New Airline guidelines – a boon to Retailers

Even as the bus was moving slowly on the tarmac towards the aircraft, it all seemed a dream for me. I would actually be taking the flight to head back home after a long four days that included a road trip from Delhi to Chandigarh, Jalandhar and Amritsar and back to Delhi - a distance of over 900 kms covered in less than 60 hours. The car journey was indeed tiresome and the trip was hectic but the wish-list was complete - A visit to the Golden Temple, the Wagah Border, Wal-Mart stores in Punjab and a couple of other meetings. All those memories were coming back to my mind as the bus slowly halted. There were just five of us in the long bus operated by India’s most efficient airline, Jet Airways as most of them were already seated and their seat-belts fastened. Usually the late comers are welcomed with a stiff and dirty look by some passengers as though the flight was held up only because of them (which was not in our case). The crew, ever smiling and happy to help, guided us to our seats and the doors were being closed, the flight getting ready for take-off. As the plane reached the runway and started moving, I was amused that this could actually happen to me – reaching the airport 14 minutes before the scheduled departure time and still being flown. Yes, I reached at 18.31 hrs. at the Terminal 1D at Delhi Airport for a flight that was scheduled to depart at 18.45 hrs. Even the lady at the check-in was amused of my (in)sanity and reassured – that she wouldn’t be responsible if I couldn’t board the craft. I have held faith in miracles and one such happened that day.
Since I had already done a web-check the previous day, all I needed to do was carry a print out to show the Security staff and run to the boarding gates. The usually unfriendly and rude staff of CISF at Delhi Airport was, for a change nice and polite and let me past the security gates, while also advising that I need to really rush as the flight’s about to take off. Even as I approached the waiting area, my name along with a few others were being screamed on the Public Address systems and I had to run across the 2,000 sqm terminal building to reach the boarding gates. Just that I was feeling a bit guilty that I wasn’t taking anything back for my family or friends from the sprawling Retail areas. What was reassuring was that there was an all-purpose retail outlet at the Arrival areas at Bangalore International Airport, managed by India’s leading Leisure Retailer Odyssey that stocks everything from toys to chocolates, books to music. So I didn’t have to worry much since I could pick it up after reaching Bangalore.

While my getting into the flight was indeed some kind of magic, it was an eye-opener and warning, given the new guidelines laid down by many of the airlines in conjunction with the airports – Check-In counters for Domestic Flights would close 45 minutes prior to scheduled departure (previously 30 minutes) and 75 minutes prior for International flights and this would be applicable at the top six airports by passenger volumes in India including Mumbai, Delhi, Chennai, Bangalore, Kolkata and Hyderabad. This means one wouldn’t be able to check-in at the airport after the counters close, but could still board the flight if check-in has already been done though telephone or on the Web well in advance. Over a period of time, this trend would result in passengers arriving early to the airport, like how they do at other points of transit such as Railway stations and Bus stands. Earlier, the airports were smaller and cramped, but all this changed with the Government allowing private participation in constructing new infrastructure at airports. Bangalore International Airport was the first one to be signed on paper although Hyderabad International Airport was the first to commence its Greenfield Airport in 2008. GVK managed Mumbai International Airport had its new terminal building inaugurated a few months ago and GMR operated Delhi International Airport has recently commenced India’s pride, Terminal 3, or T3 as it is fondly called. Other airports at Chennai, Kolkata, Mangalore, Ahmadabad and many others managed by Airports Authority of India are being modernised at a total cost of over USD 4 Billion.

While arriving at the airport was not seen as a major attraction a few years ago, today passengers seem to love it. For Example, Cafe Coffee Day, the first national Retail Brand to enter airports many years ago had its share of patrons arriving at the erstwhile HAL Airport in Bangalore only to sip a cup of hot coffee before they left the city which they do even today at the new airport. Currently, CCD operates over 30 outlets across leading airports in India and is planning to enter many more in the years to come. The Bangalore International Airport was the first one in the country to have a properly planned and well-managed Retail footprint, led by India’s largest retailer in the lifestyle business, viz. Shoppers Stop which also incidentally operates at Hyderabad Airport. T3 at Delhi has over 20,000 sqm of Retail areas and hosts leading domestic, regional and international brands alike across domestic & International Departure and Arrival areas. It is quite common to see passengers packing sandwiches or burgers from CCD outlets along with a cold coffee or a frappe or Pizzas & Pepsi from Pizza Hut outlets at various airport terminals, thanks to the advent of low-cost airlines (which command a 35% market share in the Indian skies) that do not serve complimentary meals on board.

While arriving early to shop at Duty Free areas in the International Departures is common worldwide, the trend was basic and functional many years ago which was again altered at the Bangalore International Airport which hosts one of the best collections of Scotch, Tobacco, perfumes & cosmetics, Electronics etc. This is the airport where leading city-side retailers such as Odyssey Books and Leisure, Ethos Swiss Watch studio and fashion designer Deepika Govind started their airport retail journey. Today, Odyssey aand Ethos have mastered the trade and operate at many other airports while planning for more stores in times to come.

There are indeed many advantages for passengers to shop at airports. To begin with, it’s a lot of time saved for business passengers and busy executives, compared to that at the over-crowded malls in the city where entering and exiting could take more than 20 minutes during the weekends. Since these store understand the pulse of their customers, they stock the right kind of products so the decision making is quicker. Most importantly, these outlets offer a value-addition to their customers by bundling various promotions – afterall, the passenger doesn’t and cannot come every day to the airport! F&B operators focus on speed of delivery and high quality products and even offer tamper-proof packing so that there is no spill over even if it were to be consumed 20,000 ft above sea level. They also offer a wide assortment which caters to the millions of travellers who could never get bored of the offering.

So, if you are travelling through an airport next time, reach early. You might be in for a surprise looking at what’s available at the airport. Needless to say, the writer is not responsible if you exceed the limits on your credit card. Happy Shopping & Dining!

Beginning of the End...

I was in Germany for a month in June 2008. Not on a holiday, but on a mission. I was part of a five member team sponsored by The Rotary International that visited the Stuttgart region as Cultural Ambassador of India to spread friendship and strengthen business relationship between the two countries. We weren’t on vacation but as guests in the houses of German Rotarians. It was a fabulous four weeks and we learnt a lot about the country while also sharing the greatness of our own homeland. During the course of the stay, I had the opportunity to visit a couple of Retail points – a Hypermarket, a Supermarket, a Mall, a famous High Street and a Factory Outlet city. During my course of interactions with various people within the Retail business and outside, I learned one thing – consumers are the same world over! Irrespective of their origin or culture, what they seek when they buy something is the same – “value”. They could have grown up shopping and aspiring for various brands across borders and cultures, but the most important thing that they seek is the product should deliver value and the brand has to stand for its stated attributes. The city that I am referring to is Metzingen, famous for its factory outlets, attracting people from all over the world. Hugo Boss, which was founded in Metzingen and still has its headquarters there, started first with its factory outlet and was soon followed by other companies (e.g. Armani, Joop, Strenesse, Escada, Bally, Puma, Adidas, Reebok, etc.) who offer a range of their clothing and accessories at reduced prices. I was told that shoppers visit this city in large groups and spend a lot of time and money. All this, in the country of Volkswagen, Audi and Mercedes!

It’s quite common to see Retailers and Brands mark-down and sell their products after the season cycle is over. Typically, the fashion cycle is aligned to climatic conditions – Spring Summer from Feb – July and Autumn Winter from Aug – Jan. Once the season is over, the left over stock of the previous batches are sent to specialized shops popularly known as Factory Outlets. Such outlets are located outside the city due to low real-estate costs, provide basic amenities – may or may not provide a/c, nil or minimal personalised staff service, and limited parking for vehicles. The outlets do not stock the full range but shoppers do not complain as the goods are heavily marked down, ranging from 15-60%. While street-wear brands were pioneers in this line of business, premium and even luxury brands have joined this trend since the mid-1990s. It is quite common to see such outlets all over the world and India is no exception. Since mid-2000, a number of such small localities have come up in the city outskirts and attract large crowds, especially during the weekends. Large format stores such as Brand Factory (by The Future Group), Mega Mart (by Arvind Mills) and many such Retailers operate today and are slowly getting near CBD areas too.

While the Factory Outlets are a sure shot dump-yard, brands try their best to liquidate their stocks from within their stores, at lower mark-downs but “higher discounts” that appeal to shoppers. And this was born the concept of “End of Season Sale” or EOSS. Almost every brand across the spectrum offer EOSS twice a year, just after the season is over. The Sale begins as early as Jan and July and goes on for 4-6 weeks. While the discounts are lower during the opening weeks, it gets deeper as weeks pass by, but shoppers may not get their preferred sizes and colours, so stocks get liquidated quite much during the opening weeks.

One would have noticed during the last few days, various brands offering deep discounts at their outlets. While consumers keep track of who is offering what, they usually wait for the big boys – the Department Stores such as Shoppers Stop, Lifestyle, Westside and Central to commence their EOSS. Since the size of stock-holding is substantial, the discounts offered by them are also deeper. India’s largest Department store chain by size, Shoppers Stop (which operates more than 25 stores across the country including at Bangalore International Airport & Hyderabad International Airport) and Lifestyle offer a preview for two days to their privileged customers, their Loyalty card holders (First Citizen and Inner Circle). Westside offers an additional percentage of discounts if shoppers use a particular bank’s credit card. The newest and the most premium Department Store format, The Collective from Madura Garments that stocks brands such as Hugo Boss, Armani, Ralph Lauren, etc also goes on Sale!

The season has just begun and is expected to continue for the next 6-8 weeks. My friends in the apparel business say that the recent Spring-Summer season reflected healthy sales – same store sales growth of over 10-15% YoY and hence the discounts this season may not be very high (unlike last year same time where the average discount was 40% and went as high as 70%). Whichever way, the same product is going to be available at a price lower than before (remember, it’s only the price that is lower and not the Brand value0, so what are you waiting for? Rush to a store near you and I guarantee that you are in for a surprise. Happy Shopping...

Low Cost: It’s all about perception!

There is a famous saying doing the rounds in recent times: 19^th Century globally was about roadways, 20^th century was about railways and the 21^st century is all about airways. How true!

Mainline media was abuzz over the past weekend about the most recent development in Indian Aviation – Sun Network owner Kalanidhi Maran had purchased a strategic stake in his personal capacity in Spicejet (IATA Code: SG), the second largest low-cost airline in the country by market share. While the deal has been on the table for over 3-4 months, the timing couldn’t have been better. Passenger and Cargo traffic is at an all time high since late – 2008 after the global recession and the US sub-prime crisis. Major airports such as Delhi IGI, Mumbai CSIA and Bengaluru International Airport are squeezed for space and the check-in / security queues during peak hours could take as high as 30 minutes per person. Spicejet, apart from other low-cost airlines such as Indigo, Go Air, etc. have been in operation for around five years, ever since the first low-cost airline in India, Air Deccan was launched. It has carved a niche for itself with its on-time performance and crew service standards just like its main competitor, Indigo. Jet Airways, India’s premier airline and Kingfisher, the only five-star airline in the country, also have their respective low-cost avatars, Jet Konnect and Kingfisher Red respectively, which directly compete in the same price segment.

So what’s with a media baron who is the leader in his own right in TV (Sun TV networks), Radio (S FM), DTH (Sun Direct) and many other related businesses got to do with Aviation? His critics slammed saying he lacks experience and exposure in the business to which he replied “CEO needs core competence; Chairman needs foresight”. Well said Mr. Maran. After all, he had purchased an entity which was operating in the low-cost segment. The concept of low-cost and low-fare have been misread in India for some time now. Air Deccan was actually low-cost and low-fare – the airline had minimal usage of resources (human and others) compared with many other scheduled airlines such as Air India and Jet Airways. The in-flight services were minimal and water for drinking was being sold – contrary to an almost Indian way-of-living “Athithi Devo Bhava” (Guests are treated like God). World over, low-cost airlines are the ones who are faring well even during the slowdown. That’s because their business model is like that. Scheduled airlines in India are competing on price but retain many other value-added services, which is what costs them and like how! A quick comparison between various airlines revealed that the fare difference on low-cost and scheduled airlines between Bangalore and Delhi if booked a week in advance is not more than Rs. 800/-. While Spicejet and Indigo offer the ticket at Rs. 5,476, Jetlite at Rs. 5,497/-, Jet Airways at Rs. 5,548/- and Air India at Rs. 6,210/-. 

There is a lot that can be compared between Aviation and Retail. Global experts on Macro-Economics say that for a buoyant economy, Aviation must grow twice the rate of the national GDP. That’s been the case in India since early 2000s, barring a few months of turbulence since mid-2008. The same applies for Retail. Both industries propel consumption and reflect growing consumerism and aspirational affordability; both bring in healthy competition and the uncompetitive are flushed out within a few years; both Industries grow only by scale – larger the number, higher the economies of scale. Both industries are a favourite for international players driving FDI into the country. Both provide direct and indirect employment for thousands of people (although aviation globally is reducing the number of staff per 1,000 pax, this number would continue to remain high in India due to localization issues). And both can work pretty much independently without Government support although policy decisions do affect the functioning of the industries.

Organized Retail has been growing at over 15% CAGR for leading retailers ever since they came into foray during the last decade. The highest growth has been for retailers nicknamed “Hypermarkets” led by Big Bazaar, a Future Group entity that commenced business in the year 2001 at a nondescript VIP Road, east of Calcutta. And the rest, as they say has been not just history, but historical! The group has managed to open over 140 outlets, over half of which were during the past 4 years. Other players in the same business include Hypercity (by the Rahejas), Star Bazaar (by the Tatas), Reliance Hyper, More (by the Birlas), Spar (by the Landmark Group of Dubai), Total (by the Jubilant Group), Easy Day (by the Bhartis) and many other local and regional players. The idea was simple – lease a big box location; project the business as low-cost, sell atleast 100 items at the lowest price possible and communicate the same en-masse. By attracting thousands of shoppers to visit the store, Retailers look to sell their products in large quantities thereby managing better economies of scale. The business would become profitable over a period of time, but only with more number of outlets selling more SKUs.  Not all the items in a Hyper are always low-cost; At the end of it, it’s all about perception – of Low-Cost. Hypers reinforce the fact that the key household items are below the selling price in the local markets; this acts as a bait to attract shoppers to visit the store. Over a period of time, consumers get hooked to the idea of shopping in a relaxed, convenient, hygienic environment where they could also save some money!

So whether it is a Low-cost airline or a Hyper, its all about perception. And there are many who are trying it hard. Only some will succeed. After all, those who do so will have people at the helm with foresight. It surely helps. 

Learning from Levis; Collaborate, Cooperate and Succeed.

It’s quite rare to see (in the Indian context) Brands working very closely with Retailers or Malls. Most often, each Brand would like to leverage its presence within the large format, be it a Department Store or a Hyper or even a Mall by taking up pole position (read – prime locations at the entrance). Retailers cash in on this trend by charging a premium for such locations which Brands pay, albeit not happily. Many Brands, international, domestic and regional believe that a prime location within the store would attract footfalls and the Brand magic would result into higher conversions. In most cases, it is not so. Corner locations alone do not guarantee higher business potential. What’s important is for the Brand to work closely with the Retailer in mutual interest and both must make best use of each other.

A recent example is that of Levis. I have read somewhere that on an average an American owns 1.65 pairs of Levis. That’s very similar to the count on Wal-Mart, that over the past 40 years, over 90% of all Americans have visited the world’s largest Retailer atleast once in their lifetime. In India, of course we cannot share such figures with authenticity though. Back to Levis. The Brand was among the earliest entrants in the casual-wear denim wear segment in India during the early 90s and continues to remain among the most aspired affordable fashion brands in India. After a small lull during mid-2000 decade, Levis has bounced back in strength. A very strong merchandising and marketing team is at work and the results are on the face. After many successful campaigns over the past months, the most recent one is an encouraging trend set by the brand again. This time, its outright collaboration.

Levis and Lifestyle, the Department Store chain owned and managed by The Landmark Group of Dubai, have come together in what seems to be among the most talked about promo in town. The tagline, aptly named “Just4YOUth” targets the young by age and young at heart to enjoy the mood and spirit of youth. This at a time, when most first-timers enter their college days, an important part of growing-up. To have a bit of variety and participation from other brands, LEE and ARROW have also been roped in. The promo seems simple; an assured gift with a minimum billing and a chance to win a Mega Prize, VW Beetle, the newest and coolest Youth icon in the making in India. And there are other prizes to be won too, including a YAMAHA motorbike and voila, a chance to be the next model for the Department Store chain! This is seemingly similar to the promotion that was held a year ago at Bengaluru International Airport to celebrate its first anniversary. Although many sceptics believe that such promos do not offer tangible benefits, I refuse to believe so. Indian shoppers are value-seekers and if they see anything additional to their purchases, they would just grab it. It’s been so for many years now and will remain so for times to come. The simple promo is a great crowd puller into the Lifestyle Stores, especially for Levis fans to check out the latest collections. On similar lines, Levis has also partnered with Shoppers Stop, India’s largest Department Store chain with another exciting promo – “Denim Rocks”, attracting music lovers by offering a Promotion revolving around the most favoured fabric of rock stars, pop stars and rappers. Here, the associate partner is another fashion brand FLYING MACHINE.

Today, Brands should seek more prominence among shoppers by not just having a premium location but by experimenting such promotions from time to time. The mantra is clear – Collaboration between the various parties, i.e., Brands and Retailers. Cooperation among Brands within the store. And the result – Mutual success for all. Wish more brands understand this simple logic, rather advertising silos on supplement first-pages!

Duty Free in India – a fiasco or a success story in the making?

“Nuance Group (India) to exit Hyderabad Airport Travel Retail as new Tender looms” read the headline on The Moodie Report – the most respected and authentic Travel Retail news site that never sleeps. Even though the Publisher Martin Moodie, Deputy Editor Dermott David and many other senior people were stranded over the past 10 days due the flight disruptions caused by E15 (that’s the short code for the Icelandic Volcano), the news website kept going. Such is the commitment of the people behind. Back to the headline, which also appeared in a leading Indian newspaper a few days ago, it was indeed a surprise for many of us in the Industry. Or should we say was it a surprise that the news came so late! Well. 

The Nuance Group that operates over 400 shops across 60 airports and 20 countries worldwide and which is among the largest Duty Free operators in the world entered India in the year 2006, with a JV with Shoppers Stop, India’s leading retailer. The JV was specifically formed for the Duty Free tenders that were coming up then, at Bangalore and Hyderabad for the two new Greenfield airports. It was quite a surprise to see this JV and so were many other partnerships – The Oberoi Group with Heinemann, for example. It was the first time that international players were setting their eyes in India. It was initially India Tourism Development Corporation (ITDC), a Govt. Of India undertaking which was the monopoly operator across Indian airports over the past 3-4 decades. And then came in the private monopoly of Flemingo since the turn of the 21^st century. This was challenged by the International players in 2006 when the top five Duty Free operators of the world including Nuance, DFS, Dufry, Heinemann and Alpha participated in the tender process of BIAL. The line-up and interest in the Indian Duty Free was so impressive that many in the industry were hoping for better days ahead, guessing that the international players with their global exposure and best practices would mark a change in the country. Wish dreams were horses!

The first International player to win a tender in India was the Nuance-Shoppers Stop JV at Bangalore International Airport. This was followed by a similar success at Hyderabad International Airport. Other players such as Dufry and Heinemann made a quiet exit from India heading back to their strong bases. Alpha, which had been operating in Kochi and Colombo for over 10 years went back to focus on its territories.

A lot was anticipated by the Industry from the Nuance-Shoppers JV since its victory from the tenders at Bangalore and Hyderabad. With their impeccable track record in India, Shoppers Stop was expected to put things into perspective and bring some method to madness in this crazy business. After all, travel retail was, and is still a very nascent industry in India and who would believe me as an Airport Retail Manager a few years ago when I would say passengers would buy not just books and magazines, but also diamonds, watches, t-shirts and perfumes, even in the domestic departures of the airports! Shoppers Stop is doing an excellent job and one can see this at the Bangalore and Hyderabad Airports. And Nuance, with their global experience and success was expected to negotiate the best rates from its suppliers and pass on the discounts to its customers at the International Departures and Arrivals. Needless to say, this is a true story today and the duty free stores in Bangalore and Hyderabad have been the favourite for most International passengers in recent times, surpassing erstwhile favorites such as Dubai, Singapore and Bangkok Duty Free.

So, what really went wrong at Hyderabad? Honestly, I wouldn’t like to speculate. But there are certain points that were evident with their business model, some of which are discussed here. Sure, these are observations of yours truly and a few people around while personal thoughts of some of the readers may differ. To begin with, the size of the market was over-estimated. Going by previous experiences, the incumbent Flemingo who was operating at the erstwhile Begumpet Airport at Hyderabad did not have such a large duty free area. This, in my opinion should have been the first learning. A large airport doesn’t necessarily mean a large Duty Free Store, many of you would agree. Next, the range included high-end premium products including Scotch and Cigars, which was probably not required. The reason for this being over 60% of international passengers are either proceeding towards or returning from the Middle East and are blue-collared workers, whose primary requirements include some inexpensive chocolates to distribute among friends and family, low-cost tobacco products, whisky and rum. And most importantly, over half of all passengers belong to the Muslim community who do not consume any form of alcohol. This, according to many in the industry was the most important point that should have been kept in mind. Indeed, for the reasons mentioned above, it was widely expected that Alpha Duty Free, now a part of the Autogrill Group, which has been operating in Cochin (with similar consumer profiles) could have been a better bet for this airport.

Most recently, middle of 2009, there was an unsavoury incident at Hyderabad Airport where some of the staff of the duty free were allegedly involved in a racket that included illegal smuggling of customs bonded goods. While the words may sound alarming or confusing, what was happening actually was that the staff were taking goods out of the store that were not purchased by passengers, but by illegally using their personal details. This, according to some in the close vicinity of the Operator as well as the Airport Management was the last nail on the coffin. Afterall, the GMR Group which operates and manages the airports in Delhi and Hyderabad was in no mood to continue a situation that would give it disrepute in any form. The new Terminal 3 at New Delhi is nearing completion and once finished would possibly be the best terminal in India and among the best in the world. So, the latest news is that a new tender is being called for and the new operator “may” have a Joint Venture with the GMR Group directly, just like how Aer Rianta has entered in Delhi.

Having said all of that, Nuance has done a commendable job in Bangalore over the last two years and this is also a reflection of their best practices being continued – they are also doing great in Zurich Airport, which happens to be one of the main shareholders in Bangalore Airport. Their achievements in Bangalore include bringing for the first time in India a Formula One Racing Car to many other exciting promotions that have never been tried in the country. While there is wide speculation that they would wind up their India operations  (naturally by the Indian Media coz they love doing it), many in the know are unwilling to believe so. Bangalore Duty Free, if done well in the years to come would be not just among the most profitable to the operator, but has the possibility to be one of the best in the world. Nuance has proven time and again that it is THE BEST Operator at Singapore and Hong Kong and understands the pulse of this market quite much. I am sure the business will flourish well in capable hands and continued mentoring and look forward to its wining accolades in times to come. So, where is the Indian Duty Free heading towards? Just wait until T3 opens - and the new integrated Terminal at Mumbai International Airport. Just a matter of time, when Indian operators will show the world how this business is run best. Cheers.