AI in RetAil

I had the good fortune to speak early September at one of India’s most prestigious educational institutions, Coimbatore Institute of Technology, which has been a breeding ground for several top technocrats this country has produced. 

Among various notable such people include the current Chairman of the eponymous TATA Group, Mr. N. Chandrasekaran. 

I was invited to speak at RISE 2024, the in-house conclave of the college, where I addressed over 300+ students and faculty members for over 90 mins. 

 

That I succeeded yet again, keeping the audience awake right after the lunch break, has been a sort of a successful streak to me as a speaker across various conclaves, conferences and events worldwide since 2006. 

Perhaps, it was the intriguing subject that I chose this time around, to keep the listeners not just awake, rather get excited about the possibilities that Artificial Intelligence brings to Retail. 

Way back in the 90s, my first brush with retail was shopping at the ration shop in our locality every month, where I would be assigned by my parents, the task of bringing rice, sugar and kerosene, among other things. 

Why kerosene – we would use them to boil water for bath using a pumping stove! 

Later on, I witnessed firsthand the early days of organised retail in India, with the mushrooming of concepts such as Lifestyle and Shoppers Stop in fashion and the likes Subhiksha, Stop and Shop, Nilgiris and RPG Retail’s Foodworld in grocery retail. 

 

When I joined the erstwhile Madras’ first Baskin Robbins ice-cream parlour as a part time employee in 1997, I witnessed and used the billing machine for the first time, which kept a track of the day’s sales.

From there to now, the use of technology in Retail has not just stunned me, rather has kept me guessing on what’s coming next. 

  

I have been using Apps such as Amazon, Zepto, Swiggy for e-commerce, household and grocery shopping and for ordering food respectively for over a decade now. The amount of machine learning and artificial intelligence used by these companies, especially the likes of Amazon, is very interesting. 

Offline retailers in India have been laggards to embrace artificial intelligence, primarily due to heavy investments that go in to building such modules. However, the choice for them is limited. The writing on the wall is clear - start building AI into your business planning NOW or perish. 

 

One could argue that even a rudimentary ERP is in nascent stages in Indian retail, let alone AI in Retail. However, the choices we have on hand are extremely limited. 

One of the key reasons for loss of sales is not having the right merchandise at stores, and not lack of footfalls. 

Embracing AI / ML is a must for offline retailers, which was the essence of my presentation at the institution. Will share the link of my lecture here, soon. 

Happy New Year

I was among those millions in India who would end up waking up groggy on the 1st of Jan. for a few years every year between 2005 – 2012 or so. The rave parties, get togethers and the whole joy and excitement of welcoming a brand New Year was palpable. From buying new clothes to a trimmed hair cut and what not, there was so much consumer spending around Christmas and New Year. With homes getting a tad bigger, households getting more liberal, party venues moved from hotels and public places to living rooms, esp. in the high rise apartments. Shouting “Happy New Year” from a balcony and wishing strangers was absolutely acceptable on that night (and the next morning!). Many years later I realised how stupid the whole thing was. Been a few years since I attained my “buddha” moment from being a budhu.

The 1st of Jan. is celebrated with fanfare globally, for it marks the dawn of a new chapter in the lives of people in many countries. For them, it’s the starting of a new Academic year for children, a new Financial year for businesses and a new year, with a change in season to embrace the goodness of nature. Lastly, it is also celebratory right after Christmas, a festival revered and celebrated by over half of the world. So, yes for them it makes a lot of sense.

Retailers worldwide run huge sale campaigns right from end-Nov – the Black Friday Sale all the way up to Cyber Monday Sale which has caught up in the past 20 years. People change their cars and bikes, deck up their houses, paint the inner and outer walls as spring & summer season beckons and shop for new clothes to suit the weather conditions. Many professional change jobs and several others retire around December. The entire construct is so different in these countries and has been that way for them. Works well too, I guess. 

However, India and Indians have embraced this trend almost meaninglessly as we try to ape the West in several ways. As long as we imbibe the good – such as environmental awareness, climate change, gender pay-gap among other things, it’s okay. But to celebrate someone else’s new year and go ga-ga about it – has become a weird trend.

For many years now, I celebrate “New Year” twice in a year – one on the 1st of April as the professional year begins. It’s also the change of academic year for my kids, so that’s a reason to cheer and motivate them to do better. A sought after time in the year for employees to look forward to a hike in Salary, expect a Bonus and perhaps, even a job change for many. The second is the New Year celebrated within our community – Ugadi – that phase of the Spring season based on the Lunar Calendar. At a personal level, it’s about offering obeisance to the Creator Lord Almighty and wearing new clothes, but nothing much beyond.

On the professional side, it’s a very important day to look forward to. The run-up begins usually 45-60 days in advance, with the making of the coveted “Annual Business Plan” (ABP), reworking on it several times and finally making the entire team buy in to your vision for the business – right from the Board and Top Management till the lowest cadre employee in the system. While the more organised Corporates and large companies go through this almost ritualistically, several mid-sized companies and SMEs usually tend to ignore the importance of “Strategic Planning”. When I say this, it’s not just about a dream number to achieve – be it any business. Rather, a methodical and practical way to build up the entire narrative – either top-down or bottom-up like a pyramid. But this is just so important, so we know what to do with the next 365 days. That’s a lot of time to achieve any business goal, honestly. 

The first day and the first few days of the new Financial Year is so important towards clear goal setting and creating measurable plans to execute them. While completing the ABP well in advance helps – one gets 365 days to achieve it, even starting off the process in early April is not bad at all. But not having a clear plan for every working day of the year is so important.

It’s better to have a clear plan, try one’s best to achieve it and still, fail to do so, rather not having a plan at all. I have seen several leaders grappling with business challenges through the year – one of it being unplanned on the way forward. 

Here’s wishing you all a healthy, wealthy prosperous FY 22-23 ahead. Cheers & Good luck. 

Moving on... #Miles2Go

The past 12 months have been the most unfortunate and unhappy for millions of people worldwide. The Covid-19 pandemic was beyond comprehension in its new form since Mar. 2020 onwards and took epic proportions over the next few months. 

As they say, there is always calm before storm and in my case, it worked exactly this way on the professional front. Just that the lockdown period was the calm and what followed was storm, quite literally. I consider myself a lot luckier than the unlucky millions because I not only had a job to feed my family – my parents, wife and both kids tested Covid-19 positive (and I was the sole negative member in the home!) in May ’20 but each of them fought bravely and bounced back in full form in less than 45 days; I managed to ensure my team – starting from 100 around June ’20 growing all the way to 175+ around Mar. ’21 remained cautious of the dreaded infection and less than 10% of my workforce & their immediate family tested positive for the virus; increased point of sales presence for Levista Coffee across Tamil Nadu and Karnataka from 26,000+ in Mar. ’20 to over 79,000+ by Mar. ’21 – completely led by my brave boys in the field; which eventually led to a whopping 42% growth in the Brand’s top line over the past Financial Year; and finally – painstakingly have built a “solid team” of sorts which would work cohesively (and I sincerely hope) in my absence as I step down from Levista Coffee as Vice President - Sales & Marketing after joining in Jan. ‘20. 

It’s not been an easy decision for me to step down, honestly. It was unprecedented that I had to move on, even though things were looking bright for the Brand. Sometimes in life, we need to do what is right, rather than continuing to do what works well – for us and for others. More than this, I restrain from saying here or elsewhere the whys and whats of my decision – life moves on.

I wanted to summarise my learning through this tumultuous period even as thousands lost lives and livelihood, and here I was – making history by the day and night with unheard of and unseen types of marketing strategy coupled with fabulous execution by my team. By the way, these accolades have been showered by well-wishers around me – which I have openly declared as not mine and solely belong to my team, though there have been some black sheep around me. 

I credit the success of the Brand with the quote “Due to Corona or Despite Corona” but for the first time, I must confess that I kept moving on all these months “despite the black sheep or due to them”. At one point, you give in - for you need to do the "right thing". No blames, Peace. 

My single biggest learning during this period is to nurture people in the team and believe in them – as the adage goes, take care of your people and they would take care of the business. The moment it was formally informed of my leaving, many people within and outside my team reached out to me and expressed their disappointment over my decision. Goes to show that though I could have been harsh on them sometimes, they have perhaps realised and seen the  benefit for them – the larger view, perhaps. Another learning has been that I have maintained a healthy space between those around me and myself. This measured space ensured that we all had the much required time and thought process to ourselves. 

The fact that I have never called or summoned anyone on weekends or after office hours – not once in the past 12 months – is a simple edifice that appreciating everyone’s time works well. Keeping the interest of the staff and their families in each act and activity of the Organisation and staying on it genuinely works in the larger interest thereby delivering positive results. 

And lastly, never to antagonise those who are closer to the people who matter and speak behind you – it probably gives them more ammunition to pull us down. I had a choice – not to antagonise people and keep moving for the sake of money and a steady career; or to do the "right thing". I chose the latter. 

Obviously. When you are brought up with the right kind of “values” from childhood, that’s what you do. Works best for all of us, isn’t it. Adios, Amigos. Moving on and moving ahead in life. 

I have miles to go, after all. 

Howdy Slowdown?

Flipkart commenced operations in India about a decade ago. For the FY 2017-18, the Annual T/o of the company was Rs. 24,000 Crores (about US $4 Billion) while Amazon India has a turnover of Rs. 12,000 Crores for the same period. Swiggy earned around Rs. 442 Crores for the previous FY and Zomato added Rs. 1,340 Crores. Industry Leader in the Furniture segment Urban Ladder reported a top line of Rs. 200 Crores for the previous year. Offline Retail Giant Future Group has an annual turnover of Rs. 30,000 Crores across various formats from Grocery to Electronics. Reliance Retail on the other hand has a combined turnover of Rs. 100,000 Crores of which 70% comes from Fuel Retailing and Jio, the data cum telecom company which is part of the retail entity. Ola, the cab hailing company clocked a turnover of Rs. 2,200 Crores while Uber India has an approx. annual turnover of little less than 1,000 Crores last fiscal. Phew.

So, why am I enlisting these turnover figures here?

Because, we are complaining of an Economic Slowdown. FMCG companies, Retailers, Automobile Manufacturers and many other consumer facing companies (and their backend suppliers) have all been complaining of a slowing growth in their businesses. As is the case most often, the Government is being blamed for the mess that we are supposedly in, right now. 

Reliance Retail & the Future Group together account for over Rs. 60,000 Crores which is almost 2% of the total estimated Retail Industry in India (about US $ 500 billion). Add Amazon & Flipkart and the overall business from new channels has increased tremendously over the years. The total pie of the Organised Retail Industry as well as the total consumption market have increased over the past decade and a half from less than 5% to nearly 12% currently. While ITC, Britannia, HUL and others have seen a slide in their sales, remember how Patanjali is raking close to Rs. 10,000 Cr in turnover and is aggressively followed by the likes of Dabur & Himalaya!

E-commerce has played a pivotal role in increasing the overall consumption market in India – selling products online and delivering at the doorstep at the most comfortable time for consumers, service offering (such as booking plumbing & carpentry services) and of course transportation including local mobility as well as ticket bookings across modes of transport. 

While Swiggy and Zomato deliver lakhs of food parcels daily, the restaurants have seen an average 15-20% of their business coming from these channels with a marginal increase in their total business as well. Hundreds of restaurants which were invisible are now able to showcase their products on the Food Delivery Apps and have eventually taken away some of the market share of popular restaurants, thereby curtailing footfalls to restaurants as well as through online orders.

With millions of rides fulfilled everyday by Ride hailing apps in India, have you ever seen an Auto Rickshaw driver starving off business? In fact, thousands of new Autos have been sold. New companies like MG Motors & Kia have set up plants and newer models are outselling older versions. Just that the outdated models like i10 and Indica don’t have any takers. Fortuners, XUV500 & Audis and Beamers aren’t selling short anymore! 

The overall consumption market hasn’t shrunk, rather newer channels and opportunities have opened up. The turnover numbers in the first paragraph are to showcase how much new business has been added over the past decade. The slowdown is more in our minds and a measured approach towards over-spending, which is anyway an inherent way of living.  

And btw, the headline has nothing to do with the so called “Economic Slowdown” but the Indian PM is addressing an event in the US this weekend and the name of the event is “Howdy Modi”, so I thought I would use it to entice my readers.

Marketing or Sales – Take your pick?

I participated in a professional debate after a very long time last week. The Topic was “Marketing or Sales - Take your Pick” organised by TiE Chennai. Quite obviously I was given the topic of Sales and the co-speaker was a much senior person to me with vast experience in Marketing & Lead Generation. The Moderator conducted the session very well asking some uncomfortable questions on behalf of the august audience who were all members of TiE Chennai and many of them young Entrepreneurs. The topic was more in the scheme of Entrepreneurship and Start-Ups. For a young Start-up, be it 1 month old or 3 years old (Oh, btw, Flipkart and Ola are not start-ups anymore – the unofficial timeframe that is globally accepted for a new business to be called a Start-up is only 5 years!), should it put its focus, money and effort on Marketing (Offline or Online) or on getting the first Sale (and successive Sales) therefore effectively in building a Sales Team which will eventually build a Sales pipeline. The jury was out that evening, as decided by the Moderator and “Sales” won the topic of the day hands down. However, my co-speaker as well as a few in the audience (and some of my friends too) had a different view. Many felt that a product becomes a Brand only because of it’s Marketing, Promotions, Brand Recall and so on. 

Here’s my take. If a Brand is only remembered for it’s Marketing and probably not for its Sales, then it is, perhaps not selling enough! There’s a good old saying that a good product doesn’t need Marketing. Then there is evoking, invoking and hard selling the theories of Ace Marketing Professor Peter F Drucker (with which accompanies loads of 2 decade old emotions from University PG days) by one and all. I am of the humble opinion that Marketing, in it’s true definition and application has truly changed in the last 3 decades, more so in the last decade with the emergence of the Millenials and Gen Z as consumers of products and services.

For Ex., the newest Indian Interest which are the Food hailing Apps, affectionately (sic) known in the Start-Up ecosystem as “FoodTech” – apparently using technology to sell food (hic). Companies that are funded by Wall St., the Chinese and the Japanese, tease customers who order through the App with deep discounts, at times 50% or more effectively making a mockery of the efforts of the Restaurateurs who prefer to align with these Apps for the fear of losing out to competition. Interestingly, none of these discounts are offered in most cases by the Restaurants themselves, rather by the FoodTech companies – in order to acquire new customers and retain existing ones. The so called coupon codes aka cost of acquiring new customers is shown as Marketing – for convenience purposes as well as for the Balance Sheet. So, what was traditionally known as a one off “Sampling exercise” has now morphed in to this. Most e-commerce companies that sprang up in the past 10 years or so have effectively used this tactic to raise more funding. This, I do not call as Marketing. Cut to bigger and established consumer brands who offer 10% extra Shampoo or 15 gms extra of Biscuits and 20% more of Air in packs of Chips for the same price – No, this I do not call Marketing either. 

The core principles of Marketing haven’t died, they have just been tweaked conveniently to suit new age Marketing Campaigns, created by new age Marketers, approved by new-age Marketing Standards to please new-age Millenials and Gen-Z Consumers. Be it is a Start-Up or a Larger company, if you are not selling enough to fund your cash flows, you will cease to exist in the short term, no matter how strong a brand equity you build. Everyone is not as lucky as a Flipkart or Idea Mobile. 

I have been a firm believer of the adage, “A bird in the hand is worth two in the bush”. In the recent Tamil film “Petta”, there’s a conversation between two friends how a Facebook video garnered thousands of likes and shares to which another quips, if these could fetch him a beer. This is the reality of the so called new-age Marketing. Even as we felt that the physical sampling of audience viewership by Research Firms was a dubious exercise, today’s digital marketing metrics are not just dubious but futile. In fact, most of today’s new-age techniques do not have a conversion to sale, thereby making the money and most importantly the time invested in the exercise, a gross wastage.

Yet, there’s so much hype for Marketing a new product or service without giving it the much needed Sales push. There’s only so much Marketing can do, finally the product has to sell. And sell again and again for the company to remain in business. Be it a Start-Up or an established one. Take your pick.

Deepavali Retail Sales – Less Fire, more Smoke

The week leading up to Deepavali was perhaps the most exciting times for Retailers. From Apparel to Consumer Durables, Motor cycles to Cars, people would flock to Retail Stores with their savings of the year. The period around Deepavali, which normally comes in the latter half of October or early November and the entire 3^rd Quarter of a financial Year would contribute over 50% of Retail Sales for certain categories like Television sets, Refrigerators, Washing Machines etc. This was the trend through the 90s and the new Millennium.

Cut to mid-2000s, the evolution of Mall culture in India has been rapid, with over 1,000 functional shopping centers across the country. For every 3 new malls that open, 1 perishes and the trend is worse in certain cities, which were over-hyped by the Real Estate fraternity. The good part of Malls is that they provide customers 365-day access to regional, domestic and international brands. The footfalls used to be far higher in Malls a decade back than today – in act, today it has halved on an average to say the least. Since the prevalence of E-Commerce over the past 5 years, there has been all round the year discount on Electronics and Apparel which means customers are shopping more online than before, while the overall market growth has been tepid with Organized Retail registering a CAGR of 6-7% over the past few years. After MRP adjustment due to Inflation, there is hardly any positivity on the bottom-line numbers and Retailers have been struggling over the past few years. The Balance sheet has been strained a lot and to keep the monthly and quarterly Sales numbers looking up, Retailers have been offering various incentives to Customers all through the year.

The fight-back from Offline Retailers against Online Retailers has been merely on the price front which E-tailers have been managing all the while thanks to Wall Street funding in billions in the sector in India. That no E-Commerce company has been profitable in a decade (almost) nor have they been sold / acquired at a premium says a story that’s still unfolding.

So I set out this Deepavali to various retail stores to see what’s brewing and how the market is operating. The Offline Retailers are a worried lot. Fewer people are coming to their stores and even fewer are actually shopping. The bill values have halved in 5 years with customers picking lesser number of garments per bill. Consumer Durables retail is even worse with round the year launch of new models, availability across modern retail chains and low prices through the year. The best was saved for electronics, perhaps. I walked in to a retailer of mobile phones and enquired for an iPad. To my shock and surprise, he suggested I buy it online since the prices are far lower than his procurement prices.

Deepavali Retail Sales 2017 has been more smoke than fire, I guess. Local Retailers have taken full page Ads making Vinit Jain & Co. richer by a few hundred crores but the desired result is obvious that it has not translated in to incremental Sales. Smaller Retailers, with less than 3 shops are even more worried due to liquidity, cash crunch and rising debts. I never imagined that Retail would see such a gloomy period, but this is only getting more real. 

Inventory Management

For any retailer, Inventory Management is about maintaining the right level of stocks at the right place at the right time. If this is achieved, then the Sales can increase by atleast 30-50%. Sadly, it isn’t so easy. The “Fill Rates” as they are called refers to the amount of stock level that’s maintained at the Retail stores. It varies according to formats, location, pricing strategy, etc. In Grocery Retail, a fill rate of 80% is considered to be healthy while in fashion, it is ideal to have 90% and above. It may not even be relevant in Gold Jewelry while in Consumer Durables, it is normally about the breadth of brands and models one carries.

I set-out earlier this week to buy some general merchandise for our new office. As always, I prepared a list and walked in to one of the oldest Grocery stores in the neighborhood. The first thing I asked – a dustbin, wasn’t available. Really? And then I asked for another thing, which wasn’t available. And then another thing and the same answer. This sends a very negative imagery about the store to the potential customer. In Retail, it is estimated that over 70% of customers always purchase more items than they had originally come to buy provided a wider range of items are available and also the Retailer maintains a level of excitement at the store. In just a few minutes, I knew how the store was being managed since products of the same category were kept for display in two locations inside the store! Really felt bad for the store and the Retailer Brand that there is scant focus on merchandising & visual merchandising. But the god thing was I also picked up something which caught my attention at the cash till, which I had not written in my list. Smart placement, I would say.

Soon, I reached out to another store closeby for purchasing the rest of the items – now this is the last thing that a customer wants to do – store hopping for essentials. And trust me, while e-commerce has chipped in to some extent in offering a wider range, even they haven’t been able to crack the Hyperlocal delivery where such products are delivered in the fastest instance. At this store, I picked up the stuff I was looking for, thankfully got what I wanted and bingo! Picked up a few more things which I hadn’t planned to purchase. Again, because it was displayed near the Cash tills.

Inventory Management at a Retail Store has been automated for well over 2 decades now, from running simple software solutions to implementing complicated ERP solutions from top IT Companies. Sadly, even then, the fill rates in India in the Grocery store business continues to be less than 60%, sending Customer Experience to very low levels. I would also say, Indian Customers have been very nice to Retailers by being lenient loyal to such retail stores, shopping frequently at the same store even though the Retailer provides a poor experience. When I try to analyze, it’s partly tech-related but more importantly, the attitude of the front-end staff make all the difference. If only they displayed the products that have arrived from the Warehouse and also send out feedback of what’s not available! Wishful thinking.

I reiterate that Retailers can improve not only their Sales but also their margins by managing Inventory better. But it is a discipline to be followed daily.