My i Vs. Mi Experiences

I purchased my Mobile SIM card for the first time in the year 2002 in Chennai from Aircel and that number is still active. My my first handset was an Ericsson followed by Samsung R220, the first mobile phone launched in India with a multi-colour display. This was followed by a few Nokia models over a decade and a Sony Ericsson P1i before I finally moved to Blackberry. A few models and 4 years later, I moved on to the Apple Ecosystem with iPhone 4S in 2011. I upgraded to 5S, 6 and 7 over the years as well as including other i-Devices such as 3 generations of iPod, 2 variants of iPads, a MacBook, Apple Tv and finally an iWatch. With a paid plan for Apple Music and a huge storage on iCloud, I don’t have to worry about my stuff on the hard disk anymore, for its all safe and secure, “Up in the Air”. Hopefully. With a seamless integration within the iOS, it is almost impossible for me to move out of the Apple Ecosystem anymore and I guess I will remain clued in here. however, when the announcements for new models of iPhone XS & XS Max were announced last month, I had less interest than last year for the iPhone 8 & X. Somehow I felt that Apple has stopped making mobile phones for common users and is perhaps focusing on a niche segment who can use most of their offering.

Notwithstanding my self-prejudice for a coveted Brand and its products that I love so much, I decided to visit a Retail Store to physically touch and see the new launches. On a sunny Chennai afternoon last weekend, visited an upmarket Mall in the City, which for some strange reason has four retail stores next to & opposite to each other who sell multi-brands of Mobile phones and accessories apart from an Apple Premium Reseller (APR) and a Mi Experience Store. Even before I could visit the APR I happened to see the new iPhones at one of Tamil Nadu’s leading multi-brand Retail Store. The Staff were as uninterested as I were and they hardly explained why the new damn thing costs a lakh and fifty thousand bucks, with which one can but at least three new laptops or 15 mediocre mobile phones or perhaps even 5 top-end new mobile phone models. I didn’t bother to even ask queries and quickly moved on to the next chore with the family. Was having a sad grin on my face that the same “me” had waited at the same Mall five years back in a queue for four hours on a sunny November afternoon along with my better half to buy my Apple iPhone 5S on the launch day. How things change, huh!

My wife has been asking me to buy her a wearable device to measure footsteps, which we have been exploring for the past few days. Surprisingly, Croma and Reliance didn’t have a wide range while the Mi Experience Store at Express Avenue Mall didn’t have the widely popular Mi Watch 2. The staff at the Mi Store was unapologetic that it wasn’t available at their flagship store in South Chennai and instead advised us to visit a few days later when it would arrive at the Store. Really? Do Brand staff think Customers will Queue up anymore for their once coveted products? We ended up buying at another store whose Sales staff surprised us and matched the same price as the Mi Experience store where the device’s price is Rs. 200 lower than outside. At the Mi Experience store, I saw a wide range of products including LED TVs but another flagship Mi A5 model of Mobile Phone wasn’t available, once again. 

Recently, I was reading how Best Buy has embraced omni-channel in the US by ensuring a wide variety of models across Brands were made available at the Store and the Retailer also offered multiple models of delivery such as in-store, same day delivery, Day +1 delivery, at home delivery, etc. This was the only way they could counter the intense competition from Amazon in the US. Back in India, things remain unchanged. Croma has a namesake omni-channel model but the staff are disinterested in taking the effort. The bigger surprise was Mi Experience Store, where the staff could have immediately engaged with us, potential buyers of a Watch to browse the range on a device kept right at the store where one could browse and buy with a deliver in a day or two, Lost opportunity. 

This is just my personal experience and am damn sure there are millions of such experiences across the world where Customers are walking away without purchasing, thanks to disinterested staff and their respective Managements. A report in the Economic Times suggests that of the 1 lakh units kept ready for the opening weekend in India, not more than 50% were sold, thanks to low interest of Customers for various reasons, from new innovations to pricing. This is a first for Apple, what with already sagging Sales and the same trend could continue if they keep making iPhones which people stop buying for snob-value. And a younger brand like Mi which boasts of giving a run for money with its devices could do better with Merchandise Planning some Staff training. hope that’s not asking for too much from a Brand which has apparently carved a niche for itself.  

The iPhone Saga continues...

When I posted on my Facebook page at 11.35pm on the night of 16 Oct. 2014 that I was the first in the city of Chennai to receive a 64 GB Gold variant of the iPhone 6, someone sarcastically quipped "So?!?" Well. It was no big deal. Really. Anyone could have been the first one if they had put in the effort. And for me, it was pure fun. And a Retailer's delight too - to see how a Retailer delights his customers through completing a much anticipated and well hyped "transaction". In many parts of the country, the event was quite publicized and draw discerning customers to the Retail Stores - one retailer in Chennai had gone a step ahead to rope in leading actress Hansika Motwani to do the honours. India's largest mobile store chain, The Mobile Store took a full page Ad in national newspapers urging people to preorder and get the device in the midnight. Flipkart, India's largest ECommerce company along with rivals Snapdeal and Amazon was taking preorders promising one-day delivery. Crazy Apple Fans lined up the outsides of the Retail Stores, from UB City in Bangalore to Select City Walk in New Delhi's posh Saket area. I, however chose to skip the queues and chose to book with a low-key Retailer close to my workplace. I really took a chance with this Retail Shop, it is called Hello World located at Adyar, in South Chennai. They charged me Rs. 5,000 as booking charges 5 days before the original launch and assured to deliver the phone by midnight.

 On the day of release, I called then twice during the day to check if everything was as per plan, and they continued to assure that they were geared up for the event and I could come over after 11.30 in the night to collect the "piece". Yeah, ultimately its a piece, but a precious one though! I finished work, went home, had shower and dinner and drove back to the shop and reached around 11.15pm. There were 2-3 other customers who had turned up at that time. I was actually taking a chance, just in case they offered to sell the piece well before the time the invitation suggested. And in true Indian style, they did. They "sold" the first piece to me well in advance of the promised time but cautioned me not to activate the phone until 00.00 hours, lest I lose warranty.

I came back to my car, clicked a Selfie and shared on social media and whatsapp groups - small thrills, you see. And was greeted and responded by many people whom I knew and didn't. I really felt happy that the Retailer stood its purpose and kept us its word by delivering what was promised.

I came home and waited patiently, only to activate my new iPhone6 at 00.05 hrs. Its a delight to restart or swicth on an iDevice. And I love that experience absolutely. The finesse with which a product has been created and packaged - Hats off to Steve Jobs for this. I have been using Apple products for a decade now, with my first one being an iPod Nano 4GB. In the year 2004, it was a miracle to store over 10,000 songs on a single portable device that can be heard through headphones, on a car through an AUX Jack as well as played on a music system. And Apple has gradually grown its line-up. at the moment, I guess they have over 30 SKUs, some in sales in a few countries while some have been discontinued from production as well.

There have been a number of reviews about iPhone6 itself, so I am not going to get into the technicalities. Your favourite news websites are a better source than mine. So, I would urge you to read what you think suits you best. I am only going to share how it feels as a user, as a keen observer of consumerism, as a retailer and as a Retail Consultant who advises various businesses.

The iPhone6 is a tad bigger than the previously launched iPhone5S. The beauty of the earlier iPhones and iPods was that they could be managed using one hand, depending on what suits you. Not anymore with the new model. While a few can hold the device comfortably in one hand, most people, including a few women may find it difficult to use it on one hand. However, the flipside is the screen size looks much bigger. You get to see and read a lot more, especially on sites like twitter and facebook as well was webpages. While the default font size remains the same (it can be increased through manual settings though), one gets a feeling of using a non-Apple device. Maybe like an HTC or Sony. Samsung has launched various sizes appealing to various strata of people, just like how another Korean Automobile company Hyundai does. So, it depends on which other smartphone you compare it with. But interestingly the new model is lighter than the previous one, so the size is compensated with the pressure exerted by the palm.

Speed is immensely better in the iPhone6, but you would realise this only while using certain apps. And the likes of Facebook and Twitter have updated their own apps in line with the iOS8 Operating system, so the apps now open up and perform much better than in previous devices. Battery drains slower than before, although I haven't put the device to too much of use such as having a Facetime Call or watching a movie. Features like Near Field Communication (NFC) and ApplePay wouldn't be usable in India, for we dont have the relevant infrastructure here. Other than some basic cosmetic changes, there is nothing new in the device, although hardcore Apple Fans will tell you about the technicalities which I dont think will change the way we live! However, to each his own. 

At the moment, its been just about 36 hours since I have been using the phone and it seems to be working well and doing its job to its best. And my love for Apple keeps increasing by the day. As the saga continues...

Happy Hours on the Web

The term “Happy Hours’ is better known for a “Buy One. Get One Drink Free” at most bars and restaurants all across the world. F&B Retailers have for long used this to lure customers to trickle in to their premises during the lean times, which is typically between 3pm – 8pm and Happy Hours are usually between 5pm – 8pm. While the margins on alcoholic beverages are quite high, say 200 – 500% on Sales, Restaurateurs forego some of it to get customers and utilize the time well and also hope that these customers would continue much after the Happy Hours are over. Also, consumption of food during the course of having a peg or a mug is quite high and hence they make money on it as well. I remember, a tony Restobar on Church Street in Bangalore offerred a group of 8 of us Happy HOurs even after 8pm, knowing fully well that the business that would arise out of our total consumption is well worth it.

What is new, is that e-commerce companies are now promoting their “Happy Hours” to lure shoppers to buy online during the so called “lean hours”. What is interesting is that the business on the web is busy only during a few hours in the day. As you would guess, it is during the day time, and between lunch and evening. The reasons for this kind of hectic activity is as follows;

Broadband Speed

Most (online) shoppers’ households still do not have the kind of internet speed that’s available at their respective offices. The Airtels and BSNLs of the world do not offer seamless connectivity that the IT Managers in small and large companies work relentlessly to ensure connectivity all the time for business purposes. And therefore consumers prefer to shop online during office hours. Incidentally, IRCTC sees hectic activity between 9am – 11am, especially for tatkal bookings.

Secure Access

Home internet is certainly not as safe and secure for making online transactions, and is vulnerable for hacking, especially by fraudsters who are constantly monitoring those who are shopping online. So, online shoppers tend to believe that office internet is much safer and is hack-proof, although it is indeed a misnomer

Delivery

Many youngsters live away from their families these days, mainly owing to work and do not have a permanent address. Some others do not have anyone to collect the goods being delivered, especially if they as COD – Cash on Delivery products. Hence it makes sense to get them delivered at their office making it more convenient.

Boredom

Over the past decade, the internet has been an important leveler to kill boredom. During the initial days, it was just about reading (Internet 1.0) where one could only transact one way. Then came the years when Google started invading our lives with various products, Youtube being a very important one. Social networking has seen hectic parleys over the years including Facebook, Twitter, Pinterest and so on. Online Shopping is a mere extension. People shop online, from grocery to gadgets, tickets to gifts, just to kill their boredom. Also, long office hours (during the week) and travel to hometown (over weekends) doesn’t allow many to shop at High Streets and Malls.

Desktop / Laptop

While mCommerce or shopping on the Apple or Android smartphones is becoming common, shoppers still prefer to see the products on a wider screen such as Desktops and Laptops as it gives them a better view of the products. Also, the reliability of 2G/3G connections is much lower than on wifi/broadband services.

I read this recently on the web;

“If I want to find something, I will Google it. If I want to buy something, I will Amazon it.”

Very powerful statement.

Amazon India recently launched a campaign to encourage shoppers to shop online during the evening hours, promising them best deals in town. I guess more and more etailers would follow this trend shortly. "Working hour visits are the highest—there's a spike around lunch time and evening and dies out at night," said Sandeep Komaravelly, vicepresident, marketing, Snapdeal.com told in a recent interview to The Economic Times. "Besides, weekdays are busy for shopping online, while weekend traffic drops by 10-12 per cent, particularly on long weekends like this one." Hasbro Clothing, the parent company of basicslife.com runs 100 exclusive offline stores and also retails via 800 multibrand outlets. "Office net connectivity is much faster than at home, prompting quick purchases at work," said Sriram Ravi, head, digital marketing, Hasbro Clothing. "We get 20 per cent daily orders around lunch time and marked increase during office closing hours. People are done with the day's work and use the last hour to browse and buy from shopping sites, while on weekends, sales in retail outlets are higher." Average time spent in buying boxers or handbags or shoes online is five to 10 minutes and these are typically repeat buyers, familiar with a site and knowing what they want.Same-day delivery options are also pushing buyers to shop during office hours. For example, eBay India offers nine-hour delivery, but for this, orders have to be placed by noon. At Amazon, orders have to be placed by 10 am to qualify for sameday delivery according to The Economic Times.

Honestly, there is no good time to shop. Anytime is a good time, from the view point of Retailers. It’s just a matter of time that Offline Retailers would also start offerring discounts during lean hours, a practice started by United Colours of Benneton many years ago. For now, check out the web for special deals. If you reading this later in the evening, you may be in for a surprise! Happy Shopping…

Digital Retail is still nascent

Croma, which is a part of the TATA Group has been my preferred store for shopping all things electronic over the past few years. They customer service is friendly, well-stocked and well maintained and operated stores. The staff also double up as digital experts, mostly guiding customers on why they need to buy a gadget, rather than what they need to. The apple Assistant at one of the Croma Stores I frequent is more like a good friend and advisor now – I reach out to him regarding queries about the phone, the software, the enhancements and a whole lot. Croma’s main competitors in the organized Retail space include EZone from the Future Group and Reliance Digital, a part of Reliance Retail. Then there are the local biggies, such as Viveks, Shahs, VGp, etc in Chennai and ofcourse the most infamous Ritchie Street off Mount Road which is the hub for electronic products in the city. Croma has fared much better than the others while it faces stiff competition from Reliance which is expanding rapidly off late.

I visited the Croma Store on Mount Road a month back, to enquire about a revolutionary device – a a USB Stick which provided 3G & Wi-Fi services on the go. The device just needs a plug point – AC or DC; which means you can use it as a wi+fi device using the cigarette lighter slot in your car and can provide its service upto 5 gadgets including laptops, tablets, phones, iPods, etc. The device has been around for sometime and the staff say that it is seeing brisk sales every other day that it gets sold out within a few days of stocks coming in to the store. So, the store that I went to didn’t have the stocks and they apologised for the same, and said that I could pay the advance for the device and that they would call once the device reaches the store. Somehow, I wasn’t comfortable with that idea, since I wanted the device then and there.

I set out looking for the Tata DOCOMO Store that exclusively sells these devices and offers other solutions and services of the same nature. Even they didn’t have the stock at the time I went. However, the staff was quick to note down my details and said he would call me the next day as soon as he received the stocks. And he did promptly call me the next day. Within just four hours, the device was working!

So, why did the guy at Croma not do what the guy at the DoCoMo store did? Since, the sales targets were different to each one of them, simple. For a mass retailer, which attracts hundreds of customers to their stores, the kind of focused service is always on the back seat. For the guy at the exclusive store, his key targets are selling the USB sticks and converting buyers into users and users into big spenders. It’s a known fact that “data usage” is indeed going to be a money spinner in times to come for Telecom companies, with SMS being replaced by the likes of whatsApp and ISD calls being replaced by the likes of Viber, Line, etc.

I would have expected Croma, which is also a Tata Company to work closely with another division of the group (DoCoMo is a Telecom company operated by Tata Teleservics). It is challenging, since they are different companies with different cultures. Also, the supply chain mechanism could be different. The big learning was as consumers, we need to visit the right kind of stores to get our things done. While it is simpler to buy online, it takes much more time to get the sim-card activated which required personal identification at a retail store, and hence only elongates the process.

Reliance wins handsdown

The first store for Reliance came up in Hyderabad. It was a grocery retail format and many skeptics wrote off the idea, citing intense competition in this segment. Gross Margins are low, two-digits and net margins, if any are a mere 4-6%. So, how would the company ever make money? Further, there were already established players in this segment, especially in the South (of India) such as Foodworld, Spencers, Food Bazaar, Nilgiris, FabMall, Trinetra (now together More), Fresh @ from Heritage Foods – the list could go on! But patience and perseverance has helped the company in the long term. According to a report in the most respected Hindustan Times newspaper, the company would become the largest Retailer in India by Sales in 2013-2014. The company is expected to close the year with $2 Billion in Sales, approx. INR 12,000 Crores. And it made a meagre INR 78 Crores last year and has made INR 278 Crores in 2013-14. That’s not bad at all. The company has been able to achieve scale over the past 7 years and its many Chief Executives of respective businesses have built the business brick by brick, sweating and toiling between Board Rooms and Store fronts.

Take a quick look at how the numbers stack up;

It’s a commendable achievement for Reliance Retail to achieve this position. Those who know me well would now agree what I have been saying ever since Reliance joined the fray in the Retail sector. I predicted right in the beginning that they are here for the long term. With a cash pile of INR 90,000 Crores and managing the largest Oil refinery in the world, Reliance has real deep pockets. And its Chairman Mukesh Ambani is not someone to open and shut businesses. Its not in their blood. Dirubhai Ambani, the patron founder of the group tht every household in India should have a Reliance product in some form or the other. The group created a furore in 2002 when the Reliance Mobile network was launched with an exciting Rs. 501/- package making it the most affordable mobile phone of its times. Similarly, they forayed into various other businesses and turned around all of them, albeit patiently.

One of the biggest reasons why Reliance has been able to reach where they are is also because of steadfast focus in the formats that they have opened and operated. They just have one Hypermarket, One Digital Electronics Format, three formats in Fashion, one in Jewelry and half a dozen international brand tie-ups. Makes it easy to focus on scaling up each vertical constantly. Reliance operates small supermarkets which compete with Kiran Stores and other organized players such as Spencers, Foodworld, Food Bazaar, etc. Reliance hyper directly competes with Metro AG, Best Price (Bharti Retail), Hypercity (K Raheja Group), Total (Jubilant  Retail), Big Bazaar (Future Group) nd other local wholesale markets and APMC operated mandis. In the fashion segment, Reliance Trends is positioned against Lifestyle (Dubai based Landmark Group), Shoppers Stop (India’s largest Department store Chain) and Pantaloon (now owned by Aditya Birla Group). Reliance Footprints has a unique positioning and doesn’t have major names for competition except Metro and Mochi who have a pan-India presence. Reliance Jewels competes with the local jewelry stores in each micro market. Reliance Brands such as Diesel, Quicksilver, etc. compete with their international competitive brands.

This is just the beginning. Look how Reliance is going to grow leaps and bounds in times to come. I am still sure that they wouldn’t have a JV with the global biggies such as Wal-Mart, Carrefour, etc. They would rather grow organically in times to come.

The game gets more interesting.

Smartphones & Dumbphones

In the early 2000s, there was only one mobile phone brand that was popular in India. It was none other than Nokia. It was considered the “Maruti” of mobile phones, with one model priced at a gap of a Thousand odd Rupees. Customers could choose from an array of models starting from a few thousands to a lot of thousands! Mid-2005, came the BlackBerry. A BB was the ultimate corporate tool that every executive carried; or rather wished he could carry. Over time, the company reduced the entry level prices and it was accessible to small time traders, entrepreneurs, businessmen and their ilk. The Late Steve Jobs, former CEO of Apple Inc. unveiled the iPhone to the public on January 9, 2007, at the Macworld 2007 convention at the Moscone Center in San Francisco. The two initial models, a 4 GB model priced at US$ 499 and an 8 GB model at US$ 599, went on sale in the United States on June 29, 2007, at 6:00 pm local time, while hundreds of customers lined up outside the stores nationwide. The passionate reaction to the launch of the iPhone resulted in sections of the media dubbing it the 'Jesus phone'.The fit and finish and the premium pricing meant that it excluded the masses. It was seen as a toy for the rich and famous. Soon, Apple realized that they had to be a useful product for millions of people worldwide and hence subsequent models such as the 3G, 3GS, 4, 4S, 5 & 5S were released. The latest in the line is of course the hugely popular iPhone 5S which was launched on 20 Sep. 2013. It is also the most sold model for the company.

Between the rise and fall of Nokia, Blackberry and Apple, several other brands have come (and a few have gone) with their range of smartphones. The commonality of the former three is that they used their own hardware and software whereas all other devices manufactured by brands run on the Android software which is developed and owned by Google. One of the reasons why Blackberry and Apple were appreciated by their customers was that their products were unique. While the most complained thing about the Android devices is no matter how the phone looks (or feels like), the interface is just the same of the Android. The world has most number of Android phones, but that’s probably due to cheaper price points of these phones as well.

Apple has been playing hide and seek in India for the past couple of years. While the market seems promising, its China that’s a bigger opportunity currently for the company. Despite so many efforts by its Senior Management to focus on India, the California HQ team has been reluctant to do so, for reasons best known to them. This has been clearly visible in the Sales and Marketing Strategy, Distribution network and Pricing. Clearly, India doesn’t seem to be among the favourites yet. However, last week, Apple announced that it would commence manufacturing of the now discontinued iPhone4 model to play catch up with the Android device manufactures such as Samsung, LG, Sony, Micromax and others to compete aggressively in the Indian Market.

I was astonished to see a huge advertisement for this now obsolete model at Delhi Airport’s Terminal 1D recently. Why would a user want to buy an expensive smartphone, which is now obsolete in the developed markets, at a price point where there are several other options! As many say, Steve would have never allowed it to happen. If you have read his Auto-Bio like me, you would know what I am saying. The business team is trying to play catch up in a market which is flooded with cheaper, imported as well as locally manufactured phones.The iPhone4 which I owned two years back was an excellent phone, but was only relevant then. Some of the new features that the competing Android devices currently provide are no match for the older Operating system of apple that this model runs on. Will this bring pot loads of money to the company? Probably no. Will this bring a distribution strength to Apple in India? Yes. Retailers like Croma, EZone, Reliance, Univercell, etc. would be happy to stock these phones and offer them at prices sub-20,000 with buy-back schemes and EMIs on Credit Cards. This is a wait and watch game. Apple has to do a lot more to upgrade users from dumbphones to its range of smartphones. It would not happen any soon. It would not happen with any one model. The entire infrastructure has to be focused on the supply chain-pricing-marketing model. While most Apple users do not downgrade (their models) at any cost, its mostly the users of other platforms who move to Apple. Price alone would not be enough to convert them to buyers and loyalists. Apple needs to do a lot more.

No more EMIs for shopping

The Reserve Bank of India (RBI) has come very strongly against the ongoing practice of Retailers like Croma, The Mobile Store, Imagine, Univercell and many more in assosciation with product companies and Banks to offer interest free EMIs (Equated Monthly Instalments). Currently, Brands like Apple, Samsung and many others subsidise their products by passing on the margins to Banks in return for offerring interest free EMIs. Using a credit card, consumers can own their coveted piece of technology or household items by converting their purchases into convenient monthly payments instead of paying at one shot. Many people have bought their first iphone or other smartphones which offline and online retailers have been offering for quite a while. Believe me, it is indeed tempting. Instead of spending ₹45,000/- all together,  one could pay as low as ₹4,000 for 12 months without paying a penny as interest. Even though Consumers could have paid the full sum, they prefer to pay in instalments. The scheme has graduated many who were having feature phones and CRT Tvs to upgrade to a smartphone or an LCD/LED Tv respectively. 

So, where is the catch? Who bears the interest cost? 

Within the organized retail trade, debit/credit card penetration is quite low at about 15-35% at the max. Banks earn 1.25-2.50% commission on such transactions from Retailers. So, at a 12% interest rate on a transaction of ₹15,000, the bank could have earned ₹1,800 as interest. Instead, it gets only 2% on the transaction. The balance 10% is usually offset by the Brand which is promoting the scheme along with the Retailer. This is on top of the Retailer margin that the Brand pays the Retailer. Therefore, the real value of the product sold is much lower than what is perceived by the customer. The Brand usually doesn't disclose the discounted price of the product so as not to lose the value the customer would derive from the product. 

The scheme has been a massive hit especially among youngsters and first time income earners who are new into their jobs but would like to impress people around them with fine gadgets et al.

The Banks usually anticipate a credit roll over, which means the customer is unable to pay the EMI and therefore pays only the minimum due in a certain month and rolls over the EMI to the next month, on which the Bank earns 3% interest on the said amount. They make up the lost out interest here too. 

RBI is of the opinion that such schemes mislead customers about the impact of rolled over interests by Banks. The new Governor Mr. Raghuram Rajan probably also believes that these schemes promote unwarranted consumption thereby reducing monetary liquidity in the system. Among the slew of economic measures that have been taken since Sep. 13, this is a key one. Retailers are fuming. With the impending festivals eason coming in, Brands and Retailers expected a surge in sales. But this scheme has come as a dampener. Many middle class pople who aspired for their favourite consumer durable or furniture may have to put off their puchases or pay in full. 

NBFCs and private financiers have however been exempted. Bajaj Finserv which has an over 40% market share in Retail credit must be happy. But for availing the scheme provided by them, customers must furnish certain other details such as proof of income, proof of address, PAN Card, etc. So, there is still hope for Retailers and Customers. May the festival of lights bring hope to one and all and increase consumption. Consumption laeds to Growth. Retail prospers. 

Product Vs. Experience

A couple of days back, I was having a conversation with a colleague regarding Brand Experience versus Product specifications. He was of the view that a customer proposes to buy a certain brand or a product but the actual retail experience is utmost important to close the Sale. It got me thinking and the result of some intellectual head-scratching is this column. At the end of the day, it’s the product that the customer is ultimately going to use and may or may not remember the sales experience, especially for low-value items. In fact it may even qualify for certain high value purchases.

For example, Bose which manufactures some of the finest sound systems in the world  advertises heavily online these days (in India), about its products. They are usually banner ads and I find them all across – there is a certain way the online advertisers follow you (which I will cover in a subsequent blog later). But I wonder what kind of experience that Bose is driving while advertising its products online. For one, Bose is not bought. Bose is lived. In a sense that the experience of Bose is something that the consumer lives with during the lifetime of the product. Having said that, would a potential customer walk in to a Bose store after seeing the online ad? Probably yes. Bose banner ads direct the user to the Bose website. It is upto the customer thereafter to seek whatever information they need. And therefore, there is no closure of sale! Is Bose trying to popularise the brand or is it a sales technique? I guess it is the former.

On the other hand, Samsung advertises its most famous Galaxy range of smatphones online too. In this case also, the company is building the brand but the nodes (read Retail touchpoints) for buying the product are umpteen in number than in the case of Bose. For, a Samsung Galaxy is available at thousands of retailers across the country in comparison to a Bose.

While the online ad would build curiosity for a brand like Bose, it would convert more customers for Samsung. And these are just examples.

Read More: The Bose Experience

While at the Retail Store, when a customer intends to buy a mobile phone, irrespective of the store experience, the customer would choose from one of the four main Operating Systems – the Android, the BlackBerry, the Nokia OS and the Apple iOS. It probably wouldn’t matter whether the retail store is Croma or EZone or Reliance Digital or a regional Retailer such as Viveks or Girias or for that matter, small time shops that sell these types of phones. In this case, its just the product that matters and not really the experience. Ecommerce is playing an even more important spoiler for Offline Retailers in terms of snatching away customers. Is there a physical experience in online shopping? Not really. Indeed, there is a lot of science in designing a great website / webpages but that’s more technical. Playing with the layouts is a tried and tested way for online retailers to keep improving the shopping experience. But there is really no “customer experience” as such while shopping online.

There is no doubt that the customer would return to the Retail Store to buy a similar product the next time around if the experience at the store was extraordinary. Therefore it is indeed important for Retailers to ensure a consistent Consumer Experience at the outlets. At the end of the day, between product (availability) and experience, the customer would choose the product.

EMIs are a way of living for the nextgen

I am not too surprised to see the two main distributors for Apple in India, namely Ingram and Redington jointly releasing full page Ads to promote the iPhone 4S and iPhone 5 in daily newspapers. There has been a huge Marketing blitzkrieg in this regard since Jan. 2013. No wonder, sales of Apple’s latest smartphones have seen a jump of over 100% across various Retailers such as Croma, EZone, etc. Until the launch of iPhone 5, Apple used to bundle their newest smartphones exclusively with mobile operators such as Vodafone, Airtel, Aircel, etc.Which means if a customer is not on one of the networks that has been bundled with, then he cannot buy the phone (one has to buy it with a particular network and then use the number portability option). All these changed with the launch of the iPhone 5 in India. During this time, Apple decided to release their phones to the broad trade channel through its two national authorised distributors mentioned above. Which meant that the iPhone 5 was readily available across major retail stores in the country right from its day of launch. Although there was an initial demand-supply mismatch, this was corrected soon. Apple executed the same flawlessly once again with the launch of its iPad Mini. What was more attractive is that these smartphones are available at attractive EMIs, for as low as Rs. 2,376 per month for 12 months along with a down payment of just Rs. 16,990/- The recent newspaper ads have drawn thousands of footfalls to Retail stores that stock and sell the iPhones. Although Samsung started this trend in 2012 for its Galaxy range of smartphones, the scheme has become more popular thanks to Apple’s initiative.

 

Recently, India’s top car maker Tata Motors launched a marketing promotion for its Nano range of cars. The Tata Nano which was launched with much fanfare a few years ago remains to be the cheapest car in the world with its base model touted to cost less than USD 3,000 (Rs. 1.50 lakh). The car didn’t take off well initially due to its stripped-down features but a prolonged grim economy forced fence-sitters to downgrade their purchases and this car seemed to fit the bill as far as a comfortable city drive was concerned. However, sales had come down still more over the past months. From 9,000 – 10,000 units a month in its hay days, sales have been hovering at about 2,000 units a month of late. So, the company decided to launch an EMI Scheme which is hassle free. At a equated monthly installment of Rs. 8,333 per lakh, a prospective customer can swipe his credit card from various banks such as ICICI, HSBC, Axis, Standard Chartered and Kotak Mahindra to avail this offer across dealerships. Add another Rs. 6,500 for fuel every month. Effectively for Rs. 15,000/- one can own and drive around comfortably with a family of four in the city in a small car such as the Nano. The initial market feedback seems to be good although one needs to wait and watch how things go along in the medium term. This is one of the most innovative promotions that the Indian Automobile industry has seen in recent times.

The younger generation which lives on what they earn today rather than save boatloads for future is spending happily on such promotions. I have personally observed so many of them earning less than Rs. 6-8 lakhs pa carrying such smartphones and showing off their ability to own them to those around. After all, their cost of acquisition is as low as Rs. 3,000 per month. They are probably cutting down their spends on other discretionary spends such as travel, food, cinema etc and rather investing on a wonderful smartphone for themselves. For a large middle class that thrives on day-today commute on their two-wheelers (the size of the Indian two-wheeler market is over a million vehicles a year), it is always a dream to travel in a four-wheeled vehicle, atleast on holidays and weekends when the entire family is outing. And such promotions actually help satisfy their needs. What needs to be seen is how long these promotions could sustain. For example, the typical target customer who would buy a Nano is one who is in the lower middle class and with the car being his first four-wheeler. But would he have a credit card to buy the car? If yes, would he have a credit balance of a few lakhs in his account, given that the entire money would get blocked if he had to swipe his card for purchasing a car and may not be left with any credit for other regular expenses such as monthly grocery, fuel, dining, etc.

Whichever way, the next-gen is hapy to live on EMIs. And Retailers should be happy!

Another New store Opening?!?

Retailers in India seem to be continuing their efforts to open new stores, despite a slowing economy, higher import values, a falling rupee, increasing inflation and a weak consumer sentiment. This has been evident in the Retail Sales over the last two Quarters of this calendar year especially in high-value items such as A/Cs, Refrigerators, LCD TVs, automobiles including two-wheelers and four-wheelers. On one side, Retailers are offering huge discounts to lure customers – in India, Q1 & Q4 (for Financial Year starting April onwards) are essentially the most difficult times for clearing inventories and it is relatively easier in Q2 & Q3 due to the impending Festival and Marriage seasons. The above mentioned macro-economic factors haven’t helped them either. And Product ECommerce (excluding Ticketing services which account for over USD 8.5 Billion) which is estimated at over USD 2 Billion (approx. Rs. 11,500 Crores) is the biggest competition today for many Brick & Mortar Retailers, at least in the metros and mini-metros where Consumers have a reasonably quick and safe internet connectivity. And on the other side, large stores are being inaugurated in the hope that consumers would still like to visit and shop. We truly live in two contrasting worlds, to say the least. India's largest retailer, Future Group, which runs Central Malls, Pantaloon Fashions – a Department store chain, Big Bazaar Hypermarkets and FoodBazaar supermarkets among various other formats and models has scaled back its expansion from 2.5 million to 2 million square feet this fiscal year due to an economy growing at its weakest in nine years. The growth rate was 5.3 percent on an annual basis in the March quarter.

To drive footfalls to the store, continuously and consistently is one of the key challenges for Retailers anywhere in the world. That the population in India is huge is a bonus factor. However, conversions are miniscule. In the apparel and lifestyle formats, conversions range from 8-15% (those who buy as against those who enter the stores) while in consumer durables and brown goods, it is even lower. For Malls, which are destinations and are expected to attract significant footfalls, the conversions range from 3-5% and maybe lower in some cases (on a lower base of footfalls, usually). Given this fact, Retailers are in a frenzy opening newer stores within existing cities as well as in newer cities. One such example is Viveks, one of the oldest Consumer Durable Retailers in South India which was also the first one to start an EMI option in the early 90s when the Indian Economy was just opening up. It is rather surprising that the Retailer chose to remain a regional player, unlike its later counterparts such as EZone (part of Future Group) and Croma (from the house of Tatas) who quickly increased scale and went national with their presence. EZone is having operational challenges but that is not because of expansion but rather due to internal issues. To add to the woes of Consumer Durable Retailers, Hypermarket Chains such as Hypercity, Big Bazaar, Star Bazaar, etc. also stock Electronic Goods.

Challenges for Consumer Durable Retailers

Footfalls

To expect continuous footfalls all through the week is rather not practical. Instead, Retailers focus on weekend shopping festivals, usually for short durations. This is the time when Shoppers visit Retail stores and chances of conversion are higher!

Service

Superior Customer Service is something everyone talks about but is not generally followed all the time. And Customer Service is not just a gentle staff doing some smooth-talking and smart selling. It includes all the moments of truth – from hygiene factors such as lighting, A/c, Parking, etc. as well as product knowledge and friendly staff.

Differentiation

Multiple Retailers sell the same Brands and products. So why should a customer actually shop with one Retailer and not with another? Honestly, there is no clear answer. Consumers do not buy products, they buy Brands. And this includes the Retailer’s Brand Value as well, on which they should be focusing on.

Ecommerce

Showrooming – a prevalent concept in the West where shoppers visit Retail stores to check out products and prices but ended up ordering on Amazon.com or other ECommerce portals is brewing in India too. So, the difficulty of touch-and feel is negated. Another challenge is paying by Cash which is also something that ECommerce players have started over the recent months. Lastly, the convenience of getting the product on hand immediately – something that ECommerce players are finding it difficult to deliver but are successfully meeting customers’ requirements within 2-3 days in general.

With so many challenges, I wonder at times whether Retailing is worth the effort at all. For some, it’s a question of growth, for many it’s a matter of survival. With the opening of FDI in Retail sooner than later, the Big boys with boat loads of cash are going to lap up market share easily and faster. Interesting times ahead.

Apple–Smart Product or Smarter Retailer?

 

After a lot of careful consideration over the past few months, including reading various literature online and discussion with friends and users of the iPhone, I finally decided to take the plunge. Yes. Now I own an iPhone 4S 32 GB. So, what? Actually. It is just another phone, in my opinion. It is indeed a true case study of how an ordinary product can be made an extraordinary success with simple, yet effective Marketing. One must learn from Apple in this regard. Much has been written about the technical specifications, uniqueness and superiority of the iOS of the iPhone, the Siri and various other features and hence I wouldn’t delve into it. Nor am I a technology expert to rip through comparisons with an Android phone (from Samsung or HTC ) or a BlackBerry or a Windows Phone. Oh yeah, by the way there is Nokia too. Apple iPhone 4S, for me lacks some basic stuff – such as a favourite tune as an alarm; select many / select all in the email box to delete and many such small features. Wonder how the Apple engineers skipped these and a bigger wonder that Apple Marketers kept them low-key, promoting various other features. It is a good smartphone but can be a lot better. Will leave it there.

10 days ago, I ordered my iPhone online – through www.indiaplaza.com where I work. Not just because of a particular loyalty – but also because of the Price. The phone is about Rs. 2,000 (USD 40) cheaper while buying online, compared to the ones sold at an Apple Store or other Electronic Retail chains such as Croma (from the house of Tatas), Ezone (part of the Future Group), Reliance Digital, etc. Two months ago, I bought an iPod Touch (also from www.indiaplaza.com) and the price online was a lot cheaper – I got a 10% discount while the company was celebrating the birthday of Apple founder Steve Jobs. In my view, the iPods, iPhones and iPads should also be sold through Department store chains such as Shoppers Stop and Lifestyle too. After all, it is indeed a lifestyle product as promoted by Apple and not just merely a gadget. The Apple stores are more a novelty than being electronic stores. They are a lot more engaging, inviting and most importantly (well stocked). And I am referring this from an Indian context.

I visited the Apple Store twice in a span of two months to buy accessories for my iPod and iPhone. Every time, the staff have delighted me. They speak little, but with a lot of sense. I have already bought Rs. 10,000 (USD 200) worth accessories from the Apple Store and I believe it is only because of the wonderful staff interaction that I have had each time. On the first instance, I wanted to buy a case and screen guard for my iPod and the staff showed me gladly all the varieties that they had – without indicating any obligation on me to buy. I walked up to two nearby stores that also sold mobile accessories to check out what they have – at one store, the staff was busy canoodling with his girlfriend (I guess) on the phone and had least interest or respect for the customer who came to spend money. At another store, they had stocks for every damn model but an iPod. The staff felt sorry but couldn’t offer anymore. I came back to the Apple store and ended up buying from there. I repeated my visit a month later – this time to buy a screen guard and a case for the iPhone. I visited various other electronic retail stores who didn’t stock them, and were more interested in selling larger items such as LCDs, Washing Machines and Refrigerators. Even Croma, which is known to stock a wide range of accessories wasn’t carrying anything specific for the iPhone.

Back at my favourite Apple store  at the Forum Mall (Bangalore)m Simran, the sales assistant was not just being polite and interactive but was also non-obtrusive. She allowed me to have a look at things, touch and feel them and never got perturbed by the questions that I enquired regarding the various options. She was happy to answer as many and even offered a few ideas such as a “Matt-finish” scratch guard that would not leave traces of oil from the face and which is easy to wipe off. She suggested a case that not just matched with the phone but was sleek and had a good form factor. Amongst other things, she also showed a few headphones and a couple of JBL speakers. And eventually, I ended up buying a noise-cancellation Apple ear phone worth a 100 dollars (Rs. 4,800) which was completely unplanned! All in a span of a few minutes. Now, that’s what I call “engaging customers” smartly. She knew my preferences for music, realised I had an iPod Touch and an iPhone and that I could, most importantly – appreciate and enjoy the stuff that they make and sell. Hats off to their level of knowledge and customer service. Next on my list: JBL Speakers for the iPod.

I have been using a Samsung Galaxy Tab for the past one year and a BlackBerry for over 3 years. Its been just over two weeks since I have been using the iPhone. Happy with it. But would go back to my BlackBerry any day. I am just that. But all said and done, Apple is not just a product maker but also a smart Retailer. With its unique offering of products, they seemed to have mastered the art of letting customers engage with their products. Single Brand Retailers have a lot to learn from them. Of how not to sell, but to make customers buy the products. And appreciate them all their life. Kudos Apple.

Air Conditioners–From Luxury to Necessity!

Its summer time again – that time of the year when children spend more time outside school, though not necessarily at one’s home! They could be either playing street cricket all day or some indoor games at a friends place! And it is also that time of the year when people look for a cooler climate than it is outside – what better reason to enjoy the weekends with the comfort of an air conditioner! It is the time when the sales of A/Cs sees a peak – sales surge by over 200%. Retailers such as Reliance Digital, Croma and EZone and Brands such as Onida, Samsung, Daikin and many more woo customers with various offers and promotions over these 3 months.

While it used to be a luxury to have a window a/c (in middle-class Indian homes two decades back), things have evolved a lot over the recent years. Today, to have an a/c at home is no more just aspirational. After a long tired day at work, inmates would rather prefer to spend time at home within the confines of a cool area. In fact many builders who construct apartments plan for a/c ducts (window or split) well in advance. And connecting one is no more cumbersome as they used to be. Today, brands send their respective service personnel to the homes of customers for a free installation which is completed within 1-2 hours depending on the complexity of the wiring!

The challenge is not about buying an a/c anymore. It is about being able to use them consistently as well as being able to afford surging electricity bills. This year, states like Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra and many more are facing acute shortage of power – and regular power cuts are the norm of the day. At Avadi, a suburb outside Chennai (where train carriages are manufactured for the Indian Railways), there are atleast 5-6 times power cuts everyday including twice in the night between 7pm – 7am for an hour each. In areas like Whitefield and Sarjapur Road in South East Bangalore, power cuts for 2-3 hours are considered normal. Houses that have inverters may not necessarily connect their a/cs as the cost goes up significantly.

Unless the Government manages the grim Power situation better, it is of no help to the Retailers and Brands who publish half-page advertisements in leading newspapers! However, if you are planning to buy an A/c, rush to your nearest Retailer now for exciting deals and offers! And yes, Happy Summer!

When Retailers and Brands collaborate!

 

Its not so usual that you see Electronic Retailers promoting one particular brand at their stores. It means there is a larger strategic relationship between the two beyond just selling a few pieces of a particular model. Most retailers though, refrain from such tactics to avoid the wrath of other players in the respective segments. It is not just the advertising cost that gets shared between the two, but they both look at building an everlasting relationship to build a category, as the one undertaken between Apple and Croma, the electronic megastore from the house of Tatas. One could own an iPad 2 at just over Rs. 2,400 a month (USD 45), on an EMI basis for 12 months, thanks to credit offered by ICICI and HDFC Banks. Croma has built up their electronic retail format over the past years, thanks to its aggressive expansion mainly among metro cities where consumers shop around not just for exciting deals but where the staff are well trained, an inviting store ambience that allows you to browse at ease without too much intrusion by the staff and ofcourse, the TATA Guarantee. The Salt to Steel Major has built its retail portfolio through TRENT – the company that operates formats such as the Westside Department stores, Zara exclusive stores and Star Bazaar Hypermarkets. Incidentally, Apple which has a strategic tie-up with Reliance and allows it to operate the exclusive Apple stores has not undertaken such an aggressive promotion with Reliance Digital, the electronics format of Reliance Retail. Instead, they seem to be promoting rival Samsung with its Galaxy Tab, seen as a major contender for the No. 1 space in the tablet market.

Retailers who focus on mobile phones and accessories such as The Mobile Store, UniverCell, Sangeetha, etc. seem to play a similar strategy, just that they promote those brands which they distribute themselves. For example, Sangeetha has been promoting the latest from Nokia, the Lumia 800 pretty aggressively. At a similar EMI of Rs. 2,400 pm one can easily own the latest windows-based smartphone which was meant to revive the fortunes for Nokia, though the initial launch results have proved it to be unlikely. Nokia somewhere lost the steam – that’s the chorus that most observers and industry watchers seem to say. A once trusted phone for the smarter class lost its popularity to the Blackberry and Android based smartphones and ofcourse to the iPhone (although negligibly) due to the price disparity. Nokia continues to be a leader in the entry segment, phones below Rs. 5,000 but sees enormous competition from local brands like Micromax, Karbonn and Lava while Samsung and LG have also been stepping up the gas in these segments. 

There a few advantages when Retailers promote a particular brand;

• Brand Leadership

When a Retailer courts itself with a particular brand and also aggressively promotes its products, it looks like they have leadership specific to the said brand. This brings in positive recall in the minds of potential customers who would like to buy that particular brand in future and the retailer becomes the obvious choice.

• Continuity of customer cycle

When customers of a brand want to upgrade / replace their existing products, they flock to the preferred retailers due to a previous positive experience. This is category agnostic and hence would prevail for most products, so to say.

• Better Prices

Being the preferred partner (to a Brand), the Retailer also commands a special price to the new launches. Not only do they get the products first (than the other retailers), they would also be able to command a special price – directly from the brand as well as through special associations with Banks who provide 0% interest on EMIs

There are also a few drawbacks;

• Popularity among other brands

When Retailers strike a special note with a specific brand and keep promoting them aggressively, potential customers could perceive that the Retailer doesn’t maintain other leading brands. This, in a way distracts customers and diverts them to other Retailers.

• Relationship with other brands

When other brands know that a Retailer promotes a particular brand, they may turn away to other multi-brand retailers who provide equal importance to other brands. Although this is uncommon, it could be seen as a potential threat, especially for future launches.

Nevertheless, it is nice to see Retailers and Brands collaborate to promote each other. The Retailer attracts walk-ins into the store and the Brand sees higher conversion. In the US, UK and European markets, there has been a strong swing towards e-commerce over the last few years where customers are shopping online for mobiles and electronics. This is bound to happen in India soon. Until then atleast, let such collaborations prosper!

Retail FDI - Letter from the Commerce Minister of India

Last week, the Cabinet of the Indian Government allowed 100% FDI in Single Brand Retail and upto 51% FDI in Multi-Brand Retail - it was indeed a surprise move, given that the Winter session of the Parliament is on and the Ruling UPA is mired under various issues due to which the Upper House and the Lower House have seen continued agitation and adjournments. In the wake of this latest crisis, Union Minister (of India) for Commerce, Mr. Anand Sharma has written a letter to the leaders of all the leading political parties in India, explaining the reasoning behind the government's decision to allow FDI.

Here is the full text of the letter;

As you are aware, the Union Cabinet has taken a decision for liberalization of the Foreign Direct Investment (FDI) policy in Multi-Brand Retail, which holds the potential of transforming rural economy and unlocking the supply chain efficiencies in the agri-business.

The policy has evolved after a process of intense stakeholder consultation which commenced on 6 July 2010, when a discussion paper was floated by our Ministry. Comments from a wide cross section of stakeholders including farmers associations, industry bodies, consumer forums, academics, traders associations, international investors were analysed in depth before the matter was deliberated by the Committee of Secretaries on July 22, 2011.

The matter was finally discussed by the Cabinet on 25th November and a view was taken to allow liberalization in multi brand retail. In doing so, we have consciously adopted a model with a distinct Indian imprint, recognizing the complexity of Indian society and the competing demands of different stakeholders. Over the years, while we may have transformed into a service led economy, yet even today India primarily resides in the villages and an overwhelming majority of people are dependant of agriculture. It is a tribute to our farmers that India is the second largest producer of fruits and vegetables in the world with an annual production of over 200 million tonnes. Yet, in absence of adequate cold chain infrastructure, logistics and transportation, our post-harvest losses remain unacceptably high. A large part of farmers produce perishes and never reaches the market. A complex chain of middlemen have a cascading impact on supply inefficiencies and prices as well. As a result, on the one hand farmers are unable to secure remunerative price for their produce, while consumer ends up paying more than 5 times the price secured by the farmers.

Opening up FDI in multi-brand retail will bring in much needed investments, technologies and efficiencies to unlock the true potential of the agricultural value chain.

The policy mandates minimum investment of $100 million with at least half going towards back end infrastructure including cold chains, refrigerated transportation, and logistics. We have also stipulated mandatory 30% sourcing from small industry, which will encourage local value addition and manufacturing. It will also unfold immense employment opportunities for rural youth and make them stakeholders in the entire agri-business chain from farm to fork.

I felt it my duty to dispel some apprehensions expressed by certain political parties. In formulating this policy we were conscious of the livelihood concerns of millions of small retailers.

Informed studies of global experience has revealed that even in developing economies like China, Brazil, Argentina, Singapore, Indonesia and Thailand, where FDI is permitted upto 100%, local retailers have found innovative ways to co-exist along with organized retail and are integral to the organized retail chain. In Indonesia, even after several years of emergence of supermarkets, 90% of the fresh food and 70% of all food continues to be controlled by traditional retailers.

In any case organized retail through Indian corporate entities is permissible in India and the experience of the last one decade has borne the small retailers have flourished in harmony with the large retail outlets. Even then, we have therefore taken a view that in India we may permit FDI upto 51% equity and roll out the policy only in 53 cities with a population of more than a million. In the rest of the country the existing policy will continue, which will ensure that the small retailers are able to access high quality produce at better price from the wholesale cash and carry point.

We were also mindful of the imperative of ensuring food security for the poorest of the poor and have therefore retained the first right of procurement of food grains to rest with government for the public distribution system.

Concerns have been expressed that the multinational companies will resort to predatory pricing techniques to drive away small retail. You are aware that the Competition Commission has been established by law to ensure that such practices receive great scrutiny and I have specially discussed the matter with the Chairman of Competition Commission to build in regulatory capacities to ensure necessary checks and balances. In any case, you will appreciate that predatory pricing works in markets with high entry barriers, which is not the case in India.

The Indian consumer will undoubtedly gain significantly from this step as they will be afforded much greater choice, better quality and lower prices. In the medium term, even RBI governor feels that this step will have a salutary impact on inflation.

I have had occasion to discuss the matter with a wide cross section of all stakeholders, including farmer association, traders, consumer organizations, industry leaders, economists and there is an overwhelming case for introducing this policy. I am sure that being a political leader of long standing and experience, the benefits of this policy for the Indian citizens will find resonance with you. Policy initiatives taken in larger national interest demand political leadership to rise above partisan politics to create a healthy bipartisan consensus. This has been the strength of Indian democratic traditions.

I look forward to your personal support and understanding in the roll out of this policy for the larger public good.

………………………………………………………………………………

It is anybody’s guess if this letter would make any difference though in the current situation. India has been witnessing a rare camaraderie cutting across  political parties which have taken a united stance against the Government urging it to roll back the decision to allow FDI in Retail, which looks unlikely though. In the given scenario, atleast 25 cities out of the 53 which qualify for the criteria that has been set (above 1 million population) are covered under those states that have not welcomed FDI. India INC however has voiced its opinions, most of which is pro-FDI to say the least. For the next few days, if not a few weeks the entire world (read: Business houses) would be watching how things turn out here.

Watch this space for more!

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.

Selling, Upselling and Unselling

Despite my request thrice, the staff of India’s first class airline forgot to sell me sandwiches and muffin, my first and most important meal of the day – Breakfast, while I was flying from Bangalore to Delhi (on work) last week. My first request was placed around 25 minutes after take-off, and I waved at her two times thereafter, but to my dismay and surprise, she seemed to have forgotten till the flight landed… And it was a 2.5 hour flight! Was it pure negligence or arrogance or forgetfulness – I don’t know, but for sure, a lost opportunity. What I may, if allowed can call “unselling”. In our (Retail) business, a lost consumption opportunity can never be recovered. After all, a breakfast meal (to the same person) cannot be served for lunch or dinner! On a quick calculation, I was stunned to note the business opportunity of selling on board – if, for example, an airline flies 100 flights a day, with an average of 100 pax per flight, and a 25% conversion @ Rs. 120 per person, it amounts to Rs. 3 lakhs per day or Rs. 100 crore per annum in topline! Well – that’s the potential opportunity and it all depends on how best the airline staff are able to sell. However, what the airline then needs are not air hosts and hostesses but air- salesmen and saleswomen! but why not? The airlines haven’t yet spotted this as an important opportunity (I Guess so, lest she would have sold my muffin!) and I am sure this is one market that F&B players cannot and shouldn’t miss. With minimum dwell time at airports (time spent between security checks and boarding), and with a healthy >25% conversion of pax at F&B outlets across Indian airport terminals, I wonder why this opportunity cannot be real. It is, indeed.

(Suggested Reading: Travel Retail and Luxury Retail at Airports)

Over the last weekend, India’s most consumed newspaper Times of India carried 20-30 page supplements across all major cities, most of which were advertisements by Retailers and Brands wooing shoppers to choose their respective locations and products while shopping this Diwali. Prominent advertisers included large retailers such as The Future Group (Pantaloons, Big Bazaar, Food Bazaar, Central Malls, EZone, Home Town), Shoppers Stop, Lifestyle, Croma, Reliance Retail, etc. What was interesting was most Retailers were promoting “bill value” based promotions – a clear tactic to entice shoppers to spend a little extra – what we popularly call as “Upselling”. This could be on and off the ground – while advertisements promote the idea, it is the sales’ staff who finally “close the sale’ and hence are the messengers by the Retailers to convince shoppers to spend more. Unsurprisingly, sales grew between 25% – 45% across various Retail stores. Electronics and Furniture took centre stage this time (specifically for promotions) while apparel and accessories including Jewellery, Watches, etc. were assumed to be sure-shot purchases for the festive season.

(Suggested Reading: Consumer Driven)

Upselling is an art, taught and trained to Retail staff right from the time they join in their roles and all through their career. It’s a bit like negotiation, pushing customers to buy more. While this is expected of every staff towards every customer who walks into the store, it is emphasized especially during festive times to increase the bill values – the amount spent by a customer on his / her shopping bill.

 

Gift Vouchers

While “gifts” of a certain perceived value are given away if the customer achieves a certain amount of bill, other tactics have also been used over time – gift vouchers being the most common one. The advantage with gift vouchers is that the shopper has to return back to the store once again and encash it or utilize the voucher for part-payment and that too, within a certain time frame. The average amount spent over and above the value of Gift Vouchers ranges between 20-35% and goes up to 70% in some cases. They are also transferable, and can hence be passed on to loved ones. This festive season, Reliance Trends is providing coupons worth Rs. 3,000 for a shopping value of the same amount.

(Suggested Reading: Gift Vouchers)

By-Products

This is a smart tactic used, especially in the Electronics business. While a battery charger and headphones are in-built with the original packaging (in most cases), the retailer or the brand could throw in an additional accessory, say a screen guard or a Bluetooth ™ headset along with a mobile phone! Instead of providing a cheap one, Samsung upsells with a Samsung Bluetooth™ headset for just Rs. 500 (MRP Rs. 899) at select retail stores including at Ezone and 50% off on other accessories for its Galaxy Tablet. Great way to engage shoppers to spend more!

Buy One Get One

An age-old tactic to upsell, this is the most common (yet boring) phenomenon one can find. Giordano offers another wrist watch when you buy one! Works well for couples who want a new one for themselves but the designs may be limited. However, it also works as a worthy gift. Last year, I bought an Esprit ladies watch as a gift and I got myself a fabric-strap sporty watch from Puma which I use while cycling. Needless to say, one can always find utilities how to use the free product.

Scratch and win!

Some Retailers offer a promotion scheme where every shopper who attains a certain bill value gets to scratch a card (or crush a fortune cookie) and wins a gift as mentioned in it. The gifts may range from gift vouchers to small home utensils to accessories or even a motor bike or a car or a house! The excitement in this case is pretty high, with each shopper hoping to win something big. Atleast, there is no disappointment that one didn’t get the big fish! SPAR, world’s largest F&B Retailer is offering a similar proposition to enable more shoppers to buy more!

(Suggested Reading: National Shopping Day!)

Shop and win!

Central Malls, India’s largest Mall chain is offering a Toyota Etios (car) and a Harley Davidson (Motorbike) to be won when you shop and participate in a lucky draw! By far, the most exciting, tried-and-tested promotion globally to attract shoppers. An average middle class shopper, irrespective of whether he / she owns a car or a bike (no matter how many) wouldn’t decline an offer to own one more, especially if it is free of cost. The only catch – the winner has to pay road taxes and insurance, which may cost a few thousands. However, this sort of promotion, a raffle to say is among the ones that excite shoppers the most. Airports worldwide, including Singapore, Dubai, Heathrow, Frankfurt etc., offer luxury and high-end cars to be won for a few bucks that is spent at their airport shops. No matter, what – people buy! And buy more, and in this case, upselling just works.

(Also Read: Central Realigns the City!)

Diwali is gone, but the offers are still on! Festivals would come and go buy upselling continues. Retailers must spend a lot of time encouraging their staff to upsell, rather to talk to potential customers, to begin with. These days, many shop assistants feel they are paid to stand (there are well-dressed mannequins already) and usually talk with each other but move to a corner when a shopper walks by. Store Managers would do well for themselves if they lead by example. I have done so, many years back encouraging shoppers to buy bread when they come to buy their morning milk, to try a new range of ketchup when they are looking for noodles at Foodworld.

It’s possible. Just needs a bit of push. By each of us! Happy Selling… errr… Upselling…