Retail Dude

Hello Readers,

A sudden brew in the coffee mug of India spurred this article!

India forever has been a contemporary tea drinking nation than anything else. Although coffee was predominantly popular down the southern states, the up class nature of coffee bars made it popular across the country. What clicked with all the retailers was the young and deep pocketed urban youth of India. These cafes perfectly filled the gap of a nice comfy place to hang out with your pals or that sophistication of breakfast meetings.

Clearly, with India’s middle class aspiring to be in sync with the global culture almost all the major coffee chains of the world (Starbucks is still in the picture) were hungry for the country. An express growth lured all of them. That led to the “superlative experience” of these outlets. Products in a wide range of variants that included not only hot coffee, cold coffee, coffee add ons, powder coffee etc but also other drinks and snacks. Actually in most joints tea also made to the menu, which would be touted as adapting to the local environments. The chains have also been adopting state-of-the-art store formats and some even offer wi-fi access to their customers. As a step forward, CCD has incorporated formats like music cafés, book cafés, highway cafés, lounge cafés, garden cafés and cyber cafés targeting a diversified customer profile. Some also went ahead to sell merchandise through their outlets. A prominent feature into Bollywood sponsorships only made sipping a cult. Infact the bug also hit some prominent retailers like Shoppers Stop (Brio), Reliance (Time Out) who had coffee joints introduced to their outlets. Tata Coffee, Indias largest exporter also couldn’t wait to open up Mr Bean Coffee Junction in Chennai recently. FMCG majors like Nestle already had their kiosks well placed when coffee retailing was happening.

Some of the prominent names like CCD, Barista (now acquired by Lavazza), CBTL, Costa Coffee, Barnies and Coffee World are still vying for market share and have very unique expansion plans. Barista in a recent outrage to gain back market share have gone veggie in all outlets of Ahmedabad and are serving udipi menu in the likes of dosas and uttapam! They have also applied for liquor licenses for their ‘Creme’ outlets in Delhi and Mumbai where they plan to keep international varieties of beer and wine. Whereas robust plans of CCD are just enthralling as they have identified 6 new verticals to serve your favorite coffee which also included hospitals. From Highway outlets to more luxurious outlets will include recently launched CCD Squares and Lounges, CCD with its current 720 stores and an addition of 20 -25 every month looks to remain firm on the top.

There is also news that FMCG major HUL is eyeing this lucrative market as well. It will be interesting to see whether HUL gives some spill or chill to the established players.

We all know, a lot can happen over a cuppa coffee.

Cheers

Sudip

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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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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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