WSJ Article: A Costly Quest to Lure India’s Online Shoppers

MADURAI, India — The future of India’s booming e-commerce market is in the hands of small-time customers like 27-year-old Gayathri Rajamansingh.

Each Sunday, the owner of a small hair salon browses the Shopclues website from her home, hunting for bargains. Recently, she fixed on a floral-print sari, a traditional Indian one-piece garment, and clicked “Buy Now.”

Ms. Rajamansingh’s impulse purchase of the 199 rupee ($3.06) sari, set in motion a logistical operation that is complex and costly. Delivering the item involved a three-day, roughly 1,200-mile journey from Surat, in the western state of Gujarat, to her home in Madurai, in the southern state of Tamil Nadu. More than 30 people moved the package, through two overnight truck journeys, a long-haul flight and, finally, a motorbike to her doorstep.

It cost Shopclues 45 rupees to deliver the sari to Ms. Rajamansingh, or about a quarter of the item’s price.

Many Indian e-commerce startups spend as much as 30% of their net sales on logistics, according to New Delhi-based consulting firm Technopak, way more than the 11.7% Inc. spent delivering packages in the U.S. last year. In China, market leader Alibaba Group Holding Ltd. doesn’t shoulder any shipping costs, which are split between merchants and buyers.

Indian e-commerce firms must figure out how to turn a profit in a country fraught with logistical obstacles — including bad roads, shoddy trucks, monsoon floods, corrupt state-border officials, overcrowded airports and complicated tax rules. Shopclues made money on Ms. Rajamansingh’s sari — 33.40 rupees — but overall, it doesn’t make enough to cover wages for employees or rent for its offices. Like its competitors, Shopclues relies on investors to stay afloat.

Most have deep pockets thanks to a flood of cash from venture capitalists looking to build the Indian equivalent of Alibaba.

With over $3 billion in the bank and a $15 billion valuation, Flipkart Internet Pvt., the country’s biggest e-commerce player, is the world’s most valuable shopping startup. Jasper Infotech Pvt.’s Snapdeal has raised $1.5 billion and is valued at $5 billion, according to Dow Jones VentureSource. Amazon plans to invest $2 billion to expand its India operations.

Jostling for position, these players offer steep discounts on everything from smartphones to refrigerators. They are prepared to risk losses on deliveries to far-flung patrons like Ms. Rajamansingh in the hope they will become loyal customers.

India is a few years away from an e-commerce boom like the one that took place in China, according to Credit Suisse Group AG. China’s market exploded to $458 billion in sales last year from $7 billion in 2007. India’s e-commerce market is currently worth $4 billion, Credit Suisse reckons.

But India faces a greater challenge getting people hooked up to the Internet. More than one billion people — almost 85% of the population — were still without Web access as of 2013, according to a report by McKinsey & Co.

Delivering cheap saris across the country on airplanes in a few days’ time doesn’t make economic sense, said Mohit Tandon, head of strategy at Delhivery, a logistics company that transports roughly one-fifth of all packages ordered online in India. Though more expensive than trucks, air shipping is popular with e-commerce firms eager to get a hold on India’s potentially vast market.

“The wall of cash can make people do irrational things,” said Shopclues Chief Executive Sanjay Sethi. Shopclues tries to keep a tight control on its costs and doesn’t sell most items at a loss, in part because it has raised only $130 million, Mr. Sethi said.

The torrent of investment cash has started to slow and some backers are beginning to ask e-commerce companies to show they are working on profitability, said Avnish Bajaj, managing director of India operations for U.S.-based Matrix Partners.

Indian e-commerce startups aren’t expected to turn a profit immediately. After all, Amazon only began to flirt with profitability after 20 years.

Shopclues says it is focused on achieving profitability in the next year. It makes roughly 10 rupees in gross profit for every 100 rupees in sales, Mr. Sethi said.

Flipkart has said it wants to be profitable by 2017, and Snapdeal is aiming to reach profitability in the next two to three years. Neither company has detailed their plans to achieve this. Flipkart and Snapdeal wouldn’t comment on logistical costs.

Investors say Indian e-commerce companies must make more money off customers.

Shopclues is nevertheless modeling its business on shoppers like Ms. Rajamansingh.

“Our price-point play is the masses,” said Mr. Sethi.

Raising prices or delivery costs may turn away shoppers like Ms. Rajamansingh, so Delhivery believes e-commerce players will end up ditching air travel for trucks.

“People have to move to that model,” said Delhivery’s Mr. Tandon. “Right now, it’s just who blinks first.”

Wall Street Journal Article

U.S. News: Historic Trade Pact Sealed
By David Kesmodel, William Mauldin and Jonathan D. Rockoff
916 words
6 October 2015
The Wall Street Journal

Copyright © 2015, Dow Jones & Company, Inc.

U.S. industries as diverse as aerospace, agriculture and apparel lauded a historic 12-nation Pacific trade deal struck Monday, while pharmaceutical makers, tobacco companies and others criticized the pact as falling short in key areas.

Completion of the Trans-Pacific Partnership, the biggest trade deal in a generation, marks a victory for President Barack Obama, who said it would open new markets to American products and set high standards for protecting workers and the environment.

The pact among the U.S., Japan, Australia, Vietnam and eight other countries around the Pacific — though not China — lowers trade barriers for goods and services ranging from poultry to building materials, and sets commercial rules for two-fifths of the global economy.

But the president now faces an arduous challenge of winning approval for the agreement in a divided Congress during a heated presidential campaign and amid upheaval in the Republican ranks.

The congressional debate could be influenced in part by diverting views from industry, as well as continued criticism of the pact from labor, consumer and environmental groups.

Several prominent pro-trade Republicans — whose support could be vital to moving the trade agreement through Congress — offered chilly appraisals of the final product.

“While the details are still emerging, unfortunately I am afraid this deal appears to fall woefully short,” said Sen. Orrin Hatch of Utah, chairman of the Senate Finance Committee. Rep. Paul Ryan of Wisconsin, chairman of the House committee that oversees trade, said he had “concerns surrounding the most recent aspects of the agreement” and was “reserving judgment” until he could study the details.

Within the business world, some of the broadest support came from the farm sector. The TPP would eliminate trade partners’ import taxes of as high as 40% on U.S. poultry products and fruit and 35% on soybeans, while seeking to minimize unpredictable export bans that can upend business for agricultural firms.

Cargill Inc., a giant grain exporter and meat processor, urged lawmakers to support the pact, saying it could set a new standard for international trade and help improve food security in developing countries.

Congress will have at least 90 days to review the deal, meaning it won’t come to a vote until January at the earliest — right as the 2016 presidential race begins in earnest.

Some top presidential candidates panned the pact. Republican front-runner Donald Trump said in a tweet that “TPP is a terrible deal.” Democratic candidate and Vermont Sen. Bernie Sanders called it “disastrous” and a victory for “Wall Street and other big corporations.”

The House is all but certain to pose the biggest challenge in winning final approval. On Monday, a number of liberal critics of the deal said it did little to protect vulnerable industries or promote job creation.

Some big U.S. manufacturers seconded those worries. Ford Motor Co., which has been outspoken in its concern about stipulations preventing currency manipulation, urged Congress to reject the current deal. But Detroit auto makers don’t have as much to complain about as some had feared when Japan joined the talks. A senior administration official said U.S. tariffs that protect the domestic car industry won’t be eliminated for 25 years, with truck tariffs ended only after 30 years.

Other big industry groups were more positive. The National Association of Manufacturers applauded the pact, which the White House said would eliminate import duties of up to 59% on U.S. machinery shipped to TPP partners.

Boeing Co., the largest U.S. exporter by value, said the deal would help it compete overseas, where it gets 70% of its commercial airplane revenue, while computer-chip giant Intel Corp. said it could bolster U.S. tech companies through “critical” intellectual property protections and encryption standards.

In apparel, the pact could enlarge foreign-market access while also helping U.S. giants like Nike Inc. ship goods home from overseas factories. The company said Monday the agreement “will allow us to innovate, expand our business and drive economic growth.”

Michael Penner, chief executive of Peds Legwear Inc., called TPP “a big deal.” For now, the company’s Hildebran, N.C., plant is producing socks almost entirely for North America, but he hopes the accord eventually will help him export to Japan and elsewhere.

Big drug companies’ main trade group, Pharmaceutical Research and Manufacturers of America or PhRMA, pointed to a provision that seems to protect biotech drugs from lower-priced competition for at least five years plus potentially more. The industry sought the 12 years of intellectual-property protection that biotech drugs receive in the U.S., and the duration was a sticking point until the end of the talks.

Tobacco companies are among losers in the pact. The agreement is the one of the first in the world to allow countries to prevent the tobacco industry from suing foreign governments over antismoking measures in special arbitration panels.

Philip Morris International Inc. on Monday said the provision “undermines the core principle of equality.”

Wall Street Journal Article: Globalization: Battered but Not Beaten by Stephen Fidler

World Economic Forum — Analysis: Globalization: Battered but Not Beaten — Ever-More Interconnected World Delivers Economic Gains to Many, While Pace of Change Stokes Unease, Political Tension

By Stephen Fidler

21 January 2015

(Copyright (c) 2015, Dow Jones & Company, Inc.)

The perils of forecasting: 12 months ago, as World Economic Forum delegates gathered in Davos, nobody predicted Russia would, within months, annex part of a neighboring state, and anyone anticipating a halving of oil prices would have been guided to a darkened room and told to lie down.

But other developments were more foreseeable: Low growth and low inflation in the eurozone were to hold back Europe’s ability to emerge from its debt crisis and reduce high unemployment. Partly as a result, the political mainstream in many European countries weakened, and nationalist parties grew in strength. Governments elsewhere struggled to cope with the powerful currents buffeting their nations.

In one way or another, most of these developments — foreseen or not — now risk further erosion of the fabric of our internationalized, interconnected world economy.

“Globalization has helped raise hundreds of millions out of poverty,” says Robin Niblett, director of the Chatham House think tank in London. But, he says, it’s moving faster than people and states can adapt to, politically, socially and institutionally. As a result, “levels of trust between governments and citizens are fraying.”

Trust among governments has also been a casualty, he argues. Russia’s annexation of Crimea and its backing for separatist rebels in Ukraine undermined the assumption that countries are all moving at a faster or slower pace to market-based democracies. China worries that the U.S. will try to contain it; while the West worries that rising powers — such as China and India — may not uphold the rules of the global game.

The collapse of oil prices will have widespread ramifications for the world economy, redistributing global income from energy producers — Russia, Venezuela and countries in the Middle East — to energy consumers, which include most of the world’s developed economies.

That should help global growth. Indeed, on the evidence of car sales and other indicators, Americans are already spending their windfall, making the U.S. perhaps the only major engine driving the world economy.

World oil production has been rising thanks in part to the development of nonconventional energy supplies, like shale oil, which has pushed the U.S. toward self-sufficiency. Saudi Arabia, meanwhile, has kept open the spigots with the apparent strategic aim of curbing further investment in the nonconventional sources.

But faltering demand also appears to be a factor, and to the extent the oil price betrays a weakening world economy — and evidence of a Chinese slowdown — it isn’t good news. Slowing demand has already hit other commodities, hurting the economies of raw-materials producers in Africa and Latin America.

Another worry is that falling energy prices might flip low-growth, low-inflation Europe into a deflationary mind-set that would lead people to postpone spending decisions, further inhibiting growth.

“If I were discussing issues in Davos, I think that the prospects of European deflation and a sudden stop in growth in China are the two things I’d be most worried about,” says Lant Pritchett, an economist at Harvard University’s Kennedy School.

Europe’s economic uncertainties are feeding through into its politics. A strong reaction against established political parties isn’t limited to Europe but is taking hold there. People see themselves as losing control over their lives, and blame government elites.

One reason for that is that the trends associated with globalization — rapid technological change, outsourcing and world finance — appear to be responsible for growing wealth disparities. Billions of people around the world are richer because of globalization but inside many nations it has resulted in growing inequalities in income and wealth.

The policy debate about how — or whether — to tackle national inequalities has intensified thanks in part to French economist Thomas Piketty, whose data-heavy tome “Capital in the Twenty-First Century” was published in English last year. Mr. Piketty proposed greater international cooperation on taxation, a move now being explored within the European Union for another reason: to curb rampant corporate tax avoidance.

In Europe, many people view the EU as being responsible for their discomfort with the globalized economy and for encouraging unwanted immigration.

Indeed, immigration is also held responsible by some of those struggling with one of the dark faces of globalization: Islamist terrorism. A few fanatics have the capacity to convulse nations, as shown by this month’s attacks in France. Terrorist atrocities meanwhile have taken the lives of thousands of people in Africa, the Middle East and Asia.

“I’m afraid that is the future,” says Mr. Niblett of Chatham House. But, he adds, “I don’t see the globalized economy being in retreat for the simple reason that everybody has seen the benefits. I think the world will hang together.”

Dow Jones & Company, Inc

How a U.S. Textile Maker Came to Embrace Free Trade

By Bob Davis

May 4, 2015 10:40 p.m. ET

SPARTANBURG, S.C.—Milliken & Co., one of the largest U.S. textile makers, has been on the front lines of nearly every recent battle to defeat free-trade legislation. It has financed activists, backed like-minded lawmakers and helped build a coalition of right and left-wing opponents of free trade.

With Congress now gearing up for another trade fight, this time over whether to give President Barack Obama authority to negotiate sweeping trade deals in Asia and Europe, Milliken is in an unfamiliar place. Its executives are urging lawmakers to support the free-trade measure.

The about-face by the family-owned company followed the 2010 death of Roger Millken, its chairman and former chief executive, at age 95. Mr. Milliken, who set the strategy for nearly everything at the company, had railed for years against what he considered China’s pernicious trade practices.

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Total Taps Chinese Banks to Fund Russian Project

By Brian Spegele and Andrew Peaple

Updated March 23, 2015 7:50 p.m. ET

BEIJING—Total SA TOT 2.39 % is pushing ahead with a $27 billion natural-gas project in the Russian Arctic, but it will seek a big chunk of the financing—as much as $15 billion worth—through Chinese banks in local currency and euros.

The decision comes amid worry that Western sanctions against Russia could complicate the sort of dollar-based fundraising that is more typical for big energy projects.

Total’s Arctic project—years in the planning—doesn’t run afoul of sanctions itself. But one of Total’s partners in the Yamal liquid natural gas venture is Russian energy firm OAO Novatek, NVTK -1.88 % in which Total has a minority stake. Another big Novatek shareholder is Gennady Timchenko, who has been specifically targeted by U.S. sanctions.

The U.S. and Europe have slapped a series of economic sanctions on Moscow in recent months amid a standoff over Ukraine and Crimea. Under the sanctions regime, rules limit the transfer to Russian firms of technology related to some unconventional drilling techniques, including shale-oil recovery methods and some Arctic and offshore oil projects. But Yamal, a natural-gas project, isn’t specifically affected.

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Why Auto Makers Are Building New Factories in Mexico, not the U.S.

Bank of Russia Cuts Interest Rates

Strong Dollar Forces Factories to Lose Flab

Volkswagen Strains to Keep Foot on the Gas

By William Boston

Updated Dec. 10, 2014 9:50 p.m. ET

WOLFSBURG, Germany—Seven years into a decadelong push to outsell rivals Toyota Motor Corp. and General Motors Co. , Volkswagen AG Chief Executive Martin Winterkorn appeared to be in the passing lane.

Volkswagen, after all, is on track to sell more than 10 million cars and trucks in 2014—four years ahead of plan. It overtook GM last year and could soon eclipse Toyota to claim the industry’s top spot.

But on Tuesday, Mr. Winterkorn surprised investors by announcing he would step down as CEO of the VW brand, the company’s namesake marque which has suffered dwindling sales in most markets as well as weak overall profits. He will retain his position as group CEO. His replacement at the VW unit, a top executive from German rival BMW AG , Herbert Diess, will come aboard in October.

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Russia Moves to Help Lift Sinking Ruble

By Nicole Hong in New York, Andrey Ostroukh in Moscow and Chiara Albanese in London
Dec. 15, 2014 7:38 p.m. ET

A spiraling currency crisis, fueled by the bite of Western sanctions and the plummeting price of oil, spurred Russia’s central bank to raise interest rates late Monday, a drastic move aimed at shoring up the collapsing ruble.

The surprise action came at the end of a turbulent day for global financial markets. Currencies and stock markets from several developing nations were buffeted by the deepening oil-price slump and worries about future interest-rate increases in the U.S.

The epicenter of the troubles was Russia, where the ruble plunged to a record low in its biggest one-day decline since 1999.

The ruble’s fall, described by analysts as “staggering” and “extreme,” prompted Russia’s central bank to hike a key interest rate by 6.5 percentage points, to 17%, after New York’s trading day had ended. One dollar now buys more than 65 rubles, compared with 33 rubles at the start of the year.

Before Russia’s late move, U.S. stocks posted their fifth loss in six sessions, with the Dow industrials dropping 99.99 points, or 0.6%, to 17180.84. The selling was more intense in other markets, with Europe’s main index down 2.2%. Stock markets from Thailand to Mexico also dropped.

Analysts chalked up that bout of selling to growing anxiety about the impact on fragile developing economies of falling oil prices and the Federal Reserve’s looming policy shift. Many investors expect the Fed to signal at the end of its two-day meeting Wednesday that it is closer to raising interest rates than it has indicated in the past. That would deliver a hit to emerging markets that have benefited from years of easy-money policies by the U.S.

Russia’s central bank, which announced its decision after a late-night board meeting, said it increased rates because of devaluation and inflation threats. It also raised another key benchmark, known as the repurchase rate, to 18% from 11.5%. The moves risk pushing Russia closer to recession and are liable to be a blow to Russian consumers, who will face much higher rates to borrow the currency.Analysts chalked up that bout of selling to growing anxiety about the impact on fragile developing economies of falling oil prices and the Federal Reserve’s looming policy shift. Many investors expect the Fed to signal at the end of its two-day meeting Wednesday that it is closer to raising interest rates than it has indicated in the past. That would deliver a hit to emerging markets that have benefited from years of easy-money policies by the U.S.

Russia’s central bank, which announced its decision after a late-night board meeting, said it increased rates because of devaluation and inflation threats. It also raised another key benchmark, known as the repurchase rate, to 18% from 11.5%. The moves risk pushing Russia closer to recession and are liable to be a blow to Russian consumers, who will face much higher rates to borrow the currency.

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