This week on the news bulletin, we cover news on the three sectors which were heavily impacted when the pandemic has started. Hospitality, Retail, and Export sector. First, we talk about OYO, the Indian Unicorn startup which has suffered huge losses during the pandemic, but is now focusing on a new direction, and preparing for an IPO. Next, we discuss the impact of Reliance Retail’s private labels on the global consumer goods makers in the country. We also discuss how Indian exporters are experiencing a surge in global demand. Know all about these topics and their implication in detail here. Read on to find out more!
Topics:
- OYO’s expansion plans within India and abroad amidst Softbank’s withdrawal
- Reliance Retail's private labels revolution and its impact on global consumer goods makers
- Indian exporters experience a surge in global demand
Oyo is scaling back its international aspirations by exiting the US and European markets and terminating its Latin American relationship. The unicorn startup, founded in 2013, lost $15 million per month last year as the global pandemic closed most hospitality firms and grounded foreign and holiday tourism. The company has reduced its global workforce of 30,000 employees by more than 65 percent.
The company’s largest investor, SoftBank, has reduced Oyo's valuation to $3 billion — $7 billion less than in 2019.
The company's earlier global aspirations of establishing a stronghold in China, the United Kingdom, and the United States would be scaled down.
In India, it comes down to concentrating on lucrative geographies and the return of the small business traveler, according to Ritesh Agarwal, chief executive officer. Oyo grew by partnering with independent entrepreneurs who needed assistance competing against large franchises.
What has caused the decline of OYO?
Even before the pandemic, the platform's rapid expansion was causing major problems.
Oyo's initial policy assured hotel partners a minimum monthly payment, but this became unlikely once COVID-19 took effect. The business has since switched to a revenue-sharing model.
However, hoteliers across the company's geographies have alleged that Oyo drives down prices in order to fill rooms and meet targets, while squeezing owners' margins to almost nothing.
According to Oyo, its pricing algorithm is based on “changing demand trends” and local factors, and it is intended to increase net revenues at hotels. However, to give property owners more control, OYO has now enabled them to change the price range by 10% on its revenue management platform.
How is OYO positioning itself now?
OYO is attempting to reposition itself as a leisure and technology-driven business rather than a pure-play hotel company. It is now attempting to align its operational metrics with those of a technology company. OYO aspires to go public in 2022. "We will be IPO-ready, so the board will decide whether to look at public markets," said Ritesh Agarwal. In the coming year, the company will focus on developing the technological capabilities and fine-tuning its strategy.
Products like Snac tac noodles and Yeah! colas are Reliance's private label products. These are billionaire Ambani's not-so-secret arms as he aims to dominate a grocery market worth $608 billion and expected to expand by more than 20% by 2024, according to Forrester Research.
These are more than just a low-cost and optimistic alternative for urban shoppers in Reliance's growing store network. The products are largely manufactured in India by small third-party suppliers. This is Ambani's bet on pitching fundamental but aspirational brands at kiranas, or traditional mom-and-pop stores.
The general trade which includes Kirana and mom-and-pop stores still contribute to 80-85% of the retail market in the country.
How will this impact the industry?
Consumer brands whose products are now competing for shelf space with Reliance's private label brands will have to deal with a business whose grocery store muscle will nearly triple to 2,100 outlets if the Future Retail deal is approved, which is being challenged in India's Supreme Court.
According to analysts, Ambani's plans are similar to the private-label pushes mastered by the world's largest retailer, Walmart, and German supermarket chains Aldi and Lidl.
One significant distinction is that Western retailers have positioned own-label products as a value proposition. In India, they serve as both an inexpensive option and a lifestyle choice for those who are accustomed to purchasing packaged or branded goods.
According to industry executives and analysts, the push is causing concern among international and Indian consumer giants to find ways to safeguard their distribution network. Pressure is already building, with online grocers like BigBasket and e-commerce giant Amazon extending their portfolio of private brands.
Indian export books have been increased by up to 40% in the current fiscal year, providing a boost to the Indian economy. This is a sign of relief, as global demand had taken a hit when the pandemic struck in 2020.
Higher global demand, particularly for engineering goods, chemicals, and low-value lifestyle products such as carpets, has improved the order books of Indian exporters. Handicrafts, ceramic products, and cotton yarn/fabrics showing signs of further strengthening despite a drop in new cases in the United States and another wave of infections in the European Union.
Demand for Indian engineering products from China, Singapore, Germany, and Thailand has increased by double digits. This is driven by exports of iron and steel, nonferrous metals such as copper, and auto components. The handicraft industry anticipates a 30 percent increase in exports in the current quarter.
There is still a long way to go
Though India's domestic and foreign products are increasing, exports have not yet recovered to pre-pandemic levels. Leather exports from India fell 32.16 percent year on year between April 2020 and February 2021, while handicrafts fell 8.49 percent.
Unlike in the pre-Covid era, when orders would arrive months in advance, orders now arrive in a short period of time and must be met quickly, making it difficult to plan the business.
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