Retail Dude

Marketing today has become synonymous with pushing the brand in people’s face. What many forget is that branding is more about creating an awe for the brand through some unusual marketing ideas. Companies targeting niche always have innovative concepts up their sleeves. The 4^th outlet of Hard Rock Café in a short journey of 3.5 years which started in Mumbai in January, 2006, clearly augurs that the company is cautiously planning to map the length and breadth of the subcontinent by spreading it’s network across the country. The new 7,000-square foot cafe and retail outlet, India’s fourth Hard Rock Café, operated by franchisee India offers guests American fare in a rock ‘n’ roll ambience. HR Café is a name that resounds rock music in all it’s forms. Apart from being a cool place to hangout for the youngsters and enjoy their favorite contemporary rock artists, HR Café also caters to the taste of the old timers by housing a grand collection of greats such as The Doors, The Beatles, Jethro Tull, Jimi Hendrix, Led Zepplin and many more. HR’s story is a case study for many. The first lesson is to shift the focus to doing good rather than just sales boosting promotions. When more and more brands are promoting ‘Consumerism’ this organization still has it’s focus on ‘Altruism’.

The strapline, ‘Doing well by doing good’ is appropriate to represent its philanthropic strategy as put by Annie Balliro Sr. Director, Hard Rock Café. For Hard Rock Café, corporate social responsibility isn’t a primary marketing strategy – it’s an extra piece of the puzzle in the global business that helps strengthen the company’s brand. Every Hard Rock Café has what it calls a ‘local ambassadors’ programme, where employees – from waiting staff to marketing managers – choose their own outreach initiatives for their local community.

Another bizarre yet inimitable marketing concept that I came across was the Heart Attack Grill restaurant, which serves Quadruple Bypass Burger, Flatliner Fries and to wash it all down your body there’s Jolt Cola and not to mention No Filter Cigs!!! Jon Basso, owner of Heart Attack Grill Restaurant in Tempe, Arizona, has his own innovative way of doing things. Throwing away the traditional forms of advertising Basso chooses to advertise his joint by means of creating a controversy. I don’t think it’ll come as a surprise to you that he’s created an international fan following for his draconian sounding cuisines. All this without even spending one dollar on advertising.

Last but not the least, a London restaurant chain, which has declared it will not give any customers a bill during February. Instead, the customer pays whatever he or she feels the meal is worth (drinks are not included in the offer). Well, I’m sure the finance Gurus are straight away going to discard the proposal as totally delirious. On the flip side an innovative marketer, such as me, would look at it as a wizard of an idea in an economic downturn. Struggling restaurateurs would not be too comfortable taking a call on this. Maybe, just like HR Café, it is a philanthropic gesture too?
What do you think?

- Vivin Wason

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As all of us know that entire world’s economy is ailing because of recession. Companies are not able to beat the slowdown and are registering negative growth consistently. Though there is a glimpse of recovery but same is being look on as a temporary phenomenon as everyone is having pessimistic notion of the future.

To sustain in consistent slowdown, most of the retailers are trying to consolidate their business to cut down cost and register more profits. They are afraid of red figures in their books and are doing so to maintain there stock prices and shareholders. Many feel that this is rationalizing there business and will help them to have a long term sustainability.

But if we analyze, there has been a common trend among all companies who have gone out of business during Recession – “All of them went into Cost Cutting before dissolving”. It doesn’t mean that companies who are involved in cost cutting will go out of business. But then this process needs to be a rational one.

For instance, if a retailer decreased the number of store staff from 10 to 7 to cut down store cost, and as a result of this few customers are unattended during peak hours, then cost of lost sales should not be more than the cost saving from layoff. And this need to check by aggregating the result for a period having all kind of trends like peak and dip. As result may be favorable in dip and unfavorable in peak. Similarly many other factors need to be considered before taking a small decision otherwise the effect can be awful.

But there are some brands that are very much optimistic about recession and are considering it as an opportunity to expand optimally. Levi Strauss & Co. is one of such brands. Even after reporting losses, they are expanding there presence and opening as well as acquiring new stores. And I think that this approach is very wise as all resources are cheap during recession. Retailer can get cheaper real estate, merchandise, labor etc. Moreover, this will generate a sense of job security among employees which will in effect increase their loyalty and reduce the attrition rate during boom. Retailer will be able to have more market presence and visibility. And this will strengthen the market share during boom.

As per a study, 30% of the retailer will lose their business by the time recession ends and the remaining 70% will be stronger than ever. And only the retailer who will be doing things differently will be able to include their name in these 70% retailers.

- Rajeev Damani

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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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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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We all are aware of how severely the Indian retail industry has been hit by these times of recession, and now the news has dropped in that even the slow and strategic entrant like Bharti Retail, is going to close down around 4-5 of its stores, from the total of 28 stores that it has in states of Panjab and Haryana. Bharti Retail so far has been trying different retail mix models to understand the market better, and as per reports there response in terms of margins have been 40-50% better than the competition on per square feet basis.

News reports have quoted Sunil Mittal suggesting that “We were very clear that there will be a struggle and we have a struggle. You do these experimentation’s in a controlled environment. So, we are only in Punjab, a bit in Haryana and that is it. The fact is if we would have opened 500 stores, we would have had to shut half the stores. That would have been very expensive”

But we at Retail Dude believe that this move is just part of strategy which Bharti Retail is adopting in India, expansion is not always about rapidly opening up stores, but also about closing them at the right time.

- Sarthak

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What began 60 years ago as a humble television store in this sleepy Southern capital ended Sunday as Circuit City closed its doors for good — its 567 remaining U.S. stores to be left broom clean and vacant.

For the last month and a half, a group of four liquidators have conducted going-out-of-business sales for what was the nation’s second-largest consumer electronics retailer, selling its remaining $1.7 billion worth of inventory weeks sooner than expected.
In its wake Richmond-based Circuit City Stores Inc. will leave more than 18 million square feet of vacant space in a faltering real estate market. And more than 34,000 employees, some who worked through the liquidation announced in January, will be jobless. Shareholders will likely get nothing and creditors may receive far less than what they are owed.

Over the last few years, Circuit City, which at its height had more than 700 stores, faced heightened competition, pressure from vendors and waning consumer spending. Ultimately, the hobbled credit market and consumer worries proved insurmountable. The dismal environment also has claimed retailers including KB Toys and Mervyns.
Circuit City, which posted losses in seven of its final eight quarters, had its brand value diminished in the 1990s as it lost significant traffic to rivals like Best Buy Co., which built bigger stores in better locations and achieved greater economies of scale. Wal-Mart Stores Inc. and others who have expanded their electronics offerings also wooed Circuit City customers.

- Rajeev

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