Retail Dude

The “I” is now synonymous with the retailers, having accepted the change needed in the hour to “Integrate” processes of the business with “Information” technology.  With the increase in the scale of operations of retailers and the globalization of the whole business, Indian retail could only bank upon Information technology to come to its rescue. From the point of sale to the point of supply, the seamless working can only take place with the IT bone in place. However it’s the, retailers who must make sound decisions supported by a rigorous business case that delivers quantitative benefits far greater than the costs with the multiple technologies in place right from RFID’s, touch screens, smart shopping carts to interactive consumer consoles.

Most of the retail operations in functionality are complex and highly customized to the format or the chain itself. The high degree of product complexity, supply chain dilemmas all along with the multiple touch points that retail face (manufacturing, C&F, distributors, retail outlets and the customer himself) calls for an integration which can only be process driven through systems. But in reality retailers who do not manage the IT systems effectively will find that this becomes the pain point more than the alleviation of it. IT networks effectively impacts the cost of goods sold, through better management of critical processes like inventory management, supply chain management and to an extent merchandising activity. We all agree that retail scope varies across geographies even within the same borders. The only way to address this variability will be to track, measure and implement the optimum products at the right places. We cannot imagine doing that effectively today without information systems in place.

There will also remain a need to maintain a proper data architecture since many a decisions are accumulated from past records ie the measure of a given sales scheme or a particular seasonal discount in the past years that was successful. Some of the most critical decisions based on data warehousing will be forecasting of trends. Our new mantra of customer centric retail is unfinished without a CRM database for that matter. A strong base of customers is what all retailers look for; and in fact the Govt felt the need of a “Do Not Disturb” policy for the telecom products. Effective use of such databases for service retail is essential, although having such a huge database of customers is nothing short of a goliath act.

Retail analytics is one of the emerging fields to conceptualization of the business from scratch to its improvements, mainly a field based on numbers and its dynamics. Most large chains of the world like Wal-Mart, Tesco, Sears and likes had set up back offices way back into early 2000’s just to support their sourcing activities in India and now slowly foraying into their front ends once when their system architecture is now robust enough to compete. ERP’s have now become a necessity to most retailers than just a showcase for better and effective management, since the prominent retailers now have a vertical integration of their products. Life is surely made easier even when your products are outsourced. Optimization can only be achieved when you can track real time. RFID’s the next gen technology can only lead to smarter supply chain and inventory management. Touted as the revolution, we have previously seen what a smart store connected to your kitchen can do. The only dampener which is the cost will surely see a reduction in future.

The cost of implementation of IT structure as said earlier has to prove its mettle and managed properly. The initial set up cost is certainly high, which reduces over time as we head towards a more profitable business reaping its benefits. Other challenges in the IT landscape would be to manage the lack of standards to move to a universal platform or towards highly customized solutions which escalates cost. This is a double edged sword to walk for the sector. However to talk of its intangible benefits, the knowhow of an advanced retail solution can be relevant to the retailer’s long-term strategy and competitive positioning. Some of the mentionable aspects would be the brand perception (by using cutting edge technology to stay up beat), to a more brand evangelist and heightened brand or store experience for its customers.

So to say, that IT can support the strategic decisions, the operational moves and the customer interfaces is only a pool to be dived into. Certainly the way ahead will be to re integrate the IT structure itself from the customer POS to the back end supports. We could productively see spends on the store itself being the hallmark of a customer experience and also the point of customer delight. We could see more value added services like Mobile POS and intelligent systems which identify the store loyalists in an informed world.

To keep up to the shifting consumer spending patterns and trends, IT is definitely IN.

 Cheers!

Sudip

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Retail was synonymous to word Boom in India before Recession. But like all other sectors, it also felt the heat of recession.

Now when India Inc. is recovering, it again seems to be the sector which is regaining its position with maximum pace. Many retailers feel that Retail was not that much affected by recession. It was only in the month of March 2009 that they felt downturn but from April, again things improved.

As per AT Kearney’s 2009 global retail development index, India’s largely un-modernised retail sector remained attractive to both domestic and international retailers, in spite of government regulations that prevent 100 per cent foreign ownership of retail stores.

We are witnessing inflow of large number of international brands in India. Walmart opened its first store last month in Punjab, and Tesco and Carrefour are also looking for JV’s. IKEA is waiting for Govt. decsion on FDI. Hopefully FDI in Retail will be relaxed in the forthcoming Union Budget.

With all these in place, I will like to ask readers whether they feel that there is a re-boom in Retail ?

 - Rajeev Damani

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Hello Readers,

We have opened our new Poll. Please feel free to give your response. Our new Poll topic is:

“Will Govt. increase FDI in Retail in Budget’09 ?”

Readers can post there views and comments on this topic as a comment to this thread.

Thank You,

-Team : RetailDude

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It was hot summer of Chennai which made me realize of this unique pricing strategy of Cola Companies. Few days back while quenching my thirst in a local cola shop in Chennai, I discovered how these Cola companies have strategically shift there pricing by selling 200ml of soft-drink at the cost of 300ml. I had to quench my thirst by consuming 2 bottles huhhh!!

It was few years back when these companies come up with the concept of “Chota Pepsi” or “Coke” for that matter. They offered consumers 150 ml of soft-drink for Rs.5. It was well accepted by consumers who were use to drink 300 ml. At this point of time both 150 ml and 300 ml (for Rs. 9) were available in the market.

Then after some time they increased the volume and price of small bottles to 200 ml and Rs. 7, though 300 ml was at same price. These companies discovered a new trend in consumers. They realized that still consumers prefer small bottles. This appeared as a great opportunity for them. Bingo!! The result of this we are seeing now.

Finally, these companies are now selling same “Chota Pepsi” or “Small Coke” at the price of “Bada” i.e. Rs. 9. And we without realizing this have happily accepted this. And the price of pet jar i.e. 500 ml has just increased from Rs. 18 to Rs. 20, where as the prices of 1.5 liters and 2 liters have been decreasing or is mostly with some offer like free my can or something. 300 ml bottles have almost vanished from the market now.

Hats Off to the pricing strategy of the Cola Companies who have been successfully able to sell 66% of the product at the cost of 100% almost in a phased manner and making consumer habitual and unaware of the increased price.

- Rajeev Damani

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Hello Readers,

Its been an awfully long time since any post in the blog and due apologies for it. This post is more of a thought, that i was having for a long time now and thus wanted to share with all of you.

India has now proven what a strong economy is all about. Although it has been the last fortress to conquer to all brands across the globe, they still flock to this amazing demography. The varied profiles of the Indian masses have made it even more challenging for hitting the right positioning bucket. Brands are made and brands are eroded in this country. But when i come down to the basic idea of branding and its stages, the last being its ambassador, i wonder does it still work that way?

A simple exercise: Think of a 2 brands (Products, Goods etc) which have in the last 10 years been built routinely built upon from scratch?

In most probability you will come up by sayin “Ipod” (but wasnt it Apple Incs branding that it shouldered), or say Viao (but isnt it a Sony First?). The point i am tryin to make is that do not count brands which are the children of some huge names. Are you left with any? Yes you might get a few in the service  category! (Websites, Restaurants et all)

The most popularly talked about brands and leading examples in classrooms are all brands which are pre millenium. Does it mean, that it is getting increasingly difficult if not impossible to follow the brand building exercise? Or are they very short lived? What about brand icons, associations that we have read about? Do they dont apply anymore.

If i may talk of the Indian Consumer, is it becoming difficult to get that brand loyalty or followers from them? or Is it that the basket of offerings have increased and hence the result?

These questions are more or less inter related and have plagued me for quite some time now. I wanted to know the various points people make to encourage a discussion. The most logical thing that came to my mind was that the consumer today is more aware and therefore has comparisons and benchmarks of their own. They know what quallity and service means to them in their own yard sticks. I do not see any company fulfilling them all at any point to all the segments. Therefore a universally appealing brand is missing. We have more switchers than ever in any context. What people think is branded (having a name tag) is what is craved for. It could be the technology, the product offing or even the latest “in thing” that enthuses its customers. Its not about the association you build these days. That stong presence of a community is certainly missing. Its something that you want to “own” , which in branding terminology is something in you, that wants to be a part of the brand. Aspirations being build onto a personality to create ambassadors of it. Branding expertise is very low in India where manufacturers still think that branding means advertising. Ideally the brand response has been low to the consumer expectations is what comes to me.

This wasnt the case in the past, where the most strongest of brands today in the market have been created with a certain degree of pedigree in their own fields. How was the associations made, which is remote in todays context? I also beleive that the brands in history are the ones where the product arose of a need, which ideally gave them the exclusivity of addressing a need. Most brands today compete with each other of pushing products to people. Lifestyle concepts have risen only in the last decade, which might be another contributing factor of very less brands making its presence felt.Companies that build for the long-term and establish brand equity, rather than brand image, should outride any ups and downs of markets and of customers.

Will it then help build a brand in its true sense?

Cheers

Sudip

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“Organized Retail to touch $ 45 billion mark by 2010”. Does this sound outlandish to you? Well, this was the headline in a daily publication called Midday dated 11/1/07. And, the figures are taken right out of the India Retail Report 2007, released by Retail Association of India. Looking at the present day scenario whoever projected these figures might want to look back and certainly make a few corrections here and there. As it stands today, the retail business amounts to only $ 18 billion. If we peak a bit more in the past in 2006 Retail was projected to grow a handsome 37% in 2007 and 42% in 2008. Any guesses as to how much did it actually grow? “We had assumed a GDP growth of 8% to 10% during 2007-12 in the report” adds Joseph who headed the ICRIER team researching on the impact of modern retail on small outlets as per the directions of the Union Commerce Ministry. He sums it up by saying “this is now impossible, at least for the current year 2008-09 and the coming year.”

So that gives us a good idea as to why a number of retailers felt like packing their bags while others just started pulling back their resources. “We had expanded rapidly; most of the growth was debt-led. The company had planned to raise equity during 2008 and was close to doing so in September when calamity hit the global markets” says R. Subramanian, MD Subhiksha (once India’s largest retail chain). The first evident rationale is the erroneous projections or rather over-projections, as most of these organizations went by things as they looked on the face of it, eventually having to face the music as none of these projections came true.

Second, imperative reason for the failure of retail chains has been splurge of investments in real estate. Though, the retailers cannot be exclusively blamed for this reason. Even till date there is no governing authority which controls circle rates for properties, and restricts them within a reasonable limit. “Those who had big expansion plans had [acquired] real estate earlier at much higher prices. They are now re-looking at their expansion plans and renegotiating the rates” observes Gibson Vedamani, Director, RAI. Why would they no, Mr. Vedamani?

Third, the delusion in the mind of organized retailers, that with the advent of organized retail the consumer focus was bound to shift. “Mom-and-pop stores could become part of the system, benefiting everybody.” Personally, I would not agree with the fact that the retail sales of the kirana stores shelves has actually gone down in the past few months. It’s just that the anticipated pace with which the companies expected to the consumer to shift from unorganized to the organized stores which did not quite realistic. This specifically applies to smaller towns and cities where value retailers like Vishal are sailing in troubled waters.

Fourth, the only value proposition which most of the retailers relied on for luring their consumers was discounts. Many a times this lead to drop in quality of the merchandise being sold. All but a few retailers tried to introduce promotions that went beyond price offs.

Fifth, would be a coalesced effect of the a number of factors such as insufficient investment in strengthening back-end operations, inability to retain talent, in turn leading to high attrition, lack of sufficient support in logistics and infrastructure, inefficient supply chains and lower quality produce.

If you are a retailer..don’t sigh. Just hang on for the next post as it’ll be the answer to all that has gone wrong in the past. And, surely enough I won’t be projecting any figures.

- Vivin

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I represent the impatient generation of today. Fast is the order of the day. Fast pleasure, fast vacations, fast food, fast affairs, fast cars, fast communication and ofcourse fast money. Having said that somehow I’m not a big fan of the new age fast cricket and particularly IPL. Well, it’s not about the tournament moving out of the country or the fact that only handful of players get to represent their states or even the reports that Indian Captain MS Dhoni and Harbhajan Singh bunked the Padma Award ceremony in order to make it to SA, the new host to this cricket carnival. It’s just the loads of money surrounding the tournament that puts me off. Millions and millions spent on errr….entertainment. Just cannot digest. In a country where people spend a lifetime and still do not manage to earn even a fraction of what some of amount of money being spent on the event. Let’s take a look at how it works and the kind of money involved. DLF as the prime sponsor for the event has invested a mind boggling INR 200 crores spread over a 5year period. The overall prize money is US $5 million, with the winners taking home $2 million. By contrast, the winners of the 2007 ICC World Cup in the Caribbean took home $1 million. The top players who have been bought by the franchisee are Kevin Peterson and Andrew Flintoff get $ 1.5 million apiece. Followed by our very own MS Dhoni at $ 1.35 Million. IPL II has been insured for USD 286 million, more than double the amount spent last season, owing to terror threats. The cost in premiums to the franchises is around USD 430,000 each. Besides, the whopping sum for overall insurance for the tournament, India and Chennai Super Kings captain Mahendra Singh Dhoni has attracted the highest individual insurance cover of USD 10.5 million. Sony/World Sport Group has a signed a 10 year contract with as the official broadcaster for the event at a whopping USD 1.026 Billion. Reliance industries has paid 111.9 million for the Mumbai Indians Franchise closely followed by the Royal Challengers Bangalore which paid USD 111.6 million a team owned by none other than, savior of our national pride, Mr. Vijay Mallaya, MD UB Group. So who gets all this money? All of these revenues are directed to a central pool, 40% of which will go to IPL itself, 54% to franchisees and 6% as prize money. The money will be distributed in these proportions until 2017, after which the share of IPL will be 50%, franchisees 45% and prize money 5%. Having said that, the biggest bidders also turned out to be the biggest losers. UB Group lost as much as 43 crores last year whereas the Mumbai Indians were the third worst hit losing 16 crores in the whole deal with Hyderabad Deccan Chargers taking the second place with a blow of 18 crores only. Looking at these figures the event does not make much business sense. Does it??

I’m disturbed. So much money being just thrown away on just a game, which tragically is not even our national sport. Hockey might be equally exciting as cricket if not more, but no matter how hard it tries, hockey would never enjoy the status that cricket has. Sadly, IPL should not even be our prime concern. The only positive of IPL, from the Indian perspective, was to inspirit the domestic talent by making it rub shoulders with some of the best international talent. With the tournament moving overseas, leaving out a lucky few, that advantage has also gone for a toss for many aspirants. IPL as of today simply stands as a money laundering business with the only purpose of making business conglomerates’, our very own cricket board’s and the ‘oh so rich’ celebrities’, pockets even deeper. Did someone mention a recession? Well, looks like it is going to end soon in SA.

- Vivin

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As Sudip very well quoted some examples that retailers are using to cope with the situation as well as to show sustainability. Reducing size of format or closing the stores can be the solution but it’s not what business permits. Business is all about profits and these measure mentioned can take care of your top line but what about bottom line what about the driving force for which you are in retailing. For the sake of business instead of closing I would like to suggest opening or I should articulate it and should say “Use different channel”, use the internet. Because of this crisis many shoppers are turning towards online shopping and this is not only coz u can get the item cheaper online but because of this economic condition, daily you will see promotions and price cuts on products and internet is the fast and easy way to get this information.

Internet analyst James Wallace, co-founder of free price information website PriceProtectr.com, says “The Internet is more optimized for information than commerce,” But ultimately this information drives the customer to the shop to buy. Online shopping last year raked in $25 billion, and online shopping growth should exceed 10% as compared to single digits for overall consumer spending. But, online transactions still account for less than 5% of total consumer spending. But anyways it’s a sale whether it’s online or through brick and mortar model. By providing the information on internet helps customer in their buying decision and every sale which have any kind of prior online enquiry, should be credited in internet shopping.

And because of this economic crisis many promotional offers and discounts are floating in the air of internet. “We’ve seen price drops as much at 95%,” said Wallace. “A $1,800 set of leather-bound books went on clearance for under $20. It sold out in minutes. In the Indian context I would like to quote my own example: I prefer to buy gadgets and electronic stuff from ebay rather than going to Electronic market (S.P. Road, Blr). I get almost a discount of 500-2000 INR depending on the amount of purchase. My apple iPod classic which was for MRP 12500 INR, I got it from ebay for just 10999 INR and that too in 6 month EMI, five months back, who won’t prefer the easy installment method or a discount of 1500 INR and guess what I got a portable vacuum clearer free with the order as the order exceed 10000 INR mark. What else would you wish?

Again as Ebay.in turned 4 they are giving gift and I just bought an external hard disk which was for 5800 INR in electronic market and I get it for 5500 INR and 3 month EMI and a gift: Nokia Bluetooth may be it worth around 1000 INR. So I believe this to be a steal deal.

The prices can vary depending on locations, as previously my favorite place for gadgets buying was Nehru Place, Delhi and I still believe items are cheaper there any ways. So whenever I plan to buy some electronics item I check Nehru place’s official site for price quotes I check with the local electronic market and then I check it on ebay and with all these offers and promotions I just can’t resist buying it from ebay. It’s convenient, easy, 24×7 access and cheap (think abt EMIs).

Riding on the online shopping wagon, many sites  evolved recently, but each one with different business model, like ratetag.com, naaptol.com, bechna.com and the ultop.com etc, which just provide the comparison for the already existing online shops like indiatimes shopping rediff and yahoo shopping portals (But I must say these shopping portals miss something) And secondly there are online counter parts of retailers like futurebazaar.com. and just to try their online service I searched  for external hard disk 1 TB which I bought from ebay for 5500 INR and future bazaar was selling that for 9999 INR, are you kidding me, this is even dearer then my local electronic shops. ”Garv se kaho hum kanjoos hain” won’t fit here. Why they are not creating something like ebay. I know Ebay is a marketplace but when someone is selling a product so cheap why don’t a biggest retailer of India source the same product for the same rate. I have no doubt on the vendor network of future group; it might be the biggest one I guess. I believe they can do this.

For big ticket item every consumer look for information and more details. So the online counterpart of a retailer will definitely help a consumer in their decision and can also lure the customer to their brick and mortar model. Thus I think online thing is a powerful weapon in the hands on retailers to shoot this crisis, but not in a way future bazaar is doing. Not in a “Oops! page not found” way.

- Prateek Katiyar

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Hello Readers,

Its good to see that when nature strikes, the riverine always finds a new course. From something that was entirely created by man, we need more perseverance and effort to claw back. FDI regulations thinning out investments, to the real estate corrections to retailers closing out. There so much that has been happening in and around. But finally we get to see some good moves which definately promises a sustained growth. Although the growth rate be just for the time being, slowing down.

To talk about some of the recent happenings, we find Subhiksha in an utter dismay. Possibly the dream run of Subramaniam’s expansions have brightened his mismanagement with funds.The intention was there, but clearly a mismatch of optimism and reality. We find Shoppers Stop closing down Crosswords and Cafe Brio, although that means good for the book lovers as they have continued a 80% discount for clearance and  the Coffee lovers will get their neighbourhood CCD there!

 ”Garv se kaho hum kanjoos hain” is the internal slogan for the Future Group this year, coined by none other than Biyani himself, showing a great proactiveness to cut down on costs. There have been remarkable methods that have taken place. Firstly, a hard negotiations that have come by with the vendors to supply at much lesser rates than usual. Margins have been thus effective. It has forced players to play on volumes than on small consignments. Reliance Retail have started scaring realtors “Lessen or we vacate”. Most of its initial 18 months lock in contracts are expiring soon and thus a bargain for heavy negotiation to reduce them. They have drastically reduced the format sizes and altered a few to give them maximum coverage. Eg a hypermarket which was initially planned for 1.6 L sq ft are now operating at 50-60K sizes. Reliance Timeout (books and music) have reduced to almost half of its roll out size of 25K sq feet. With store development cost of around 2000/sq ft, the company claims to have saved a whopping 190Cr just scaling the size. Pantaloons have integrated Back-end operations such as marketing, human resources and information technology support to create one common back-end entity for all stores. This is surely to save a huge chunk.

Vishal retail also have saved big bucks on rentals which it claims that are lower by 25%-30% lower than the actual levels. They have also closed out many of their warehouses and operate only a few to maximise the potential savings on logistics. Sale period across retailers this year have exceeded an usual month period to almost two, to generate sales. Closing down of non profitable stores and sections has been yet another feature adapted by most retailers. Big Bazaar has been examplary to close down certain sections to save on non moving goods.  Apart from private labels which has been the breather to most, the retailers have seemed to focus on inventory levels. Most of them now keep very low inventory to keep circulating the capital instead of blocking it.

The most unappreciated move though is related to human resources through the re-distribution of staff across stores and rationalisation of manpower per store. There has been a freeze on fresh hiring since last August for most. Although the savings are great for the retailer.

In future though, i would not be surprised, if retailers gave more attention to their supply chain. We may possibly see sharing of resources within them.Optimised logistics will be a key area of consolidation and growth. A focused expansion will be made to covering more cities than offering a full width of the lineup within a city. It will just be about holding the stallions back for sometime.

Cheers!

Sudip

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Their is a thought that if you want to recover from fever then eat more ice-creams. I hope this is not what Mall Developers in Chennai believe. Chennai is set to have 6 to 8 new Malls in next couple of years. Two of them will be functional by this year end. According to a report by Cushman and Wakefield, a well-known real estate solutions firm, 14 malls covering 6.2 million sq ft were to come up in 2010 and 2011, mostly in the southern and western parts of Chennai, but many are now on hold. Recession has not effected the retail market in Chennai except for high streets. Unlike other cities, Chennai has only two big malls and faces a huge demand-supply mismatch when it comes to organised retail, and retailers too need more space which is why the new malls are expected to be a hit. According to Jones Lang LaSalle Meghraj (JLLM), a leading real estate services firm, the share of organised retail space in Chennai is under 5% as compared to 35% in Delhi NCR and 17% in Mumbai.

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