Phoenix Market City–Everything for Everyone!

Yet another mall opened its doors recently in Bangalore – this time in the far eastern limits of Bangalore, near Whitefield. After a successful launch at Pune and Mumbai, the Mumbai-based Phoenix Mall Management has launched their prestigious project in Bangalore. This is the largest mall in town with an estimated 1.80 million square feet of space – a multi-development concept and one of its kind in the city that also includes a half a million square feet of office space, a 5 Star hotel with 236 rooms, a service apartment with 174 rooms and a multiplex spread over 55,000 sq ft. The external beauty lies in the fact that it is horizontally spread than vertically – all of four floors and a lower ground which connects directly to the most spacious parking lot which is well spread and brightly lit. The construction architecture is minimalistic with no jazz – focus is on the Retail Stores than crazy designs and confusing walkways. This mall also launched for the first time in Bangalore, marquee brands such as Zara, the Spanish fast-fashion retail chain in a JV with the Tatas (Also Read: Starbucks India – a TATA Alliance), Calvin Klein, Gant and California Pizza Kitchen. The main anchors include Big Bazaar, India’s largest Grocery and Homewear Hypermarket chain, MAX Hypermarkets, Reliance Trends, Reliance Digital and Reliance Time-Out. Regular Mall names such as Benetton, Tommy, Fab-India, Titan, Louis Philippe, Arrow are present while a few such as Café Coffee Day, Barista are conspicuously missing!

The best thing about the mall is that it has everything – for the first time, multiple entrances – from the main entry gate, from the sides (Drop-off area), and from the basement parking area. The Ground Floor (entry level) is rather wide and broad – spacious enough to make it appear like a premium mall. Tommy, Gant and Zara welcome visitors with their bright signages and show-windows. Once inside, the shopper gets to see the wide expanse through well thought out and planned cut-off areas – from one floor, there is ample visibility to other floors.

The anchors are also well spread. Big Bazaar is closer to the Parking Area so it would be easier for customers to take their shopping trolleys to their vehicles; however one needs to walk almost half a mile to the main road if they don’t have a personal transportation – an area that must have been given thought to. Max Hypermarkets welcome you once the shopper enters from the lower basement. Pantaloon Fashion store is placed in the upper floor while Reliance Digital (the Electronics Store) is in the lower basement too. There is a small gifts shop – all of 400 sq ft which is packed with curious onlookers for all the fancy cheap Chinese imports that the store has. The Foodcourt is as always, on the top floor nearer to the Cinema Halls while the Gloria Jeans coffee shop is sadly placed beneath an escalator with sparsely spread out seats – some wooden and some sofa seating in some random manner! Obviously, the café doesn’t commensurate its great coffee with its ambience. The other coffee shop, Costa is placed on the top floor – some logic I guess!

I walked for over an hour, before understanding the layouts and placements, familiarizing myself – I scored lesser marks in my own purview although I wonder if shoppers would get to know it even after as many as 3-4 visits. Zoning, which I know personally had taken many months with inputs from some fabulous international consultants is to say the least, sad. Maintenance costs would be sky high I guess – air-conditioning such a wide area with two dozen security guards for over 14 hours a day is not going to be cheap or easy. The escalators – onward and downward are placed next to each other thereby not diverting traffic in various directions. Signages- although we don’t read as much – are scarce.

Overall, this Mall has tried to become everything to everyone – a premium mall in one-fourth of its space and a normal neigbourhood shopping centre with the rest. While Big Bazaar and Max are expected to draw a different set of clientele than, say a Zara or Gant, they are placed far behind – from a real estate point of view, this probably makes sense. But just that. Most people who intend to shop at a Hypermarket would be passing through premium retail stores – not only would they find it out of place but also a bit weird. Also, the Hypermarkets, whose predominant customer base are those who depend on autos and two-wheelers would find it taxing to come and shop here. And btw, Big Bazaar has its store close by – within a 3 km distance to be precise. Other than being a show piece, I wonder if they have any other reason to be here. And for the customers of premium Branded Retail stores – the car parking areas are just too far away. Wonder if that would put them off. Except if they have specifically come to shop at, say the iconic Calvin Klein.

Firstly, does Bangalore need such a large Mall? With congested roads and consistently heavy traffic not just at the CBD but almost everywhere in the city, what we need are a number of neighbourhood malls – within a 4-5 sq km radius and within a 15-20 minute drive. And this everything under one roof doesn’t work as much. Bangalore, or most Indian cities do not attract a huge tourist population such as Dubai or Singapore. Nor are our prices globally competitive, rather more expensive. The semi-urban crowd that comes to the larger metros and cities rather stick to traditional shopping areas (Read: Downtown shopping centres, predominantly the semi-organized retail stores). The Mall also needs to attract 3-4 times what the best Mall in town attracts today – to support the single-digit conversions at its stores. For a Mall that is located so far off, it is anybody’s guess if the Mall or its tenants would do well in the first few years. Maybe over 3-4 years, the location would attract some traction.

Needless to say, the group has invested significantly and so have the Retailers. Here’s wishing them good luck in times to come.

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!

100% FDI in Single Brand Retail. So?!?

The Government of India officially announced allowing 100% FDI in Single Brand Retail on 9 Jan 2012. “We have now allowed foreign investment up to 100 percent with the stipulation that in respect of proposals involving FDI beyond 51 percent, there will be mandatory sourcing of atleast 30 percent of the total value of the products sold…from Indian small industries/village and cottage industries and craftsmen,” Commerce and Industry minister of India, Mr. Anand Sharma said in a statement.

(Suggested Reading: FDI in Retail – the saga continues)

The Indian Industry seems to be equally upbeat;

In an interview to ET, Future Group's CEO Mr. Kishore Biyani said, "I believe both single and multi brand retail together can bring in an investment of $10 billion in the front-end alone. I think this is a significant investment in the next four to five years, and the journey has just begun." The announcement of single brand retail has come sooner than we had expected, though. It is a good move, and a precursor to the bigger one now - the multi-brand retail announcement, added Biyani.

“We hope the initiative is a precursor to further liberalisation in the sector in the days to come,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s India partner for wholesale stores, told Bloomberg.

"The notification was expected because single-brand is less controversial, as the brand will not compete with a local retailer," said Bijou Kurien, who heads the lifestyle division of Reliance Retail, which runs department stores, hyper-markets and supermarkets.

“The opening of India’s single-brand retail sector sends a crystal clear signal that India is open for business at a time when economic opportunity is certainly welcome amidst global uncertainty,” said Ron Somers, president of US-India Business Council (USIBC).

We believe that further opening up of the single brand retail clearly shows the government`s positive intent towards bringing about reforms. We see this as an important step towards further reforms in the multi-brand sector as well said broking house ICICIDirect

“Globally, single-brand retail follows a business model of 100 percent ownership and global majors have been reluctant to establish their presence in a restrictive policy environment,” the department of industrial policy and promotion (DIPP), said in a statement.

(Suggested Reading: Luxury Retailing in India)

100 percent ownership would be permitted in single brand product retail trading under the government approval route, subject to the following conditions:

• Products to be sold should be of a single brand only
• Products should be sold under the same brand internationally (i.e. products should be sold under the same brand in one or more countries other than in India)
• Single brand product-retail trading would cover only products which are branded during manufacturing
• The foreign investor should be the owner of the brand
• In respect of proposals involving FDI beyond 51 percent, mandatory sourcing of at least 30 percent of the value of products sold would have to be done from Indian “small industries/village and cottage industries, artisans and craftsmen”
• Application should be submitted seeking permission from the Indian government for FDI in retail trade of single brand products to the Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion
• The application will specifically indicate the product/product categories which are proposed to be sold under a single brand
• Any addition to the product/product categories to be sold under single brand would require fresh approval from the government
• Applications would be processed in the Department of Industrial Policy and Promotion to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for government approval

(Suggested Reading: “UnHate” by Benetton)

Mono Brands such as Tommy Hilfiger, Pepe, Mont Blanc, Rolex, Pizza Hut, Costa Coffee and many others through a JV with Indian partners have been operating in India over the past years. Some like Benetton and Nike have been operating on their own, using manufacturing/marketing as their modus operandi through a predominantly franchisee model. Over the past few years, we have seen even luxury brands like Louis Vuitton, Diesel, Tumi, Armani and Versace enter the Indian Retail market through respectable JVs with the likes of Reliance Retail, DLF Brands, etc. and all of them seem to be doing well in their own way. Indian business houses such as the Tatas, Jubilant Organosys and Dabur have been happy to partner with international brands such as Zara, Dominos and Subway (respectively) and operate large franchise operations. But the fuss over 100% FDI in single brand retail seems surprising, if not confusing. Louis Vuitton, for example expects a sale of over USD 100 million from a 550 sqm outle from its only airport store in the world at Incheon International Airport, Korea. It would take LV a few years to achieve a similar number in the Indian market. In such a scenario, I wonder why would international brands invest and fund their expansion and growth in India all by their own, while there are so many Indian business houses/partners who wish to do so.

Video Courtesy: The Moodie Report

Indian and International Retailers are eagerly looking forward to the approval of 100% FDI in Multi-Brand Retail, which is not expected until the elections are over in key states such as Uttar Pradesh. Major action is expected only when the big boys of multi-brand retailing are allowed to enter India and operate directly and service end-users/customers. And that doesn’t seem to happen soon, certainly not in 2012. Hopefully, the next year – if the world doesn’t end. That is.

(Suggested Reading: Borders – a book in itself)

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.

(Suggested Reading: What retailers can learn from the aviation crisis)

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.

Retail in India–Way ahead for 2012

 

Organized Retail in India has come a long way over the past decade and 2011 was expected to change the wind towards the positive side, due to allowing FDI in Retail. Thanks to political unrest and the opposition parties claiming hoarse, FDI in Multi-Brand Retail has been put on hold (hope not shelved) while FDI in Single Brand Retail has quietly been allowed, atleast on paper. While a few International Brands such as Benetton, Tommy, Diesel, Esprit, etc. have been operating in India for many years now through Joint Ventures with Indian partners, a beeline of Brands wanting to enter India is expected in 2012 – a hope that many in Retail have been holding on for sometime now! The coming months are expected to be exciting times for our Industry and here’s a view on how this landscape would evolve;

Malls

From a lakh square feet to a million square feet in 10 years, modern shopping centers aka Malls have walked a long journey all these years. Today, Malls are not places for consumers to just shop but a generous mix of shopatainment – which includes Shopping, Dining and Entertainment. While there are over 200 operational malls today in the country, another equal number is expected to come up in the next few years. A number of mall projects which commenced during the slowdown in 2008 are ready for occupancy now and many are expected to launch this year.

Supermarkets

The neighborhood supermarkets have evolved the most, among all formats of Retail over the years. Size was always a concern for players like Spencer’s and More – getting it right was a challenge, either the stores being too big with empty shelves or too small with regular stock-outs. Many players have exited the marketplace while a few like Food Bazaar and Nilgiris (through franchises) are increasing their presence assuming scale-up would help them gain overall net margins which range in high single digits. This would be the first format, in my opinion that would straighten up – only serious players would exist and they would do a great job while many others would exit – hopefully this year.

Hypermarkets

With foreigner CEOs and advisors engaging the managements of Indian Retailers, it was widely believed that Hypermarkets must be large, really large like the ones in western countries.Thanks to some early learning, many players like Hypercity and Total have corrected their ways of working. Small is the new Big, with Hypers ranging from 20,000 – 45,000 in prime retail areas in multi-level locations compared to the earlier proposition of being over 60,000 sft – one single floor in suburban areas! Newer players especially multi-nationals like Tesco and Target are expected in this format in the coming year while existing players are planning massive scale-ups.

Department Stores

These large format stores, the blue-eyed ones due to their colorful appearance was and is expected to be the only ones to see some EBIDTA in their early years. That’s a boon and bane in a sense in this format. To ensure they attract high-spender footfalls regularly, they should turn their stocks quite often; that means having the right mix of merchandise is extremely important which is a direct impact of having high quality staff who can choose the right merchandise every consecutive season. This is a vicious cycle and players like Shoppers Stop, Lifestyle, Westside etc. have got it right while a few of them are still struggling to learn.

Specialty Retailers

Stand-alone specialty stores of international and even domestic brands are seeing dwindling numbers. The total number of stores that were being added year-on-year have reduced considerably. If it was 20 new stores and most being unprofitable four years ago, the numbers have reversed, thankfully. Most brands don’t talk about crazy numbers anymore, only well-merchandised stores and outlet level profitably.

QSRs and Food Retailing

It seems cooking and eating at home is a more expensive proposition these days thanks to high food inflation and going by the sales of pizza chains and fine-dine restaurants. While Dunkin Donuts is almost ready with its first outlet, Starbucks is slated to open quite soon too. Café Coffee Day will ad over 200 new cafes this year while Dominos and Pizza Hut will have company in California Pizza Kitchen and a few others. This would indeed be the most exciting format to watch indeed!

Kiranas

The unorganized retailer down the road doesn’t pay taxes or offer health benefits to employees; no one ever checks the quality or quantity of goods sold; BUT he is able to offer lower prices everyday to consumers with other additional benefits such as short-term credit and quick home delivery. Modernisation is the byword for the them and they are indeed giving a touch competition to the organized players.

E-Commerce

But the real competition, if not threat to all formats of retail in 2012 is going to be through E-Commerce. Sadly, many brands and retailers are not paying attention to the increasing internet user base – over 100 million as of 2011 compared to just three million in 2001. This has allowed fly-by-night operators to open websites that sell everything from toothpaste to watches, apparel to expensive jewelry! Most of them have no clue how e-commerce works and many are even buying merchandise and selling – something which goes against the fundamental philosophy of transacting online!

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!

Retail Employees Day! Thank you folks!

No matter how popular or old a retail brand is, they will not be able to reach out to their customers without the continued and trusted efforts of their employees. Retailers across the country have come forward to support an initiative called "Retail Employees Day" to be celebrated on the 12 December every year. An organization by the name TRRAIN is behind this idea. TRRAIN is the brainchild of the most respected Mr. BS Nagesh, the Vice-Chairman of K Raheja Retail which manages various retail formats such as Shoppers Stop (Department Store), Crossword (Book Store), Hypercity (Hypermarkets), Home Stop (Home & Living) and InOrbit Malls. Nagesh has been part of the Retail industry over for over 20 years and is seen as an icon among the retail professionals young and old, a kind of role model that every retail manager wants to become! He has been through the industry's ups and downs and has always been there to support the various ideas and initiatives of the Retail Industry. 

Retail staffing in India has come a long way since the 1980s. The old-fashioned “showroom salesman or salesgirl” is now referred as “Customer Care Associates”, thanks to the proliferation of modern and organized retail formats. Even stand-alone traditional retailers have embraced this well and provide respectable employability to their front-end staff, who can make or break the business. The final “conversion” of a potential customer into a real one is in the hands of the CCA and hence, a lot of importance to their well-being is being provided. In the good old days, they were paid a lumpsum as salary but things have changed today. They are covered under Minimum Wages Act, are to be provided PF, Gratuity and ESI and needless to say, additional income options such as performance bonus and variable increments. CCAs undergo a fortnight, if not more of classroom training before they enter their dream world of employment at the swanky retail stores. Within two years of commencing their first job, many smart ones move up the hierarchy as floor managers, department managers, etc. There are even classic examples of front-line staff making it to senior positions and more are in the making. The dedication of some of the staff is exemplary, to say the least. I personally know a few who have gone out of the way, beyond their call of duty at many times. 

I have been personally involved in training the front-end staff right from the beginning of my career. A fellow colleague, who used to sell DVDs and Video Games at Musicworld Kolkata ten years ago has now grown to the rank of a Regional Manager at one of the most reputed music companies in the world! I was also a certified trainer at RPG Institute of Retail Management, an inhouse training agency of RPG Retail which was created to focus continued training and development to the front-end staff. I have trained over 2,000 staff members ahead of the opening of Central Malls at Bangalore, Hyderbad and Pune during 2003-04. They stand all day, greet customers with a smile, make your shopping and dining experience a great one and at the end of day, deserve more than their salaries.

On this day, I salute these heroes – without whom the Organized Retailers cannot grow the way they aspire to! My heartiest thanks to each one of them for making us proud; Cheers guys! 

From Spencer's Plaza to Indiaplaza!

Indiaplaza appoints Mr. S Shriram as SBU Head – Life Style

Indiaplaza.com, the company that pioneered online shopping in India since 1999, today announced the appointment of Mr. S Shriram as the SBU Head – Lifestyle.  A Retailer by Profession and Choice” as he loves to call himself, Shriram is indeed very passionate about Retail. As SBU Head for Indiaplaza, he is responsible for building the Lifestyle business including Men’s, Women’s and Kid’s Apparel and accessories, Jewelry, Watches, Sunglasses, Home Furnishing and Furniture. 

According to Mr. K Vaitheeswaran, Founder & CEO, Indiaplaza.com, “We are very happy to have Shriram on board. I am confident his rich experience as a retailer will help position Indiaplaza as the leading online shopping destination for lifestyle also, just like for books and electronics.”

Online shopping in India is booming across books and electronics. With the Indian internet population crossing 100 million recently, the next wave of growth is expected in the area of lifestyle. With a loyal base of customers and fast growing traffic, Indiaplaza is aiming to quickly establish leadership position in online retailing of lifestyle as well.

Prior to joining Indiaplaza, Shriram was the National Head of Business Development at Café Coffee Day and was responsible for their expansion among Key account partner-locations. Earlier to this, he was leading the Travel Retail and Consumer Businesses at Bangalore International Airport Limited as part of the Core Committee that was involved in selecting the operators across various commercial businesses such as Domestic and International Retail, Duty Free, F&B, Forex, Landside Traffic Management, Ground Transportation, etc.  He also had the privilege of working with United Colors of Benetton, one of the leading fashion brand and some of India’s prominent retail organisations : The Future Group and the RPG Group.

Shriram holds an Executive Education from IIM Bangalore, PG Diploma in Business Administration in Marketing from New Hampshire University, USA (in association with Institute for Technology & Management, Chennai), PG Diploma in International Business from Pondicherry University and is a Commerce graduate from Ramakrishna Mission Vivekananda College, Chennai. He is a renowned speaker at various seminars/ conferences and a visiting faculty at some of the prominent B-Schools.  

About Indiaplaza :

Indiaplaza.com pioneered e-commerce in India way back in 1999 when there were less than 3 million people using the internet in India. Today, Indiaplaza is an industry leader offering an outstanding selection of millions of items on its website at low prices. Millions of customers within and outside India have used Indiaplaza to shop for themselves or send a gift to someone.

Way back in 2001, I started my career as a Management Trainee with RPG Retail and my first stop was at Spencers' Plaza in Chennai for my induction. It's been a long and exciting journey until now and I look forward to accomplishing many more in times to come. 

As I always say, "Miles to go before I sleep..."

Retail FDI - Letter from the Commerce Minister of India

Last week, the Cabinet of the Indian Government allowed 100% FDI in Single Brand Retail and upto 51% FDI in Multi-Brand Retail - it was indeed a surprise move, given that the Winter session of the Parliament is on and the Ruling UPA is mired under various issues due to which the Upper House and the Lower House have seen continued agitation and adjournments. In the wake of this latest crisis, Union Minister (of India) for Commerce, Mr. Anand Sharma has written a letter to the leaders of all the leading political parties in India, explaining the reasoning behind the government's decision to allow FDI.

Here is the full text of the letter;

As you are aware, the Union Cabinet has taken a decision for liberalization of the Foreign Direct Investment (FDI) policy in Multi-Brand Retail, which holds the potential of transforming rural economy and unlocking the supply chain efficiencies in the agri-business.

The policy has evolved after a process of intense stakeholder consultation which commenced on 6 July 2010, when a discussion paper was floated by our Ministry. Comments from a wide cross section of stakeholders including farmers associations, industry bodies, consumer forums, academics, traders associations, international investors were analysed in depth before the matter was deliberated by the Committee of Secretaries on July 22, 2011.

The matter was finally discussed by the Cabinet on 25th November and a view was taken to allow liberalization in multi brand retail. In doing so, we have consciously adopted a model with a distinct Indian imprint, recognizing the complexity of Indian society and the competing demands of different stakeholders. Over the years, while we may have transformed into a service led economy, yet even today India primarily resides in the villages and an overwhelming majority of people are dependant of agriculture. It is a tribute to our farmers that India is the second largest producer of fruits and vegetables in the world with an annual production of over 200 million tonnes. Yet, in absence of adequate cold chain infrastructure, logistics and transportation, our post-harvest losses remain unacceptably high. A large part of farmers produce perishes and never reaches the market. A complex chain of middlemen have a cascading impact on supply inefficiencies and prices as well. As a result, on the one hand farmers are unable to secure remunerative price for their produce, while consumer ends up paying more than 5 times the price secured by the farmers.

Opening up FDI in multi-brand retail will bring in much needed investments, technologies and efficiencies to unlock the true potential of the agricultural value chain.

The policy mandates minimum investment of $100 million with at least half going towards back end infrastructure including cold chains, refrigerated transportation, and logistics. We have also stipulated mandatory 30% sourcing from small industry, which will encourage local value addition and manufacturing. It will also unfold immense employment opportunities for rural youth and make them stakeholders in the entire agri-business chain from farm to fork.

I felt it my duty to dispel some apprehensions expressed by certain political parties. In formulating this policy we were conscious of the livelihood concerns of millions of small retailers.

Informed studies of global experience has revealed that even in developing economies like China, Brazil, Argentina, Singapore, Indonesia and Thailand, where FDI is permitted upto 100%, local retailers have found innovative ways to co-exist along with organized retail and are integral to the organized retail chain. In Indonesia, even after several years of emergence of supermarkets, 90% of the fresh food and 70% of all food continues to be controlled by traditional retailers.

In any case organized retail through Indian corporate entities is permissible in India and the experience of the last one decade has borne the small retailers have flourished in harmony with the large retail outlets. Even then, we have therefore taken a view that in India we may permit FDI upto 51% equity and roll out the policy only in 53 cities with a population of more than a million. In the rest of the country the existing policy will continue, which will ensure that the small retailers are able to access high quality produce at better price from the wholesale cash and carry point.

We were also mindful of the imperative of ensuring food security for the poorest of the poor and have therefore retained the first right of procurement of food grains to rest with government for the public distribution system.

Concerns have been expressed that the multinational companies will resort to predatory pricing techniques to drive away small retail. You are aware that the Competition Commission has been established by law to ensure that such practices receive great scrutiny and I have specially discussed the matter with the Chairman of Competition Commission to build in regulatory capacities to ensure necessary checks and balances. In any case, you will appreciate that predatory pricing works in markets with high entry barriers, which is not the case in India.

The Indian consumer will undoubtedly gain significantly from this step as they will be afforded much greater choice, better quality and lower prices. In the medium term, even RBI governor feels that this step will have a salutary impact on inflation.

I have had occasion to discuss the matter with a wide cross section of all stakeholders, including farmer association, traders, consumer organizations, industry leaders, economists and there is an overwhelming case for introducing this policy. I am sure that being a political leader of long standing and experience, the benefits of this policy for the Indian citizens will find resonance with you. Policy initiatives taken in larger national interest demand political leadership to rise above partisan politics to create a healthy bipartisan consensus. This has been the strength of Indian democratic traditions.

I look forward to your personal support and understanding in the roll out of this policy for the larger public good.

………………………………………………………………………………

It is anybody’s guess if this letter would make any difference though in the current situation. India has been witnessing a rare camaraderie cutting across  political parties which have taken a united stance against the Government urging it to roll back the decision to allow FDI in Retail, which looks unlikely though. In the given scenario, atleast 25 cities out of the 53 which qualify for the criteria that has been set (above 1 million population) are covered under those states that have not welcomed FDI. India INC however has voiced its opinions, most of which is pro-FDI to say the least. For the next few days, if not a few weeks the entire world (read: Business houses) would be watching how things turn out here.

Watch this space for more!

FDI in Retail–the saga continues!

It was a much-awaited, welcome move by the Cabinet of the Indian Parliament to allow 100% FDI in Single Brand Retail and up to 51% FDI in multi-brand retail on 24th Nov. 2011. A surprise announcement, given that the winter session of the Parliament is under progress, which hasn’t been functioning fully due to various issues in the fore. The announcement comes after two decades of reforms that started in 1991 and over 10 years of strong growth by the Organized players of the Retail Industry in India. The Left parties along with the main opposition party in the Parliament, viz., the BJP have been publicly protesting against the decision. One senior member of the party has announced that she will burn the Wal-Mart store if it opens anywhere and she is ready to court arrest for the same! Such has been the tensions on this topic for many years now. Even the general public (read: Consumers) have been left confused due to various approaches proposed by those who are for- and against allowing FDI in retail. The issue has been politicized more than it is, by a section of those who claim that allowing foreign retailers will harm the livelihood of small kiranas (mom and pop retailers) while another view is that it would create millions of jobs and would bring down food inflation.

(Suggested Reading: Kirans and Retailers)

Background of the Indian Retail Industry

India’s largest retailer, The Future Group is close to $3 Billion in Revenues through its various formats such as Big Bazaar (hypermarket), Food Bazaar (supermarket), Pantaloon and Central Malls (lifestyle retailing), EZone (electronics) and Home Town (home improvement) and many other brands that it has created as well as through a license to operate. The $82 Billion TATA Group has been in the consumer lifestyle business through the TITAN watch brand for over 2 decades now while its premium jewellery chain Tanishq is the biggest among its peers. India’s largest company by market capitalisation, The Reliance Industries also operates various formats through its subsidiary Reliance Retail. Shoppers Stop (India’s largest Department store chain) and Hypercity (Hypermarkets) along with Home Stop and the Crossword book store chain is expected to reach a Billion Dollars in Revenue in the next 2-3 years with aggressive expansion and brisk business. UAE based Landmark Group which operates the Lifestyle stores along with SPAR supermarkets and MAX hypermarkets along with a few licensed brands will also be Billion dollar company soon (in its India operations). The world’s largest Retailer Wal-Mart has a JV with Bharti enterprises for operating supermarkets and hypermakets while has its own 100% subsidiary for operating the Cash-&-Carry format; Carrefour from France and Metro AG from Germany have similar models as well. Many other international retailers have been peeping into the Indian economy for want a small share of its vast business potential. And then there are a number of regional players across various geographies focussing in specific verticals who have aggressive expansion plans coupled with ambitious growth plans. Most of their funding has been through internal accruals while some of the large national players are public limited companies.

FDI – For and Against

While its fair to say that a few kiranas will face the heat due to the presence of large Retailers in their vicinity, I wonder why is the threat perception only against the international players. I would disagree that we need dollar funding for our growth – we have enough money in the economy (white, black, red, whatever) and some of the Indian business houses have more collective intellectual ability than compared with those abroad – the Indian conglomerate buying out a premier automobile company in the UK and turning it around in less than 2 years is a great example. Indian Hypermarkets, all of over 100 in number have been given a tuff fight in turn by the local kiranas, whose biggest advantage is convenience and home delivery coupled with short-term credit. The large retailers have been grappling with the single biggest problem of attrition (of staff) followed by shrinkage (or pilferage – wastages/stolen goods) which is amongst the highest in the world. India has over 12 million retail touch points and growing. While it is fashionable for some rich-kids to venture into retailing, it is indeed the livelihood of many million families that they are highly self-dependent on their own trade. in my view their threat is from anyone who ventures into the same business in their locality, big or small, domestic or international. If any, what we have to learn from International retailers is their strict adherence to processes and procedures which we tend to take easy at times. I remember, during my days at Foodworld a decade back, we used to have check-lists to be filled in my store managers and their deputies every hour to ensure the store is looking perfect at all times. Needless to say, the check-list was drafted by Dairy Farm International – DFI (incidentally, an anagram of FDI) and was shared with its then Indian JV partner, the RPG Spencers Group. Actually, there are many other things including best practices that we could learn a thing or two from International partners.

(Suggested Reading – How Odyssey gained International acclaim)

Inflation

It is a myth that allowing FDI would reduce food inflation. Certainly not in the short-term. What we lack, and very badly at that is the back-end infrastructure including logistics and supply chain. This is one area where international retailers with their vast experience in other markets such as the US, Europe, China and Brazil could bring in their expertise. Factually, it begins with the interaction with the farmer who grows the produce. What is popularly known as Farm-to-Fork. This area needs huge investments and conviction by the humble farmer that his efforts would indeed make a difference to the country, to the end user – the consumer. Let’s agree that this takes time. Maybe five years. Or more. But to convince people that allowing Wal-Mart and its ilk to open new stores would bring down inflation is a story that no one who is in the know will buy!

Execution – the key to FDI success

The cabinet has clearly indicated a few conditions which make FDI rules difficult for execution. Firstly, it says that the matter is a state subject which means each state can decide whether it wants to allow FDI or not. Secondly, it allows foreign retailers to enter cities only with a million or more population (and we have only 53 cities such as this as of Nov. 2011). In a way it is good, that only evolved, mature markets are open for FDI investment, but in hindsight it is the Tier II & below cities that need more investments. so, these two points make it extremely cumbersome to operate. If an Indian Retailers wants to share its “board” with a foreign retailer, it is only for one of the two reasons – either it wants to reduce its debt by offloading stake (which the banks are not willing to, anymore) or to learn international best practices.

(Also Read: Low-Cost – its all about the perception)

The draft is yet to be tabled in the parliament as this column is being written and some high-voltage drama is expected over the next few days. Whichever way, these are exciting times ahead. For Retailers, its a new ray of hope to perform better for the sake of its shareholders & for itself; For Retail professionals like me, it opens up our employability & professional success; and for Consumers, it means more options & competitive environment between existing retailers and better prices for them.

All summed up in one word – Hope.

What Retailers can learn from Kingfisher Airlines

The past few weeks would have been one of the most tumultuous for India’s five star Airline, Kingfisher! The Airline and its promoter Dr. Vijay Mallya were in the news (and continue to be) for all the wrong reasons. The India Media which I personally respect a lot were making some scathing remarks and reports all of a sudden about the airline’s business health although it knew about it for many years now being a public limited company. With a debt exceeding Rs. 7,000 Crores (USD 1.80 Billion), Cash-and-carry of Fuel at airports and a few flights grounded for reconfiguration of seats, the Airline was abused by one and all including those who otherwise held it in high esteem. It was common to see many passengers at airport lounges discussing their wisdom and advising how the Airline should be run and how the promoter and the Management can do better. These were some of those who earlier yearned to be seen in the Kingfisher Lounges at airports! In fact, some subscribed for the Kingfisher-Amex credit card so they would get free and immediate access to these Lounges (obviously not for Kingfisher parties which were for the most elite). And some would go any length to get a Kingfisher calendar (in the same lines of a Pirelli calendar). Serious. No Kidding. Anybody who is somebody had a word of advice for the airline. They should do this; they shouldn’t have done that and so on. Naturally (sic).

I am not an Aviation Expert or one who shares Management Consulting for free. I have my own thoughts about the airline, and those are my views. Running a USD 2 Billion empire and being the second largest liquor company in the world (UB is expected to reach the number one position sometime in 2012), I believe Mr. Mallya and Co. knows their business best despite the unconventional ways of how entrepreneurs run their business (rare to see them plunge in Horse & Car Racing or hosting the most enviable parties at Monaco & Monte Carlo). The airline is going through some turbulence and I am sure they would come out of it sooner than later. Whether someone picks up a stake in the airline or if the Banks bail them out is one thing, but the exemplary five-star service which Kingfisher introduced is something that is worth living for. As eminent scholar Swaminathan Anklesaria Aiyar said in his recent article, “Kingfisher is worth saving!”

There are some interesting learning that our Retail Industry could take from the state of affairs of Kingfisher, which I have listed as below;

Scale-Up but at what cost

The airline was founded six years ago and has hence scaled up reasonably well, in fact started flying international since 2009 after acquiring Air Deccan (which was seen as the main reason for buying out). However, some of the routes it was operating were just not profitable. A Few were as per govt. Regulations such as flying to the North East of India, but there were some routes that could have been avoided. I guess this applies to Retailers as well. In a quest to expand their presence some Retailers like those in the F&B business such as cafes, speciality restaurants, etc. enter new cities and towns although they would just not be profitable ever! For Ex., the number of staff who are required to manage an outlet, a region & a territory would just not make sense unless the number of stores are reasonably big.

Being Everything for Everybody

At the India Retail Forum in 2010, Mr. Kishore Biyani of The Future Group made a statement which many of us in the industry vouched for – “A Retailer cannot be everything for everybody!”. Such powerful words. And makes so much sense. This applies a lot especially for Luxury Retailers. One thing that Kingfisher did was to position itself for the fashionable few with all its flamboyance and exclusivity. Later, when it bought out Air Deccan, it created a platform in the low-cost segment with “Kingfisher Red” which was recently scrapped off. In the meanwhile, Kingfisher was offering differential service patterns across its flights – some were served hot food on the house while some had to pay exorbitant prices for cold sandwiches!

Price Matters – Discounts don’t work all the time

In tune with many other airlines offering everyday low fares, Kingfisher was also pricing its fares accordingly. This, I believe was one of the earliest and biggest mistakes the airline did although it had an option not to do so. Many Retailers, to gain easy and quick market share especially Hypermarkets and Supermarkets work aggressively on their pricing and create hundreds of loss-leaders. That way, they attract footfalls in the initial stages although they would never be able to lift prices in future. This is a dangerous strategy that Retailers should keep monitoring constantly. Although it is fine to change the market positioning once in a while, one has to be careful in the long-term.

Competition – Creating a Niche for oneself

Over time, Competition will increase, irrespective of which business one is operating in. For Kingfisher, it was initially the low cost Indian counterparts and over time, International airlines were also competing for market share. This applies to Retailers such as those in the Fashion segment. It is but natural that international brands would enter India eventually, given the potential the 10 million plus affluent households we have which is their main target segment. This should be part of the Strategy and not a knee-jerk reaction.

Managing the Media

Most importantly, Media should be well-managed – always. To say the least, lesser the better. Kingfisher has been the darling of the Media, with all the red short skirts, the sexy parties and those PYTs who are partying. Every move of the airline has been well covered and captured right from the first page, the Page 3 as well as in the last pages of the newspapers (the sports pages, usually). TV Channels have never missed covering its important times, and there is even a channel dedicated to the Good Times! Most Retailers fail to engage the Media well – either they are over exposed or under-exposed. Well, its worth discussing the business priorities and problems from time to time to- and with the media, rather than bringing it all at once. The recent discussions and view points on allowing FDI in Retail is a great example. Many Retailers, who were initially reluctant on the subject have now done a volte-face because they are cash-strapped by agreeing to bring in foreign retailers in to the fray! This stance will affect them sooner than later, with the media as well as their consumers.

Life’s lessons come from various quarters all the while and this time it is in the form of Kingfisher airlines. It is up to us to make good use of wisdom, irrespective where it comes from.