Retail Dude

Price optimization in general mean pricing you product in an optimized way so as to retain customers as well as increase bottom lines.

Pricing is a very important function of Retail. Right pricing can fetch you strong and loyal customer base. With increasing competition in retail space, rising real estate costs and rising fuel prices, it has become more critical than ever. As competition is increasing, now consumers have more options to explore and make the best deals and stretch their dollars. With Real Estate prices shooting up, fixed costs are increasing for retailers whereas Fuel Prices are increasing the logistic cost. So, all these factors are contributing to higher prices which repel customers and result into losses. So in order to be successful we need to optimize our price keeping in mind all the variables affecting it including competition. This will ensure that we retain and grow our customer base. Moreover we need to consider various variables which affect the demand of the products too while pricing (we all know law of demand and its relation with pricing). These variables are seasonality, price elasticity, cross-elasticity between items, and inventory presentation.

In an organized retail chain with number of categories, and so many variables attached to pricing, it is really difficult to manage price optimization. Each variable affects price in its own way. So, retailers need an efficient pricing approach which is customer centric, margin maximizing, competitive and which optimizes prices at SKU level across the categories. The pricing strategy must be long term and must be implemented keeping in mind the product life cycle.

To manage this complex function, we have good price optimization applications available in the market.

- Rajeev Damani

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The inflation not only affected each and every aspect of India and its market but it really hitted hard the organized retail in India. Because of unbridled inflation and high interest rates the purchasing power of an average Indian dropped significantly and thus retailers faced a slowdown in purchases. But there is a light at the end of the tunnel for the retailers and that light is the government’s recent decision to implement the Sixth Pay Commission. a large segment of Indian middle class is a salaried class about 5 million central government employees and not only this each state will have their own six pay commission plan and every government employee will get his share. typically in a middle class 37% are the salaried employees which will suddenly have disposable income in their hands just before the festive season which is a good indicator for the retailers. Besides the enhanced salaries that will cost Rs 17,798cr annually, the Government has committed to payment of arrears as the hikes are effective from 2006 which cause a one-time burden of Rs 18,060 crore.  So you can see there is raining money in the middle class of India but we can’t generalize the thing that it will be beneficial for all the organized players in Indian retail market. As we can see that majority of the people that will enjoy the sixth pay commission belong to middle class and if we consider the psychology of a middle class, he will like to spend this money in discount stores and on big ticket items like hardliners for which he might be waiting for long time and this behaviour is also drived by the festival season and there will be sale and promotional offers on lots of item. High end retailing will not get much pie of this as the this crowd is not their target segment. but for the value, discount and off price retailers is a time to relax and do business to the fullest.

But wait this light at the end of the tunnel can also be a train that will run over the retailers, because this hike in salaries due to sixth pay commission will slowly led to further inflation and this will again hit back the business of organized players.

But what i suggest just enjoy the festive season we will face the later things later

- Prateek Katiyar

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As we all are aware that Retail Sales for same store in US is continuously diminishing, but the it’s not so in case of Discounters. Wal-Mart has showed growth in same store sales by 3% beating the expectations of analysts which was only 1.6%. This is not a surprise as US consumers are now very focused on value, stretching their dollars, and anything deemed not absolutely of need, they are forgoing those purchases. Other low-price chains like Family Dollar Store, BJ’s Wholesale Club have also shown increase in same store sales more than expected. Retailers in Luxury sector like Saks & Nordstrom posted worse-than-expected sales.

Department Stores and Luxury Stores had good expectation this month from back to school deals. But their expectations were shattered.

- Rajeev Damani

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It’s true that every one learn from their mistakes only. Indian Retail biggies have initiated much awaited corrections as well as consolidation in their current business. Though these are first round of changes in their strategies but at least it has started.

1.       Indian organized retail players have realized that it’s really tough to compete with cost-efficient and customer-focused kirana stores (mom-n-pop). This is why convenience store formats like Reliance Fresh, More, Spencer’s & Subhiksha are shutting down stores which are not viable and at the same time are going slow with their expansion plans. This is taking place because of the low margins in this business and high real estate costs. Hypercity has also exited this space.

Industry Speak:

“What kind of conveniences can modern retailers now offer with an inevitable high-cost structure? It makes no sense to be in this space” says Andrew Levermore of HyperCity Retail. 

“Although we had a lead entry into the space, we knew that the neighbourhood formats will never be viable. Even if consumers have the money why will they spend extra in air-conditioned formats to make daily purchases. The local kiranas are already far too efficient in the space” said Future Group CEO Kishore Biyani.

“The current crop of neighbourhood formats are merely air-conditioned kiranas. It makes no sense to compete with the supremely customer-friendly kiranas, which offer credit and a great service system. The merchandising will have to be different to bring back the consumers,” says Gibson Vedhamani, president of the Retailer’s Association of India. 

2.       As the Retail bubble burst, every one jumped into it registering their presence everywhere possible. Retailers should learn from what is happening in Ahmadabad. Once it was favorite of all retailers but now stores are shutting there. City malls are experiencing vacant spaces and Big Bazaar recently closed two of its big outlet there.  These are result of wrong analysis of Gujrati Consumers who look for functional benefits from the retail experience. The result: closure of ambitious retail projects across the city. Brands like Nike, Tea Centre, Conizza, etc, have already closed shop (ET). According to Retail Analysts these are nothing but sign of consolidation. So, this shows that how Indian Retailers just jumped into the market without proper market research.

3.       Bharti Retail seems to have learnt from the mistakes of other and so they have taken strategy of going slow. Compared to Reliance’s one-store-a-day approach, Bharti’s pace has been almost one-store-a-month. It has opened seven stores in six months, as against around 700 stores of Reliance in two years. “We plan to have pan India presence, but are in no hurry to roll out stores everywhere. Our aim is to understand the dynamics of retail and evolve the right model. We are not here to prove anything in a year or two, but looking at 5-10-year period,” says Bharti Retail president and COO Vinod Sawhny to ET.

(Ref: http://economictimes.indiatimes.com )

-          Rajeev Damani

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Although this post strays away from the focus of this blog, but I could not resist the temptation of posting this information. For this is something I had always anticipated, and now its taking a real shape. Google, in a few hours from now, is slated to launch a all new web browser, written completely from the scratch, with a brand new java support, faster and better - Google Chrome!

It was with the emergence of websites like Facebook, MySpace and then gMail which made me realise that, Web is not all about serving information anymore! and its fast turning into the concept of “Service as a application”, Some blogs has speculated about Web Browsers to be replacing OS’s in the future, and I think Google Chrome is just a step closer to this speculation. I will not deviate much from the core of this blog, Here are a few links for catching up with the heat! 

Google Comic Strip for Google Chrome Launch:

http://www.google.com/googlebooks/chrome/

Speculated Google Chrome Launch URL’s:

http://www.google.com/chrome

http://gears.google.com/chrome/?hl=en

- Sarthak

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“Lighting the way to greener retail” is a report by Naulight which I went through recently. The report concludes the benefits of replacing environment unfriendly fluorescent tube with digital lighting in refrigerated display. By doing so a mid size retailer can save up to 50% in their lighting expenses apart from the benefits to the environment.

The report says that fluorescent tubes used in refrigerated display consume excess energy as they produce heat in a chilled environment. Replacing them by digital lighting would result in reduce energy consumption as well as improve merchandising appeal.

Naulight also performed a small test with one of its retail customer whereby it replaced the fluorescent tubes in one side of the aisle with digital lighting and kept other side same. Result was 19% higher sales in the side where lights were replaced.

So, replacing fluorescent tube with digital lighting is a good idea as it will result in reduced energy consumption i.e. reduced cist, increased sales and improved environment.

Full report can be viewed at:

http://www.greenbang.com/wp-content/uploads/2008/09/lighting-the-way-to-greener-retail.pdf

 - Rajeev Damani

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Just few days back I posted that Walmart is entering SFR (Small Format Retailing) with Marketside chain of stores ( http://bimtech-retail.com/blog/2008/wal-mart%e2%80%99s-marketside-small-format-retailing/ ), and now its turn of India. Vishal Retail, one of the biggest retailers in India has ventured in SFR with first store opened in Indore last week. They are planning to open 250 such stores by the end of this fiscal and 2000 by end of 2009-10. The company already has around 140 hypermarket in 80 cities.

These stores will be of smaller size (1000sqft – 1300sqft) and will be under franchise model, and will be located in metros, tier II and tier III cities. The store will be of three types:

·         FMCG Stores: Vishal Dailymart

·         Apparel Stores : Vishal Fashion Mart

·         Durables & IT Stores: Vishal Technomart

SFR has been majorly part of unorganized sector, but this initiative by Vishal Retail will fuel the growth of SFR in organized retail sector too.

-          Rajeev Damani

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After reading the article and surfing the sites as mentioned in article “Thrift Stores” , I came across the term “Give-away Shops“. Give-away Shops also known as freeshops, or free stores are second-hand stores where all goods are free. They are similar to charity shops, only everything is available at no cost. Whether it is a book, a piece of furniture, a garment or a household item, it is all freely given away. They reflect a switch over from scarcity to abundance brought about by increased material wealth due to technological advances. The idea of free goods still carries some stigma, so many people who use these shops are those who are led to them either by need (financially poor, such as students, single parents and the elderly) or by conviction (anti-capitalists). A free store is a temporary market where people exchange goods and services outside of a money-based economy.

I am able to find one pic of the free store —

Inside a free shop in Freiburg, Germany

From the picture you can depict that it is not that bad if you are getting a merchandise absolutely Free

The roots of the “free store” lie in the anarchist movement. Today the idea is kept alive by the new generations of environmentalists who view the idea as an intriguing way to raise awareness about consumer culture and to promote the reuse of commodities.Now the donors are often not motivated by financial need or strictly anti-capitalist conviction, but by a desire to get rid of what would otherwise be garbage without adding it to landfills.

Thus these give-away stores are not only helping society but also result in reuse of commodity which otherwise end up into waste or pollution for environment.

- Prateek Katiyar

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Recently I came across a website http://www.americasthrift.com and was convinced to post something on Thrift Stores. So, I did little bit of research and googling to come up with this article. A Thrift Store is basically a Retail store selling second-hand goods at reduced prices as to benefit a charitable organization. Thrift Stores purchases new and used items from local charities and department stores and provides additional, and often vital, funding for local Christian-based charities to benefit needy families and individuals. The ranges of items which are sold in a thrift store are clothes, footwear, CD’s, DVD’s, Home Furnishing, White Goods etc.

While going through all these details, the picture of thrift store which came into my mind was a small store having old goods arrange haphazardly and a group of unprofessional sales man selling the merchandise with no touch of Organized Retailing. But I was shocked after seeing a video on the America’s Thrift Stores website, check following link:

 http://www.americasthrift.com/shopping_a_thrift_store.php  

 The stores are no less than an organized retail outlet with proper fixtures, ticketing, clear aisles, good atmospherics, assortment, customer service, lightings etc.

 With rising gas prices and depreciating Dollar, popularity of Thrift Stores is increasing in America. Other benefits of buying from a thrift store are:

·         Good Bargains

·         Unique or hard to find items

·         Keeps merchandise out of landfill

But there are few challenges with Thrift Stores. In a recent national study of thrift stores conducted by the U.S. Consumer Product Safety Commission, an estimated 69 percent of the stores were selling at least one type of hazardous consumer product. Many of these were children’s products. So, ensuring safety is a challenge for thrift store.  (Check: http://www.cpsc.gov/cpscpub/pubs/thrift/thrftck.html ) 

-          Rajeev Damani

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