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.

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!

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.

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.

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.

Private Label Strategy - Part III

The Indian Private Label Story

In the Indian context the private label play is slightly different from how international players do it. Internationally, the product team is extensively involved in the product development and has a say in each component and feature of the private label product. Many a time the representative of the retailer is a regular visitor or even stationed there to monitor the production.

This is possible because of the enormous volumes that this is made possible by the large number of stores that international retailers have. These volumes are good enough for even larger manufacturing units to dedicate their entire production for a few months or even dedicate one production line permanently.

However, Indian Retail has not yet reached that stage and it would take time. So, how does private label work in India?

It is largely done as a pricing play. This means that existing products being manufactured are chosen and packaging is changed to reflect the store brand. In certain cases the features or composition is tweaked marginally to create a differentiation.

The other peculiarity with regards to Indian Retail is the high percentage of basic grocery sales. As much as 25% – 30% of a family’s monthly shopping consists of staples. Other than Oil, Masala, Salt and Atta, there are no major brands in most other grocery products. So by default every retailer starts off with a private label contribution of anywhere in the region of 20% - 25%. Then comes the other private label products which would average 10% to 15% nowadays, barring exceptions.

The exceptions are stores which have only store brands in their range and have adopted it as a business strategy. Internationally Marks & Spencer’s have done this and in India, Westside does this successfully. If successful the upside to this approach is enormous starting from a shorter cycle time to break even due to higher margins. The downside is that this becomes an all or nothing game.

Lastly, Private Label or Store Brands are an undeniable part of any retailer’s life. Scale enables it and it enables scale and that’s the chicken and egg part of the story

A rose by any name???

I recently read an article about how several retailers in India have managed to use distorted/ modified versions of several international retail brands very successfully. This has been implemented so well in certain cases that if the international retailer were to enter India, they might have a serious issue in terms of not only competition but also consumers mixing up the retail identity.

It was rather co-incidental that I happened to come across this store in Kerala during a recent trip. Interestingly the name is the same as that of a famous supermarket chain. Is it that the chain is so well known in Kerala and this operator is leveraging it or is it completely unknown that no one can make the connection!!

Differentiated range

The fourth article in the series about a basic retail model and its various elements was published in Business Line today.

"Customers frequent retailers who stock a range that is relevant to them. A look at the factors that help the retailer arrive at the right mix.. "

- Differentiated range

100 days and counting!

I have been blogging for 100 days now.

5,000 plus walk ins, lots of comments for various posts, a Google page rank of 2, etc.

A big ‘Thank you’ to all the readers and supporters of this blog.

Decided to do something interesting for all the readers of the blog and those who follow me on Twitter and Facebook, to celebrate all these milestones. So, have planned a daily post through the month of July ’09, wherein each post would feature a Retail jargon, its meaning and sometimes my interpretation too! I plan to include all the conventional established jargons as also a few weird ones, which may or may not be commonly used.

Hope to receive your feedback regarding this series. Some of you might find these posts too basic, please bear with me.

Service expectations while purchasing durables or electronics

A few years ago when we went to purchase a fridge I recall the comic confusion that the various sales persons standing at the durables store created. There were three or four salesmen standing around and when we pointed to a fridge and asked them to show us the features, first they were reluctant. Then one person reluctantly explained how the concerned salesman had gone for his tea break. While I was wondering on the absurdity of having individual salesmen for each product, another elaborated that I was enquiring about brand A while all those present were representing Brand B or C or D. Finally one person did try to at least engage us till the time that the concerned salesman returned!

I am sure most of you would have had this experience.

Later on when I was handling the marketing for a durables store, such similar experiences prompted the team to relook at the way the store staff interacted with customers and went on to become a key differentiator.

It might definitely help the durable retailers if they were cognizant of this dissonance being created by what is called company promoters as also internalize that the consumers are changing.

Typically the various brand manufacturers agree to place these salesmen or promoters as they are called. Hence, most are briefed and trained only with details of a particular brand. Of course there is a fair amount of churn within this group and it would not be uncommon to see a person be a salesman for Brand A and a few weeks or months later for Brand B. Although this and the fact that they all work together makes them all aware of the various brands, the tendency is to constantly steer the customer towards one’s brand. From a customer point of view, this is not only confusing but extremely annoying too.

Today the reality is that youngsters are emerging or rather have emerged as a significant consuming class, especially of Electronics. These consumers are well informed and usually have done some homework with regards to the products, brands, features, etc. In such a context having to face a virtual race amongst the salesmen is not the best thing that a store can do.

Secondly, there is a large group of educated consumers who are older and who typically indulge in high- end electronics and durables. Such consumers again do not appreciate pushy selling because they are looking for additional inputs, details and explanations with regards to the various features of a product.

And then you have the average consumer who is looking for functional benefits and is often technologically challenged. Yet again, not a good choice to practice hard sell. They look for some information and lots of reassurance!

So, essentially the purchasing pattern for this category of products is fast moving towards informed and knowledgeable decision making by the consumer instead of being hustled into a sale.

Most modern durables chains are aware of this shift in consumer behavior and they have the store staff to offer nonpartisan inputs and help in the purchase. However, the larger universe of small operators still relies on the company promoter route, simply because it helps defray the man power costs. What they seem to be missing out is that if the customers dry up, there would be no store and no costs left to defray!

Every successful person has their own formula

I had written an article on self development and wanted to share the same with you because the core message is very relevant to Retail, especially Indian Retail.

There are no universal success formulas, but every successful person has their own formula. Similarly, a one size fits all approach to retail will not work, especially in India. Walmart, one of the poster boys of Retail has reportedly opened a 3,200 sq. Ft. Convenience format store in China. The chain whose stores are big, bigger and biggest is experimenting to find its success formula in a new country. Similarly there are several stories from India about Innovation and Success. For example, “Heart Mart” is an interesting Retail innovation in rural and semi urban markets of Gujarat.

Please do read the article at this URL and I hope you enjoy the same.

- http://tickledbylife.com/index.php/why-most-success-formulas-fail/

How consumers think about retail pricing

In the retail context, communication of prices or offers is a fine mix of science and art. It is more of science because one needs to truly understand the consumer’s mind set. Understand is an understatement. It requires that the retailer get under the skin of the consumer and communicate, almost telepathically!

A simple way of communicating prices or offers is by stating the MRP and offer price, for the relevant pack size. However, the consumer does not always think in such a simplistic linear manner.

The consumer’s mind anchors the prices of a few products which are referred to as KVI’s (Known Value Items). The perception of value basis pricing is defined by the price communicated for such KVIs. Prices perceived to be lower than the benchmark price of a KVI leads one to believe that the store offers great prices and hence lots of savings. This is a classic example of the halo effect theory.

KVI’s as a concept is more relevant in a non-MRP scenario as there are no published prices on any product. However, in the Indian context this is very relevant for groceries, fruits and vegetables. Additionally, even with a MRP, the offer price or “Our Price” as many retailers say, is a powerful perception driver. Non Stick Tava at Rs. 149/-, when seen by a customer who is used to a price point of Rs. 250/- becomes a strong influence with regards to the pricing of that store.

Next is the pack size. Most of us are not mathematical wizards and prefer to be presented with numbers which don’t require my mind to do calculations and then be able to benchmark with my KVI.

Groceries, Fruits and Vegetables are usually benchmarked in per kilo basis, in our minds. Even though we might purchase lesser or more and never in exact multiples of a kilo, our minds pegs the per kilo price and we prefer to use that as a comparison.

I came across this offer communication recently and would like to take this as an example to drive home the point. If I were planning this communication, the following would be changed.

1. Price would be per kilo. The pack size price can be mentioned if required. But the per kilo price is more important.
2. Savings can still be basis the pack size, but should be mentioned clearly that this is for a 20 kg bag.
3. In groceries, fruits and vegetables the consumer does not think of MRP. The prices are dynamic and basis the market price. So, it might be a good idea to mention market price, then MRP (Only if required) and lastly Our price. If the pricing has been managed well, there should be a difference between market price and MRP itself, further reinforcing the price-value image.
4. Lastly, the savings if mentioned as a difference between Market Price and Our price would be even more powerful, if point 3 has been done.

Retail might appear simple and easy to do. It actually is. However, it requires a lot of common sense and a deep, instinctive understanding of the way consumers think.

Another innovative idea - A floating supermarket

Consumerfed has launched a floating superstore in Kuttanad – a novel concept – to sell essential commodities to those living in isolated and inaccessible areas of the backwater region. The story, picture and a video report can be seen on these URLs -

http://www.thehindubusinessline.com/2009/06/09/stories/2009060951481700.htm
http://www.deccanherald.com/content/7042/floating-supermarket-below-sea-level.html

Video from http://newsx.com/.

This is an interesting innovation to help create a differentiated format. Hope to see many more such ideas in the Indian Retail Landscape.

Guest Post by Mr. Arun Vishwanath, Head – Training at RAYMOND Retail

One thing which is always working on the mind of a business head of a company is "how do we ensure that we have maximum returns from our investments"? Same is the case with learning and development investments. Six months ago, we at Raymond Retail, were looking at various ways of making learning fun and easy to digest, while being cost effective. With a bit of brainstorming within the Training Team, we came up with a brilliant idea of using SMS for Training through mobile phones. The rationale behind this was:

• Every staff including the housekeeping staff and the doorman carries a mobile phone these days
• SMS is unobtrusive and gives you the flexibility of accessing the message at a time when you are comfortable (the absence of urgency factor!)
• You can reach anyone across the country without too many hassles
• And of course, this is a cost effective tool, with charges of less than 20 paise per SMS!

With the spread of over 400 Plus "The Raymond Stores" Pan-India, reaching over 2000 plus staff, SMS training works wonderfully for us. This way, we can ensure that training is effective, continuous and it does not overload the front end staff with a lot of information at any one time. Probably, for the first time in India, SMS is being used extensively as a learning and development tool.

We use a service provider for Bulk SMS and program the messages to be sent on a weekly basis. We have a weekly theme and cover a range of topics in a "question and answer" format, which include:

• Product knowledge
• Selling Skills
• Customer Service
• Company updates
• Safety
• Visual Merchandising
• Personal hygiene and grooming

One message is sent everyday at 9.30 am, just before the store opens. This way, this knowledge can be used and shared during the regular store meetings and briefings. SMS training complements our other regular training efforts and is not a substitute.

The success of any training module or tool depends on its effectiveness. To ensure that there is regular interaction and to check how effective the training was, we have a "weekly test" which is conducted every Sunday, on the topic / theme covered the previous week. Respondents are required to reply with the correct answers to a standard mobile number at regular SMS charges. One lucky winner who gets a gift voucher worth Rs. 500/- which can be redeemed in any of "The Raymond Shops".

The popularity and success of this initiative can be gauged by the responses we get every week. The most encouraging aspect of this aspect is that it is extremely cost effective and helps in reinforcing learning. Currently this program is available in English and we are exploring options of extending this initiative in other Indian languages as also management related.

Overall, the "SMS Training" initiative has been received very well by both the staff and the management. In fact, most of the staff look forward to receiving the "learning message" every day.

Happy innovating and learning!

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Comment by VR - Retail is all about such innovations and ideas. Great to hear about such happenings. I am sure, many readers would benefit from this idea.

An interesting differentiator

In most consumer electronics stores the focus would be on range, pricing and of late it has been on in-store service and customer interaction. In that context, it was a pleasant surprise to see an advertisement of a store which has highlighted a latent consumer need and has used that as an USP.

Usually most such stores have one unit for display and either one more for purchase or not even that in the case of larger products, especially those which require installation. In the Indian context most products do require installation barring maybe things like the mixie, toaster or the hair dryer!

So, typically after a customer puts down, what is often an obscenely large sum of money the machinery swings into action. The store informs the delivery/ distribution centre of the purchase and they then schedule the delivery. But what if they don’t have any stock? Frantic calls to the company or distributor and hopefully the product is delivered to the retailers distribution point. The product then is received into the system (physically and in the IT system) of the retailer and then it is ready to be sent out for delivery. Phew! Imagine if just reading about this was so long, how long the actual process would take.

A shortcut would be to ask the distributor to deliver directly to the customer and then manage the paperwork to bring it into the retailer’s system to adjust it against the sale. But, that has issues and is not a preferred action plan.

So, as a consumer what do you experience? After paying the money and not hearing the door bell ring, you wonder why? Calls to the store give you vague answers as they are also usually not very clear when this whole process will be completed. If you are lucky you would have got the product without this hassle or just when your fuse is about to blow, the product arrives. Or you give up and when the product arrives, it is usually a mild surprise!

Now this chain has taken the entire fun out of this Russian roulette by promising a 98.9% same day delivery. But hey, hang on. The statement is just a statement. One does not know if it is a promise or a mention of their track record. And there are no little asterisks to indicate hidden meanings. So, it is up to the customer to interpret it the way they want.

Let’s come back to the customer’s mind. You see this advertisement. Notice this, but move on to check some of the prices mentioned. You find it interesting and you are also looking to buy a LCD TV or a walk in fridge or whatever. You also have memories of the previous time you purchased something and you got it almost on the first anniversary of the purchase. Suddenly, the 98.9% becomes a powerful hook. An excellent differentiator.

In a segment where promotions can also not be entirely at the discretion of the retailers and market Operating Price rules (MOP – Will explain in another post) and most stores rapidly changing their looks to offer an experience, this is a true differentiator.

Hats off to whoever thought of this idea. I would have liked to have done this first. But, I admire this innovative and subtle differentiator. This store is now redefining the rules of the game and drawing customers away from a pure pricing play platform.

Excellent!

Welcome to India — We are like that only!

The Hindu Business Line has published my article about the Bharti-Walmart's Cash & Carry store opening.

"When Sam Walton opened his first store all those years ago, he had the luxury of being a pioneer and could afford to experiment, make mistakes and perfect the model — without being under the public glare. However, the first store of Bharti Wal- Mart cannot afford this luxury. Apart from being in retail, it is a joint venture with a leading Indian and US corporate. Its every move will be watched and commented upon, second-guessed and debated. A couple of thoughts came to my mind while reading about the opening of the first store."

The article's URL is -

- Welcome to India - We are like that only!

Is Retailing being redefined?

I have been taught and have also seen it in experience that Retailing is more about the back end. It is all about aggregating volumes and leveraging this to generate value. This value helps manage the differential cost structure of a Corporate Retailer as also enables passing on some of the same to customers. The whole cycle of value creation and bettering the value proposition gets more customers, which in turn enables increased levels of volume aggregation. This helps in establishing a sustainable business cycle.

A few days ago I saw a press report titled on how Retailers now prefer to buy from wholesale markets (New Indian Express article – Retailer Shun Direct Procurement). Frankly I was flabbergasted.
 

If this is indeed the thinking and reality, all I can say is that it is fraught with dangers.

1. Everyone, including the street cart vendor purchases from the wholesale market. I agree that the volumes purchased by them Vs a chain of stores would give some price advantage to the chain. Whether the advantage is large enough to compensate for the cost structure variance and yet offer a meaningful value proposition to the customers is a huge question mark.
2. Such ideas only further arm the anti-corporate retail voices. Their main grouse has been that conventional traders would be wiped out in the short term without any sustainable long term benefit in terms of development of agriculture, cold chain, etc. When corporate chains also start being dependent on the wholesale, one only further strengthens the existing the supply chain instead of making a meaningful change.

This seems to be a short term fix-it approach with only the current operating cost being the primary consideration. The past few years have seen massive expansion of the number of stores and distribution centres. But, has not been matched with grass root level efforts to aggregate value and truly make a difference.

I am reminded of a couple of corporate efforts who did this and they have reaped rich rewards. One that comes immediately to mind is the corporate supported sunflower cultivation when sunflower oil started becoming a big thing in India. There are lots of similar stories.

If Retailers pursue private label to leverage volumes and reduced cost structure of such products, but depend on the wholesale market for fruits and vegetables, there is a clear dissonance in strategic thought. This is akin to saying that I will purchase from the stockist and distributors instead of negotiating with the manufacturers to build long term value.

I am reminded of the milk revolution started by Dr. Kurien (who was later sidelined by corporate!!). Right now India needs a fruits and vegetable revolution. It needs a GREEN REVOLUTION. A comprehensive cold chain is needed, along with enormous inputs and support to the farmers.

Corporate Retail was supposed to be the answer. If they also follow the same wholesaler route, who will now make this difference?