Leveraging Catchment Area Analysis

Continuing along my recent theme on Customer Service, there is an excellent tool to enable great customer service. This is the detailed analysis of one’s catchment area.

It is also one of my favourite training sessions, which is a big hit with participants as this topic can be conducted as a conceptual program or a action plan oriented workshop. Till date I have conducted this session for the staff of several Retail organisations.

Recently I witnessed a store staff lose out on one such opportunity to create customer WOW and gain further loyalty. I have written an article on this topic, which has been published in “The Hindu Business Line”.

This is the link to the article - Who's buying what in your area?

Please do share your comments about the article.

Creating Unsustainable Expectations

Waiting at the billing counter has always been a touchy and sensitive point with customers. They are at their irritable best if there is even the smallest of delays. In fact this factor is now one of the key drivers for customer to revert to their trusted neighborhood store for basic/ functional purchases. Make a phone call and be done with it.

So, it was refreshing to see an Indian hypermarket take the bull by its horns and tackle this issue head on. They released advertisements about the “No more long billing queues” and branded it as the Green Line revolution.

Quite frankly I thought that they were quite ambitious in their claim and was watching to see how this would pan out.

I shared this advertisement in several of my classes and invited inputs from the students in the context of customer service and customer satisfaction. Initially the feedback was very positive with most students mentioning how this was a welcome move and they would try this store just for this service factor.

Cut to a few weeks later. This campaign has been on my mind and I was keen to see how successfully this Retailer had managed this service issue and what had happened.

In order to maintain objectivity I asked another class of mine to do a field visit to various stores including this hypermarket. They had not been showed this advertisement and there had been no discussion in this regard in the class.

The feedback was rather shocking although along expected lines. The Green Line initiative was highlighted as a positive and the message registered well with the student customers. Although under the negatives for that store long lines and a long wait for the billing was highlighted. The net take out was that the claim was not supported in reality and was a huge disappointment.

Obviously this Retailer might have ended up irritating more customers than winning them over with this initiative and the fact that this is no longer mentioned in their advertisements seems to validate my point of view.

So, what went wrong?

It was creating unreasonable and unsustainable expectations. Service delivery is not only ensuring great service but also setting the right expectations. In this case the customer expectations would have far exceeded the delivery that the Retailer was prepared for. This is not uncommon and I see this often enough.

In fact the reality is that most customers might have not even registered the word “long” in the advertisements. They would have registered the message as no more queues.

This just another case to the point that Retail marketing is a 360 degree exercise and starts from the home where customers get some communication from the Retailer. Wrong or misleading communications like “Upto 50% Off”, with “Upto” lost in the small print or claims which are not sustainable will hurt more than help.

In Retail everyone should get a first hand feel of the store reality by spending time there and ideally working at the store often. Then they will be wary of such actions which are not sustainable. Remember, Retail is all about execution, execution and execution. Brilliant ideas conceived and presented in meeting rooms counts for very little in the reality test of how the customer actually experiences the same.

Indigenous cost control & Margin Maximization

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

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

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

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

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

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

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

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

Lack of Urban Planning is a bane for Indian Retail

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

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

 And many more such disadvantages and issues.

 

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

 

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

Sense and Simplicity

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

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

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

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

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

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

As mentioned above, sensible and simple.

Brand Raghu Pillai

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

- Brand Raghu Pillai

Some of the more memorable quotes of Raghu are –

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

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

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

Dear Raghu, RIP.

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

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

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

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

Loyalty Cards; The new toy!

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

The following thoughts ran through my mind in a flash –  

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

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

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

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