Retailers see smaller outlets as the next big thing.

Bigger is not always better. Just ask the biggest retailers in the country — and their customers.

 Neng Yang, left, purchases a new phone at the Best Buy Mobile mini-store at Independence, Mo., with her brothers Cheng Yang and John Yang, right.

KANSAS CITY, Mo. — To Neng Yang, the Best Buy store in Independence, Mo., is just too overwhelming — so much so that she only shops there once a year, at the holidays.

So when she needed a new cellphone, she bypassed the 55,000-square-foot store with its many departments — appliances, big-screen TVs, computers, cameras, car audio, video and music. Instead, she stopped across the street at the Best Buy Mobile store.

The slimmed-down 850-square-foot sister store concentrates only on mobile devices.

“I ask about a thousand questions, and this is more personalized, more one-on-one attention,” said Yang of Blue Springs, Mo.

Yang bought a white Droid Razr, and her brother John Yang picked up a black one.

Bigger is not always better. Just ask the biggest retailers in the country — and their customers.

The recession and the growth of online shopping have conspired to cut chains down to size. One strategy they’ve employed has been to close underperforming stores. But Best Buy and an increasing number of companies are trying another strategy too — going smaller.

Among the retailers testing smaller concepts are Blockbuster, Ann Taylor, Gap, Kohl’s, Lowe’s and Sports Authority. RadioShack even is trying a “store-within-a-store” format in several OfficeMax stores in California.

Lower square footage makes for lower construction and remodeling costs, and that also tends to make them easier to finance. The smaller locations have less overhead costs and can be manned by fewer employees.

The small size also gives the chains more flexibility in locations, allowing them to squeeze into heavily developed urban centers, and compact spaces in airports, college campuses and strip centers. If the location isn’t successful, the chains can close the sites with less financial fallout.

“For a decade it was ‘build it and they will come,’ ” said Candace Corlett, president of WSL Strategic Retail in New York.

“It’s definitely a correction for retailers as well as restaurants, a direct result of consumers not having as much to spend on the extras. The strategy has to be to reduce your costs to offset less traffic. Usually that means less rent, shrinking retail and restaurants,” Corlett said.

Jeff Green, president of Jeff Green Partners, Phoenix-based real-estate consultants, has long criticized the “bigger is better” movement.

“They think the bigger they are the more exciting they are and that’s not necessarily the case, as Apple has proven,” Green said.

“Consumers like the smaller stores, like to be part of a ‘happening,’ and smaller stores have that feel.”

When retailers like Ann Taylor, Chico’s and the Gap opened larger stores, they didn’t necessarily see an equivalent rise in sales, if any rise at all, that would justify the added expense, Green said.

“Any retailer that is opening larger and larger stores, I question their long-term viability,” Green said. “Costco and Sam’s Club defy that theory. That’s because consumers really perceive them as great values and value trumps the inconvenience of size.”

One of the latest retailers to embrace small stores is Cabela’s. On Feb. 16, the outdoor-equipment and sporting-goods retailer said it would open its first Cabela’s Outpost Store this fall in Union Gap, just south of Yakima; up to three more are planned for next year.

The Outpost stores will be significantly smaller than traditional Cabela’s: about 40,000 square feet compared with, say, the 185,000-square-foot Cabela’s in Lacey, Thurston County.

Cabela’s also has plans to open an 110,000-square-foot store this year at Quil Ceda Village on the Tulalip Tribes Indian reservation. And it will target smaller markets — 250,000 people or less with a high concentration of them already Cabela’s customers.

Best Buy introduced its mobile locations in 2007 and there are about 260 nationwide, including the Independence Best Buy Mobile store, which opened in August. Best Buy has about 1,100 full-size stores.

“The customer wants a different shopping experience. We don’t work on commission, and we carry everybody,” said Kyle Cochran, manager of the Independence store, which is tucked between two specialty stores on the lower level of the Independence Center mall.

Still, consumers who have come to know a brand as a “category killer” might be confused by the new concept.

The Wal-Mart Neighborhood Stores are designed to provide shoppers with a quick, convenient stop for fresh produce, dairy items, and pharmacy products at low prices. The grocery stores are about 29,000 square feet compared with a 142,000-square-foot supercenter.

But some grocery store shoppers still expect to see the large selections of products Wal-Mart is known for.

Carolyn Shaw of Shawnee, Kan., was disappointed in the holiday selection at a Wal-Mart Neighborhood store earlier this month during a morning stop in a snowstorm.

“They didn’t have many Valentine’s items,” Shaw said. “Now I’ll have to go back out this afternoon to a bigger Wal-Mart.”

Coca Cola launches mobile marketing campaign

Coca Cola launches mobile marketing campaign

Coca-Cola Great Britain has launched a promotion to give away 50p free mobile credit with every purchase of a Fanta, Dr Pepper and Sprite drink.

The campaign which is aimed at teenagers will run for one month. Cans and bottles carry a code which can be entered at
http://www.gimmecredit.co.uk. Thereafter, customers can enter subsequent codes online or text the code to 85888.

Credit will be added to the prepay or contract customer’s account within 48 hours of redemption and is available on all the major networks. Coca-Cola Great Britain marketing director Cathryn Sleight said: “We are always looking at innovative ways to engage with our teen consumers. We know mobiles are integral to their lives and we wanted to bring them both value and a point of difference that will fully engage them with the promotion.”

Paypoint partners with O2 for Load & Go prepaid card

Paypoint partners with O2 for Load & Go prepaid card

PayPoint’s 22,000 retailers are poised to benefit from the latest prepaid card to be launched into the UK’s mobile banking market as demand for mobile banking services grows.

Mobile network operator O2 announced on 15 July that it has teamed up with high street bank NatWest to offer the Load & Go prepaid card through its new O2 Money business.

Load & Go, which is aimed at young people who want the security of using a card rather than carrying cash on them, will be available from late August, and is one of the first in a planned line of financial products which will be offered to O2’s customers.

O2 says the prepaid card will help people manage their money as they would be free and people could not go overdrawn on them or incur interest charges.

The Load & Go card is available to O2 customers only and can be loaded at all PayPoint outlets and O2 stores across the country.

“With our constant focus firmly on driving additional footfall and profits for our retailers, we always welcome innovative new products that achieve these aims,” said Mike Igoe, Retail Strategy Director at PayPoint. “It is clear from our research that customers consistently spend more when they are paying bills or topping up mobile and prepaid products. With its low costs to users and younger profile, the Load & Go card will attract more customers into our retailers’ stores with more money to spend.”

Foreign brands look to Indian market to survive slowdown.

HOW about enjoying evening coffee at mobile Alto Cafe mini-van parked in your neighbourhood or trying out the newest flavour of fruit juice at Revive Juice outlet — the coffee and juice retail brands from France and the UK — in your very own city? Well, this may soon be possible.

Several American and European retail brands in segments as varied as fashion, cosmetics, lingerie, food & beverages, among others, are preparing to make their presence felt in the Indian market through franchise route, as a result of sharp drop in sales in these markets following economic slowdown. Certain brands from countries like the UAE, Brazil and Thailand are also eyeing Indian market.

“Drop in retail sales in Europe and the US markets are leading to this phenomenon. Retail brands that built great amount of manufacturing capacities are under pressure to offload excess inventories and are therefore entering into alternative sales practices by setting up their franchise in large-sized markets like India,” Gaurav Marya, franchising expert and president, Franchise India Holding, told ET.

Following the collapse of the international retail markets, several brands like Beverley Hills Polo (USA), Spa Siam (Thailand), Taman Gang Restaurants (UK) and others entered Indian market through franchise route.

Others like Revive Juice Bars (UK), Mrs Fields Cookies (USA), Jamba Juice (USA), fashion brand Jules (France), cosmetics brand Mikyajy (UAE), lingerie brand Nayomi (UAE), car-wash service brand Moly Company (Thailand), food & beverages brands Habibs (Brazil) and Herfy, BBQ Chicken (Singapore), Pizza Company and Spicchio Pizza (both Thailand), Marina Furniture (UAE), and Alto Cafe (France) are learnt to be at various levels of negotiation to start their services in India. Companies that have long nurtured ambition to enter retail-friendly markets like India and China are finding this a convenient time as sales in their own countries have tapered. They are trying to convert this as an opportunity to taste Indian waters, which they plan to do for 2-3 years before they decide on their future plans in these countries, says business strategy specialist Harish Bijoor.

“Several brands are looking for green pastures, and India having a decent GDP growth of 4.3% holds lots of potential for them. They are taking up franchise route as they cannot risk coming on their own at this juncture. This also means a big chunk of business coming in for entrepreneurs,” Mr Bijoor said.

Several brands are targeting grade B and C cities rather than expanding in metros, as smaller cities are more brand hungry and retail is not much hit here, say experts.

With the presence of limited brands in India markets, the country holds big opportunity for these brands as this would also help them re-route inventories and orders to new markets and keep their sagging sales volume intact. At the same time, their Indian counterparts are finding this a right opportunity to strike negotiations to their advantage,” added Mr Marya.

LG catching up fast in GSM market

SOUTH Korean mobile phone manufacturer, LG Mobile’s assessment is that India can overtake China and become its largest market in terms of size and demand for handsets in the near future. In the background of a sharp economic slowdown in the US and Europe, the company has identified India as a strategic market for investment for its GSM and IT verticals, its managing director Moon B Shin said during an interaction with ET.
How important is India for LG, especially with demand in developed countries such as the US slowing down? What are your plans for India in the current fiscal?

India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here, of which six will be touch phones, while many other models will be 3G-enabled and some of these will also be entry level phones. At present, we have about three touch phones and six 3G-enabled handsets already in the market and we plan to have about 10 models each in both these segments by the year-end. We are betting big on the touch screen segment and we are targeting sales of up to six lakh units  and a 10% market share in this space alone within the next six months.

What will be your investments in India this fiscal?

We will double our investment this year and the company as a whole will spend about Rs 400 crore on advertising this year. Additionally, we will invest Rs 200 crore in R&D to study market dynamics and consumer behaviour here. We are looking at increasing our headcount in our sales vertical to enhance our presence.

How many of the products you sell here are made here? How have your sales been so far?

Currently, we manufacture mobile phones at two units located in Pune and Greater Noida and these plants have a production capacity of three million units per year. About 70% of the production is exported while the rest is for domestic consumption. We sold about 2.4 million GSM handsets in India last year and we expect a 50% increase in sales this year.

Our institutional sales account for just 10% our total mobile sales.
Currently the Indian mobile handset market is dominated by some of your competitors.

How are you looking at improving your brand visibility here?

LG is rapidly gaining market share in the GSM market, despite being a late entrant. We are already the fifth-largest player in the segment. I believe our distribution line was poor earlier, but now we are reworking our strategy here. Based on the analysis of our marketing team, we are deploying 1,000 additional shop sales executives and we will be launching about 1,000 additional shop-inshop formats in rural and tier II cities. On the organised retail front, the overall channel coverage is at 42%.

India is an important market for us due to the opportunities it presents. We have plans to launch more than 32 new models here… We are betting big on the touch screen segment
MOON B SHIN

MANAGING DIRECTOR, LG

ITC picks up Nokia’s global packaging deal.

IT HAS remained a well kept secret for a while. ITC is now the principal supplier of value-added packaging material and box cartons for every Nokia cellphone that gets shipped to as many as 50 countries from the Finnish telecom giant’s Chennai factory. Nokia has silently inked a bulk purchase agreement with the $4.75-billion plus cigarettes-to-hotels conglomerate, wherein ITC is now the prime vendor of packaging material and customised microfluted cartons for all Nokia phones and accessories manufactured in Channai.

When contacted, both Nokia India and ITC confirmed the development. According to a Nokia India spokeswoman: “The decision to enter into a global purchase pact with ITC for packaging cellphones manufactured in Chennai is part of Nokia’s global sourcing strategy, wherein the packaging material and box cartons are procured from a local supplier near to its handset manufacturing plant. We can’t share commercials but such international purchase agreements are reviewed periodically.”

As Nokia phones shipped from Chennai hit several global retail points in 50 countries, ITC has to manufacture boxes that meet the Finnish player’s stringent quality standards. “Since all sales boxes and the larger shipping cartons supplied by ITC will carry the Nokia brand and hit several of our international retail points, quality consistency is critical. The boxes will also need to have very high grade image graphics and texture,” said Mr Josh Foulger, who is Nokia’s national sourcing head for India.

India Sells 10,000 Phone Per Hour in Q1 ’08

According to IDC India, close to 85 million mobile phones were shipped in India between April 2007 and March 2008, compared to just under 66 million units shipped over the equivalent period a year ago. This was a record and amounts to a year-on-year growth of around 29 percent in terms of units.

Kapil Dev Singh, Country Manager, IDC India said, “This growth comes on the back of a burgeoning mobile services market and lower entry barriers across various customer categories, as average selling values (ASVs) of handsets continue to fall in the wake of a highly competitive landscape populated by close to 25 vendors.”

FY 2007-08 also witnessed shares of higher-level air interfaces rising. EDGE and WCDMA-enabled mobile phones contributed 15.4% and 3.1% of the total mobile phone shipments in 2007-08 compared to 7.4% and 1.2%, respectively, in 2006-07.

Naveen Mishra, Manager, Communications Research at IDC India, said, “As the need of Indian mobile phone consumers is evolving, they are demanding feature-rich devices, which can cater to their business communication requirements as well as their personal needs.”

Shipments in Q1 2008 stood at more than 22 million handsets, which amounts to around 10,000 mobile phones being shipped every hour during the quarter. In the same quarter a year ago (Q1 ’07), just under 18 million mobile phones were shipped.

Overall, Nokia retained the top spot with a market share of 52.8%, followed by LG at 10.2%, and Samsung at 8.3% in terms of units shipped during the quarter ended March 31, 2008.

Posted to the site on 19th June 2008

China Unicom Buys China Netcom in $23.8 Billion Deal

HONG KONG (AP) — China pressed ahead with a restructuring of its telecommunications market Monday as mobile phone company China Unicom Ltd. announced plans to take over a fixed-line provider and sell off a mobile business.

The country’s No. 2 mobile operator said it would aquire China Netcom Group Corp. Ltd in a share swap valuing the fixed-line operator at 185 billion Hong Kong dollars ($23.8 billion). That represents a 3 percent premium over Netcom’s last closing share price.

Separately, China Unicom and its parent said they would sell the code division multiple access, or CDMA, mobile network and accompanying business to China Telecom and its parent for 110 billion yuan ($15.86 billion). China Telecom is the country’s biggest fixed-line operator.

The moves were expected as part of a government-mandated shake up of China’s telecommunications sector unveiled late last month. That plan called for the country’s six telecom companies to combine into three groups in a bid to create a more competitive industry and prevent a dominant operator from monopolizing the market.

The deals could help China Unicom and China Telecom compete with the country’s cell phone heavyweight, China Mobile, the world’s largest mobile provider by subscribers. China Telecom could expand its new mobile business with its current fixed-line customers; China Unicom could grow its current mobile business with the new fixed-line subscribers.

”China Mobile, as everyone has talked about, would have more competition,” said Jackson Wong, investment manager at Tanrich Securities in Hong Kong.

Still, even China Unicom Chairman and CEO Chang Xiaobing suggested that a close rivalry was far off.

Asked at a news conference when his company might surpass China Mobile, Chang grinned.

”It’s hard to say when the new company will become the largest mobile operator in China,” he told reporters. ”Frankly, I still believe there is a significant gap between the new company and China Mobile.”

Under the transactions unveiled Monday, each existing China Netcom share will be swapped for 1.508 new China Unicom shares.

In its latest filing with the U.S. Securities and Exchange Commission, China Netcom said it had about 6.674 billion shares outstanding as of Dec. 31. Based on China Unicom’s closing price of 18.48 Hong Kong dollars on May 23, the offer would value Netcom’s shares at 186 billion Hong Kong dollars, or $23.8 billion. China Unicom said its offer represented a 3 percent premium over Netcom’s closing price on May 23, the last day of trading in Netcom shares.

Unicom said the deal would create a company with a combined value of 439.17 billion Hong Kong dollars ($56.3 billion).

China Unicom Chairman Chang said at a news conference the company expects the deal to close by the end of 2008.

In a separate statement to the Hong Kong stock exchange, China Telecom said its parent, China Telecommunications Corp., will acquire the CDMA network from China United Telecommunications Corp. for 66.2 billion yuan and will buy China Unicom’s CDMA operations for 43.8 billion yuan. The CDMA technology is popular in the U.S. and Asia.

China Telecom said the move will allow the company to branch out into the mobile business.

”It will provide the company with a solid foundation upon which to build and develop the next generation mobile business and service,” it said.

China Unicom is the only CDMA service provider in China, with 42 million subscribers by the end of 2007.

The CDMA business posted a pretax profit of 1.2 billion yuan ($173.4 million) for 2007 and 240 million yuan ($34.7 million) for the three months ended March.

Shares in China Unicom, China Telecom and China Netcom had been suspended from trade since May 23 pending ”price-sensitive” announcements.

The three companies said Monday that trading will resume Tuesday.

Media Magic to offer retail platform for mobile users

The Maharashtra-based software company Mobile Magic has announced the launch of a retail service under the name Media Magic.

The service would offer a retail platform to mobile users for legal content such as games, applications, movies and music, in an offline format.

Media Magic would help in legalising the selling and buying process of content for the mobile users with the offline channel.

The primary focus of the company will be on the distribution model through retail outlets since the country has very low broadband penetration. The company has set a target of having over 10,000 retail outlets in place, which will be serviced by the distributors across the country.

Hungama Mobile would have an exclusive tie up with Media Magic to distribute Hungama’s content through its retail platform. Besides, Shemaroo Entertainment will provide the movie content to the company’s retail initiative through a strategic tie-up.

“With this initiative of Media Magic, mobile consumers will now enjoy rich content such as movies, music, games and applications in the most affordable and convenient way for the first time in India,” said Vijay Singh, President & CEO, Media Magic Retail Pvt Ltd.