Are you Buying Sales?

The SALE season is upon us!

Every Retailer, especially those in the lifestyle space routinely announce and execute the “End Of Season Sale” (EOSS). Advertisements, posters, etc., scream varying percentages with the word “Upto” mentioned in small print - for example “Upto 70% Off”.

Although the intent of these EOSS offers is to clear stocks and shelf space for the new products, lines and styles, this is becoming counterproductive in many cases. Shoppers have started expecting such offers and their timing has become a well known fact. As such, the customers tend to often wait for EOSS to make their purchases. Ironically Retailers have realized that and are beginning to feed this habit by planning for special EOSS stocks which defeats the very purpose of this activity.

The reality in Indian Retail is that most promotions by and large are run without much thought and no clearly defined specific objective. Most promotions are being planned to increase sales and then every category jumps on to the band wagon to leverage the increased customer walk ins. EOSS is also going down that road and this is definitely not a good trend.

For starters this trend is clearly conditioning the shopper against the regular pricing being offered at any store and skews the sales trends heavily. In the case of mass merchandisers, the skewed sales trends do affect the inventory levels, forecasting, etc. Even after normalizing the sales for promotion impact, the data cannot be completely trusted because there are similar promotions on the same brand being offered by other stores and this also skews the data.

This brings me to the ago old debate of Hi-Lo promotion led pricing Vs EDLP or discounted pricing. Although EDLP offers consistency and its resultant benefits, promotions bring in excitement which has its own set of benefits for any Retailer.

Am I proposing that Retailers do away with promotions and only follow a discounting model?

Not at all. My view is that promotions are not only tactical but also a part of the Retailer’s strategy. As such promotion planning needs to be done in a structured and well planned manner. Let me elaborate on one aspect of structured promotion planning which is setting objectives.

When asked why that particular promotion is being run on that SKU or category, the inevitable answer is either about increasing sales or because competition is doing the same. In other words a well defined and specific objective is missing.

I say so because sales is not an absolute and insulated phenomenon in Retail. It is actually composed of three elements –

• Walk ins or Footfall
• Number of Bills
• Average Bill Value or Ticket Size

Any promotion must be structured to deliver a result which will clearly impact one or more of these three elements. This is important because different categories and varying promotions impact each of these three elements in a different manner. For example impulse or low involvement categories are great to increase footfalls but would require a very strong offer.

Execution is the next important factor to ensure that the promotions deliver the desired results. Whether it is with regard to having adequate stocks or having the proper signage and promotion communication, every execution element plays a vital role and cannot be ignored.

Last but definitely not the least is the store staff briefing which can in some cases make or break a promotion.

Let me share an example. An apparel store was offering a gift voucher linked to particular slabs of bill value. When the cashier was billing my purchase I noticed that I had become eligible for one such gift voucher and wanted to use the value of that voucher against the remaining purchases. Therefore reduce the total amount I was paying.

When I mentioned this to the cashier, as expected, he became flustered and called the supervisor. I was surprised to find that the supervisor was well briefed and he checked my purchases and briefed the cashier to bill the products as I had requested as also capture the gift voucher number against the second bill.

There are two take aways from this incident.

1. From a shopper’s perspective the majority of cashiers and supervisors would be flustered in such situations and take the easy way out by saying that it is not allowed. Briefing the staff helps the customer get a clear communication which build loyalty instead of making them frustrated.
2. However, from a Retailer’s perspective this seems like a waste of promotional budget. Neither is it bringing me back to increase their footfall nor did it make me buy more and therefore increase the average bill value. Why did that Retailer throw away that margin?

Very clearly promotions are not easy to plan and manage. To be able to achieve the right balance between positive business impact as also happy shoppers, the Retailer should have planned the promotion with a lot of thought, data and a clear objective.

In the absence of adequate thought and planning for any promotion, the Retailer is only buying sales!

Retail Idea; 5 Stars for your store staff

The irony of customer service is that the store staff are trained and expected to deliver great service but invariably the systems and processes are counter to this intent. More importantly, the staff are rated, recognized and rewarded largely by the managers and the supervisors instead of the customers.

In this convoluted as also slightly confusing scenario, the high school pass or college dropout staff is expected to deliver customer delight. It is a wonder that they manage to do whatever little that they are able to deliver.

A simple maxim for success and leadership is “Walk the talk”. In line with this thought I suggest a simple and highly effective system of staff recognition which could even be linked to their incentives and other rewards. 

Let the customers rate the store staff on the basis of stars for good service. This is a typical Retail idea in terms of minimal costs, easy to implement and would be highly effective. All it requires is some supervision to ensure that no one is misusing this system. Although some might debate that there would be variances in the expected standards of service from customer to customer, the same variance would also equalize the rating in this system over a period of time.

CLICK here to read about the details of this idea in my ET article and share your views and comments. 

Retail Trend; Shoppers can and will experience the product before purchase

Showrooming was a concern when shoppers used to come to the physical stores, check out the products and then purchase it online because of a better price. Just when this was becoming a cause of concern the exact opposite happened for several categories - reverse showrooming. Here shoppers would do extensive research online and then come to a physical store to experience the product and make the purchase. Needless to say smart Retailers have developed strategies to counter showrooming and to encourage reverse showrooming.

The next step would be to combine the power of technology and the shopper’s need to experience the product, without even having to come into the store. This trend is going to only increase especially in lifestyle and high involvement categories.

The IKEA initiative for their catalogue is an apt example for how Retailers can leverage technology to encourage reverse showrooming; more importantly, deliver shopper value which is not limited to price alone. 

As you can see in this video IKEA has used an augmented reality app to enable shoppers to not only experience their products before hand but also create wonderful memories.

Now to address the question I am invariably asked - is this possible in India and will it be worth it?

Yes, it is very much possible in India and it is definitely worth it because the Retailer will create value for the shopper which is not limited to price. Also, such experiences will have an emotional impact on the customer as also trigger word-of-mouth publicity which is fantastic.

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The Changing Indian Shopper

Indian Retail is going through a evolution at jet speed and the Indian shopper is changing at an even faster pace. With information at their finger tips (literally and figuratively) they are not stopping for anyone or anything.

Retailers need to keep abreast of these changes and some thoughts about the changing Indian shopper has been captured in this article and those who create a customer centric value proposition keeping in mind these changes might emerge as the winner.

Click Here to read the article. 

What’s in store; 2014

My article for Economic Times Retail details some predictions for the Indian Retail sector in 2014. The first point naturally talks about the FDI in Retail and how it is not going to happen soon simply because of the final rider of a state’s clearance exists.

Today’s announcement by the new government in Delhi that they will not allow FDI in multi-brand Retail is exactly what I was talking about. It would be interesting to see how this pans out because the central government is miffed by this and the same party is supporting the minority government in Delhi. 

Regardless of the FDI story, 2014 promises to an exciting year for Indian Retail.  Click here to read the full article and share your views.

Indian Retail; Learning from a tender coconut vendor

I recently saw this tender coconut vendor in a locality called Mylapore in Chennai. His name is Mr. Rajkumar and when I asked him about the neatly printed price ticket, he said that he decided to put up the same to attract customers as also avoid bargaining with them.

 

 

Apart from his idea of putting up the price ticket, I was impressed by the attention to detail and execution focus. The signage is printed neatly and more importantly it is placed in an eye catching manner facing the traffic flow.

Execution focus is more about common sense and attention to detail. Something this picture clearly demonstrates. Contrast this with what is often seen in the various Retail stores; missing communication, torn posters, slanted price tickets, etc.

That leads me to the topic of ownership. This vendor is clearly the owner/ operators and you can see him standing proud next to his “store”. Obviously his standards of execution are high.

If Retailers work towards creating a similar sense of ownership amongst the staff, they would also take pride in everything inside a store and a customer’s experience would automatically be of a higher level.

Indian Retail; Analytics is dead without Operational Excellence

The hot topic nowadays is “Big Data” and therefore analytics. This promises to have great potential for Retailers in terms of understanding and interpreting shopper behavior and expectations. Thereby enabling the Retailer to develop a more focused and sharply defined competitive advantage.
But, then are we missing something very important here?

 

I think the more important thing especially in the Indian retail scenario is operational excellence and execution focus. However, this does not sound as “cool” and futuristic as “Big Data”. Perhaps this is why I am asked more about “Big Data” and analytics in many of the forums, programs and classes and there is a marked decrease in interest levels when I choose to talk about operational excellence.

 

Analytics and “Big Data” is essentially about interpreting data. What if the underlying data itself was wrong?

 

 

This poster was displayed outside a leading chain of stores recently. Apart from the obvious mistake of printing out the email verbatim and just sticking it on a stand, the entire approach is incorrect and counterproductive.

 

The bonus points have a cost attached to it in terms of the redemption value, the cost of administering the system, etc. The Retailer has started incurring this cost hoping that capturing the birthday and anniversary details of shopper will create a sales opportunity. The bonus points are a reward or can even be called a bribe to make the shopper share this information with the Retailer.

 

You can see the level of operational excellence or rather the lack of it in the picture. In this context, how productive and useful is the cost and effort being expended on such initiatives? More importantly, what would be the accuracy of any analytics done on this? Suppose a report was being generated about the shopper participation in this scheme, it will obviously have very poor numbers and the data would be skewed.

 

Instead, if the Retailer had spent some more in having a better caliber of person who sends out an email with a separate attachment of the poster with the attachment, the impact level improves. Added to that is if the Retailer motivates the staff to implement such initiatives, then the impact and the data coming out of such programs would be far more meaningful.

 

In such a context is it worth it to spend large sums of money on software and skilled people to mine data and analyze the same?

 

Take a simpler example of sales data. The cashier tries to scan a product and when they are unable to locate the product code, they scan it using some other product code with the same price to complete the billing. This directly affects the inventory and sales data. H would such a level of data accucy help in any analysis?

 

At least in the Indian context there exists enormous opportunities for shopper delight and increasing operational productivity which will have a direct impact on the bottom line. Analytics and fascination with “Big Data” is good and should happen but after the operational issues are fixed and execution excellence is a reality.

 

Click HERE to join the debate about whether Retail analytics should wait for execution excellence.

Indian Retail Opportunity; Shipping Container Stores

Recently I read about a news item that a 40 foot shipping container is being used to open the first of its kind restaurant in Kakkanad near Kochi in Kerala, India. This reminded me of the PUMA container store in Singapore, which is was an interesting Pop-Up Retail initiative by PUMA during the F1 in 2011.

Interestingly the idea of using shipping containers as temporary or permanent real estate is not new and you would have seen these in many of the construction sites of large projects. Even extending this idea to Retail is not new. Dordoy or Dordoi Bazaar in the city of Bishkek, Kyrgyzstan, has a large marketplace which is made up only from discarded shipping containers.

These are placed 2 high in rows. The container at the top is the stocking or warehouse space while the Retail business is conducted from the container placed at ground level. This is a massive and sprawling market which has more than 5,000 container stores.

Is this not an excellent opportunity for Indian Retail?

A 40 foot container is 40 foot long, 8 foot wide and tall. This means a floor space of 320 sq. ft. which is the space that a small kirana store would have. The ceiling height at 8 feet is a bit low but can be managed if designed well. The reality is that one can purchase these easily and eBay lists these from USD 1,000 onwards to USD 5,000 for a new one. Even with the current exchange rate of 1 USD to Rs. 63, these would cost a maximum of Rs. 3,15,000 which is less than Rs. 1,000 per sq. ft. as a capital expenditure.

Imagine the possibilities in the Indian context where real estate is increasingly becoming expensive and also a constraint.

Any format, especially lifestyle and specialty stores can explore this option for temporary expansion within the city during festival or promotion periods.

- Open spaces in tier 2 and 3 towns can be easily leveraged for expansion.

- As these are built for transportation, such pop-up stores can be transported to several tier 2, 3 and even smaller towns to increase penetration.

- The operating expenses for such pop-up outlets should not be high and even the capital expenditure might get be recovered fairly soon.

Definitely worth exploring!

Click Here to view a video about Dordoy Bazaar and to join the debate whether is is doable.

Picture Courtesy 

- monkboughtlunch.com/bishkek-bazaars/

- forum.tempt.ee/uploads/4016_bazaar3.JPG