An idea whose time has come?

On the 4th of Jan 2010, I got up to face the first working day of the year and decade. After a nice vacation with the family the obvious tinges of blues in the air while I was wading through the news paper. I turned the pages and suddenly my brain went into overdrive and all thoughts of blues or greens vanished when I saw the cartoon as shown below.

I saw this interesting cartoon in “The Hindu” and was struck by how wonderfully the cartoonist has captured the essence of an article of mine “Mobile and Different” which was published last year in May ’09.

- Mobile and Different

Either the cartoonist has read the article and the thought was powerful enough to inspire this cartoon or he has seen and heard of expectations and indications from consumers and vegetable cart sellers and feels that the trends indicate such developments.

Either way, looks like the idea mentioned by me in 2009 is interesting and might even see the light of the day as its time seems to be coming, if not having come!

Cartoon courtesy: The Hindu dated 4th January 2010

2010; Here we come!

Phew, 2009 is almost through and what a year it has been. I am sure everyone would be looking forward to 2010 with a lot of hope and wishes for positive things to happen and hear about.

Although personally 2009 was not too bad and is the year which saw the start of “An Indian and A Retailer” as also its rapid acceptance and widespread popularity as seen from the 10K plus walkins in less than a year. Thanks to all of you for that.

2010 is awaited and everyone might have a wish list or two. May as many wishes as possible come true for everyone. The coming year is expected to be a milestone in terms of how economies manage the recovery, how companies leverage opportunities that are sure to emerge in the recovery phase. Indian Retail is also expected to have an exciting journey and a few things that I expect to happen are –

• Consolidation - either by collaboration or purchase. There is not enough of aggregation of volumes for a true retail play and this might change with either collaboration in the back end or simple M&A.
• Coming of age of the conventional outlets: The humble Kirana proved that their business model is not only sustainable but also recession proof and robust. With increasing awareness and education I am sure that this hardy tribe would leverage their business model to become better and more competitive.
• Beyond ERP: Post the scramble to implement the big bucks ERP everyone was struggling to get it right and in no mood to look at any other IT initiative. A whole host of tactical and strategic IT solutions exists and now is the time for Retailers to start exploring and exploiting such solutions.
• GST? I am not brave enough to predict that GST would come in and change the way trade happens in India. But, I definitely hope that this happens soon and in 2010 itself. As also, I wish that the government starts recognizing Retail as an important industry segment and accords it due recognition and support.

Will sign off 2009 with my Best Wishes to all of you for a Very Happy New Year and hope that all your wishes and plans come true.

What an idea!

Sometime ago while I was browsing in a supermarket I noticed a person checking out products on the shelves and then fiddling with his mobile phone with a stylus. He would again check out something on the shelf and shift his attention back to his mobile. At first I thought he is one of ‘those’, people who are chronically addicted to their mobiles. Having seen increasing instances of such mobile centric behavior, I have a strong thought that human evolution might lead to ears with Bluetooth like capabilities and fingers which are more like the stylus.

Anyways.

Coming back to the story, I realized that the person was actually noting down something from the shelves. I could think of only two possibilities; one being that he was checking the stocks or he was checking the prices and was from a competing store.

(Please overlook the poor quality of the picture as it was taken with my mobile in indoor lighting)

My curiosity was piqued and I approached him to enquire. He was indeed taking stock and also taking down the requirements for each of the SKUs as he was the distributor’s representative. Being very impressed by this use of technology I requested a picture of his devise, which is what one can see here.

It is indeed heartening to see the slow intrusion of such technology into Indian Retail which has typically chosen man power options in the technology vs. people cost benefit analysis.

This person visits the stores, checks the stocks and captures the requirements, goes back to office and updates everything by plugging his phone to a computer. Technically he need not even go to the office and can do this from anywhere by sending it over a call or as a message.

This is just a representative use of technology in retail which is today affordable and helps increase efficiency and productivity. More importantly, the accuracy increases vastly in a context where data accuracy was guestimated to be anywhere from 60% to 80%.

Of course there are myriad such things which can bring about significant operating changes and shall detail a few in the coming posts.

Lastly one should remember why adopting such technologies is considered difficult in the Indian context. It is simply a matter of cost.

Quite a few number of years ago when a new store was being planned, the debate was about having a hand held, radio frequency based device to manage stock receiving, inventory checking, etc. versus having it done manually. Needless to say the manual way won out because the other option costed some 3 or 4 times that of doing it manually. With technology costs coming down (take the case of Netbooks) Indian Retail might find the time right to explore some interesting technological options in several functional areas. However, the fact of the matter is that a device that appears affordable at USD 1,000, might trigger second thoughts because; at INR 45,000 for a 3,000 sq. ft. store, it is Rs. 15 per sq. ft. and the meter starts ticking if multiple such devices are required to make it effective.

Supply chain tangle, untangle

Consider the picture above which tell the story of supply chain management challenges in India, so poignantly.

The large land mass with poor and in some cases nil infrastructure is challenging enough. Add to that myriad taxes and levies that are imposed from state to state. GST which was supposed to have been introduced from April 2010 appears to be delayed.

The variance between farm gate to end consumer price can be as high as 4 times for tomatoes largely because of damages which could be as much as 40%.

In isolation all these statements and nice numbers make for lively discussions and debate. When one sees a picture of a truck with paddy being ferried on a barge the reality of managing supply chain in India hits a person, hard.

Are there any solutions to manage this, apart from the clichéd statement of setting up distribution centers and transportation management?

I think there is a possibility to address this in a very different way and have written a detailed article about it, which was published recently in the Business Line, Brand Line. Pls click on the following URL to read the article.

Supply chain tangle, untangle

Photo courtesy – The Hindu.

Bucking the trend

Customers in Chennai look forward to the annual year end sale extravaganza unleashed by almost every consumer durable retailer. So it was a pleasant surprise to see these advertisements by a consumer durable retailer who is trying to break this pattern while attempting to grab a larger share of consumer spends by changing the rules of the game. After all Retail is all about breaking shopping habits and gaining through this disruption of established consumer behavior.

In fact the story behind the year end sales itself has its genesis in similar intent; that of wanting to break established consumer behavior and gaining in that process.

December 15th to January 15th is a period called Margazhi in the Tamil calendar and this is somewhat similar to the shradh period observed in Northern Indian. Margazhi is supposed to be a month dedicated to devotion and prayer. Marriages are not conducted during this period and usually any materialistic activity like big ticket purchases is avoided in this month.

Although the idea and intent of this belief was steeped in tradition, religion and culture, it did hurt the Retailers of big ticket items rather badly. Lack of marriage led purchases coupled with people not making even routine purchases for their home led to very sharp decline in sales and usually left the Retailer and manufacturers with large inventory levels at the end of the year.

One innovative Retailer decided to buck this trend and started the concept of year end “Cost Price Sale”. The USP of this activity was very simple and of great interest to consumers. The initial few years saw this sale being conducted on the 30th and 31st of December and the 1st of January. Advertisements and adequate publicity created enough consumer craze and even mild hysteria to get the best deals. All the previous conditioning of Margazhi went out of the window and one could see hordes of people thronging the outlets. It went to such an extent that the Retailer had to take separate premises to conduct this sale in order to manage the crowds.

Like all good things, imitation followed and soon every consumer durable Retailer started having the year end sale in some form or the other. Typically this craze kicks off from the 25th of December and goes on till the 1st or 2nd of January.

I guess the Retailer whose advertisement I have shown above has decided to rewrite the rules of the game by advancing this sale by a whole month.

It might work well enough for the Retailer this year, but whether this is sustainable is doubtful because of the following reasons;

This year Diwali was very early and so November did not see very heavy expenditures by consumers. This is not the case in most years wherein Diwali and its associated expenses is during November and hence shoppers would need at least a month plus to recover.

What started off as a single Retailers innovative gambit has now become a market occurrence and consumers play the cherry picking game by visiting every retailer and comparing prices. In that context would customers blindly trust that they are getting the best deals and make purchases without the reassurance of comparison? I doubt it.

Anyways, let’s wait and see how this pans out and whether a new trend is established.

Making a mountain out of a molehill

The “Global Retail Theft Barometer 2009” report has led a flurry of news reports and yet another opportunity for India bashing. Headlines like “Nation of shoplifters?”, “Indians are world’s best at shoplifting” make for attention grabbing news while the more balanced publications still did succumb to headlines like “India No. 1 in Retail theft”, “India tops list of shoplifting nations”, etc.

This is a classic example of misunderstanding or maybe even misrepresenting facts to create a distorted perspective. In that context, let us do a reality check by examining certain facts without colouring them in any way.

First is the study itself. This is based on a confidential survey of only 1069 Retailers, although 4,200 large retailers were supposedly contacted. Which means that 75% of those contacted did not reply or participate in the study. I wonder why?

I have tried to see what kind of a questionnaire was used and am unable to access a copy online. So, will limit my view to the simple fact that one cannot, I repeat, one cannot effectively measure theft. At best it is an opinion expressed. What a Retailer can measure in the difference between physical and system stock. How can this be segmented with precise percentages between theft and other reasons.

There are various components of shrinkage. Wrong receipts, Wrong billing, Inaccurate stock audits, Unaccounted breakage/ damages and of course willful theft in transit or by store staff or customers. Any retailer can first of all only measure the overall shrinkage and even that is a guesstimate in the case of many operators. To expect them to be able to measure the component of shoplifting is incredibly hilarious. I just loved the decimals in the figure of 45.2% of shoplifting and 23.3% employee theft! It does create an aura of absolute accuracy.

So, it means that the entire range of system and process related issues are responsible for only 31.5% (Note the decimal point!) of the shrinkage. Having been in the industry for so long this is incredibly unbelievable. Most Retailers would state that their fill rates hover between 70% to 85%. In a context where system inefficiencies cannot ensure optimum stocking, to state that the contribution of system/ process errors is far lower than theft is at best wishful thinking.

Only the shrinkage figure of 3.2% has some validity because it is objective and is based on reality. In fact even that is suspect in the case of certain operators who do not have a robust stock audit system in place.

Let’s retain some objectivity when reviewing such reports and not get carried away by fancy headlines and provocative reporting.

Interesting experiences of Customer Orientation

Today evening I was searching for some exotic food stuffs to attempt home made pizza's. In the course of my search I witnessed two very interesting customer service experiences and would like to share that and leave you all with some thoughts.

1. Had picked up whatever was available and was waiting in line for billing. It was around 6 p.m. and most staff seem to be on a break basis the comments I heard (Funny time for a break on a weekend). There was only 1 cashier and she seemed to be quite unhappy to be one of the few working and not on break. Suddenly she called out for the duty manager to come. Another staff replied that he was eating to which the cashier petulantly replied; "Tell him his authorisation is required for the billing and he will come". Immediately, a youngster rushed up trying to hide his right hand which was covered with rice. Obviously he had been having a belated lunch. I was impressed with his reaction, including the fact that he did not take time to wash his hand and focused on the task at hand. A true Retailer and he will go far in life. As for the cashier, I am sure she was least apologetic for having created a situation wherein an authorisation is required. I can state this confidently as a retailer since the customer had not changed any of the purchases and so the only reason for an authorisation is an error by the cashier.

Now the question that vexes me is that with the increasing shortage shortage of store staff will the staff be more and more indifferent to the customer while the store supervisors and managers scurry to overcome the service deficiencies? How long will this last? How can this be handled better?

2. Next I landed up in another store and was enquiring where I would find chili flakes. This middle aged store staff called out to another that I was looking for chili flakes. This staff was a youngster and picked out the packet from a carton kept at the lowest shelf of a rack which did not even have shelf edge labels. Now my curiosity was piqued and I went around asking staff for directions to products and was completely amazed with the exact direction I got from each staff for products which were a few aisles away and one was at the other end of the store. I was reminded of the customer service training sessions I would take in the early days where Product knowledge was stressed upon including the location of the various products. Hats off to this team and more importantly to whoever has trained them.

How can such brilliant service be duplicated and replicated across stores? formats?

Worth thinking about.

Whai arhe bhe insiting on Enghlish!

I have seen Chineese food on a menu which also had an offering of Mashroom XXX!

I have seen Hotel Vegetable and Non Vegetable!

I cant figure out this fixation with English, especially wrongly spelled and mispronounced.

I have interacted with service staff who would rather speak complete nonsense because of bad pronunciation and wrong usage of words, even when addressed in the vernacular language.

Why?

Maybe the HR and Training executives need to wake up and realise some ground realities and home truths!

Most service staff especially in Retail are from economically challenged backgrounds (Politically correct term for poor people with limited or no exposure)

They are further subjected to training programs which are full of PowerPoint presentations and lots of Enghlish!

Is the unsaid and subconscious conditioning that, we want you to be like goras!

Service is service, regardless of the language used to deliver the same. I think that it is high time that staff were trained in vernacular languages and the focus should shift from language to service orientation and service delivery.

Recently when I went to Yercaud near Salem to train a bunch of youngsters on leadership, I experienced a superb example of a person’s pride in vernacular language. While waiting for the train in the night I wanted to use the wash room and walked up to the nearest platform shop and enquired where the wash room was and then said thank you after getting the directions. The person replied in Tamil “Nandri, Vanakkam”. Which loosely means thanks and regards. I am impressed and obviously this interaction of a few seconds left a strong enough impression in my mind. This person has chosen to prioritise the communication instead of the language and in the process ended up communicating far more powerfully than if he had replied with an accented welcome!

Internationally speaking, the French are proud of their language and so is the case with many other countries. Why should we bend over backwards to prove that we know better English that most others, which is also incidentally the fact!

Conversely, if a large tourist group of Indians lands up in California, should they expect to be addressed in Hindi or Tamil or Telugu or possibly all Indian Languages.

How will they do assortment planning!!

In the previous post, I was mentioning about a truly different store and next to it was another truly different store. A store selling Indian drugs (medicines).

Another interesting store which is different in terms of assortment and presentation.

While walking through this shop I started marvelling about the challenge they would face with regards to assortment planning and inventory control. Understanding such diversities of Indian Retail is what would help create a world class Retail mechanism in India.

The variables to be handled and managed are far too many and too complex. Yet, they do it and do it well. But, for 1 store or maybe a few stores. The challenge facing Indian Retail is how such interesting and disparate ideas can be scaled up using systems and processes.

This can be done and if anyone says otherwise don’t believe them!

A truly different store!!

Have always advocated the concept of a truly different store and during a recent trip of mine I came across this interestingly different store. Please note the name of the outlet “Coconut World”. As customers we were driving past this place and after noticing this unique name, we made an U Turn and came back to visit this store.

Of course the expectations that this name evoked were very different from what we actually experienced. The name created an imagery of a store with a whole range of products made from coconut and related materials. We expected to see handicrafts, curios, food stuff, etc. (Hint, Hint – Maybe they should realign the assortment in line with the branding!!)

What we discovered was a small cafe kind of place (Note the rack of tender coconut on a rack outside) which served a lot of coconut related food items. To be fair to the store, they also had several coconut related products including a very innovative one; coconut pickle.

Now, that was one thing I never expected to find anywhere in the world; Coconut pickle. I don’t particularly fancy the stuff but my son says that it is the best thing he has tasted ever!

Which brings me to another point of my basic retail model; differentiated assortment. There is a huge potential to this interesting format. How it pans out is dependent on so many factors.

But, they have managed to attract attention and a share of my mind space by ensuring two elements of my basic retail model;

• A truly different store
• Differentiated and relevant assortment

Hope to see and share many more such stories with all of you, which illustrate how well the basic retail model works in real life!

Happy Deepavali/ Diwali!

Best wishes for a Very Happy and Prosperous Deepavali or Diwali depending on which part of India one hails from.

This is one festival or social occasion which not only unites the country (which even the myriad languages are not able to do)but more importantly, this is a true Retailer’s festival.

If anyone were to ask me what was a national day/ common festival or occasion for Indian Retailers, my unblinking reply would be Deepavali or Diwali.

Regardless of the mythology behind this festival which changes from Shri Ram’s return to Ayodhya to Shri Krishna’s triumph over the evil Narakasura, this is a festival which celebrates rejuvenation, hope, prosperity, aspirations for future prosperity and overall materialistic well being.

Is it any wonder that the festival is celebrated by purchasing all sorts of new things. It is symbolic of a new persona/ new beginning and an auspicious start.

Hey, all this is fine, but where does Retail figure in all this?

First of all, for most North Indian traders and businessmen Diwali is the auspicious start. I still recall the visits to the cloth wholesale markets with my father where on Diwali night, Laxmi puja would be done and the books of accounts taken from the Puja and a fresh set of accounts started. So, in that context, Diwali is definitely a trader/ retailer festival as it is unique to them.

At a slightly larger scale, pan India, the Diwali season accounts for anywhere upto 60% of a Retailer’s annual sales. Which other festival or occasion can come close to this in terms of Sales?

So, in that spirit – as an Indian and a Retailer, where Deepavali or Diwali is the biggest thing for most Indians, WISHING ALL MY READERS AND SUPPORTERS A VERY HAPPY DEEPAVALI/ DIWALI & A Very Prosperous Year Ahead. Special wishes to my Retail brethren, for the cash tills to ring continuously, loud and long during this festive occasion.

Intricacies of Indian Retail

This article of mine appeared in 'Retail &Leisure International', which is a UK based magazine in their Sept '09 issue.

The Indian market is a strong attraction for any marketer simply because of the vast consumer base. A population of billion plus, of which approximately a third live in urban areas and this is expected to go up to 40% by 2030. This is enough to make any enterprise worthwhile, especially retail and more so food retailing. Most international chains are looking at India keenly and waiting for the opening up of FDI eagerly to partake of this market opportunity.

However, there are several factors that an international operator needs to be aware of and more importantly build into their entry strategy, failing which, even after FDI opens up the going would not be smooth.

• Competition – Apart from the thousands of corporate chain stores that now dot the Indian Retailscape, there are approximately 12 million conventional outlets. Of these, roughly 60% to 70% are grocery stores and a third is in urban centers. Taking into account the geographical spread of India, this simply means that there are far more number of stores in cities and they continue to offer a compelling value proposition, fronted by convenience.
• Also, the conventional stores operate with a significant cost structure advantage as also generate far higher sales per sq. ft. because of their smaller size. Such stores would definitely not be able to generate higher margins as compared to chain stores, especially those who leverage global sourcing. However, the relatively higher sales and far lower cost structure would enable these stores to comfortably take on any competition in their stride. Therefore, any chain store would require a dual strategy to manage competition from other chain stores as also the large number of neighborhood conventional outlets.
• The Indian consumer – The consumer behavior is changing towards increased consumption and preference for a better lifestyle. However, the core sense of thrift and caution has not been eroded completely and the recent downturn has made these consumers more value driven. So pricing and promotions are not just important, they are crucial.
• Indian cities – Barring a few newer cities, most have grown and morphed over the years. A substantial part of this development happened without zoning laws and therefore the cities have residential areas interspersed with commercial development. It is only in the past few years that well defined residential suburbs have come about and even that has not completely removed residences from city centers. If a store wants to leverage all the relevant catchment areas, real estate costs are higher in most parts of a city. If the store network plans on averaging this by having stores in the emerging residential suburbs, the sales would usually be inverse to the rental and by that logic the average sales would be lower.
• Supply chain – The sheer physical spread of the country makes for a challenge with regards to supply chain. Compounding this is the current taxation and levies which does not allow for a distribution center network that can be planned basis distance alone. However, the recent budget proposal to implement GST by 2010 is a step in the right direction and would go a long way in enabling chains to plan more efficient supply chain system.
• Other statutory and legal framework constraints – Today a store needs to obtain as many as 20 – 30 different licenses to start operations and usually from different authorities. Similarly, there is a legislation called APMC act in most states which effectively prohibits direct procurement from farmers. Some cities levy an entry tax called Octroi, which indirectly forces a retailer to either set up a distribution center in a higher rent area within the city or incur higher transportation costs for store fills.
• MRP – Although there are many instances of price regulation in the retail sector across the world, I don’t think any other country enforces the Maximum Retail Price (MRP) rule. This price is printed on product and is applicable on all packaged products. This price is used to calculate certain taxes and manufacturers peg the margin structure with regards to this. As a corporate entity any chain store does not have the luxury of selling above this price and hence it acts like a glass ceiling. Even in high cost locations where the catchment might not be particularly bothered about the price, a retailer can sell only at MRP, whereas in price sensitive areas one is forced to discount, especially for KVIs.

I guess by now the reader would have concluded that my secret mission is to deter any international retailer from entering the Indian market. However, that is not the case. My intent is to portray a realistic picture that balances the huge market potential of Indian Retail with the ground realities that one would have to manage.

My suggestion to any international operator watching the Indian Retailscape with the intent of future entry would be to do so immediately leveraging the Cash & Carry route, simply because it is now immediately possible and would enable any retailer to build a ‘game changing’ back end infrastructure.

Take the food segment for example. It is no use focusing only on distribution centers, transportation, etc as an entry strategy. This would address only 60% to 70% of the household consumption in terms of CPG/ packaged products. Also, given the MRP scenario, there is a limit to how much value can be generated by focusing on the supply chain of these categories.

30% to 40% of Indian consumption is basic staples and grocery items as also fresh produce. Significant work needs to be done in this sphere to extract value from the supply chain. Being dependent on the same wholesale/ semi-wholesale chain with marginal infrastructure at the tail end will not help. Paradigm changing initiatives like end to end cold chain, cooperative/ corporate farm, etc. should be explored and indulged in to extract the value that is present, but is now lost due to damages and intermediaries. The APMC act not withstanding, such initiatives are possible and would provide a competitive edge to any retailer.

The game changer for a new entrant would not be setting up yet another store with maybe better facilities but in offering a significantly better value proposition. And for that, the key would be the back end.

Moving away from the food segment, several other product categories have not even been explored; Home Improvement being one. Housing being a key aspiration for Indians, the economic recovery will definitely see a boom in this sector. A retailer who understands the intricacies of Indian Retail would only stand to garner a major share of this boom.

In summary I would state that bring on the global best practices, but Indianize it for it to work, and it will.

Consumer insights; I don’t know how to make the right choice!

Whenever I address any audience with regard to Retail - I am fond of making a statement which inevitably provokes a reaction of shock and disbelief - the statement being - that most of us are not qualified to purchase products. This is not an off the cuff remark, but based on my customer experiences over the years across product categories. Some examples:

• I have seen ladies sift through rice and hold it up and sniff at it. Most cases when I have asked, they could not tell what exactly they were looking for! This is not an issue of not being able to articulate. This is simply a habit.


• Even today when one buys vegetables which are not packed, there would be a significant number of ladies fingers which have been mutilated and left behind! Again habit based on an assumption that only those whose tips snap away sharply are tender and worth buying. This particular habit is comical and irritating in equal parts when one sees a customer busily snapping away at the ladies finger and then tossing a few aside for others. I have checked some of the ladies fingers which have been so disdainfully rejected, only to find that they are as good as the others.


• Customers purchasing furniture in many cases tend to knock on the wooden surface as if it was an occult material that would yield up secrets. These same customers would be completely lost when asked about MDF. The extent of their information is that the furniture seems to be solid (Usually meaning, made of wood) or otherwise (Which means, it is usually particle board)
  And so on and on.

The reality of the matter is that we tend to get very little information with regard to the products we purchase. We are exposed to a lot of information which are usually claims. However, we rarely get unbiased, objective information that would enable us to make a good purchase decision.

In many cases like the rice and ladies finger example our purchase is driven by ritualistic behaviour which is not understood and therefore not questioned.

Although, the extent of such uninformed buying depends on category, the most vulnerable is grocery - simply because in the case of most other product categories like electronics or apparel there is a benchmark in terms of various brands. In fact my view is that the concept of brands is itself largely driven by this ignorance and therefore the consumer needs to be reassured.

How does this influence retail?

Any retailer who understands this and follows a practice of doing things which would help address, allay and comfort the customer will be ahead of the game.

An obvious action point is to accept replacements and returns as mentioned in the earlier post. The more enduring step would be to engage the customer and educate the customer.

It could be simple things like circulating small pamphlets or leaflets about the product, signage or VM in the store or ideally by organising interactions with customers which would engage and educate the customers.

I have chosen to post this topic on Gandhi Jayanthi because there is a connection. His quotation about customer service (Customer is the most important visitor on our premises and so on) which is often bandied about can actually lead to customer disservice if not understood well. If one understands and internalises the universal truth of that statement then there starts an inherent conflict. We assume important people to be informed and knowledgeable, which is not the case with most shoppers. Hence, there is a dilema and retailers often swing to either extremes of becoming patronising/ condescending or becoming servile assuming that the customer knows best.

The ideal approach in today's context would be to internalise the statement of Mahatma Gandhi and execute it keeping in mind the customer insight mentioned above in this post.

Consumer Insights; Am I doing the right thing?

“Nice to see, but consider it sold if broken” or “No replacement or return of any items once purchased” used to be standard caveats in many stores a decade ago. I was shocked and surprised to see the ‘no replacement’ warning on the bill recently and started wondering if we have progressed at all with regards to consumer rights and consumerism.

I could not understand the concept of no items can be replaced or returned. This smacks of totalitarian attitude and assumes that the customer is actually more of a “con” sumer.

In that context the kirana store’s attitude used to be and is still a refreshing change. Many a time I have seen products including bags of rice being sent back and the same being replaced.

How does the kirana store owner manage to do it whereas many larger stores are afraid (Yes, afraid!!) to extend this basic customer service?

Simply because the he is a far more astute businessman completely tuned into the basic psyche of a consumer. Almost everyone has experienced the phenomenon called post purchase dissonance. Which basically translates into concern/ worry/ dissatisfaction with regard to the choices made and the product(s) purchased.

The Kirana guy eliminates this by giving the customers a psychological comfort which over a period of time grows into the foundation of his business - the trust of the customer - and therefore a habit to purchase from that store.

Most Corporate Retailers have taken this lesson, but whether it is to heart or is it lip service is something that I leave you to think about. The reason for my ambivalence is, although most of them have a replacement or returns policy, the on-the-ground experience for a customer who wishes to avail this is still not a very pleasant experience.

The usual culprits - internal policies, procedures and paper work ensures that the staff are apprehensive in extending this without any questions asked and in the process make the entire consumer experience most painful.

Lastly, if I don’t have the confidence that the retailer would support me in my moment of post purchase dissonance or even a genuine quality problem, would my loyalty be with that retailer?

Very doubtful.

Delivering a memorable customer experience

This article is the next in the series on how to implement the customer experience element of basic Retail model, in the Indian context. This was published on Sept 17, 2009.

The faith and trust a customer places in a retailer is a function of his shopping experience. Unless a Retailer works towards creating a memorable experience, the chances of success is very slim. There are many ways to achieve this objective. The Kirana stores use a one on one personalised approach which cannot be duplicated by Corporate Retail. So, how should Corporate Retail manage this crucial element?

To read the whole article, please click on this link -

- Delivering a memorable customer experience

Some views about Corporate Retail

I have been and will continue to be a passionate advocate of corporate retail which enables a chain of stores. Simply because this would enable too many good things if done well; Like supply chain, development of food processing industry, employment opportunities (Most Important), better tax realisation for the government, so on and so forth.

But then I can’t be blind to the handicaps and shortcomings of this segment too.

Although I have written about the cost disparity between corporate and conventional retail, the fact remains that most conventional shop keepers have learnt fast and got their act together; whether it is in terms of self service or packed groceries! Or even adopting technology in terms of billing systems, etc as reported in Times of India recently.

While corporate retail seems to be floundering! Why?

By now countless seminars, training sessions and perhaps even blogs like mine have created a humongous information base. Media, as always, has capitalised on this craze and one gets to see a large array of magazines about retailing.

Plus there are a handful of experienced retail professionals in India who have not only pioneered Corporate Retail, but have extensive experience spanning across formats and life cycle stages.
So, why is corporate retail struggling against all the conventional ones - be it the ubiquitous kaka ka dukaan or naadar kadai or some of the larger ones.

I believe it is because of the fact that a basic principle of retail has been forgotten. This is called as “Leadership by dirtying one’s hands”. This is my terminology and this translates into leading from the front.

I recall a very poignant memory. During one of my earlier employment stints, I was with Pepsi Foods. I happened to go route riding and was faced with an irate store owner who demanded immediate resolution of an outstanding issue. After polite counter points (Please read as Bull Shit, in CAPS) failed, I had no other choice but to call the office and take inputs/ seek help from the sales head. The secretary (Obviously well trained) promptly said that the head of sales was in a meeting. While I was relaying this message to the shop owner, he grabbed the phone and said in basic Tamil – Amma, naangalla veyillae vitthathaan, aangae AC le meeting nadakum. This means – Only if we sell in this sweltering heat, can you guys afford to conduct meetings in AC rooms. Needless to say, the concerned person came on line and the issue was resolved.

There is an old Tamil folk lore of a King who had a bell which could be rung by any aggrieved citizen and once, even a cow rang it and got justice.

In a country so rich with consumer rights, why is no corporate retail chain displaying any consumer orientation?

Apart from other things like cost structure, is this crucial consumer orientation the core/ key factor which tilts the scale in favour of conventional stores?

Reaching out and creating a connect with customers is a simple thing and there are enough and more simple, cost effective ways of creating this connect. However, at a macro level the organisation needs to be aligned and honest to delivering this customer delight. That by itself would diminish the usual corporate games and enable people to work towards consumer delight.

Is Corporate Retail listening? Or rather, are they interested?

Why social networking sites are not being used by Indian Retail?

Twitter, the micro blogging site is gaining strength each passing day. Yet, I don’t see this being leveraged by any of the Indian Retail Chains, leave alone the Indian businesses. This has the potential to become a great sounding board for customers as also an information source for retailers. I would leverage this medium in myriad ways, starting from the following –

• Create a followers base of all regular/ loyal customers and tweet all promotions and offers details.
• Leverage this medium to increase the followers’ base by offering some exclusive powerful offers only to twitter followers with a unique alphanumeric code. They need to show this tweet at the cash-till wherein this is captured for audit purposes and the promotion is extended to the customer.
• Leverage the power of retweet to increase reach and the number of loyal customers.
  Create a database of potential part time employees who can be sent tweets in times of special promotions where extra man power is required.
• Conversely, customers can tweet their feedback/ suggestions and complaints which can be directed to the respective department with a date and time stamp to track closure and measure reaction time.

Sceptics would debate about the penetration and awareness of such applications amongst the Indian shopper, especially the India Housewife. All I can say is that there are lots of net savvy housewives and individuals in India today and these initiatives will only create further impetus for others to take to this. I recall a news report way back in 2007 which talked about how housewives are increasingly doing online trading in shares! I rest my case.

Similar to Twitter is Facebook. Why can’t Indian Retail leverage it the way ZooZoo’s of Vodafone did? Create a group, invite fans as also invite feedback and suggestions. Create interesting messages to be shares and propagated. Simple things like wall papers, screen savers of interesting advertisements, automatic updates.

In fact several consumer review sites like mouthshut.com are being ignored by retail marketers, assuming people are even aware of the same! This site has close to 90 listings each for one of the corporate chains and similarly significant number of reviews about others. I wonder if this is being even seen or tracked by anyone and reverted to? At least is someone aware that such a thing is there on the net and I am talking about only one such site. Word of mouth advertising is the most powerful toll for a retailer and ignoring such public feedback is not going to help the lakhs and crores of marketing spends being indulged by these retailers.

In summary, there seems to be a serious dearth of creativity in Indian Retail with regard to maximising the marketing efforts and budgets available. What has been done since the mid 90’s in terms of product and price communications, using red and yellow seems to be a clichéd, repetitive pattern. I for one do not believe in knocking the old, tried and tested methods. But I also do not recommend being blind to new developments and not exploring every such new opportunities, especially low cost and high impact options.

Is there a fear psychosis?

The above picture was published in today’s “The Hindu” newspaper and shows the Fort St. George which was where the East India Company built a fort and formed a settlement. In a year’s time they had built a warehouse and a stockade.

Retail or trading as it used to be in those days has truly been the building blocks of an empire. Even today Retail in most developed countries is the largest employment provider and a significant contributor to the economy. In India too this might be the case, excepting that no one knows the true picture because of the fragmented nature of this sector.

The above picture prompted another thought. Is there a strong fear psychosis behind not allowing international retailers into India? Is there concern about a repeat of East India Company? The fact of the matter is that retail as a sector would definitely be a strong component of any economy. The government needs to think along the lines of allowing retail FDI while retaining strong control and curbs and not be blind to its benefits because of what happened centuries ago.

Lastly, I am not too familiar with the retail FDI rules in the UK but from what I know there has been no space for Retail players from other countries apart from a few exceptions where international operators have taken over UK Retailers such as ASDA.

Is that an alternative route to go about developing Indian Retail? Focus on enabling local corporates to build a strong and vibrant industry?

Regardless of the route chosen, the government can ill afford to sit on a fence dithering about how to manage this industry while consumers are voting through their wallets for the modern formats and chain stores.

Private Label Strategy - Part I

"Indian Management" is a magazine published by the Business Standard group and is the Journal of AIMA. The August 2009 issue featured an article about Private Label Strategy, written by me which I would like to share with all of you.

What is a private label?

Private label products are usually manufactured by a company and sold under the brand of another company. This is a common practice in retail and is also referred to as store brands. Private label portfolios are a powerful margin enhancer for any retailer and most chains promote them aggressively. Such products also deliver several other strategic and tactical benefits to a retailer and are emerging to be a strong factor in any successful retail strategy.

Private label or store brands have two components. One is the product and the other is the brand. The product component is usually benchmarked to an existing one, usually the market leader, in terms of features and benefits. This helps in creating an easy benchmark in the customers mind.

Typically, store brands leverage the branding of the chain and the trust that customers repose in the stores. So, when the customers see a near similar product on the shelf and which has either better features or a lower price, the tendency to pick up that store brand SKU is high. If the product meets the customer expectations, the store brands subsequently substitute the national brands in their shopping baskets.

So, how do retailers get their act together in this regards?

First they define the branding strategy for private label. This is very important because this will not only guide the choice of products but also the features to be included, the packaging, pricing, etc. Typically the retailer adopts an overall private label strategy. The usual strategy used by the majority of retailers is to follow a good; better; best approach.

This strategy clearly defines the portfolio into three segments. The ‘Good’ segment is often the base version or functional products wherein the features are matched but the pricing is significantly competitive. The ‘Better’ segment operates on either better or additional features at similar prices or even lower prices. The ‘Best’ segment is the top end of the portfolio and has a dual role. This segment apart from enhancing the category offering helps to build the overall store imagery as also ensure that the private label portfolio is perceived to be comprehensive and not only cheap products.

Next is the approach to the branding of these products. At a macro level there are two options. One is to use an unrelated brand name for the products and the other is to leverage the store’s name as a prefix followed by a branding which is often a descriptor like Value, Premium, Organic, etc.

Most retailers seem to veer towards the store brand with sub brands for each group as against a generic unrelated name. However, it is not uncommon to see unrelated brand names in certain situations like in the case of Apparels, where customers would prefer some nice names instead of XYZ Cottons. Also, in the Indian context where retailers are experimenting with trying to also distribute the store brands to the trade, have the store name on the product might not work.

Once the overall private label strategy has been finalized and agreed upon, detailed guidelines with regards to the product differentiation, segment classification, packaging guidelines, etc are developed and circulated.

The trading team in the meanwhile would have identified products which would qualify for a private label. This is done basis two main criteria; is there an existing gap in terms of product and/ or price, is the current offering generic and therefore offers an opportunity to create a brand and leverage the first mover advantage. The selected products are then evaluated and the suitable positioning is decided basis the guidelines for each of the segment - good; better; best.

Private Label Strategy - Part II

Is it worth it?

The natural question that would come to anyone’s mind is whether all this effort is worth it? After all there is a cost attached to all this effort too.

The answer is an unqualified Yes. The effort is more than worth it. Let us see how.

The biggest benefit lies in benefiting from the differentiated cost structure. A retailer typically leverages the existing manufacturing capability of someone else and hence does not have to incur fixed costs with regards to manufacturing. This is a clear savings and a significant one. Second, most store brands leverage existing technology and as such there is no R&D cost to be recovered. Third, there is no need for a separate sales team to generate demand and hence the cost of that effort is also saved.

In addition to the absence of the above mentioned costs, store brands incur far lesser advertising, marketing and transportation costs as they piggy back on the existing infrastructure and promotion of such products is usually done in-store which is not very expensive. In fact some chains actually promote such products as “No Name” brands to strongly communicate the extreme price value that these products deliver.

China’s emergence as a manufacturing base for the world has created a lot more of opportunities for private labels which international retailers are keenly taking advantage off. This is basis the cost advantage detailed above.

Next, a good and well planned private label portfolio helps the retailer in increasing sales in addition to margins. The cost advantage enables the retailer to price these products significantly lower and/ or give added features too. Not only does this induce customers to switch to private label products which deliver higher margins, but in most cases it also increases the overall category sales. This is because of the fact that brand loyalists continue to patronize the brands and many new customers start purchasing the private label products.

A classic example is the private label CFL that was introduced by a leading retailer. CFL bulbs are a nascent category and are only now beginning to make a mark in the sales charts of any retailer. When the private label product was introduced, many new customers entered this category and the overall sales went up. Although most brands did not lose out too much with regards to sales, the private label picked up a majority of the new, incremental sales. Similar examples abound in several categories. In fact, during the early days of corporate retail store brand jams have had a similar story.

Most importantly, store brands offers an exclusivity that further fosters loyalty of the shopper and creates yet another strong reason to shop at a particular chain only.

So, the rewards of a private label program goes beyond just margins and sales and over a period of time can become an important element of the overall strategy. Is it any wonder that some chains generate more than 40% – 50% of their sales from private label products.