An interesting differentiator

In most consumer electronics stores the focus would be on range, pricing and of late it has been on in-store service and customer interaction. In that context, it was a pleasant surprise to see an advertisement of a store which has highlighted a latent consumer need and has used that as an USP.

Usually most such stores have one unit for display and either one more for purchase or not even that in the case of larger products, especially those which require installation. In the Indian context most products do require installation barring maybe things like the mixie, toaster or the hair dryer!

So, typically after a customer puts down, what is often an obscenely large sum of money the machinery swings into action. The store informs the delivery/ distribution centre of the purchase and they then schedule the delivery. But what if they don’t have any stock? Frantic calls to the company or distributor and hopefully the product is delivered to the retailers distribution point. The product then is received into the system (physically and in the IT system) of the retailer and then it is ready to be sent out for delivery. Phew! Imagine if just reading about this was so long, how long the actual process would take.

A shortcut would be to ask the distributor to deliver directly to the customer and then manage the paperwork to bring it into the retailer’s system to adjust it against the sale. But, that has issues and is not a preferred action plan.

So, as a consumer what do you experience? After paying the money and not hearing the door bell ring, you wonder why? Calls to the store give you vague answers as they are also usually not very clear when this whole process will be completed. If you are lucky you would have got the product without this hassle or just when your fuse is about to blow, the product arrives. Or you give up and when the product arrives, it is usually a mild surprise!

Now this chain has taken the entire fun out of this Russian roulette by promising a 98.9% same day delivery. But hey, hang on. The statement is just a statement. One does not know if it is a promise or a mention of their track record. And there are no little asterisks to indicate hidden meanings. So, it is up to the customer to interpret it the way they want.

Let’s come back to the customer’s mind. You see this advertisement. Notice this, but move on to check some of the prices mentioned. You find it interesting and you are also looking to buy a LCD TV or a walk in fridge or whatever. You also have memories of the previous time you purchased something and you got it almost on the first anniversary of the purchase. Suddenly, the 98.9% becomes a powerful hook. An excellent differentiator.

In a segment where promotions can also not be entirely at the discretion of the retailers and market Operating Price rules (MOP – Will explain in another post) and most stores rapidly changing their looks to offer an experience, this is a true differentiator.

Hats off to whoever thought of this idea. I would have liked to have done this first. But, I admire this innovative and subtle differentiator. This store is now redefining the rules of the game and drawing customers away from a pure pricing play platform.

Excellent!

Welcome to India — We are like that only!

The Hindu Business Line has published my article about the Bharti-Walmart's Cash & Carry store opening.

"When Sam Walton opened his first store all those years ago, he had the luxury of being a pioneer and could afford to experiment, make mistakes and perfect the model — without being under the public glare. However, the first store of Bharti Wal- Mart cannot afford this luxury. Apart from being in retail, it is a joint venture with a leading Indian and US corporate. Its every move will be watched and commented upon, second-guessed and debated. A couple of thoughts came to my mind while reading about the opening of the first store."

The article's URL is -

- Welcome to India - We are like that only!

Is Retailing being redefined?

I have been taught and have also seen it in experience that Retailing is more about the back end. It is all about aggregating volumes and leveraging this to generate value. This value helps manage the differential cost structure of a Corporate Retailer as also enables passing on some of the same to customers. The whole cycle of value creation and bettering the value proposition gets more customers, which in turn enables increased levels of volume aggregation. This helps in establishing a sustainable business cycle.

A few days ago I saw a press report titled on how Retailers now prefer to buy from wholesale markets (New Indian Express article – Retailer Shun Direct Procurement). Frankly I was flabbergasted.
 

If this is indeed the thinking and reality, all I can say is that it is fraught with dangers.

1. Everyone, including the street cart vendor purchases from the wholesale market. I agree that the volumes purchased by them Vs a chain of stores would give some price advantage to the chain. Whether the advantage is large enough to compensate for the cost structure variance and yet offer a meaningful value proposition to the customers is a huge question mark.
2. Such ideas only further arm the anti-corporate retail voices. Their main grouse has been that conventional traders would be wiped out in the short term without any sustainable long term benefit in terms of development of agriculture, cold chain, etc. When corporate chains also start being dependent on the wholesale, one only further strengthens the existing the supply chain instead of making a meaningful change.

This seems to be a short term fix-it approach with only the current operating cost being the primary consideration. The past few years have seen massive expansion of the number of stores and distribution centres. But, has not been matched with grass root level efforts to aggregate value and truly make a difference.

I am reminded of a couple of corporate efforts who did this and they have reaped rich rewards. One that comes immediately to mind is the corporate supported sunflower cultivation when sunflower oil started becoming a big thing in India. There are lots of similar stories.

If Retailers pursue private label to leverage volumes and reduced cost structure of such products, but depend on the wholesale market for fruits and vegetables, there is a clear dissonance in strategic thought. This is akin to saying that I will purchase from the stockist and distributors instead of negotiating with the manufacturers to build long term value.

I am reminded of the milk revolution started by Dr. Kurien (who was later sidelined by corporate!!). Right now India needs a fruits and vegetable revolution. It needs a GREEN REVOLUTION. A comprehensive cold chain is needed, along with enormous inputs and support to the farmers.

Corporate Retail was supposed to be the answer. If they also follow the same wholesaler route, who will now make this difference?

A wake up call

In today’s environment of equal rights and awareness about prevention of harassment of any kind, an incident which a young lady professional wrote to me is a rude wake up call. This young retail professional has done her management studies and used to work with a leading organisation. To say that I am shocked by what she mentions is an understatement.

“it was a kind of torture.... my store manager want me to stay after 9:30 in the store.... he misbehaved... I complained but nothing worked.... nothing will happen as everyone is aware, but still do the same.....”

I am not naive enough to think that this could be the only or first such incident. Also, I am aware that I have heard only one side of the story. However, I am publishing this and hope the following happens –

1. People who are exposed to such harassment are encouraged to stand up and fight.
2. Retail, which not only has many women employees but also depends on the goodwill of the housewife, should be especially sensitive to avoid any such harassment to the women staff.
3. With the expected growth in corporate retail, maybe it’s time to proactively create an employee ombudsman. Such a neutral arbitrator would encourage employees to come forward more confidently instead of losing faith in the system, like the person who mentioned this incident.
4. Lastly, there should be an open and secure channel of communication to the senior-most management level. This should be championed by the senior leadership and well publicised. Let us remember that most of the store staff are young and might be graduates at best. Their natural inhibition itself would be a barrier to report/ complain which can be easily exploited.

The prevalence of harassment is there in almost every industry. However, in retail it has enormous significance. If women face such situations and also lose hope that the organisation does not bother, the industry loses both an employee and a consumer! Which housewife would be comfortable shopping in a store which allows women to be harassed?

In the coming days of competition, no retailer can afford to lose either.

Mobile and different; an innovative Retail Idea

The next article in my series about a sustainable retail model, focussing on the basics was published in 'The Hindu Business Line', today.

The article deals the first element of the model; A truly different store. An idea is presented for the readers to think and comment upon. Technically speaking it is not a store, but it is definitely a retail format worth exploring for India!

Click on this link to read this article -

- Mobile and Different

Please do post your comments on the feasibility of this idea.

I would be personally delighted if any corporate or entrepreneur decided to experiment with this model and will be happy to provide inputs.

Reader's Feedback/ Comment

I would like to share a few comments received from a reader. My views are in italics.

Chanced upon your blogsite from one of your articles in tickled by life. It is nice. Though I am not a retailer by profession or passion - I thought of sharing my 2 cents on this topic.

1) Why do we have to ape the west in terms of retailing models & instead why not we have our own models?
It is very difficult to strictly compartmentalise formats and models as western or Indian. Even the over the counter model was prevalent in the west before the self service formats became popular. Broadly speaking retail can be either a convenience store, Supermarket, Hypermarket, Cash & Carry, Price Clubs, Specialty retail, etc. These are generic labels and universal. However, how it is implemented is country dependent. For example supermarkets abroad are typically much larger than the average 3,000 sq. ft. stores found in India. So, in that sense the format are being modified for India but it is in the evolutionary phase and one can expect to see a lot of action on this front.

2) For staples why not we have something like a pizza delivery model - where one could use a phone and have them delivered at home. (This one partly stems from my laziness of pushing the cart around in a shop) And for the other items, where the customer has usually made his mind on the brand, and why not adopt the above model.
This format is the key value offering of Kirana’s. They prefer this model to maximise sales from their relatively smaller store to leverage the kind of products that has been mentioned by the reader; generic grocery and products already decided by the customer. This was also tried out by a company in Mumbai – Sangam Direct. However, once the customer gets used to the “Touch, Feel & See” experience, it is difficult to substitute that.

It is a fact that as much as 30% of a customer’s basket in a self service format was unplanned purchases. If the retailer delinked the must-have purchases from the impulse ones, the overall sales would drop because impulse purchases would definitely decrease.

3) As for the issues of the customer trying new brands / in store promotion- why can't this be shifted to the customer’s house - will be more targeted / focussed and measurable.
The logistics and cost of trying this is not feasible. Earlier one would have seen sales people coming to the homes with samples and selling products of even famous brands. Increased security concerns and proliferation of apartments have made it difficult for such people to gain entry into homes. Also, as mentioned earlier, the retailer’s effort is to induce the shopper to enhance the basket while purchasing the must-have products. For that, the customer needs to come to a store where a range is on display.

4) And lastly why can't the local kirana stores be used as an order fulfilment mechanism - this way we do not drive them out of business and be on the right side (politically).
This is an idea worth exploring only if the retailer is operating a tele ordering/ web based or catalogue format.

5) Yes, I agree quality is one of the issues - but there are ways of tackling them - probably standardizing them. By this mechanism we save on retail space, high rentals and other costs.
As mentioned above, a virtual store can definitely leverage the local kirana as a delivery point. However, tracking availability, delivery of order, payment collection and transmission onwards would be very complicated unless the store became a franchisee.

Store launch is like a 20:20 match!

While watching the past few matches of IPL2 I was suddenly struck by the similarities between a store launch and a 20:20 match. Both call for enormous planning and at the end of the day the difference between a win and a loss is all about proper planning and excellent execution.

Even today with the proliferation of stores of varying types, the opening of a store is a milestone and something that the whole team works towards.

My view has been that the opening day should be a grand gala event which should attract maximum number of customers from the catchment and generate positive word of mouth. The contra view is to open the store with minimal fuss and then market it well once everything falls into place. This has its merits but also means that the retailer loses an opportunity to make his presence felt. After all once the store opens or is launched, it is no longer a secret! The launch is an opportunity to make a large number of people ‘sample’ the new offering in the catchment and then work on converting them into loyal shoppers.

In that way, the launch is definitely like a 20:20, wherein maximum number of runs needs to be taken with minimal loss of wickets, in a defined period- the day of opening.

Getting more runs -

The trick is to start with a bang. Unlike in a test match, where the openers have all the time in the world to settle down, here, in 20:20 there is no such luxury – the focus is straight away on achieving a high run rate. Similarly, the first hour or so of opening needs to set the cash tills on fire. A good range and service would influence this. But an unbeatable promotional offer limited by time is a sure fire way to get customers to line up before a launch!

The next is to ensure a consistently high run rate. Blanket offers and promotions would mean that customers would choose to shop at their convenience, which is typically in the evening. Apart from letting the “run rate” decline in the lull period, this would create an enormous pressure on the staff and store infrastructure in the evening. Often this leads to more of dissonance, instead of creating a positive word-of-mouth message. Therefore, time based, targeted offers would ensure a run rate, which does not flag.

Lastly, the slog overs - which are precisely that. The evening of the launch requires adequate planning and preparation to manage the customer crowds, ensure stocks are still there on the shelf and most importantly the staff are physically and mentally ready to handle this.

Saving the wickets -

Saving the wickets, translates into saving these first customers and generating positive word of mouth, towards building a loyal base of shoppers in the catchment. Just like how a wrongly timed shot makes the difference between a sixer and a catch, similarly, high expectation with poor customer management experience is equal to the store being declared out.

The basic expectation of a retailer is to leverage promotions to attract the customers to come and experience/ sample the store. In this context, billing issues compounded by arguing with the customer means that the store has been clean bowled, out! In all these years of store launches I have seen, there will definitely be some minor glitch at least, especially with regards to promotions. The best stand is to gracefully honor the promised promotion and resolve the accounting later on.

An LBW is also possible. “Leg before wicket” is equivalent to customers without stocks for them to purchase! Low stocks or even worse, nil stocks, especially of the key promotions SKUs, is a sure shot LBW. Customers are drawn by the promise of these products and the offers on them. By not having adequate stocks to cater to this expectation, all the money spent for the launch becomes a waste!

Poor crowd management is No-No. In the early days of supermarkets, temporary cash tills were deployed to handle the expected rush. In fact a few were deployed at key locations near the exit to facilitate the customers. Today one has several IT led solutions to manage crowds and for queue busting, the favorite being a mobile POS. I will detail more about this in another post as this has several other benefits apart from only being used during a launch.

There are a whole host of things and detailed action plans that are required to generate a large number of walk-ins and subsequently manage the same successfully. But, I shall leave you with these basic things, which if done well should help win the match on the launch day.

DIFM - Implications for Home Improvement retail

What does DIFM or DIY have to do with retail? Very simple - the model for a home improvement format has to duplicate the neighborhood hardware store in terms of having skilled workmen to do the job.

Given the clear mandate to the new government, expected economic recovery and hence an expectation of enormous amount of housing development, it is only a matter of time before this format attracts serious attention and players enter the same. There are a few stores in this format, but they are not majorly focused on the repair and maintenance part of home improvement.

Just like how supermarkets had to closely match the experiential differences offered by the Kirana to successfully attract customers, home improvement stores would need to offer services as the core value offering. Sales of the products would be almost by default as anyways the skilled workmen take a call on the majority of purchases.


Once customers experience the certainty and convenience of such a service offering, the dependence on the offering would drive loyalty to the store.


Alternatively, given the rentals in most cities, only a service centre can be there in most major neighbourhood catering to requirements. The store could be a warehouse type of format in the outskirts. Since such large purchases are usually once in a lifetime, a good range at very competitive prices and backed by the service offering would more than offset the trouble of going to a suburban store. And lastly, even that can be countered by the store offering pick up and drop facilities for large purchases.


Going forward, customer engagement and education programs might help in slowing ushering in a DIY culture. Mr. Ashwin Mahesh in his comment on the previous post about home improvement mentions about how painting the walls is a fairly simple job and he would do that himself. But, the reality in India is that such customers would be an exception to prove the rule and even if a small percentage of people started to do this, it would be a major step in that direction.