Shaswat Goenka–Hearlding new frontiers at Spencers Retail

 

After dabbling with various sectors in the Rs 14,000-crore RP-Sanjiv Goenka group for about a year, Shashwat Goenka, 23, son of group chairman Sanjiv Goenka, has taken charge of Spencer's, the retail chain, from April 1. In an interview with Namrata Acharya & Ishita Ayan Dutt of Business Standard, he talks about his personal mandate and the road map for the Rs 1,400 crore business. Edited excerpts:

What goal have you set for Spencer's?
I assumed the role of sector head from April 1. What is most important at this point in time is profitability; that's where we are all trying to go. That will be the focus for the coming year and the year after. Spencer's is aiming to deliver Ebitda (operating earnings) breakeven at a company level in the third quarter of 2013-14 and be Ebitda-positive on a full year basis in 2014-15. That's the overarching short-term goal.

Spencer's has missed its breakeven deadline quite a few times. What makes you think you would be able to achieve it?
Well, each time we have done better. We have achieved breakeven at store-level but company level is what we want to achieve.

How do you plan to get there?
We want to increase our footprint. We will go up to two million sq ft from 900,000 sq ft currently and will expand in the north, east and south over the next four to five years.
We will achieve it over the next few years. The other important thing, obviously, would be operational efficiency.
In terms of offering, we would look at increasing international foods and regional foods. Value-added fresh is one of the areas we would like to explore.

Doesn't the fresh segment have one of the lowest margins?
We have very good margins in the food business compared to our competitors. Margins in apparel are obviously much higher but our margins in foods are good.

Any new formats for Spencer's on the anvil?
We haven't thought of any. We want to grow in hypermarkets.

Is the rationalisation process for Spencer's over?
Last year was the rationalising and consolidation process. We have exited Pune. In the past two years, we have closed 65 stores. Now, we want to start growing and in the hypermarkets.
Earlier, we had hyper, super, daily and express stores. Now, we have hyper and dailies and a few of the old express stores are still functioning.

Why did you exit Pune?
We wanted to become stronger where we are. So, we wanted to focus on the north, south and east. After we get that strong, we will revisit the west.

Why do you think the response from foreign retailers has been muted, after FDI (foreign direct investment) has been cleared?
I think people are interested. They just want to figure it all out before they come in.

Do you see foreign retailers as a threat to Spencer's?
Walmart and its likes coming in will help us. We can learn a lot from them. Back-end infrastructure will improve. There are basic infrastructure issues in India, like roads. Also, cold chains or dairy chains, for instance, are not very well developed.

A lot of options were being explored at the back-end by retailers. Any progress on that front?
We are open to FDI at the back-end but we haven't been approached by anyone.

Spencer's was exploring the IPO (public share offer) option. When is it likely?
That's something we definitely want to do but right now, the focus is on profitability.

Would you look at getting into the cash and carry format?
We have not looked at it. We want to be profitable and then explore other things.

India: Starbucks Coffee–A Tata Alliance

 

“We will look at expanding this partnership as a long-term relation... We are excited at building an enduring company that has a positive impact on India,” John Culver, President of Starbucks (China and Asia-Pacific), told reporters on Monday, 30th Jan 2012 at Mumbai, India. The company has signed a joint venture with the $ 80 Billion Tata Group, its first outing in India after waiting and watching the market for a long time now. Starbucks (Nasdaq: SBUX) operates over 17,000 cafes across 57 countries, with over 30% of them being outside the US (home) market. China has over 400 cafes since it opened in 1999. For the Tata Group, this is their second outing in the coffee business – earlier, they bought a 34% stake in Barista Coffee in 2001 which was later sold (in 2004) to the Sterling Group which later sold it to Lavazza of Italy (2007). “The joint venture with Starbucks is in line with Tata Global Beverages’ strategy of growing through inorganic growth focusing on strategic alliances in addition to organic growth,” R.K. Krishna Kumar, vice-chairman of Tata Global Beverages, told reporters.

(Suggested Reading: National Coffee Day)

The Indian coffee market has been well sought after for the past decade or so. Homegrown café chain Café Coffee Day has over 1,200 cafes across 140 cities in India and also has a presence in Pakistan, Austria and Czech Republic. The company, founded by serial entrepreneur VG Siddhartha and backed by Sequoia Capital and KKR among others has a deep rooted coffee heritage spanning over 130 years. The Coffee Day Group manages thousands of acres of coffee plantation in Chikmaglur, the coffee belt of Karnataka in the south of India and consumes most of its production for self-consumption and very little for exports (which was the other way around a decade ago). Barista Coffee, owned and operated by Lavazza from Italy comes a distant second with over 250 cafes across the country while Costa Coffee from the UK,  which has a JV with Devyani International, a Delhi based business powerhouse comes close with over 140 cafes. Apart from this, there are several regional players who occupy a sweet spot for themselves in their respective markets.

So, what is in it for SBUX and for the Indian consumers?

Well, for SBUX it is a large play on an untapped burgeoning coffee market in India. With over one-third of the entire population of 1.20 billion under the age of 35, there is no better market than ours for a café chain. With increasing earning ability and higher disposable incomes, Indian consumers want nothing but the best and hence there has been a mad rush by various apparel brands in the premium and high-end spectrum of the organized Retail Market. From McDonalds to Pizza Hut, Dominos and KFC, they are all here and have even tweaked their global menu, mostly for the first time to suit the Indian palette. So Starbucks has a ready market which is waiting eagerly to lap it up immediately. For the Indian consumer, there is a lack of differentiation today; they have been used so much to the CCDs and Baristas that they are eagerly looking forward to a change. With more consumers undertaking International travel on work and leisure, they get exposed to various facets and hence are expecting similar standards and offering.

Starbucks’ entry has been a dogma for many years now. There was an aborted attempt in 2006 when it planned a JV with The Future Group. And thereafter, it has been slow. This time, they seem to have got the JV right. Rest, as they say needs proof of the pudding. Well, you can’t really go wrong with the Tatas, given the way TRENT has managed its relationships with Woolworths, Tesco and Zara. However, they wouldn’t have an easy task to establish themselves, here’s why;

• Scalability – Delhi, Mumbai and Bangalore would contribute to over 1,200 cafes together, about three-fourths as many cafes in the country.To penetrate these markets wouldn’t be easy. And then to scale up. Well.
• Real Estate – While more and more Malls are coming up in the top 10 cities, High Streets will continue to remain a favourite for SBUX and this is an area they will indeed find a huge challenge, in getting the best locations
• Menu – While CCD has a more or less Indian menu (Read: suiting the local palette) no other café chain has done this – and would apply to SBUX as well
• Pricing – This would remain the most important competitive advantage that CCD would score against SBUX and probably all others. Getting this right would be a key challenge, to say the least
• People – To get high quality baristas and front-end staff is not going to be easy. With its rigorous process-driven approach, SBUX may find this as a problem but this is one that can be fixed sooner than the others above

(Suggested Reading: When Skill sets take over everything else!)

It’s now a matter of time that Starbucks would be all over, but probably not as ubiquitous as Café Coffee Day. There are neighborhoods, for example in Bangalore where CCD has half a dozen cafes within 3-4 sq. km. And this applies in Mumbai, Delhi, Hyderabad, Chennai, Kolkata, Pune, etc. as well. SBUX would probably take half the time (or probably lesser than) it took CCD to get as many cafes, but that’s still a long way ahead. It was announced yesterday that the first few cafes would come up at Delhi and Mumbai, which is a disappointment for me (living in Bangalore) but also strange that Bangalore has not been given its importance. Anyway, look forward to having a large café latte soon!

The above video has been shared from www.starbucks.com

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!

When Retailers and Brands collaborate!

 

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

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

There a few advantages when Retailers promote a particular brand;

• Brand Leadership

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

• Continuity of customer cycle

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

• Better Prices

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

There are also a few drawbacks;

• Popularity among other brands

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

• Relationship with other brands

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

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

Selling, Upselling and Unselling

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

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

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

(Suggested Reading: Consumer Driven)

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

 

Gift Vouchers

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

(Suggested Reading: Gift Vouchers)

By-Products

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

Buy One Get One

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

Scratch and win!

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

(Suggested Reading: National Shopping Day!)

Shop and win!

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

(Also Read: Central Realigns the City!)

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

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

Show-stopper - Shoppers Stop!

There used to be a time during the late 80s and even early 90s when this part of Bangalore was the most preferred area to settle down for the older generation, mainly due to the lush greenery and minimal traffic. After all, why would any one pass through Koramangla – an erstwhile nondescript part of south Bangalore that connects the city towards Hosur, Chennai. Etc. However, all this changed, thanks to the IT revolution and what followed was concrete invasion. Large tracts of empty lands gave way to huge constructions – corporate offices, residential block and of course, Retail stores. In India, one thing is peculiar, if not common. It’s always the unorganized retailers who enter a locality sensing consumption opportunities. The Kirana stores that sell everything from tooth paste to grocery, the Hardware stores that sell all that one would need in their homes, from door handles to curtain rods and the ubiquitous furniture stores – large shell shops that stock cots and mattresses, dining tables and other loose furniture. After a few months, if not a few years of the area settling down with people, the Organized Retailers start swamping the localities. What’s natural is that when a locality is on the verge of getting popular (from a consumption perspective), most of the big players enter together, if not in shorter bursts, thus unsettling the small kiranas.

And the same happened to Koramangla as well. After a lull for many years, organized players started penetrating this area – RPG Foodworld (now Spencer’s), Monday to Sunday (from Jubilant Retail), Viveks – the Electronics store, MegaMart (from the house of Arvind) and most notably, Big Bazaar (BB), a Future Group concept. Interestingly, this was one of the earliest outlets for the now ubiquitous value-retailer in India, a mere 35,000 sft store that was supposed to be a Pantaloon Fashion Store! There was a last minute change in the concept and thus was born BB. The store is located in a building that also houses many corporate offices and hence parking for 2/4 wheelers weren’t too many. Anyway, value-retail stores were expected to bring their shoppers by Bus and thankfully, there was a Bus-stand just outside the store. Rest as they say, is history. This BB store attracts as many people driving their own fancy 4 wheelers as much as those coming by buses and autos and is supposedly the highest in terms of returns per sft, a key metric for Retailers.

The year 2004 saw the opening up of Forum Mall, the most notable Retail landmark in Bangalore till date and rightly so, located adjacent to Prestige Acropolis, a residential dwelling that houses the crème de la crème of Bangalore. The Mall has such a unprecedented opening that the U-turn on this road had to be removed, thankfully! The first outlet for McDonalds in South India opened here and without exaggeration, there were queues waiting outside the store just to get in and have a grub. I was among the last to enjoy the frenzy, when I first entered the store almost three months after they opened. The Mall had many other firsts as well, the largest stores for Fashion Brands such as Benetton and Tommy Hillfiger, the first Apple store through its distributor aptly named “Imagine”, the largest (then) foodcourt in town with over a dozen different cuisines, and the first and among the largest cinemas in Bangalore operated by PVR. The retail chain from the house of Tatas, Westside was the anchor and Landmark Books & Leisure (which was also bought out by Tatas) was another anchor. There wasn’t a multi-brand Department store and thus all the Mono Brands present in the mall perform very well. There wasn’t anything that wasn’t amiss and the Mall ably run by a professional team from the Prestige Group went to win accolades for their achievements, in design, tenant mix, zoning and most importantly managing the multi-level car parking, among the largest & the first in the city.

The area started getting a lot of attention from construction companies as this was the closest locality for those who were working in Bangalore’s own Silicon Valley area – The Electronics City. Real estate prices of land holding soared so high that the area was and still among the most premium residential areas in the city. Almost every Retailer has a presence in this area and the only brand to have multiple locations due to its business model is Cafe Coffee Day – yes, there are five cafes within a three km radius and there are two more in the offing. Recent retail concepts such as E-Zone (also from the Future Group) and Star Bazaar (a hyper-store from Tatas) have found their own spaces and are serving their customers quite well. The one Retail concept that was conspicuously missing was Shoppers Stop (SS), India’s largest multi-brand Department Store chain. And that too was fulfilled recently. While operating three other locations in the city and one at the Bangalore International Airport, the retailer took over the same location earlier occupied by fellow retailer and similar business house “Globus”. There were many reasons why Globus wasn’t doing well; many experts felt it was the location that was the main one at fault apart from the depressing merchandising at the store level. In Retail, there are three main factors to consider before opening a store – Location, Location and Location. And that’s exactly what SS has tried to revisit. They have chosen one of the most complicated locations ever possible for a Retailer but I am sure the decision was conscious and would prove to work to their advantage. After all, who knows this business as well as they do. The store is located in one of the busiest stretches in Bangalore, just ahead of an important traffic signal where the waiting time could range from 10-30 minutes during peak hours to crawl through a 300 meter stretch. Entering and Exiting the store is not just difficult but would need sharp driving skills. The store, which is spread across 40,000 sft is self-sufficient to that catchment since most of the brands have their own stores independently or within the mall close by. The well-maintained and well-merchandised store has almost everything that a harried customer needs, but for a cafe which I guess should soon be there too.

But why one more Retail concept for a locality that already has a substantial penetration of retail formats? Well, one reason is that there is no Shoppers Stop! The unique shopping experience that the Retailer provides is not just consistent across the country but also amongst the most superior in its own form. Secondly, when an area has as many shopping formats, it becomes a natural destination for shoppers. It’s not just the Retailers who benefit due to the presence of a large number of consumers but also the shoppers – they benefit from the wider offering that they are offered and not to mention the innumerous promotions and special offers through the year. So, lets hope this outlet of Shoppers Stop is indeed going to become a show-stopper!

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.