Is Kirana Retail dead? David vs. Goliath

For the first half of my life, I grew up in Tamil Nadu Housing Board Quarters in Chennai which had odd 800 tenements. Lloyds Colony at Royapettah, close to the Marina Beach came up in the 1960s when Late Shri. Bhaktavatsalam was the Home Minister of former Chief Minister K. Kamaraj's cabinet who’s primary motive was to provide affordable rented houses for the EWS, LIG & MIG of the state. The houses were owned by the Government of Tamil Nadu and houses were allotted to users on a rotational basis. Within the entire housing complex, there was a one commercial complex, a school, a community center for weddings & events, a park, a milk vending booth, a library, two playgrounds and about 400 trees. Yes, you read that right – 1970s. And the complex had a few shops allotted for various vocations such as carpentry, automotive, Public Distribution Scheme centers (for Ration products) and most memorably a Kirana Shop (Provisions Shop). That the shop owner was our immediate neighbour and a family well wisher was an advantage for me as I used to visit the shop as a child quite often to pick up some thing or the other and the Uncle would give me a toffee or two once in a while.

I remember vividly collecting newspaper copies of “The Hindu” which had a full page Advertisement in the early 90s when Pepsi launched in town and one could get a sample 100ml RGB against the paper clipping and we exchanged several of these at this particular shop which functioned in the name and style of “Murugan Stores”. Guess, the seeds of Retail and Consumer Business was sowed in my heart in an early age, unknowlingly. Or by design. And hence my nemonic, "Retailer by Profession and Choice".

So, when Subhiksha Retail stores started expanding in the late 90s along with a bunch of new age airconditioned super markets in the “Mecca of Retail” that is Chennai including my alma mater and first job at RPG run Foodworld, conches were blown that this was the death knell for small and marginal kirana shops. Around the new Millenium, larger corporates such as Tatas, Birlas, Rahejas among others entered in to business of Organised Retail and we saw formats such as Supermarkets at Neighbourhoods, standalone Hypermarkets as well as those in basements of Malls and so on, Big Bazaar being the most popular such chain across India over the past 15 years and is India's largest Hypermarket chain. Once again, naysayers blew the conch that this would be the death knell for Kiranas. 

Then came the likes of Big Basket followed by small dotcom companies such as PepperTap, Grofers (including Oyethere.com founded by Your’s truly in 2015 and made strides) where the conch was blown yet again against the Kirans. 

Yet, amidst all this hullaboo, the Kiranas are standing rock solid with their determination, continued efforts to modernize & upgrade and of course, sustain their business with changing times by adapting to the new normal. 

Covid-19 is yet another opportunity for the Kiranas who form the backbone of India’s FMCG retail industry. With over 13 million Kirana shops across India, the Industry employs over 50 million people directly and indirectly including shop management, logistics such as first mile (from factory), middle mile (to Distributor points) and last mile (delivery of goods to Retailers / Consumers). Other than this, the Organised Retail Industry is estimated to employ a million or so staff members. The Share of Kiranas in Grocery & Household / FMCG Retail is approx. 90% which over the past 100+ days during Lockdown has increased to, perhaps say 98% since most Organised Retail stores were shut and E-Comm players remained non-operational or marginally. 

I have been saying this for over 15 years – in this battle, Kiranas are the Goliath. 

It’s almost impossible to get them off this equation – not because they outnumber organized retailers on a ratio of 9:1, rather because of the proximity that they enjoy with the end Consumers and the longstanding relationship they've meticulously built. 

According to a recent study by E&Y, over 40% of Kiranas have imbibed the Digital route including collecting online payments through Google Pay or PayTM as well as delivering through e-comm apps. Agility and Adaptability are the two main traits that these small business owners display, which is also the bane of larger companies and corporates who's employees work for a salary while the small entrepreneurs work for a living and especially to earn for the next meal. Makes a lot of difference in their approach, isn’t it.

Desi, Videsi or Woh!

I started my 30-hour 2 Credit Retail Management Elective Course at BIM – Trichy for the 40-odd sophomores who are completing their 2-Year MBA shortly. On my first session last Thursday, I was having exactly the same nervousness addressing students as was on my first session I took 15 years back at a B-School in Bangalore which was more of a one-off Guest Lecture. As with all the time, a few students asked me in the plenary session about the potential threat of Organised Indian players towards the 12 million+ Kiranas (Mom & Pop run) retail stores in India. And how the International Retailers and the fastest growing segment run by E-Commerce Retailers (despite their humongous losses) will fare in this game. 

Like in my past lectures, I invoked the story of David & Goliath and asked who really is the Goliath which elicited mixed responses. In my humble opinion, the Kiranas and small and marginal Retailers are the Goliath up and against the modern retailers. Their collective opinion-making (and vote bank) has found the flavour of the Politicians and ever since the starting of this Millennium when International Retailers heading India-wards, there has been growing unrest over Foreign Direct Investment (FDI) in Retail. The decade long UPA Government kept assuring to the small Retailers that their interests would not be compromised and the just about to conclude BJP Government has also ensured policy policing for the five years although by balancing the two power centres. While FDI in single-brand retail is allowed up to 100%, FDI in multi-brand Retail is controlled with a majority ownership by an Indian entity and no FDI in E-commerce at all, except for marketplaces. 

A growing economy like India needs FDI in many Industries and Retail is not an exception. While we keep telling ourselves that India is unique and that Indian consumers have a completely different attitude towards shopping, there is much to learn from International players, from the West, East and everywhere else in between. Having spent the last 22 years in Organised Retail, having grown with the Industry and with a notable and rich experience at Leadership levels at some of India’s home-grown top Retailers, I can say with confidence that no one is going to take away the opportunity and market share of the Kiranas. 

Metro AG, among the world’s largest Retailers and from Germany stepped in to India in 2002. The Retailer made profits in India recently after a presence of over 15 years and has assured a long term game plan for the Indian entity, which doesn’t sell to end-users rather only to Traders, Shopkeepers, Kiranas and anyone who prefers to buy in bulk. The coveted Retailer was recently called upon by DPIIT to work on a model that would help the unorganised to get organised, calling for a paper which could propose better fortunes for the marginalised retailers who mostly lack technology support for billing, reordering and consumer connect. Quite similarly, Wal-Mart which entered India in 2008 has been building large warehouse-styled Retail stores where it sells directly to Kiranas, similar to Metro. Walmart India provides a lot of information and support such as a native seller-marketplace for the Kiranas to reach their Customers, Sales associates who visit the Retailers with a Tab to get their instant orders and also arranges for delivery where possible. 

Reliance SMART (now being renamed MART) has done a similar thing while what it does differently is that it also opens its doors to end-consumers for shopping, a rule in the law book which allows home grown Retailers to do so. Being Indian companies, Reliance, D’Mart and even the Future Group have the opportunity to sell to Resellers and have created independent business units to cater to this need. The FMCG business of the Future Group is now the largest contributor across many categories at the Big Bazaar stores. Online players like UDAAN have created an e-commerce platform where small Kiranas can order products on the App which then gets supplied by wholesalers from across the India to the local store, perhaps even 1,000s of kilometres away. UDAAN connects the two and makes a small profit in the process, a much laudable initiative indeed.

So, are the Kiranas at an undue disadvantage despite all these advancements, provisions and support by Organised Retailers? Perhaps not. There’s a lot more work to be done to support the smaller retailers, beyond business interest. Ultimately, the SME Retailers are consumers for many other categories, so when they prosper, the economy also does. And Retailers increase their pie.

G for Grocery Retail – Then Vs. Now

From shopping grocery at Kirana stores to Government Ration Shops to one of the first organized retail shops in India to the supermarkets and hypermarkets and finally now with my own mobile Apps for Grocery, I would say I have been lucky to see them all. My tryst with Grocery shopping is cut to the early 90s when I would accompany my father to the state-run TUCS shops and PDS shops and bring, rice, dal & kerosene kept on the back of our bicycles. During the late 90s, a retail shop named Subiksha opened in the heart of South Chennai – a store similar to a PDS but a bit modern with staff in uniform who assisted customers with their shopping needs and a computerized bill to support the transaction. I remember cycling 5 kms to buy 3 kgs of sugar, which would save us 10-12% than buying from the neighborhood Kirana shop. I used to be amazed at how shopping was revolutionized in the late 90s with the advent of “Shop n Stop” a modern retail store close to my house in Royapettah that encouraged self-service, which was not just a fancy thing but also a very convenient one.

I was fortunate in the early 2000s to join and work with RPG Retail’s Foodworld Supermarkets, which was one of the earliest organized retail stores in India. From consumer offers to world class shopping experiences, the company paved the way for future entrants with this format of retailing. When I joined the Future Group, I witnessed how a humble 1,500 sft of a supermarket had morphed itself into a hypermarket with Food Bazaar spread over 10,000 sft at its largest outlet then in 2004 and that too on the fourth floor of India’s first seamless Mall, Bangalore Central. Till date, our family has shopped only at Food Bazaar in over 95% of cases. That’s some loyalty, rather just the convenience of shopping the entire household I would say. Late 2000s was the challenging periods for Retail, although not as worse as what we’ve been witnessing for the past 24 months. Hypermarkets reduced their sizes and have found the 4,000 sft model as their sweetspots and are still tweaking their models.

Since the turn of the decade in 2010, we have seen online retailers come and go and behemoths like Big Basket stay on with a supposedly proven model. I would like to cite the example of IBuyFresh.com which was the online effort of Kovai Pazhamudir Nilayam, a Coimbatore based Retail store that started with fresh Fruits & vegetables and later moved on to the Grocery & Household segments. The e-commerce start-up, which was serving over 800 orders a day in just 6 months of commencing shut down abruptly one day due to viability issues. Others like Peppertap and Local Banya raised millions of dollars to eventually shut down their ventures leaving smaller players like my own Hyperlocal start-up Oyethere.com in jeopardy, what with Investors sitting on the fence not wanting to experiment on new models any further.

Much has been spoken about Amazon’s self-service, self-check-out store in America which is a dubbed as a smart-store where customers pick products off the shelves which get billed while picking-up and the check-out is super quick with just a tap of their credit cards or mobile phones (NFC payments). Grocery shopping worldwide and in India has been seeing a lot of new opportunities, of course with challenges but perhaps, remains the most interesting retail format.

Retail horoscope 2017

There have been predictions written about sun signs and moon signs. So, I set-out writing one for the Retail Industry in which I complete 20 years this year . These are not purely fictional but I see things going this way. Take a look and let me know what you think.

Kirana Stores

The largest Retail segment, the sem-organized and unorganized Kirana Stores are set for a huge overhaul. With the onset of demonetization, Kirana stores do not have a choice but to go digital. All this while, most of them have been collecting cash for sales which mostly go unaccounted causing a great loss to the exchequer. This will change in 2017. From Bank EDC machines to Mobile Wallets, they will start accepting every form of money other than cash. A robust y-o-y growth is also seen in this business model.

Supermarkets

Neighborhood Supermarkets from large retail chains have already been making a comeback. Nilgiris is leading from the front through Franchising, while Aditya Birla More seems to merge with Future Group, and so would Heritage Retail this year. None of the supermarket chains have an online presence due to reasons best known to them. I don’t see any change here. Heritage is experimenting something but I am not sure if they would be scale up like the Hyperlocal players. Margins will be strained and even store profitability will be a challenge. I see more consolidation in 2017 among the medium sized players.

Hypermarkets

The most abused retail format of the last half a decade, the Hypermarkets have come a full circle. As I write this article, the store sizes have come down from 25,000-45,000 sft to as low as 8,000 sft. While poor availability of retail space is one of the reasons, the sheer ability to sell higher volumes like in Western markets is the core reasons. Indian customers prefer fresh products, be it rice or atta or oil or vegetables and fruits. Also, the households are smaller in size, so are the kitchens and refridgerators. Quite obviously the trolley size will be smaller. With most Mall spaces exhausted and almost no new Mall of any significance across major metros, Hypers may look for standalone sites in suburban areas.

Apparel Retail / Specialty

With a chunk of this format having moved online, from Diapers to Accessories to shirts to dresses, this offline retail format would see more store exits in 2017. The franchisee-dominated model will find few takers and loss making / average performing stores will be closed or consolidated. Malls are already operating at an average 15-25% vacancy of Vanilla Store locations and this year will be worse with burgeoning rent and maintenance cost (the CAM Scam!). Consumers will move towards E-Commerce for specialty retail and will be fine to shop even with limited or nil discounts due to the convenience it offers. Bad year for Retailers in this space which will see many small and regional Brands winding up.

Consumer Durables Retail

With E-Commerce already swooping a majority of consumer durable retail sales, such Retailers will be left in the lurch. Brands, who have initially supported offline retailers in the mid-2000s have started balancing their act with e-commerce. 2017 will see a swing in their loyalties towards e-commerce players. With tighter margins, higher rentals, surging operating costs, many such Retailers dealing in Consumer Durables will consolidate their store count while many would shut stores which are not making enough profits. Overall very challenging year for retailers in this space.

Jewelry Retail

The most affected sector after Demonitization is this retail format. Various media reports suggest how some leading players made a killing on 8^th and 9^th Nov. 2016 after the Prime Minister made the historical announcement. With 90% or more of their business in cash, and it’s quite well known how much of them get accounted, Bullion retailers will face heat the most. A significant number of stores would be thrown out of business. Large chains which have PE Investments made based on PPTs and Excel File projections will face a blank wall, with valuations diving deep and would find the going very tough. Extremely tough year for Retailers in this space. The market will dictate terms in May around Akshaya Trithiya when consumers go bonkers buying bullion.

Food & Beverage

With the Industry having matured in the last decade, it is time for consolidation for F&B Retailers. With scale in place, players like CCD, Dominos and McD will now consolidate their presence and focus on store EBIDTA. New initiatives such as Home Delivery and signing up with delivery companies will bring more business while a tired economy will put pressure on attract store footfalls. Outlet sizes will reduce by 30-50% across formats. There is a sudden upswing in specialty bars and pubs and this trend will continue. A growing and discerning set of gastro-enthusiasts will mean new entrants and new formats are on the anvil. Interesting space for Startups in this space.

 E-Commerce

It’s been 10 years since Flipkart the market leader was born. Sadly, this year would be the most challenging to the company that made e-commerce take off in this country where less than 10% of the Retail Industry is organized. With 1,000s of e-commerce companies of various sizes and shapes, names and offering in the market, the space would see a blood bath this year too. Most such companies which did not have a significant differentiator will have to bid adieu. Less than a Billion Dollar will go in to investments in existing companies while new startups will find the going tough. Amazon will consolidate itself in the market and will become a household name with higher market share and mind share. Hyperlocal Market places which connect offline retailers online will have a good run, since this model is reasonable new to customers. There will be some consolidation in this space too but new entrants will carve a niche. Reasonable investments are expected in this space.

Consumer

A weak economy, struggling to grow since the last 5 years will mean strained purses for consumers. They will be cautious this year on spending and will demand quality and service from Retailers than ever before. 

Online Grocery Shopping

There has been enough spoken and written about the Flipkart-Myntra deal. Online Commerce is no more a hype at the moment and there is no money to be made – that’s the response most subject matter experts are saying although they don’t want to be quoted since they are in various advisory capacities for many such companies. With a healthy two-digit margin, if offline Retailers are not able to succeed (read: profitable), then how would these companies survive- they ask. Having said that, there is not a single ECommerce company (in India) that has tasted profits yet. While many promoters have made millions of dollars collectively, the companies in question still remain unprofitable. I would presume that a very few of them would even be making unit level margins. Such is the discount structure and focus on Topline that these companies are almost forgetting that the main intention of a business is to create value through profitability and not just a valuation (to subsequent investors). Amongst the online frenzy across categories, the most dreaded and the most challenging category is grocery & daily needs including fruits and vegetables. Bangalore based BigBasket.com already has some headway while WeStaple.com from Noida and a few others who are regional players are taking the lead to establish their positions. Big Basket even has a Mobile app for Android and iOS from Apple. Take a look below at what their customers have to say;

https://www.facebook.com/Bigbasketcom 

http://venkysundaram.wordpress.com/2013/05/29/why-i-stopped-using-bigbasket-com/

https://www.facebook.com/WEstaple

K Ganesh and his wife Meena Ganesh are an entrepreneur and angel investor-duo. BigBasket, which is run on a daily basis by the founders of e-tailer Fabmart, on the other hand, is one of India’s only online grocery stores. Online grocery stores have been seeing big traction around the world, as recurring orders prop up the profitability of the niche e-commerce category. “The Series B funding for BigBasket, which should close in the next three-to-four months, will be around $40- $50 million. We believe it has huge potential, with gross margins of nearly 20 per cent. Every order is profitable for us on BigBasket,” Mr. Ganesh told The Hindu.

Bigbasket founder Hari Menon, a successful entrepreneur who sold his brick-and-mortar retail chain Fabmall and Trinetra to Aditya Birla Group, is bullish. “It’s a huge, underserved market. Convenience is a major factor in our metros. We are finding that at least 85% of our customers return after the second order.” Menon said that revenue is increasing 20% each month. Bigbasket delivers 4,000 orders daily. In Mumbai, where the average size of an order is Rs1800, it does 800 deliveries each day. The site has served 200,000 customers so far and is expanding to Delhi and its suburbs. Menon said the company did Rs85 crore ($14.3 million) in revenue in 2013-14 and was on course to do Rs200 crore ($33.7 million)  in sales this fiscal year.

While the category is exciting, most customers seem to expect the savings (on real estate) to be passed on to them, which in reality is not. If the Real Estate savings are about 10-12% on Sales, the promotions and marketing costs are much larger than that, especially the first-time acquisition cost of customers. While most players do not offer much of discounts for every item, there are chances of combined savings when you buy more quantities or multiple brands from the same company.

However, the overall sentiment seems to be simple- customers would buy products online only if they value their time more than the time spent in shopping offline at Retail Stores such as Spencers, Foodworld, Nilgiris, Big Bazaar, etc. India has a huge density of Kirana Stores while Organized Retailers in the big cities are already quite popular for more than a decade now. Fruits and Vegetables are still preferred to be bought from the vendors who sell fresh quality items, most of them directly sourced from the Markets. Retail FDI in multi-brand retailing is a contentious issue and even the new Modi-led Government is not actively pursuing this at the moment, for the benefit of the trader community who form a big chunk of vote bank.

Online Grocery, at the moment is restricted only to those who work in odd-times, say BPO Employees and many others who would find it difficult to shop at a nearby store especially those who live in far off suburbs. Having said that, the Kiranas are much more active these days, offering various facilities such as door delivery to credit facilities to their customers. While Online Grocery has a great future, time will be a real reckoner.

Reliance wins handsdown

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

Take a quick look at how the numbers stack up;

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

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

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

The game gets more interesting.

Retail Store Opening Time

I recently received an email from Reliance Mart that they would opening their stores at 8am! The email newsletter was a bit incomplete in most respects – it doesn’t talk of its existing store timing (including opening and closing) and the list of all stores or a contact number such as a Customer Care number or a Toll Free number. It is anybody’s guess why this particular retailer would want to open so early – given that it is a Hypermarket format. In the footer of the communication, the cities where they operate is mentioned, most of which are non-Metro cities, which I guess could be the main reason for this move. In metro cities, people (Read: consumers) leave to work by 8am and return back around 8pm, hence most of the modern shopping environments including Malls, Supermarkets, Hypermarkets and Specialty Retailers open their stores only by 11am. Also, this is a huge cost-saving for retailers – lower usage of electricity and other utilities; staff can work in a single shift; most importantly, it provides time to set-up the store in the mornings – stock fulfillments, “facings” of products on the shelves and a sound briefing session to the staff.

At Foodworld, (a Supermaket chain part of the erstwhile RPG Retail) when I used to work in Chennai 10 years ago, we experimented opening the store at 7am – really early by Organized Retail standards. But what we realised was that we built a strong loyalty among the local residents and the neighborhood. Customers started coming in early to pick up vegetables that would have landed fresh at the store; and along with bought a packet of bread and some milk. And a few other daily use things too! I remember, we used to interact with regular customers and they would feel happy to be at the store so early! I guess this is one area where Kiranas cleverly take a lead amongst Organized Retailers. A typical kirana store opens by 7am and starts brisk business early. And closes as late as 10.30 or even 11pm at times.

The Government’s rules and regulations are not helping Organized Retailers either. Law states that women employees (who contribute to a significant percentage of the work force in the front-end of Organized Retail in India) cannot work beyond 9pm and should be escorted back home by the employer. Almost no one follows this though, thanks to lax overseeing by the respective agencies and authorities. The retail stores cannot function beyond a certain timeline, which is 8.30pm in Kolkata, 9.30 pm in Chennai and so on. Recently, Star Bazaar, part of TRENT Retail (owned by the TATAs) and Total Hypermarkets, part of Jubilant Retail based out of Bangalore extended their store closing time to 12.00 midnight, a welcome move by regular customers who heaved a sigh of relief since they could comfortably shop during the late hours! Mustafa, a local retail giant in Singapore, for example, is open all night and sees regular customer flow all through! I was told that the contribution of business between 9pm and 8am is almost 20% since tourists hop by after the city closes down.

With FDI in single brand retail already in place, it is anybody’s guess if more and more Retailers would want to keep the stores open late night or open early since the International Giants might want to pump in more money and experiment if customers walk in late at night. While this may work for certain categories such as grocery, household, furniture, etc. it may be obvious that fashion is not something that could work. After all, that category of customers would we wining, dining and partying late night than shopping! Café chains such as Café Coffee Day, Barista, Costa, etc. keep their outlets open until late in the night while book store chains such as Crossword and Odyssey usually wind up early. The case may be a bit different at Airports, where a majority of International Travel happens during the night and therefore, most of the Retailers are open all through the day and night.

There are a few advantages for Retailers to have extended store opening time;

• Customer Service – During the lean hours, Retailers can provide better customer service, a typical measure to increase conversions
• Loyalty – Retailers could offer bonus loyalty points (if they are operating such a program) to those who shop during such a stipulated time
• Understanding Consumer Behavior – Since customers would be shopping under a more relaxed environment, they may tend to show a better behavioral pattern which may be useful to Retailers
• Targeted Promotions – Retailers and Brands could run specific promotions during such times to increase penetration of certain SKUs

The drawbacks though, would be;

• Increased Operating Costs – Retailers would have to shell out additional salaries to staff who work during such extended times as well as incur other overheads
• Sustenance – Such a move, if it is experimental only for a short while can dent the brand image of the retailer among customers, leaving them confused
• Managing the network – If the Retailer has stores across multiple cities, then it may be forced to maintain uniformity across all locations

Having said that, I believe there are hardly few Retailers who would want to try this venture. For, success is not something that comes without repeated attempts!

End of Season! End of Party time?!?

Late 2009 was the time when one could see the slow down of the 2008 Economic slowdown in India. While rest of the world including America, Japan and parts of Europe were down with Recession (read: 2 Quarters of continued negative economic growth), India was seeing its GDP grow at a modest 7%. As Kishore Biyani, CEO Future Group once said in 2008, “Consumers are sitting on the fence, not really knowing when and what to spend”. How true, it was at that time. And then 2010 happened. Growth was the new buzz word and Retailers were back in action. New swanky stores, additional staffing, high-paid executives in the upper echelons and yes, a double digit same store sales growth which was being celebrated by one and all. All izzz well – the song from the movie “3 Idiots” was the most hummed song among the Retail fraternity thereafter for the next 18 months.

Photo Courtesy: Times of India

Consumers who were holding on started buying new houses; furniture and furnishings for their new/old houses; Cars of all sizes – from an upgrade to a sedan to the first four-wheeler in the family; brown goods – LCDs and LEDs saw growth of over 100% for some brands! Refrigerators and Washing machines were flying off the shelves; Smartphones’ sales grew than those of normal phones; shoppers were buying more footwear and clothes, not just to show-off their wealth and happiness but because they could now afford to. Monthly grocery, which is an important metric to measure consumer confidence was growing at a healthy double digit. The confidence in consumer spending allowed Retailers and Brands to invest more and more – on new stores as well as higher targets. Unfortunately, the party seems to have ended abruptly.

(Suggested Reading: New Store Openings)

Lifestyle, India’s premier Department Store Chain was the first to announce EOSS – End of Season Sale last week. This came as a big surprise to the market – consumers aren’t complaining though. Central Malls, part of the Future Group and the largest mall chain in the country announced flash sales over the New Year Weekend, only to end up disappointing itself. Even brands like Levis which wait until Valentines announced “Sale” a day before. Spanish chain Zara, went on sale too, albeit it matches its International calendar where the end of season sale happens around Boxing Day and continues until Christmas. The new season in the West begins from January onwards. Most brands usually run on full price until Feb. 14, assuming shoppers would anyway buy, irrespective of the price-tag to fulfill their own wishes as that of their loved ones. This year seems to be an aberration.

Photo Courtesy: Times of India

“The targets for the current year were ridiculously high; We pleaded the Management not to set such high, unrealistic targets but they were in no mood to listen, thanks to the high voltage sales that have happened over the past 4 seasons” – says the Area Sales Manager of a premium apparel brand, who requested anonymity, saying he was not the official spokesperson. The Unit-Head of one of India’s largest Department store chains quipped that the chain has more stores today in large cities and hence the pie doesn’t seem to be growing rather getting cannibalized. “Instead of increasing the customer base of loyalty members through marketing activities and TV ads, the Management is getting into deep discounting; we had one of the finest customer service staff 4 years ago, but I cannot claim so now; they (the CSAs) are paid 6-7000 bucks and obviously the quality of staff and their service has deteriorated.” This gentleman, whom I’ve known for over seven years now requested I don’t mention his name as he may even lose his job for saying so.

(Suggested Reading: Customer Service by Trial & Error)

“These days, people are walking to our stores, checking out the products and then buying online. 5 years ago, the larger players were threatening our livelihood, but these days, looks like the online players will wipe us out”, quips Ravindra, shop assistant at a leading electronic store in Bangalore. “FDI in Retail is a big threat for us; if the big international players step up their expansion like what I’ve seen in the Gulf over the past 15 years (read: Middle East), then we will all have to shut shop and find an alternative full-time job rather than running these departmental stores”, cries Syed Pasha who settled in East Bangalore 5 years ago after working in Sharjah for 15 years as a low-cost laborer.

Photo Courtesy: Times of India

So, is the party over already? The answer is a big NO. Retailers and Brands have to realize that short-term growth is no metric for long-term survival. Nor would E-Commerce players like Indiaplaza.com would take away their share of business. India is a one trillion dollar economy and is fundamentally a strong one, with its ability for self-sustenance. (Sale) Targets are an important part of the business but they are not the only ones to focus on. Most Retailers and EBOs of Brands need to step up customer service. Rather than pay lower and have more staff, they should consider paying higher salaries, mostly linked to sales and have lower staff on the floor who are efficient and effective in their output.

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The Retail India Story has just begun; Internet Commerce is still under-penetrated at the moment. Retailers can and should take advantage of growing consumerism with better service with fewer stores. As always, Small is Beautiful.