KARIGAR RETAIL REPORT 2011-2012

Retail Scenario

As per the latest Nielsen Global Consumer Confidence Index, Indians plan to spend less on fun and entertainment to deal with rising food prices. 7 out of 10 Indians have changed their spending habits to save on household expenses in the last one year. The segments expected to impact most are apparel, home décor, out-of-home-entertainment and gadgets like computer and mobile phone. The study said that while there has been a resurgence in consumer spends in the second and third quarters of calendar 2011, the last quarter showed a decline in spending intentions in India. India has been experiencing high inflation for some time now. On an average, prices of fruit and vegetables in the country have gone up by around 50% in the last one year.

Many retailers Besides, due to the high rentals and the shortage of quality retail space to turn profitable have scaled down the store size and numbers to save on rents eating into the profits of many.

Market analysts and researches are projecting a mega fold increase in the popularity of the yet fledgling e-commerce retail industry in India. With e-retail sites like railways irctc.com and MakeMyTrip.com and Flipkart.com showing the way, several players have since entered the field with big ticket funding. As reported in the media, a report by the Boston Consulting Group is projecting that online retail in India is likely to grow tenfold and become an $84 billion industry by 2016. E-commerce would account for nearly 4.5% of total retail, with small-town India playing the key role. Internet & Mobile Association of India’s group business director, Balendu Shrivastava is reported to have said that by the end of this year, 60% of online shoppers would be from beyond the metros. The reason for this phenomenon is that the organised retail chains are as yet focused on big towns and metros, accounting for barely 10% of the market. Towns like Bhatinda, Nasik, Aurangabad, and several others have a wealthy and aspirational class, with easy access to internet and G3 mobile telephones, who are better able to find their brands on the internet, rather than the local shops. The online retailer snapdeal.com has reported that online retail of jewellery and lingerie has emerged as a huge segment beyond the metros. E-commerce is able to offer better price points for the same products, and a wider range of goods. This matched with easy delivery and payment modules, such as Cash-on-delivery, it is not surprising that new e-retail sites are being launched on a daily basis, with several big names in the retail industry quitting to start their own ventures.

Karigar retail report 2011-2012

Karigar has experienced its worst season in retail possibly due to high establishment costs, low footfalls, more import products compared to local product line, cash flow & no market penetration for the year.

High establishment costs have been eating into the profitability of the company for sometime now , to stay a float in well established malls is hard for small time retailers like our-self as we do not have enough back up cash flow to stay a float. Like us many retailers in the same segment of handicrafts & décor have shut shop non-performing stores & are re-working the road ahead. At the same time low footfalls have also affected Karigar as a brand due to no marketing activity, even though the brand has tried out marketing through flyers, facebook, twitter, SMS – the main platform of advertising through newspapers, magazines , hoardings, bus panels & radio were totally left out for the second year in a row. In India unlike abroad consumers need to be pulled out of their houses through strong marketing activities to get them to the store, even though Karigar decided a balancing act for 2011-2012 by bringing in equal amount of imports to local products to bring up the gross margin, the same has not worked in favour of the brand due to a negative cashflow due to low sales and also due to products not arriving on time to sell at the stores both local and imports. Many of our local suppliers also did not end up sending products on time due to a backlog of outstanding payments again affecting the balance of both local and import products at stores finally resulting in a chaotic selling of products at the store through offers and discounts. To get profitability for Karigar one things stands very clear we need a good cash flow plan so that products which need to be purchased should stand as per the business plan and should arrive at the right time at stores to sell alongwith a good marketing activity. If we are ot able to get this right the brand however hard we work towards it will never stand ground.

After saying all this there have been some positives as well for the brand, many retailers within the segment have looked at Karigar as a trendsetter in comparison to products and pricing, for example our vases, bikes & lamps from bangkok have been a huge hit alongwith our aroma lamps & crockery from china. Our tieup with Shoppers Stop has also been a plus for the brand taking us to the next level in retailing with many retailers looking at us a strength to reckon in retail.

To sum up all this it was sad to hear in January 2012 that Karigar is going to be downsized completely as it is getting difficult for Asha to look after the brand as a whole , We believe the brand is still strong and should be revived in the near future.

Thank you

Ulrich Viegas