Reader's Feedback/ Comment

I would like to share a few comments received from a reader. My views are in italics.

Chanced upon your blogsite from one of your articles in tickled by life. It is nice. Though I am not a retailer by profession or passion - I thought of sharing my 2 cents on this topic.

1) Why do we have to ape the west in terms of retailing models & instead why not we have our own models?
It is very difficult to strictly compartmentalise formats and models as western or Indian. Even the over the counter model was prevalent in the west before the self service formats became popular. Broadly speaking retail can be either a convenience store, Supermarket, Hypermarket, Cash & Carry, Price Clubs, Specialty retail, etc. These are generic labels and universal. However, how it is implemented is country dependent. For example supermarkets abroad are typically much larger than the average 3,000 sq. ft. stores found in India. So, in that sense the format are being modified for India but it is in the evolutionary phase and one can expect to see a lot of action on this front.

2) For staples why not we have something like a pizza delivery model - where one could use a phone and have them delivered at home. (This one partly stems from my laziness of pushing the cart around in a shop) And for the other items, where the customer has usually made his mind on the brand, and why not adopt the above model.
This format is the key value offering of Kirana’s. They prefer this model to maximise sales from their relatively smaller store to leverage the kind of products that has been mentioned by the reader; generic grocery and products already decided by the customer. This was also tried out by a company in Mumbai – Sangam Direct. However, once the customer gets used to the “Touch, Feel & See” experience, it is difficult to substitute that.

It is a fact that as much as 30% of a customer’s basket in a self service format was unplanned purchases. If the retailer delinked the must-have purchases from the impulse ones, the overall sales would drop because impulse purchases would definitely decrease.

3) As for the issues of the customer trying new brands / in store promotion- why can't this be shifted to the customer’s house - will be more targeted / focussed and measurable.
The logistics and cost of trying this is not feasible. Earlier one would have seen sales people coming to the homes with samples and selling products of even famous brands. Increased security concerns and proliferation of apartments have made it difficult for such people to gain entry into homes. Also, as mentioned earlier, the retailer’s effort is to induce the shopper to enhance the basket while purchasing the must-have products. For that, the customer needs to come to a store where a range is on display.

4) And lastly why can't the local kirana stores be used as an order fulfilment mechanism - this way we do not drive them out of business and be on the right side (politically).
This is an idea worth exploring only if the retailer is operating a tele ordering/ web based or catalogue format.

5) Yes, I agree quality is one of the issues - but there are ways of tackling them - probably standardizing them. By this mechanism we save on retail space, high rentals and other costs.
As mentioned above, a virtual store can definitely leverage the local kirana as a delivery point. However, tracking availability, delivery of order, payment collection and transmission onwards would be very complicated unless the store became a franchisee.

Store launch is like a 20:20 match!

While watching the past few matches of IPL2 I was suddenly struck by the similarities between a store launch and a 20:20 match. Both call for enormous planning and at the end of the day the difference between a win and a loss is all about proper planning and excellent execution.

Even today with the proliferation of stores of varying types, the opening of a store is a milestone and something that the whole team works towards.

My view has been that the opening day should be a grand gala event which should attract maximum number of customers from the catchment and generate positive word of mouth. The contra view is to open the store with minimal fuss and then market it well once everything falls into place. This has its merits but also means that the retailer loses an opportunity to make his presence felt. After all once the store opens or is launched, it is no longer a secret! The launch is an opportunity to make a large number of people ‘sample’ the new offering in the catchment and then work on converting them into loyal shoppers.

In that way, the launch is definitely like a 20:20, wherein maximum number of runs needs to be taken with minimal loss of wickets, in a defined period- the day of opening.

Getting more runs -

The trick is to start with a bang. Unlike in a test match, where the openers have all the time in the world to settle down, here, in 20:20 there is no such luxury – the focus is straight away on achieving a high run rate. Similarly, the first hour or so of opening needs to set the cash tills on fire. A good range and service would influence this. But an unbeatable promotional offer limited by time is a sure fire way to get customers to line up before a launch!

The next is to ensure a consistently high run rate. Blanket offers and promotions would mean that customers would choose to shop at their convenience, which is typically in the evening. Apart from letting the “run rate” decline in the lull period, this would create an enormous pressure on the staff and store infrastructure in the evening. Often this leads to more of dissonance, instead of creating a positive word-of-mouth message. Therefore, time based, targeted offers would ensure a run rate, which does not flag.

Lastly, the slog overs - which are precisely that. The evening of the launch requires adequate planning and preparation to manage the customer crowds, ensure stocks are still there on the shelf and most importantly the staff are physically and mentally ready to handle this.

Saving the wickets -

Saving the wickets, translates into saving these first customers and generating positive word of mouth, towards building a loyal base of shoppers in the catchment. Just like how a wrongly timed shot makes the difference between a sixer and a catch, similarly, high expectation with poor customer management experience is equal to the store being declared out.

The basic expectation of a retailer is to leverage promotions to attract the customers to come and experience/ sample the store. In this context, billing issues compounded by arguing with the customer means that the store has been clean bowled, out! In all these years of store launches I have seen, there will definitely be some minor glitch at least, especially with regards to promotions. The best stand is to gracefully honor the promised promotion and resolve the accounting later on.

An LBW is also possible. “Leg before wicket” is equivalent to customers without stocks for them to purchase! Low stocks or even worse, nil stocks, especially of the key promotions SKUs, is a sure shot LBW. Customers are drawn by the promise of these products and the offers on them. By not having adequate stocks to cater to this expectation, all the money spent for the launch becomes a waste!

Poor crowd management is No-No. In the early days of supermarkets, temporary cash tills were deployed to handle the expected rush. In fact a few were deployed at key locations near the exit to facilitate the customers. Today one has several IT led solutions to manage crowds and for queue busting, the favorite being a mobile POS. I will detail more about this in another post as this has several other benefits apart from only being used during a launch.

There are a whole host of things and detailed action plans that are required to generate a large number of walk-ins and subsequently manage the same successfully. But, I shall leave you with these basic things, which if done well should help win the match on the launch day.

DIFM - Implications for Home Improvement retail

What does DIFM or DIY have to do with retail? Very simple - the model for a home improvement format has to duplicate the neighborhood hardware store in terms of having skilled workmen to do the job.

Given the clear mandate to the new government, expected economic recovery and hence an expectation of enormous amount of housing development, it is only a matter of time before this format attracts serious attention and players enter the same. There are a few stores in this format, but they are not majorly focused on the repair and maintenance part of home improvement.

Just like how supermarkets had to closely match the experiential differences offered by the Kirana to successfully attract customers, home improvement stores would need to offer services as the core value offering. Sales of the products would be almost by default as anyways the skilled workmen take a call on the majority of purchases.


Once customers experience the certainty and convenience of such a service offering, the dependence on the offering would drive loyalty to the store.


Alternatively, given the rentals in most cities, only a service centre can be there in most major neighbourhood catering to requirements. The store could be a warehouse type of format in the outskirts. Since such large purchases are usually once in a lifetime, a good range at very competitive prices and backed by the service offering would more than offset the trouble of going to a suburban store. And lastly, even that can be countered by the store offering pick up and drop facilities for large purchases.


Going forward, customer engagement and education programs might help in slowing ushering in a DIY culture. Mr. Ashwin Mahesh in his comment on the previous post about home improvement mentions about how painting the walls is a fairly simple job and he would do that himself. But, the reality in India is that such customers would be an exception to prove the rule and even if a small percentage of people started to do this, it would be a major step in that direction.

Will FDI in Retail happen now?

With a clear majority and a free “hand”, the new government might want to implement some of the things which had to be compromised in the previous innings. One such was the allowing of FDI in Retail without strings such as single brand or cash & carry, etc. Most people in the Retail sector today expect that FDI in Retail would soon be allowed and this would help big developments and also bring in global expertise.

A couple of points in my mind about this development and the expectations from such an outcome –

1. Industry status for Retail is required immediately, thereby enabling Retail to avail various benefits from this. This would do much in addressing several issues related to licensing, statutory matters and more importantly access to credit.
2. Regardless of the industry status, licensing requirements for Retail should be streamlined and unified. Today, depending on the range of products one has in a store as many as 13 – 15 different kinds of licenses are required across a wide range of governmental agencies/ departments. Apart from the time and effort required to get these licenses, which could also vary depending on the state, the effort needed to renew and manage these is time consuming and is a pain.
3. MRP, do we need it? Had written about this earlier (http://v-rajesh.blogspot.com/2009/04/mrp-do-we-need-it.html ) and I think the time has come to do away with this or relook at its role. When significant investments are expected in Retail, be it the front end or the back end, the operators should be allowed to leverage pricing based on the other components of the value proposition. To force fit one price for all, disregarding costs of location, service, etc., is not viable in the long run.
4. Zoning and classification in cities is long overdue and in some cases only on paper. How will this help? The rental costs would be rationalized, especially as we seem to be heading towards a recovery and possible escalation of real estate prices again.

FDI or no FDI, the above four points need immediate attention and some forward thinking solutions if Retail as a sector needs to grow and thrive over a period of time.
Of course, some would include a 5th point of defining/ restricting sizes, formats and locations to protect the small kiranas. However, I don’t think that is feasible and anyways with proper zoning classifications this would be taken care of in a way. Also, if Kirana stores were accorded a status similar to small scale industries, they would fare better. Anyways, as I mentioned in another post of mine (http://v-rajesh.blogspot.com/2009/04/hidden-advantage.html), their cost structure gives them several inherent advantages and the only disadvantage they have is not being able to aggregate volumes.

Which brings me to an important point with regards to entrants waiting to leverage the opening up of FDI. It would be prudent to understand the Indian customers and focus on the backend more than the front end and this can be done immediately without waiting for FDI rules to change. Worse case scenario, such operators can leverage the supply chain that they invest in for the other Retailers.

Here is where understanding Indian consuming habits is crucial. It is no use focusing only of distribution centres, transportation, etc. This would address only 60% to 70% of the household consumption in terms of FMCG/ 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 products. 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. needs to be explored and indulged in to extract the value that is present, but is now lost due to damages and intermediaries.

Indian consumers have already experienced and in most cases embraced the self service, modern formats. Therefore, the game changer for a new entrant would not be setting up another air conditioned store with maybe better facilities but in offering a significantly better value proposition. And for that, the key would be the back end.

In summary, FDI might be around the corner. But, to truly leverage that the government should look at making crucial changes and the operators should start working now in putting the infrastructure in place.

Home Improvement - The illusion of low labour cost!

We Indians are a DIFM (Do It For Me) type of customer when it comes to any kind of home improvement project. DIY (Do It Yourself) is an alien concept given the over abundance of labor in the Indian context. However, is it sustainable?

Traditionally the majority of urban Indians require an electrician to replace a blown fuse and therefore obviously the support of a plumber, carpenter and so on. Hanging a picture in the house is a major project because we need a carpenter for that! Why is that?

First and foremost, we are not taught even the basic skills required for some of the home related repair and maintenance work. And we don’t take the trouble to acquire these skills because of the existence of the neighborhood electrician/ plumber, etc. Therefore, we also don’t have the tools required to even do simple things like changing the fuse!

Secondly most neighborhoods have a hardware shop which has a resident plumber and electrician. These people are not employed by the store. They just use the store as their base of operations and a contact point. In return the sales generated due to the work they do is monopolized by that store. So, it is mutually dependent and creates a self sustaining cycle between the customer, the skilled worker and the store.

Lastly, given the cost of a proper tool kit, hand drill, etc., and while balancing it against the occasional repair needs as also the on-call low cost labor, most Indians prefer DIFM.

This is fine when paying a few hundred rupees to do minor stuff. Recently, the capacitor of one of the ceiling fans gave up. To replace the same we paid Rs. 75/- to the electrician who had come plus the cost of the capacitor. Even assuming that the price of the capacitor would not change, if I had changed the same, there is a savings of Rs. 75/-. Why did I not do that? Urban dwellers increasingly trade off money for time (Read this article about this concept - http://www.blonnet.com/catalyst/2003/05/08/stories/2003050800080200.htm). So, in my view the cost of the electrician’s time was far less than the value of my time and the required effort for this.

But, this also leads to conditioning and repetitive behavior. Even if I knew something about home improvement, I soon lose touch and my dependence on the skilled workers increases and thereby my latent need and dependence on contractors also grows, for larger home improvement jobs.

Now, imagine a slightly larger in scope but simple enough home improvement work. Painting your home or even one room! It is actually a simple enough job. One needs to sandpaper the walls and then paint the same. It becomes ridiculously easy of one were to use a roller instead of a brush. Yet, we usually ask a contractor to do this job.Ask anyone who has had to manage even such a simple job and there will pour forth a litany of complaints about how the painters usually did not come on time, made a mess and often left without cleaning and so on. If one were to calculate the cost of the time and effort required to follow up, supervise, clean up, etc., one would realize that the actual cost of the job was far more. Therein lies the irony of the supposedly low cost labor and completely undermines our main rational for being DIFM instead of DIY.

Ingenious Indian Retail

Have been invited to write a piece about Indian Retail for an international publication and while I was mulling about the topic I happened to see this coconut semi-wholesaler/ retailer. This is located in Mylapore, Chennai, India. This is the heart of a city where rentals are in the range of Rs. 100/- odd per sq. ft.

See how innovatively the space has been used. It is nothing short of genius. Also, given that the space would be normally treated as dead space, this guy would have got it at ridiculously a low rent. Just in case the premises was owned, imagine the ROI.

Can anyone guess the Sales per sq. ft. or GMROI or GMROF!!!!

End of the day, retailing is not rocket science. Remember the basic model and stick to it as an obsession!!

Customers are predominantly honest!

In continuation of one of my previous post about shrinkage and in defense of customers, I would like to share this interesting incident.

Going back to my favorite period of reminisces, the early days of Foodworld, we were constantly trying to figure out why customers still preferred the neighborhood kirana store as compared to the air conditioned and more convenient supermarkets. After talking functional issues like pricing, the preferred quality of groceries, home delivery, etc., we were still unearthing some interesting insights.

One such insight was the comfort level that the housewife has in being able to send back stuff she is not happy with. In one of my earlier articles, I have mentioned how shopping is a habit, especially given the fact that we do not have adequate inputs for making truly rational purchases. In that context, the comfort that the store would take back/ replace something is a significant cushion for the housewife. I can’t say that the same holds true of today’s consumers. But that is another story.

A program was initiated to popularize the replacement policy, wherein anything excepting razors n similar personal items could be replaced/ returned with a defined number of days. No questions asked.

Surprisingly, the resistance to the program came internally from the store team. At the briefing meeting they were vehement in their protest and the biggest argument was how this would be grossly misused by customers. And so a pitched battle ensued between marketing and operations.

Finally the then head of Foodworld stepped in and mandated that the program should be given a chance. But, to be fair to the operating team we would meet again in a month and review.
The program was rolled out. Lots of banners all over the place, posters at the store, shelf edge material, etc. Basically, no customer could miss that message.

A month went by quickly and we were reviewing this initiative. I had not heard of any major incident of the program having been misused. But, I had also not heard any positive feedback of acceptance from the store team and was looking forward to what would be mentioned.
Finally when we discussed this program, it was a bit of an anticlimax. If I remember correctly there had been a few cases of misuse including a lady who brought back a half eaten can of cheese with fungus on it!

When compared to the total number of customers, the percentage of such instances was miniscule and the benefits of creating this kind of trust far outweighed the few cases.
Having said that, in most countries where retail is mature customers also evolve. Or rather people who want to misuse the systems and processes also evolve and therein lies the challenge for a retailer today.

To trust or not to trust!

Will leave you with this experience of mine at Makro, UK. While at the customer service desk I was aghast to see the lady staff accept a supposedly defective hand drill for return/ replacement. When I pointed out that the drill could be working, the lady drawled in her Manchester accent, “It could be working, luv. But if I were to check and got a shock the company would pay far more than what the drill costs. Also luv, why would anyone want to return a working drill”!! Is it any wonder that we get to read how some people purchase a nice dress on Friday and return it on Monday, after the weekend party!

Mr. Owen Price; And his priceless input!

The first year passed by fairly fast. For some time The R A Puram store was the only store in Chennai and most of the team members either stayed closed by or passed it enroute to office and home. Like all single children, the store and its team suffered from an over abundance of attention, feedback, action points, etc.

Interestingly most of us were from different industries. Not just Retailing but a majority of what we sold was new to us. We were busy learning the tricks of the trade while picking up inputs on how to differentiate between Toor and Urad Dal, how to select a good broom, etc. Our spouses were not complaining (As yet!!) because we were all venturing into the uncharted territory of the household shopping, grocery, kitchen, etc. Obviously there were many hilarious moments, but in the privacy of the home and will leave it at that!

I remember a plaintive cry to the operations head by the store team to debar our visits because just the day before not one or two but a whole bunch had visited and given inputs on how to display brooms!

The reality was also that customers would come, pick up a few items and leave. We yearned to see the large monthly shopping bags, but they were few and far between. As the marketing person for Chennai, it was my onus to bring in more customers and make them buy more.
Many ideas were shared by the then JV partners and most were implemented, including a monthly draw, special offers and what not.

In the meanwhile, the first year’s anniversary rolled by and like all first birthdays it was to be celebrated in style. We had a seminar on retailing and then a cake-cutting at the store with the works.

One of the special invitees for the anniversary was Mr. Owen Price from Dairy Farm International. He is the grand old man of Asian retail and he retired from the board of company in May 2007 after 33 years of association. He had requested that someone be attached to him to help him prepare his notes and speech for the seminar and yours truly was drafted for that role.

After completing my tasks and having attended the seminar and function, we went back to the hotel where I was to drop him and pack up. He invited me in for a drink and remarked that for all the help I had extended he would like to help me out. He asked me, what was the biggest challenge I faced as a retail marketer. Promptly I blurted out about customers not doing grocery shopping. He asked me about the places where most people shopped and agreed to come for a quick tour the next day, before leaving for the airport.

The next day, we went to all the Murugan stores, Bharat stores, etc in Chennai and Mr. Price was very intrigued by the huge bags of rice kept in these stores. Soon it was time to leave and on the way to the airport he taught me the core basic of retail. Identify the largest item in value and/ or volume that people buy. Ensure that they buy that from your store and everything else will follow. He left with a single sentence saying “Rice seems to be your key”.

I quickly did some homework and understood what he had meant. We had a major argument as to who would take on the cost of the promotion. The final arbitration was that marketing would take the cost, but if this proved successful it would be a merchandising cost. The first promotion we ran in 1997 on rice was 2 Kgs of Sugar Free with a 20 KG bag of rice. The floodgates opened. Soon we realized that basic items need to be driven by pricing and not by promotion. So pricing was focused upon and the term banner/balloon rice was born! (Mentioned in the earlier post www.v-rajesh.blogspot.com/2009/03/where-is-banner-balloon-rice.html) Needless to say, marketing did not get any debit for the initial promotion!

Mr. Price; A tall, regal looking person, I still remember his keen eyes and smiling face. In a way, he is my first Guru in the field of Retailing. He taught me to step out and learn firsthand about consumers and how crucial it is in Retail. Post this incident I realized that reports and data can tell you only so much. For a complete picture one needs to step out and experience it in totality.