Not the end of the rack. Part III

Continuation of the article written by me for the magazine “Indian Management”, June 2009

Next is the issue of service.

Shopping is a habit, especially grocery shopping. This habit is driven primarily by trust built over years and based on softer service elements. Hence, even with similar stores offering similar products, one tends to have strong loyalties with a particular Kirana store.

In the case of corporate Retail, the structuring of the business model itself makes it very difficult to offer these softer service elements. Hence the need for a very sound value proposition, to the customer. The value proposition can be built around the store design, range and service. However, with similar looking stores with hardly any differentiation, how can anyone perceive a unique value proposition?

This has led to customers constantly shifting between stores either because of availability issues or driven by pricing and promotions. This leads to two things –

• Promotion/ pricing driven purchases lead to lower margins. A promotional sales contribution of 15% is a healthy indicator that the promotions are being perceived to be good and seen to deliver value. When this share goes up significantly it is a surefire indicator that customers are only “cherry picking” at that store.


• Customers alternating between various stores leads to a misleading picture with regards to sales analysis and this in turn could severely impact the forecasting and replenishment of a store. The direct consequence is certain products not being available, which is again a trigger for customers to frequent other stores.
  

Recruiting store staff has always been a challenge because of the perception of Retailing and getting trained people has been a bigger challenge. This is further compounded by the cost cutting orientation which has led many chains to reduce the head count in a store. This not only puts pressure on the staff to fulfill their internal work and yet interface with customers. This is truly a Hobson’s choice because customers come to a store to buy and hence the staff needs to ensure that the products are available and displayed. Yet, the customer would build loyalty and rapport only based on interactions and service, which often is compromised. An even simple thing like smiling and wishing or thanking the customer after billing is increasingly hard to experience. Is it any wonder that customers have little or no loyalty to any store?

Retail chains should look beyond the downturn. Today, these chains are scrambling for the reducing share of the shopping basket, further compounded by overcrowding and without any differentiation. By reducing store staff and thereby impacting the service levels, the chains are only further reducing any chance of differentiation and therefore customer loyalty.

Also, in the coming years when the economy picks up again and expansion starts, getting store staff is going to become increasingly difficult in spite of a slew of training academies being opened by everyone, including the Retail chains.

Perhaps it is now time for the Retail chains to work towards the staffing models of stores abroad, wherein elderly people and students form the majority of the work force and work as temporary staff. India has both these segments of people and youngsters today are increasingly adopting the work and study model. Such people can be used to supplement the store staff’s efforts, especially in customer interface and customer service functions.

Last, is the issue about funding, debt, etc., which is seen as a major factor to doom this sector. Retail, the largest employer in India and also abroad is not an industry in India. Suffice to say that being recognized as an industry would help manage this issue as currently these chains are largely dependent on PE funding.In summary, the store would be a tipping point in the Indian Retail story. Which side of the fence it tips over, is a result of some concentrated action which is required immediately.

The good news is that, this seems to be happening and shortly when the sector resumes its growth story, I can claim that I told you so!.

Guest Post by Mr. Shiv Murti, A mentor for most Indian retail professionals!

I can remember the first time I saw the site sometime in 2000 1st. Quarter. The site comprised of 2 factory sheds with a road in between and I wondered how we would make a Hypermarket out of it. Many months later the final design came out and when the civil work was completed it was like a transformation of the Ugly duckling. India's first single level Hypermarket was born.

The next step was filling it up. 45,000 sq.ft. of store space - a team that was more used to filling up supermarkets of 3,000 sq.ft - new product categories to handle. It was a learning experience and a very enriching one and within 4 months we had the Product Master ready with the space allocations etc.

Then the order placement and the drive to fill up the store. We set ourselves an impossible task of 15 days time from first receipt to opening. I remember Kruben saying it normally took 60 days but he had done it in 45 days with a supply chain that worked, vendor supply efficiencies of 90% plus and with experienced staff. We had none of these but we had a team that was willing, eager and did not know the meaning of the word impossible. We were ready 1 hour before the store opening with what even Michael and Kruben admitted was a very high level of store readiness and a store fill of approx 84% of what we had planned as the SKU count. It took passion and an immense drive from everyone concerned to make it possible.

And then of course the store opened. And within the first hour we knew it was a runaway success. That was the story of the opening of the first true hypermarket in India and it was all made possible by a very committed team.

Guest Post by Mr. Saurabh Chadha, who was the Business Head, then

27th June is etched in my memory as one of the most memorable days in my life and also "INDIAN RETAIL HISTORY' as it marks the arrival of HYPERMARKETS in India. It’s been 8 years since then and the industry has grown by leaps and bounds but the trigger for that was the 27th June 2001.

The team had worked relentlessly for 15 days 24 hours a day to ensure that "GIANT" opens on the designated date and I thank the entire team for the support and the able guidance of Raghu, Kruben and Shiv who made it possible.

Once again let’s celebrate this day by dedicating ourselves for the cause of "INDIAN RETAIL".

A Giant Step for Indian Retail

India’s first full fledged hypermarket opened its doors to customers on June 27th 2001 in the twin cities of Hyderabad and Secunderabad.

Spread over 1,20,000 sq. ft. site, the store was a first of its kind in the country. Many interesting firsts were tried out in that store. Industrial type of racking was used and the upper parts of these fixtures were used for inventory storage. There were more than 15 cash tills, which itself were an awesome sight to see. Not many Indians would have seen this unless they had travelled abroad. Apart from all the products that a supermarket had, there were clothes, consumer durables, etc. I personally was amazed that there were so many products (20,000 SKUs) that a consumer could choose from in the Indian environment.

One of the most interesting innovations was the open, wet market type offering of fruits and vegetables. The consistent popularity of the neighbourhood wet market was diminished only partially by the crowded, dirty environment of such places. However, the long standing Indian habit of sifting through and selecting vegetables made consumers overlook the environment. The idea was to offer the same wet market feel of mounds of vegetables that customers could select from, without the dirt and slush usually found in such places. This was an instant hit and nowadays one sees a similar offering in most stores.

This store was also a fore runner of the Cash & Carry format, which is an exclusive B2B format. Although ‘Giant’ was a hypermarket catering to end consumers, there were a group of B2B customers who were regulars for the store. A small sales team from the store catered to such B2B customers in terms of their requirements.

Memorable moments abound with regard to the launch and the most interesting one is the launch promotion on sunflower oil. Oil sells like hot cakes in Hyderabad. As compared to the 3 to 5 litres of oil that most of us purchase every month, many families in the twin cities actually purchase 15 litre cans and also manage to finish it month after month.

Therefore, any launch without a special offer on oil would have been incomplete. Now, oil is a commodity and even though we purchase cooking oil in packets, the pricing is influenced by the ruling commodity price. It so happened that the price of oil spike a day before the launch and there was no way we could change the offer so later into the run up to launch. Also, once communicated through advertisements and leaflets there was no way we could not honour the offer and risk losing credibility in the customer’s mind.

However, what ended up happening is that a large number of small traders descended onto the store and literally a few seconds after the doors were thrown open, the shelf was wiped clean. In the picture you can see the mad scramble to grab this product whilst the staff is trying to bring down additional stocks from the storage area.

An interesting experience which left behind a huge learning. The practice of reserving the right to limit the quantity purchased by anyone, especially on such highly popular offers was born out of this learning.

From my memorablia collection

Offers and promotions are a default part of any value retailer’s life and cannot be wished away from any communication element. By the time the Giant store was launched RPG Foodworld had established the 365 day promotion as a norm and several other retailers had also started to mimic that.

In that context, the challenge was to communicate offers, but come up with a creative idea to communicate the size and scale of the new format in terms of the store itself as also the products available. The risk of being seen as yet another store, especially a supermarket had to be managed as also the concept of a hypermarket had to be established as the term hypermarket itself was completely new to the consumer’s psyche.

This led to an interesting launch campaign, which leveraged the traditional sight of a person pushing or pulling a large cart laden with things. Coupled with some mind boggling numbers in terms of store size and number of products available, the communication was an instant hit; of course helped along by some very attractive offers. Sharing some visuals from my scrap book for everyone to enjoy; The advertisement, Invitation, etc.

What’s in a name!

Selecting names whether it is for a new born or a new store has similar levels of involvement and effort. So, it was during the run up to the first store launch. Several names were discussed and discarded. A little known fact was that the team landed on the name big bazaar. The idea was to communicate the largeness of the offering. Various designs were discussed and finally a blue, yellow and red colour scheme with the word ‘big’ being the central visual point was agreed upon. Design guides were made and other related communication and design elements were being developed and processed.

One fine day there appeared a recruitment advertisement for another yet-to-start chain and lo behold, the name of the proposed chain was big bazaar. The first half of that day was complete pandemonium with everyone trying to figure out how this could have happened and if our application for registration had been declined for any reason. After much huffing and puffing, it came to light that the matter had slipped between tables by someone, somewhere.

So, the hunt for another name started and after a furiously fast search, dip stick studies and feedback sessions, the name Giant Hypermarket was decided upon. The logo design was the same. Giant replaced Big and Hypermarket replaced Bazaar. Going forward, even that gave way to Spencer’s Hyper.

If you believe in numerology and the original name did not have to be given up, who knows how the Indian Retail landscape would be today!

But then, like the famous bard said; what’s in a name, a rose smells as sweet whatever it is called.

Shopping in a nighty; The paradigm shift!

The recent posts about the anniversary triggered off a flurry of “Do you remember” conversations. One such incident recalled was about when the head of RPG Foodworld once rather cryptically mentioned in a group that I was responsible for getting women in nighties to shop at the store! The incident and the background deserve to be shared in this forum.

We once had a group of women who were invited to share their view of shopping, where they shopped and why. There were many interesting and even startling feedback points with regards to the modern air conditioned stores as compared to the tried and tested kirana.

One very interesting comment made by several ladies was that they need to dress up and look smart if they were to visit the modern stores, whereas they could walk across in even a nightie to the kirana store. Apparently, the uniformed staff who spoke in English, the modern ambiance, etc had created a self induced sense of very high standards with regards to purchasing from the modern format stores. This obviously did not help the stores as it was seen as slightly intimidating and definitely not “my store”.

One needs to understand that in the Indian context, dressing up means precisely that and starts with a smart saree or similar attire, hair to be groomed, etc. Imagine the consequence. Even the housewife staying next door to such a store would have to spend considerable time and effort just to get ready for shopping. Thereby making the whole expedition not a very convenient choice, unless one was going out as a family outing!

It was an interesting insight and one that became the starting point for lots of initiatives which were rolled out to make the customers feel at ease and not make the store so intimidating as to be almost unapproachable.

Cut to a few years later and we were launching the chain in a new city. The recent batch of management trainees had been dispatched to participate, experience and learn from the launch. At an informal get together the then head of RPG Foodworld was asking these youngsters about their experiences when one person quipped that the customers were so comfortable and accepting of the store that a lot of them were seen shopping in their nighty. That’s when the head made the remark of how yours truly was responsible in bringing women shoppers in their nighties to the store.

Needless to say, I spent that evening explaining away this comment while my colleagues would often ask me as to which consumer attire I was working on next!

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!