"Basic Retail Model" video

There is a "Basic Retail Model" which I have written about and propagate as it is relevant to any Retail business.

The model explains how to make any store successful as also will help any Retailer to develop a strong competitive advantage in a sustainable manner.

This video shows the "Basic Retail Model" being explained by me in one of the Retail Management class.

 

Indian Retail – Point & Counterpoint; The gain and pain from MRP

Once again my oft repeated grouse about which I have posted several times crops up again.

Times of India carried a news item titled “Chilled drinks drain the pocket as shops charge extra for power” and had the following chart which as part of this news report. This clearly shows how shops are selling soft drinks, juices, etc. at prices which are 10% to 25% more than MRP. Needless to say this is illegal and in February 2012 IRTC has been fined Rs. 10 Lakhs by New Delhi District Consumer Disputes Redressal Forum.

 

 

Who benefits from MRP? Or rather the key question is who follows MRP?

Today MRP has become redundant and market dynamics defines pricing at the Retail end. The fact that a majority of shops in India sell many products above MRP and get away with it is ample proof that this legislation is outdated.

The typical counterpoint to this is how consumers are protected against being overcharged because of MRP.

Is that a valid statement? Not at all.
 

As consumers we all pay what the shop keeper asks whether it is below, on par or above the MRP. This is not restricted to only shops and the same reality exists in Hotels, Restaurants, Malls, Airports, etc. The only saving grace is that many of the corporate and larger entities today source products which has “For sale in select trade channels” printed on the product. This enables them to pursue a differential pricing which is invariably above the usual MRP.

Even in the above mentioned article a shop keeper is quoted as saying “I can't possibly charge more because if I do, then customers will walk into the supermarket a few meters away and buy the product there at MRP.”

Sure, IRTC has been fined for charging more than MRP. But, how many others have been penalized for flouting the MRP rule in spite of this being an open secret. Interestingly, the Judiciary seems to have a different perspective about MRP. In 2007 The Delhi High Court passed a judgment that hotels and restaurants can charge more than the MRP. This was justified in the ruling because such places provide ambience and services to their customers. However, this does not apply to shops and retail outlets.

I wonder why?

By this same logic the “cooling charge” is not illegal as it does constitute a “service”. Anyways, the stand alone stores do charge above MRP if possible and also gets away with it. By the same logic, the self service chains also provide service and ambiance and should therefore be exempt from the MRP rule.

So, who is then left to follow this out dated MRP concept? Therefore, if every channel has a reason and logic to charge more than MRP, why have this at all?

Click here to join the discussion on my page

Picture courtesy - Times of India, Chennai edition dated 10th March 2013

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.

 

Click here to join this discussion and also reach the article.

 

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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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