The Future of Retail

The writing was on the wall for a long time. Many old timers like me and thousands of retail enthusiasts in India and worldwide were eagerly waiting for the announcement. That the Reliance Group was a strong contender to buy out The Future Group lock, stock and barrel was a known fact. And that Amazon and Walmart were discussing the final nuances was also a known thing. And then, it happened finally. It Happened In India – on 29th August 2020, Reliance Retail and The Future Group formally announced in the media that the former had bought out the wholesale, retail and warehousing business of the latter in full. A red letter day for self made Entrepreneurs, groaned many on social media and in passive interactions. The man recovered his 30 year’s investment of time, quipped many others. A few former employees were seen sulking in public and private, some even wept at this outcome. At the end of the day, it’s a business that has changed hands, owners and course. Life moves on, so why fret, said many others. 

Kishore Biyani and his cousins started the traditional business of selling dress materials for men in Calcutta in the 80s. As a family driven business from the “Maheshwari” community of Marwaris, the family spread their work load. Each one of them had an important role to play – from sourcing to selling, accounting to managing working capital. They named the company “Pantaloon” as they were selling Pant lengths for making patloon, the Indian namesake for western clothing. When the family gathered pace with their wholesale business, was born an idea of retail models such that customers could grace the shop and buy. They opened their fancy big outlet at Gariahat, Calcutta in the late 90s. The shop was a runaway hit and also boasted “Green Card” – a loyalty platform. Yes, 1990s. With the stupendous success of the fashion format, the company decided to cater to the other essentials for the family – Roti, Kapda aur Makaan. Thus was born Big Bazaar on VIP Road, Kolkata in 2001. All along the Biyanis were shuttling between the city of joy and the city of dreams. With dreams unlimited. 

I joined the group in 2004 when the company ventured with Mall Retailing – Bangalore Central which opened it’s doors in May 2004 And has over 45 Malls to its credit till date all India. The company opened some format of retailing in every residential locality of India’s top 100 cities – from Gauhati to Madurai, Baroda to Bilaspur. At some point, the company was selling everything from a humble Rs. 10 samosa to the entire wardrobe for the house with accessories, furnishings, paraphernalia and everything in between. After the big slowdown of 2008, Kishore Ji in his inimitable style conceded at the 2009 India Retail Forum at Mumbai that the company wanted to be “everything to everyone” and failed miserably at it. As a person who only gathers learning and lessons from failures, he simply moved on to build a coveted “Pantaloon Fashion” business which he sold at a handsome profit to the Birlas. Once again, he painstakingly built other fashion retail brands including Cover Story and fBB alongside the equivalent of India’s very own Walmart – Big Bazaar. 

For every 10 customers who frowned at the business model of BB, 100 others became loyal patrons everyday of the multi-category retailer infamous for crazy deals and price-offs. During these last 20 years, there were several internal and external forces that wanted a slice of the Golden Sparrow – a pneumonic which the group added to it’s logo when the company’s name was changed to The Future Group – Sone Ki Chidiya tagged along with. When Reliance Retail was contemplating to enter the retail business in 2008, they had obviously explored a buy out. However, the company built it’s own fort with all it’s might. Amazon and Walmart made several attempts all these years to get a pie in the business but couldn’t lay siege in a big way. In turn, Bharti-Walmart ended up selling their retail business “Easy Day Stores” to the group several years back even as Carrefour bowed out of India with a single store in East Delhi which never took off. The group and it’s Founder were building a mighty retail company with several formats, several business models including a foray in to packaged FMCG with the “Tasty Treat” Brand which was an outcome of the private label business of the company through its grocery retail business. 

It’s all about timing, as they say in business and bourses. 

The Corona Crisis was a great opportunity for the Promoters to exit the business especially when the richest man of Asia was willing to write a cheque. This was not a hostile bid. Yes, there has been mounting pressure from Investors, bankers and share holders due the company’s debt levels. But a bailout, if needed was only favorable for the Biyanis. As they didn’t just sell grocery, household, electronics and fashion alone. Kishore Biyani was a Dream Merchant. He made millions of Indians to dream. To dream Big. To dream big about building scale and grow their businesses. For thousands of naysayers of the group’s way of running the business, lakhs of small time business persons grew their small ventures inspired by the self-styled and non-conformist serial Entrepreneur who tried to sell everything a consumer can consume, literally and figuratively including insurance and EMI-led credit to shop more at his 1,000s of stores. Some even went public or raised private investments. He strongly believed in a consumption led economy and Kept repeating that the Great Indian Consumption Story is yet to take off in a big way.

As a Retail professional, my second stint was with the group where I saw firsthand decision making of a slew of deals; how to take risks with determination and a cushion to fall; gather self motivation and courage to keep moving, no matter what. If one thing doesn’t work one way, try it another away. And a 100 other ways. It would eventually work, after all. It had to. Had I not moved to Bangalore on that Sankranthi day of 2004, much to the chagrin of my parents with 4 bags and a bagful of dreams, my professional career, a Retail dominated one at that wouldn’t have occurred, probably. I am ever grateful to the Leadership Team at the erstwhile Pantaloon group who guided me as a young man with a mere 2.5 years’ experience and of course my many interactions with Mr. Rakesh Biyani with whom I worked closely while setting up the Concessionaire Business at Bangalore Central. 

I personally see this as yet another lesson for budding as well as well settled Entrepreneurs  - to believe in oneself and keep moving with earnest efforts. If you do well, you will succeed. If you don’t do as well as you could have, yet have built something incredible, then there will always be someone to support you, invest in your dreams or perhaps buy them out. 

The Great Indian Retail story is yet to be fully told. I am glad I am a part of it.

A Retailer by Profession and Choice. Since 1997. 

EMIs to the rescue of Retailers

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

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

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

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

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.

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.

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!

Malls and Anchors – the inseparable cousins!

A year after Borders Group collapsed, a survey by Colliers International shows that one-third of 205 bookstores shut down by the company are still vacant, according to the Wall Street Journal. Stores that replaced Borders in U.S. malls and shopping centers are leasing at rates an average of 30% lower than Borders paid. In at least one case, tenants demanded rent decreases to make up for Borders' absence. Bizarre, as it may sound, that’s the real power of anchor tenants. Anchors are those Retailers who attract the most number of shoppers walking into a mall. They could be of different formats such as Hypermarkets, Supermarkets, Specialty Retailers, Book Stores, Leisure Stores, Factory Outlets. Cinemas and Multiplexes and even Cafes and Restaurants.

While planning and zoning a Mall, the developers provide a lot of importance to the placement of Anchors. As the name suggests, they literally hold the ship (the mall) on their shoulders. They usually have a road-facing presence, mostly on the ground and upper floors and on either sides of the Mall if the Mall has two entrances or more. Anchors are also the first to be signed up by the Mall Developers because it is easier to attract smaller tenants basis the power of footfall attraction of the Anchors.

Let us look at some of the most common Mall tenants;

Hypermarkets

Retailers such as Big Bazaar, Hypercity, Spar, etc. qualify under this category. Hypermarkets are usually located in the lower ground as this is an area that is otherwise difficult to lease. Hypers however have the ability to pull footfalls due to their pricing and promotion strategies. Due to their low cost of operation, Hypermarkets command a very low rental structure, which is usually expected to be maintained at 6-8% of their Turnover. Malls usually provide a separate entry / exit for Hypers if they are in the lower basement with large escalators and elevators and pathways for customers with trolleys to move comfortably and safely. To have established Hypers in the Mall is a sure shot way to ensure continued heavy footfalls through the week.

Department Stores

Shoppers Stop, Lifestyle, Reliance Trends, Westside to name a few have been the Mall developers first choice to sign up in their premises. Inorbit Mall at Malad, a suburban area in Mumbai was one of the first malls to have two Department stores within. Needless to say, it attracts one of the highest footfalls for any Mall in India. Department Stores are good tenants, from a return per sft point of view to the Mall Developers. They peg their rentals at 10-15% of their Turnover and can hence pay a slight premium compared to Hypers. Also, they attract a superior set of customers which benefits the Mall overall. Premium customers also means more amenities, such as large car-parking areas, valet parking services, premium architecture, more elevators and escalators, etc.

Specialty Retailers

Brands such as Tommy Hilfiger, Aldo, Zara Calvin Klein, Mont Blanc, Apple, Electronic and Consumer Durables Retailers such as Croma and Ezone, home improvement retailers such as Home Stop, Home Town, Home Centre etc. are considered Specialty Retailers who stock premium merchandise. These Retailers are extremely choosy in terms of their choice of location, sometimes no more than 2 or 3 per city. Specialty Retailers pay premium charges for high-profile locations within the Mall, usually road-facing two-tier stores or atrium-facing outlets. Since they are available sparingly, customers flock to their stores and hence the brands maintain their exclusivity.

Books and Leisure

Crossword, Odyssey, Landmark, to name a few are chains of books and leisure stores commonly found in Malls in India. They usually do not occupy the ground floors – mainly due to compelling rents. Instead, they prefer higher floors and have a strong pull of customers who are more of impulse shoppers. Their rent-to-sales ratio is no more than 20% and also operate with heavy staffing, mainly due to pilferage issues. E-Commerce has threatened the existence of many book stores and it’s a common sight these days to either see many of them empty even during peak hours and weekends or a few of them shutting their shutters for want of business.

Factory Outlets

Suburban Malls, usually located outside the city have tenants such as Mega Mart, Brand Factory, Loot, Coupon, etc. who are deep discounters. These stores sell merchandise that belong to the previous seasons and hence at a discount. India has over 500 million people under the age of 30, and hence there is a huge opportunity to sell to a third of customers in this bracket who are aspirational, yet price-sensitive customers. They pay not more than 12-15% of their sales as rent and hence maintain a lean-mean operation. Most of their stores are non-air-conditioned and staff strength is minimal.

Cafes, Restaurants and Foodcourts

Café Coffee Day, India’s leading café chain with over 1,300 cafes across the country is among the trusted tenants to double up as anchors. Being a youth brand, it attracts the right target group for malls. Restaurant & Bar chains such as McDonalds, KFC, Geoffrey's, TGIF, Hard Rock Café, etc. are sure-shot crowd pullers mainly due to their limited presence in the cities. Also many boutique restaurants, usually high-end also are considered as anchors in some way. They are unique in their offering and are usually entrepreneur driven, which means superior service, great food and a superb ambience, consistently and all through the year. Cafes and Restaurants can stretch upto 25% of their Turnover as Rents, to gain maximum visibility.

Multiplexes

The boom began around 2006 when the country’s first chain of cinemas PVR began rapid expansion in Delhi and surrounding National Capital Region (NCR) and later followed by the Northern, Western and Southern Markets. And then came others such as INOX, Big Cinemas, Fame Cinemas, Fun Cinemas and the most recent being the world’s largest exhibitor, Cinepolis. The movie screening business is considered to be one of the most lucrative ones in India, given the fact that India produces over 2,000 movies every year across several genres in over 15 languages. Although it is a high investment business, the returns are equally exciting.

Going back to the opening statement, sadly there is not a single retailer in India who commands the respect and power as the one that Borders does. Not yet. Developers and Retailers are always at logger heads due to high rentals charged and low / sometimes poor maintenance of the Malls. Mall Developers and Retailers are constantly in a love-hate relationship. Both need each other and cannot do without one another. Yet, there are very few successful stories of collaboration between the two, maybe countable with both hands. Thanks to the ongoing opening up of FDI in Retail and with more and more International Retailers coming in, this is one area that would only get better. And hopefully, I would get a chance to chronicle a few of them.

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!

Customer Service - by Trial & Error!

My only claim to understanding or appreciating an Apple product is my iPod Nano, which my buddy had gifted me 6 years ago. A 4 GB nano, I didn't know actually how to even switch it off when I first laid my hands on it. Since 2005, it has been one of my favourite companions, accompanying me in my life's journey. The voice clarity on the iPod was one of the best I've ever heard in my life - even the Nakamichi headphones that were kept for sampling CDs at Musicworld (where I started by professional career a decade ago) weren't as great in terms of audio quality and clarity as the original apple (white-colored) ear phones. Over the years, I have added so many other devices to my kitty for listening music but none like the iPod nano. So, when it stopped working abruptly, I was worried. I logged online and tried some trouble-shooting methods although none of them came in handy. And finally I heeded the advice of one such post - which was to visit the nearest Apple store! Which I did. Only to be disappointed by the approach of the staff out there! The discussion ended in less than two minutes - yes, just two minutes. The staff heard my problem, connected it in his Mac and came back to me and said that it was working perfectly well. And he glanced as though I should just move on with my old monumental piece for a new swanky one... Well, he didn't say it out loud, but I could make it.

iPod Nano

I walked off in disgust but came back to the store again, this time to propose an alternative - switch off and switch on in "Disk utility mode" which he attempted. And said that the scroller wasn't working and the only alternative would be to replace it which would cost about a hundred dollars! And again, he was referring indirectly that I give up! He also suggested to erase all the data, format the device and then I try at home, which wasn't the best route possible. But I agreed since I had all the music backed-up so I would be fine as long as the device was working well again. When I tried connecting the iPod later on my laptop, it wasn't working either. So, his "customer service" methods were just by trial and error. Try this. Oh, if that doesn't work, then try that. And so on. A day later, I installed some Microsoft updates on my system and... pronto... the iPod was working!! Strange as it may sound, the issue was not with the device at all - just that some new updates were required for it to work. And all this from a so called "Apple Support Team member". Ufff. Thank God, Steve is no more to see all this, I mumbled.

(Suggested Reading: Retail Staffing)

So, why this kind of an approach to "Customer Service"? I ain't an Apple basher nor am I a die-hard fan. I love electronic devices as they make our life easy. And they make it simpler to use them for the purposes they were intended and invented for. Unlike many other electronic products / brands, Apple doesn't have a designated service center. The Retail store also doubles up as a service center where users can bring their devices for any kind of trouble-shooting, including migration from MS to Mac.While the technically-abled are behind the scenes fiddling with the devices, the young boys ( and girls) who attend to customers are not as strong in their technical skills as are expected to be. I see this issue is common across various other retail formats too. 

Apple Imagine Store, UB City, Bangalore

While I agree that the staff attitude and behavior in this case may not be intended to be the way it was, it does send wrong signals to present and potential customers. And this was the second time with me. In an earlier instance, when we had walked into the same store, the staff failed to provide us a proper demo of the iPhone 4, which led us to change our mind to another store and eventually, Samsung (Galaxy S4) benefited, I would say! The staff were already profiling their customers (mentally) even before knowing the intended reason for their visit. Too bad. This is common across many other premium and luxury brands. For example, If a customer asks for the price of a product at an upmarket watch retail store, then the staff begin to think that he/she is merely there to appreciate the product and not necessarily buy them. At a premium apparel store in Bangalore which houses many brands such as Versace, Armani, Boss and so on, the sales manager doesn't walk up and greet customers whom she thinks may have come window-shopping. The higher the value of the product, the lower is the importance given to visitors and potential customers. 

(Suggested Reading: Luxury Retailing in India)

Retail Staff, who start their careers in the front-end at the beginning of their careers slowly make headway to higher roles and positions and during the course of this journey, forget the basics, at times. Retail Training Managers and the Business Management also fail to train their staff to keep them competent all the time. Unfortunately, Customer Service has become, as I mentioned earlier, by Trial and Error many times! And all this in the country which chants "Athithi Devo Bhava", a sanskrit slogan which means to say guests should be treated like god. Pity the Guests. Amen! 

(Suggested Reading: Customer Service)

Driving footfalls…

It has been the talk of the town for sometime now, the new BlackBerry Playbook, the tablet from Research In Motion.There are thousands of reviews online and I am not going to delve into it for now. I got my hands on it three weeks back (even before it was launched in India) when a friend of mine who had brought it from the US showed it to me. Pretty engaging stuff, with its plusses and drawbacks. But what interested me to analyse and write this column was an email which I received a weeks back from EZone, India’s largest electronics store from The Future Group. There were actually two, one for a pre-booking and another stating that the wait was over and the Playbook™ is Finally Here. Am sure the mailer would have gone to hundreds, or maybe thousands of email accounts and would have pulled quite a few to the store over the past few days. I myself visited a few stores of EZone and Croma (TRENT Enterprises, part of the TATA Group) over the past few days and the results were amazing! Of the six different stores that I went to in Bangalore, two didn’t have stocks – I was informed by the sales executive that the “Catchment” for that store was not expected to explore Tablets! Another store had just the Playbook and an iPad, there were no other Tablets from any other Brand. And at one of the largest showrooms of one of the Retailers, there were crowds across the store in every section and surprisingly, there was no staff to attend the curious seekers at the area that stocked “Tablets” although there were atleast 6 different brands which were available.  Shoppers explored themselves (none of them were functional since WiFi was not connected) and moved on – one could imagine how many “Tablets” they would have sold today!

Elsewhere in the world, in the US, you can collect boatloads of kicks™ in the kicks Reward Program and unlock awesome exclusive deals at your favourite stores. Walk into Target, Best Buy, Macy's, American Eagle, Sports Authority, Crate&Barrel, West Elm, Wet Seal and the largest Simon malls. Open the Shopkick™ app on your iPhone or Android phone in the entrance area, and wait for a few seconds. That's it! Your Shopkick app will reward you instantly. It's fun. You can get rewards at all 1,300 Best Buy and Best Buy Mobile stores in the United States, and at all Crate&Barrel and West Elm stores! And in many major cities you will find more stores with walk-in rewards, like Target, Macy's, American Eagle, Sports Authority Wet Seal and Simon Malls. Shopkick is adding more stores in more cities every month. Cool rewards like iTunes gift cards, Restaurant vouchers, Best Buy/Target/Macy's/American Eagle/Sports Authority gift cards, Facebook Credits, movie tickets, or if you go all out, True Religion jeans, a Coach handbag, or a 3D 55" Sony Bravia HDTV. And if you want to change the world, donate your kicks to 30 different causes! And all this, just to woo shoppers to walk into a Retail Store!

Look at the contrast. In one country, there are not enough sales staff to manage shoppers and potential customers who walk into the store. And in another scenario where shoppers are “paid” to just visit the stores! According to the Shopkick program, as you walk into the stores, there are specific sections where you get higher kicks™ and one can keep accumulating them. There are also certain products, which by mere scanning fetches additional kicks. I did try to download the Android app in my phone, but I got a message that the app was not applicable in my country!

What makes me wonder, is how Retailers need to woo shoppers to walk-in to their stores and convert them into buyers. While the first part is not so difficult in India – with less than 10% of the Retail Industry being organized, and there is no dearth of footfalls walking into Retail formats, it is indeed important for Retailers to focus on;

• Merchandise Availability – This would be a game changer between those who remain in the business and those who don’t…
• Customer Service – the Retailer might have the products, but if they are not showcased well to potential buyers, then the conversion is not bound to happen; and not just this time, even the next time too!

Sales are happening despite these, but its just a matter of time for shoppers to move to alternative avenues for shopping. An ASSOCHAM Report suggests that the expected market size of online shopping in India is about USD 2 Billion pa. Forget shoppers walking off to neighbouring stores, they may be shopping on their mobile phones and tablets sitting at the favourite Coffee Day outlets! And then, I would be writing a column on that trend, from a cafe indeed!

Much ado about nothing...

It is quite common to see radically minded political parties create ruckus during cultural celebrations such as Valentine’s Day, Friendship Day, etc. citing them as western concepts which India can do without. Although most of them forget that ours is a Democracy and one is free to live the way they want to, provided they fall within the legal purview of our constitution. Retailers had initially taken advantage of such events, creating a lot of hype around and managing to attract customers. While the trend still continues, many of them have toned down the way it is celebrated and have started focussing on other days of national importance. In Western countries where Organized Retail has evolved much, Mother’s Day, Father’s Day and even Thanksgiving are celebrated with glee and harmony. In India, while we have been celebrating Children’s Day (birthday of former and first Prime Minister, Jawaharlal Nehru), Teacher’s Day (birthday of freedom fighter and academician, Dr. S. Radhakrishnan) and regional festivals like Akshaya Trithiya (most auspicious day to buy gold), Raksha Bandhan (sibling’s day) and Karva Chouth (prayers for the husband) for many decades now, Independence Day and Republic Day are celebrated since 1947 and 1951 respectively, ever after achieving Independence from the British Rule and since becoming a republic country. Although earlier, these days were usually celebrated with national fervour and devotion, they have been converted into social events which also include personal and family celebrations, since they are usually preceded or succeeded by a weekend.

Sensing an opportunity, one of the first retailer in the country to take advantage was The Future Group. Way back in 2004, the company which operates the largest Hypermarket chain under the trade name “Big Bazaar” created a unique concept “Sabse Sasta Teen Din”, which translated into English means “the cheapest three days”. When they first experimented this concept on 26^th January, India’s Republic Day which also happens to be a National Holiday, the queue outside the store located at Lower Parel in downtown Mumbai was miles long and the store had to be shut for a few hours to ensure safe exit of those who had already walked into the store! Ever since, there was no looking back. Founder & CEO Kishore Biyani who is known as the pioneer of Organized Modern Retail in India has experimented more and more – a mantra that he and his company lives by. The three days became longer and usually were tagged to the closest weekend and over a period of time, more such events were created. As always, many others in the business followed suit and started following their own trends – creating marketing concepts that suited their respective business models.

2010 was a bit special though. To celebrate the 63^rd Independence Day on 15^th Aug., almost all the large Retail players in India attempted such a concept in their own way. Newspapers were abuzz with articles, write-ups, advertorials and full-page advertisements. Needless to say, news publishing houses would have cashed in on this opportunity; after all, they have been quite starved over the past two years with minimal ads by Retailers who pulled back their spending after the global recession which impacted Indian consumers more psychologically than financially. The message from players across product categories ranging from apparel to electronics, grocery to home furnishing was loud and clear – discounts ranging from 10-60% over the weekend. The hype was carefully built-up over a period of time and the buzz in the minds of shoppers was clear – visit the stores at the earliest and get the best out of the season. Erstwhile popular but now dormant retailers like Viveks, one of the oldest and trusted electronics dealers with a strong presence in South India bounced back with amazing offers. In fact, this was the very place where my parents purchased our first prized possession, a Crown Colour Tv in 1981 at a nondescript location called Luz Corner in Madras, (now known as Chennai). Over the weekend, my mother went there again, this time to buy a Microwave Oven, a reasonably new gadget in the life of Indian homemakers that promises comfortable yet delicious cooking. Well, she visited the store for just one reason – her trust in the brand “Viveks” continues to remain strong, where almost all our household items have been purchased for the past three decades.

One of the most exciting concepts created this year was again from Big Bazaar, aptly titled “war on inflation” – helping housewives to fight the price rise in the economy. While everyone from the Prime Minister to my car driver have been talking about the rise in prices of essential commodities and the measures that must be taken to curb them, The Future Group was the first one to create an impact. It has been running various campaigns in the media, highlighting the fact how Big Bazaar can together fight with the middle-class households by offering products at lower prices and shoppers can buy large quantities and store them for future usage – a form of hedging, if one could say so. Expectedly, all the stores in the country, numbering over 125 were over flowing with eager shoppers who started thronging the stores since as early as 9 in the morning until 10 in the night.

Somehow, the focus of shopping during the season remained on categories such as Grocery & Household and Electronics & Appliances. E-Zone (another Future Group format) and Croma (from the house of Tatas), both of which operate in the premium consumer durables space and target SEC A & A+ went ballistic about their offering, by providing never before prices coupled with freebies. Most notably, both were offering spot loans from Bajaj Finance, wherein select products could be purchased on EMI – Equated Monthly Instalment after paying a token sum as down payment. The processing of loans was quite simple – in just a few minutes after obtaining some basic documents such as an address proof and an identity proof, loans are sanctioned on the spot if one holds a credit card. I was amazed at the speed at which loans ranging from Rs. 10,000 – Rs. 60,000 was being sanctioned, without any collaterals or scrutiny. It is anyone’s guess what happens if the loan is not paid back or the borrower vanishes once for all.  Reliance Retail which operates multiple formats kept its communication straight – highlighting the number of stores and thereby the inherent foothold it holds in the business. Some traditional local retailers tried their best to match up with their national peers. While they successfully demonstrated their presence in the business and their respective leadership positions among their target customers with full-page ads in national dailies, they also showed that they could offer at prices similar to those offered by national players thereby conforming their positioning – they remain equal if not cheaper compared the newer larger entrants within the business.

One question that came to my mind over the weekend – why so much fuss to offer the best to customers! Do we need special days in a year to pass on the benefit of margins to shoppers? Is it just a trend that’s getting started or would we evolve as we move forward? Many in the Industry already agree that in India, we just can’t rely on Thanksgiving and Christmas Shopping like in the West, since we have more than 300 days of festivals all through the year across six major religions, a dozen national holidays and many more regional excuses for shopping. Isn’t it better to maintain a momentum and build shopping behaviour all through the year rather than just creating hype during a one-off period? Am sure, the answers could be mixed and diverse, just like our Retail environment. Well, that’s the best thing about us. Incredible India. Jai Hind.