"Basic Retail Model" video

There is a "Basic Retail Model" which I have written about and propagate as it is relevant to any Retail business.

The model explains how to make any store successful as also will help any Retailer to develop a strong competitive advantage in a sustainable manner.

This video shows the "Basic Retail Model" being explained by me in one of the Retail Management class.

 

Indian Retail – Point & Counterpoint; The gain and pain from MRP

Once again my oft repeated grouse about which I have posted several times crops up again.

Times of India carried a news item titled “Chilled drinks drain the pocket as shops charge extra for power” and had the following chart which as part of this news report. This clearly shows how shops are selling soft drinks, juices, etc. at prices which are 10% to 25% more than MRP. Needless to say this is illegal and in February 2012 IRTC has been fined Rs. 10 Lakhs by New Delhi District Consumer Disputes Redressal Forum.

 

 

Who benefits from MRP? Or rather the key question is who follows MRP?

Today MRP has become redundant and market dynamics defines pricing at the Retail end. The fact that a majority of shops in India sell many products above MRP and get away with it is ample proof that this legislation is outdated.

The typical counterpoint to this is how consumers are protected against being overcharged because of MRP.

Is that a valid statement? Not at all.
 

As consumers we all pay what the shop keeper asks whether it is below, on par or above the MRP. This is not restricted to only shops and the same reality exists in Hotels, Restaurants, Malls, Airports, etc. The only saving grace is that many of the corporate and larger entities today source products which has “For sale in select trade channels” printed on the product. This enables them to pursue a differential pricing which is invariably above the usual MRP.

Even in the above mentioned article a shop keeper is quoted as saying “I can't possibly charge more because if I do, then customers will walk into the supermarket a few meters away and buy the product there at MRP.”

Sure, IRTC has been fined for charging more than MRP. But, how many others have been penalized for flouting the MRP rule in spite of this being an open secret. Interestingly, the Judiciary seems to have a different perspective about MRP. In 2007 The Delhi High Court passed a judgment that hotels and restaurants can charge more than the MRP. This was justified in the ruling because such places provide ambience and services to their customers. However, this does not apply to shops and retail outlets.

I wonder why?

By this same logic the “cooling charge” is not illegal as it does constitute a “service”. Anyways, the stand alone stores do charge above MRP if possible and also gets away with it. By the same logic, the self service chains also provide service and ambiance and should therefore be exempt from the MRP rule.

So, who is then left to follow this out dated MRP concept? Therefore, if every channel has a reason and logic to charge more than MRP, why have this at all?

Click here to join the discussion on my page

Picture courtesy - Times of India, Chennai edition dated 10th March 2013

Point & Counterpoint: Employment Vs Entrepreneur approach to leverage Retail opportunities

Every interaction is a give and take, even when one is teaching or training. This was validated after a recent interaction with students of a B School about Retail. A few of them came up to me and in the midst of the typical queries about FDI, future or Retail, etc., they asked me something which has actually set me thinking and the take out I got from this session.

 

They wanted to know whether the expected Retail boom had entrepreneurial possibilities similar to what happened during the IT boom.

 

Invariably I keep talking about the great employment potential and career opportunities in the Retail sector and this question has taught me to think in a whole new perspective.

 

While I answered that there are indeed entrepreneurial opportunities, I would like to share my views for comments and inputs from others simply because such opportunities definitely exist.

 

Some initial ideas which can be built upon and experimented with are;

• Partner, take over or even start a standalone store which follows the “Basic Retail Model” and will therefore offer a viable value proposition. Franchising is a good option to explore.
• Set up a consolidation business for the small vendors who typically are not covered by the existing distribution system. One recent discussion I had with a person was about trying to do something along these lines for the vegetable sellers in his village.
• As I often point out Tier II and II towns are great growth stories waiting to happen. Explore that.
• Chain stores today require many support activities and that presents a whole new world of entrepreneurial options. For example; Physical stock checks are a tedious and painful process. If a credible service to manage this is given, there might be takers.

 

The underlying theme in all these ideas is a strong focus on a sustainable and viable value proposition.

 

Lastly, thanks to this question by the student I will start to build upon inputs that will help Retail related Entrepreneurship which has a great future.

 

The point to debate is, I was asked about entrepreneurial opportunities by a few students out of my interactions with 1,000 plus students in the past year. Before talking Retail entrepreneurial ideas, should we focus on kindling and developing a basic entrepreneurial spirit?

 

Click here to share your views and join this discussion on my Facebook page

Point & Counterpoint: Protection Vs Encouragement

A few days ago when I went to a local fruit and vegetable chain store called as Kovai Pazhamudir Nilayam, it was a pleasant surprise to see a poster wherein they are attempting to leverage social media network as a marketing initiative. As you can see from this picture, it is a simple database building initiative and incentivizes the customer with a discount coupon.

 

 

 

It is interesting to see how this regional chain is adapting and innovating to create and maintain a competitive advantage. They have approximately 35 plus shops largely in and around Chennai and Coimbatore and predominantly sell fruits and vegetables. Interestingly this is a category which even the larger chains find to be very challenging to manage.

This reminded me of another chain in the pharma space; Pasumai chain of pharmacies. They operate on a franchise model and are again regional with stores largely in Tamil Nadu. They leverage the core concept of Retailing which is aggregation of volumes, thereby creating value.

I am not sure if the coincidence that both these chains are from Coimbatore is an important element given that the region is known for being home to a large number of entrepreneurs.

The larger message pertains to the fact that Indian Retail chains and also stand-alone shop owners have it in them to keep pace and be competitive while also evolving to keep pace with times. Why can’t this spirit of initiative and competiveness be encouraged and enabled by well thought out policies and assistance?

Is it better to assume that these shop owners are an incompetent lot that requires protection from the big ‘bad’ international Retailers or it is more practical and viable to create an enabling environment for these businesses to develop and grow?

In that context I wonder what would have happened if our small and medium manufacturers had been enabled and encouraged to compete on a global scale. Would they have given China a run for their money?

Click here to share your views and join the discussion

Point & Counterpoint: Jugaad is a great competitive advantage

Jugaad; an essentially Indian word which stands for the ability to work out an out of the box solution for problems. The solution may be permanent or not, but it does work as a quick fix and definitely helps makes life easier.

 

Recently when I had been to a newly developing part of Chennai for some classes I saw this very interesting sight; heavy duty electrical cables joined together in an impromptu manner and then capped with cut off pieces of water bottles.

An interesting and amazing Jugaad!

 

Sure, this is not very safe and neither is this long lasting but it provides an interim solution and keeps things working. More importantly it does serve the intended functional purpose.

 

Click here to read a wonderful Retail perspective to Jugaad and join the discussion about whether this will continue to be their core competitive advantage and also be sustainable.

 

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Let the games begin!!

The phrase “Let the games begin” is associated with Roman history and how this was used to distract the people from the various issues that the state of Rome was facing at that time. I find this whole announcement rigmarole about Retail FDI without any significant development on the ground somewhat similar.

 

“Government clears FDI in multi brand retail”, was the HOT news of the day. Essentially this will now allow 51% FDI by international Retail chains who have been looking forward to this for quite some time now.

 

The larger question is whether this is a step forward? Is there justifiable cause to cheer and plan accordingly or not?

 

In November 2011 when the cabinet cleared the Retail FDI proposal, I had posted about the anomalies and the constraints which might make this decision a non starter. Many if not all of those pre-conditions still exist with regard to the government’s decision and I wonder if this decision is intended to be implemented at all or just a good distraction from the several woes which are dogging the Indian economy.

 

Let us start with the fact that Retail is not an industry, a pet peeve of mine. The FDI decision is subject to the respective state’s willingness to allow this. I find this clause to the most ridiculous and cannot think of any other sector where this has been applied. For argument’s sake imagine if the Telecom revolution and mobile telephony was subject to such a rule. What would have happened to telecom? Ridiculous is an understatement for such a stand.

 

What is the logic in restricting the Retail FDI to towns with 10 Lakhs plus population? And also stating that if any state or union territory does not have any such town, then FDI is allowed in the largest/ larger town? If the old argument of protecting the small trader is being trotted out, it makes no sense at all. The fact remains that several studies have proven that the larger issue for the small trader is the lack of continuity as the next generation is usually not interested in managing these shops.

 

Possibly, one of the few sensible clauses in this FDI decision is that of investing 50% in the back end. However, even that is a non starter if fundamental changes are not made to key statutes and legislation like re looking at the APMC act. Now, let us consider the populist but impractical statement that states are allowed to decide whether they would allow FDI or not. State A allows FDI and stores are set up. Sourcing for many products might be from State B or C which has decided not to allow Retail FDI. As a business man would you be inclined to invest in State B or C with regard to the back end?

 

After this announcement the swords are drawn and the air is thick with talks of continuing support to the government. For all you know, this FDI decision might be eclipsed by an election in which case it will be back to square one.

 

So, Let the games begin!

Indigenous Ingenuity and Enterprise

Sometime ago when I was in Coimbatore to teach Retail Management, I stepped out of the campus at the end of the day to see a curious sight.

A young man was selling some kind of a paste to the lower income houses on the street from a tricycle. I walked closer and realised that he was vending the ubiquitous dosa/ idly batter. One end of this value added product is what many people would have seen in supermarkets in the form of this batter being sold in plastic pouches. Being vended in loose from barrels was something new.

This youngster whose name is Mr. Thirunavakarasu is a hotel management graduate and has hit upon this simple and effective idea to fulfil an existing customer need. He makes the batter and sells it at the rate of Rs. 10 per mug (Yes, he sells it by the mug, a plastic mug). His customers typically buy 1 or 2 mugs of batter which he says is just right for the night time family meal.

I was thrilled to have met this enterprising youngster and want to share this story with all of you to drive home 2 points –

1. As mentioned in my earlier posts, I am fascinated by Retail’s mobile delivery model and unfortunately not many in India have realised it’s enormous potential. India has the highest density of retail penetration and given the current urban landscape, mobile delivery is a simple and very effective route to increase any Retailer’s market penetration. It is definitely not easy and as is the case with India, one needs to think hard and in detail to be able to come up with a viable model. The fact remains that this is a huge, huge opportunity waiting to be tapped. Already there exists proof of the potential in terms of ice cream vendors, hawkers, etc. When will someone put some method to this madness and leverage this opportunity?
2. The second perspective is related to my new book “Out Of Syllabus”. The core message of the book is to pursue one’s interest and passion and not get fixated on designations, salaries, etc. This young person is a shining example of how one can take education to a practical and logical implementation towards enabling a career instead of thinking that a degree is an automatic ticket to a well paying job. I do hope that this story and the inputs from “Out Of Syllabus” helps bring about a paradigm shift with regard to education and career in the minds of young adults.

Taking Indian Retail to the next level

The main fall-out of the now defunct FDI decision by the cabinet is the heightened interest in Retail and large amounts of media space and time being devoted to this topic. As I have always maintained, the core issue of an Industry status is again lost amist this noise. Please Click Here to read a detailed article about the next stage of Indian Retail which has been published in Images Retail.

What is Innovation in the Retail context?

The word innovation conjures up images of cutting edge ideas and new things which are dramatically different and stand out. The unsaid component of innovation is the influence of large doses of intellectual thought and creativity. No wonder innovation is so very highly rated - one might even say over rated.

In the context of Retail, the word innovation is obviously linked up with absolutely marvellous and cutting edge ideas. But is that true?

I was a part of the Retail panel for the ISB Leadership Summit 2011 at Hyderabad and it was a great experience to share dais space with the likes of Mr. R Sriram who founded Crossword book stores, Mr. Ajay Kaul, the head of Jubilant Foodworks (Dominos), Mr. Harish Bahl of the Smile group and Mr. Suhas Tuljapurkar of Legasis Pertners.

One of the questions fielded was about what kind of innovations will help in Indian Retail. I identified so much with the response given by Mr. Sriram that I wanted to share that and my thoughts about it on the blog.

He said that innovation should facilitate and make the life of the customer easier. A simple example of the innovation of Cash on Delivery (CoD) which is considered to a major factor in success of e-commerce sites like Flipkart. It has actually been in vogue for ages now by the neighbourhood grocer. It is a good example of adopting a good idea to a changed context.

This is so much in sync with my view about innovation.

Innovation is about simplifying things. It is not about complicating things. Unfortunately, when things are simplified, the perception is not about great thought or intellectual prowess. Actually, it could not be further from the truth.

Definitely innovation should facilitate and make the life of the target audience simpler. However, the larger part of innovation is simplifying things. Whether it is a product, process or a system, simple and easy to use are the keywords that define true innovation.

Some good Indian examples, a few of which feature earlier in the blog are –

- Baskets with wheels. Simple but profoundly useful.
- Mobile stock check to ensure availability.

So, remember to keep the cardinal rule of simplifying when thinking innovation, at least with regard to Retail. Do share any examples about innovation that you have witnessed in this regard.

The FDI Decision

Late in the evening on the 24^th, I suddenly got a flurry of SMSes congratulating me about the FDI opening up for multi brand Retail. I was puzzled and also a bit amused. Puzzled because we are used to seeing many such decisions being watered down or even rolled back in the face of a larger issue where FDI regarding Retail might be sacrificed.

Amused, because of the premature celebratory mood. Of course the fact that the government has at least taken a stand now after going back and forth for years now is a cause to celebrate but is there enough in this cabinet decision for such an upbeat mood?

Well, I have my scepticism about this decision.

Firstly, the trend in the past few years has been the domination of coalition pressures on decisions. I will wait to see whether the adjournment of parliament extends to the next week and causes enough furore for any dilution or even roll back of this decision.

Second, this decision has already been announced with a major catch. The trade and commerce minister has gone on record stating that the final ground level implementation will be the state government’s prerogative because trade licenses, especially Shops & Establishment Act comes under their purview. What exactly does this mean? You are welcome to bring in big bucks, set up a corporate office and get a senior team in place. Then, go around to each chief minister to beg & plead to open stores?

Does this sound practical? In the current context only the Punjab CM has extended support to this decision. Most are silent and obviously some are vocal in their opposition. This has some very troubling implications.

Second are the various riders. Obviously the powers that be have very little clue about Retail and many of these conditions seem very food & grocery Retail specific. For example, take the clause of sourcing a third of products from 'micro and small industries’.  Take Toys as a category which hardly has any noticeable modern trade presence. If an international operator enters the country, 30% of their range has to be from local small scale industries or artisans. Sure, you can include the wooden toys of Srirangapatnam and a few such regional specialities. Will this add up to 30%? I don’t think so.

Does this enable at least the food and grocery formats properly? No. Take the other factor of 50% of  the investment needs to be in the back end. Contrast this with the reality of limitations like the APMC legislation, varied taxation and octroi, etc. What use will this back end be if there are other constraints that stop such chains from sourcing effectively?

What is the logic of limiting these operators to the top 50 odd towns based on population out of close to 8,000 towns in India? In fact this is an oxymoron to the arguments for allowing FDI in terms of employment generation. Should at least a part of these chains be mandated to open in regions which need local impetus? Then there will be overall growth of that region.

So, all I can say is so far so good. At least there is now a decision around which debate can be built and hopefully meaningful improvements to the policy made.

Lastly, there is an urgent need for experienced Indian Retailers to be involved in this and not only as providers as opinions. That would ensure some method to the madness and bring to fore a far more important and pressing matter.

When is Retail going to be accorded an Industry status?

Tier 2/3 towns come of age for Retailers

Almost a year ago I was in Tanjore to teach at a business school there. I noticed a few things about the Retail scene there, namely the presence of a few national chains of supermarket. Also, the consumer base was present and the latent need for a better shopping experience was evident in my interactions with people.

I happened to visit that town again after a few months for a wedding and was amazed at what changes can happen within a this period.

Obviously the consumers, shoppers and the Retailers of this town had caught up with their peers across the world. Some noteworthy observations –

Smarter stores – The stores seemed brighter with better signages and also more inviting. When I stepped into one such store the change was obvious. There was better lighting, the merchandise was presented in a more inviting manner plus the personalized service. It made for an unbeatable combination.

Wider range and assortment across categories – Apart from packed grocery, the shelves had a wider range of products be it processed food or some new and interesting home ware product.

Advertising and promotions – The local TV/ cable channels were filled with advertisements of the local retailers across categories. Supermarkets were shown with very appealing self service shelves, furniture, CDIT, you name it and it was there.

Focus on shopping experience - The underlying theme across all these advertisements was the service factor with the personal touch being highlighted in several ways.

All these and more made me accept the reality which I have spoken about often enough and even mentioned in my book "The INDIAN reTALEs"; tier 2 and 3 towns are the future for Indian Retail.

Lastly, the sad reality that national chains are losing out! This was a fact that I could not ignore and if the management of these chains are true retailers, they also will not be impervious to this fact. A simple example to illustrate this reality - a supermarket of a national chain situated on high street has its signage in a sad state. The letters of the signage were missing. If one were to ignore this and enter the store, it was dark, dirty and offered a pathetic shopping experience. Obviously the store manager is either too busy fighting other fires or is just not motivated enough to create a sustainable alternative to the shoppers of this town.

So, in summary what is the take out?

• Be aware of the potentials of such towns and leverage the same.
• Ensure that the staff are motivated enough to leverage the existing potential, especially in such towns which are outside the ambit of corporate networking and also offer several other local employment opportunities.
• Most importantly, hire locally and encourage local ownership in terms of staff profile and empowerment. Increasingly good management and other educational institutes are there in such towns. So finding good talent locally is not difficult and will also prove beneficial as retention would be easier.

A simple reality needs to be kept in mind while handling such local competition. The physical and visual attributes of a store are the easiest to match. Coupled with personalized service the local Retailers have a good competitive alternative. A great and appropriate merchandise with reasonable prices is the core competitive advantage that national chains can and must leverage.

Reality Check!

I stay in one of those relatively quiet streets which does not have too much of traffic by virtue of it being a cul-de-sac. The other side of the coin is that the street is targeted as a free parking spot by everyone who knows of its location.

We often used to find that autorikshaws would be left parked through the night and they would then disappear in the morning. Given the current scenario where one never knows what danger lurks in such unknown vehicles the residents complained to the traffic police and they finally got the autos removed.

It was quite a surprise to learn that these autos were owned by a flower vendor. I shall come back to this.

Today morning while out for a walk I saw a person come in a scooter, park it, open a Maruti Van and get ready to drive away. I stopped this person and asked him who he was and why he had parked the van in the street? He said that the van also belongs to the flower vendor whose autos had been removed. He further explained that they park all the vehicles here as it was safe!

Now, this flower vendor typically stands outside a supermarket on the main road and sells flowers which are piled up on a wicker tray, mounted to his cycle. His typical bargaining point is how a few rupees will not make a difference to the customer but is a big difference to him. The poor guy!

This poor guy owns a couple of autos, a Maruti van, a scooter and that’s only what we have come to know. Obviously he pays no sales tax or any other government levies although he uses all the civic amenities. As often mentioned by me, I do admire the business acumen of these Indian traders. At the same time, it is such smart and savvy people that the government wants to protect because of which the FDI debate is raging.

If FDI is allowed and corporate Retail grows there will be more accountability, increased tax inflows and more credible employment opportunities. Why are we avoiding this step forward?

In this context I had participated in a panel discussion about this topic organised by SSN School of Management & Computer Applications and The Business Line Club. (The coverage about this event can be found on this URL - It wont be a cakewalk for foreign retailers). One of the participants asked the mandatory question of whether FDI will kill the small Retailer. I do wish I can bring him and introduce him to the poor flower vendor who owns a few autos, Maruti van, etc. etc.

Indigenous cost control & Margin Maximization

I am a strong advocate of the conventional neighborhood outlets simply because they display a remarkable amount of ownership and flexibility. I have illustrated this with several posts and also in my book "The INDIAN reTALEs". A few days ago during one of my teaching sessions the familiar debate of how will such stores survive came up. The usual points were covered and I returned to Chennai.

Yesterday we had to purchase a few things and picked it up from a neighborhood medical store. First point to illustrate flexibility; these stores have quickly realized the value of an extended range very similar to how supermarkets evolved into hypermarkets. More range for the existing customer base is equal to obviously more sales.

So, this store too offers a variety of products which are not medicines only.

My first observation was that the carry bag given was actually a branded bag of a national supermarket chain. Simple cost cutting measure for this conventional store. He must have picked up a few bags either during multiple visits to that store or even brought it off from an unscrupulous staff for a pittance. Or the vendor must have offered these extra stocks of bags at a throw away price because they cannot be sold otherwise. Essentially, the medical shop owner spotted an opportunity to cut costs and leveraged it fully.

Next, when I came home and opened the bag to use the purchased products, I was amused to find a price sticker of a different store on the pack. There is a large format discount store in Chennai which is famous for its low prices. The medical shop owner must be picking up a lot of his extended range of products from this store as getting into the distribution system for these products might not be worth it given the low volumes that he can offer. See the picture below. The store name is clear while the price has been struck out. Guess, it would have been a better idea to strike out the store name. But then all his customers might not be a Retailer like me.

This is where the large format store is morphing into cash & carry operations, also. As mentioned in my book, operators interested in India entry might do well to enter this potent segment with potential, instead of lamenting about FDI.

Coming back to the medical store. I cannot but appreciate the remarkable ownership, flexibility and focus that the owner shows and is therefore rewarded with a sustainable business. However, is it scalable? I doubt it. A chain of discount stores used to encourage its buyers to take cash and make opportunity buys from the wholesale markets whenever there was a very attractive trade scheme. It obviously did not sustain as the chain has been closed down.

Regardless one has to appreciate the initiative of the conventional store owner in this as compared to any organizational chain stores wherein cost cutting or margin improvement will result in a whole series of meeting and presentations! The take out is that such organizational chain stores need to bring in more of a trader/ shop owner mentality without compromising on systems and processes to develop a win:win formula.

Lack of Urban Planning is a bane for Indian Retail

One of the key costs for any retailer is that of real estate. When too many players fight for the same space, obviously the prices go up and very soon reach levels which are unviable for a Retail business. Retailers operate at a 20 odd percentage gross margin compared to say the IT industry which operates at much higher levels. So, the lack of proper zoning laws and enforcement of the same leads to several issues such as –

• Different businesses with different cost structures competing for the same real estate.
• Over-crowding and congestion, leading to pollution, etc.
• Neighborhood penetration of self service modern formats increasingly becoming a challenge.
• Size having to be compromised and therefore the range. So, in effect over a period of time there is no major competitive advantage over conventional stores.

 And many more such disadvantages and issues.

 

See the following two pictures which show two separate road names for the same stretch of the street. I am confident that each of these streets would have different valuations and therefore varying financial implications in terms of rentals, etc.

 

Forget all this. Should the common man have to suffer such confusion?

Sense and Simplicity

Retail is all about common sense is an adage I have heard and also propounded often enough in my various posts and in my book “The INDIAN reTALEs”. Especially with regard to good execution, the simpler the idea, better the execution.

In this context I happened see a film about a design management firm called IDEO which is a US based one. They were showcasing their design management process to come up with a better shopping cart. It does sound a bit funny. A better shopping cart? What’s wrong with the current ones?

They figured out some of the key problems in current shopping carts and came up with a simple solution of a frame with wheels which can hold two baskets. This solved a variety of problems like pushing the carts into crowded aisles. A family can shop at the same time using the baskets and then put them on this frame. The wheels turned 360 degrees so, maneuvering it was simple, etc.

In the Indian context a similar idea was implemented in a national chain and proved to be successful. However, a problem unique to India because of the store’s smaller size is crowded aisles, especially if there are pillars/ columns in the middle. Even the frame based trolley would be cumbersome, especially during crowded times.

A few days ago I happened to visit a supermarket where I saw this amazingly simple but hugely effective innovation. A basket with wheels. The wheels turned all the way making it extremely maneuverable and it has two sets of handles. A long one to wheel it along and two short ones to carry it. Simply marvelous. It was easy to use and a great idea. Simple and sensible. Exactly the kind of ideas that are needed for Indian Retail. Please see the picture for details.

One can ask what is so great about this. After all a basket is used by shoppers to purchase small quantities of items and why take the trouble to put wheels on them and incur the extra cost. It has been proven that if shoppers are given a basket they end up shopping more. In fact this used to be a SOP in some of the store chains I have worked with. Every shopper was given a basket as soon as they came in. If this study is correct and has merit, the contra is also true. Shoppers stop picking items when the basket becomes heavy and even one PET bottle of any soft drink can make a difference. So, by introducing this innovation, this Retailer has enabled the shooper for an easy shopping experience while eliminating the drawback of using a basket.

As mentioned above, sensible and simple.

Brand Raghu Pillai

Mr. P K Mohapatra who was associated with Mr. Raghu Pillai has penned a wonderful and very insightful article which delves into the man, mentor, leader and colleague named Raghu PIllai. His comments about Raghu being a hurricane is so very accurate and everyone who has been caught up in the force of that hurricane can testify to the life altering experience of working with him. Please click on the link below to read the full article.

- Brand Raghu Pillai

Some of the more memorable quotes of Raghu are –

When presented with a complicated Excel working he would say “Stop this Excel gymnastics and tell me what it means and what you will do with it”.

• His comment “English jhadna band kaar” (Stop spouting English) has been the guiding light to making crisp and meaningful presentations for many.
• The customer is always right was not mere words and he walked the talk by briefing the cashiers during any store launch to not argue about promotions.
• Lastly his perspective of the larger picture and its components was amply illustrated when he told someone who was discussing compensation; “I don’t think a few thousands here or there will significantly affect the balance sheet of this company”

 Many more such memories fill my mind and will continue to do so…..

Dear Raghu, RIP.

Mr. Raghu Pillai, one of the founding fathers of Indian Corporate Retail, was a great leader and an outstanding human being. In the years of my association with him, I have seen him help, counsel, mentor so many people including myself that it is almost impossible to keep count.

To say that he was a simple and a very nice person is so inadequate when one remembers him and recalls the many instances of interactions with him. Outside his apartment complex today where many cars were parked and several drivers were gathered talking together, I heard one of them remark “He was such a good person at heart” and everyone else agreed wholeheartedly. A senior industry captain to have touched the lives of people from every economic background and be remembered as such is not something one gets to see or hear often.

Indian Corporate Retail, nay, Indian industry itself has today lost a true and natural leader who knew every facet of business inside out. His views and comments were based on sound basics learnt literally and figuratively at the shop floor. His genuine care and concern for his team was something to be experienced in order to understand the depth of this loss. He always set a wonderful example for others to emulate.

These few words are so small to try and capture the essence of the person that Raghu was and his myriad achievements. May his soul rest in peace.

Loyalty Cards; The new toy!

I went to a supermarket a few days ago and was informed by a staff member that they have launched a loyalty card. Later while billing, the cashier thrust an envelope at me and said that it is a loyalty card and I can become a member. I politely declined and after another half hearted suggestion to enroll in the loyalty program the cashier gave up.

The following thoughts ran through my mind in a flash –  

• The typical cost of any loyalty program averages at 3% of sales. So, this supermarket chain is now going to incur an additional cost and that is going to put pressure on its other operational parameters. 
• Any event or activity that is to be implemented in Retail needs simplicity and clear cut directions to the store staff. The impression I got was one of a standard briefing email about the new loyalty program and a courier with all the application packs. That could be a key reason why the cashier was not able to highlight the benefits and make me interested in the loyalty card. If the store staff are not sold about a program, how can they sell it to the customer?
• There are a few more supermarkets on the same road and a few of them also have loyalty cards. As a customer if I do not get what I want in shop A, I will go to shop B without being bothered about the loyalty card. Here lies the issue with regard to Indian Retail. When availability of many products is still a common problem faced by supermarket customers, why should the business waste time, effort and money to run a loyalty program. Customer loyalty can be gained by simply addressing the stock out issues, as a first step! The usual argument to justify such loyalty cards is the possibility of targeted data and therefore better decision making. Frankly, this is a myth. Indian Retail can generate enough data from the POS sales to manage adequate stocks. In fact, the reality is that the POS data itself might have an accuracy of anywhere upwards of 65% to 70%. So, how does data from one more source help?

I have faced many situations when someone suggests that we should run a loyalty program and I have some very strong views about it.

Loyalty programs per se are not bad or wrong. It is like a sharp instrument. In the hands of a doctor the instrument saves a life and in the hands of a murderer it takes a life. Similarly, if loyalty programs are run without adequate thought, preparation, briefing and very good execution, it will only take the life of that Retail business. The funny thing is that most enabling businesses like the loyalty program implementer, card supplier, etc. will all strongly endorse loyalty programs because it ensures revenue. Whereas the Retailer who gets influenced and implements the program will spend and spend, while a long wait awaits them to realize the fruits of such an initiative, if at all there are any.

There is a common saying about easy ways to lose money. It is said that the two easiest ways are to get into gambling or get into Retail without knowing Retailing. A faster and surefire way to lose money is to start a loyalty program as if it were a new toy and play with it!

What is the need regarding MRP!

A few days ago I saw a quarter page advertisement highlighting MRP (the maximum retail price) and how complaints can be lodged, etc. etc., as you can see on the picture above.

I have always propagated doing away from MRP as the context has changed in India whether it is in urban or rural markets. MRP is no longer adhered to or relevant and the links to my other posts are as follows for reference.

- Do we need MRP?

- The MRP scam!

Now consider the following –

• In most places they charge more for soft drinks and claim it is for cooling! When most consumers are aware of this and pay up I wonder why no one from the Department of Consumer Affairs is aware of this reality.
• The same is the case in any monopolistic market context. Be it a multiplex, Hill Station, Tourist spots, etc. If you want something you end up paying whatever is named as the price. I wonder if the fact is that officials of this department are so hard working, they never frequent such places and are therefore unaware of such practices.
• Most of the overcharging happens in the vast network of railway stations and many airports. These are government run institutions. I wonder why no one has happened to notice this open disregard for the MRP?

I guess these Shop Keepers/ Retailers know the fact about market driven economy better than the Department of Consumer Affairs.

Especially in the Indian Context where filing complaints is easy but getting redressal or a solution is hardly if ever to be found, what is the purpose of such advertisements? Just blow up public money because it was allocated to this department in the budget???

In that context let me share a personal experience. For some weird reason voter id cards have been given to everyone in our apartment excepting our household. Multiple complaints to the local corporation and election commissioner’s cell did not have any result. Finally I filed an online complaint. All I have to show for all this is a nice pre printed post card saying that my complaint has been received and will be addressed soon by the corporation commissioner from the Chief Minister’s special cell. This came in 2009 and I am still waiting!!

My Fascination with Innovative Mobile Delivery Options

Mobile Retail Delivery is as old as Retail itself and hence my fascination with that delivery model with regard to all the innovation that can be tried out out in this space to leverage the same. India already boasts of 12 or 14 million retail outlets depending on which consultant’s report you are referring to. Also, what is not clear is whether this number includes the hawkers AKA mobile retail. Anyways, lets forget this Akbar-and-Birbal method of trying to measure Indian Retail.

Mobile Retail or mobile vending has been there in various forms from ancient times be it the street hawkers, the boat peddlers of Dal Lake, Floating market of Bangkok or more recently the floating supermarket in Kerala. However, one peculiarity barring the floating supermarket is the self limitation that these entrepreneurs impose on themselves as also the fact that the evolving Indian Retail Market seems to completely ignore it’s enormous potential.

Since 2009 I have been lamenting the fact that that this segment represents an enormous potential and had written a detailed article in The Hindu Business Line.

Article about Innovative mobile delivery models

A cartoon in The Hindu

 Ironically, The Hindu published this cartoon a few months later which epitomizes my construct. Till now this was a thought, a concept, something in the air. Today I saw this is in action and want to share this with my readers.

This picture is that of a normal neighbourhood iron man who does laundry and pressing.

Now watch an innovative mobile retailer has done.

- Put a shed and used it to advertise other services

He has done this a few months ago since he and his friends got this idea. He parks the cart in a safe spot during the night and operates from here during the day. I would not be surprised if he started selling various small essential products.

The difference between the earlier iron man and the second person is all about inititive and drive about which I have written in this post as also earlier ones. When will this become a mass movement?

Imagine if a Retail chain were to leverage this enormous potential of mobile Retail! Brand such carts, offer small, high margin and often used SKUs, so on and so forth.

Some food for thought ???