Retail = Fast reflexes and foresight

I appreciated this Retailer who has reacted by leveraging the budget. Although they do not lose anything because the stocks would have been invoiced at existing prices, this preemptive strike is very good for the following reasons –

• Customer trust and loyalty: Customers would increasingly trust this Retailer because they demonstrate responsiveness. A key factor in building loyalty.
• An opportunity to increase sales and liquidate stocks: Especially in a format where stock holding value is high and any opportunity to sell is welcome.
• Vendor respect: Such a Retailer would stand tall in the eyes of the vendors who would then increasingly cooperate instead of having conflicts.

All in all, a smart move and well worth emulating.

Now, advertising is not a simple business. One needs to have the artwork ready, media space booked, the material sent in advance and so on. So, how did this Retailer react in less than 24 hours?

Simple. It’s all about Foresight.

Book media space. Give a material. Meanwhile have two artworks ready. One talking about how the prices are reduced from today (If the budget led to price drop) and another about holding the old prices in the case of price increase. The budget speech ended post lunch yesterday. An hour or so to decide and send a new artwork to the publications.

Sounds simple isn’t it? It is. But involves a lot of planning and thinking and hard work. That’s Retail Marketing for you.

A moment of disappointed irritation

The finance minister makes mention of a sector that contributes 8% to the GDP and I expectantly looked at the TV.

Yet again Retail whose size is as big and bigger than some other industries and also contributed approximately 8% to the GDP was left out in the cold.

Starting from simple expectations about offset of service tax to mammoth ones like industry status, the wish list was long. But was ignored.

Sad.

Food Inflation @ 18%. What a joke!!

I received a SMS from my friend Vishy which reads as follows –

“Tur dal rates for one Kg as on 8 pm today (10/2/10) – Nilgiris Rs. 115/-, Spencer’s Rs. 99/-, More Rs. 79.98/-, Fresh – Rs. 88.45, Nadar Kadais – vary between 68 to 85. How can there be so much variation in a KVI like Tur Dal? Do people cross check amongst stores?”

When I spoke to him he was visiting wholesale markets in places like Gulbarga where Tur Dal was being sold for Rs. 38 per kilo. Smaller farmers who sell locally at villages might realize even less at Rs. 32 or so per Kilo. The talk in the wholesale markets was that the prices of Tur Dal had actually come down over the past few weeks. But at the retail end in an urban market, it was soaring!

First is that, this reflects rather poorly on chain stores who are supposed to aggregate volumes and therefore be able to influence the supply chain in order to create value for the consumers. This does not seem to be happening. These chains are at best sourcing from the millers. So, the question is that what or who is driving up the prices? And who is going to bring in changes and advancement of the supply chain if not Retail?

At least Tur Dal can be stored and inventories managed as a buffer to commodity price fluctuations. Now, take the case of a perishable like Tomato. A decade ago the farm gate price used to be Rs. 2 as compared to the Retail price of Rs. 8, while for Potato it used to be Rs.6.5 and Rs. 12. Nowadays, with the retail price being in the range of Rs. 20 odd, do you think there would have been a significant increase in the farm gate prices? Not at all.

Today the price of Hybrid Tomato was Rs. 18 and Potato was Rs. 23 and the sourcing price was only Rs. 3.50 and Rs.9. respectively. Again the point of whether the farmer is benefiting from the increase in prices is there. The Retail price rise is not even proportionately matched by the farm gate price. Today evening, the prices of Tomato and Potato had dropped to Rs. 16 and 11. Does the farmer get such low prices to buffer such huge price variations, by the others?

Why does this happen?

Consumer habit, dependence on the retailers and even some amount of apathy, leads consumers to overlook prices of items purchased from their regular store. Trust drives their habit and the same trust also ensures that they do not check the prices or the bill.

As a consumer, when was the last time you checked the price or the bill of some of these basic items?

P.S. – The Retail prices of tomato and potato have been averaged out across a few stores.

Is it Retailing?

Recently while travelling back to Chennai I was at the airport in Kochi and saw a large number of shops at the domestic terminal. After checking in I decided to explore these shops. What I saw and experienced was an eye opener and on a magnified scale seems to be the problem with most shopping malls.

There were approximately 50 odd shops and most of them were closed. That by itself is OK, given that it was only 7 a.m. But what completely flummoxed me was the sheer repetition and lack of differentiation. I counted 6 odd book shops and the balance were roughly equally divided between Kerala handicrafts, spices, etc. and Kerala Sarees, Apparel, etc.

When I tried finding some differentiation between these similar stores, there were hardly any. Similar or rather the same books, similar packets of banana chips, similar white sarees with designs and so on.

I wonder how these businesses are surviving.

I do not think they differentiate on price because the others would react to any attempts at discounting. Range seems similar. Service might be a differentiation, given that only a few were open so early. Maybe they have devised a staggered timing system where each group of shops opens at different times during the day.

Even then, it seems to be an enormous waste of retail space, inventory and other related investments to create similar shops in a confined environment.

The potential to offer a larger and more diverse range obviously exists. Similarly, I have seen several malls which have focused on getting occupancy instead of ensuring that the right retail mix is ensured for a lasting consumer value proposition.

An airport might still survive with such an approach to retailing with a worse case scenario of reduced income from this area of operation. Whereas a mall which does not ensure an optimum mix will lose out on the long run simply because that is the merchandise mix of a mall and needs as much attention as a Retailer needs to give to their merchandising strategy