Coffee Conversations...

It’s been almost a year since I started writing this column – recording my own observations about the Retail Industry as well as analyzing and interpreting decisions and actions of Retailers and their activities. I must admit that I have acquired a lot of admirers and a few critics on the way – not on a personal note but more on a professional stance. To make your reading more interesting, I am introducing a new column titled “Coffee Conversations”. In this section, I seek answers for queries that I have from Industry experts and stalwarts, while also discussing my own thoughts about the same. This is not mainline journalism – and I am not a journalist. Nor are those who opine spokespersons of their respective organizations. They are mere professionals who share their thoughts on certain specific topics.

The next column is about the recent advertising marathon by Retailers and Brands – and the recent occasion being India’s Republic day that is celebrated every year on the 26th of January. Almost every brand/retailer have been showering discounts – from 10% - even 60% in some cases on a range of products including apparel, accessories, electronics, household items, etc. The only category missing conspicuously is Automobiles – probably they are happy counting their bucks, thanks to very good sales over the past three months. But this Discounting phenomenon brings some thoughts to my mind – what happens to the Brand‘s Equity in the long run?

I spoke to my good friend Raman Kalia, an Advertising and Marketing professional with varied experience across consumer brands and services who now leads the Marketing division for one of the best managed Airports in India. Excerpts from the conversations that we had recently over coffee:

Shriram (SS): So, Raman, did you see all the nice ads overt the past few days on leading national newspapers inviting shoppers to buy products on discounts? Which was the one that attracted you the most and why?

Raman Kalia (RK): In this season, it is not possible not to see discount and promotional advertising from brands across categories. The season in a way has become synonymous with discounts, so I did notice advertising from apparel brands, electronics brands to host of others categories. There is no specific campaign that stood out in the clutter because these were plain announcement ads with each brand trying to outshout the other but even with these one, even if one tries, not notice the larger formats and in your face advertising. So I did notice Big Bazaar, Croma and some apparel brands advertising, but the bigger question is what I remembered beyond the fact discounts were on - Answer is nothing.

SS: Do you think most consumers tend to shop more when they find words such as “Sale”, “Best Deals”, “Save”, etc.? If so, then why?

RK: It is no secret that Indian consumer is a value consumer and with discount seasons getting well established, purchase cycles are getting aligned to these seasons. It is more important for brands to consider with such seasons - are people spending more or actually less? On the surface, it might give an impression that people are spending more in that particular week, month or season but if a planned or need based purchase is getting aligned to that season, then probably brands are earning less, not more. Against this, if brands are able to build impulses, which are true in certain categories, say electronics or apparel, and expand their base of users, it can be said that consumers have shopped more. Brands should not look at just the season to base their assumptions but look at the full year to make a judgment whether discounts or sales or best deals have added value to their business or not.

SS: In the long run, do you think these brands/retailers would lose their significance? Would consumers shop only when there are deals?

RK: But of course brands/retailers would lose revenue and equity if consumers start buying during season. To take an example, if the MRP of a product is100 and offers a 20% seasonal discount year after year and the bulk of consumers start buying during that time, they are telling the brand we value at 80 and no longer 100, that means its premium has eroded in the consumer’s mind. The prime example of this is Benetton; you would rarely find people buying this, one of the most respectable and recognized all over the world brand, at full price in India any longer. It has become a discount brand, with weak associated imagery.

SS: What about the Brand Equity? Do you think consumers would value the brand as much at a later date when they shop again in full price?

RK: There is no single answer to this question; it depends from category to category. In certain cases it actually enhances the value of the brand because it offers a chance to experience or enter the category. Every brand has three set of consumers – core buyers, fringe buyers and non-buyers. As long as discounts do not isolate or create dissonance in core buyers and at the same time give an opportunity and a reason to fringe buyers/non-buyers such schemes add value.

SS: Which categories according to you think have the least effect on their value? Can you elaborate with some examples?

RK: Discounts, at the end of the day in a way mark the end of something and are a symbol of change, a precursor before the new comes. And in certain cases clearly demarcated time fragments which are well established. Let me explain this by picking up three categories; technology, apparel and hotels.

Let’s start with the simplest one, hotels, you have season and non-season. Discounts and offers during non-season do not impact the rates that hotels charge during the season, why one because people travel less during that time, but it gives a chance to fringe or non-buyer to enjoy that exclusive experience. Even if a core consumer avails the opportunity it still does not erode the value because overall reason of a season is well differentiated from the non-season. Different opportunities, different reason, no dissonance, yet at the same time adds value to the brand in terms of revenue, consumer base and building brand equity.

In case of technology, it is an ever evolving category and every new launch makes the previous obsolete. So when an Apple discounts Nano after the launch of Nano with camera, buyer who has bought Nano at full price also understands that earlier price was an opportunity cost, without impacting the brand equity. Same is true for cars, when a new launch happens, say i-10 vs Santro from Hyundai and Hyundai offers Santro at a discount, it need not kill the demand of i-10. Some value conscious consumers might buy Santro instead of i-10 but in their mind the trade off of price and technology is clear. It does not devalue the brand.

Apparel is far trickier to answer. Fashion is always about change, and in a way reflection of the consumer. Now if new range is distinctive from the old discounts it would not erode the equity but unfortunately it is not true every time. Some brands and their products are so generic that it is impossible to differentiate the two and that’s where the issue comes. Now change could be color, cut, shade, design anything but in apparel a majority of Indian brands have not been to establish that and even otherwise a majority of Indians are not fashion conscious, hence erosion of brand equity with established seasonal discounts gets eroded rapidly.

Bottom-line is, discounts work for brands only when the reason of discount is well established and consumers can answer the brand is offering a discount because of a well defined and well understood reason. Trade off between new and old is when discounts do not impact brand equity, if that difference is not established it leads to dilution of brand equity and loss of margins. And the market is strewn with such examples where brands have not been able to achieve this; white goods, apparel, fashion accessories, footwear and zillion more – and today are victims of “I will buy during the discount season” mentality.

Brands should offer discounts only when-

1. Such schemes will not create dissonance in core buyers or change their buying behavior

2. Reason of discount is well established and trade off is understood

3. It marks the end of something

4. There is marked difference that segregates the old from the new, which is felt by the buyer either in perception or by any of the five senses.

SS: Last words of wisdom for Retail Marketing Managers?

RK: There are no simple or easy answers.

Thank you Raman, and wish you all the best for your upcoming Shopping Festival.

National Shopping (& Savings) Days…

We sold 40,000 cameras, 7,000 laptops and 8,000-9,000 LCD Tvs, during the 23-26 weekend, proclaimed Mr. Kishore Biyani last week, Founder and CEO of India’s largest Retailer, The Future Group. This property famously created as “Sabse Sasta teen din” or “Cheapest three days” six years ago, was experimented at the Big Bazaar Outlet at Lower Parel, Mumbai among others and has hence become a national rage. This year, over 120 outlets of Big Bazaar spread all across the country participated in this challenge. Over the past few years, the other formats of the group have also joined the bandwagon and this was vividly seen this year. The idea apparently stemmed from a simple fact – that consumption in India is driven largely based on two needs – a regular monthly need and a festival/event related one. So, there was monthly shopping of Grocery and Household items and the 2-3 times a year festival/event shopping – Diwali, Id, Christmas, Wedding, Birthday, Anniversary, etc when consumers shopped for Apparel, Electronics and other Home needs including premium and luxury products. The Group wanted to create a day (or rather a period) where consumers could shop without a specific reason – and only for the value and related happiness they derive. Thus was born this unique concept. 26th of January is India’s Republic Day, a national holiday which is always one or two days around the weekend and is usually considered as a long weekend since many take one or two days leave from their work places to spend more time with their family and friends.

Many industry experts have compared this to Boxing Day/Thanksgiving Day like in the West. These are specific days of the year when consumers throng to Retail stores because products are available at the cheapest prices. While most products are outdated or out of season, consumers still see value in the offering. For example, a laptop for home use which would usually cost $ 900 would be sold at say, $ 600 – and this is only for a day. So, consumers plan their purchases in such a way that they wait for the shopping season. A lot of research on the topic has revealed that more than 30% of such products purchased during these times were inconspicuous consumption – the customers didn’t really want them but bought only because it was cheaper… Consumers are the same everywhere – from Amsterdam to Ahmedabad, Bangalore to Boston, show them “value” and they would buy even if they don’t need it immediately. Thus, the value formats of The Future Group, namely “Big Bazaar” & “Food Bazaar” have seen a huge spike in sales.

What confused many of us in the industry is that this concept has been blatantly followed by many other Indian and even International Retailers who are not in the “value” retail formats. Apparel and Department stores were offering discounts, and so were the mono-brand fashion retailers. Electronics saw a huge surge in discounts, with a number of bundled deals and lowest prices for the period. While the offers were tempting enough for consumers to buy, was there a long-term approach in these efforts? Probably not. Beyond a point, discounts will not increase sales but will only decrease – what is famously know in Macro-Economics as “Law of Diminishing Marginal Utility”. Over a period of time, consumers will refrain from buying at full prices and will wait for the discount season. Yes, I agree that this country has over a billion consumers and thereby throughout-the-year shopping will exist, however this would do more damage to the brands' reputation, especially fashion and luxury, in the long run.

The End of Season Sale or EOSS is usually just around Christmas globally but in India, the cycle was a bit behind – many Retailers were planning it around Valentines Day (14th Feb.). But this has also changed of late. Many Indian Retailers have already started their EOSS in Jan. and there seems to be a mad-rush among them for the customer’s wallet. With all the brouhaha around discount shopping (my forthcoming article would delve deeper into this), consumers are smiling away to glory having got the best deals due to intense price-competition among Retailers. So, what happens to the Brand Equity of these players? Would consumers continue to shop at full-prices when they know that the same brand is available at a discount in the near future? Watch this space…

Coffee Conversations...

It’s almost a year since I started writing this column – recording my own observations about the Retail Industry as well as analyzing and interpreting decisions and actions of Retailers and their activities. I must admit that I have acquired a lot of admirers and a few critics on the way – not on a personal note but more on a professional stance. To make your reading more interesting, I am introducing a new column titled “Coffee Conversations”. In this section, I seek answers for queries that I have from Industry experts and stalwarts, while also discussing my own thoughts about the same. This is not mainline journalism – and I am not a journalist. Nor are those who opine spokespersons of their respective organizations. They are mere professionals who share their thoughts on certain specific topics.

The first such column is about the recent advertising fiasco featuring the world’s best known Ice-Cream Retailer and one of the most respected agencies. Many of you would know the fauxpas already – the agency communicated on a signage that entry to the newly launched store was “restricted only to holders of international passports”. What they meant was something else but this irked the Indian sensibilities almost immediately and what followed was brand bashing – offline and online. They say “Any publicity is good publicity” but I guess this is the last the Brand would have wanted even as they move into one of the toughest consumer markets in the world. The agency has been removed from the services of the company with immediate effect and it is yet to be seen what happens next.

I spoke to my good friend Akshay Ananth, a young and energetic advertising professional who leads the Client Servicing Division for one of the best known agencies in the world, which is also the most popular and respected one in India. Excerpts from the conversations that we had recently over coffee:

Shriram (SS): Tell me Akshay, how important is the role of the Advertising agency to get into the DNA of the Retailer or the Brand, especially if it is new in the Indian market?

Akshay Ananth(AA): Whether the brand is old or new it needs someone to communicate with the consumer. It’s the agency that does it right now. The whole idea of an agency is to talk the consumer’s language as opposed to manufacturer speak. Some of the best brands have been created by the agencies. E.g. BBH raised Johnnie Walker to where it is now. Lemon, Axe, McDonald’s. The list goes on.

SS: Is it important for the Retailer/Brand to engage the agency at a very early stage – say, even when the Brand plans to enter the country?

AA: Yes absolutely, the brand that will win the war over minds is the one that makes the consumers tell the right story. If the entry itself provides a story, why not?

SS: Is the agency solely responsible for all internal and external communication that goes out? What about the Brand Management Team?

AA: When s**t hits the roof, somebody has to be holding the can – accolades to the brand team and all s**t to the agency. It’s a hurting fact but its true… Globally.

SS: When there is a result that is not the most desirable (like in this example), what is the stance that the agency and the Brand should take? Defensive? Mud-slinging? Does sacking and replacing the agency help?

AA: I guess there are two things here, do the due diligence (also get someone to wear the black hat) and the second is, get a crisis plan ready.

Mud-slinging is our national sport, so I guess that’s good entertainment. Other than that, if you do not stick with each other thru thick and thin, what team are you? Firing the agency was a knee jerk reaction and an easy one. I would have started with firing the brand manager.

SS: What happens with the image of the Brand? Is it true that Consumers forget and forgive? Can you cite some examples?

AA: Yes, to a great extent. With all the clutter in the consumer space, nobody is an Einstein. People do have very short memories today and a lot of brands to take advantage of this fact. For examples, I will only say Lexus, Mattel and Cadburys & Pepsi.

SS: Last words of wisdom for Brand Managers?

AA: The agency is not your slave, but a partner. If you treat as a slave, like all slaves it will run at the first sign of trouble. A partner will see a problem and solve it, have a back up plan or atleast stick with you. Additionally, clients that treat agencies like dirt always end up paying the price. They see attrition rates shoot through the sky from the other end.

Only one word of wisdom to the agency crowd: one of my bosses was fond of saying: “client ke client ko samjho”, believe me, this piece of advice is invaluable.

Thank you, Akshay for your time and keep up the great work. Best Wishes for your future endeavors. Cheers.

Swagatham! Suswagatham! Welcome to India…

The Indian Ministry of Tourism recently announced Visa on Arrival for residents of Finland, Japan, Luxembourg, New Zealand and Singapore – a move which was debated so much that the Hon’ble Minister of State for External Affairs Mr. Shashi Tharoor even tweeted about the topic, which was covered more in the media than the Visa news itself! The visas would have a maximum validity of 30 days with a single entry into the country which will be restricted to airports at Delhi, Mumbai, Chennai and Kolkata. The four airports account for over 65% of Indian aviation – of the over 110 million pax who fly within and outside the country every year. Whether there are enough takers from these countries is anybody’s guess.

But it’s a welcome move, many say. Martin Moodie, founder of The Moodie Report, the world’s most read Travel Retail website that never sleeps, remarks “Obtaining an Indian visa is a notoriously unwieldy process”. He couldn’t be wrong. He travels all across the world for over 200 days a year and visits India atleast once each year. One of my good friends in the Industry and a mentor of sorts in my professional life, Martin Moodie blogs regularly about his experiences across airports and the Travel Retail business in general. Apparently, the number of Japanese visitors into India grew by 3.5% in 2009 to 151,000. Understandable, since many Japanese Auto companies, Suzuki, Toyota and Honda, command a respectable market share in India. While Suzuki (with a JV with Maruti) holds the fort in the mass segment, Toyota and Honda slug it out in the premium segments and are famous among the Sec A+ and A in the large metros.

So what does it mean to have “Visa on Arrival”… Aplenty. To begin with, it is seen as a country which welcomes visitors. Thailand and Malaysia have been doing this for sometime now and have seen noteworthy results. While the domestic unrest in Thailand did crash the visitor entries in the first half of 2008, the tsunami after effect in 2006 and early 2007 was severe in Malaysia – a country which has a tremendous tourism potential due to its unending sea shore. They are also inexpensive for those from the West and the Pacific as the Dollar conversion works very well – from coffee to cigarettes, from luxury stay to gourmet food. India has taken a giant leap in 2010 by announcing this major initiative, kudos! The move is expected to help the country’s economy to a large extent and how.

One of my presumptions after the Congress Party won the Parliamentary Elections in Summer of 2009 was the main focus areas – Tourism and Infrastructure. And this is exactly what we are seeing. While Infrastructure Development is the mantra all around, the Tourism impetus has been doubled, the least to say. Wish the same focus remains on developing Domestic Tourism as well. The website of Incredible India is not just attractive, but quite informative, exhaustive and engaging as well. And is the entry point not just to India, bit for all those who are looking for information about Indian Tourism.

And with growing Tourism, Retail is sure to benefit in a big way. Global tourist destinations have tourists visit their Malls and Shopping Centers as much as the city residents.

In fact, certain products are always considered to be cheaper in foreign countries – possibly because they are either manufactured there or the country allows cheaper or nil import duties. For example, coir and jute products are famous in Thailand just as Dry Fruits are in Dubai. International Fashion Brands are always the pick of the place at Singapore and Hong Kong. Except for Mangoes and Tender Coconuts during summer and woolen clothes from Punjab and Cotton produce from Tiruppur or Surat, there is little that we have to offer that tourists can grab. But there is enough and more of tourism potential to offer across the country, throughout the year. From Deserts to Sea Shores, from Mountains to Fashion Capitals, India has everything to offer. And while people travel, they are bound to consume. It’s just a matter of time, that we see an uptick in Retail Sales due to foreign travelers. But it’s sure bound to happen, sooner than later

Till then, let’s keep chanting “Athithi Devo Bhava” – Welcome to India…

Organized Indian Retail – yesterday, today and tomorrow...

As I write this column while the first decade of the new millennium is transiting, I can’t but recall the way the last ten years have gone by for the Indian Retail Industry. As a child, I used to visit the PDS outlets to buy rice, sugar and kerosene (to heat water on a pump stove). A few years later, I would cycle a couple of kilometers from my house to a particular shop in Mandaveli, where a modern PDS store was opened – called Subiksha. Although organized better than a PDS outlet, the charm of shopping still didn’t exist; the concept was driven on the premise of “value”. Almost everything that was sold was 10% cheaper than many other grocery stores and the owners had played well to the sentiments of the price-conscious Madrasis. In 1996, the first wave of Organized Retail actually started off in India. Calcutta based Goenkas (of The RPG Group), who had interests in music, tea and tyres ventured into modern retailing. Accepting the invitation of their former CEO Mr. Raghu Pillai, Ace Carnatic musician, late Ms. M.S.Subbulakshmi inaugurated the first organized kirana store called “Foodworld” at RA Puram, an upmarket neighborhood of South Madras. And the rest, as they say is history.

A few years later, I had the rare opportunity to work in that same store for more than a year as Store Manager. It was at this place, my love for retailing and consumerism was born. As the store was already five years old, a relayout was being planed and I played an important role in that activity. With my own hands, I drew the relaid floor plan and planogram – the former Controller of Operations made me do that exercise outside his cabin – to plot various categories in a Supermarket in a manner in which (men and women) consumers would shop. That’s when I understood what Organized Retail was to be, how people shop. I am still trying to get clarity – don’t know when I would.

RPG had already tied up with DFI – Dairy Farm International (Hong Kong) as regards the FDI regulations and the foreign entity was providing backend support for various formats that was launched by the group. In 1997, two new formats were created – Music & Leisure and Personal Care & Grooming under the trade names of “Musicworld” and “Health & Glow” respectively. During the same time, when the internet revolution was taking off, Mr. VG Sidhartha, a visionary businessman set-up internet coffee cafes at Bangalore to cater to the growing need of youngsters who were trying their best to catch up with the Western world. Today, his efforts have paid-off – with over 840 cafés across the country and a handful in Austria and Pakistan, Café Coffee Day is the largest coffee café chain in the country today!

Meanwhile, elsewhere in Kolkata, a shrewd Marwari businessman who was toying with the idea of selling trouser lengths and shirt bits had already entered into Organized retailing with a readymade garment store, called Pantaloon Shoppe. Sensing the bigger opportunity that lay ahead, he conceptualized a new model called “Big Bazaar” – a Hypermarket which was the first of its kind in the country that sold everything that one wanted to purchase for the household at prices that were cheaper and better compared to similar local wholesale markets. While the Goenkas tested the Supermarket format in the south, Mr. Kishore Biyani tried his Hyper concept in 2001 in Kolkata – another conservative consumer segment. The idea though was simple and common to both businessmen – if it could work in such sensitive markets, it could work in bigger open markets too. A large format Pantaloon Department Store that had everything to drape for the whole family, was opened in the crowded neighborhood of Gariahat, also in Kolkata. In 2002, the first ever Hypermarket in South India was launched in Hyderabad under the name “Giant” by the RPG Group. A new wave of consumerism had already started off. Mr. Biyani launched his new grocery model Foodbazaar in 2002. The Times Group (a media powerhouse which publishes newspapers and manages TV channels) had also ventured into organized retail – by opening a music store in Mumbai called Planet M. TATAs, whose business interests range from steel to salt, and the most respected business family in the country was also testing waters into organized retail. With its first family department store “Westside” already working well in Bangalore, there were plans to extend the business to other cities. And Rahejas, whose already successful department store concept “Shoppers Stop” was the first one to expand on a pan-India level under the able leadership of its former CEO and Customer Care Executive, Mr. BS Nagesh, now the Vice-Chairman of the Retail entity which has multiple formats under its fray.

And many other local retailers such as Viveks (in Chennai) and Vijay Sales (in Mumbai) were expanding in their respective geographic regions. The next few years saw a flurry of Retail Stores being opened – across various formats. The Organized Retail Industry, which was not even approximately valued till 1999, was estimated to be around $ 2 Billion in 2001 and has now grown to over $ 135 Billion (in estimates, including services). Biyani once again launched a new format – a seamless Mall called “Central”, loosely based on the iconic Bangkok Central. The specialty of the Mall was all the brands were next to each other, without walls, but had common billing points in the same floor. This saved time and effort for shoppers and the size of the mall need not be too big. Again, I was fortunate to be part among the core group leading this revolution, since its inception. Meanwhile, the other players had strengthened their presence across verticals. India’s oldest organized retailer Madura Garments from the house of well respected Aditya Birla Group, had grown by then from strength to strength with hundreds of points of presence across the country and had two large formats – Planet Fashion and Trouser Town under its operation. They entered the food and grocery retail formats with More. Supermarkets and Hypermarkets – an attempt that has still not taken off the way they had wanted it to. Another manufacturer cum retailer, Arvind Brands, had also scaled up its retail presence and was fighting head-on with the international fashion brands such as Benetton, Levi’s, Pepe, etc. who were consolidating and growing their respective businesses.

Electronics Retail was the next big bet – with mobile call rates having fallen to single digits per minute, and mobile handsets becoming more popular than landline telephones, selling mobile phones was not just a fancy, but the easiest thing (atleast many thought so!). And with higher GDP rates between 2002 – 2006, consumption increased, which witnessed better Demand-Supply match and hence, electronics manufacturing became more and more viable, leading to crash in prices. For example, a 29 inches Samsung CRT TV that cost upwards of Rs, 20,000 in 2004 fell to less than half its price by 2008. And so was the case in laptops, refrigerators, etc. Home appliances such as Mixer Grinders and Iron machines were no more planned annual purchases – were more “by the way” ones. In 2006, India’s largest business house by size, Reliance Industries ventured into organized retail, experimenting various concepts – grocery at Hyderabad, Technology at Bangalore. Meanwhile, several luxury brands entered India – they couldn’t ignore this market anymore.

The period from mid-2006 to late 2008 saw the highest realty rates in the market. Mall Developers were quoting lease rates that defied conventional logic – and Retailers were embracing them with both hands. There was a stupid competition of one-upmanship especially among the Fashion Brands – who paid more for a particular property – as merely being present was everything. No exaggeration, I have seen it personally, even present in a few discussions. Bizarre! During this period, many businesses changed hands, some saw M&As, some ventured into Retail just for the heck of it.

Also it was the time when the first Greenfield Private Airport at Bangalore was pioneering the newest business concept in India – Travel Retail. The Airport’s Retail areas today are testimony to the continuous efforts taken by the Management Team at BIAL – the airport operator, to create the best Retail footprint among the airports in India. This is among the most cherished and most fulfilling professional experience for me till date. The challenge was to explain to the head honchos of various established Indian Retailers and propose to them to lease space at the airport – these were the most evolved and well-travelled individuals, but most of them failed to believe in the dream. Very few were convinced and for them, it has worked superbly. Around the same time in 2006, global retailers of repute, including Walmart, Carrefour and Tesco were considering India seriously. Metro AG from Germany which had entered India in 2002 with its Cash and Carry model couldn’t grow beyond its first two stores in Bangalore for a few years due to FDI regulations. They still do not operate more than five outlets in India – a similar fate that Walmart had to face when they opened in Germany in the 90s and eventually closed. Walmart entered into a strategic tie-up with Telecom major Bharti Group, while Carrefour preferred to go on its own with its C & C model and is said to be in advanced stages of talks with Mr. Biyani’s Future Group as of last month.

And then Aug. 2008 arrived. The sub-prime crisis in the US had a cascading effect. Millions lost jobs in the US, Europe and Far East. Countries which were feeding western consumption like China and India took a hit on their exports – India especially on the IT / ITES front – an industry that provides direct employment to over a half a million people in India. Consumption slowed down; no growth rates for Retailers. 2009 was the worst year for the trade. Mr. Biyani was recently quoted saying “I think 2009 came in and gave a slap on our face.” So true. Several Retail businesses tumbled. The non-serious ones exited quietly while the focused ones grew their might with perseverance and continue to remain in business to explain their successful efforts.

Thousands of people are already working in the organized Indian Retail Industry to-date and this is only expected to increase – to about 15% of total employment in the country by 2020, if not earlier. What has happened seems like a true roller-costar ride. Over the past 45 minutes that I have been typing this article, I could remember only a few best moments of the Great Indian Retail Story that is yet to be fully told. The next decade would answer that, for sure. And you and I would be a part of this success story, I hope. The world will watch in awe the way Indian consumerism has taken off and would take lessons too. As the most prominent figure of Indian Retail often says, “We are a country of shopkeepers and hence we don’t need outsiders to teach us the way we do – we will do it our way”.

Long Live Indian Consumerism! Long Live Indian Retailing. Jai Ho!

WorldSpace – R.I.P.

I was shattered to receive a mail on Christmas Day - Friday the 25th Dec., from WorldSpace Inc. – that they will discontinue their services in India w.e.f. 31st Dec. 2009. More than the subscription money lost, I was pondering over the inability of such a service to sustain, especially in India. WorldSpace Corporation was founded in 1990 by Noah A. Samara, Chairman and CEO, with a vision to provide digital satellite audio, data, and multimedia services primarily to the emerging markets of Africa and Asia. To implement this vision, WorldSpace conceived and built the first ever satellite radio infrastructure in the world. In the past 12 years the company has built three satellites and launched two to provide audio, data, and multimedia broadcasting coverage to Africa, Asia, The Middle East and Western Europe. With the global headquarters in Washington D.C., Worldspace created the initial proprietary technology and programming infrastructure that both WorldSpace Satellite Radio and XM Satellite Radio are built on. In fact, 2003 saw WorldSpace Satellite Radio technology become the fastest adopted new consumer media in America since the DVD player. Until today, WorldSpace Satellite Radio provides 5% of XM Satellite Radio programming. JVC, XM Radio, Hitachi, and Panasonic are registered marks used with permission. In 2006, AR Rahman, India’s first Oscar award winner (2008) and Brand Ambassador of WorldSpace created a signature tune for the brand which was used extensively in its marketing and communication efforts.

Although I subscribed to their service only in March 2009, I first heard WorldSpace way back in the year 2001 when I was working for RPG Retail. There was an exclusive arrangement between both the companies to play their music across the Foodworld stores in the country. While the idea was to familiarize shoppers with the concept of satellite radio, it was also a great advertising opportunity for the service provider. If one may recall, that was also the year when the Private FM Operators started their commercial operations (until then, the Govt. owned Prasar Bharti was operating the FM channels exclusively) across the key cities in the country and even today, only the Govt chanels can provide “News” content – a monopoly that the private operators are trying their best to break. There was (and still continues to be) intense competition among the Radio channels that today, people prefer to keep their personal radio on their mobile phones, their cars and homes tuned in all the time.

WorldSpace was, according to me, one of the best things to have happened in the field of entertainment. Using Satellite technology, one can carry the receiver anywhere within the country and to certain countries abroad, keep the antennae facing a certain azimuth (an angle at which the antennae receives signal from the satellite) and bingo – hear live content being played 24 hours a day… Of course, the antennae must always be facing the satellite in a particular direction and hence, it cannot be heard while on the move (like in a car). But WorldSpace had been working closely with FIAT in Italy to provide such a solution which was to be unveiled sometime next year. Until, it all fell apart. WorldSpace filed for bankruptcy in the US in Oct. 2008 and has now officially announced that it would be shutting down its services in India.

The crux of WorldSpace was its subscription based listenership. At the moment, India has over 300 radio channels (and increasing every month) which play regional languages as well as Hindi and English 24/7/365. As per the existing Govt. norms, the ad space should be around 20% of an hour’s airplay - that’s approx 12 minutes of advertising and the rate per minute varies for every city and the radio station. Assuming the average duration per song is 5 minutes, not more than 12 songs could be played an hour – but the stations modify the song (reduce the overtones) and create a playlist of 10-13 songs including advertising in between. For large cities like Delhi, Mumbai, Chennai and Bangalore, this makes so much sense as the traffic during the peak hours is very high and in effect, listeners get hooked to their private radio sets. Cut to contrast, WorldSpace offered over 55 minutes of music interrupted only by the voice-over of the RJs who explain almost every song – the lyricist, the composer, etc.

I believe the main reason for such a service to die an unnatural sudden death – is simply timing. Satellite Home Television has picked up in India in the recent years and has two dominating operators – Tata SKY and DISH TV with the new entrants Airtel, BIG and SUN entering the fray aggressively in the past 18 months. Viewers have realized that the reason to switch over from conventional Cable TV to the Satellite form is not just novelty, but actually the purpose – of no-interruption and absolute clarity while watching. What we haven’t realized is that we still pay for the subscription but are done to death with the advertising content – especially during festive days and special events like cricket matches and entertainment shows. The difference – WorldSpace was creating and hosting most of its programmes itself without any advertisements while the Satellite TV marketers buy the content from established TV Channels including the advertisements. And people have accepted the pay and use over the years while with WorldSpace, consumers were never fully convinced to pay for such a service.

One reason why WorldSpace is facing this destiny today in India where over 90% of its subscribers are based, is its positioning, the others being its location of hosting and points of sale. Clearly, the product (or service as you may call) was positioned as a one-up above the Radio over the years and there was probably not too much of an effort to take it to the middle-class masses. Unsurprisingly, Satellite TV marketing companies are selling their products at leading Retails stores in the country. A great example in recent times is SUN Direct Satellite TV. While they have done it to the extreme, by making the pan-wallahs and mom-and-pop grocers as their distributors, the strategy has somewhat paid-off. Contrast to WorldSpace, which made almost no major Retail presence except for a handful of distributors here and there ans some in-store Demos. I am not sure if they underestimated the power of Organized Retail today, but surely one didn’t see that approach. While subscribers to the service were acting Brand ambassadors (like me) who preached the greatness of the service, a new wanna-be subscriber never knew where and how to buy. Simply speaking, it was not available off-the-shelf at a Retail store nearest to you. And they were hosting the service from the US – I got to know this recently and am somewhat confused why they chose not to host from India.

I would assume that there is still a rebirth possible, provided the Brand takes a new approach and aligns itself with modern Retailers in India. There are over 5,000 Organized and semi-organized Retail stores in the country today and millions of shoppers visit these outlets every month. And that’s the opportunity. Whether WorldSpace (if and when it is reborn) or someone else in a similar segment will grab this opportunity is yet to be seen. Until then, WorldSpace – Rest In Peace.

Gift vouchers and spread smiles this festive season…

It’s very Indian to gift – we actually do not need a reason to gift. Be it a birthday or an anniversary, new addition in the family or a new job, gifting is a given thing. So much so that a famous confectionery brand had launched a campaign a couple of months ago to gift chocolates during the beginning of every month – as one get’s his or her monthly salary! It is also widely believed that gifting existed in our culture for very long. For example in our Kannadiga culture, guests who attend a wedding are actually given some money and food on the last day of the wedding – the idea being that once they return home, they don’t have to cook food and the money given to them is for their conveyance back. Strange, but is still practised. They are also gifted clothing or cash equivalent during the course of the wedding as a token of appreciation of their visit and guests would even wear the same new clothes during the wedding. Similarly, we have many other examples in each culture and community.

In modern times, gifting has taken a different route. It’s quite common to see women shopping for their men – father, brother, husband or friend. And similarly, men shopping for women in their lives – mother, sister, wife or friend. So much so that luxury diamond brand “Carbon” successfully created “guilt-shopping” where men buy diamonds for their women without even understanding the jewelry – it was fashion jewelry and hence, not to much of thinking or analysis (like how women would do while buying jewelry) was required. And the result – the concept is a great hit and their flagship outlet is now at the “Bengaluru International Airport” where over 80% of customers are men! Although Jewelry, watches and accessories are quite common to purchase as gifts, consumers tend to weigh back on apparel. This is mainly due to size inconsistency among people and the brands and their fits. And add to that, color preferences. So usually, apparel is refrained from gifting, except for t-shirts and other fashion wear.

This is where the concept of “Gift Vouchers” fit in. It’s quite common to see today people rushing to buy such vouchers from leading retail stores, especially Department Stores and Mono Brand Apparel/Accessories Stores. A few years ago, the Future Group introduced “Central Vouchers” which could be redeemed across the Central Malls in the country and sometime ago, launched vouchers that could be redeemed at their home improvement retail concept – Home Town. Even café chains like Café Coffee Day have vouchers that could be redeemed across the 800+ outlets in the country. If there is one segment where it is not yet present in full measure, it’s probably at the Supermarkets. However, these vouchers are usually sold through institutional sales – typically a B2B activity where the Retailer sells the vouchers at a discounted price to Corporates who in turn pass them on to their staff members on special occasions such as birthdays or anniversaries. And the common belief is that the user would buy more than the voucher value and the retailer would benefit from it. Well. If only it was so true! My friends in the business would agree that while the redemption is sure, the difference in the final purchase price and the cost of the voucher is not very high. It could also be because the consumer didn’t find anything as exciting or the validity of the voucher was shorter and he/she didn’t have anything to buy at that time.

While Shoppers Stop has created a big opportunity among its customers through branding and communication measures, many retailers haven’t done this yet. I would rather say, they haven’t “tapped” this yet. Imagine, Christmas and New Year is around the corner and you may want to be gifting something to your loved one – but may not know what to. So, that’s where the Voucher comes in. But do Indian consumers believe so? Probably not. And the reason is simple. When you buy a product and gift, it is generally perceived not to be valued monetarily. For example, if your give a flower bouquet and a vase, then there is no value that is attached. Instead, if you give a 500 Rupee voucher, then the receiver would “feel” the value of the gift – something that is not very much in our culture. Although, we contradict ourselves a bit in reality. In Indian marriages, its quite common to give some money as gifts. Probably for other occasions as well. This is usually instead of a product as gift. While this is commonly accepted, Retail gift Vouchers are not. Reason? They are probably not so well marketed. Starbucks recently had a scheme where when a person buys a gift voucher, the buyer gets rewarded… So, with a US $ 100 voucher, the buyer gets a US $ 20 voucher – that’s a 20% Discount. It still works to the benefit of the café chain as they make higher margins. This could be a bit of a challenge for traditional retailers but still, certainly worth a try.

And the key to this is marketing and communication. The concept must be communicated to potential consumers in such a way that it induces them to buy gift vouchers. I am already dreaming of a day when consumers would flock to their favorite Retail stores to buy vouchers during a particular day or week because of attractive offers like how they now buy during the End of Season Sale. I would imagine that consumers would stock up these vouchers at home and would use it as and when an occasion arises. Or they would find one where they could gift it. Whichever way, gifting is good – brings a smile to the giver, a bigger smile to the receiver and yes, helps us, the Retailers.

So, whom are you gifting this festive season? Make a list and remember to count me in…