramesh Tainwala.

The correction in some locations in Delhi has been as much as 80%. Though, Samsonite opened only three new stores in 2008, it plans to add 35 stores by 2009 end. Biba is also using the slowdown as an opportunity to expand. “We have renegotiated our rentals for 10 properties in the last one week alone,” says Biba Apparel director Sanjay Bindra.

In one of the existing stores in Navi Mumbai, it managed to negotiate its rental and brought it down by 50%. Lower rentals are now helping it expand to prime areas in New Delhi, where it has just one store. Today, Biba has 64-standalone stores across the country and plans are on to add 30 more over the next year. A property broker, on the condition of anonymity, cites the case of a Hyderabad mall where the rent was at Rs 300 per square foot, a year ago. That is now down to just over Rs 100 per square foot. Likewise, rates in a prominent mall in south Mumbai have reduced from Rs 600 per square foot to a third at Rs 200 per square foot. Like a host of other players, CCD, too, plans to use the fall in rentals to expand in Tier-I locations.

“Rentals in malls would have fallen by 20-30%, while on high streets it would have fallen by 15-30%. Falling rentals are definitely helping our expansion plans and helping us enter locations where we were not present earlier,” says CCD director Alok Gupta. He adds that it takes less time to negotiate with developers. The plan is to establish a stronger presence in south Mumbai and Delhi where developers were unwilling to negotiate on rents. CCD, which currently has 800 outlets, plans to ramp it up to 1,000 in the next financial year. A large part of it is scheduled to come up in the 115 cities where it already has a presence.

BUILDING BLOCKS

Correction in some locations in Delhi has been as much as 80% Samsonite plans to add 35 stores by 2009 end Biba, too, plans to add 30 stores over the next year Biba has managed to negotiate its rentals and bring it down by 50% CCD, which currently has 800 outlets, plans to ramp it up to 1,000 in the next fiscal.

Lucera to spend Rs 85cr on stores

Lucera, the sterling silver jewellery brand of Renaissance Retail Venture Pvt Ltd (RRVPL), has lined up investment of Rs 85 crore till 2010 for setting up 250 outlets, primarily inside shopping malls.

Lucera currently has around 26 outlets in India.

According to R K Menon, CEO of the company, “We have signed up more than 100 properties. Around 60 outlets will be set up on franchisee mode and the remaining will be company-owned. We are looking at primarily shopping malls for setting up outlets as these provide maximum visibility and ensure highest footfall.”

Menon claimed the company is looking at tying-up with Cafe Coffee Day, Spykar Jeans and Kingfisher Airlines for cross-promotions in the form of gift vouchers and free gifts.

“We will spend close to Rs 5 crore in branding over the next 18 months. We plan to position the brand as a youth brand and therefore have lined up tie-ups with other brands that are positioned similarly,” Menon pointed out.

The Lucera stores sell sterling silver jewellery that range between Rs 500 and Rs 3,000.

It also sells gold and diamond jewellery that start from around Rs 3,500 and go up to Rs 55,000.

According to Menon, its stores witness close to 6,000 customer walk-ins everyday with a conversion ratio of 45 per cent.

Tata Tea into F&B retailing

Gaurav Choudhury, Hindustan Times, New Delhi, January 23, 2008

Tata Tea, part of the multi-billion dollar Tata Group, has announced plans to enter into the food-and-beverage (F&B) retailing segment and opened its first outlet in the Indian Institute of Management (IIM) campus in Bangalore on Tuesday.

The outlet is the first in a chain of such retail stores that the company plans to roll out across major cities in the country under the brand name Chai Unchai.

“The outlet offers both tea and non tea beverages with a range of snack offerings especially designed for it Our research showed that this segment has a huge opportunity as consumers are looking at different options for a satisfying out-of-home beverage experience,” Sangeeta Talwar, executive director, Tata Tea, said.

The chain of outlets will directly compete with retail coffee chains such as Café Coffee Day and Barista, which was once owned by the group.

The organised coffee retail segment presently stands at about Rs 500-odd crore. The size of the overall non-alcoholic, non-carbonated be- verages market is pegged at around Rs 10,000 crore, industry analyts said.

Tata Tea acquired the Tetley Group in 2000, and followed it up with Good Earth in US, Jemca in Czech, Eight O’ Clock Coffee in US and recently, of Polish trademarks Vitax and Flosana.

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