Wednesday, June 22, 2011

A deal is a deal…

Unlimited Idlis and Dosas for only Rs. 149 at the reputed Mr.Idli! Multiple varieties to choose from!

What intrigued me was the headline that came to me as a mailer from SoSasta.com, a product of Groupon which is the worlds’ biggest group-buying site. Groupon was launched in November 2008, created by Andrew Mason who is also the current CEO of the company whose former employer Eric Lefkofsky provided him $1 billion “seed money” to develop the idea. The business model is that the site offers “group coupon” and the deal is valid if a certain minimum number of users (as predetermined by the company) buy it within a particular timeframe. Usually, there is one big “Deal of the day” and it is informed to registered users by emails and SMS. The discounts usually range between 30-60% but can go as high as even 90% in some cases. The offers are proposed on Health & Beauty, Cosmetics, Eyewear and even at Restaurants, Pubs, Cafes, etc. The company, which was valued at $1.35 Billion in April 2011, is expecting to make $1 billion in Sales faster than any other business, ever. Below is the Menu Card of the offer that was sent to me by email. I called up to enquire how this works and I was informed that by paying Rs. 149 on the site, one will get a voucher which can be redeemed by the user for unlimited number of Dosas and / or Idlis from 9-11am at their store. The spokesperson whom I enquired said that they expect a person on a average to consume not more than 3-4 dosas, the original cost of which could be around Rs. 200, but this kind of promotion could go viral, and hence may attract enormous footfalls into their store, many of whom could be first timers.

Apparently, Groupon gets 50% of the price that’s paid by the buyer of the coupon and the balance goes to the Retailer. But that would depend on the marketing ability of the site and the retailer who negotiate their best respectively. Similar to Groupon, there are over 500 such sites world over and more than 100 sites in the US alone. In India, several sites such as SnapDeal, MyDala, Taggle, Koovs and many more have swarmed the market over the months. Since January this year, Snapdeal has been growing its revenues at over 100%, selling unused inventories of everything from sunglasses, wallets and even travel packages, totalling over 10,000 discounted deals everyday. At 25, Kunal Bahl had quit his cushy Microsoft job based in Seattle and even convinced his IIT Delhi batchmate Rohit Bansal to take a leap of faith in 2007. In a recent interview to The Economic Times, India’s leading business daily, he says "We sold about 2,200 Reebok Sunglasses in a day, at an 80% discount deal. About 400 packages to Kerala were sold in February. Our model is to go after unsold distress inventory," says Bahl who along with Bansal had to shell out $3,000 for buying the Snapdeal.in domain name — an investment that's paying off well.

Here is how Groupon works, as explained in a video placed on their home page.

Video Courtesy: http://www.groupon.com/learn

Some of the key benefits for Retailers to tie-up with such sites are as follows;

  • Create new customers for a specific category / brand. The “deal” may appeal to first time users who may not have entered the Retail store / restaurant otherwise
  • Sell off unused or distress inventory – one that most product retailers would carry at some point in time. Typically one would find them at discount stores in the suburban areas or outskirts of the city, but this model is even better as they can be shipped out of the warehouse directly
  • Utilise the unused service time, typically at beauty salons, restaurants and pubs. What used to be Happy hours may be extended as “Happier hours!”
  • Viral Branding – While the cost of discounting may seem ruthlessly high, it also acts as a brilliant way of advertising – Cloud advertising!
  • Word of Mouth publicity is very high – typically works in colleges / office environments where people could share the deals and make purchases as a group. After all, shopping and dining is a fun activity and makes so much sense when done in a group. So, a set of 4-5 friends may all buy out coupons for unlimited F&B, so they all could spend a gala evening or may buy holiday packages as a group to enjoy over the weekend

So, what’s in it for Retailers after the second or third purchase or visit? Would such a business model be sustainable in the long run? Would consumer fatigue set in sooner than later? These are some questions that are best left unanswered as this column is published. However, I assure I will review this in a year from now again with results and feedback, but for now this is one model that’s going to drive innumerable footfalls to the Retail stores. If you are a Retailer, try talking to one of these guys and get your offer up and running, wait and watch the results. If you are a potential consumer, then just register yourself in one of those websites and look forward to some exciting offers soon. Whichever way, Happy Retailing…

Photo courtesy: sosasta.com

Friday, June 17, 2011

Bar Codes have simplified our lives!

 

During my maiden trip in 2008, when my best friend took me to a JUSCO store at Whampoa in downtown Hong Kong, what impressed me first was the boat shaped structure of the building. Given the general ambience in the island town, it looked as though a large ferry had crashed into the inland areas! The five storeyed structure had a supermarket, restaurant, bars, etc.  “There’s more inside than what you see”, he quipped. And when I walked inside, I was amazed to see the way the neighbourhood store was maintained – bright lighting, wide aisles, sparsely populated store staff though they were extremely friendly, cheerful and helping around, low height shelves (culturally appealing to the region I guess!) and over 15 check-out counters; and this was for a 3,000 sft store which stocks grocery, household, fresh items, basic apparel, a bakery and a liquor store. Our main purpose was to buy some snacks and beer, so just after that he walked straight, even beyond the check-out counters without paying.

Jusco 1

“I can use Octopus, my charge card to pay, you see, and I don’t have to wait in those queues” he said. He scanned all those items that we had intended to buy, the bill amount appeared on the screen and he punched his Octopus, took a copy of the bill and we moved out! There was no security guard at the exit and he told me that they didn’t need one! Shoppers respected the fact that someone else would lose money if they shop-lifted and hence, “Retail Shrinkage” is one of the lowest in the region. If someone broke the law, no questions asked, straight to the jail, it seems. That was the first time I was seeing something like that. And for the next few days, either at the nearby Ferry station or at a vending machine to buy Coke & Water, I saw him only use the Octopus.

What surprised me and I kept thinking about it later too was that the check-out queues though long, were moving faster than I have ever seen elsewhere. The “beep” of scanning each item was so quick that the staff didn’t have to reconfirm even once, so sure they seemed to be. I was stunned at the efficiency of these staff, more or less similar in age and other attributes to those who work back home in India. Back in 2001, when I used to work at Musicworld Kolkata, anxious customers used to peep into the cash tills area – they were quite intrigued by how the price of the Audio Cassette was being recorded into the computer desktop. And we actually had to explain to quite a few of them regularly. Well, “Bar Code” was not so popular and is still not, probably across the country. The technology has made billing more accurate and faster than before, although its original intent why it was invented in the US, is still a far cry as far as Indian Retail is concerned. The main purpose of using “Bar Codes” by the Supermarkets was to reduce labour costs amid rising inflation, back in the early 1970s in the US. Tens of millions of different objects have acquired bar codes over the years; each day, more than five billion of the codes are scanned in retail establishments worldwide, according to GS1 US, the non-profit organization based in Lawrenceville, N.J., that issues and administers the codes. This transformation, industry experts say, is largely because of the work of one person, a supermarket executive from Massachusetts named Alan L. Haberman, who died on Sunday at 81.

At 8:01 a.m. on June 26 of that year, a 10-pack of Wrigley’s Juicy Fruit gum slid down a conveyor belt and past an optical scanner. The scanner beeped, and the cash register understood, faithfully ringing up 67 cents. That purchase, at a Marsh Supermarket in Troy, Ohio, was the first anywhere to be rung up using a bar code. Alan Lloyd Haberman was born in Worcester, Mass., on July 27, 1929. He earned a bachelor’s degree in American history and literature from Harvard in 1951 and an M.B.A. from Harvard Business School in 1953. Mr. Haberman led the industry committee that chose the bar code over other contenders — circles, bull’s-eyes and seemingly random agglomerations of dots — in 1973. By all accounts, he spent years afterward cajoling manufacturers, retailers and the public to accept the strange new symbol, which resembles a highly if irregularly compacted zebra. His efforts helped cement the marriage between the age-old practice of commerce and the new world of information technology. The design would print crisply, which meant scanners could read it clearly. Through its varying patterns of thick and thin bars, it could efficiently represent the 11 digits needed to encode data about manufacturer and product. (Today, U.P.C. codes typically have 12 digits.)

 

In India, usage of “Bar Codes” has been misused, abused and what not, over the years. There are various reasons why the technology has not been put to full use here. To name a few;

  • Most of the products’ surface where the Bar codes are pasted, get erased partially – due to dust, wear and tear or transportation, thus making it unrecognisable
  • The Scanners are practically never cleaned or periodically maintained; mostly serviced only after they become unusable
  • Information Technology Vs. Manual Intelligence: The store staff, including some senior members in the team believe that it would be faster to key in the details of the product or search on the database!

Having said all of that, Bar Codes have definitely simplified our lives. From bread packets at supermarkets to new-born babies being identified at hospitals, they form an intrinsic part of our lives. Just that we haven’t taken full advantage of them yet. The speed of billing benefits Customers and Retailers – check-out is faster and hence shorter queues at Billing counters and hence customers may prefer to go to a particular shop and thus the retailer gets repeat footfalls and maximises the business opportunity. But beyond the obvious, Retailers can stock their merchandise better, by maintaining their inventory accordingly. Even today, the neighborhood local Retailer who uses Bar Codes and Scanners maintains better stock levels than the much-respected National players in the Food & Grocery Industry. However, Retail Managers are giving its due importance to Bar Codes these days and one can see the cashiers, especially at Hypermarkets taking the additional few seconds to rescan a few times, rather than typing the code manually. It’s up to us, as Retailers and as Consumers how we want the Bar Codes to help us. So, next time you see a staff typing the code, insist him or her to rescan – whether you see it as an employee or a shopper. And if it still doesn’t work, then complain. Sooner than later, things should indeed fall in place. I trust it will.

Photo Courtesy and inputs – NYTimes.com