afaqs!

Retailing, e-tailing potential brings Lifespring to India

By , agencyfaqs! | In | August 29, 2000
Looking to tap the set-to-blossom retailing and e-tailing market, Total Care India has launched Lifespring, India's first complete, multi-brand health and beauty store in Delhi.

N. Shatrujeet
agencyfaqs!
NEW DELHI, August 29

Total Care India (P) Ltd has launched the first store of its planned specialty retail chain, branded Lifespring, in Delhi. The Lifespring brand is being positioned as India's first complete, multi-brand health and beauty store for the entire family.
Total Care India is an equal-equity JV between the Sydney-based, Australian $70-million retail chain Bodiam International and the Jatia Group of India. For Bodiam International, the foray into India marks its debut in the South and South East Asian markets. The Australian company has, so far, been limited to the Pacific region, with 20-odd drug stores in Papua New Guinea and 10 mega-supermarkets in Fiji.
Citing the reasons behind choosing India to launch the Lifespring brand, Mahesh Patel, director, Total Care India, said, "We had a gut feel that India would work given the developed retailing structure here, the fact that consumers are driving sales and that restrictions on imports are easing."
However, Patel refuses to hazard a guess on the size of the domestic retail market. "A lot of figures are being thrown around but they're mostly way off the real picture. All I say is the market is maturing, and with the opening of the economy, there's a lot of potential."
When asked about the marketing strategy, Patel replied, "One thing that came up in the course of the AC Nielsen study we had commissioned in 1997 was the fact that consumers did not seem inclined to travel more than 2-5 km to shop for utility products. So we do not want to make Lifespring a destination shop… at least not in the short term." Which means that there should be a flood of Lifespring outlets in every city. Patel agrees. "Ours is, in any case, a volumes game. So we must have as many outlets as possible."
Does that mean Total Care will set up a franchise model? Patel overrules the idea. "There is no discipline in the Indian retailing sector. A certain level of training and work ethic forms the backbone of our operations. Taking the franchise route robs us of that control over training and ethics. After all, how do you ensure a franchisee is not selling substandard stuff under the Lifespring label?" Patel inquires.
The pricing strategy that Total Care is targeting - selling most products below the MRP - could well be the key to Lifespring's success. "There are many links in the supply chain and at each level there are margins," Patel explains. "Once we have multiple stores and the corresponding volumes, we would like to deal with the manufacturers directly. And the margins that we thus gain shall be passed on to the consumer."
Apart from low pricing, Total Care also wants to position Lifespring as a specialty products store. In fact, 35 per cent of products sold here are imported. "These products are unique in India, sourced through our global network. Here again, the prices are in our control." But only to an extent. Duties, in some cases, are as high as 90 per cent.
So competition from the grey market is bound to affect Lifespring. "Yes," agrees Patel. "But we can guarantee the authenticity of brands, which is always suspect in goods bought from the grey market. It's easier for us to gain the consumer's confidence."
The total investment earmarked for this year is Rs 10 crore. Setting up a store costs approximately Rs 2 crore. "This is the pilot stage," Patel insists, "so the number of stores are bound to be low. And even the five stores we have planned depend on the availability of prime space in and around Delhi. After all, it is important that we get approximately 3,500 sq. ft. of space per locality." The first store is situated in South Extension, while Rajouri Garden, Connaught Place, Greater Kailash and Noida have been identified as the other locations.
Mumbai isn't even being considered - at least for the next three months - for many reasons. Logistics is one. "For us, everything starts from Delhi and anything outside is a burden," says Patel. "Even in the case of Noida, the inter-State tax is a huge hindrance." So much so, Noida has dropped from No 2 to No 4 on the priority list.
Economies of scale is another reason for the region-wise growth. "For smaller store chains that operate on volumes, a single-store-per-city format isn't feasible," says Patel. "So there is no point in moving to Mumbai till we decide that we'll open x number of stores in y period of time."
Patel admits that competition can move into untapped markets in this lag time. However, he favours vertical consolidation over spreading out too thin horizontally. And even in the US, different retail chains are strong in different regions. He also believes that the market is big enough to support many players.
One of the highlights of the Lifespring chain is the in-store pharmacy advisory service, branded Pharmacist Advice. Here, trained pharmacists provide customers with advice on proper usage of different medicines - both prescription-based and OTC.
"The advisory has proved to be a huge draw as customers find the interaction with a pharmacist a novelty," says Patel. He estimates that 20 per cent of the store's revenue will come from the pharmacy.
Total Care is also negotiating a strategic alliance with Bausch & Lomb (B&L) for setting up a B&L section at Lifespring. This store-within-a-store would not only sell contact lenses and prescription glasses, but also serve as an eye testing center.
Retailing is fine, but what about the threat from e-tailing? Patel dismisses it. "Look at Amazon.com. It has $200 million worth of stock in its inventory when it should actually have nothing. The fact is, virtual retailing needs brick-and-mortar to survive." Total Care is, in fact, planning to set up its portal in six-eight months' time. Says Patel, "The aim is to go for e-tailing - it always has been. But only as an add-on to retailing, never as a substitute."
Total Care is targeting a turnover of Rs 25-30 crore from its five outlets in a year's time. And in two-three years, the company hopes to have opened 100 Lifespring stores that are expected to generate a turnover of Rs 500 crore.

© 2000 agencyfaqs!