Retail Chronicles Issue8 (01-15 December 2016)

J Somaiya Institute Of Management Studies & Research,Mumbai
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RETAIL
CHRONICLES
Fortnightly Newsletter | Issue 8 | 01-15 DECEMBER 2016
Sector -
Khadi
for reforms
Longing
02
in India:
Disney
your Revive
06
Childhood
of leaders on
Views
in Payment
Shift
07
Pg 02
Methods
Pg 07 Pg 06
News at
Retail
Glance! a
10
Pg 10
Retail Lab SIMSR
retaillab.simsr@somaiya.edu

A S A T I S F I E D
C U S T O M E R I S T H E
B E S T B U S I N E S S
S T R A T E G Y O F A L L .
- MICHAEL LeBoeuf

Khadi Sector – Longing for Reforms!
A recent report in the Times of India
shows that the Khadi fabric and
garments sales witnessed a 29%
growth and crossed ₹1,500 crore mark
for the first time. This announcement
is very exciting in its nominal terms.
However, a recent study conducted
by CPPR in 2015-16 on the Khadi
sector provides quite contrasting
insights on the sector. The study
shows that the Government of India
has spent large sums on Khadi sector.
However, this sector has experienced
a decline in production, sales and
employment. Moreover, the huge
amount spent for the economic
empowerment of the poor artisans is
not reaching their hands.
All Is Not Well
The annual reports of Ministry of
Small and Medium Enterprises
(MSME) show a rise in the plan and the
non-plan amount spent on Khadi
sector.
By Vipul Varkar
The plan amount shows a rise from
₹194.27 crore to ₹ 1,454 crore and nonplan
amounts from ₹43.7 crore to
₹229.1 crore respectively in the period
1994-95 to 2014-2015. The interest
subsidies to Khadi institutions
increased from ₹ 9.63 crore to ₹ 31.45
crore in this period.
At the same time, production and
sales of Khadi . fabrics, adjusted for
inflation, declined from ₹9.19 crore
and ₹ 11.58 crore to ₹5.19 crore and
₹6.09 crore respectively in the same
period. The Comptroller and Auditor
General (CAG) of India Audit report
(Report Number 25 of 2014) on Khadi
and Village Industries Commission
(KVIC) also reveals that KVIC is
ineffective in utilizing the plan and
non-plan funds for the Khadi sector
promotion, clearly indicating the
wastage of public money.
02

The Inconvenient Truth
According to MSME, only KVIC and
KVIC certified institutions namely
some NGOs are allowed to produce
Khadi. This creates significant entry
barriers. The Government imposed
the certification process to protect
the industry. However, it is not
market-friendly and does not cater to
the interests and tastes of the
customers. Many weaving units have
not produced any Khadi products.
They emerge with the sole intent of
getting KVIC rebates and other
benefits. At the same time, this has
also resulted in many piracy
problems associated with Khadi
industry. These include producing
spurious products in the name of
Khadi through unofficial channels.
Moreover, the study proves that
individual certification marks are
becoming less important to the
consumers in choosing products. This
is because consumers select
products largely based on the brand
image rather than the certification
marks
Khadi fabrics are 02available
mostly in
KVIC certified stores only, restricting the
availability of Khadi products to the
consumers. In the Khadi retail outlets,
the working times are the government
office timings – from 10 am to 5 pm.
When the whole marketing is adopting
e-commerce, the stereotypes in Khadi
sector are not doing anything good for
the marketing.
Only Khadi institutions undertake its
marketing.
Repercussions of Regulation
Over-protection of the sector has
resulted in poor branding and marketing
plans. Furthermore, not many big
players are in the field.
The traditionalists still resort to the
conventional print advertisements or
banners and rebate schemes for
marketing. The above-mentioned
restricted practices have resulted in the
decline of the production and sales of
Khadi fabrics. It is mainly due to over
bearance of KVIC in the sector.
03

The primary objective of KVIC is
employment generation in the rural
economy through the promotion of
Khadi. Unfortunately, it has not
achieved this in India. The
employment in Khadi sector declined
from in the period 1960-61 to 2014-15,
from 1.7 crores to 0.11 crore, with a
significant negative growth rate of 5.2
percent.
The employment in Khadi sector
declined from in the period 1960-61 to
2014-15, from 1.7 crores to 0.11 crore,
with a significant negative growth
rate of 5.2 percent.
Tribulations and Turmoil
Khadi institutions contract Khadi
artisans, mainly women spinners, and
weavers. They are piece rate workers.
Khadi institutions decide the wages,
according to the minimum wage rate
fixed by KVIC. In addition to the
wages, the MSME has implemented
different measures for the economic
empowerment of the poor artisans.
These include schemes like Market
Development Assistance Schemes
and different Welfare Schemes.
The women spinners and weavers,
however, receive only the guaranteed
minimum wage in hand every day. This
ranges from ₹ 100 to ₹125 only, which is
very low compared to those working in
sectors like match industry (₹336 per
day).
These wages are not sufficient for
maintaining their livelihood.
Furthermore, there is a mandatory
requirement from MSME to give the
artisans’ wages only through banks or
post offices. In spite of this, a majority of
the Khadi institutions give wages in
cash.
There is no certainty on when the
artisans are getting the other
allowances.
For Khadi cloth worth ₹100, ₹38.75 goes
to the wages for the poor artisans, as
shown by the Khadi cost chart 2015 of
Kerala. It, however, is split into spinning
and weaving wages. Considering the
spinning and weaving wages separately,
spinning and weaving are only 15 per
cent each of the total cost.
04

At the same time, the private wage
standards of weavers who work for
the textile entrepreneurs in the
handloom industry in many states as
shown by studies are 25 per cent.
This is counterproductive.
The new initiative to tie up with Paytm
for online selling of products is also
appreciable here.
Similarly, the government must
undertake marketing techniques for the
promotion of Khadi rather than relying
on outdated techniques.This will also
prevent piracy problems associated
with the Khadi industry such as the
production of fake products being sold
as Khadi through unofficial channels.
Call for Reforms
The government, through KVIC
regulates the entire production
process, sales, distribution, and
marketing.
The restrictive practices adopted by
the government, implemented
through KVIC, have resulted in
making the Khadi industry ineffective,
inefficient along with failing to
deliver economic empowerment to
the poor artisans working in the
sector.
The government should remove the
entry barriers in this market and make
the fabric available to private retail
stores. This way, consumers would
have a wide range of choices. It is
important to add here, that the
opening up of Khadi retailing to
private players such as Raymond and
Fabindia are good initiatives in this
regard. However, at present, both
require the prior permission of KVIC to
retail Khadi.
05

06
By Shivani Agrawal
Disney in India: Revive your
Strolling down the road in her new mickey
shorts, she went through her childhood
memoirs. Sitting laid back on couch with
younger brother watching that tiny brainchild
of The Walt Disney, Mickey Mouse. Those days
were long back, but for Disney merchandise it
was quite recent in 2007 when they ventured
the Indian markets with Retail Stores. It was
just yesterday when her roommate mentioned
those tiny Cinderella glass shoes her father
bought on her 4th birthday. She keeps them as
precious collection (as they really are) even if
that little girl doesn’t know their valuation of
$140.
Childhood!
Walt Disney opened its first store with turnover
of mere US$ 8 billion to DCPs’ (Disney consumer
products) 2015 revenue of US$52.5 billion. Today
Disney has over 3,000 licensees globally, 150 of
them in India. The over 10,000 SKUs covering
fashion, home, stationery, toys, food, health,
beauty and publishing are being dished out
through its strategic partnerships in the country.
In 2004-05, when Disney merchandise was
launched in India, they featured familiar
characters from Mickey Mouse & gang and the
SKUs were restricted to school stationery, toys
and apparel, to some extent. While Disney has
always been a "storytelling brand", a decade
later the addition of Marvel and Star Wars
expanded its character portfolio and as a result
its ability to offer more options to its
consumers, young and older.
Venturing into entertainment industry; Disney
bought Hungama, a local children's cable and
satellite television channel in India for $30.5
million back in 2007. With this, it owns three kid
channels, the other two are Toon Disney and
Disney Channel under its media networks
business. The two lines of Disney’s business,
Walt Disney Studios and Disney Theme Parks. In
India, it has decided not to set up theme parks
as of now. The former, Disney studios is getting
out of Bollywood after backing some bad
projects like Sawariyaan, Khoobsurat and
Mohenjo Daro which backfired for them after
huge hit of The Jungle Book.
Whatever might be the fate of Disney Media, it
pioneered character licensing in India and its
success has been driven by its strong wealth of
stories and characters that are timeless and
admired by people of all ages. Although India's
Rs 4000 crore licensing and merchandising
industry is still in its infancy, the segment is
poised to grow significantly in the coming
years, growing 15%-18% y-o-y. She returned
home excitedly mapping Disney’s future with
her little contribution; buying Bata’s new
Disney collection slippers in blue and yellow
straps.

Views of leaders on Shift in Payment
Methods
By Surbhi Jain
Demonetization triggers spurt in digital
payments paving the way for India towards
cashless Economy. The Demonetization which
initially paralyzed the economy is now acting
as a catalyst towards Digital Payments
Ecosystem. We are witnessing an Economic
transition right now. The quintessential
digitally-spooked the common man is keeping
aside his cash & signing up for e-payments &
mobile wallets. That payment processing
companies are overloaded and are racing the
devil to accommodate the immense spike in
traffic. CIO India had discussed the impact and
implications with the top guns in the digital
payments space, and here is what they must
say—
The Paytm Platform saw an overwhelming
response of 435 % increase in overall traffic in
just two days after demonetization, and the
company experienced a 1000 percent growth
in transaction value of offline payments.
Why the Industry leaders are cheering so
much?
The fact that the black money- hoarding
Babus are now staring down the barrel.
Madhur Deora, CFO- Paytm says “This is the
biggest and the most significant step ever to
s.”
crack down on black money and fake
currency. We stand by the government in
its efforts towards taking black money out of
the equation and offering a major boost the
Indian Economy. Paytm has been increasing its
customer base and acquisition efforts as it is
realising the benefits of the strong positive
network effect and its diverse use- case
efforts towards taking black money out of
the equation and offering a major boost the
Indian Economy. Paytm has been increasing
its customer base and acquisition efforts as it
is realising the benefits of the strong positive
network effect and its diverse use- cases.”
Ola Money also revealed that over 1500
percent increase recharges across the 102
cities of its operation, since 8.30PM on 8
November 2016 till 12.00PM. Talking about
the shift Pallav Singh SVP & Head says “This
move marks the beginning of a significant
step towards a cashless economy and Ola
Money is at the forefront of our Vision of a
Digital India.”
07

Razorpay, also witnessed a 150 percent spike
on the morning after the decision was
announced, which by afternoon, shot up to
200 percent. The company gave relief
thousands of small businesses caught off
guard because of the Demonetization. “We
have introduced ‘Express Activation’ which
will allow merchants to get their account
approved and activated within one hour of
submitting relevant documents, earlier this
process could take up to two or three days’,
reveals Harshil Mathur, CEO & Co- founder,
Razorpay.
Mohan Vizhakat, Group CTO & EVP-
Mannapuram Finance says that Indian
believes that this move will cause a shift in
the mindset of people, and make them more
open to cashless transactions.“At
Mannapuram, we are focussing on the end
—user perspective, and trying to make
customers more comfortable for users, says
Vizhakat.
Now Let’s talk about, what are the Security
implications here?
Rajeev Narayan, Chief Innovation & strategy
officer @ Tech Press Payment services. India’s
largest cash management and payment
solution firm, says that the company is scaling
up its Technology platforms, and looking at
Elastic models to deal with surge of Digital
payments.
Vimal gupta, VP- Server Engineering, Mobikwik
says “we were geared up for the spike owing to
Diwali sales. In addition to this there is a cloudbased
model, scaling up has been easy”.
Engineers at Mobikwik and Razorpay has been
working round the clock.
Similarly, Itz cash card wasn’t too worried
about its infrastructure being over- burdened.
“Several our business lines have seasonal peaks
and we are well capacitated to scale demand
at all layers of our infrastructure, be it
compute, storage or network says Daykin
Creado, CTO, Itz cash card. There might be
slight hiccups from customers who are very
much new to electronic transactions, so
handling customer complaints and ensuring a
smoother transition is the key adds Gupta.
Demonetization Impact: Offline retailers play
Digital Card —
We find consumers saving every single penny
post the Government’s announcement to
Demonetize Rs.500 & 1000 notes. Offline
retailers are extending and encouraging
consumers to use Digital payments, to the
short-term loss in consumption pattern
emerging from lack of enough Liquidity in the
Economy as such. The fact is that India is very
much Cash Intensive Economies in the world,
with a Cash to GDP ratio of 12 % This almost
four times like Brazil, Mexico and South Africa.
The recent decision has led to retail shops &
Malls wearing a deserted look, only for a short
period.
08

09
Sectors with a sizeable magnitude of cash
transactions such as Real Estate, High-end
Retail & Travel, Construction, Jewellery
Tourism are expected to be affected.White
goods demand a source of strength for the
Economy, will also be affected for a while. To
face and conquer the present challenges,
offline retailers are encouraging consumers
to move away from cash and are giving
various payment solutions to avoid any
obstacles in purchases. Kishore Biyani Future
Group CEO which operates Big Bazaar, the
largest retail chain in the country is
encouraging consumers to use cards.“We will
introduce cheque payment and encourage
people to go Digital, we are also going to
promote Debit, digital payment & gift cards,
says Future Group. CEO Kishore Biyani.
In a similar situation CFO Panasonic Mr.
Manish Kumar say “our customers can now
upgrade to a niftier, cashless, e- commerce,
option to overcome the current situation.”
Thus, this is an integral step towards
creating more Transparency, weeding out
Corruption/ unaccounted for cash enabling
for a smooth business Ecosystem.
The old currency will however affect small
merchants who cannot offer choice and
usage of Digital payments to consumers. The
government will consider small incentives
and rebates for small merchants to adopt
digital payments such as in the case of
countries like South Korea and Uruguay.
Thus, we find Demonetization has
revolutionized the wheels of progress, oiled
the wheels of Production towards
Digitalization by taking India Vikas Ki Aur!

10
ITC to invest Rs 800 cr on food processing,
RETAIL NEWS AT A GLANCE
hotel in Odisha
Reliance Jio Money to launch merchant app
from December 5
Big Mac sandwich creator Michael James
Delligatti passes away
Flipkart owned Myntra set to be profitable
by FY18
Steep ‘price cut’ for Flipkart as Morgan
Stanley mutual fund marks down shares
35 mn online recharges done over last few
days: Paytm
India represents the third largest workforce
within the Ferrero Group: Roberto Grasso,
MD, Ferrero India
Jewellers claim 85-90% dip in domestic
business, exports unaffected
Dairy brand Osam raises Rs 45 crore from
Lok Capital and Aavishkaar
Online bounty: 15 million Lenovo phones
sold on Flipkart
RIL's Vimal gets US patent for technology to
fight sweat odour
Retail price of LED bulbs under government
scheme drops to Rs 65.

Our Team
Content Heads
Akhilesh Prabhu
Meghna Bamankar
Junior Team
Retail Chronicles is a bi-monthly newsletter
of Retail Lab, the Retail committee of KJ
Somaiya Institute of Management Studies
& Research, Mumbai. Images used in Retail
Chronicles are subject to copyright.
Anchal Pandey
Neeti Narain Gupta
Shivani Agrawal
Surbhi Jain
Vipul Varkar
Design Team
Abhishek Kemminje
Abhirup Bannerjee
Gaurav Pandey
Rabin Kumar Singh
/retaillabsimsr
@Retail_LAB
retail_lab
K J Somaiya Institute Of
Management Studies & Research,
Mumbai
retaillab.simsr@somaiya.edu
+91 9158256641
+91 9769886091