Food Fiesta! But Free Food?

My favourite haunt in Chennai for a great Filter Coffee & South Indian snacks continues to be the iconic “Woodlands Restaurant” on RK Salai, Chennai which doesn’t have a towering personality quite literally (pun intended) like it’s neighbour Hotel Savera (which is among the first 5-Star Hotels in the city). But patrons and lovers of the third generation restaurant brand which runs a single branch in the city for over 5 decades is a sight to reckon. On a Weekend, one has to wait at least 30 mins if you are in a group of 4 or more, especially after 7pm. Around 9.15pm, the Manager would courteously inform you to look out elsewhere for dinner since the restaurant would take its last order by 10pm and that there would be no space for seating anymore. Call it brand arrogance or customer affinity; I term it the latter. For the love of Customers, that they would either come in early and dine their heart full or stay and dine, whichever suits them from time to time. Trust me, dining here isn't cheap; a table for four adults could cost upwards of Rs. 1,500 for dinner. Also, this is perhaps the only standalone restaurants in Chennai (or even in India) where you would hardly find boys in T-Shirts of various colours, Orange or Red or Black waiting to pick up food. For, this one restaurant never “logged in” to the Food Apps or their Loyalty Programs (namesake I say!). 

Two weekends back, we went for a family dinner at a leading Chinese restaurant in town. We logged on to an App which offered FLAT 50% off the Bill if we purchased an entry fee of Rs. 25 for each of us. Apparently, they termed is as Table Reservation Fee, which we anyway accepted. To our bad luck, there were only 3 coupons left to buy but we were 4. So I called the restaurant and requested if they could accommodate us. My friendly bangali babu accepted to allow the 4 of against 3 coupons and to my surprise, we saved a whopping 50% off the bill on a cheque of Rs. 2,200. The next week, I went out again with my classmates where I carefully booked a popular restaurant in the heart of South Chennai, known for its exotic fare and of course obnoxious prices. Again, I saved over Rs. 1,000 during this outing. At both instances, the restaurant was not even 25% full - the former was a dinner & the latter was Luncheon. Just when I was planning the next visit last weekend with an extended family and close friends (a larger crowd, perhaps), the NRAI announced a “Logout” Campaign to reduce their losses. Thankfully. For there was no end to this practise of subsidising patrons for what they would ideally charge others. Membership or otherwise, a 50% off on Bill was simply too much to give away as discounts.

Now compare the two glaring examples. As I always say, it’s a game of David Vs. Goliath, with the smaller, less-organised players being the Goliath collectively. How does it make sense to offer a food item on a discount when it is cooked with loads of investment - time and money included and of course with a lot of passion and love! It makes no sense to offer F&B at lower prices than what they are meant to be, except for lean times such as Happy Hours when people would prefer not to consume or to sell-out certain items at a discount to ensure there was no wastage at the end of the business day. From the beginning, I have watched closely how restaurants were getting caught in the whirlwind that the Food Aggregators were hatching on them, sadly. A friend who runs a large restaurant chain in Coimbatore was clear that he would neither discount their signature food nor allow the Apps to do so. And he, along with the local Federation members has been successful till date, save for a 10% discount once in a while. 

Most Restaurants complain that their bottomline has not seen a significant leap although the turnover has gone up significantly, helping them to reach more customers including many new users although there’s no guarantee that they would order at full price or even visit the restaurants. My hunch has been right – when there are no discounts, people order less frequently and lesser portion sizes. And the opposite in the contrary. This is not specific to India but a human quality called “greed”. Isn't it not common that we see people buying a lot more clothes during End of Season Sale even though they may not be sure whether they would ever wear it, even once. 

I have never believed personally in the theory of discounting in Retail, be it Grocery or Fashion, Food or Furniture. Some products like Electronics outdate faster or Room Inventory at Hotels perish, so perhaps yes. But then, most businesses believe Discounts attract Customers more than their products. I think it’s otherwise. If a user doesn’t see value in your pricing, then don’t decrease it, rather increase the value offering. 

After all,

Price is what you Pay;

Value is what you derive. 

SS EOSS 2018 is a full house

After a long time, I went shopping. Once again, of course during EOSS popularly known as End of Season Sale which usually occurs twice a year after each season is over (SS – Spring Summer & AW - Autumn Winter). I recall, during my days at Benetton in 2004, there were not more than 3-4 weeks of EOSS, which would begin right after Valentine’s Day (late-Feb) & just before Ganesh Chathurthi (July). There would be a frenzy among Customers to get the best merchandise at lower prices during this time and the EOSS was a great crowd puller. A number of first time customers would turn up at the stores, those who’ve otherwise not been the Brand’s patrons earlier. They would engage with the Brand, the Staff, take Trials and purchase. If they liked what they wore, they would come back and buy again, even at full prices. Therefore, EOSS was a great tool to induce first time buyers (of a Brand).

Things started changing slowly, especially between 2006-2012 during the Retail explosion pan-India with over 300 Malls opening simultaneously across the country. What was supposed to work “for” the Retailers and Brands worked “against” them. Let me give a perspective;

Let’s say, Brand A had 3 -5 stores per Metro (around 2006) and a small presence in 1-2 Department stores. Circa 2012, the same Brand had a dozen or more stores plus larger counters at various Department stores in the city. Add to this, so many International, Domestic & Regional Brands started exploding the retail scenario in the country with total shopping space quadrupling every two years. 

All of a sudden, customers had too much choice, and at better price points. If a (Male) Customer had 4 brands to choose for Formalwear earlier, there were atleast 20+ brands in the same space now. Similarly, for casualwear & sportswear while new categories like fitness & lounge wear were created.

Meanwhile, the Bansals were building E-Commerce websites which offered clothes and accessories at half the price (like books!) and they called it disruption. It was indeed, that Customers could shop from their desks or sofas – just that a few Brand Managers got it all wrong. While pushing unsold merchandise to e-commerce (at discounts), thanks to a general slowdown in Retail Sales, even fresh Merchandise were being sold at lower prices than at stores. Mall Owners were gasping, feeling high and dry with footfalls barely hitting the precincts during the weekdays and largely window shopping over the weekends. Everyone was talking E-Commerce. So many Brands built their own websites while most of them who wanted an online presence aligned with E-commerce Marketplaces like Myntra & Jabong, as well as horizontal players like Flipkart & Amazon. 

As an ecosystem, we (Retailers) pampered Customers to shop online, return if they didn’t like what they bought, get a 100% refund if they deemed fit and encouraged them with a variety of discounts. This became a daily habit and more Brand Managers were getting intrigued with this incredible opportunity. All along, many Retailers missed meeting Customer Expectations at the Retail Outlets. Customer Engagement was negligible, Customer Service levels were dropping and the Staff were getting impatient not being able to earn more, thanks to a fall in their Incentives which was directly linked to lower Sales, thanks to fewer footfalls. The cookie crumbled. Many Brands shrunk their operations, some exited less important markets and a few downed their shutters. 

It’s been reasonably slow the last 4 seasons for most Retailers. However, I saw something incredible last weekend at one of India’s largest Department Stores. Customers were patiently waiting in a long queue to bill their products which took an average 20 mins during peak hours. Add to this, they have already spent quite some time trying out their outfits at the mobile trial rooms set-up. I was convinced, Customers haven’t shunned Offline Retail. They will come back to the stores when they see “value” for what they buy coupled with fantastic / personalised service. Ofcourse they are here for discounts right now, but then, the same discount is available on their Mobile Apps. So why did they come? Think.

Is Consumer Loyalty Dead?

Commencing this weekend (23 June), almost all Fashion Brands in India will go on EOSS – End of Season Sale, a biennial activity that has been witnessing a higher share of annual sales. When I used to work for Benetton as Area Manager in 2004, things were different. There used to be EOSS Twice a year followed by the “seasons” as they are called, viz., “Spring Summer (SS)” and “Autumn Winter (AW)”. EOSS would usually start after Valentine’s Day in the hope that shoppers would still shop at full price for the big day to impress their dear ones. And the next EOSS would occur after Schools and Colleges have reopened, just ahead of the Festival season that usually begins from August onwards. Slowly, things started changing, rather realigning to Global trends. Many international brands had to match their Global Fashion Calendar and the year-end Christmas Sales, so the EOSS was pushed to December & January and accordingly the next EOSS moved earlier to end-June. And that’s the current trend now.

From Apparel Department Stores to Mono Brands, almost all Brands try to exhaust their Stocks during the EOSS. Interestingly, 15 years back, EOSS was restricted to a little less than 3-4 weeks. However, now it has moved to 6-8 weeks. There are many reasons that could be attributed to this;

• There is limited seasonality these days, in a sense Customers shop all through the year compared to “Occasion-based Shopping” such as for festivals, wedding season, special occasions etc. So, while the lean periods through the year have more or less flattened, the demand spread has also evened out
• Ever since the 2008 Economic Crash worldwide, Customers have become wary of spending high on products which would eventually be available at a lower price in a few weeks (sic). While India saw a boom in Mall culture between 2009-2014, the sheer number of Brands and their availability all through the year have been a cake for the Customers with easier accessibility 365 days
• While I am not a big fan of “E-Commerce killed Offline” theory, it is a fact that there has been a reasonable impact for fashion brands, especially. This is mainly because the unsold Inventory were pushed to their digital vertical by Brands to liquidate the stocks and over time, the likes of Jabong and Myntra have become more of “Factory Outlets” where discounted Merchandise are available, always. It is no wonder that the share of products which are on Full Price on such Ecommerce Marketplaces is relatively low compared to those on Discounts. Actually, this is applicable for all categories
• Department Stores offer a larger “Discount Pie” compared to the Mono Brands, given that most of them operate on a “Buy and Sell” model with no stock returns to the Brands. Therefore, in an effort to reduce the impact of their exposure to unsold Inventory, Department Stores offer aggressive discounts & promotions to ensure they clear old stocks as much as possible. 

So, with all the above factors taken in to account, I wonder at times, is there “Brand Loyalty” left anymore especially for the Fashion Brands?

When was the last time, You – the Reader of this Article, bought the same Brand of Apparel or Footwear or Watch or Sunglasses? Are you wearing now the same Brand that you wore yesterday? If two Brands are offering similar discounts during EOSS (or even at full price), would you buy a particular Brand? If so, then why?

So, the responses could be very subjective and suits each one of our needs. 

Honestly, I do not see Consumers clinging on to any particular Brand and I attribute it to two reasons – variety offered by over Top 500 Indian and International Brands (and Labels) across products categories from Perfumes to Casual wear, formal shoes, running shoes and beyond. 

Are you rewarding your Loyal Customers just with just Loyalty Points, Sale Previews and price-offs? Is this going to be sustainable at all in the long term? 

How would you retain them for longer – LTV as they say, Life Time Value (sic)?

J for Jacking up Prices

Worldwide, it’s a common practice for Retailers to increase the “Selling Price” of products and then offer a huge discount to Customers. This works well in most countries where there is no MRP regime – Maximum Retail Price. MRP is fixed in certain countries like India and even has an Act passed by the Parliament. According to the MRP Act in India, any product that has been packed and sealed must carry an MRP – a price that’s the maximum fixed for that product. The manufacturer or the seller is free to fix the price but there are a lot of governance issues around this. For example, a product that has to be sealed must go through certain formalities with various Government Departments. Although prices keep fluctuating from time to time, especially for essential items such as Grocery, the Retailers can keep changing the price but after prior information to the concerned Government Authorities.

A packed product could mean a premium shirt from Louis Philippe or 1 kg of Rice or Atta and everything in between. This applies for Cars, Bikes, Consumer Durables, Alcohol, Packaged Drinking Water and almost everything that can be packed and sold. However, there are exceptions for Fruits & Vegetables, Meat, Flowers, etc. which are not covered under the MRP guidelines. Therefore it is quite common to see Organized Retailers playing around with the F&V category which is not only demand & supply dependent, but also on various other external factors such as a Traders strike or a Truckers strike.

Small Retailers, especially the semi organized ones do not follow the MRP guidelines strictly. I had an experience just yesterday at a premium Toy Shop in Chennai. Being summer time with holidays for kids, I visited the shop to pick some board games and toys for my kids. There were items which were pegged at high discounts – 30% - 50%. But most of these items didn’t have an MRP. It seemed most of these items were being imported by the Retailer directly from the Manufacturer or an International source. And therefore had the liberty to adjust the prices. Interestingly, the law allows Retailers to do so. The prices can be arbitrarily changed for most products (except alcohol which is governed by the State in TN) by the Retailers and hence the practice of “jacking up prices” is quite common during such times.

While there was no real discount to the customer, it was a sort of a “made-up” discount that the Customer is expected to perceive as a value offering. With the increasing availability of products, customers are quite aware of such malpractices and have taken the Retailer/Seller to the courts. One such recent example was how a consumer in Hyderabad won a case against INOX multiplex for selling Drinking Water above Market Prices although with a different price printed on it. The Court was of the view that the same product cannot be at different prices in different locations and the Customer won hands down.

So how does the Retailer manage to still offer huge discounts (especially to match online prices) and still be profitable? Indeed, it’s a tough call. With markets still in a limbo, it has been a challenge for Retailers to survive but they come up with various tactics such as product diversification or even a new format. Some have pulled down their shutters but the show goes on. 

EMIs to the rescue of Retailers

I have been receiving emailers from Bajaj Finance, one of the largest consumer finance companies in the country for a long time now, ever since I bought a couple of stuff using their services 5 years back. I still haven't unsubscribed to their mails, hoping that I get to gain a lot of insights into Consumer Behavior day in and day out. The one that I received today was a bit surprising... Even as I just finished my daily quota of early morning news releases, Bajaj Finance sends me an email that the newly launched iPhone6 can be bought using their services through EMIs, while Apple had announced earlier in the day that they have advised Retailers to discontinue the EMI Schemes specifically for the newly launched models due to overwhelming response and low stock quantity. Wonder where the communication channels failed between Apple, the Retailer and the Financing Company, clearly that there was an overlap of information to consumers which is misleading. Leading Retail chains such as Univercell, The Mobile store, EZone and a whole lot of smaller local resellers have been offering EMIs on the newly launched iPhone6 and 6 Plus.

Apple has been struggling in India, not because of a slowing market. Its quite the opposite. More and more people are embracing the Apple Ecosystem and this trend is clearly visible every time there is a new launch. For a country of over 1.2 billion with 300 million youth population, assuming a 0.1% population that would aspire to buy a new iPhone, Apple Inc has dispatched just 55,000 units of the newly launched model. This is quite amusing. Apple Sales have been scaling higher and higher in India over the last 2-3 years, yet the US Headquarters hasn't been giving the subsidiary and the market its due. In fact, it was the news recently that Apple India had to almost fight with HQ to advance the sales of the newly launched models ahead of Diwali to cash in on Festive sales. That the Sales would have been the same otherwise too, is another matter.

So why has Apple advised Retailers not to offer EMIs on the newly launched models? According to trade partners, the reason is three fold. To begin with, the company wants to create an atmosphere of desirability - EMI is the easiest way for youngsters to posess the product and Apple wants to keep it away from this lot of consumers. By not offering the EMI, only those who can really afford would end up buying the new models and it would command a premium in the market for a much longer time. Second, Apple and the Retailer would have to bear the interest costs partially since the EMI would be offered interest free to the consumer and it wants to minimise this cost at the moment. Third, Apple wants to clear the past inventory in the market; Models such as the iPhone 4 and 4S which were released over 3-4 years ago are still available to buy in the market and since there is no bigger market opportunity than India, Apple perhaps wants to clear the last lot of models asap.

So, if you are looking for a great deal on an older model of iPhone, now is the time. Rush to your nearest Retailer and negotiate a good deal, which I am sure they would be happy to offer. After all, an Apple product has a wonderful ecosystem and the older models too have a great experience to offer.