Friday, December 27, 2013

Indian Retail; Analytics is dead without Operational Excellence

The hot topic nowadays is “Big Data” and therefore analytics. This promises to have great potential for Retailers in terms of understanding and interpreting shopper behavior and expectations. Thereby enabling the Retailer to develop a more focused and sharply defined competitive advantage.
But, then are we missing something very important here?
I think the more important thing especially in the Indian retail scenario is operational excellence and execution focus. However, this does not sound as “cool” and futuristic as “Big Data”. Perhaps this is why I am asked more about “Big Data” and analytics in many of the forums, programs and classes and there is a marked decrease in interest levels when I choose to talk about operational excellence.
Analytics and “Big Data” is essentially about interpreting data. What if the underlying data itself was wrong?
Retail, Indian Retail, Store, CRM, Indian Retail Industry
This poster was displayed outside a leading chain of stores recently. Apart from the obvious mistake of printing out the email verbatim and just sticking it on a stand, the entire approach is incorrect and counterproductive.
The bonus points have a cost attached to it in terms of the redemption value, the cost of administering the system, etc. The Retailer has started incurring this cost hoping that capturing the birthday and anniversary details of shopper will create a sales opportunity. The bonus points are a reward or can even be called a bribe to make the shopper share this information with the Retailer.
You can see the level of operational excellence or rather the lack of it in the picture. In this context, how productive and useful is the cost and effort being expended on such initiatives? More importantly, what would be the accuracy of any analytics done on this? Suppose a report was being generated about the shopper participation in this scheme, it will obviously have very poor numbers and the data would be skewed.
Instead, if the Retailer had spent some more in having a better caliber of person who sends out an email with a separate attachment of the poster with the attachment, the impact level improves. Added to that is if the Retailer motivates the staff to implement such initiatives, then the impact and the data coming out of such programs would be far more meaningful.
In such a context is it worth it to spend large sums of money on software and skilled people to mine data and analyze the same?
Take a simpler example of sales data. The cashier tries to scan a product and when they are unable to locate the product code, they scan it using some other product code with the same price to complete the billing. This directly affects the inventory and sales data. H would such a level of data accucy help in any analysis?
At least in the Indian context there exists enormous opportunities for shopper delight and increasing operational productivity which will have a direct impact on the bottom line. Analytics and fascination with “Big Data” is good and should happen but after the operational issues are fixed and execution excellence is a reality.
Click HERE to join the debate about whether Retail analytics should wait for execution excellence.

Friday, December 20, 2013

Indian Retail Opportunity; Shipping Container Stores

PUMA, F1, Indian Retail, Idea, Innovation, StoreRecently I read about a news item that a 40 foot shipping container is being used to open the first of its kind restaurant in Kakkanad near Kochi in Kerala, India. This reminded me of the PUMA container store in Singapore, which is was an interesting Pop-Up Retail initiative by PUMA during the F1 in 2011.

Interestingly the idea of using shipping containers as temporary or permanent real estate is not new and you would have seen these in many of the construction sites of large projects. Even extending this idea to Retail is not new. Dordoy or Dordoi Bazaar in the city of Bishkek, Kyrgyzstan, has a large marketplace which is made up only from discarded shipping containers.
Indian Retail, Idea, Innovation, Store

These are placed 2 high in rows. The container at the top is the stocking or warehouse space while the Retail business is conducted from the container placed at ground level. This is a massive and sprawling market which has more than 5,000 container stores.

Is this not an excellent opportunity for Indian Retail?

A 40 foot container is 40 foot long, 8 foot wide and tall. This means a floor space of 320 sq. ft. which is the space that a small kirana store would have. The ceiling height at 8 feet is a bit low but can be managed if designed well. The reality is that one can purchase these easily and eBay lists these from USD 1,000 onwards to USD 5,000 for a new one. Even with the current exchange rate of 1 USD to Rs. 63, these would cost a maximum of Rs. 3,15,000 which is less than Rs. 1,000 per sq. ft. as a capital expenditure.
Indian Retail, Idea, Innovation, Store
Imagine the possibilities in the Indian context where real estate is increasingly becoming expensive and also a constraint.

Any format, especially lifestyle and specialty stores can explore this option for temporary expansion within the city during festival or promotion periods.

- Open spaces in tier 2 and 3 towns can be easily leveraged for expansion.
- As these are built for transportation, such pop-up stores can be transported to several tier 2, 3 and even smaller towns to increase penetration.
- The operating expenses for such pop-up outlets should not be high and even the capital expenditure might get be recovered fairly soon.

Definitely worth exploring!

Picture Courtesy 


Tuesday, December 17, 2013

Retail Trend: Reimagining CRM and loyalty programs with technology

A recent news was about an interesting app rolled out by the up market department store chain; Neiman Marcus. This enables their customer to be linked to a specific sales associate and for a start enables the staff to update the customer about new arrivals, it alerts the store staff when the customer enters the store, etc. Obviously this enables a whole new level of personalized service and customer relationship management (CRM). This video about NM Service would help you understand how this works.


With a new year around the corner I have been fielding questions about what does the immediate future hold for shoppers and Retailers. A recent post of mine was about technology changes, namely 3D printing and Google glasses, which might redefine shopping and it might come into our lives even as you read this post. To use Neiman Marcus as a case to point, they have unveiled a range of exclusive gifts for Christmas which can be printed out in their store!
Neiman Marcus, Retail, Indian Retail, CRM, 3D Printing 
This lovely pendant can be printed (!) with the shopper’s initials at the store.
Even assuming that printing of products at home will take time as 3D printer penetration in households is a constraint, there are other implications to these development. If we are to combine all these separate technologies, it would lead to a completely new paradigm in shopping, especially in the CRM and loyalty space.
Imagine this, which could be a reality very soon. You as a shopper enter the store where the staff have been fitted with Google glasses which is linked to the loyalty database. As soon as the staff sees you, they know your name and can recall your preferences, etc. The staff will be able to wish you in a personalized manner and interact with you. Add on 3D printing and the staff might be able to print out a unique and personalized SKU for you. Your experience will be one of a kind and cannot be duplicated easily by a competitor. In essence the CRM would be at the absolute best.
Is it practical? Is it cost effective? Which formats can afford this?
Yes, it is practical and depending on the format and cost structure the technology will pay for itself in terms of customer retention and profitability. I have never been a big fan of loyalty programs by mass merchandisers and I don’t think that this is a path they should even consider. A typical CRM program would approximately cost 3% of sales and in the case of mass merchandisers who focus on pricing and volumes this cost would be better spent on lower prices of the KVIs.
On the other hand lifestyle and specialty formats should definitely explore this, especially in India. A good CRM program can ensure that loyal customers generate anywhere upwards of 50% of the sales for a retailer. Therefore, incremental marketing costs can be dramatically cut and such a technologically enabled CRM program will give more bang for the buck. The other direct benefit is the increased conversion rates. This means that the staff would be interacting with more of actual buyers instead of potential buyers, thereby making the staff more productive. Lastly, the lifestyle and specialty stores can also work towards rationalizing their assortment and increasing the stock turns, leading to increased profitability.
Needless to say, all these would remain as useless gizmos if the Retailer does not leverage the data being generated to customize their offerings. Just having loyalty cards, giving points or outfitting the staff with Google glasses will not make any customer happy unless they get some direct and tangible benefit from these initiatives.