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.

Malls are also parking lots!

I recently came across an article which claims that Bangalore is the most painful place when it comes to commuting and parking of vehicles! My suggestion – is to build more Malls.

IBM Global Commuter Pain survey

A new IBM survey of the daily commute in a cross-section of some of the most economically important international cities reveals a startling dichotomy: while the commute has become a lot more bearable over the past year, drivers’ complaints are going through the roof. The annual global Commuter Pain Survey, which IBM released recently, reveals that in a number of cities more people are taking public transportation rather than driving, when compared with last year’s survey. In many cities, there were big jumps in the percentage of respondents who said that roadway traffic has improved either “somewhat” or “substantially” in the past three years.

To better understand consumer attitudes around traffic congestion as the issue continues to grow around the world, IBM conducted the 2011 Commuter Pain survey. The IBM Commuter Pain Index, illustrated in this speedometer graphic, ranks the emotional and economic toll of commuting in 20 international cities. From right to left, cities are plotted from least painful starting with Montreal and gradually increase to the most painful city, Mexico City. But that’s only part of the story. In many cities, the survey recorded significant increases, when compared with last year, in the number of respondents who said that roadway traffic has increased their levels of personal stress and anger and negatively affected their performance at work or school.  “Commuting doesn’t occur in a vacuum,” said Naveen Lamba, IBM’s global intelligent transportation expert. “A person’s emotional response to the daily commute is colored by many factors – pertaining both to traffic congestion as well as to other, unrelated, issues. This year’s Global Commuter Pain survey indicates that drivers in cities around the world are much more unsettled and anxious compared with 2010.” 

According a report recently in Times of India, around 1,300 vehicles are fined everyday for illegal parking. And this is just the official number. I would assume for every ticket that is issued, atleast 5 are not! So, we can guess the number of illegal / wrong parking. Whose fault is it – to provide adequate parking spaces in a city like Bangalore, to ensure ample public transport is provided? And as users, as commuters, aren’t we as public responsible too? Well, there are no straight answers. In a growing urban metropolitan city like Bangalore, this is bound to happen. With the price of automobiles going down each year (and despite the rising petrol costs), more people are opting for personal transportation options, both for official as well as personal usage. And I wonder what relief a 3km Metro rail will bring in the short-term and even if a fifth of the city is connected, am not sure how useful it is going to be!

However, there is a simple solution through public-private partnership that can significantly reduce the pain-points – build more public car parking spaces which would also double up as Retail Destinations! Call them Malls, Shopping Centres, whatever. And we already have a great example in Garuda Mall. The land belongs to the city Corporation, the structure built by a private party which was expected to house over 2000 cars and two-wheelers. And also have some shops which would provide the revenues to maintain and manage the parking lot. And we know the result – a swanky mall with 100s of shops and restaurants including some big names such as Shoppers Stop, Westside, Louis Philippe, Benetton, etc. a full-blown food court and a six screen INOX Multiplex! Avid shoppers wait patiently outside just to just enter the mall over the weekends! Movie-goers reach the Mall 20-30 minutes before the cinema commences to ensure they watch the film from the beginning. A similar example is Mantri Mall at Malleswaram in South Bangalore

Bangalore, overall has only 10 notable Malls for a city that has a population of over 8 million people (as per the recent census). By any means, this is just not enough. World cities like New York, London, Paris, Tokyo, and even Shanghai and Beijing have a reasonably more number of Malls. And many other Retail destinations such as Hypermarkets, Neighbourhood Malls, etc. These locations, typically act as public parking spots for a particular locality during the day (since serious shoppers typically prefer late evenings or weekends). In a way, higher retail proliferation also means additional space on offer, which makes the market more competitive, such that builders and developers or Mall Management companies do not charge the Retailers exorbitantly, which in turn affects the number of stores a Retailer or a Brand operates in that market. This can be seen vividly in markets like China close by and in the US, needless to say. For example, every locality would have a Wal-Mart with hundreds of car parking lots – and it is not just for shoppers, but also for those who have work in the vicinity.  The expectation is that those who didn’t have any work in the mall may also just pop-in. And it happens many times. 

 

Infrastructure is one of the biggest challenges India is facing, and Retail Infrastructure is no better. Coupled to that, we as a society are averse to walking – which is very common to see in Japan, Singapore, Hong Kong, China, Europe and other countries. They say, that cafes and QSRs do not have parking lots (worldwide) because customers prefer to walk a bit. But not in India. Even a humble “darshini” restaurant which serves local fare would see a dozen two-wheelers parked outside its shop, mostly in a “No-Parking” area. Most of us, in the name of saving time prefer not to walk even a bit. And people also blame it on pollution, lack of pavements or walking tracks and so on.

Bangalore will see two new retail developments open its doors within the next six months. Each of them have a million square feet of Retail, F&B and Entertainment. And a couple of smaller developments are in various stages too. Together, at the moment around 5,000 cars and two-wheelers can be parked in our Malls but this expected to simply double with the new developments coming in. I assure, the next time I have to visit a place I will atleast attempt to look for a nearby mall. What about you?

Controversial Ads, Branding and Footfalls

There has been a lot of furore over the recent so called “indecent” advertisements in the mainline media by “Flying Machine” (FM), a popular denim wear brand in India for close to two decades now. The brand, which was one of the earliest entrants in the denim wear market competed with international ones such as Lee, Levis and Pepe since the late 90s and has hence maintained its position as an entry level fashion wear due to its affordable price tag and distribution reach – since it shares shelf space with other brands such as Arrow and Lee from the house of Arvind Mills. The debate is about how much indecent an ad can get and what the society would feel rather than its impact on sales! Well.

(Suggested reading: National Shopping Day)

Denim Market in India is highly unorganized – with less than 25% of all denim wear sold at Organized retail outlets such as Shoppers Stop, Lifestyle, Central Malls, MegaMart, Brand Factory, Fashion @ Big Bazaar and other exclusive brand stores. We have denim wear (bottoms) starting from as low as Rs. 200 (1 USD = Rs. 48 approx) on footpaths at Linking Road in Mumbai, Janpath in New Delhi, Commercial Street in Bangalore, etc. to over Rs. 10,000 across premium brands such as Tommy Hilfiger and Diesel and in the range of Rs. 20,000 – Rs. 40,000 across exclusive luxury brands such as Versace and Armani. Denim for long was not considered a comfortable dress to use in India due to various reasons;

• The texture/fabric was rather thick – and many thought it wasn't suitable to wear during hot and humid weather which is the case across the country for 6-9 months a year
• Washing the Denim wasn’t an easy affair since most households (in the urban areas) didn’t have Washing machines and maids would complain washing denim by hand due to its heaviness when soaked in water
• It wasn’t well accepted in the society – Colleges had banned them, Offices preferred formal attire and hence Denim was rather dedicated for a select few special occasions
• Women were not the main Target consumers, essentially because denim bottom wear couldn’t be well coordinated with other dresses in the wardrobe
• Blue and Black were the only colours mostly and the “fit” was standardised

Things have changed and how over the last decade!

The fabric has been well-treated to ensure it is light-weight and easy to wear. Also most reputed brands mix denim with cotton fabric, thus ensuring sweat is absorbed and hence making it a comfortable thing to wear all through the year. A fully automatic Washing Machine from a reputed brand that used to cost over Rs. 20,000 during the early part of the past decade is almost half the price now. Most urban households have moved away from the concept of house maids (especially for washing clothes) and now boast of semi-automatic or even fully-automatic washing machines which also dry the clothes after washing within an hour! Most colleges do not have such bans anymore, as long as the students wear decent clothing! More and more offices are moving towards smart work-wear and hence denim (especially on Fridays / Weekends) at most offices and all week across companies in the IT and ITES sectors, Ad agencies, etc. is an accepted norm. Denims are now available in various colours and women coordinate with traditional looking “Kurtis” or short-tops. To the benefit of consumers and retailers, the market has indeed evolved for good. The number of “fits” available today is exhaustive and one can really choose the best fit for oneself – mostly across brands.

(Suggested Reading: Customer Service)

So, do brands in this space still need controversial aspects to advertise, to divert attention? FM is not the only exception. During a Fashion Show last year, actor Akshay Kumar, the brand ambassador for Levi’s walked up to his wife and yester year actress Twinkle Khanna who was seated in the front row for her to open the button fly in full public view! The act was a trending video online and the photos would have been searched a zillion times! Bizarre, some quipped. What a great attention seeking tactic, many others said. “Seeking Cheap Publicity” – a few blasted. Well, no more than that.

Leading Business newspaper The Economic Times has carried an interesting article over the weekend that illustrates how internationally denim brands use controversial advertisements and other such acts especially in the print media to create attention. The big question though is “Has it increased Sales?”. the answer is a big NO. But what it does is create a flutter effect – people get talking about it and the word spreads faster these days than before, thanks to powerful social media tools such as Twitter and Facebook. For Retailers (and Brands), the most important outcome for any investment is a substantive increase in footfalls at its stores. Research has it that only 30% of men and 60% of women who enter a store undertake “product trials”, however over 80% of those who took a trial end up buying the product. And this applies all the more for Denim-wear because each fit is different and unique in its own sense. Now, do such Ads pull shoppers into the stores? No. And hence the question of “new trials” doesn’t arise. However, Ad agencies benefit enormously in the meanwhile. #justsaying

(Suggested Reading: The Levi’s way of collaboration)

I bet if such ads are a great way of brand-building, especially when the Brand is communicating to middle-class masses who neither understand nor appreciate such bold communication. It is a lot different when showcased at Fashion Weeks in London or Lisbon, Paris of New York. For now, the focus should be on creating Ads that have a pull-effect; one that attracts the eye of potential shoppers and drives them to the stores. If not anything, the Retailer’s names and contact numbers could have been a font bigger in the said Ad. If only someone is wanting more footfalls, that is.

Hypermarkets–The latest poster boy of Modern Retail

The first thought that came to my mind was – “Will this store be THE game changer for this Mall?” Not that it had weak anchors otherwise, but somehow this store, I believe would attract most number of footfalls. Time will prove, and I hope my assessment would be correct in this case too. I am referring to HyperCITY from the K Raheja Group which opened a few weeks back at Royal Meenakshi Mall - Hulimavu, a lesser known suburb in South-East Bangalore which houses one of the largest new-age residential settlements of those who are employed in IT, ITES and the BPO Industries, mainly due to the cost effective availability of housing requirements as well as reasonable accessibility in terms of time and distance to their respective workplaces. A maiden attempt by a group of enterprising entrepreneurs, I would say this is another brilliant model for Neighbourhood malls – self sustained with most aspects of modern retail within its precincts. Other anchors include Cineapolis, the Mexico based multiplex chain with its first cinema in South India, CROMA – the electronics store from Tata Retail (TRENT) and many others.

The store is located on the upper ground floor facing the main entrance and the lower ground floor of the mall with direct access to the basement parking areas – a smart move by the Retailer to encourage shoppers to enter the store directly after they park their vehicles.  However, after finishing their shopping from the Upper ground floor, one would have to pass through the lower floor to access their cars – a bit of walking around the store though, which could be inconvenient during peak shopping hours. The store is well laid out – the lower ground floor offers Grocery and other Home needs while the upper ground floor with all other categories including Electronics, Toys, Apparel, Furniture, even Bicycles and many more. My guess is that the lower ground would remain more crowded – for two reasons; one that it has brilliant view from outside and would naturally attract mall visitors, and two that it houses the core categories which shoppers would come looking to save for – grocery, fruits and vegetables and household items. What I liked the most was the “fresh section” – Maybe it was the first day and hence everything looked very nicely displayed but still, the way the categories were planned was commendable. Also, they are located deep within the store, another smart idea to pull customers inside and thereby making them walk through the store. Meat & Poultry located close by could prove to be a disadvantage if the exhausts and HVAC are not maintained well – an issue that many retailers are trying to grope with.

The store interiors are typical of a Hyper – no false roofing, basic tiles on the floor, tube-lights running through the length and breadth of the store and focus lights on merchandise that’s on offer. While it does reduce the Capex to a large extent, it also showcases the store as being simple and straightforward – a stark contrast to the luxury stores at high-end malls that sometimes stink of grandeur and austerity! After all, hypermarkets should also look what they profess – savings, savings and savings. And HyperCITY is indeed very good at it. On the store launch, Mark Ashman, CEO, HyperCity Retail (India) Ltd, told the media, “HyperCity is committed to fulfilling the aspirations of the local people by providing them a world-class shopping experience. Our customers will enjoy the convenience of international shopping from over 44,000 products at great value under one roof.” And all this over a mere 60,000 sft.!

With their continued focus on convenience, experience, quality and savings, there is something that this Retailer has been doing right. Apart from stacking the right merchandise, I guess its the speed at which they have been growing. Often accused (not in a real sense though) of being slow in terms of store expansion and growth, HyperCITY has got its act right. With only 10 stores across the country, the group has managed to understand the business well – they have opened at interesting catchments across cities to ensure that they are not just in the race to grab market share but also to make money at the store level. With an investment of upto INR 2 Crores per store, the Retailer has been cautious about its overall Operational profitability which seems to be getting better by the day. Specific to this Mall, none other than the Hyper is going to be the the main anchor that would attract thousands of shoppers every month! Those who come to shop would indeed pass through the other Retail stores, Food Courts & Restaurants and m\Movies would complete the entertainment bit as well. This store is not an exception, but Hypers would become the Poster boy of Modern Retail and the Darling of Mall Developers soon.

A curious case of Autorickshaws and Kiranas!

The prepaid queue at the Bangalore City Railway Station was long, but we decided to wait patiently instead of choosing one of the touts who were continuously stalking us. After all, many auto drivers have been waiting patiently notwithstanding the early morning chillness for their turn to pick up a customer at the prepaid counter for a long time. In our city like many others, the night fare (10 pm – 5 am) is usually 1.5 times of the normal and is quite well accepted. So the prepaid fare to my house was Rs. 200/- as against the more luxurious Meru Cab which we took during the onward journey that cost us Rs. 350. While sitting in the auto this morning, I was thinking about need and necessity. At 5am, all we needed was a transportation to reach home safely. During the peak hours last Saturday we had chosen a taxi – we had time at our disposal and didn’t mind paying a bit more for the comfort of a/c during the day time. Is there a lesson or two, I was guessing if one had to compare autos and kiranas. Just after sometime, the headline of a leading English newspaper claimed that 15,000 additional autorickshaw permits were being issued shortly and the total number of such vehicles plying in the city would touch close to 95,000 vehicles!

That’s a lot for a city of size of Bangalore, many would argue. I disagree a bit. It is based on the age-old principle of demand and supply, according to State Transport Commissioner Bhaskar Rao. The power of permit makes the auto driver a ruler. We need more autorickshaws to reduce the nuisance. Liberalising the over-regulated permits will no doubt increase their numbers on road but the good part is that it will also increase options for the commuting public. Auto drivers will have to oblige then, he said. Quite true. In the long run, with personal mobility becoming a compulsive habit and the acceptance of public transport as a sustainable and viable mode of commute, Autos will become more of fillers – running short distances and acting as the last mile connectivity – be it from bus stands or Metro stations while taxis could turn out to be the preferred mode while travelling from home to airport or railway station.

Cut to the real Retail Story. In spite of the increasing number of Organized Retailers, especially in the food, grocery and household segments, it’s quite common to see so many Kirana Stores coming up in smaller neighbourhoods. As is the case of “Bottom of Pyramid”, the consuming class is right there and is expanding its base as well as its propensity to consume. They are moving upwards from the Govt. run – Public Distribution Stores (PDS) to the neighbourhood kiranas whose regular clientele is moving towards neighbourhood Supermarkets, and in turn whose regulars are moving towards the large-format Hyperstores. However, all these consumers, when they need a pack of salt or sugar, vermicelli or Maggi, reach out to the neighbourhood kirana!

The case here is logical and comparable. When the product becomes a bare necessity, consumers would reach out to what’s close by and cheapest as a measure of time – the ubiquitous kirana while the monthly pantry filling or a weekend party shopping would be at a large format organized Super market or Hypermarket. The consumer is fully aware that one doesn’t derive the benefits of organized retail such as bulk discounts, buy one get one, and price-offs at the local kirana, but they know that time is of essence and hence reach out.

I have always remained a proponent of Retail FDI in the hope and faith that it would only do good to Kiranas as well as end users and consumers in the long term. Such anecdotes make our hypotheses stronger.

Long Live Kiranas; Long Live Organized Retailers!

It was a Sunday afternoon and a lazy one at it. And that’s just when someone at home asks for a pack of NAN 3 – a health substitute from Nestle SA that’s given to children. Given that it is a product not available so easily and usually procured from Pharmacies or Drug Stores, no one at home is willing to hit the road and that’s when the friendly Kirana comes to remembrance. One phone call and it would be delivered in a few minutes, suggested one of the members at the household. The next minute, someone was making the call and the friendly voice at the other end was actually prodding for further purchases if the family needed something else. A few other items were included and it was promised the stuff would be delivered shortly. And indeed, it was. In the next 15 minutes, there was a young boy at the door with a bag full of items for well over Rs. 500/-. This can happen, most probably only in India. We as a nation are not yet fully used to shopping in a cycle – although we see major crowds at the large hyper and super markets, consumers miss out buying many things – either they are out of stock or they are out of their shopping list. This is very unlike in the West where there has been an evolution of shopping habits, usually during the beginning of the month, or even on weekends, well in advance for the week ahead. But here, most times we prefer the “just-in-time” way.

 

While the debate and discussion regarding opening up FDI in Retail has prevailed for long, there is little doubt that Organized Retailers could offer such services. “Free Home Delivery” is usually advertised at many Supermarkets like Foodworld, Spencers, Nilgiris and even a few Hypermarkets like Total, Food Bazaar but they all come with riders – that the distance should be within a 3-5 km radius, the total bill value should be above a certain level and that the delivery could take between 2- 6 hours depending on the day of the week and place of delivery. Naturally, since the cost of operating is far higher for Organized Retailers than the neighbourhood kiranas. The big boys need to maintain books of accounts, a mini truck or a van to deliver and a driver to drive (not to forget the maintenance of these vehicles) and many other internal processes. All these are negated with the local kirana. Depending on the level or urgency, the kirana is willing to deliver at the earliest and usually within the locality and most of them operate in one.

Cash & Carry Retailers (are they actually retailers?!?) such as Metro AG have been operating in India since 2001 and most recently Wal-Mart in a JV with the Bharti Group has been operating such stores in Punjab under the trade name “Best Price”. These stores usually sell their wares to the smaller kiranas, hotels, restaurants, etc. who in turn retail to end users and consumers. Since the large Organized Retailers order their goods directly from the brands and suppliers, they are able to pass on higher margins to the kiranas who in fact benefit from this exercise. This has been a strong point supporting FDI in Retail all along since many in the industry believe that it would do well in the long run for the Retailers, the Kiranas and the Consumers.

 

It is quite natural to see more deliveries over the weekends, festivals days and specials events such as Cricket Series and Public holidays as there are more people to consume at home. Not just the kirana stuff, even door-delivery of food and other beverages seems to be on the rise. Last Sunday along with the morning newspapers, there were pamphlets from atleast three restaurants in the area – all small time local operators. An A4 page size pamphlet cluttered with a whopping menu of more than 100 items printed in two colours on the back and front size. But who cares! As long as the food is tasty and delivered on time, nobody bothers. What’s important is not just quick service but the quality of products. Kiranas and small-time eateries take greater care while packing, transporting and delivering as these simple steps are their real “Brand Ambassadors”. If all three were good the first time, chances are they would be called again.

So, no matter how many large Retail formats open up in this country, one reason why Kiranas will remain in business is “convenience” – a fact that most of us live by.

Long Live Kiranas! Long Live Home Deliveries!

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.

Beginning of the End...

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

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

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

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

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

Low Cost: It’s all about perception!

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

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

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

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

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

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