Product Vs. Experience

A couple of days back, I was having a conversation with a colleague regarding Brand Experience versus Product specifications. He was of the view that a customer proposes to buy a certain brand or a product but the actual retail experience is utmost important to close the Sale. It got me thinking and the result of some intellectual head-scratching is this column. At the end of the day, it’s the product that the customer is ultimately going to use and may or may not remember the sales experience, especially for low-value items. In fact it may even qualify for certain high value purchases.

For example, Bose which manufactures some of the finest sound systems in the world  advertises heavily online these days (in India), about its products. They are usually banner ads and I find them all across – there is a certain way the online advertisers follow you (which I will cover in a subsequent blog later). But I wonder what kind of experience that Bose is driving while advertising its products online. For one, Bose is not bought. Bose is lived. In a sense that the experience of Bose is something that the consumer lives with during the lifetime of the product. Having said that, would a potential customer walk in to a Bose store after seeing the online ad? Probably yes. Bose banner ads direct the user to the Bose website. It is upto the customer thereafter to seek whatever information they need. And therefore, there is no closure of sale! Is Bose trying to popularise the brand or is it a sales technique? I guess it is the former.

On the other hand, Samsung advertises its most famous Galaxy range of smatphones online too. In this case also, the company is building the brand but the nodes (read Retail touchpoints) for buying the product are umpteen in number than in the case of Bose. For, a Samsung Galaxy is available at thousands of retailers across the country in comparison to a Bose.

While the online ad would build curiosity for a brand like Bose, it would convert more customers for Samsung. And these are just examples.

Read More: The Bose Experience

While at the Retail Store, when a customer intends to buy a mobile phone, irrespective of the store experience, the customer would choose from one of the four main Operating Systems – the Android, the BlackBerry, the Nokia OS and the Apple iOS. It probably wouldn’t matter whether the retail store is Croma or EZone or Reliance Digital or a regional Retailer such as Viveks or Girias or for that matter, small time shops that sell these types of phones. In this case, its just the product that matters and not really the experience. Ecommerce is playing an even more important spoiler for Offline Retailers in terms of snatching away customers. Is there a physical experience in online shopping? Not really. Indeed, there is a lot of science in designing a great website / webpages but that’s more technical. Playing with the layouts is a tried and tested way for online retailers to keep improving the shopping experience. But there is really no “customer experience” as such while shopping online.

There is no doubt that the customer would return to the Retail Store to buy a similar product the next time around if the experience at the store was extraordinary. Therefore it is indeed important for Retailers to ensure a consistent Consumer Experience at the outlets. At the end of the day, between product (availability) and experience, the customer would choose the product.

RIP Musicworld

It was a bright sunny sunday, June 24th 2001 to be precise. I landed in Kolkata in the morning by train at Howrah where my former classmate picked me up at the Railway Station. The smell of freshly procured fishes welcomed me as we passed by the Howrah Bridge over the Ganges in a yellow taxi – the iconic Ambassador which still runs in the city even now. After lunch and a short nap, I walked down Russell Street towards Park Street, the most popular shopping alley in what was then known as Calcutta. At the corner was an iconic orange and purple signage aptly named “music world” – the main branding purposely in small letters to convey the casual attitude of the brand. As I entered the store, I was in for a shocking surprise. Over 8,000 sft of space allotted to music – cassettes and CDs. There were separate areas for different genres of music. At the entry was Hindi and Bollywood – the Bengalis loved hindi film music as much as they loved their own. RD Burman and Kishore Kumar, were afterall local boys who made it big in Bollywood. And so was Amitabh Bachchan who used to roam around Park Street looking for a suitable career over 50 years ago. The influence of Western Music was notable on Bengalis – From Carpentars to Led Zep, from Michael Jackson to Madonna, people here listened to all forms of music. Regional Music – Bengali language was located at the far end of the store along with some titles from other parts of the country such as Tamil, Kannada and Telugu. Rabindrasangeet, the music compositions of Nobel Laureate Rabindranath Tagore sung by various artists had a separate section. This was the largest music store in the country.  And I was going to be managing the store from the next day onwards! Whoa! I was so excited.

Life at MW as it was called was pretty cool. The store would open for business around 10am and would close by 8.30pm as per local government norms. Customers would slowly start trickling in the morning, typically housewives and retired people and a number of NRIs who were on vacation in town. College goers and those who work in offices nearby would peep in during lunch hours before or after having a delicious meal at one of the restaurants on Park Street. Evenings would be college goers and music enthusiasts. In 2001, the store used to clock a sale of Rs. One Lakh per day selling music cassettes worth Rs. 35-55 each. DVDs were slowly growing then, and Video Games were starting to become a rage among the young and old slowly. Need for Speed was the most sold video game of those days. The RPG Group which was the company that owned musicworld launched with much fanfare “Hamara CD”, a kiosk which can create a customised CD of songs from across their extensive catalogue. The concept took off well though the prohibitive price of about Rs. 350/- per CD was too much of an ask and a deterrent to growth. Eventually, it died a natural death.  There were so many album releases and launches almost every other day. It was great interacting with the guests, notably of them included Sourav Ganguly who had come for a music album launch and Diya Mirza who had come to promote her film “Rehna Hai Tere Dil Mein” (RHTDM, which was originaly made in Tamil as Minnale). Artist visits and Launches would culminate with a High Tea at the Flurys next door, one of the oldest and most respected Cakes and Pastries shop in the country. I had a great team to work with and each member knew their job so well. In fact I am still in touch with a couple of them and one of them has stayed back with the same store till date – for over 14 years!

Even during those days, I was of the opinion that music would become free sooner than later. And to promote music, we had to promote music players and alternate sources which could play music. Early 2000s were the time computers were beginning to become a part of our corporate lives. Thick cardboard files were replaced by Floppy Disks carrying 20 times the data and which could fit in easily in a shirt pocket. CDs were just about to be gaining popularity. MP3 was a fairly unheard of format then. I remember discussing in various internal meetings that the company should sell music players along with music Cassettes and CDs. Naturally, as a freshly passed out Management Graduate from a Business School, my pleas fell onto deaf ears. I believed that unless we promoted CD players – the huge decks and portable ones, there was no chance that we were going to sell more CDs. I had already sensed that cassettes would see their end sooner than later and the next big wave was hearing music on computers and laptops. Almost every single senior that I interacted with laughed me off. I also suggested that we entered the Mall way of retailing – Rahul Saraf, the promoter of the first organized Mall in Kolkata, The Forum approached me to discuss a proposal to set-up a MW outlet within. My proposal was beaten down by the Management saying that Calcuttans would not shop at Malls and would rather prefer local markets at Ballygunge or Explanade. MW entered Malls much later but by then, music was already available in various other formats across devices. Sadly, the business declined slowly and it was recently announced that the curtains would permanently come down by the end of June 2013.

I don’t fully agree that piracy alone is the reason for the decline of the Music Industry. It is also because the industry failed to keep up with the technological advancements. I was recently reading on Forbes India about Alok Kejriwal of Games2Win and his Indian experiences when he tried to come up with wonderful ideas in the mobile telephony space. He was the one who successfully pioneered the concept of Caller Tunes in India – one could send an SMS and get a caller tune and have it stored in their mobile phone. As he painfully explains, the mobile operators wanted to charge a premium for the service and also a lions’ share of profits from the venture rather than making the concept popular. Similarly, the Hamara CD could have been a clear winner those days. But the opportunity and greed cost the company quite a bit. Over time, music world eventually started selling non-core items such as MP3 players and the like, but it was too late by then. The kiosk outside the store on Park Street was selling cheaper chinese made MP3 players for a quarter of the price. music world also failed to collaborate with other music labels in the country to come up with alternate ways of streaming music, mainly because they owned the domestic and international rights of the extensive HMV catalogue. In fact, initially HMV owned content would get more prominence in the store than that of other labels.

A couple of years back, I approached music world to co-opt with Café Coffee Day, India’s largest coffee chain with over 1,400 outlets across the country where I was the Head of Business Development and Expansion across the country. Instead of seeing it as a way to garner more footfalls and attract more music enthusiasts into the store, the folks at the company rather tried to charge a premium for space. Obviously the deal didn’t go through. Am sure, the team tried their best to revive the falling business, but what probably lacked was innovation and new ideas, not for the lack of it but for a lack of willingness, probably. It was one of the saddest days in my life when my former colleague informed me about its closure. I always knew this day would come, but it was earlier than expected. RIP Musicworld.

Inviting patrons for a great feast

The Hotel Industry in India is facing tough times ever since the global recession occurred a couple of years ago. In my current role at Royal Enfield as Head of Business Development, I travel atleast 2-3 days every week across the country. Whenever I try to book rooms in small and big cities, the room rates just surprises me. I was trying to look for rooms in Hyderabad for stay over the next few days and was surprised to find discounted rates at 5 star hotels for as low as Rs. 5000 (USD 90). The Leela and Grand Chola – both touted as 7 star rated properties in Chennai are offering over 40% discounts on printed rates, to as low as Rs. 7,000 (USD 130). Same is the case in Delhi, Gurgaon, Mumbai, Pune and is even worse in smaller towns. I stayed in Trichy, a city in central TamilNadu which connects a number of other towns of prominence in business and culture within a 100 km radius during the first week of May 2013. On the MakeMyTrip mobile app for the Apple iPhone, I could get a double room for three adults and two kids for as low as Rs. 2,500 (USD 55). The room was quite large to hold a King size bed and two single beds. I have stayed in cities like Coimbatore, Dehra Dun, Jammu, Patna and many others for similar rates in well maintained properties. The outlook for hospitality in India as such wears a glim look and with increasing inventory and competition, not to forget the choices that customers make, the pricing is aggressive at most of the properties. This is where ancillary income to Hotels are helping them.

Most of the hotels have in-house restaurants, mainly to cater to resident guests. Many of them advertise these restaurants quite heavily, thereby attracting visitors through the year irrespective of peak season or otherwise for room occupancy. While this practice has been there for long, its quite evident these days with a number of hotels including some premium Hotel chains advertising in the media. What caught my attention recently  was an ad (displayed above), by ITC Hotels, one of India’s largest companies in the hospitality space for their Cappuccino Restaurant at the erstwhile Park Sheraton (in Chennai) . They have advertised buffet options with prices! Do those patrons who visit these places really care for the price? I mean – everyone does. But then, do people care what the final bill is gonna be when they visit star rated hotels and restaurants? I really doubt. Restaurant incomes are an important source of revenue for Hotels. They contribute anywhere between 7-25% of total sales depending on how well these restaurants are positioned and popularised. Some of the restaurants in these hotels are even Michelin-rated – a rating by the Vehicle Tyres powerhouse Michelin which grades eating joints across the world and shares in a report that is published annually.

Suggested Reading: Franchising

Stand-alone restaurants are doing their best too, to woo potential customers. They advertise in leading newspapers regularly to attract attention and over a period of time become destinations. In some cases, they are located within hotels and Malls and in many cases they are located on High Streets. User reviews in sites and apps such as Trip Advisor, Zomato, Burrp! etc. help them gain more traction. Chains like McDonalds, Pizza Hut, Subway and Café Coffee Day advertise across the media regularly to pull customers to their outlets and many of them even offer complimentary WiFi as a hook to retain them.

Suggested Reading: Does Free Wifi help?

With inflation leading to peak rates of food items, it is becoming impossible to middle class families to venture out eating outside. But the upper-middle class seems to be slightly more insulated, fuelling the needs of these restaurants. While premium hotels and restaurants promise great food (quality) and a wonderful ambience, consistency is key. To retain existing customers and to attract newer ones. If you are planning a visit to a nearby restaurant this weekend, flip through the pages of newspapers or mobile apps and you may be in for a surprise at a hotel nearby you! Happy Dining…

Suggested Reading: Food Inflation

Shaswat Goenka–Hearlding new frontiers at Spencers Retail

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Royal Enfield rears into new realms...

The last few years have seen Royal Enfield rediscover speed, with the sales of its premium bikes rising quickly. Overwhelmed by increasing demand, the waiting period for some of the company’s models has risen to nearly 10 months. The Eicher group firm, which recently kick-started production at its second plant in Chennai, is looking to grow further in the ‘mid-sized motorcycle space’. As a custodian of this iconic brand, Siddhartha Lal, Managing Director of Eicher Motors, is determined to retain the best of the old while still pushing the envelope in terms of new products. In an interview to The Hindu, Mr. Lal talks on the journey so far, the road ahead, and the attributes that make Royal Enfield click with India’s urban youth. Excerpts:

Is your transformation plan going on schedule?

Absolutely. It has been many years in the making. Our inflexion happened with the ‘Classic’ bike in 2008, but a bike in itself can never make an inflexion. It happened because we had put in everything before that — the dealers, the service infrastructure, and so on. All of that went in, and then came the new engine platform.

The bike got us into an inflexion on our volumes. For the last 20 years, we sold between 20,000 and 30,000 units. It was flat at best. And then we hit the ramp. In the last few years, we have been growing rapidly. Our growth started from 2008, and it has been great since then. Since our product and distribution fronts are now up to speed, the market is on a positive cycle for us. The visibility of the brand is at a high point right now. We hope we will be able to stretch this type of growth for the next two years.

How much of your revenue or sales is linked to the overall market, which is performing poorly? Or, are you de-linked completely?

Well, clearly at this point, you can say we are de-linked. We are growing at 50 per cent. The two-wheeler industry, however, is not. That is because we are still a very small player in the overall motorcycle industry. If we were a 50 per cent player in the motorcycle industry, we would have a limitation of growth. Since we are a tiny player right now, we can still grow much faster than the industry and not be constrained by the overall industry pace.

Is being a niche player a blessing in disguise during downturn?

Our growth is really dependent on us. For 20 years from the mid-1980s till 2008, we were hardly growing. Meanwhile, the motorcycle industry went from a few lakh units a year to nearly 13 million.

We never grew during that time. What has happened now is that we are firing on all cylinders. We are able to create a value proposition for customers, and that is fuelling our growth. The main point here is that we were able to create a real desirability among the urban youth.

Are you only riding on the urban market though?

We always had a traditional and rural market, and that is still there. But it is the urban youth who mainly ride commuter bikes. After five and eight years into their jobs, they want something better. So, they have an option to go for a larger commuter bike or they look at us, and say this is also an interesting option. This happened because we removed a lot of barriers in the minds of the urban youth. What were these barriers? A lot of people were confused over the whole shifting from the wrong foot; everyone was worried about what would happen if they pressed the gear instead of the brake. So, we fixed that. Second was that the bike was too heavy, so we went and made the stand much easier. And then, of course, the finish and the paint job — they weren’t very great.

Fixing all of this has driven demand for us.

You have had a supply-demand mismatch over the last three years. Has this helped boost demand by creating scarcity or has it dampened sales?

Well, I believe we have actually lost sales because of that. Honestly, there is always a little aura around a product that makes you wait. People feel that there is something about the product, a lot of people are buying it, and, therefore, it must be good.

So, there is that element. However, on the other hand, we have discovered that at least 20 per cent of our customers are falling out because they don’t want to wait for a year. So, they move onto some other bikes. Net-net, if you put both these conditions together, we have definitely lost out. Our first objective is to reduce that waiting period now.

What is the brand message of Royal Enfield now, compared to 20 years ago?

Originally, it was about being big, and was about power. That has subtly changed now. The ‘Bullet’ still carries a lot of the values of what originally we had. But now that is restricted only to a particular model. Overall, the message now is what we call a pure motorcycle. Other bikes are really fast, or really heavy, and or really excess in one aspect. On the other hand, our’s is about simplicity. When you see our bike, there is nothing superfluous about it. Royal Enfield is about harmonising the rider, the bike and the terrain. When you go on the highways, you enjoy going at a medium pace on our bikes. The rider is able to enjoy thoroughly.

Do you intend to have a brand ambassador?

We will never have a brand ambassador! We don’t pay people to be seen on our bike. Every movie that uses our bike is because they want to use our bike. We don’t spend one rupee on all that. Our bikes still contain that genuine feel. We believe we have created a brand which is very strong. So, it is a pull strategy rather than a push strategy. We have stayed the course. Over 15 to 20 years, when we were struggling, we never said let’s bring about a commuter bike or do something that isn’t serious.

What will you do to ensure that your product stays its course of differentiation?

Our strategy, for me, is to continue to push the envelope of making products that are even more differentiated. People don’t buy our bikes on specifications.

Obviously, we have to invest in new products. We will have many more bikes coming on the line soon. There will be more players coming, no doubt. But, I think, there is enough market for everybody. As more players come in, the market will keep growing.

So, Royal Enfield will continue to dig more deep into its niche play? Can it not become a product for the masses at any point?

Well, we can grow five-fold. But that will still never make it a mass product! I guess we are going in for much more depth in what we call the mid-sized motorcycle space. Look at our next product, the Continental GT, which is extremely differentiated and attracts a totally different segment of customers. We will have more models that have that type of differentiation. Beyond that, our ambitions are global in nature. In emerging markets, which already have a commuter market, we see a vacant space between the commuter market and the big bikes. We will provide a compelling option there.

However, in developed markets such as the U.S., we see that people are trading down from big bikes due to the current economic conditions. Therefore, we believe we will be in a sweet spot for both emerging and developed markets. That is our strategy. We want to be a global player.

What are the external factors that could prove to be limiting for Royal Enfield? Why did you decide to locate your second plant too in Chennai?

The only limiting factor for us is our own imagination. We aren’t constrained by economic numbers or the market size. With this new plant, we have the ability to expand very quickly. Of course there are risks in having both plants in the same city, but we like Chennai! We did a very detailed study, and we looked across India. But we came to the conclusion that a second plant in Chennai would be better because our entire supplier base is here. I have no intention of developing a new supplier base right now! Chennai has a very strong ecosystem of every form. Right from a paint shop to vehicle assembly and measurement equipment—everything is here! We know this area very well. If you go to an out-of-Chennai market, we have to learn everything from scratch.

Right now, we have no intention of setting up a plant elsewhere. Of course, if taxation demands, we could think of a plant elsewhere to deliver on our global ambitions. Our effort to consolidate here is our growth strategy. We will stretch this place forever, like we did in our old plant.

How was it to completely overhaul the Eicher product portfolio over the last twenty years? Do you have any regrets now?

When we were doing a review of our portfolio in 2004, we had many big businesses. But we had a multitude of smaller businesses. We had got into the garments business, tools, merchant trading, agriculture product trading - all sorts of stuff! We did a full portfolio rehash. We should focus only on a few. So, we wanted to move from being mediocre to being great.

Let us be very clear about that. We were very middling in all of these businesses, including motorcycles. But for motorcycles, we did a leap of faith, as I was sure it would grow.

So we shut down the rest of the businesses, the most visible one being the tractor business which we sold. We have no regrets.

 

Article Credit:

 

jagannathan.kt@thehindu.co.in  and anuj.s@thehindu.co.in

The Third Place just got costlier!

 

On Monday, 29th April 2013, The Tamil Nadu Hotels Association (TNHA) observed a one-day strike to protest against the Central Government’s decision to impose Service Tax on their businesses. Speaking to the media, TNHA President M. Venkadasubbu said, “The TNHA had taken the lead to organise similar associations in all states in this regard and a federation, the Federation of Hotel Associations, had also been formed for the first time in the country.The announcement of Service Tax was made by India’s Union Finance Minister Mr. P Chidambaram in the Union budget and had already come into effect, beginning this month… (April 2013). The Service Tax of 12.36 per cent levied out of the 40 per cent of the sales proceeds is illegal and a big burden on consumers who are already forced to bear the brunt of price escalation due to inflation. While the hotels and restaurants were already paying VAT ranging from 2 to 14 per cent, the new Service Tax levied by the Central government would amount to double taxation,” he said. ‘This problem of double taxation was discussed at a meeting organised by the Federation of Hotel Associations (comprising office bearers and representatives of hotel associations from all states) in Mumbai last week and a unanimous decision was taken to launch a nationwide bandh if the Central government did not roll back the Service Tax.’

Eating out has become extremely expensive over the past decade. I remember, when I was in Graduate School, with pocket money of less than Rs. 300/- per month, we could meet most of our out-of-home expenses including filling fuel for our bikes. Not so these days. The purpose of having a meal outside home, The Third Place as it is called is not just eating. It’s all about building camaraderie and relationship/bonding with family and friends. Ray Oldenberg defined the third place as an alternative to Home and Workplace in his research paper in 1991. Oldenburg calls one's "first place" the home and those that one lives with. The "second place" is the workplace — where people may actually spend most of their time. Third places, then, are "anchors" of community life and facilitate and foster broader, more creative interaction.There were already numerous such spaces all over the world. Cafes, Restaurants and other Eating Spots are among the most sought after third-places. In India, cafes and eateries have burgeoned all over the country in the past few years. Café Coffee Day, India’s largest café chain has over 1,400 cafes across the country. Starbucks, Costa, Coffee Bean and Tea Leaf, Gloria Jeans, Mocha and many other such international and domestic café chains have their outlets spread across major cities, providing an opportunity to people to hang around and discuss everything under the sun – from personal banters to professional meetings to matrimonial discussions, one can find all of those out there. Apart from Coffee Shops, there are over half a million eateries of various shapes and sizes across the country which provide Food & Beverage options. For nuclear families, eating out is one of the biggest entertainment these days, what with very little time to spend with the family!

With the proposed new tax, food bills are expected to go up significantly to consumers. For example, on a bill of say, Rs. 1,000/- for a family of four, the Value Added Tax ranges from 2-14%, so lets assume its on an average of 8%. So, the bill goes up to Rs. 1,080/-. The service tax of 12.36% is applicable on 40% of the Sales, so that works out to Rs. 49.44, rounded off to Rs. 50/-. Hence the total bill to consumer now is Rs. 1,130/- just because this family chose to eat in an air-conditioned restaurant…where such a tax is applicable. The definition is quite clear – whether serving F&B in an air-conditioned area is a sale or a service. As per the recent amendment in the Law, its both. While food is cooked and sold, it is also served (by waiters) and hence considered a service. Also, the a/c facility is meant for seating and consumption, thereby making it amply clear that it is indeed a service. While this rule will bring about encouraging revenues to the Government, those that are meant to suffer are the middle-class consumers. For students and youngsters, visiting their favourite coffee shop or a fast food joint would get more expensive, thereby creating a dent on their pocket money. However, for the affluent and well to do, the proposed hike may not mean much, given that their spending power is relatively higher. In most cases, such individuals / families don’t even check the bill – probably pay (usually by a credit card) and sign-off.

While inflation and cost of consumption have gone up significantly, the income rates haven’t gone up proportionately. This has left the middle-class with fewer options for recreation. And Eating joints may not be the most preferred Third-Places anymore! For F&B Retailers, it means reduced number of visitors. And business too.

How Nokia lost connection!

“The problem with you is that you are atleast 5 years ahead in your thinking as far as Retail trends in India are concerned”, a former colleague of mine whom I don’t wish to name quipped many years ago when I was setting up the Retail business at Bangalore International Airport. This is a forum that records Retail thoughts and not meant for self-propaganda, but when I look back, it seems so true of what he had said. Even now, I am working on certain concepts and ideas which are years ahead of what others in the business are doing, much to the annoyance sometimes of my colleagues and business partners. Those who have worked with me / have known me for quite some time would certainly agree to what I am saying. And Nokia is a case in point.

Nokia,which enjoyed an over 70% market share around 2004 in India had experimented with various retail formats such as Nokia Distributors cum Retailers, Nokia preferred Retailers, Nokia Priority Centers and exclusive Nokia dealers. In 2004, they opened a new format called the Nokia Concept Store at Church Street in Bangalore. This was the time that call rates had dropped to low single digit rupees and consumers were lapping up mobile handsets like never before. The beauty of this Concept stores was for the first time, Nokia models that were kept on display were not dummies. They were real ones which the user could actually touch and feel, they way it would be when they owned it. The store was a super-hit. I upgraded from a 7780 to N72 at this particular store. Although it was a franchisee managed store, service was excellent with staff explaining the little nuances and details of the various models to customers. The staff would transfer contact details from one handset to another when you buy a new phone from the shop, a sort of value added service which no other Retailer provided then. The store was located in a mall which had very few footfalls but to its grand signage and visibility coupled with positive word of mouth, it attracted thousands of people thronging its stores each month.

In India, the mobile evolution probably has had four phases – from 1999 – 2002 was the time when it was a novelty. Wealthy businessmen and Corporate Executives had expensive bulky handsets to prove a point. From 2001 – 2005 was the time when affordability of handsets became the prime focus, with Reliance Communications launching their Rs. 500 scheme which was an overnight success. And from 2005 – 2009 when Style quotient became prevalent, what with various sizes, models and colors ruling the roost. From 2009 onwards, it was the turn of smartphones – handsets that went beyond texting and calling, the revolution led by Apple, quickly followed by Samsung and also by Blackberry to an extent. Nokia interestingly was the leader in the first two phases. They were still in Phase two when the third phase was on. And this probably led to customers dumping them to alternate brands and models. Nokia had as its brand ambassador the biggest showman of India in the 21st Century, the one and only Badshaah of Bollywood, actor Shah Rukh Khan. He was shown as using various Nokia handsets in public appearances, innumerous advertisements and commercials and so many Brand campaigns. Nokia was also the Chief Sponsor of the IPL Team owned by the actor, Kolkata Knight Riders. The team’s dismal performance in the first three seasons didn’t help the brand either.

In 2008, I was trying to create various new concepts at the Bangalore Aiprort and I had proposed an exclusively lounge / store to showcase the premium models of Nokia. This was the time when Blackberry phones were slowly sneaking into the corporate sector. During a chance meeting with their then India CEO Mr. D. Shivkumar, I shared this idea who immediately asked his colleagues to evaluate the proposal. The Regional Manager called me promptly and asked what was the rent for the proposed space, to which I replied that it would be ideal for him to come over to the airport so we could discuss in detail since the concept was not about a rental Retail space but rather a holistic Brand promotion approach. He informed me that the airport was about 50km one-way from his office and hence would be too far an affair to meet me in person and insisted I explain to him on the phone which I did. Sadly, he never called back.

D. Shivkumar, Senior Vice President of Nokia – Emerging Markets India, West Asia and Africa made headlines on Good Friday, 29th March 2013 with news of his resignation. The media went abuzz just the previous day that the company has been slapped a fine of Rs. 2,000 Crores (USD 400 million) for alleged violation of taxes. And all this amidst losing market share, (presently about 25%) to premium rivals such as Apple, Blackberry, Samsung, LG, HTC and other low-cost manufacturers of mobiles in India such as Karbonn and MicroMax. His exit comes at a time when Nokia is under siege globally struggling to combat the onslaught of smartphone makers led by South Korea's Samuang and US-based Apple. From over 40% market share globally in 2008, Nokia now commands less than a fifth of the total handset volumes as it products have of late struggled to capture customer imagination. "When I joined Nokia, India had about 80 million mobile phone subscribers. Today it is over 900 million. I believe that Nokia too had a role to play in this along with mobile operators. Over the last eight years, the major changes in the market is that it is driven by youth, style and technology," Shivakumar said.

Nokia’s Retail Strategy was a strong one. They appointed hundreds of Priority Stores, Distributors and Dealers including large format Retail Stores across the country such as Big Bazaar, Central Malls, Croma, EZone, Landmark Stores and also across ECommerce players such as Indiaplaza, Flipkart, etc. to name a few but somewhere the Brand failed to deliver with upgraded technology. This is a clear case where the front end of Retail is very strong but the business crumbles due to lack of product innovation & positioning and keeping up with times and competition. Around 2005-08, Nokia was focused on targeting the high-end customers with a new model every couple of weeks. Around the same time, Blackberry phones stormed the market. Emails, which were still new and a recent phenomenon of connectivity was an important aspect while choosing a mobile handset for consumers. Facebook, Twitter and Social Media overall where slowly gaining prominence and Nokia was floundering badly with their models. So they decided to shift focus to lower-end phones priced below Rs. 5,000 (USD 100). And today, that is indeed the market where they have highest share.

Retail penetration is foremost for any consumer brand. But then, it has to be backed by a strong line-up of models and technological innovation. I guess this is precisely why consumers disconnected with Nokia. Is there a chance to connect once again? Of course, there is hope. The mobile market in India is still nascent and there is so much that Nokia could do. I guess it is just a matter of time. Wishing them luck in times to come .

Alternate ECommerce–Auction Sites

There was a cover story about Alibaba.com, China’s largest ECommerce company in recent issue of The Economist. Quite a few facts. That it is turning out to be one of the largest ecommerce companies in the world, with sales of over $170 billion, which is Amazon and eBay put together. That it has a financing division, viz., AliFinance which provides micro credit to small firms and consumers; and that it has 6 million vendors registered on its site. What was started in 1999 by the firm’s founder, Mr. Jack Ma, an English Teacher as a B-2-B portal connecting small Chinese manufacturers to overseas buyers has now transformed into an internet behemoth. “EBay may be a shark in the ocean,” Mr Ma once said, “but I am a crocodile in the Yangzi river. If we fight in the ocean, we lose; but if we fight in the river, we win.”Taobao, a consumer-to-consumer portal not unlike eBay, features nearly a billion products and is one of the 20 most-visited websites globally. Tmall, a newish business-to-consumer portal that is a bit like Amazon, helps global brands such as Disney and Levi’s reach China’s middle classes.

Indiaplaza, which was also founded in 1999 back home in India is unfortunately facing its toughest time yet. With over 80% of its 150+ workforce having quit over the past six months, the company which pioneered ecommerce in India has no takers today. With a weak b-2-c model based on product listing by various partners, the company has just not been able to scale up over the last few years, thus allowing late entrants like flipkart, myntra, jabong and coupon sites like snapdeal and groupon to surge ahead. To be fair to Indiaplaza, most of the Ecommerce sites in India are on deathbed, awaiting Angels to come and save them. The top three players, Flipkart, Jabong & Myntra with sales of over USD 600 million collectively are only making losses and there no signs of any profitability in the immediate future. Offline Retailers have had a slow start without much success in this arena. Croma, part of the Tata Group’s Trent Ltd., Crossword, India’s largest book store chain along with Landmark and Shoppers Stop,  India’s largest Department Store chain are the only few large Retailers who have attempted an Ecommerce entry over the past years. With FDI in Retail not included for Ecommerce businesses, the Government’s backing has been minimal in this regard.

Even as I was thinking so, I came across an article which mentioned about an auction site named QuiBids (spelt as KweeBids). More out of curiosity, I set-up an account to know how this works. Registration was simple.GBP 0.40 is the value of each bid (for the UK Site) and can be bought online at the store in bundles that the user can choose, which in turn can be used while placing bids or while buying an item on the site after discounts and offers. The joining fee will be refunded in full or part thereof if bids are not placed for the said value. They have listed hundreds of items and all of them are on auction. The products are genuine and the processes are audited by Grant Thornton, one of the top audit companies in the world (I have personally seen the audit assurance report which is published on their website). One can bid an item only 5 minutes before the bid time comes to an end. Which means, users keep track of all those items on bid and are probably hooked on to the site all through, if they want to participate in the bidding process. Each time a bidder places a bid, the time slot for the auction increases by 20, 15 and 10 seconds in that order. If the number of bids the user holds is over, then he/she cannot participate in the bid anymore but the value in their account can be used against purchases. Also, the value of the product is discounted to the extent the bids are placed by users. Which means, if a product is priced at, say GBP 100, and the auction ends at GBP 32, with a discount of GBP 9, then the user can buy the product for GBP 91 (less the value that is already in the account). Shipping is charged depending on the size and weight of the product. All in all, it is a win-win for the company and the user. The company makes a thin margin on sale of such products while the loss on bid money is usually written off against a publicity fee paid by the brand to feature their products. And on top of it, users also buy the product which is at a discount for them but which fetches a margin for the company. In addition to this, users may also buy “bids” for set values, so as to keep on bidding. At the end of the day, a user will only gain from the tremendous discount that he gets out of the product even after buying bids.

The prose above may not be fully convincing, so do log on to www.quibids.com to explore.

According to their website,

“QuiBids was started in July 2009 as an attempt to improve the Internet auction model by making it more exciting, safer, and more reliable. We're based out of Oklahoma City, Oklahoma and our goal as a business is simple: To provide an exciting online auction model with better deals for the consumer than any other website in existence."

You can win all sorts of popular products at incredibly low prices. Look at our homepage to see what products are up for auction right now, and if one catches your eye, buy some bids for a low price! When you place a bid, we add a maximum of 10-20 seconds to the timer - to give someone else the chance to bid if they're interested. This is similar to the "Going Once...Twice...SOLD" approach of auctions.

If no one else bids and the timer reaches zero, you’ve won a sweet deal on QuiBids! If you don't win the auction, you never have to go away empty handed. Any time after you've placed your first bid in an auction, you can choose to buy the product for a discount using the Buy Now feature. This will help limit your losses so you don’t have to leave all your bids on the table. You’ll never have to pay more than the Value Price for any products on QuiBids.

I have never come across such an exciting business model which I can comfortably say is an alternate Ecommerce model. There is hardly any publicity that I see for this company or for this form of Ecommerce and yet there are hundreds of dedicated users who are constantly bidding to win their favorite products at rock bottom prices. I guess the typical profile of the customer would be in their 20s and this is almost like a contest for them! Internet penetration is quite important for the success of this model and I presume the success of this model in western countries, which is not so the case in India where most of the internet consumption still happens at workplace with curious onlookers peeping into each others’ desktops and laptops. With Wifi (at home) using the iPad and other tablets and 3G on mobiles such as the iPhones by Apple and Blackberry gaining popularity coupled with the deeper penetration of Android smartphones starting at $ 100 (Rs. 5,500), chances are more young ones in India will appreciate and participate in such promotions in times to come.

Indian Ecommerce players need to reinvent themselves to stay ahead in the game. Afterall, everyone remembers who is the biggest of ‘em all, and not really the one who started. Such is life.

Free Wifi will be a crowd puller for Retailers

I was at the Starbucks (SBUX) outlet in South Mumbai a few days ago. SBUX, in a JV with the Tata Group  opened their first outlet in India in South Mumbai a couple of months ago. We had a long day ahead and decided to start our first meeting at this location for the sheer purpose of convenience. And ofcourse, some good coffee. Not awesome coffee, atleast for me. For which I would go back to Café Coffee Day, India’s largest café chain with over 1,400 outlets across the country which in my opinion still brews the best coffee in town despite lapses in service levels here and there once in a while. I was pleasantly surprised that the SBUX outlet offers complimentary wifi to those who wish to have a sip or grab a bite and spend time around at their cafe. Ofcourse, for me it wasn’t the reason why I chose my meeting venue there. But then, anything complimentary is welcome in this mean world, I say. So there I was, connecting all my three devices – the laptop, the iPadmini and the iPhone on wifi sponsored by Tata Communications (I felt it was a great marketing opportunity for them although they didn’t seem to use it as well as they could). I was online for over half an hour, finished my emails for the morning and was all ready to step out for my next meeting. The staff at SBUX, as friendly as they were, cheered every customer who walked in or walked out with a customary welcome or thank you respectively. Even as I was walking out, I wondered how happy I was as a customer using complimentary wifi at the café. I have a USB Data Card for my laptop, 3G for my iPadmini and iPhone. But then, its sheer convenience and speed to use wifi.

I have been extensively travelling since Aug. 2012, ever since I joined Royal Enfield where I am responsible for Dealer Development and expansion of other key pet projects for the company. I book my hotels myself, mostly on my Make My Trip Mobile App for the iPhone or on their website although the former is quicker and handy. While most of the hotels provide complimentary wifi in their rooms, only a few work seamlessly. It is usually patchy and the front office staff are usually unable to resolve the connectivity issue blaming it either on the service provider or sometimes on my device! (Yes, at a Delhi hotel, the staff claimed my iPadmini was faulty). These days I look for reviews on sites like Trip Advisor while choosing a hotel that provides complimentary wifi. And most reviews are correct and genuine, as I have experienced.

That set me thinking, what if other Retailers provide Wifi to their customers. Would it bring additional walk-ins? Would it increase the stickiness? Would shoppers be showrooming – a term used for browsing the store for products and buying them simultaneously online, thereby increasing ECommerce? If so, would it help Retailers like Shoppers Stop and Landmark Book Stores which have a strong offline/online connect? I guess there are no immediate answers. Large Department Stores in the West have a café within their store so bored husbands and boyfriends could have a cup of coffee or a mug of beer while their wives/girlfriends are shopping. These days, my friends who live in the West tell me that Wifi is almost free everywhere around, which prompts them to choose a location for their need – be it a restaurant, a café , a book store or any other format of Retail. In India, unlike in the West internet bandwidth is minimal and the speed is not all that great. Cost wise too, it isn’t worthy for most Retailers to offer it free especially for those shoppers who just pass by and not really spend at their stores. Bangalore International Airport, where I worked many years ago was the first airport in India to offer free wifi for one hour to passengers passing through the airport. And most airports in India follow the trend albeit for a shorter duration. Atleast, large Indian Retailers should try this concept. With increased penetration of smartphones and tablets, there is abundance usage of data these days. Lousy 3G speeds by most Indian mobile networks mean an alternative connectivity which is what wifi is all about. Facebook and Twitter updates by the minute are not uncommon for those who are hooked on to their devices.

It’s just a matter of time that free wifi would become the thing of the day. Even now, I am sitting at another airport lounge while transiting from one city to another. And yes, this article would be published using the free wifi. Stickiness, I would say that I visit the lounge as often as I could, and just because of the complimentary boring food. If only the Lounge was more exciting with various marketing promotions other than the TV which is blaring music and bollywood gossip from one leading Indian channel just because they probably provide free Televisions!

EMIs are a way of living for the nextgen

I am not too surprised to see the two main distributors for Apple in India, namely Ingram and Redington jointly releasing full page Ads to promote the iPhone 4S and iPhone 5 in daily newspapers. There has been a huge Marketing blitzkrieg in this regard since Jan. 2013. No wonder, sales of Apple’s latest smartphones have seen a jump of over 100% across various Retailers such as Croma, EZone, etc. Until the launch of iPhone 5, Apple used to bundle their newest smartphones exclusively with mobile operators such as Vodafone, Airtel, Aircel, etc.Which means if a customer is not on one of the networks that has been bundled with, then he cannot buy the phone (one has to buy it with a particular network and then use the number portability option). All these changed with the launch of the iPhone 5 in India. During this time, Apple decided to release their phones to the broad trade channel through its two national authorised distributors mentioned above. Which meant that the iPhone 5 was readily available across major retail stores in the country right from its day of launch. Although there was an initial demand-supply mismatch, this was corrected soon. Apple executed the same flawlessly once again with the launch of its iPad Mini. What was more attractive is that these smartphones are available at attractive EMIs, for as low as Rs. 2,376 per month for 12 months along with a down payment of just Rs. 16,990/- The recent newspaper ads have drawn thousands of footfalls to Retail stores that stock and sell the iPhones. Although Samsung started this trend in 2012 for its Galaxy range of smartphones, the scheme has become more popular thanks to Apple’s initiative.

 

Recently, India’s top car maker Tata Motors launched a marketing promotion for its Nano range of cars. The Tata Nano which was launched with much fanfare a few years ago remains to be the cheapest car in the world with its base model touted to cost less than USD 3,000 (Rs. 1.50 lakh). The car didn’t take off well initially due to its stripped-down features but a prolonged grim economy forced fence-sitters to downgrade their purchases and this car seemed to fit the bill as far as a comfortable city drive was concerned. However, sales had come down still more over the past months. From 9,000 – 10,000 units a month in its hay days, sales have been hovering at about 2,000 units a month of late. So, the company decided to launch an EMI Scheme which is hassle free. At a equated monthly installment of Rs. 8,333 per lakh, a prospective customer can swipe his credit card from various banks such as ICICI, HSBC, Axis, Standard Chartered and Kotak Mahindra to avail this offer across dealerships. Add another Rs. 6,500 for fuel every month. Effectively for Rs. 15,000/- one can own and drive around comfortably with a family of four in the city in a small car such as the Nano. The initial market feedback seems to be good although one needs to wait and watch how things go along in the medium term. This is one of the most innovative promotions that the Indian Automobile industry has seen in recent times.

The younger generation which lives on what they earn today rather than save boatloads for future is spending happily on such promotions. I have personally observed so many of them earning less than Rs. 6-8 lakhs pa carrying such smartphones and showing off their ability to own them to those around. After all, their cost of acquisition is as low as Rs. 3,000 per month. They are probably cutting down their spends on other discretionary spends such as travel, food, cinema etc and rather investing on a wonderful smartphone for themselves. For a large middle class that thrives on day-today commute on their two-wheelers (the size of the Indian two-wheeler market is over a million vehicles a year), it is always a dream to travel in a four-wheeled vehicle, atleast on holidays and weekends when the entire family is outing. And such promotions actually help satisfy their needs. What needs to be seen is how long these promotions could sustain. For example, the typical target customer who would buy a Nano is one who is in the lower middle class and with the car being his first four-wheeler. But would he have a credit card to buy the car? If yes, would he have a credit balance of a few lakhs in his account, given that the entire money would get blocked if he had to swipe his card for purchasing a car and may not be left with any credit for other regular expenses such as monthly grocery, fuel, dining, etc.

Whichever way, the next-gen is hapy to live on EMIs. And Retailers should be happy!

Consumer Spend – a loot at Airports

Recently, the Chief Minister of Tamil Nadu launched a populist move in Chennai to commemorate her birthday – a Government funded canteen that serves one idly (rice patty) for Re 1 (1 USD is Rs. 53 approx.) Yes, you read that right, One Rupee for a Idly. The move is aimed to cater to the needs of those under the poverty line and the poor, the working class such as drivers of autos, taxis, trucks and so on. This was a way Amma (mother) as she is fondly known as, appeased the vote bank. It is not sure how much this scheme is going to cause to the State. Ofcourse, these so called welfare measures are out of the state’s coffers – tax payers money. It so happened that the very next day since this scheme was launched, I was travelling through the Chennai Airport which is managed by Airports Authority of India, a government body which also operates the Airport in Kolkata. These two airports faced stiff opposition by the unions when the Ministry of Aviation privatized the other major airports in India in 2005 located at Delhi, Mumbai, Bangalore and Hyderabad. These six airports contribute to over 70% or more of the total air travellers in the country which is estimated at 110 million pax per year. While the Kolkata Airport has been recently renovated at a cost of Rs. 3,000 Crores, the Chennai Airport has been renovated for aorund the same cost and was inaugurated recently although the terminal buildings havent been opened up to the public due to lack of passenger amenities, a move that the Commercial Department of AAI conveniently seemed to have forgotten while planning the terminal building.

I was taking an early morning flight, a long one that too to Ahmedabad via Mumbai, an arduous 5 hour journey. And I was flying Spicejet, India’s most preferred low-cost airline which doesn’t offer complimentary meals on board, rather “sells” Cashews and Sandwiches at exorbitant prices. So I chose to have a quick breakfast before the Security Check for which I had quite some time. I walked up to the nearest F&B Kiosk which was serving hot food items. I ordered a plate of idly consisting two pieces and a Vada. The damage was Rs. 100/-. Yes, you read that right. Most passengers like me had no option but to pay such steep prices at airports to quench their hunger and thirst. What was more surprising is that the staff do not issue bills for every item sold on their own. Rather, the consumer needs to insist one of they really need one. I demanded one. And bingo, the staff tore a piece of paper from the manual bill book which had pre-written “Breakfast” in many of the bills. A closer look and the TIN numbers which are mandatory were indeed printed. But VAT or Value Added Tax and other charges such as Service Charge, Service Tax, etc. were not explicitly mentioned in the bill. I couldn’t blame the staff because they were just doing their job. I quietly paid the bill and proceeded to the aircraft. Afterall, this is not an isolated case at Chennai Airport. Almost all airports managed by AAI have the same issues more or less.

So, why are airport food products so expensive? To begin with, it’s the way the places are leased out by AAI. They follow an age-old practice of an out-dated tender system wherein those who qualify should propose a base price for the said location. H1, which is the highest quote gets selected. The tender period is usually for 3-5 years and doesn’t specify the architectural look and feel of the outlet. And most often, there is no seating option that is provided. This is completely contrasted by the approach taken by private Airport operators such as GVK and GMR Groups which manage Mumbai & Bangalore and Delhi & Hyderabad Airports respectively. The chosen partners need to submit and discuss schematic drawings and layouts with the airports and thereafter finalized. The design is not just contemporary but also functional and convenient. During my tenure at Bangalore Airport (BIAL) in 2006, we launched a global tender for Retail and F&B which attracted top players in the world to compete on a level playing field. The selection process was touted as one of the most transparent and efficient processes by international media which tracks Travel Retail.

AAI’s outdated tender system is the mother of all troubles. Coupled with it is its terrible space planning with outlets spread haywire here and there. Add to it, unqualified commercial guys who have no clue of global best practices and arbitrarily follow the H1 route to choose partners. It is quite obvious that they quote higher fees in the tender and therefore over charge customers. Branded players like Café Coffee Day, Subway, Pizza Hut, McDonalds, etc who also operate at airports follow a corporate pricing policy and provide bills with all statutory requirements. Due to high entry costs and related operating costs such as complimentary snacks and beverages to airport staff, most organized players do not even venture into this arena.

A popular Indian Aviation Entrepreneur who successfully started and shut a low-cost airline often used to quip that there is a private mafia now in the form of private airport operators. But then, the government operated airports are no better.

Flagship Stores

After the successful launch of 137 stores across the country, Fastrack, the leading youth fashion accessories brand (a division of Titan Industries, part of the $85 billion Tata Group), today announced the launch of their flagship store at CMH Road, Bangalore. The success story of the Fastrack stores has been unprecedented. Since the launch of its first store in 2009, the retail channel has grown to 137 stores across 68 cities in all metros, mini metros and several smaller towns like Manipal and Nasik receiving tremendous response from its young consumers. The brand is looking at increasing the number to 250 by the end of 2014. Fastrack’s current stores occupy between 500 sq. ft and 800 sq. ft. The flagship store is spread across 1000 sq. ft. The space unfolds through a series of installations and events. A physical grid of white pipes forms the basis for a grid, from which various display systems are suspended. This meshwork of grids hides away services and lighting, and supports various display systems. The store also does not rely on conventional materials apart from a basic vitrified tiled floor, to address issues of uniformity during rollouts across various cities in India. Walls are plastered with a precise mix of cement and form a neutral backdrop to the installations.

Even though there is order in the apparent chaos, there is an underlying sense of exploring a bazaar. This format will be adapted to a multitude of retail formats, including stand alone stores and kiosks. At cursory glance this seems a daunting task, but the entire design is modular and flexible. On the launch, Ronnie Talati, Business Head & Vice President, Fastrack said, “Fastrack is an irreverent brand with in your face, tongue-in-cheek communication; always known to generate a stir, the brand has created a legion of dedicated followers and fans. Fastrack has now managed to translate the irreverence of the brand into a physical space with the launch of this new retail identity”.

Each category has a space of its own and is designed with installations unique to that category. The watches are displayed inside bird cages, the belts are casually worn around a mannequin and the theme is carried forward to poles covered in leather and studs. The bags are suspended in rope using carabiners. Wallets are meant to be pickpocketed from the back of denim jeans and lie hanging out halfway from the pockets, eye wear is displayed on bright yellow bananas. There are old beaten up trunks, floating tables, mirrors, reconditioned refrigerators, urinals and water closets used as display devices, and various objects strewn through the space. Even the transaction desk is centered in the middle of the store becoming an intrinsic part of the experience. Even the signage does not take itself too seriously, and is a riot of blinking color changing lights, set to a DMX controller, representative of lighting from the high streets of Broadway, NY. The small open space in front of the store houses a bike rack and a folding bench.

Fastrack is among those handful of brands to set-up a Flagship Store for themselves. Almost every Retail brand worth its pound would like to set-up its Flagship Store in a prime location in the region / country although only a few actually do so. And even more fewer maintain such stores well enough to call them their Flagship. Some of the other examples of Flagship Stores of iconic brands include;

Louis Vuitton
160 New Bond Street
London, England, UK

• It features a two-story wall of trunks – to showcase the Louis Vuitton tradition of working in leather – and a glass and LED staircase.
• The 15,000 square-foot store is designed to reflect the 21st century mood of London and bring together innovation, heritage and fashion.
• Features a library which showcases the best of British contemporary Art Books and commissions.
• The store’s second floor is a luxurious private client suite, which can only be accessed by invitation.

Oakley
1-4 King Street
London, England, UK

• 4,000 pairs of the legendary Frogskin sunglasses have been used to create a chandelier in the store.
• The store features a 12-foot tall, 800-pound metallic angel with a 25-foot carbon fiber wingspan.
• The Oakley Custom Lab, where customers can design their own sunglasses and goggles.
• An onsite etching machine is available for custom engraving. 
• A 3D experience that showcases the company's innovation. 
• The store includes a complete O Lab that utilizes lasers and impact rings to educate customers on Oakley sunglasses.


Macy's
151 West. 34th St.
New York, NY
Flagship Features

• World's largest department store
• 1,000,000 square-foot, nine-floor building
• A registered New York City landmark
• Shoe department occupies two entire floors
• Bridal suite with a walkway platform
• Owned and operated by Macy's since 1902

Apple
235 Regent Street
London, England, UK


• Apple's largest store with an estimated rent of £1.5 million a year.
• Events and workshops are held daily in the two-story shop.

Nokia
5 East 57th Street
New York, NY
Flagship Features

• Second of 18 flagship locations planned for global expansion
• High-tech decor, and cutting edge product demos and kiosks
• Completely interactive, with an exhaustive range of products, accessories, 3rd party devices, and mobile technology
• Fully functional multimedia environments for testing all products
• Staff members are all graduates of Nokia Academy

Tiffany's
Fifth Avenue and 57th Street
Manhattan, NY
Flagship Features

• 124,000 square-foot legendary retail location since 1940
• U.S. National Register of Historic Places
• Made famous in the film, "Breakfast at Tiffany's"
• Polished granite exterior, doormen, Alpine marble, and breathtaking chandeliers
• Private selling salons with platinum ceilings
• Fifth floor entertaining and exhibition area
• Houses Tiffany & Co. Archives

Flagship Stores add a strategic advantage to the Brand as compared to normal stores. Potential customers visit these locations to know and explore the brand in detail, to appreciate the beauty and background of the brand and most importantly, to also buy – conversions are usually higher at these stores than the usual retail lot. In some cases, the Brand showcases certain products exclusively in the store after which they are sent to the rest of the Retail network. This practice is usually condemned by the trade, especially when Franchises are involved although the gap between the time to launch at the Flagship Store and other stores is too narrow these days, usually under a fortnight. Overall, it is extremely important for Brands to have a Flagship Store. Usually, it is quite easy to put up one, the challenge is to showcase and maintain them in the long term.

For better conversions, provide solutions!

A couple of days back, I had a meeting in the city (Chennai, where I live three days a week when I ain’t travelling!). The host was willing to meet anywhere and after a lot of careful thought, I fixed it at Ispahani Centre at Nungambakkam, assuming it would take me an hour from the Royal Enfield factory/office in Thiruvottiyur to drive down to. As planned , I reached on time and we met at a café and spoke for an hour about business prospects. The location is not actually a Mall but a kind of community centre that was built almost 15 years ago, one of its kind to come up in the city. Many Retailers and brands such as Mr. Kishore Biyani’s The Future Group, Gaitonde, Florsheim, to name a few, put up a shop or two here and vacated sooner than later for various reasons – some for lack of relevant footfalls and some for high cost of operating. Whereas Café Coffee Day, India’s largest coffee retail chain has been operating here for over 14 years now; ditto for Marrybrown, a concept similar to KFC that serves Burgers and the like with specialty fried chicken on the menu. I finished the meeting on time in an hour and was heading out when I noticed another iconic brand which has quietly been operating here for well over 10 years. It used to be perceived as one of the most expensive brands till until recently they have started making products that are affordable even to the aspiring middle class lot like me. Their “sound” is probably one of the best although there are many more premium sound systems in the world. And the brand I am referring to is non other than “Bose”.

How many of you there knew that the name of the brand is also the surname of an Indian! Yes, indeed. Bose Corporation was founded in 1964 by Dr. Amar G. Bose, professor of electrical engineering at the Massachusetts Institute of Technology. His graduate research at MIT led to the development of new, patented technologies, and at MIT's encouragement, he founded his own company based on those patents. Bose Corporation established itself by introducing the 901® Direct/Reflecting® speaker system in 1968. With this introduction, Bose achieved international acclaim by setting a new industry standard for lifelike sound reproduction. The list of major technologies emerging from Bose continues to grow. Award-winning products such as Lifestyle® home theatre systems and the Wave® Radio/CD have reshaped conventional thinking about the relationship between an audio system’s size and complexity, and the quality of sound it produces. To know more about the company and its products, click here.

Coming back to the incident, I walked in to the store to find about about the Bose Soundlink™ Air which they have been advertising quite a bit these days. This product seems to connect using wifi with any apple device such as an iPod, iPhone or an iPad. So, I got into the topic directly with the sales staff who came across to be affable and knowledgeable about what he was speaking – a rarity these days especially in the Electronics Retail business. He explained about the product, gave a demo with my own iPhone 5 and was patient to showcase other models as well. At the end of it, I was a bit disappointed as the product was not a complete package. It didn’t have built in Bluetooth™ to connect other devices and the Bass effect was minimal. I explored a couple of other models but none of them suited my requirements. And so, I thanked him for his efforts and efficient demonstrations and started to move out when I noticed the headphones display. I already use a noise-cancellation Apple earphone on my iPod which I have been using continuously over the past few months. It’s a welcome relief since the  external noise, especially that of an aircraft is almost unheard while in use. Ofcourse, it has its own disadvantage. One that it gets less white as the days pass by and the other is that since it locks itself inside the ear, at times it aches a bit.

The guy at the Bose store explained that the Brand has a special technology by which all mechanical sounds – any noise produced by an electronic / mechanical machine will be cut off once the head phones are switched on. I played “Comfortably Numb” by Pink Floyd from the demo iPod which they had and… Whoa! This was one of the best inventions that I had discovered. At Rs. 22,000 (USD 420), it wasn’t cheap either but I was too tempted to buy. After all, I have been longing for a great headphone for quite some years now. In my office job, I need to travel 3-4 days a week, usually 2 or 3 flights for over 2 hours each and road journeys of over 300-500km a day. And what better than hearing some soothing music all along.

The entire conversation with the guy at the Bose store lasted for over 30 minutes or so and he never once prodded me to “buy” their product directly – subtle inferences such as “When do you plan to buy this Sir?” “Take your time to decide because it is a worthy investment” “Apple devices are best heard on a Bose” to name a few. I was willing to wait and ask my wife to bring it along from London when she returns in sometime but the thought of owning a piece of marvel, a piece of history was too much for me to hold on to. Bingo – in the next few moments, I was having one on my hand for demo – billing done in less than 4 minutes flat. I have always been an impulsive shopper when it comes to technology albeit after a lot of thought and research & this wasn’t any different.

What hit me was the way the guy at the Bose store handled the Sale. He didn’t sell the product, not even the experience, but just like how a real staff of Apple provides you a solution – that’s what he did. I was walking back with a gleaming smile on my face, happy about my purchase. And that set me thinking.. If only retail staff were to stop selling and start providing solutions to customers… As the flute music of Pandit Haripraad Chaurasia reverberates on my ears through a Bose Quiet Comfort 3 as I write this column. Bliss.

E-Commerce Economics–Questionable?

I have been without a pair of floaters / slippers for over two months now. Just that I’ve not been able to find a Retail Store closeby where I could find a couple of options. And I have another peculiar issue – that my foot size is 11 and I don’t get options so easily across brands. In fact, I ‘ve been buying my shoes from Brand stores located in North India since the body/foot sixe of customers is generally larger there than in the south (and it applies for other forms of retail such as apparel such as shirts, trousers, shorts etc. and even accessories such as caps and belts. In the month of Dec. 2012, I was traveling down siuth towards Coimbatore, Karur, Bangalore and a few others and then was in Bihar for a couple of days before ending the year in Kerala for a vacation with the family. And in the new year, I finally decided that I need to get a pair of footwear immediately. A chance view of an eadvertisement on some news website took me to jabong.com which offered a 70% discount on a particular model of Lee Cooper floaters and thankfully, they had my size as well. Bingo, and I ordered my pair immediately. The entire transaction from browsing to selecting the size to payment confirmation and then finally the payment gateway took me all of 6 minutes flat. And yes, this happened not on my laptop but on my iPadmini what with its fast processing speed and convenience to hold. I was quite pleasantly surprised that jabong.com had its web page optimised to the tablet – given that the size of the ipadmini is considerably smaller than the regular iPad. Within a few minutes, I received an SMS confirming my order and that the folks there were working hard to get the product to me as soon as they could. This was at 9.45pm.

When I woke up the next morning, there was an SMS as well as an email that the product had already been shipped – and they shared a tracking number as well. Around 11am, I received an SMS that the product had reached Chennai (from Delhi where their main warehouse is located) and that it was on its way to my home. Around 1.15pm, the product was at my doorstep, neatly packed in its original box with an outer covering that was branded “jabong”. I was indeed delighted to get the product and wear it – was happy like a kid who received a new toy. From shopping to receiving the product it took less than 18 hours which I felt was simply superb. Impeccable Customer Service.

After a while, I was thinking about the economics of the entire business model. The product was at a 70% discount, so I would guess the e-tailer had a 5-10% margin if at all, had a warehouse to stock the product(s), a team that was working overnight to process the order, pack and ship it immediately and a shipping agency that delivered the product free of cost at my doorstep! No to mention the operational costs of running an e-commerce company. Well, was this worth the effort? Ecommerce specialists (and there are tons of them out there) call it the cost of acquisition – that a customer who once shops on their website would get used to the idea of shopping online and would indeed come back to them and buy once again in future. Atleast that’s what most of them in India have been doing for the past few years. But that isn’t the case. Various studies have shown that e-commerce loyalty is negligible in India (as is mostly the case outside too) and most customers who shop online are seeking better price and convenience of shopping rather than looking for a full range of products. Another recent experience confirmed this too. On 12-12-12, a book was released to commemorate the birthday of Tamil Film superstar Rajnikanth. The name of the book is “Rajnikanth – the Definitive Biography” by noted journalist and author Naman Ramachandran. I was wanting to get my hand on this book for quite some time, just that I was hoping there would be a kindle version so I could read it on one of my devices. But that doesn’t seem to be launched yet. So, I decided to buy the hard copy paper back which was priced at Rs. 699/- at Landmark, the retail venture of the Tata Group in India. Landmark is a specialty Retailer and mainly sells books and stationery, music, toys etc., among other things.  There wasn’t any discount on the book – given the fact that many hard core fans such as me would buy it whatever crazy price.

While I was browsing the internet on Sunday evening at home, again on my ipadmini, I was curious to check out the price of this book online. To my surprise, the same book was being offered at a 30% discount across various online retailers. And I chose to buy from flipkart.com which claims to be the largest etailer in India in terms of number of billings/shipments and turnover. I bought the book immediately, my second ecommerce transaction on a hand held device within a span of two days. In this case, the shipment wasn’t as quick as in my previous example. The order was processed on Monday noon and the book arrived at my home on Tuesday. I had proposed COD (Cash on Delivery) – and hence the product would be paid for only after delivery. The delivery boy was kind enough to call me on my mobile while I was at work since there wasn’t anyone at home, After sorting out the same, the book was handed over to someone at home. And pronto – I get an SMS in a while from Flipkart – that the book was delivered to a family member. Technology used to its best, I felt.

Again, there wasn’t any logic for Flipkart to sell it so cheap – if they would lose 30% margin for a transaction (and most items on their site are on discount), then where do they make money? Assuming that their Gross Margins is around 40%, this is a ridiculous business format, to say the least. Over the months, PEs and Investors have shunned away from encouraging E-Commerce businesses in India. A prominent Indian etailer which was also one of the earliest to pioneer the concept of online shopping seems to have run out of cash and hasn’t paid salary to its 100+ staff for over two months. Half a dozen of them have either shut down or been bought over by their peers and competitors during 2012. And many more will go out of business in 2013. I am neither a prophet or a pioneer to predict what would happen to the fate of such businesses but when an etailer is operating at –15% or more (negative) margin, then isn’t it logical to say so?