MUMBAI: “Made in China” is now part of the retail mainstream. A casual stroll at Magnet, a hypermarket in Matunga, in central Mumbai, confirms this. While attractively priced crockery sets are displayed in the home care section, their cases with labels of their origin are hidden unobtrusively in racks behind these sets.
Nearly 30% of all goods in Hypercity have been sourced from China, as have 20% each in Magnet and Big Bazaar. In fact, experts reckon that Chinese goods will be a huge component of non-food items in hypermarkets, going up to 50% of all goods. To counter lower margins on food and grocery, hypermarkets across the country have looked at large-scale sourcing from China for goods as varied as toys, appliances, electronics, crockery and footwear.
Clearly, the cost differential is too good to resist for hypermarkets running huge private label programs. Citing an instance, Andrew Levermore, CEO, Hypercity, says, “Electronic goods sourced from China could be up to 30% cheaper than branded electronic goods.”
The sourcing activities could take as much as 60 days, including 30 days just for shipping and customs clearance. Locally, it takes just seven days for hypermarkets to source goods from manufacturers. Yet, the prices of Chinese goods are low enough to justify this additional transportation cost.
Adds Ashok Maheshwari, managing director, HomeCare Solutions, which has the Magnet hypermarket under its fold, “Not only are Chinese goods much cheaper, they’re also far ahead of local goods in design and innovation.” Back-of-the-envelope calculations suggest that even after pricing private label goods 15-25% lowers than branded goods, retailers could still get 10-15% higher margins.
Recognising the impact that Chinese goods could have on their bottomline, hypermarkets have been putting a great deal of effort in their sourcing operations. There are stringent quality processes that hypermarkets have put in place.
For instance, Big Bazaar, with its advantages of scale, has independent agencies testing products that are sourced from China. At Hypercity, most buying teams have a technical expert who would decide product specifications. Mr Levermore adds, “For apparel and linen we normally won’t need domain experts, we go more by the look and feel of the material.”
A store like Magnet uses European and US benchmarks for electronic goods and gifting items, which most Chinese manufacturers adhere to. Virtually all hypermarkets send teams over to China to attend trade fairs and indentify.
Hypercity’s buyers attend two Cantonese trade fairs, while Magnet teams attend three. This, they say, is easier than identifying and visiting individual manufacturers, and that they can also cut sweeter deals with manufacturers.
Yet, no Indian hypermarket chain can rely on direct sourcing from manufacturers, since nobody, barring perhaps Big Bazaar, has the scale that might interest high-volume manufacturers in China. Hence, all of them work with consolidators based out of either India, Hong Kong or China.
These consolidators buy goods in bulk and ship it over to the local hypermarkts, while also helping with logistics and customs clearance. Says Rajan Malhotra, head, Big Bazaar, “Consolidators allow us flexibility to decide how much inventory we want to hold, which would be less than what a manufacturer would want to supply.”
Big Bazaar reckons they could end up sourcing between Rs 5000-10,000 crore worth of merchandise from China annually in the next five years. Says Mr Malhotra, “We will set up a sourcing office in China soon to streamline our sourcing activities.”
For this sourcing game to work, however, a very strong back-end and after-sales infrastructure is mandatory. Big Bazaar currently has the scale to handle after-sales queries, which it has done in-house. Recognising this need, Hypercity and Magnet, currently single-store entities are looking at tie-ups with certain vendors that will take care of after-sales service, but Spencers hasn’t towed the line.
Citing an issue of scale, Jitu Mehta, president, Spencers, says, “We’re currently not sourcing any items that require after-sales service.” Yet, the Chinese invasion doesn’t spell the death-knell for local manufacturers. Hypermarkets confirm that Indian manufacturers still beat China on quality, especially in apparel and linen.
Mr Levermore says, “The only differences between Indian and Chinese goods are the margins.” Once there’s sufficient scale built up locally, Hypercity plans to meet all of its sourcing requirements from India.
Source : ET
Nearly 30% of all goods in Hypercity have been sourced from China, as have 20% each in Magnet and Big Bazaar. In fact, experts reckon that Chinese goods will be a huge component of non-food items in hypermarkets, going up to 50% of all goods. To counter lower margins on food and grocery, hypermarkets across the country have looked at large-scale sourcing from China for goods as varied as toys, appliances, electronics, crockery and footwear.
Clearly, the cost differential is too good to resist for hypermarkets running huge private label programs. Citing an instance, Andrew Levermore, CEO, Hypercity, says, “Electronic goods sourced from China could be up to 30% cheaper than branded electronic goods.”
The sourcing activities could take as much as 60 days, including 30 days just for shipping and customs clearance. Locally, it takes just seven days for hypermarkets to source goods from manufacturers. Yet, the prices of Chinese goods are low enough to justify this additional transportation cost.
Adds Ashok Maheshwari, managing director, HomeCare Solutions, which has the Magnet hypermarket under its fold, “Not only are Chinese goods much cheaper, they’re also far ahead of local goods in design and innovation.” Back-of-the-envelope calculations suggest that even after pricing private label goods 15-25% lowers than branded goods, retailers could still get 10-15% higher margins.
Recognising the impact that Chinese goods could have on their bottomline, hypermarkets have been putting a great deal of effort in their sourcing operations. There are stringent quality processes that hypermarkets have put in place.
For instance, Big Bazaar, with its advantages of scale, has independent agencies testing products that are sourced from China. At Hypercity, most buying teams have a technical expert who would decide product specifications. Mr Levermore adds, “For apparel and linen we normally won’t need domain experts, we go more by the look and feel of the material.”
A store like Magnet uses European and US benchmarks for electronic goods and gifting items, which most Chinese manufacturers adhere to. Virtually all hypermarkets send teams over to China to attend trade fairs and indentify.
Hypercity’s buyers attend two Cantonese trade fairs, while Magnet teams attend three. This, they say, is easier than identifying and visiting individual manufacturers, and that they can also cut sweeter deals with manufacturers.
Yet, no Indian hypermarket chain can rely on direct sourcing from manufacturers, since nobody, barring perhaps Big Bazaar, has the scale that might interest high-volume manufacturers in China. Hence, all of them work with consolidators based out of either India, Hong Kong or China.
These consolidators buy goods in bulk and ship it over to the local hypermarkts, while also helping with logistics and customs clearance. Says Rajan Malhotra, head, Big Bazaar, “Consolidators allow us flexibility to decide how much inventory we want to hold, which would be less than what a manufacturer would want to supply.”
Big Bazaar reckons they could end up sourcing between Rs 5000-10,000 crore worth of merchandise from China annually in the next five years. Says Mr Malhotra, “We will set up a sourcing office in China soon to streamline our sourcing activities.”
For this sourcing game to work, however, a very strong back-end and after-sales infrastructure is mandatory. Big Bazaar currently has the scale to handle after-sales queries, which it has done in-house. Recognising this need, Hypercity and Magnet, currently single-store entities are looking at tie-ups with certain vendors that will take care of after-sales service, but Spencers hasn’t towed the line.
Citing an issue of scale, Jitu Mehta, president, Spencers, says, “We’re currently not sourcing any items that require after-sales service.” Yet, the Chinese invasion doesn’t spell the death-knell for local manufacturers. Hypermarkets confirm that Indian manufacturers still beat China on quality, especially in apparel and linen.
Mr Levermore says, “The only differences between Indian and Chinese goods are the margins.” Once there’s sufficient scale built up locally, Hypercity plans to meet all of its sourcing requirements from India.
Source : ET