Vivek Bali’s office in Reliance Retail’s Bangalore location is testament to the explosive changes in beauty in India. Private-label products from the retail behemoth, which is the fastest-growing category for Reliance in beauty, are arrayed on his desk, along with pictures and information about both Indian and global brands that have been changing the beauty landscape of the country.
This story first appeared in the September 6, 2013 issue of WWD. Subscribe Today.
As vice president and business head of cosmetics and fragrances in the lifestyle division of Reliance Industries Ltd., it is Bali’s mandate to make sure that the 20 percent per annum growth rate in the category continues for the company, whose retail sales reached $2 billion last year.
Experimentation has been a major part of the growth process for the group, as store locations, sizes, formats and the mix of brands have changed and become more focused over the past five years. This year, beauty at the Reliance Group is in transition, with the Time Out stores, which stock premium brands, closing. Through it all, Bali remains concentrated on what he describes as the fast-evolving Indian customer who has been trading up, learning and experimenting quite as much as the group itself.
The good thing is that lessons learned are being implemented quickly and by 2020, India is expected to close the gap with China and Russia in terms of per capita consumption. In a series of conversations about the market, Bali describes the challenges ahead and his faith in the market dynamics of growth.
How is beauty in India developing and what are the most important market dynamics?
The beauty market in India grew 17 percent in 2012-13. This growth was mainly led by fragrances at 28 percent and makeup at 25 percent. Skin care gained 16 percent and hair care, 13 percent. A large part of the growth has been led by mass brands in makeup, like Lakme, Revlon, Maybelline New York and L’Oréal Paris. However, premium brands have been growing, as well. Premium fragrances have grown by 21 percent, with the fastest growing being Calvin Klein, Versace, Giorgio Armani and Burberry. Burberry is the leader in terms of business size. The premium skin care and makeup segments have grown by 22 percent in the last year, led by Lancôme and Dior. MAC is by far the leader in terms of business size.
Although the market has been a bit slow in the April-June period of this year, it is expected to pick up towards the end of September when the festive season begins and sales are always typically higher.
Can the market sustain its growth trajectory?
India has a large customer base with a young population—more than 60 percent of the population is less than 35 years of age and that is an attractive market for the beauty business. Large numbers of women have been joining the workforce and have more purchasing power to spend on personal grooming. Men are also focusing on personal grooming. Another growing segment is teenagers. Brands are working on education, spending more on in-store advisers to help consumers choose the right product and enhance the shopping experience and trials. The global trends of fashion designers and brands driving innovation in makeup—similar trends can also be seen in India. So, yes, the market will sustain the growth trajectory.
How is the retail landscape evolving? Is retail keeping up with growth projections?
The retail environment is in the process of consolidation. Store formats are changing to weed out those that don’t work and there have been a lot of corrections in the market, including the closing of nonperforming stores, changing space allocations by category, etc. Therefore expansion is a bit slow, but I expect the momentum will increase starting this October. But overall, modern trade [department stores, specialty stores, perfumeries, hypermarkets] is keeping up with growth projections and its contribution to total retail is expected to reach 10 percent by 2015 and 20 percent by 2020.
Reliance has experimented with many different formats, from hypermarket to standalone stores to health and beauty formats. Which has been most successful and why?
In the last financial year, 2012-13, Reliance Retail Ltd. achieved a turnover of Rs 100,800 million [$2 billion], with a growth rate of 43 percent over the previous year. Each of the Reliance formats are geared to achieve market leadership in their format space and we’ve been progressing in that direction. The effort has been to meet customer expectations with the right store ambience, assortment of products, service and promotions and our formats [such as] Reliance Fresh, Reliance Super, Reliance Mart, Reliance Trends and Reliance Living are all heading towards achieving leadership in their competitive field.
What factors should international companies looking to expand in India pay attention to most right now?
In makeup, companies need to develop an assortment that is right for the Indian complexion— the shade she wants is the shade she should get. In order to win in India, international companies need to think not just of exports to India, but of a robust marketing plan to build awareness of their product range. They need to make an all-out effort to increase consumption, because the opportunity is there and needs to be explored. Each brand needs to educate the consumer on how to use the products in makeup and skin care at the point of sale and on a larger scale by using the media. The consumers often lack information and the end result is that they don’t use the product or they just use basic products, which can be scaled up.
The best option for international brands is to have a representation office in India to manage marketing and control distribution. They also need to have distributors in each province or appoint large distributors who have a reach across all regions of the country with warehouses in each region to service the retailers in both modern trade and general trade. International brands should also focus on having a wider distribution and availability of their products across India through select channels.
What is the biggest challenge for you when dealing with global brands?
A lot of companies look to appoint retailers as their distributors and this is not the right approach because a retailer will restrict the brand to their own stores.
Retailers are hesitant to import makeup and skin care, because the inventory can easily be damaged or become obsolete or be overstocked because it doesn’t have enough marketing support. The Indian market works with a wider distribution operation backed with marketing and soft trade terms, which a strong local presence can ensure.
How is the consumer evolving, particularly in terms of usage and shopping habits?
The awareness and knowledge about beauty products is increasing, but there is still a long way to go in terms of product knowledge and in terms of usage. Only 39 percent of consumers use makeup daily, 56 percent use facial skin care daily.
The real change is with the Gen I consumer, with the I standing for India, Independence and Individuality. These were largely people born in the late Seventies and early Eighties who have witnessed the opening up of the market, the influx of foreign brands. They have seen the creation of wealth and made different choices from previous generations. These are roughly the equivalent of the Baby Boomers in the U.S., who altered the consumption patterns for five generations. By 2020, 75 percent of the Indian population and 60 percent of the primary wage earners will be Gen I.
There has also been a shift in terms of value. Customers are trading up from value to mass to premium as more people enter the work force. In terms of premium and luxury customers, they are becoming increasingly better informed and are looking for newness.
What do you think the beauty landscape will look like in India in 2020?
For the beauty business, modern trade is the most important channel. Today, modern trade is just 7 percent of the business and by 2020, it should contribute 20 percent. This will improve the shopping experience of Indian consumers with education on usage and outcome, therefore the business will be robust and experiential.
The overall per capita consumption will close the gap with China and Russia in the beauty business, but the brands that will gain are the ones who enter India now and establish themselves as the market expands.
You have worked with beauty in different aspects— direct selling, brand and retail. What do you enjoy most about the industry?
There is one thing in common with all the areas I’ve worked with—it’s about getting the consumer to “use more, buy more and pay more,” to trade up and learn about beauty. Understanding the mood of the consumer is of prime importance, as is connecting the dots about the needs of the customer and what a retailer or a brand can provide to the consumer.
I also enjoy the way one can solve the jigsaw puzzle in retail—about finding the right location, the right format, the right offering, the right support service and the right infrastructure to make it work.
What’s the most challenging aspect of your job?
The challenge is to use constant innovation to build markets with a better product mix with new launches and to build market share. If you look at Indian consumers, they aspire to be like Western consumers in all respects. Now, they have the spending power, as well. But they are not getting the kind of shopping experience they want, because the infrastructure is probably a decade behind the aspirations of the people. One of the big challenges is to get the locations and the offering right and to make it really worthwhile for the consumer.
How would you describe your management style?
I have a very hands-on approach to business. I also believe in the development of my team as in my own development. I always go for the challenge over an opportunity.