Tuesday, June 30, 2009

100 days and counting!

I have been blogging for 100 days now.

5,000 plus walk ins, lots of comments for various posts, a Google page rank of 2, etc.

A big ‘Thank you’ to all the readers and supporters of this blog.

Decided to do something interesting for all the readers of the blog and those who follow me on Twitter and Facebook, to celebrate all these milestones. So, have planned a daily post through the month of July ’09, wherein each post would feature a Retail jargon, its meaning and sometimes my interpretation too! I plan to include all the conventional established jargons as also a few weird ones, which may or may not be commonly used.

Hope to receive your feedback regarding this series. Some of you might find these posts too basic, please bear with me.

Monday, June 29, 2009

Not the end of the rack. Part I

Article written by me for the magazine “Indian Management”, June 2009


There are gloom and doom stories about Corporate Indian Retail everyday and just as it was in the stock market crash, everyone wants to stand up and claim, I told you so! But, is it really the end of the great Indian Retail story? I don’t think so.

Store Level Reality

The stores are being closed for very valid reasons which are linked to making the Retail model viable.

The store is a key OPEX component and as such the cost structure of each store is crucial to the success of any Retailer. In India, the typical margins that a supermarket would realize is in the range of 18 - 19% and three of the biggest cost components are rent, manpower and energy costs. These should ideally be in the range of 12 - 13%. However, over the past years the rental costs alone have risen to as high as 7 - 8% in many cases. Coupled with the other components the top three cost components today typically totals up to 15 - 16%. Which means that the store is either losing money or the positive contribution is not large enough to sustain the other common costs being apportioned.

This steep escalation in the rental component is a direct consequence of supply and demand. With so many mega plans having been announced and location being a supposedly crucial factor, what else can one expect?

So, the first take out is that at a store level, if the cost structure does not make sense no amount of any other corrective action will make up for that.

The downturn and the falling demand in real estate is an excellent opportunity to correct the initial mistake of indiscriminate store opening without regard for high rentals. The chains are renegotiating rentals and right sizing stores to make the cost structure workable.

The cost structure is linked to projected or estimated sales. All the percentages I mentioned before have a common base. That is the optimum sale that is required for a store to be sustainable. Typically supermarkets used to generate an average of Rs. 1,000 per sq. ft. per month and this became the benchmark for developing the supermarket model. However, nowadays the typical average in a supermarket is in the range of Rs. 700 with the lower end of the spectrum touching even Rs. 450.

The simplistic solution is to realign costs to this sales figure, so that percentages remain the same. However, it’s easier said than done, especially for cost components like rentals, which is being done by most Retailers.

The other option is to increase either the sales or the margins which is the tougher thing to achieve, because there are several very valid reasons for low sales, one being oversaturation of similar stores in a locality. So, the closing or down or right sizing of stores is possibly the most prudent activity in the current context and reflects that corporate Retail not only knows what needs to be done, but is acting on that.

Not the end of the rack. Part II

Continuation of the article written by me for the magazine “Indian Management”, June 2009

Viability of the chains

Next is the larger issue of overall viability of these chains and whether they would sustain and grow. Again my view is that it will happen because there are possible solutions to existing operational problems.

At the heart of the matter is the reality that most chains have rushed in to open stores without doing a basic differentiation strategy. As one friend of mine remarked “If the fancy boards are hidden, one would not really know which store it is”. Somewhat similar to the age old debate about Coke and Pepsi and how in a blind test most people can’t spot the difference. Yet, these brands have been able to create well differentiated brand personae’s. Unfortunately food Retail cannot afford these kind of media spends and frankly it is not required.

In Retail, the store experience is the basis for anyone’s imagery of that store. And this can be a powerful tool to create a differentiated branding. At the heart of the experience is the fact that customers come to the store to purchase.

Hence, a well thought out assortment strategy with a noticeable percentage of unique or differentiated products is the first step to success. However, in the Indian context there is a serious constraint to this, in the form of availability. Even a well thought out plan would be ineffective if the customers do not see these products at the store. With fill rates of 75 – 80% from the best of vendors, every Retailer has to manage a situation of empty shelves and therefore a poor imagery in the customers mind.

This is where the private label program of a Retailer plays a crucial role apart from also generating better margins. A comprehensive private label approach which seeks to supplement the offering while providing opportunity to offer alternatives to customers in the absence of stocks is a sure fire winner.

Not the end of the rack. Part III

Continuation of the article written by me for the magazine “Indian Management”, June 2009

Next is the issue of service.

Shopping is a habit, especially grocery shopping. This habit is driven primarily by trust built over years and based on softer service elements. Hence, even with similar stores offering similar products, one tends to have strong loyalties with a particular Kirana store.


In the case of corporate Retail, the structuring of the business model itself makes it very difficult to offer these softer service elements. Hence the need for a very sound value proposition, to the customer. The value proposition can be built around the store design, range and service. However, with similar looking stores with hardly any differentiation, how can anyone perceive a unique value proposition?


This has led to customers constantly shifting between stores either because of availability issues or driven by pricing and promotions. This leads to two things –


  • Promotion/ pricing driven purchases lead to lower margins. A promotional sales contribution of 15% is a healthy indicator that the promotions are being perceived to be good and seen to deliver value. When this share goes up significantly it is a surefire indicator that customers are only “cherry picking” at that store.

  • Customers alternating between various stores leads to a misleading picture with regards to sales analysis and this in turn could severely impact the forecasting and replenishment of a store. The direct consequence is certain products not being available, which is again a trigger for customers to frequent other stores.

Recruiting store staff has always been a challenge because of the perception of Retailing and getting trained people has been a bigger challenge. This is further compounded by the cost cutting orientation which has led many chains to reduce the head count in a store. This not only puts pressure on the staff to fulfill their internal work and yet interface with customers. This is truly a Hobson’s choice because customers come to a store to buy and hence the staff needs to ensure that the products are available and displayed. Yet, the customer would build loyalty and rapport only based on interactions and service, which often is compromised. An even simple thing like smiling and wishing or thanking the customer after billing is increasingly hard to experience. Is it any wonder that customers have little or no loyalty to any store?

Retail chains should look beyond the downturn. Today, these chains are scrambling for the reducing share of the shopping basket, further compounded by overcrowding and without any differentiation. By reducing store staff and thereby impacting the service levels, the chains are only further reducing any chance of differentiation and therefore customer loyalty.

Also, in the coming years when the economy picks up again and expansion starts, getting store staff is going to become increasingly difficult in spite of a slew of training academies being opened by everyone, including the Retail chains.

Perhaps it is now time for the Retail chains to work towards the staffing models of stores abroad, wherein elderly people and students form the majority of the work force and work as temporary staff. India has both these segments of people and youngsters today are increasingly adopting the work and study model. Such people can be used to supplement the store staff’s efforts, especially in customer interface and customer service functions.

Last, is the issue about funding, debt, etc., which is seen as a major factor to doom this sector. Retail, the largest employer in India and also abroad is not an industry in India. Suffice to say that being recognized as an industry would help manage this issue as currently these chains are largely dependent on PE funding.In summary, the store would be a tipping point in the Indian Retail story. Which side of the fence it tips over, is a result of some concentrated action which is required immediately.

The good news is that, this seems to be happening and shortly when the sector resumes its growth story, I can claim that I told you so!.

Sunday, June 28, 2009

Guest Post by Mr. Shiv Murti, A mentor for most Indian retail professionals!

I can remember the first time I saw the site sometime in 2000 1st. Quarter. The site comprised of 2 factory sheds with a road in between and I wondered how we would make a Hypermarket out of it. Many months later the final design came out and when the civil work was completed it was like a transformation of the Ugly duckling. India's first single level Hypermarket was born.

The next step was filling it up. 45,000 sq.ft. of store space - a team that was more used to filling up supermarkets of 3,000 sq.ft - new product categories to handle. It was a learning experience and a very enriching one and within 4 months we had the Product Master ready with the space allocations etc.

Then the order placement and the drive to fill up the store. We set ourselves an impossible task of 15 days time from first receipt to opening. I remember Kruben saying it normally took 60 days but he had done it in 45 days with a supply chain that worked, vendor supply efficiencies of 90% plus and with experienced staff. We had none of these but we had a team that was willing, eager and did not know the meaning of the word impossible. We were ready 1 hour before the store opening with what even Michael and Kruben admitted was a very high level of store readiness and a store fill of approx 84% of what we had planned as the SKU count. It took passion and an immense drive from everyone concerned to make it possible.

And then of course the store opened. And within the first hour we knew it was a runaway success. That was the story of the opening of the first true hypermarket in India and it was all made possible by a very committed team.

Saturday, June 27, 2009

Guest Post by Mr. Saurabh Chadha, who was the Business Head, then

27th June is etched in my memory as one of the most memorable days in my life and also "INDIAN RETAIL HISTORY' as it marks the arrival of HYPERMARKETS in India. It’s been 8 years since then and the industry has grown by leaps and bounds but the trigger for that was the 27th June 2001.

The team had worked relentlessly for 15 days 24 hours a day to ensure that "GIANT" opens on the designated date and I thank the entire team for the support and the able guidance of Raghu, Kruben and Shiv who made it possible.

Once again let’s celebrate this day by dedicating ourselves for the cause of "INDIAN RETAIL".

A Giant Step for Indian Retail

India’s first full fledged hypermarket opened its doors to customers on June 27th 2001 in the twin cities of Hyderabad and Secunderabad.

Spread over 1,20,000 sq. ft. site, the store was a first of its kind in the country. Many interesting firsts were tried out in that store. Industrial type of racking was used and the upper parts of these fixtures were used for inventory storage. There were more than 15 cash tills, which itself were an awesome sight to see. Not many Indians would have seen this unless they had travelled abroad. Apart from all the products that a supermarket had, there were clothes, consumer durables, etc. I personally was amazed that there were so many products (20,000 SKUs) that a consumer could choose from in the Indian environment.

One of the most interesting innovations was the open, wet market type offering of fruits and vegetables. The consistent popularity of the neighbourhood wet market was diminished only partially by the crowded, dirty environment of such places. However, the long standing Indian habit of sifting through and selecting vegetables made consumers overlook the environment. The idea was to offer the same wet market feel of mounds of vegetables that customers could select from, without the dirt and slush usually found in such places. This was an instant hit and nowadays one sees a similar offering in most stores.

This store was also a fore runner of the Cash & Carry format, which is an exclusive B2B format. Although ‘Giant’ was a hypermarket catering to end consumers, there were a group of B2B customers who were regulars for the store. A small sales team from the store catered to such B2B customers in terms of their requirements.

Memorable moments abound with regard to the launch and the most interesting one is the launch promotion on sunflower oil. Oil sells like hot cakes in Hyderabad. As compared to the 3 to 5 litres of oil that most of us purchase every month, many families in the twin cities actually purchase 15 litre cans and also manage to finish it month after month.

Therefore, any launch without a special offer on oil would have been incomplete. Now, oil is a commodity and even though we purchase cooking oil in packets, the pricing is influenced by the ruling commodity price. It so happened that the price of oil spike a day before the launch and there was no way we could change the offer so later into the run up to launch. Also, once communicated through advertisements and leaflets there was no way we could not honour the offer and risk losing credibility in the customer’s mind.

However, what ended up happening is that a large number of small traders descended onto the store and literally a few seconds after the doors were thrown open, the shelf was wiped clean. In the picture you can see the mad scramble to grab this product whilst the staff is trying to bring down additional stocks from the storage area.

An interesting experience which left behind a huge learning. The practice of reserving the right to limit the quantity purchased by anyone, especially on such highly popular offers was born out of this learning.

From my memorablia collection













Offers and promotions are a default part of any value retailer’s life and cannot be wished away from any communication element. By the time the Giant store was launched RPG Foodworld had established the 365 day promotion as a norm and several other retailers had also started to mimic that.


In that context, the challenge was to communicate offers, but come up with a creative idea to communicate the size and scale of the new format in terms of the store itself as also the products available. The risk of being seen as yet another store, especially a supermarket had to be managed as also the concept of a hypermarket had to be established as the term hypermarket itself was completely new to the consumer’s psyche.

This led to an interesting launch campaign, which leveraged the traditional sight of a person pushing or pulling a large cart laden with things. Coupled with some mind boggling numbers in terms of store size and number of products available, the communication was an instant hit; of course helped along by some very attractive offers. Sharing some visuals from my scrap book for everyone to enjoy; The advertisement, Invitation, etc.

What’s in a name!

Selecting names whether it is for a new born or a new store has similar levels of involvement and effort. So, it was during the run up to the first store launch. Several names were discussed and discarded. A little known fact was that the team landed on the name big bazaar. The idea was to communicate the largeness of the offering. Various designs were discussed and finally a blue, yellow and red colour scheme with the word ‘big’ being the central visual point was agreed upon. Design guides were made and other related communication and design elements were being developed and processed.

One fine day there appeared a recruitment advertisement for another yet-to-start chain and lo behold, the name of the proposed chain was big bazaar. The first half of that day was complete pandemonium with everyone trying to figure out how this could have happened and if our application for registration had been declined for any reason. After much huffing and puffing, it came to light that the matter had slipped between tables by someone, somewhere.

So, the hunt for another name started and after a furiously fast search, dip stick studies and feedback sessions, the name Giant Hypermarket was decided upon. The logo design was the same. Giant replaced Big and Hypermarket replaced Bazaar. Going forward, even that gave way to Spencer’s Hyper.

If you believe in numerology and the original name did not have to be given up, who knows how the Indian Retail landscape would be today!

But then, like the famous bard said; what’s in a name, a rose smells as sweet whatever it is called.

Wednesday, June 24, 2009

Shopping in a nighty; The paradigm shift!

The recent posts about the anniversary triggered off a flurry of “Do you remember” conversations. One such incident recalled was about when the head of RPG Foodworld once rather cryptically mentioned in a group that I was responsible for getting women in nighties to shop at the store! The incident and the background deserve to be shared in this forum.

We once had a group of women who were invited to share their view of shopping, where they shopped and why. There were many interesting and even startling feedback points with regards to the modern air conditioned stores as compared to the tried and tested kirana.

One very interesting comment made by several ladies was that they need to dress up and look smart if they were to visit the modern stores, whereas they could walk across in even a nightie to the kirana store. Apparently, the uniformed staff who spoke in English, the modern ambiance, etc had created a self induced sense of very high standards with regards to purchasing from the modern format stores. This obviously did not help the stores as it was seen as slightly intimidating and definitely not “my store”.

One needs to understand that in the Indian context, dressing up means precisely that and starts with a smart saree or similar attire, hair to be groomed, etc. Imagine the consequence. Even the housewife staying next door to such a store would have to spend considerable time and effort just to get ready for shopping. Thereby making the whole expedition not a very convenient choice, unless one was going out as a family outing!

It was an interesting insight and one that became the starting point for lots of initiatives which were rolled out to make the customers feel at ease and not make the store so intimidating as to be almost unapproachable.

Cut to a few years later and we were launching the chain in a new city. The recent batch of management trainees had been dispatched to participate, experience and learn from the launch. At an informal get together the then head of RPG Foodworld was asking these youngsters about their experiences when one person quipped that the customers were so comfortable and accepting of the store that a lot of them were seen shopping in their nighty. That’s when the head made the remark of how yours truly was responsible in bringing women shoppers in their nighties to the store.

Needless to say, I spent that evening explaining away this comment while my colleagues would often ask me as to which consumer attire I was working on next!

Thursday, June 18, 2009

Service expectations while purchasing durables or electronics

A few years ago when we went to purchase a fridge I recall the comic confusion that the various sales persons standing at the durables store created. There were three or four salesmen standing around and when we pointed to a fridge and asked them to show us the features, first they were reluctant. Then one person reluctantly explained how the concerned salesman had gone for his tea break. While I was wondering on the absurdity of having individual salesmen for each product, another elaborated that I was enquiring about brand A while all those present were representing Brand B or C or D. Finally one person did try to at least engage us till the time that the concerned salesman returned!

I am sure most of you would have had this experience.

Later on when I was handling the marketing for a durables store, such similar experiences prompted the team to relook at the way the store staff interacted with customers and went on to become a key differentiator.

It might definitely help the durable retailers if they were cognizant of this dissonance being created by what is called company promoters as also internalize that the consumers are changing.

Typically the various brand manufacturers agree to place these salesmen or promoters as they are called. Hence, most are briefed and trained only with details of a particular brand. Of course there is a fair amount of churn within this group and it would not be uncommon to see a person be a salesman for Brand A and a few weeks or months later for Brand B. Although this and the fact that they all work together makes them all aware of the various brands, the tendency is to constantly steer the customer towards one’s brand. From a customer point of view, this is not only confusing but extremely annoying too.

Today the reality is that youngsters are emerging or rather have emerged as a significant consuming class, especially of Electronics. These consumers are well informed and usually have done some homework with regards to the products, brands, features, etc. In such a context having to face a virtual race amongst the salesmen is not the best thing that a store can do.

Secondly, there is a large group of educated consumers who are older and who typically indulge in high- end electronics and durables. Such consumers again do not appreciate pushy selling because they are looking for additional inputs, details and explanations with regards to the various features of a product.

And then you have the average consumer who is looking for functional benefits and is often technologically challenged. Yet again, not a good choice to practice hard sell. They look for some information and lots of reassurance!

So, essentially the purchasing pattern for this category of products is fast moving towards informed and knowledgeable decision making by the consumer instead of being hustled into a sale.

Most modern durables chains are aware of this shift in consumer behavior and they have the store staff to offer nonpartisan inputs and help in the purchase. However, the larger universe of small operators still relies on the company promoter route, simply because it helps defray the man power costs. What they seem to be missing out is that if the customers dry up, there would be no store and no costs left to defray!

Monday, June 15, 2009

Every successful person has their own formula

I had written an article on self development and wanted to share the same with you because the core message is very relevant to Retail, especially Indian Retail.

There are no universal success formulas, but every successful person has their own formula. Similarly, a one size fits all approach to retail will not work, especially in India. Walmart, one of the poster boys of Retail has reportedly opened a 3,200 sq. Ft. Convenience format store in China. The chain whose stores are big, bigger and biggest is experimenting to find its success formula in a new country. Similarly there are several stories from India about Innovation and Success. For example, “Heart Mart” is an interesting Retail innovation in rural and semi urban markets of Gujarat.

Please do read the article at this URL and I hope you enjoy the same.

Saturday, June 13, 2009

How consumers think about retail pricing

In the retail context, communication of prices or offers is a fine mix of science and art. It is more of science because one needs to truly understand the consumer’s mind set. Understand is an understatement. It requires that the retailer get under the skin of the consumer and communicate, almost telepathically!

A simple way of communicating prices or offers is by stating the MRP and offer price, for the relevant pack size. However, the consumer does not always think in such a simplistic linear manner.
The consumer’s mind anchors the prices of a few products which are referred to as KVI’s (Known Value Items). The perception of value basis pricing is defined by the price communicated for such KVIs. Prices perceived to be lower than the benchmark price of a KVI leads one to believe that the store offers great prices and hence lots of savings. This is a classic example of the halo effect theory.
KVI’s as a concept is more relevant in a non-MRP scenario as there are no published prices on any product. However, in the Indian context this is very relevant for groceries, fruits and vegetables. Additionally, even with a MRP, the offer price or “Our Price” as many retailers say, is a powerful perception driver. Non Stick Tava at Rs. 149/-, when seen by a customer who is used to a price point of Rs. 250/- becomes a strong influence with regards to the pricing of that store.
Next is the pack size. Most of us are not mathematical wizards and prefer to be presented with numbers which don’t require my mind to do calculations and then be able to benchmark with my KVI.
Groceries, Fruits and Vegetables are usually benchmarked in per kilo basis, in our minds. Even though we might purchase lesser or more and never in exact multiples of a kilo, our minds pegs the per kilo price and we prefer to use that as a comparison.


I came across this offer communication recently and would like to take this as an example to drive home the point. If I were planning this communication, the following would be changed.

  1. Price would be per kilo. The pack size price can be mentioned if required. But the per kilo price is more important.
  2. Savings can still be basis the pack size, but should be mentioned clearly that this is for a 20 kg bag.
  3. In groceries, fruits and vegetables the consumer does not think of MRP. The prices are dynamic and basis the market price. So, it might be a good idea to mention market price, then MRP (Only if required) and lastly Our price. If the pricing has been managed well, there should be a difference between market price and MRP itself, further reinforcing the price-value image.
  4. Lastly, the savings if mentioned as a difference between Market Price and Our price would be even more powerful, if point 3 has been done.
Retail might appear simple and easy to do. It actually is. However, it requires a lot of common sense and a deep, instinctive understanding of the way consumers think.

Tuesday, June 9, 2009

Another innovative idea - A floating supermarket

Consumerfed has launched a floating superstore in Kuttanad – a novel concept – to sell essential commodities to those living in isolated and inaccessible areas of the backwater region. The story, picture and a video report can be seen on these URLs -

http://www.thehindubusinessline.com/2009/06/09/stories/2009060951481700.htm
http://www.deccanherald.com/content/7042/floating-supermarket-below-sea-level.html

video

Video from http://newsx.com/.


This is an interesting innovation to help create a differentiated format. Hope to see many more such ideas in the Indian Retail Landscape.

Monday, June 8, 2009

Facing Fallout From The Downturn

Amidst conflicting news of the downturn having bottomed out, while yet another company is sacking employees and the more optimistic of the lot talking about leveraging the turnaround - one point seems to be falling between the tables.

What about the fallout from this downturn and how will it affect employers, employees and the overall economy in the coming years?

Catch some views of mine about this @ http://tickledbylife.com/index.php/counting-losses/

Sunday, June 7, 2009

Guest Post by Mr. Arun Vishwanath, Head – Training at RAYMOND Retail

One thing which is always working on the mind of a business head of a company is "how do we ensure that we have maximum returns from our investments"? Same is the case with learning and development investments. Six months ago, we at Raymond Retail, were looking at various ways of making learning fun and easy to digest, while being cost effective. With a bit of brainstorming within the Training Team, we came up with a brilliant idea of using SMS for Training through mobile phones. The rationale behind this was:
  • Every staff including the housekeeping staff and the doorman carries a mobile phone these days
  • SMS is unobtrusive and gives you the flexibility of accessing the message at a time when you are comfortable (the absence of urgency factor!)
  • You can reach anyone across the country without too many hassles
  • And of course, this is a cost effective tool, with charges of less than 20 paise per SMS!
With the spread of over 400 Plus "The Raymond Stores" Pan-India, reaching over 2000 plus staff, SMS training works wonderfully for us. This way, we can ensure that training is effective, continuous and it does not overload the front end staff with a lot of information at any one time. Probably, for the first time in India, SMS is being used extensively as a learning and development tool.


We use a service provider for Bulk SMS and program the messages to be sent on a weekly basis. We have a weekly theme and cover a range of topics in a "question and answer" format, which include:

  • Product knowledge
  • Selling Skills
  • Customer Service
  • Company updates
  • Safety
  • Visual Merchandising
  • Personal hygiene and grooming

One message is sent everyday at 9.30 am, just before the store opens. This way, this knowledge can be used and shared during the regular store meetings and briefings. SMS training complements our other regular training efforts and is not a substitute.

The success of any training module or tool depends on its effectiveness. To ensure that there is regular interaction and to check how effective the training was, we have a "weekly test" which is conducted every Sunday, on the topic / theme covered the previous week. Respondents are required to reply with the correct answers to a standard mobile number at regular SMS charges. One lucky winner who gets a gift voucher worth Rs. 500/- which can be redeemed in any of "The Raymond Shops".

The popularity and success of this initiative can be gauged by the responses we get every week. The most encouraging aspect of this aspect is that it is extremely cost effective and helps in reinforcing learning. Currently this program is available in English and we are exploring options of extending this initiative in other Indian languages as also management related.

Overall, the "SMS Training" initiative has been received very well by both the staff and the management. In fact, most of the staff look forward to receiving the "learning message" every day.

Happy innovating and learning!
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Comment by VR - Retail is all about such innovations and ideas. Great to hear about such happenings. I am sure, many readers would benefit from this idea.

Saturday, June 6, 2009

An interesting differentiator

In most consumer electronics stores the focus would be on range, pricing and of late it has been on in-store service and customer interaction. In that context, it was a pleasant surprise to see an advertisement of a store which has highlighted a latent consumer need and has used that as an USP.

Usually most such stores have one unit for display and either one more for purchase or not even that in the case of larger products, especially those which require installation. In the Indian context most products do require installation barring maybe things like the mixie, toaster or the hair dryer!

So, typically after a customer puts down, what is often an obscenely large sum of money the machinery swings into action. The store informs the delivery/ distribution centre of the purchase and they then schedule the delivery. But what if they don’t have any stock? Frantic calls to the company or distributor and hopefully the product is delivered to the retailers distribution point. The product then is received into the system (physically and in the IT system) of the retailer and then it is ready to be sent out for delivery. Phew! Imagine if just reading about this was so long, how long the actual process would take.

A shortcut would be to ask the distributor to deliver directly to the customer and then manage the paperwork to bring it into the retailer’s system to adjust it against the sale. But, that has issues and is not a preferred action plan.

So, as a consumer what do you experience? After paying the money and not hearing the door bell ring, you wonder why? Calls to the store give you vague answers as they are also usually not very clear when this whole process will be completed. If you are lucky you would have got the product without this hassle or just when your fuse is about to blow, the product arrives. Or you give up and when the product arrives, it is usually a mild surprise!

Now this chain has taken the entire fun out of this Russian roulette by promising a 98.9% same day delivery. But hey, hang on. The statement is just a statement. One does not know if it is a promise or a mention of their track record. And there are no little asterisks to indicate hidden meanings. So, it is up to the customer to interpret it the way they want.

Let’s come back to the customer’s mind. You see this advertisement. Notice this, but move on to check some of the prices mentioned. You find it interesting and you are also looking to buy a LCD TV or a walk in fridge or whatever. You also have memories of the previous time you purchased something and you got it almost on the first anniversary of the purchase. Suddenly, the 98.9% becomes a powerful hook. An excellent differentiator.

In a segment where promotions can also not be entirely at the discretion of the retailers and market Operating Price rules (MOP – Will explain in another post) and most stores rapidly changing their looks to offer an experience, this is a true differentiator.

Hats off to whoever thought of this idea. I would have liked to have done this first. But, I admire this innovative and subtle differentiator. This store is now redefining the rules of the game and drawing customers away from a pure pricing play platform.

Excellent!

Thursday, June 4, 2009

Welcome to India — We are like that only!

The Hindu Business Line has published my article about the Bharti-Walmart's Cash & Carry store opening.

"When Sam Walton opened his first store all those years ago, he had the luxury of being a pioneer and could afford to experiment, make mistakes and perfect the model — without being under the public glare. However, the first store of Bharti Wal- Mart cannot afford this luxury. Apart from being in retail, it is a joint venture with a leading Indian and US corporate. Its every move will be watched and commented upon, second-guessed and debated. A couple of thoughts came to my mind while reading about the opening of the first store."

The article's URL is -

Tuesday, June 2, 2009

Is Retailing being redefined?

I have been taught and have also seen it in experience that Retailing is more about the back end. It is all about aggregating volumes and leveraging this to generate value. This value helps manage the differential cost structure of a Corporate Retailer as also enables passing on some of the same to customers. The whole cycle of value creation and bettering the value proposition gets more customers, which in turn enables increased levels of volume aggregation. This helps in establishing a sustainable business cycle.
A few days ago I saw a press report titled on how Retailers now prefer to buy from wholesale markets (New Indian Express article – Retailer Shun Direct Procurement). Frankly I was flabbergasted.
 
If this is indeed the thinking and reality, all I can say is that it is fraught with dangers.
  1. Everyone, including the street cart vendor purchases from the wholesale market. I agree that the volumes purchased by them Vs a chain of stores would give some price advantage to the chain. Whether the advantage is large enough to compensate for the cost structure variance and yet offer a meaningful value proposition to the customers is a huge question mark.
  2. Such ideas only further arm the anti-corporate retail voices. Their main grouse has been that conventional traders would be wiped out in the short term without any sustainable long term benefit in terms of development of agriculture, cold chain, etc. When corporate chains also start being dependent on the wholesale, one only further strengthens the existing the supply chain instead of making a meaningful change.
This seems to be a short term fix-it approach with only the current operating cost being the primary consideration. The past few years have seen massive expansion of the number of stores and distribution centres. But, has not been matched with grass root level efforts to aggregate value and truly make a difference.
I am reminded of a couple of corporate efforts who did this and they have reaped rich rewards. One that comes immediately to mind is the corporate supported sunflower cultivation when sunflower oil started becoming a big thing in India. There are lots of similar stories.
If Retailers pursue private label to leverage volumes and reduced cost structure of such products, but depend on the wholesale market for fruits and vegetables, there is a clear dissonance in strategic thought. This is akin to saying that I will purchase from the stockist and distributors instead of negotiating with the manufacturers to build long term value.
I am reminded of the milk revolution started by Dr. Kurien (who was later sidelined by corporate!!). Right now India needs a fruits and vegetable revolution. It needs a GREEN REVOLUTION. A comprehensive cold chain is needed, along with enormous inputs and support to the farmers.
Corporate Retail was supposed to be the answer. If they also follow the same wholesaler route, who will now make this difference?