Monday, June 29, 2009

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.


puresunshine said...

A blind test comparison between coke and pepsi to retail outlets is very interesting. Truly the stock factor is definitely an issue. Many times I have found my desired product out of stock but then there is a better deal on a rival product, and since we have made that trip to the supermarket, we buy that. I dont know if this strategy is to promote rival products, but not stocking major brands does affect the branding of the retail house.

Post a Comment