Point & Counterpoint: Employment Vs Entrepreneur approach to leverage Retail opportunities

Every interaction is a give and take, even when one is teaching or training. This was validated after a recent interaction with students of a B School about Retail. A few of them came up to me and in the midst of the typical queries about FDI, future or Retail, etc., they asked me something which has actually set me thinking and the take out I got from this session.

 

They wanted to know whether the expected Retail boom had entrepreneurial possibilities similar to what happened during the IT boom.

 

Invariably I keep talking about the great employment potential and career opportunities in the Retail sector and this question has taught me to think in a whole new perspective.

 

While I answered that there are indeed entrepreneurial opportunities, I would like to share my views for comments and inputs from others simply because such opportunities definitely exist.

 

Some initial ideas which can be built upon and experimented with are;

• Partner, take over or even start a standalone store which follows the “Basic Retail Model” and will therefore offer a viable value proposition. Franchising is a good option to explore.
• Set up a consolidation business for the small vendors who typically are not covered by the existing distribution system. One recent discussion I had with a person was about trying to do something along these lines for the vegetable sellers in his village.
• As I often point out Tier II and II towns are great growth stories waiting to happen. Explore that.
• Chain stores today require many support activities and that presents a whole new world of entrepreneurial options. For example; Physical stock checks are a tedious and painful process. If a credible service to manage this is given, there might be takers.

 

The underlying theme in all these ideas is a strong focus on a sustainable and viable value proposition.

 

Lastly, thanks to this question by the student I will start to build upon inputs that will help Retail related Entrepreneurship which has a great future.

 

The point to debate is, I was asked about entrepreneurial opportunities by a few students out of my interactions with 1,000 plus students in the past year. Before talking Retail entrepreneurial ideas, should we focus on kindling and developing a basic entrepreneurial spirit?

 

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Point & Counterpoint: Protection Vs Encouragement

A few days ago when I went to a local fruit and vegetable chain store called as Kovai Pazhamudir Nilayam, it was a pleasant surprise to see a poster wherein they are attempting to leverage social media network as a marketing initiative. As you can see from this picture, it is a simple database building initiative and incentivizes the customer with a discount coupon.

 

 

 

It is interesting to see how this regional chain is adapting and innovating to create and maintain a competitive advantage. They have approximately 35 plus shops largely in and around Chennai and Coimbatore and predominantly sell fruits and vegetables. Interestingly this is a category which even the larger chains find to be very challenging to manage.

This reminded me of another chain in the pharma space; Pasumai chain of pharmacies. They operate on a franchise model and are again regional with stores largely in Tamil Nadu. They leverage the core concept of Retailing which is aggregation of volumes, thereby creating value.

I am not sure if the coincidence that both these chains are from Coimbatore is an important element given that the region is known for being home to a large number of entrepreneurs.

The larger message pertains to the fact that Indian Retail chains and also stand-alone shop owners have it in them to keep pace and be competitive while also evolving to keep pace with times. Why can’t this spirit of initiative and competiveness be encouraged and enabled by well thought out policies and assistance?

Is it better to assume that these shop owners are an incompetent lot that requires protection from the big ‘bad’ international Retailers or it is more practical and viable to create an enabling environment for these businesses to develop and grow?

In that context I wonder what would have happened if our small and medium manufacturers had been enabled and encouraged to compete on a global scale. Would they have given China a run for their money?

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Point & Counterpoint: Experience vs Convenience

An interesting debate has been going on about the future of physical things in the face of so many virtual options. What will happen to paper books with the wave of eBooks, especially when one of the leading newspapers abroad recently claimed that their online readership has overtaken the print for the first time in their history.

 

Related to that has been the physical stores Vs Online shopping debate.

 

In my mind it boils down to experience Vs convenience. Will there be a time when customers will completely forgo experience in favour of convenience? Many online shopping fans have been espousing this and they look forward to the same. However, given human nature I somehow don’t think that the appeal of physical experience can ever die down and therefore physical stores will not disappear.

 

The question then arises whether this might happen for a particular category or a particular format? Will any specific space in retail become go completely online and the physical ones disappear?

 

I hope not and recently read an article which validates my view by reporting how online retailers are now seeking physical space by opening brick & mortar stores or at least connect point. Experience might prevail over convenience after all.

 

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Point & Counterpoint: Jugaad is a great competitive advantage

Jugaad; an essentially Indian word which stands for the ability to work out an out of the box solution for problems. The solution may be permanent or not, but it does work as a quick fix and definitely helps makes life easier.

 

Recently when I had been to a newly developing part of Chennai for some classes I saw this very interesting sight; heavy duty electrical cables joined together in an impromptu manner and then capped with cut off pieces of water bottles.

An interesting and amazing Jugaad!

 

Sure, this is not very safe and neither is this long lasting but it provides an interim solution and keeps things working. More importantly it does serve the intended functional purpose.

 

Click here to read a wonderful Retail perspective to Jugaad and join the discussion about whether this will continue to be their core competitive advantage and also be sustainable.

 

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Point & Counterpoint: What about the issues that exist today?

It is actually very heart rending to hear of all the supposedly extremes that are waiting to fall upon and ravage our lives, thanks to the FDI announcement in Retail. One of the comments in the debate was whether the MNC Retailer will bother about the farmer’s daughter’s wedding or something like that. I wondered if the local moneylender and their bouncers are nowadays taking so much of interest in the welfare of farmer's family that they are killing themselves.

 

I Read an article about how we are losing Rice varieties in today’s paper (link to the article and discussion is on my page) and something we all know came to my mind. The poor farmer has never been a priority or in focus. Increasing use of pesticides is already rampant and what is being done about it? Cultivation patterns are more by default than design. What is being done about that? The children of farmers go away after studying to work in call-centres. We are OK with these young adults becoming telephone operators but are concerned that similar young people will become sales girls and sales boys.

 

While I am not condoning anything which is incorrect, I do ask for some objectivity from all those who are making this out to be the single, sole reason why India will perish soon. Also, neither am I saying that FDI in Retail is the panacea of all evil, it will transform India and soon we will all be driving around on gold plated roads. Everything has a good and bad side to it. Sense and sensibility is to use the good and manage the bad to minimise the negative impact. Let us do the same with Retail first and the FDI will sort itself out.

 

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Point & Counterpoint: A new idea for online discussion

"Point & Counterpoint" is a new idea that I would like to try to engage the readers of this blog. Some perspective about Retail, Indian Retail, Stores, Shopping, Customers, etc., will be shared on the blog as also on my Facebook Page. Please visit the page to share your comments and views and enable a discussion with points and counterpoints.To differentiate such posts, the title would start with the phrase "Point& Counterpoint".

 

Lets start the first such discussion on the hot topic Retail FDI. Here goes....

 

An article in "The Hindu" is about saying NO to the Retail FDI. Written by a Prof who has worked in a PSU bank earlier, he tackles this from a pure Foreign Vs Domestic fund perspective. One of his main contention is that banks are flush with funds and why are we seeking FDI?

 

Yet another completely flawed perspective from 3 points of view -

 

First of all Retail is not an industry and any business which does not fall under a specific industry classification has a tough time getting funding from banks, esp PUS banks. Especially start ups in India have a painful experience in getting funding in spite of all the much publicised schemes. How will the banks which are flush with domestic funds help in this context. Maybe, that's why they are flush with funds!

 

Funding is only one part of the story regarding Retail FDI. What about the systems, processes, etc., that will come into the picture. How will banks which are flush with funds help?

 

Lastly, while almost everyone keeps talking about why there should be no Retail FDI and how it will affect the small trader. No one wants to put on the table anything constructive in terms of helping the small traders and/ or the chain stores.

 

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Making your VM Visuals more effective

We had been for the mandatory festival shopping of clothes recently to one of the apparel chain stores. The often quoted fact of how visual merchandising influences a shopper by as much as 60% of the time was very nicely validated. Here is what happened and some insights from the experience for Retailers.

 

After having browsed through the various racks of Kurtis and other informal dresses, we had selected a few dresses and it was being tried out in the trial room. Somehow none of the shortlisted dresses were WOW and triggering the final buying decision. When I was walking around waiting to pay the bill (!!) I happened to see a mannequin which seemed to be sporting a very nice and well coordinated dress. It also helped that the mannequin was the right height and size to represent the shopper and gave a very good idea about how that dress would look on a similar person. I asked the customer service staff for the same dress combination, it was tried out and bingo, the sale was through. Great VM work by the Retailer.

 

Now comes the other side of the story. While waiting near the trial room we noticed several large visuals of models in very nice dresses. The sensible part of these visuals was the inclusion of a short description and mention of the price. Instead of just being a feel good factor these VM visuals had become extremely powerful POP and sales promotion aids. We then asked the store staff for one of the dresses and the comment by the staff “We don’t have stock of that dress. A few pieces came and has sold out. Many customers see this poster and ask for the dress. We don’t have stocks.”

 

We persisted and asked about the arrival of fresh stocks and the staff had no idea. She was even doubtful if the stocks of that particular dress would come at all.

 

No doubts, VM and visuals are extremely powerful influence on shoppers and the Merchandising & VM team at that Retailer have done a good job of leveraging the same. However, it could have been even more powerful and the sales impact could have been significantly more if some more basic things had also been done.

 

Some inputs from this experience for all Retailers, especially fashion ones are -

 

• Plan your mannequin displays and make it relevant. It is not only about the ensemble you want on the mannequin but also the size and proportion of the mannequins. A petite, very thin, mannequin might be a great idea to attract younger shoppers. It might be a better idea to use “plus sized” mannequins for stores where the shopper profile is in the older age group.
• Needless to say, accessorize, match and present a holistic solution. We ended up purchasing the complete combination. However, the mannequin did not sport any accessory like a wide belt, etc. Maybe a display of such an accessory would have included that also in our purchase.
• The use of VM visuals as POP and sales promotion aids was very impressive and I don’t see that being adopted by many Retailers in India. It is a great idea and if done tastefully it will not compromise the look and feel factor while having the positive spin off on sales.
• The most important factor is to plan, track and replenish stocks of SKUS used in such display and visuals. It requires some effort but it is not difficult to create a separate inventory and sales tracking mechanism for only these SKUs. In fact, it could even be manual and done at the store level, then consolidated at a region or state level for reordering. Even assuming that this was being done at the store we went to, it was obviously not working and imagine the loss of sales opportunity

 

Lastly, as I often say in my classes and training programs, Retail works like a ball bearing and if each and every component of the bearing does not move freely while being interlinked, the whole bearing freezes and brings the machine to a halt. Good ideas need great, outstanding execution.

Let the games begin!!

The phrase “Let the games begin” is associated with Roman history and how this was used to distract the people from the various issues that the state of Rome was facing at that time. I find this whole announcement rigmarole about Retail FDI without any significant development on the ground somewhat similar.

 

“Government clears FDI in multi brand retail”, was the HOT news of the day. Essentially this will now allow 51% FDI by international Retail chains who have been looking forward to this for quite some time now.

 

The larger question is whether this is a step forward? Is there justifiable cause to cheer and plan accordingly or not?

 

In November 2011 when the cabinet cleared the Retail FDI proposal, I had posted about the anomalies and the constraints which might make this decision a non starter. Many if not all of those pre-conditions still exist with regard to the government’s decision and I wonder if this decision is intended to be implemented at all or just a good distraction from the several woes which are dogging the Indian economy.

 

Let us start with the fact that Retail is not an industry, a pet peeve of mine. The FDI decision is subject to the respective state’s willingness to allow this. I find this clause to the most ridiculous and cannot think of any other sector where this has been applied. For argument’s sake imagine if the Telecom revolution and mobile telephony was subject to such a rule. What would have happened to telecom? Ridiculous is an understatement for such a stand.

 

What is the logic in restricting the Retail FDI to towns with 10 Lakhs plus population? And also stating that if any state or union territory does not have any such town, then FDI is allowed in the largest/ larger town? If the old argument of protecting the small trader is being trotted out, it makes no sense at all. The fact remains that several studies have proven that the larger issue for the small trader is the lack of continuity as the next generation is usually not interested in managing these shops.

 

Possibly, one of the few sensible clauses in this FDI decision is that of investing 50% in the back end. However, even that is a non starter if fundamental changes are not made to key statutes and legislation like re looking at the APMC act. Now, let us consider the populist but impractical statement that states are allowed to decide whether they would allow FDI or not. State A allows FDI and stores are set up. Sourcing for many products might be from State B or C which has decided not to allow Retail FDI. As a business man would you be inclined to invest in State B or C with regard to the back end?

 

After this announcement the swords are drawn and the air is thick with talks of continuing support to the government. For all you know, this FDI decision might be eclipsed by an election in which case it will be back to square one.

 

So, Let the games begin!