McDonald’s set the standard for Indian market entry

Cultural sensitivity isn’t always a quality associated with McDonald’s. Rightly or wrongly (depending on your point of view) the brand has been labeled as uncaring, unhealthy and imperialistic. However, in India it appears that their market entry strategy has earned them a number of fans and many Rupees.

Setting the standard

Over a conversation with an Indian retail expert our attentions turned to western retail brands and India market entry. My friend was very clear in terms of which brand had managed the transition best, without having to tinker with their core brand values or the fundamentals of their business; McDonald’s was the clear winner.

Products and Price

Through use of a joint venture arrangement they have successfully developed products and a pricing strategy to suit the local market, based on the fact that they have 160 restaurants across India you have to say it works.

Product: The McDonald’s menu in India contains no beef or pork, there is also an extensive vegetarian menu. Vegetarian and non-vegetarian food products are kept separate throughout the sourcing, supply chain, cooking and serving processes.

So while you can’t buy a hamburger or Big Mac, you can buy a McAlloo Tikki or a McVeggie burger.

Price: A price point of around – equivalent of – 20p for a burger means that McDonald’s has mass market appeal, making it a viable option for the majority of the population, not just an expensive treat for the more affluent.

McDonald’s India

Riding India’s demographic wave

While McDonald’s know older generations brought up on a different cooking style are unlikely to chose to eat from their menu, India’s young demographic allows the company to concentrate on attracting younger consumers, eager to try newer food concepts.

Local knowledge

While some retailers see joint ventures as unsatisfactory, McDonald’s have benefited by tapping in to local knowledge and developing cultural understanding. Following four years of preparation and twelve years of trading, McDonald’s have established the perfect business at the perfect time, without compromising their core brand.

Written by Dominic Twyford

Mumbai malls fail taxi test

A quick test to find out whether any single mall in Mumbai stands out from the rest. Not scientific by any means but feedback to the question, “Of all the shopping malls in Mumbai which one should I see”, produced interesting comments, one in particular was more interesting than others.

The theory

My theory is in a booming market full of eager retailers looking to expand and consumers willing to spend, building profitable shopping malls is relatively easy. When these dynamics go in to reverse things aren’t so simple, a scenario facing India.

The squeeze is being felt, AsiaProperty magazine have reported that 11 of 15 malls on MG Road, Gurgaon, have had to refit to create mixed-use schemes as demand for retail space slows. In my opinion part of the reason is that developers have been building malls, not building brands, they have been busy badging “me-too” malls instead.

While a well-positioned and clearly defined brand wont solve all problems, it will help malls stand out. More importantly it will help the developer make informed decisions about the tenant mix and service offer based on an understanding of who their target customer is.

The question

Having asked the question, general consensus was that Inorbit Mall – due to its size – was the place to go. While the size of a mall can be important, a competitor can always build a bigger mall, in India where malls are in close proximity this would be a real problem. Regardless, I set off in a taxi with a relatively open mind.

Oberoi Mall, Mumbai

The Taxi twist

The taxi driver spoke good English and asked what I wanted to buy. Having told my story he suggested the Oberoi Mall instead. His reasons were telling, it was closer and in his opinion all Mumbai malls were the same, as he put it, they have McDonalds, cinemas and the same shops.

Oberoi Mall, Mumbai

If taxi drivers can see this, the customers they deliver to malls can too. If the retail and leisure mix isn’t providing differentiation, the brand has to. If this scenario is correct Mumbai shoppers are likely to be visiting the mall nearest to home, making customer attraction and retention increasingly difficult.

Written by Dominic Twyford

Shopping centre performance, a global snapshot

Recent reports highlight difficulties of trading in a global slowdown. Evidence shows UK and US markets in decline while Australia experiences growth. Contrast with emerging markets and the picture is no clearer, Turkey is expected to boom while once optimistic India stalls.

Westfield results

This month, Westfield reported sales figures that show mature market disparity. They report increased sales across its global portfolio of 0.3% for the three months up to 31^st March. 12-month rolling sales indicate robust performance considering global slow down; sales grew 2.8% to $20.9 billion across its 119 malls in the US, UK, Australia and New Zealand.

Australia buoyant, US sinks, UK treads water

Steady results are principally attributed to strong performance – 6.7% growth – in Australia, a market contributing 45% of Westfield’s income.

With the US market described as “very challenging” – specialty retail sales down 8.4% and retail occupancy down to 90.1% – and UK sales down 0.7%, overseas sales are likely to remain flat.

Optimism in London

Despite a decline in UK sales, Westfield London, its flagship £1.6 billion, 43-acre site in central London is set to exceed its first year annual target of 20 million visitors. Encouraging news but Westfield needs visitors to become consumers.

Turkish delight

While global retail sector struggles there are bright spots. Reuters reports that Turkish shopping mall sector expects to increase revenue by 25% (US$ 12.5 billion). The organized retail sector expects dramatic growth despite an expected 2009 recession. The driver for investment from foreign developers – Germany’s Prime Development plan to invest US$ 1.5 billion in retail development – is Turkey’s large, young and increasingly prosperous population.

India caution

Market conditions in Turkey sound familiar. India’s organised retail sector expected turbo charged growth based on these same factors. To date these plans have flattered to deceive, DLF, India’s largest real estate developer recently announced last quarter net profit down 93% to $32 million.  

With footfall and revenue down India’s developers are forced to pay more attention to mall management, promotion and revenue sharing models.

India like the industry at large is being forced to face new market realities.