03 January, 2020
Inflight Retailing - Retail 2020 (Article #7)
06 March, 2013
Consumer Spend – a loot at Airports
Recently, the Chief Minister of Tamil Nadu launched a populist move in Chennai to commemorate her birthday – a Government funded canteen that serves one idly (rice patty) for Re 1 (1 USD is Rs. 53 approx.) Yes, you read that right, One Rupee for a Idly. The move is aimed to cater to the needs of those under the poverty line and the poor, the working class such as drivers of autos, taxis, trucks and so on. This was a way Amma (mother) as she is fondly known as, appeased the vote bank. It is not sure how much this scheme is going to cause to the State. Ofcourse, these so called welfare measures are out of the state’s coffers – tax payers money. It so happened that the very next day since this scheme was launched, I was travelling through the Chennai Airport which is managed by Airports Authority of India, a government body which also operates the Airport in Kolkata. These two airports faced stiff opposition by the unions when the Ministry of Aviation privatized the other major airports in India in 2005 located at Delhi, Mumbai, Bangalore and Hyderabad. These six airports contribute to over 70% or more of the total air travellers in the country which is estimated at 110 million pax per year. While the Kolkata Airport has been recently renovated at a cost of Rs. 3,000 Crores, the Chennai Airport has been renovated for aorund the same cost and was inaugurated recently although the terminal buildings havent been opened up to the public due to lack of passenger amenities, a move that the Commercial Department of AAI conveniently seemed to have forgotten while planning the terminal building.
I was taking an early morning flight, a long one that too to Ahmedabad via Mumbai, an arduous 5 hour journey. And I was flying Spicejet, India’s most preferred low-cost airline which doesn’t offer complimentary meals on board, rather “sells” Cashews and Sandwiches at exorbitant prices. So I chose to have a quick breakfast before the Security Check for which I had quite some time. I walked up to the nearest F&B Kiosk which was serving hot food items. I ordered a plate of idly consisting two pieces and a Vada. The damage was Rs. 100/-. Yes, you read that right. Most passengers like me had no option but to pay such steep prices at airports to quench their hunger and thirst. What was more surprising is that the staff do not issue bills for every item sold on their own. Rather, the consumer needs to insist one of they really need one. I demanded one. And bingo, the staff tore a piece of paper from the manual bill book which had pre-written “Breakfast” in many of the bills. A closer look and the TIN numbers which are mandatory were indeed printed. But VAT or Value Added Tax and other charges such as Service Charge, Service Tax, etc. were not explicitly mentioned in the bill. I couldn’t blame the staff because they were just doing their job. I quietly paid the bill and proceeded to the aircraft. Afterall, this is not an isolated case at Chennai Airport. Almost all airports managed by AAI have the same issues more or less.
So, why are airport food products so expensive? To begin with, it’s the way the places are leased out by AAI. They follow an age-old practice of an out-dated tender system wherein those who qualify should propose a base price for the said location. H1, which is the highest quote gets selected. The tender period is usually for 3-5 years and doesn’t specify the architectural look and feel of the outlet. And most often, there is no seating option that is provided. This is completely contrasted by the approach taken by private Airport operators such as GVK and GMR Groups which manage Mumbai & Bangalore and Delhi & Hyderabad Airports respectively. The chosen partners need to submit and discuss schematic drawings and layouts with the airports and thereafter finalized. The design is not just contemporary but also functional and convenient. During my tenure at Bangalore Airport (BIAL) in 2006, we launched a global tender for Retail and F&B which attracted top players in the world to compete on a level playing field. The selection process was touted as one of the most transparent and efficient processes by international media which tracks Travel Retail.
AAI’s outdated tender system is the mother of all troubles. Coupled with it is its terrible space planning with outlets spread haywire here and there. Add to it, unqualified commercial guys who have no clue of global best practices and arbitrarily follow the H1 route to choose partners. It is quite obvious that they quote higher fees in the tender and therefore over charge customers. Branded players like Café Coffee Day, Subway, Pizza Hut, McDonalds, etc who also operate at airports follow a corporate pricing policy and provide bills with all statutory requirements. Due to high entry costs and related operating costs such as complimentary snacks and beverages to airport staff, most organized players do not even venture into this arena.
A popular Indian Aviation Entrepreneur who successfully started and shut a low-cost airline often used to quip that there is a private mafia now in the form of private airport operators. But then, the government operated airports are no better.
21 November, 2011
What Retailers can learn from Kingfisher Airlines
The past few weeks would have been one of the most tumultuous for India’s five star Airline, Kingfisher! The Airline and its promoter Dr. Vijay Mallya were in the news (and continue to be) for all the wrong reasons. The India Media which I personally respect a lot were making some scathing remarks and reports all of a sudden about the airline’s business health although it knew about it for many years now being a public limited company. With a debt exceeding Rs. 7,000 Crores (USD 1.80 Billion), Cash-and-carry of Fuel at airports and a few flights grounded for reconfiguration of seats, the Airline was abused by one and all including those who otherwise held it in high esteem. It was common to see many passengers at airport lounges discussing their wisdom and advising how the Airline should be run and how the promoter and the Management can do better. These were some of those who earlier yearned to be seen in the Kingfisher Lounges at airports! In fact, some subscribed for the Kingfisher-Amex credit card so they would get free and immediate access to these Lounges (obviously not for Kingfisher parties which were for the most elite). And some would go any length to get a Kingfisher calendar (in the same lines of a Pirelli calendar). Serious. No Kidding. Anybody who is somebody had a word of advice for the airline. They should do this; they shouldn’t have done that and so on. Naturally (sic).
I am not an Aviation Expert or one who shares Management Consulting for free. I have my own thoughts about the airline, and those are my views. Running a USD 2 Billion empire and being the second largest liquor company in the world (UB is expected to reach the number one position sometime in 2012), I believe Mr. Mallya and Co. knows their business best despite the unconventional ways of how entrepreneurs run their business (rare to see them plunge in Horse & Car Racing or hosting the most enviable parties at Monaco & Monte Carlo). The airline is going through some turbulence and I am sure they would come out of it sooner than later. Whether someone picks up a stake in the airline or if the Banks bail them out is one thing, but the exemplary five-star service which Kingfisher introduced is something that is worth living for. As eminent scholar Swaminathan Anklesaria Aiyar said in his recent article, “Kingfisher is worth saving!”
There are some interesting learning that our Retail Industry could take from the state of affairs of Kingfisher, which I have listed as below;
Scale-Up but at what cost
The airline was founded six years ago and has hence scaled up reasonably well, in fact started flying international since 2009 after acquiring Air Deccan (which was seen as the main reason for buying out). However, some of the routes it was operating were just not profitable. A Few were as per govt. Regulations such as flying to the North East of India, but there were some routes that could have been avoided. I guess this applies to Retailers as well. In a quest to expand their presence some Retailers like those in the F&B business such as cafes, speciality restaurants, etc. enter new cities and towns although they would just not be profitable ever! For Ex., the number of staff who are required to manage an outlet, a region & a territory would just not make sense unless the number of stores are reasonably big.
Being Everything for Everybody
At the India Retail Forum in 2010, Mr. Kishore Biyani of The Future Group made a statement which many of us in the industry vouched for – “A Retailer cannot be everything for everybody!”. Such powerful words. And makes so much sense. This applies a lot especially for Luxury Retailers. One thing that Kingfisher did was to position itself for the fashionable few with all its flamboyance and exclusivity. Later, when it bought out Air Deccan, it created a platform in the low-cost segment with “Kingfisher Red” which was recently scrapped off. In the meanwhile, Kingfisher was offering differential service patterns across its flights – some were served hot food on the house while some had to pay exorbitant prices for cold sandwiches!
Price Matters – Discounts don’t work all the time
In tune with many other airlines offering everyday low fares, Kingfisher was also pricing its fares accordingly. This, I believe was one of the earliest and biggest mistakes the airline did although it had an option not to do so. Many Retailers, to gain easy and quick market share especially Hypermarkets and Supermarkets work aggressively on their pricing and create hundreds of loss-leaders. That way, they attract footfalls in the initial stages although they would never be able to lift prices in future. This is a dangerous strategy that Retailers should keep monitoring constantly. Although it is fine to change the market positioning once in a while, one has to be careful in the long-term.
Competition – Creating a Niche for oneself
Over time, Competition will increase, irrespective of which business one is operating in. For Kingfisher, it was initially the low cost Indian counterparts and over time, International airlines were also competing for market share. This applies to Retailers such as those in the Fashion segment. It is but natural that international brands would enter India eventually, given the potential the 10 million plus affluent households we have which is their main target segment. This should be part of the Strategy and not a knee-jerk reaction.
Managing the Media
Most importantly, Media should be well-managed – always. To say the least, lesser the better. Kingfisher has been the darling of the Media, with all the red short skirts, the sexy parties and those PYTs who are partying. Every move of the airline has been well covered and captured right from the first page, the Page 3 as well as in the last pages of the newspapers (the sports pages, usually). TV Channels have never missed covering its important times, and there is even a channel dedicated to the Good Times! Most Retailers fail to engage the Media well – either they are over exposed or under-exposed. Well, its worth discussing the business priorities and problems from time to time to- and with the media, rather than bringing it all at once. The recent discussions and view points on allowing FDI in Retail is a great example. Many Retailers, who were initially reluctant on the subject have now done a volte-face because they are cash-strapped by agreeing to bring in foreign retailers in to the fray! This stance will affect them sooner than later, with the media as well as their consumers.
Life’s lessons come from various quarters all the while and this time it is in the form of Kingfisher airlines. It is up to us to make good use of wisdom, irrespective where it comes from.
28 March, 2010
Pay online and gain rewards!
While retailers have been encouraging consumers to shop online more often, Banks and credit card issuers have been doing their bit too. One of the most popular ones in recent times is the initiative by Visa. Visa has its own website aptly named visabillpay.com and the Indian version called visabillpay.in. One can register and pay bills online instantly across various service providers such as Regional Electricity Boards, Mobile and Telephone service providers, Insurance companies, etc. using all Banks’ cards which are issued by Visa. Since the payment gateway is managed by Visa, security factors seem to be well in place. Apart from providing the bank login details, one needs to provide the authentication grid details as well – three out of the ten two-digit numbers that are behind every card issued (recently) must be keyed in to complete the process. Visa, on its part takes special initiatives from time to time. When I had registered two years ago, they had a simple yet effective and compulsive scheme – when a bill is paid through the website, the user gets a 5% cash back subject to a maximum of Rs. 50 per transaction. Recently, they have come up with more exciting offers and have been repeatedly announcing this through the Print Media (across various national publications). As a limited period offer, for every five bills that are paid through the website, the user receives a Gift Voucher from PVR Cinemas. And for every bill worth Rs. 800 or more that is paid through the website, the user receives a Gift voucher worth Rs. 150 from Pizza Hut.
Convenience over Experience or Vice versa?
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