Happy Hours on the Web

The term “Happy Hours’ is better known for a “Buy One. Get One Drink Free” at most bars and restaurants all across the world. F&B Retailers have for long used this to lure customers to trickle in to their premises during the lean times, which is typically between 3pm – 8pm and Happy Hours are usually between 5pm – 8pm. While the margins on alcoholic beverages are quite high, say 200 – 500% on Sales, Restaurateurs forego some of it to get customers and utilize the time well and also hope that these customers would continue much after the Happy Hours are over. Also, consumption of food during the course of having a peg or a mug is quite high and hence they make money on it as well. I remember, a tony Restobar on Church Street in Bangalore offerred a group of 8 of us Happy HOurs even after 8pm, knowing fully well that the business that would arise out of our total consumption is well worth it.

What is new, is that e-commerce companies are now promoting their “Happy Hours” to lure shoppers to buy online during the so called “lean hours”. What is interesting is that the business on the web is busy only during a few hours in the day. As you would guess, it is during the day time, and between lunch and evening. The reasons for this kind of hectic activity is as follows;

Broadband Speed

Most (online) shoppers’ households still do not have the kind of internet speed that’s available at their respective offices. The Airtels and BSNLs of the world do not offer seamless connectivity that the IT Managers in small and large companies work relentlessly to ensure connectivity all the time for business purposes. And therefore consumers prefer to shop online during office hours. Incidentally, IRCTC sees hectic activity between 9am – 11am, especially for tatkal bookings.

Secure Access

Home internet is certainly not as safe and secure for making online transactions, and is vulnerable for hacking, especially by fraudsters who are constantly monitoring those who are shopping online. So, online shoppers tend to believe that office internet is much safer and is hack-proof, although it is indeed a misnomer

Delivery

Many youngsters live away from their families these days, mainly owing to work and do not have a permanent address. Some others do not have anyone to collect the goods being delivered, especially if they as COD – Cash on Delivery products. Hence it makes sense to get them delivered at their office making it more convenient.

Boredom

Over the past decade, the internet has been an important leveler to kill boredom. During the initial days, it was just about reading (Internet 1.0) where one could only transact one way. Then came the years when Google started invading our lives with various products, Youtube being a very important one. Social networking has seen hectic parleys over the years including Facebook, Twitter, Pinterest and so on. Online Shopping is a mere extension. People shop online, from grocery to gadgets, tickets to gifts, just to kill their boredom. Also, long office hours (during the week) and travel to hometown (over weekends) doesn’t allow many to shop at High Streets and Malls.

Desktop / Laptop

While mCommerce or shopping on the Apple or Android smartphones is becoming common, shoppers still prefer to see the products on a wider screen such as Desktops and Laptops as it gives them a better view of the products. Also, the reliability of 2G/3G connections is much lower than on wifi/broadband services.

I read this recently on the web;

“If I want to find something, I will Google it. If I want to buy something, I will Amazon it.”

Very powerful statement.

Amazon India recently launched a campaign to encourage shoppers to shop online during the evening hours, promising them best deals in town. I guess more and more etailers would follow this trend shortly. "Working hour visits are the highest—there's a spike around lunch time and evening and dies out at night," said Sandeep Komaravelly, vicepresident, marketing, Snapdeal.com told in a recent interview to The Economic Times. "Besides, weekdays are busy for shopping online, while weekend traffic drops by 10-12 per cent, particularly on long weekends like this one." Hasbro Clothing, the parent company of basicslife.com runs 100 exclusive offline stores and also retails via 800 multibrand outlets. "Office net connectivity is much faster than at home, prompting quick purchases at work," said Sriram Ravi, head, digital marketing, Hasbro Clothing. "We get 20 per cent daily orders around lunch time and marked increase during office closing hours. People are done with the day's work and use the last hour to browse and buy from shopping sites, while on weekends, sales in retail outlets are higher." Average time spent in buying boxers or handbags or shoes online is five to 10 minutes and these are typically repeat buyers, familiar with a site and knowing what they want.Same-day delivery options are also pushing buyers to shop during office hours. For example, eBay India offers nine-hour delivery, but for this, orders have to be placed by noon. At Amazon, orders have to be placed by 10 am to qualify for sameday delivery according to The Economic Times.

Honestly, there is no good time to shop. Anytime is a good time, from the view point of Retailers. It’s just a matter of time that Offline Retailers would also start offerring discounts during lean hours, a practice started by United Colours of Benneton many years ago. For now, check out the web for special deals. If you reading this later in the evening, you may be in for a surprise! Happy Shopping…

Digital Retail is still nascent

Croma, which is a part of the TATA Group has been my preferred store for shopping all things electronic over the past few years. They customer service is friendly, well-stocked and well maintained and operated stores. The staff also double up as digital experts, mostly guiding customers on why they need to buy a gadget, rather than what they need to. The apple Assistant at one of the Croma Stores I frequent is more like a good friend and advisor now – I reach out to him regarding queries about the phone, the software, the enhancements and a whole lot. Croma’s main competitors in the organized Retail space include EZone from the Future Group and Reliance Digital, a part of Reliance Retail. Then there are the local biggies, such as Viveks, Shahs, VGp, etc in Chennai and ofcourse the most infamous Ritchie Street off Mount Road which is the hub for electronic products in the city. Croma has fared much better than the others while it faces stiff competition from Reliance which is expanding rapidly off late.

I visited the Croma Store on Mount Road a month back, to enquire about a revolutionary device – a a USB Stick which provided 3G & Wi-Fi services on the go. The device just needs a plug point – AC or DC; which means you can use it as a wi+fi device using the cigarette lighter slot in your car and can provide its service upto 5 gadgets including laptops, tablets, phones, iPods, etc. The device has been around for sometime and the staff say that it is seeing brisk sales every other day that it gets sold out within a few days of stocks coming in to the store. So, the store that I went to didn’t have the stocks and they apologised for the same, and said that I could pay the advance for the device and that they would call once the device reaches the store. Somehow, I wasn’t comfortable with that idea, since I wanted the device then and there.

I set out looking for the Tata DOCOMO Store that exclusively sells these devices and offers other solutions and services of the same nature. Even they didn’t have the stock at the time I went. However, the staff was quick to note down my details and said he would call me the next day as soon as he received the stocks. And he did promptly call me the next day. Within just four hours, the device was working!

So, why did the guy at Croma not do what the guy at the DoCoMo store did? Since, the sales targets were different to each one of them, simple. For a mass retailer, which attracts hundreds of customers to their stores, the kind of focused service is always on the back seat. For the guy at the exclusive store, his key targets are selling the USB sticks and converting buyers into users and users into big spenders. It’s a known fact that “data usage” is indeed going to be a money spinner in times to come for Telecom companies, with SMS being replaced by the likes of whatsApp and ISD calls being replaced by the likes of Viber, Line, etc.

I would have expected Croma, which is also a Tata Company to work closely with another division of the group (DoCoMo is a Telecom company operated by Tata Teleservics). It is challenging, since they are different companies with different cultures. Also, the supply chain mechanism could be different. The big learning was as consumers, we need to visit the right kind of stores to get our things done. While it is simpler to buy online, it takes much more time to get the sim-card activated which required personal identification at a retail store, and hence only elongates the process.

Reliance wins handsdown

The first store for Reliance came up in Hyderabad. It was a grocery retail format and many skeptics wrote off the idea, citing intense competition in this segment. Gross Margins are low, two-digits and net margins, if any are a mere 4-6%. So, how would the company ever make money? Further, there were already established players in this segment, especially in the South (of India) such as Foodworld, Spencers, Food Bazaar, Nilgiris, FabMall, Trinetra (now together More), Fresh @ from Heritage Foods – the list could go on! But patience and perseverance has helped the company in the long term. According to a report in the most respected Hindustan Times newspaper, the company would become the largest Retailer in India by Sales in 2013-2014. The company is expected to close the year with $2 Billion in Sales, approx. INR 12,000 Crores. And it made a meagre INR 78 Crores last year and has made INR 278 Crores in 2013-14. That’s not bad at all. The company has been able to achieve scale over the past 7 years and its many Chief Executives of respective businesses have built the business brick by brick, sweating and toiling between Board Rooms and Store fronts.

Take a quick look at how the numbers stack up;

It’s a commendable achievement for Reliance Retail to achieve this position. Those who know me well would now agree what I have been saying ever since Reliance joined the fray in the Retail sector. I predicted right in the beginning that they are here for the long term. With a cash pile of INR 90,000 Crores and managing the largest Oil refinery in the world, Reliance has real deep pockets. And its Chairman Mukesh Ambani is not someone to open and shut businesses. Its not in their blood. Dirubhai Ambani, the patron founder of the group tht every household in India should have a Reliance product in some form or the other. The group created a furore in 2002 when the Reliance Mobile network was launched with an exciting Rs. 501/- package making it the most affordable mobile phone of its times. Similarly, they forayed into various other businesses and turned around all of them, albeit patiently.

One of the biggest reasons why Reliance has been able to reach where they are is also because of steadfast focus in the formats that they have opened and operated. They just have one Hypermarket, One Digital Electronics Format, three formats in Fashion, one in Jewelry and half a dozen international brand tie-ups. Makes it easy to focus on scaling up each vertical constantly. Reliance operates small supermarkets which compete with Kiran Stores and other organized players such as Spencers, Foodworld, Food Bazaar, etc. Reliance hyper directly competes with Metro AG, Best Price (Bharti Retail), Hypercity (K Raheja Group), Total (Jubilant  Retail), Big Bazaar (Future Group) nd other local wholesale markets and APMC operated mandis. In the fashion segment, Reliance Trends is positioned against Lifestyle (Dubai based Landmark Group), Shoppers Stop (India’s largest Department store Chain) and Pantaloon (now owned by Aditya Birla Group). Reliance Footprints has a unique positioning and doesn’t have major names for competition except Metro and Mochi who have a pan-India presence. Reliance Jewels competes with the local jewelry stores in each micro market. Reliance Brands such as Diesel, Quicksilver, etc. compete with their international competitive brands.

This is just the beginning. Look how Reliance is going to grow leaps and bounds in times to come. I am still sure that they wouldn’t have a JV with the global biggies such as Wal-Mart, Carrefour, etc. They would rather grow organically in times to come.

The game gets more interesting.

Food Retail is tuff…

Restaurant business is damn exciting. While people don’t shop for clothes and mobiles every weekend, most people drop over for a good meal frequently and a great meal, once in a while. Great Meal, I mean is a bit indulgent. It could be a Michelin rated restaurant. It could be one among the top 10 restaurants in the country. It could be a celebrity chef’s eating place. Ofcourse, the Five-Stars. The list is long. However, the food business is also one of the tuffest to be in. In fact, it is also one of the retail formats where the churn is very high. For every 6 successful restaurants, three of them fail. And the reasons for failure are aplenty, Customer Service (or the lack of it) being one of the main reasons why restaurants cannot keep up in the short to medium term. Also, investors are not too keen to fund ventures that do not show the ability to scale. 2-3 outlets is not scaling up. It should be in double digits. Most of the restaurant owners are entrepreneurs, many having chosen the route to entrepreneurship after stints in corporate life. They invest their life time savings to open a restaurant (also includes Pubs / Nighclubs / Others) and usually find the going tuff within 18-24 months of opening. That’s when the business matures and needs further investment in marketing and PR – the machinery that keeps restaurants going. I was at a restaurant called “Tangerine” in the upmarket Alwarpet locality in Chennai. The last I had been there was about a decade back. The food was excellent, just how I remember it had tasted during my last visit. However, the place was a bit worn down. The kitchen, which has limited space and equipment cannot cook more than two dishes at a time, which increases the waiting time for guests. The staff fare not all that excited, since they don’t get regular footfalls all over the week.

The business is all the more difficult if they operate in niche categories. In a city like Chennai, there is a strong thrust on Veg-only restaurants. Yes, you heard that right. In fact, India is the only country in the world which has so many veg-only restaurants and that too, all across the country. I visited one last month. It is called La Shakahari. La, being a french word and Shakahari being vegetarian in Hindi language. The restaurant is located inside a residential area and I was almost being challenged by the Google Map in my phone to find the place despite its best efforts. But once we entered, we realized what a great place it was. They had a set-menu as well as A la Carte. The set-menu offerred more items for what we would have paid otherwise while ordering them individually.

One of the biggest challenges that Restaurateurs face is the inability to scale-up. Most times, it’s the lack of capital. At times, it’s the lack of intent and interest to grow. A potential investor would indeed be able to show inclination to projects which are tried and tested. However, many entrepreneurs just don’t expand. Another option to scale up is the Franchising route. However, the risk is you would lose consistency in the long term and many of them would probably serve food that tastes different.  For fear of not diluting their exclusive menu and taste that it offers, these restaurants remain standalone ventures and thus allow others to crop up in other parts of the city.

Of all retail formats, the F&B format is one of the toughest to operate. Many of them shut shop within 24 months of opening. If they withstand any further, then they strive to stay for a long time in their lifecycle. It also depends on the choice of real estate – Rent is almost 20% of Sales in Malls and about 12-15% at High Street locations. And that’s why you don’t find many of them in Malls not doing well or being priced exorbitantly. At the end of the day, the success of a restaurant is actually many factors playing in.

Facebook–Retailers’ best friend

I was browsing Facebook on my laptop which is quite rare. I mean, I would rather use my hand held devices viz., the iPad and iPhone for posting and checking status updates. Really don’t use the computer browser for this purpose much. However, the larger screen size means one gets to see more things like what I saw today – one of my friends’ birthday in the coming days – a gentle reminder of sorts. And there is a small tag below which states I could buy a gift online! I was surprised that Facebook has integrated this facility on its homepage although the Gift App has been around for some time. While I further browsed through, it showed the Brands and products my friend has liked or mentioned in his posts. And bingo! There are options to buy gift vouchers straight out of the Facebook page… This was truly amazing. As a Host, I can even choose when the gift voucher should reach the birthday boy and it can also be mentioned on the timeline. Honestly, this is super cool, I felt.

Ecommerce is gaining enormous proportions in the world today. In India, it is a USD 20 billion opportunity by 2017 and growing at a CAGR of over 40% over the past few years. More and more Indians are taking to the internet for consumption of news, browsing and of course shopping and the Government suggests that there could be over 230 million users in the country at present.

Facebook means various things for people. For someone, its just a public profile which is for others to know that he or she is also on Facebook. For many, it’s a chronicle of their life – for their friends and family to know what they are doing, right from the time they snooze their alarms to the workday as well as food, drink and dinner, not to mention movies and music. Gaming is an important past time for some. Thousands of friends and contacts are found everyday on Facebook, thanks to technology which is bringing the world closer. Many companies do not focus as much on their own website as much as they do on their Facebook pages which are interactive and are probably having a better reach comparatively. Daily contests, product updates and other marketing opportunities are a regular feature.

Coming back to the curious case of gifting online, the gift vouchers were predominantly for the US market – Starbucks, Dominos, Chilli’s, TGIF and many more among Food & Drinks, Barnes & Noble, Best Buy, Old Navy, JC Penny, Gap to name a few among Retailers, Spas, Uber Taxi Services, Rdio among entertainment and even Charities such as ASPCA, WWF, Unicef and many more. One can choose among the various gift voucher options that are listed on the Facebook page, pay online and the gift voucher would be sent as a coupon to the receiver by email. The voucher can then be redeemed online or offline, depending on the Etailer or Retailer from whom the voucher has been sent. According to Anshul Gupta, former Head of Gifting at Indiaplaza.com, the pioneers of online Retailing since 1999, Gifting is an enormous opportunity in the Ecommerce space. He also feels Gifting is very personal and is social in today’s context. While the option to gift someone something and the price to pay is the prerogative of the one who gifts, it is about the other person when it comes to the choice of gift.

Even in a very evolved Retail ecosystem such as in the US, there are just a handful of Retailers who are taking advantage of this opportunity. I guess it wouldn’t be too long when the listing would be country wise or region wise. It would help Retailers to expand their reach and push their vouchers to as many people as they can, thereby attracting clicks to their online website or footfalls to their stores.

If Facebook buys out ecommerce companies, specifically for a continent or region such as Snapdeal or Flipkart, then this would open up a host of opportunities for Retailers, Customers and a great monetizing opportunity for Facebook themselves. Retailers like Shoppers Stop, Croma, Odyssey, Café Coffee Day and Starbucks already have a strong digital presence and may push their vouchers through Facebook for prospective customers through the gifting platform. These instances only prove me from time to time that Retailers have a bright future ahead. Just that the timing is key.

So, next time you wish to send a gift to your loved one in the US, try the gifting app on Facebook. You may be helping them earn some additional revenues while paying for the photos that you have stored on their servers! Happy Gifting.

Smartphones & Dumbphones

In the early 2000s, there was only one mobile phone brand that was popular in India. It was none other than Nokia. It was considered the “Maruti” of mobile phones, with one model priced at a gap of a Thousand odd Rupees. Customers could choose from an array of models starting from a few thousands to a lot of thousands! Mid-2005, came the BlackBerry. A BB was the ultimate corporate tool that every executive carried; or rather wished he could carry. Over time, the company reduced the entry level prices and it was accessible to small time traders, entrepreneurs, businessmen and their ilk. The Late Steve Jobs, former CEO of Apple Inc. unveiled the iPhone to the public on January 9, 2007, at the Macworld 2007 convention at the Moscone Center in San Francisco. The two initial models, a 4 GB model priced at US$ 499 and an 8 GB model at US$ 599, went on sale in the United States on June 29, 2007, at 6:00 pm local time, while hundreds of customers lined up outside the stores nationwide. The passionate reaction to the launch of the iPhone resulted in sections of the media dubbing it the 'Jesus phone'.The fit and finish and the premium pricing meant that it excluded the masses. It was seen as a toy for the rich and famous. Soon, Apple realized that they had to be a useful product for millions of people worldwide and hence subsequent models such as the 3G, 3GS, 4, 4S, 5 & 5S were released. The latest in the line is of course the hugely popular iPhone 5S which was launched on 20 Sep. 2013. It is also the most sold model for the company.

Between the rise and fall of Nokia, Blackberry and Apple, several other brands have come (and a few have gone) with their range of smartphones. The commonality of the former three is that they used their own hardware and software whereas all other devices manufactured by brands run on the Android software which is developed and owned by Google. One of the reasons why Blackberry and Apple were appreciated by their customers was that their products were unique. While the most complained thing about the Android devices is no matter how the phone looks (or feels like), the interface is just the same of the Android. The world has most number of Android phones, but that’s probably due to cheaper price points of these phones as well.

Apple has been playing hide and seek in India for the past couple of years. While the market seems promising, its China that’s a bigger opportunity currently for the company. Despite so many efforts by its Senior Management to focus on India, the California HQ team has been reluctant to do so, for reasons best known to them. This has been clearly visible in the Sales and Marketing Strategy, Distribution network and Pricing. Clearly, India doesn’t seem to be among the favourites yet. However, last week, Apple announced that it would commence manufacturing of the now discontinued iPhone4 model to play catch up with the Android device manufactures such as Samsung, LG, Sony, Micromax and others to compete aggressively in the Indian Market.

I was astonished to see a huge advertisement for this now obsolete model at Delhi Airport’s Terminal 1D recently. Why would a user want to buy an expensive smartphone, which is now obsolete in the developed markets, at a price point where there are several other options! As many say, Steve would have never allowed it to happen. If you have read his Auto-Bio like me, you would know what I am saying. The business team is trying to play catch up in a market which is flooded with cheaper, imported as well as locally manufactured phones.The iPhone4 which I owned two years back was an excellent phone, but was only relevant then. Some of the new features that the competing Android devices currently provide are no match for the older Operating system of apple that this model runs on. Will this bring pot loads of money to the company? Probably no. Will this bring a distribution strength to Apple in India? Yes. Retailers like Croma, EZone, Reliance, Univercell, etc. would be happy to stock these phones and offer them at prices sub-20,000 with buy-back schemes and EMIs on Credit Cards. This is a wait and watch game. Apple has to do a lot more to upgrade users from dumbphones to its range of smartphones. It would not happen any soon. It would not happen with any one model. The entire infrastructure has to be focused on the supply chain-pricing-marketing model. While most Apple users do not downgrade (their models) at any cost, its mostly the users of other platforms who move to Apple. Price alone would not be enough to convert them to buyers and loyalists. Apple needs to do a lot more.

Dining experinces redefined

I had the opportunity recently to stay at Hotel Vista Park. It is located bang in the middle of the iconic Sector 29 Market at Gurgaon. This market is very special since it is the only area in Gurgaon which has about two dozen eateriees, restaurants, pubs and cafes. It also has Reliance Mart, one of the few Hypermarkets operated by Reliance Retail which is on its way to become the big daddy of Indian Retail in the organized segment. Footfalls pour in all through the day and night; mostly office goers who drop over for lunch or an evening catch up with friends and colleagues; And families over the weekend. Bikanerwala, one of the largest food chains in North India has a two storied very large outlet that sells sweets and condiments, has a fast food counter and a well laid restaurant. There is also a Micro brewery, Hops & Brews which I visited twice just for the love of fresh beer - and weisbeer is extremely rare to get in India except at such places.

Then there is Starbucks Coffee, which brushes shoulders with Cafe Coffee Day and Coffee Bean and Tea Leaf. There is Mainland China and a couple of other restaurants that serve chinese/oriental cusine. Sphagetti Kitchen, one of the most remembered names for high quality Italian food is a mainstay in the market. Cream Centre, the high-end Veg Only Restaurant along with Sasuraal serves authentic North Indian and Punjabi food.

And then there are two large hotels which have over 25 rooms each, one being Hotel Vista Park where I stayed. These hotels also have restaurants and a small bar. To my utter surprise, there was literally no one in the in-house restaurants in the evenings. I would have expected the hotels to run a few schemes such as Happy Hours in the Bar or Food combos. But no. The staff were not bothered that guests were walking away to nearby restaurants. The Management seemed to be unaware as well. 

Restaurants in hotels, especially the Bar is expected to be a money-spinner. Delhi/NCR has more than 25,000 rooms of all classes and sizes, so most of the hotels have not more than 85% occupancy during peak times and about 45-65% occupancy during the year. Therefore, ancilliary income from room service, restaurants, banquets and party arrangements become extremely important for Hotels. These revenue streams are not always given a keen look by the Hotel Management teams, thereby allowing guests to spill over to nearby restaurants, bars, pubs etc. The main reason for Guests to move  out of the Hotels is because of the boredom created by the restaurants that are within and repetitive or usually uniteresting food and beverage options. 

So, are stand alone restaurants, pubs and cafes a threat to these Hotels? Indeed. To circumvent this kind of a spill over, Ginger Hotels, a part of The Tata Group had tied up with Cafe Coffee Day. The cafes of CCD are located within the premises of these hotels, usually in the lobby and would normally be open 24/7 and would even serve piping hot Cappuccinos and Sandwiches to the rooms. Most of the Ginger Hotels have these cafes. A few standalone hotels too have made such arrangements to attract non-resident guests and the public at large. In the West, it is common to see cafe chains such as Starbucks, illy, Costa, to name a few to have their cafes within smaller boutique/business hotels. 

Hotels could do better to have attractive F&B units within their premises to add value to their revenues. Alternately, they could have more exciting dining spaces to retain resident guests. Ultimately, it is what they want to offer to their guests as part of the overall experience. 

‘Santa’stic Holiday Shopping!

Santa Claus is a symbol of positivity and cheer, is well known. But he has been used as a constant Brand Ambassador by Retailers all over the world for quite many years now. Retail Stores use various displays of Santa at their precincts – some use static images and some use real men (or women) as real life Santas who give away candy bars and chocolates, goodies and gifts to children and elders who pass by the store. Santa is a global symbol of mass Retail Advertising, I would say. From Brown Goods to Apparel, all Retail formats use Santa in their copy some way or the other to connect with their audience and to bring the relevance of shopping during this season.

Afterall, Christmas is not just a religious festival, not atleast in India, one of the most secular countries in the world which embraces all forms of worship in its country. While it may be rare to have a Masjid, a Temple and a Church to share walls, its not uncommon for people across religions to celebrate each others festivals. Diwali and Id are two other festivals which are celebrated with much fervor all over the country. Christmas is no more restricted to Christians in India, but to the community at large. Many Hindu and Muslim homes decorate their premises with small and large Christmas Trees and Stars in their balconies and order Cakes to consume with their family and friends.

This Christmas Season, leading Retailers have used Santa in their campaigns. Pantaloon Retail, formerly owned by The Future Group and now by Aditya Birla Group has a “Buy 2 Get 1” Offer on its entire range of products. Shoppers Stop, India’s largest Department Store chain with over 61 outlets across the country has a 20% cash back offer in the form of Discount Vouchers. While the offer is only for a limited period, it would promote future walkins and shopping due the Discount Vouchers being provided with every shopping worth Rs. 5,000 or more.

 

Its also a great time to shop for Consumer Durables. Chennai’s leading Retailer Shahs and Viveks are offering massive discounts on LED Tvs, Washing Machines, Refridgerators, Cameras, et al.

 

Leading Brands like Apple and Samsung, surprisingly do not have any special schemes this Christmas – Diwali is probably a bigger festival for shopping personal gadgets. Now is the best time to fill your homes and wardrobes. So rush to your nearest Retail Store and shop more, save more! Have a Santastic Shopping Season. Merry Christmas.

Catch up Game: Organized Retailers vs. Kiranas

I join my wife every month for shopping grocery and household items at Food Bazaar, the flagship Retail format of The Future Group, which is also India’s largest Retail company. She is part happy that I accompany her in household chores, but she also knows why am I there – for my own benefit, when I get to observe how consumers behave within the store. I click pictures, tweet them and seek responses from friends and colleagues within the Retail fraternity. During my recent visit, I spotted a poster which said Rice Bags can be delivered to the doorstep if the customer chooses to. In the southern part of India, rice consumption is quite high. A middle class family comprising four members buy 20-25 kgs of rice every month. There are different variants in Rice and depending on their food habits, people buy appropriately. It used to be a common practice until a decade or two ago when Rice merchants would visit homes and sample rice to their customers at their doorsteps. After finalising the right variety, the merchant would deliver gunny bags of rice to the customer’s homes. Conceptually, the more you buy, the lower the price. So families would usually buy 2-3 months of stock at one go. And it was a usual practice to give credit for payments – usually a month’s time, sometimes even on installments. All this changed with the advent of corner shops and small grocery stores stocking rice and offering them in smaller quantities at an attractive price. With joint families becoming smaller nuclear families, the size of residential units also shrank. Which meant that the space to stock also was limited. Hence, customers started buying smaller packs, more often. To ensure customer loyalty, the Kirana stores (Mom & Pop Stores) also used to offer credit facility for customers.

Things started changing in the late 90s, especially in the South (of India) when Organized Retailing started taking shape in the country. Nilgiris was one of the first Retailers to set up a large format store that could accommodate over 10,000 SKUs. Foodworld (from the RPG Group) was the first Retail chain that spread its stores every 4-5 sq. kms in its home market in Chennai, followed by Bangalore and Hyderabad. Over time, they started imitating everything that the small grocer did, and 20 kg Rice Packs was a crowd puller. Foodworld used to sell about 300 tonnes of rice a month across its network and hence could get a good price from the farmers directly. Its huge warehouse in the outskirts of Chennai would sort, clean and pack the rice in 20 kg bags, easy to carry. In fact, the staff had targets and special incentives to just push the sale of Rice Bags! Such was the frenzy.

The trend has continued till date. Large quantities are always preferred by Retailers and Brands. Ground wheat known as Atta, the base material for making batter for preparing various varieties of Roti is another packaged commodity today across the country. Annapurna from Hindustan Unilever and Ashirvad from ITC Ltd. are market leaders in this segment. Salt, Oil, Corn Flakes and many more categories have taken the route to bigger pack sizes to show better pricing to customers. Diapers, in recent times is another killer category. Traditionally, Diapers were not being used in most parts of India until a decade ago. There were two reasons – one, it was felt to be unhygienic. Second, they were priced very high. Mamy Poko, a Korean brand landed in the country 5-6 years back and has sent local players such as Pampers running tizzy.

Organized Retail in India is still less than 10% of the total market of about USD 200 billion. But Retailers in the Grocery segment have seen their business only grow, despite the advent of more and more players. The reason is simple. Retail is a game of scale. The more you grow, the better you leverage your expenses. One of the main reasons why small grocers were unable to scale up was capital. And the reason why large Retailers like Spencers, More (Aditya Birla Group), Smart, Heritage Fresh and the controversial Subiksha that went bust and many more Hypermarkets such as Star India Bazaar (from TATA Trent), Hypercity (K Raheja Corporation) and Spar are facing the heat, is due to their inability to meet customer’s expectations mainly through right merchandising, stocking and pricing. 

I wonder sometimes, who is playing catch-up, whether it is the Kiranas or Retailers. Both have a lot to learn from each other. And there is no reason why both cannot succeed in India in times to come. The key here is adaptability.

Brewing Cheer with Beer!

I recently happened to meet Rahul Singh, Founder and CEO of “The Beer Café”, an upcoming chain in Delhi NCR, based out of Gurgaon. Rahul comes across as an affable person, having spent over 20 years in the Indian Retail Industry. Before turning entrepreneur, Rahul was working for Reebok as Executive Director and was responsible for sourcing apparel for domestic as well as export markets. An electrifying guy, Rahul seems to have a natural flair for entrepreneurship. It was a chance meeting to discuss a business proposition but turned out to be a very engaging 90 minutes one on one. Prior to The Beer Café, Rahul  was responsible for creating the first ever indoor Golf centre along with F&B and Entertainment at Gurgaon, at the upscale Ambience Mall.

I couldn’t resist but to ask Rahul how many months did he take to come up with the idea of a Beer only place. He was quick to retort saying that it took him just two months! I loved the way he simplified his method of narrowing down the concept. According to Rahul, there are three broad categories in the F&B Business – Fine Dine, Quick Service and Fast Food. He chose the Fast Food model. Within that, there were two options – to focus on food or beverage and he chose the latter. And within Beverages (read Coffee Café chains like Café Coffee Day, Barista, Costa Coffee, Gloria Jeans and Starbucks which have more than 2,000 cafes in India), he chose cold beverages and that’s how the idea of Beer Café was born. Simple idea that relies on classy execution.

Rahul wants his chain to be the CCD of beer and conversations. Alcohol frees up the mind and the soul and today, one has fewer choices to consume a pint of beer, either at a restaurant or at a Pub (home parties are a limited choice though). So, he wanted to set-up Beer Cafes in convenient locations where people could drop by with their friends or colleagues at work for a quick chat or a relaxed conversation.

The Beer Café now has over 11 locations within Delhi/NCR and would have about 30 operational outlets within the next three months! With VC funding coming in, Rahul hopes to grow the café network substantially over the next couple of months. His only gripe: Real estate costs of First World with consumer spends of Third World. Every Retailer would agree to this quote. Operating Costs, especially store rentals are extremely high and staff attrition is another big challenge. Rahul is now looking for an able COO to run the business, so he could take a bigger role in managing Strategy and Expansion.

The café is very appealing, with bright lights and a friendly attitude of staff. On a weekday evening when I passed by at the Beer Café at the Ambience Mall at Gurgaon, there were many who were having a good time seemingly. And many more would be in times to come.

Should Cafes Advertise?

I came across two special offers by India’s leading café chains Café Coffee Day and Barista today. One was through a email campaign – Buy One (Cappuccino), Get One Free. And the other was on newspapers – a combo offer of a Cappuccino and Egg Wrap at a discount of over 35%. And this was not an isolated case – both these café chains have been advertising in the mainline media for quite a while now and have also been continuously offering discounts over the past couple of months on their products. And all this for attracting footfalls into their cafes. with the onslaught of new café chains such as Starbucks over the recent months and those such as Gloria Jeans, Costa Coffee and other regional café chains, this space has been witnessing active poaching of customers. However, the regulars haven’s shifted loyalty, and that’s in the proof of the pudding. If that were the case, monthly sales of these chains fluctuate quite much, which has not been the case.

The biggest effort for cafes, contrary to what we believe is not just retaining existing customers but attracting new ones as well. CCD, as it is popularly known has followed a deep penetration strategy in large cities like Bangalore (where it is headquartered), Mumbai, Delhi, Hyderabad, Chennai and Kolkata. There are over 8-10 cafes of CCD within a 3 sq. km radius in Bangalore and all cafes are full with guests in peak times. Chennai, the hotbed of the South Indian Coffee culture has grown slower for CCD than other cities. That’s perhaps because the iconic Filter Coffee available in regional restaurant chains such as Saravana Bhavan, Ananda Bhavan, Vasantha Bhavan, to name a few are just unbeatable. The modern cafes also do not prepare the filter coffee and are more popular with the Cappuccino, the Latte, the Americano, the Espresso and ofcourse the cold coffee varieties which are difficult to replicate and are not easily available at other restaurants. Barista, which has slowed down its growth over the past three years and has focused on store profitability rather has been a pioneer of the coffee culture in the North, especially in Delhi. It has also been heavily advertising especially in conjunction with India’s leading newspaper Times of India about various offers.

So, this set me out thinking, “Should cafes advertise?”

The first answer that comes to my mind, is Yes, indeed they should. Every company must advertise its products and services through relevant media to their target customers. There are two kinds of advertising, I would say. One is the Corporate form; CCD came up with its campaign “sitdownism” a few months bacj which was an instant hit among the youth and was well appreciated within the Advertising faternity. And the other is advertising its products and services. But then, for cafes, in my opinion, being present in a locality is itself the best form of advertising. The store itself is an advertisement (and holds true for other retail formats too). Be it Malls or High Streets or Airports, Café are often point of direction or a meeting place. CCD at Bangalore Airport is located in a very prominent place such that no one can ever miss seeing it. Same applies for Gloria Jeans at Hyderabad Airport. However, At Delhi Airport’s T3 Terminal, Starbucks is quite tucked away and is almost missed by everyone.

The café should rather focus on the following to retain customers and to attract newer ones mainly through word of mouth;

• Ambience
• Convenience
• Familiarity
• Consistency
• Quality

These are some factors which potential customers would consider before they step into the café for coffee and conversations. Most of them, even college kids who are the most targeted for such cafes do not like to indulge on products that are heavily discounted. Or would like to be seen in places which are positioned as being “discounted”.  I would wonder then, why do cafes scream so loudly that they have products which are “discounted” and gain adverse publicity. A satisfied customer would get ten more, goes an old saying. Cafes would do better in attracting newer customers if they provided top quality Coffee and other Food & Beverages to its customers with consistent quality and convenience (Read: Furniture, Sofas, Chairs, Plug points for Laptops, Wi+Fi, toilets) and make the place a familiar one for them to revisit. Afterall, cafes are meant to be the third alternative place after Home and Office and hence need to be the first point of recall for customers to walk into.

Chennai Airport is a sham(e)!

Even before I was part of the exciting world of Airports (in 2006), I have always been a big fan of the commercial opportunities at transit points, be it the railway stations or bus terminals, let alone airports. It was always a craze to have a cup of coffee at the railway station when we would go over to pick up our loved ones arriving from long distances, especially if the visits were made once in a couple of years. It was yet another joy to consume within trains – from Rajdhanis to Shatabdis to the passenger trains that would have hawkers selling everything from peanuts to guavas to oranges to chips and snacks. The joy of consumption during travel would somehow take over the joy of travel itself.

I have been using airports for just over 15 years now. My first flight was to Mumbai from Chennai to attend a job interview with a leading Retail Chain, with air tickets being sponsored by the company. That was the first time I was inside an Airport terminal, although I have been several times before that to drop off or receive guests from the Chennai Airport. The airport was and continues to be an important piece of the growth story of the state (of Tamilnadu) as well as served as a gateway to the rest of Southern India. In 2005, when the Government of India announced privatisation of Airports, the most protests were seen outside the Chennai Airport, the maximum being only second to the city of Kolkata. The staff of Airports Authority of India (AAI) and allied agencies protested that their livelihoods would be lost if the airport was privatised. The Government succumbed to pressure; Chennai’s loss was to the gain of Bangalore and Hyderabad. Both the cities claim to be the Gateway to South India and came up with world class private airports in the outskirts of the city in 2008, albeit the cities have been growing faster in their respective airport corridors over the past 8 years. Mumbai and Delhi somehow managed to keep the privatisation tab on. Delhi’s T3 Airport Terminal, which is managed by the GMR Group  was built in record time and is now ranked among the top 5 in the world, consecutively for the past 3 years. Mumbai Airport, managed by the GVK Group built two new terminals for Domestic and International passengers and is struggling the political onslaught for space within its precincts which has been occupied by the public at large. Kolkata and Chennai Airports were allowed to be redeveloped by AAI and the work completed early this year with a time overshoot of over 9 months and a cost escalation of several hundred crores.

According to a recent survey by passengers on sleepinginairports.com, Kolkata Airport has been ranked 2nd worst in the world, with Chennai following a close third. What an infamy for a state which is considered the Detroit of India housing majors such as Ford, Nissan, Hyundai, Royal Enfield, Ashok Leyland, Hindustan Motors, MRF Tyres, Saint Gobain, Nokia, Samsung and many more! Chennai Port handles one of the highest loads in the peninsula. Chennai’s knowledgeable crowd contributes significantly to the Indian economy with Chennaites occupying important positions in the Indian Government as well as in global positions worldwide. And we have such a dud of an airport!

I feel quite disappointed, first as a citizen of the country and then as a resident of the city to pass through such an unglamorous airport every week, when I travel on work. The facilities are poorly planned. The Four Cs of airports, Comfort, Convenience, Cleanliness and Customer Service are shameful, to say the least. The only saving grace is the imposing façade which looks attractive for those passing by on the Grand Southern Trunk Road outside, but nothing more inside. There are no refreshments available outside the terminal, save for a sole counter which sells local cuisine at thrice the price of what’s sold downtown and a small kiosk of Café Coffee Day. The check-in hall has two ‘counters” where one needs to stand and eat snacks or sip coffee, just next to a dustbin which usually overflows, as though it’s a sort of a punishment. There is no bookshop or any other similar offering around; the only thing that solves passengers’ woes being the complimentary newspapers. The Departure areas are even worse. The layout of shops and other convenience is so bad that one would rather not step in than feeling disappointed thereafter. Cookieman and Frech Loaf are the only saving grace in the mess, although tehir products are meant to be take aways rather than consuming then and there. No Foodcourts or QSRs, just a restaurant located at the far end of the terminal. Services such as Taxi Operators and Forex are abysmally managed, with long queues for taxis in the peak hours in the evenings with unavailability of taxis for passengers. Airside services such as baggage handling are terrible. There are only four baggage belts and checked in luggage may arrive anywhere between 15-45 minutes after you land at the airport. There are only four aerobridges and the buses which provide ground transportation from the terminal to the aircrafts are poorly maintained. There is no complimentary Wi+Fi within the terminals. The airline staff and security staff from Central Industrial Security Force or CISF have a similar attitude as those who manage the airport – one that is indifferent and unfriendly. After all, it’s not just their fault since there is no one to oversee how good (or bad) their service towards passengers is.

I still believe there is hope. There is a plan to privatize the terminals through an open tender and the decision is expected to be taken by the end of this year with work to begin early 2014. Senior Executives from the companies which plan to bid had visited the airport to conduct a survey two weeks back were apparently welcomed by protestors from AAI, shooing them back not wanting privatization. But this time around, the Government doesn’t seem to back out. Hopefully, good sense would prevail and the airport would be handed over to a competent agency to serve passengers better.

An Airport is the face of a city and must display pride of place. It is the first point where international visitors to the country alight at. It is indeed important to put up a great one and maintain it as well. Lets hope.

Luxury at a Discount!

It’s a misnomer that Luxury Brands do not discount. Of course, they do. Just that they don’t do it so loudly and obviously as other premium and streetwear brands. Except for brands such as Louis Vuitton, Rolex, Mont Blanc, to name a few, most other premium brands promote discount sales, albeit succinctly. In most cases, they are not at their own stores but at cozy 5 Star Hotels, where the Brands hire banquet halls and quietly carry on with their business. Even then, they need to communicate what’s on offer and choose smartly created advertisements and place them on national dailies. The purpose of hosting these so called “Exhibition cum Sales” is to ward off the junta crowd, most of them being on-lookers. The moment the venue is a Star Hotel, window shoppers would think twice to drop over. It doesn’t look nice, quite obviously to take a public transport to such a venue. Secondly, shoppers still feel intrigued to browse and shop in star hotels, traditionally where luxury products are being sold world over, with India not being an exception.

The other genuine reason is also that we do not have high quality luxury retail spaces in India except for the DLF Emporio Mall in Delhi, the Palladium in Mumbai and the UB City in Bangalore. While there is a small hub by the name Bergamo in Chennai (at Khader Nawaz Khan Road), the RPG Group is coming up with a luxury destination in Kolkata. Apart from these, there are hardly any retail spaces that fit in to the luxury brands’ portfolio. And that’s precisely the reason such Brands choose 5 Star Hotels as venues.

Over the weekend, one such event was hosted at The Westin, Chennai. Prada shoes for Rs. 25,000, Fendi belts for Rs. 15,000, Gucci Wallets for Rs. 18,000 and much more. Yes, these are apparently discounted prices. At 11.30am, on the only day  of sale (being a Sunday), the room was full of discerning customers. Though there were hardly a few pieces in each line, most of them were being bought by those who had dropped in. Many of these brands are not available at Retail Stores in Chennai and shoppers have to travel either to Delhi or Mumbai or probably outside of India to get one for themselves. The smart sales team were even wooing visitors with catalogues, taking orders thereby fulfilling sales orders. The display of items was not as what one would expect in a Retail Store for such products, but perhaps suited well for the “Exhibition” theme.

I tried on the Prada loafers, size 11, but felt it was too tight. As is always the case, the prices were not mentioned on the items, be it wallets or shoes and many people who are price conscious would rather not dare ask for prices, unless they were sure to buy!

India needs varied Retail spaces. What we have now are either too large malls that cater to the middle class or star hotels that house Luxury Brands. We do not have suitable spaces for luxury brands. Malls chains like Phoenix Market City are cordoning off certain areas within the mall for luxury brands. Express Avenue, the only Mall of over a million square feet in the hart of Chennai has created a nice mix of brands. Its so secluded that regular shoppers don’t even pass by that side.

In the meanwhile, keep looking for advertisements in newspapers like the one above. You may be able to get a good deal on your favourite luxury brand in town!

No more EMIs for shopping

The Reserve Bank of India (RBI) has come very strongly against the ongoing practice of Retailers like Croma, The Mobile Store, Imagine, Univercell and many more in assosciation with product companies and Banks to offer interest free EMIs (Equated Monthly Instalments). Currently, Brands like Apple, Samsung and many others subsidise their products by passing on the margins to Banks in return for offerring interest free EMIs. Using a credit card, consumers can own their coveted piece of technology or household items by converting their purchases into convenient monthly payments instead of paying at one shot. Many people have bought their first iphone or other smartphones which offline and online retailers have been offering for quite a while. Believe me, it is indeed tempting. Instead of spending ₹45,000/- all together,  one could pay as low as ₹4,000 for 12 months without paying a penny as interest. Even though Consumers could have paid the full sum, they prefer to pay in instalments. The scheme has graduated many who were having feature phones and CRT Tvs to upgrade to a smartphone or an LCD/LED Tv respectively. 

So, where is the catch? Who bears the interest cost? 

Within the organized retail trade, debit/credit card penetration is quite low at about 15-35% at the max. Banks earn 1.25-2.50% commission on such transactions from Retailers. So, at a 12% interest rate on a transaction of ₹15,000, the bank could have earned ₹1,800 as interest. Instead, it gets only 2% on the transaction. The balance 10% is usually offset by the Brand which is promoting the scheme along with the Retailer. This is on top of the Retailer margin that the Brand pays the Retailer. Therefore, the real value of the product sold is much lower than what is perceived by the customer. The Brand usually doesn't disclose the discounted price of the product so as not to lose the value the customer would derive from the product. 

The scheme has been a massive hit especially among youngsters and first time income earners who are new into their jobs but would like to impress people around them with fine gadgets et al.

The Banks usually anticipate a credit roll over, which means the customer is unable to pay the EMI and therefore pays only the minimum due in a certain month and rolls over the EMI to the next month, on which the Bank earns 3% interest on the said amount. They make up the lost out interest here too. 

RBI is of the opinion that such schemes mislead customers about the impact of rolled over interests by Banks. The new Governor Mr. Raghuram Rajan probably also believes that these schemes promote unwarranted consumption thereby reducing monetary liquidity in the system. Among the slew of economic measures that have been taken since Sep. 13, this is a key one. Retailers are fuming. With the impending festivals eason coming in, Brands and Retailers expected a surge in sales. But this scheme has come as a dampener. Many middle class pople who aspired for their favourite consumer durable or furniture may have to put off their puchases or pay in full. 

NBFCs and private financiers have however been exempted. Bajaj Finserv which has an over 40% market share in Retail credit must be happy. But for availing the scheme provided by them, customers must furnish certain other details such as proof of income, proof of address, PAN Card, etc. So, there is still hope for Retailers and Customers. May the festival of lights bring hope to one and all and increase consumption. Consumption laeds to Growth. Retail prospers. 

Airport Retailers get an added advantage

The Reserve Bank of India (RBI) has recently announced that Non-Resident Indians (NRIs) are not allowed to carry Indian currency out of the country. Earlier, the limit was ₹10,000 to carry with them after clearing Customs and Immigration. This was basically some loose change to meet Food & Beverage expnses while in the Security hold area. While cafes and restaurants do accept prominent foreign currencies, even foreigners try to finish their Indian currencies while leaving the country.

What brings an opportunity is for Retailers to sell Indian souvenirs and interesting take aways which can be spent using the Indian currency.

Keeping this in mind, we had created a very large section called "The Spirit of India" at the Bangalore International Airport. Within this area was a designer boutique from ace designer Deepika Govind among others. One could buy scarves, stoles, jewellery, neck ties and many more before departing. There was also a bookstore which was operated by India's largest bookstore chain Crossword. The store had many interesting books that doicted Indian history, arts among others. I remember, the most sold book used to be "Kamasutra". Foreigners would take it as a souvenir and NRIs would take it as a gift for their friends who lived abroad.

The present rule is expected to be enforced with full force by RBI. If so, then this is a boon for Retailers to sell Indian products to those who are departing the country. 

Restaurants in Malls…

I was recently at Forum Vijaya Mall (Chennai), one of the newest in town. It was a Sunday and I was there for lunch, but the upper level of car parking was almost empty around noon, which took me by surprise. However, I was told two days later by someone who works for the Mall that there were over 45,000 footfalls on that day. The Restaurant that I was supposed to visit was located on the second floor of the Mall. As is usually the case, I checked the reviews of the restaurant on the Zomato app on my iPhone. Most of them had written good things about the place and its menu, not to forget their wonderful service. Here is a sample;

After such a good meal, the bill came to around 2500 bucks. "Not bad at all!", we thought, given the amount of food we had eaten. The service too was perfect. The waiters were very watchful, responsive and most importantly, proactive. – Amruth

A great place with tastefully done interiors and food! The options on the menu are limited, but every single item you are served taste good and also look really good on the plate! – Nandhini

If I have to be perfectly honest, there could not be a more unfortunate location to host such a lovely restaurant. A mall in Vadapalani is hardly any place for a classy place like this. Where venue fails, Salt takes North Indian Cuisine and gives it a fantastic twist, to ensure they stand out from the others. I expect much more of this restaurant in the near future. – Vaishnavi

Apart from many reviews, the one above set me thinking. Are Restaurants in Malls a viable option as compared to those on high streets? Are Mall shoppers the right TG for specialty restaurants in Malls? For the cost of operation in Malls, do restaurants make any money at all as a business option? When I spoke to the gentleman who runs the restaurant, he mentioned that the rent is about Rs. 65 per sft per month. Assuming they have an area of 2,000 sft, their rent per month would be about Rs. 1.30 lakhs. Add to that all other expenses which would be around Rs. 2 lakhs pm. On a conservative estimate of Rs. 15 lakhs of sales per month and an operating margin of 50%, the store would recover its expenses and have an EBIDTA of about Rs. 2 –3 lakhs per month. Given the way the outlet has been done, their investment would have been about Rs. 70 lakhs. So, the restaurant makes about Rs. 25 lakhs in profits (before interest and taxes a year)  and would take about 3 years to break even.

On the contrary, business would be double, if not more were it to be on a High Street. There are a number of good quality specialty restaurants that are garnering those numbers already. So, why do Restaurants still prefer Malls? Perhaps, Brand building and familiarity. I don’t see any logical reason why someone would invest so heavily in a Restaurant inside a Mall and wait for 3-4 years to break even, when it could be faster in a High Street. What works best are for established brands such as Rajdhani, Sigree, Mainland China, etc. which have built reputation over the years and have hence chosen to be within Malls to leverage their brand value. For first timers in the Restaurant business, Malls are probably not the place to be in. This is not restricted just to Chennai but to other cities as well. I was at Chandigarh a few weeks back and they have a brand new Mall called Elante. I was almost alone at Chilis on a weekday evening, which is located in the same floor as the cinemas on the fourth floor of the mall. Restaurants in India’s most successful Mall, Select City Walk face the same fate – Restaurants are empty through the week with weekends being their only busy times.

So, what ails Restaurants in Malls?

Mall shoppers are mostly for spending time, probably window shopping. Conversions for Retailers too is lower than on high streets. The sheer number of footfalls make up for lower conversions and therefore helps Retailers and Restaurants. Unless you are a destination such as a Shoppers Stop, Lifestyle, Café Coffee Day, Starbucks, Subway, KFC, Pizza Hut, etc. These are places which plan to visit and hence drop by. Eating out is way to expensive these days, given the cost of ingredients. And Restaurants are trying their best not to upset their clientele by absorbing losses as much as they can. But then, consumers are staying away from eating places on a regular basis, as was the case a couple of years ago. For example, a could of years ago, the neighbourhood area of Koramangala in Bangalore had almost 50 eating joints, a third of whom have closed over the last one year.

Mall hoppers prefer food courts instead, which are usually pathetically planned. Mall planners in India somehow do not build large enough food courts, with thousand of chairs and a breathable exhaust system, that are modular and scalable as and when consumers increase. Instead, they try to lease all counters at one shot thereby not having scope for further expansion in future. What would cost around Rs. 600 for a family of three in the food court would probably cost over 50% more in a fine dine restaurant within the Mall.

Restaurateurs would do well to experiment new concepts first on the High Streets. That is where people frequent. There are no SCAM, errrr CAM expenses (Common Area Maintenance) on High Street Locations and no restrictions to close the restaurant at a stipulated time. The biggest benefit of being on High Streets is that the signage builds familiarity among customers over time. No wonder, there are more successful restaurants in India and the world over on High Streets!

Is there something as a Click-Only customer?

I was recently invited to attend the first edition of the Retail Marketing Summit Chennai, organized by Paul Writer, a leading consultancy which works in the Marketing space and advises various enterprises. The day was very exciting, with speakers from various Retail companies and Brands expressing their opinions. During the course of discussions, there was a topic which was discussed elaborately by the esteemed panel of guests as well as the audience. The topic of discussion was, whether there was someone called a “Click-only customer” that existed, who shops only online. There were ayes and naes but there was no single answer that could be fully validated. On the need for having an online presence and also focusing on the internet commerce business, Mr. Pattabhi Rama Rao, President of Australian Foods, which runs the Cookieman chain of stores felt that the market is too small at the moment on the internet and Retailers should continue to focus on the offline business by providing a better customer experience. In his own words, Man is a social animal and social interactions would never cease to exist. Pattabhi should be knowing well. With over a dozen years behind him in the Hospitality business, he started off the Cookie business 13 years ago. His brand of cookies were priced 10 times as that of a normal biscuit, although such a comparison is odious. He continued his focus in the business and now has over a 50 stores across the country. Most of his outlets are located in prime locations in Malls and Airports. Many of them bake fresh cookies at the store and the aroma spreads all over. It appeals to the senses and therefore converts a passerby into a customer, a customer into a loyalist and a loyalist into a brand ambassador. However, there is indeed an opportunity to sell categories like cookies online, although they are restricted to gifting and occasion based purchases.

In another panel discussion, Calvin John of Caratlane.com which specialises in the sale of jewelry products said that a customer has purchased 35 times in a few months from their site. And he felt that there were a small but growing species of “Click-only customers” who shopped extensively online. Jessie Paul, the convener of the event and also a moderator in one of the sessions confirmed this and said that she shops grocery extensively online at BigBasket.com, a Bangalore based start-up which has been slowly but steadily growing its online-only grocery business. With more and more people shopping online, it is all about convenience and discounts? Would the charm of shopping (at Retail outlets) dwindle over time? There are references to the West and how things have been changing in developed countries. A lady from the audience says that at Macys.com, sales were 37% of the total compared to just 26% in the previous year during the holiday season. And this was countered with a view that the sales increase was only during the Holiday Season when Macy’s was very badly organized at their stores. In India, the Books category was the first to succumb. Customers (in India) bought books online from Indiaplaza, Flipkart, eBay and the likes not just for convenience but also due to the generous discounts that were being doled out. But for those discounts, would customers have bought online? Perhaps yes, but a majority would prefer browsing and buying at their favorite books stores down the road such as Crossword.

The Internet Commerce business in India is still too small compared to the Offline one. As it is, Organized Retail in India is just under 10% of the INR 200,000 Crores market size. And e-commerce accounts for a decimal percentage of that. Although online retailers are showing double digit growth year on year, the business model is largely led by discounts and there is no hypothesis at the moment to prove that shoppers would still buy online at full prices, except for the gifting and essential categories. In my opinion, there is room for online and offline Retailers, But the bigger growth is offline, given the levels of broadband, internet and computer penetration in India. Payments gateways for credict cards, debit cards and Net Banking is quite limited too. In fact, I would place my bets more on m-commerce - shopping on smartphones which is still an untapped category. So, if you are a Retailer or a Brand, do build an internet commerce site now, if you already don’t have one. But remember, Retail is all about customer experience, and there is no better place than the store to demonstrate it.

Expansion woes for Retailers

I have admired the way Mahindra Retail has built a respectable business over the past few years, ever since the launch of “Mom & Me” Stores in 2009 which sell mothercare and babycare products. In a short period of time, the company had built a massive network of 115 stores ( as on this date) spread over 10,000 – 15000 sft. primarily at residential locations in metros and mini-metro cities. The Brand has earned the respect and spending of thousands of customers for their friendly staff, wide assortment and excellent service at their stores. The market size for this category is about INR 40,000 crores and the organized segment accounts for less than 5% with small mom-and-pop stores taking away most of the business. Apart from Mom & Me, there is no other respectable national chain of repute in India other than Mothercare, which is operated in India by Shoppers Stop and kids wear sections of reputed Retail Brands such as United Colors of Benetton, Tommy Hilfiger, Zara, to name a few. Therefore, they had a massive opportunity to quickly garner market share within the organized space. Just when things were going good, they launched a new division in the name and style of “Beanstalk” which focused on Toys, Puzzles, Games, etc. While many of the Beanstalk showrooms were part of the Mom & Me stores or located adjacent to them, many were standalone locations in pitiable environments. While Hamleys caters to the upper end of this market, Beanstalk tried to bridge the gap competing with the neighbourhood stores.

Although scaling up evens out Fixed costs in the Retail business in the long term, it also proves to be a massive cost burden in the short-medium term. I guess, that’s exactly what happened to Mahindra Retail. Their swanky office in South Bangalore is spread over three floors, houses hundreds of employees and over a dozen senior recruits – from merchandising to operations to marketing and business development. While there were plans to reach a billion dollars in sales, the company could manage not more than 20% of that figure in the fourth year of its operation and was losing over INR 50 Crores every year. Obviously, the plot was lost somewhere and half a dozen senior guys moved out of the company over the past few months. The company also plans to shut atleast 10 stores in the near short term which are making heavy loses. As reported in The Mint newspaper, Mahindra Retail declined to comment on the specifics of the store closures but chief executive K. Venkataraman said in an emailed statement, “Retail Industry is cutting costs as a rule everywhere, and Mahindra Retail too does where we deem fit. Closure of non-performing stores, and some churn in management are unavoidable realities of the business, much as new stores and new management replace the lost ones.”

The biggest bane of Retailing in India is the Real Estate and Manpower costs which is what plaguing most of the Retailers. Ideally, the Rent to Sales ratio should be not more than 15-18% in the second year of operation but that is not to be. Manpower costs are enormous in the beginning of the business as most Retail companies believe in showing off a massive strength of show in its teams. I am aware of so many case studies from the west where frugal HR costs are the norm. But in India, we have cultivated a culture of large teams, each level overseeing the other and hence so many layers and levels. While Mom & Me is essentially present only on High Streets, a very smart strategy I would say (to keep Maintenance and allied costs lower which are a big takeaway in Malls and Shopping Centres), the unrealistic High Street Rentals are not helping Retailers much.

Mom & Me is not just a retail store – it has already cultivated a calibrated relationship with its customers during its short tenure and I am sure the company would tide over the current circumstances quite well. The challenge is whether to expand further to leverage fixed costs or to build efficiency with the current set-up. Would make for a great case study in years to come.

Car Care at its best

I pass through this outlet almost everyday but have always been on a rush. This time around, I stopped by and experienced first hand what they have to offer. I am referring to the 3M Car Care outlets which have sprung up across the country quietly but drawing attention from car enthusiasts and those who love to maintain their cars spic and span. These outlets are franchised and are managed by capable entrepreneurs who have an inclination towards the automotive business and customer service. Spread between 1,500 sft – 4,000 sft covering three different business models, these stores provide complete car care which include the following;

• Car Detailing
• Interiors / Exteriors
• Corrosion Treatment
• Films for sun protection
• Car Care products Retailing
• Car Graphics
• Customer Engagement
• DIY Bays

I was warmly welcomed by a service staff who knew his subject well – he explained the different packages they offered and justified why they were expensive. There were already two vehicles which were undergoing treatment – a Mercedes S Class and a Renault Duster. I asked him how is the business doing and he gave a smile, meaning things were doing quite well. Location was not totally a disaster though. It is located on the Beach Road, close to the iconic Light House (in Chennai). Although I felt it could have been located more strategically. Another gentleman walked over to me shortly and started interacting. Introducing himself as Vijay, he informed that he was the Franchisee Owner of the store. He explained in great depth his interest in automobiles, cars and bikes alike and his love for taking good care of them. According to him, the investment on the store including security deposit is around a crore (though I felt it was quite high) and the monthly business was about 15 lakhs with a margin of 35% on Sales.

The customer lounge is powered by lighting wifi and one can use the facility while the car is being spruced up. Customers have written their compliments and feedback on Post-Its, which is incidentally one of the most iconic products of 3M.

The company has taken up print advertisements recently which has helped increase walk-ins but what they actually need to do is much more – own the category and grow it too. The market size for Car Accessories in India is estimated to be over Rs. 1,000 crore, most of which is unorganized. Car Dealerships and private players like Carnation,3M, etc. have a huge potential, given the shoddy ways of getting your car done up at busy street-side shops. If marketed well, this could be a viable Retail model and is easily scalable. Like in many other cases, I see a bigger opportunity in smaller towns across the country where people take good care of their possessions.

For me, its about making up my mind for a 20K bill – sooner than later, I would be there!

Why Flipkart is not Amazon's competition

My former boss and CEO of indiaplaza.com K. Vaitheeswaran always used to say that the best business model on the internet retail space is perhaps without stocking inventory. In my short stint at this web company, which was also the pioneer of India's ecommerce business with the same name set shop in 1999, I added around 60 vendors in just 6 months who would list their wares-from designer clothing to everyday wear, from watches to wallets and so on. During the late 90s, internet cafes were coming up all around the country. To browse the internet on bulky 17" screens with a dial up connection that would take five minutes or more to connect would cost around Rs. 100/- an hour (and the prices subsequently came down due to increased competition and lower internet rates). Shopping online those days was a novelty - well it continues to remain so still I guess. The early 2000s saw a slew of players come and go and during the last part of the decade saw the emergence of the likes of flipkart.com, myntra.com and many others. These ecommerce companies or etailers stocked merchandise-large warehouses were set-up in the suburbs of cities and mostly internal logistics teams ensured last mile delivery. Most of them were venture funded and blew their investors money on advertising, PR and promotions. Some companies were spending as much as Rs. 1,500 for acquiring a new customer - while there is no global benchmark as such for this purpose, the sum would be recovered from the same customer when he/she spends atleast Rs.6,000/- over time assuming 25% Gross margins. Not an impossible task once the customer is habituated to the internet way of shopping. Sadly, of the 25% Gross margins, what remains is less than 1-2% and that too for smart and successful companies. Most of them, even today are reporting negative margins. Well, for any business it takes time to stabilise. Typically for product retailers, break-even happens between 15-18 months and much earlier for F&B retailers. None of the ecommerce companies in India of sizeable scale and repute are profitable as I write this article. And many of them are on the path to profitability. After burning millions of dollars. The good part is customers have taken up to e-shopping faster than they have taken to Organised Retailing. Retail Industry in India is about Rs. 400,000 crores approximately and less than 10% is fom the Organised Retailers. Led by apparel and fashion, the organised industry is seeing massive growth, at a CAGR of over 15% over the past 6-8 years. Not bad, while global retailers are seeing negative growth on same store growth year onyear. Amidst all this, the $61 Billion Amazon launched its India site in June 2013. Not much different than its previous avatar, Junglee.com which was launched with much fanfare in early 2012. Amazon.in is a marketplace, a business model where retailers, small or big can list their products and Amazon attracts potential customers to shop on its site with secure payment gateways and millions of items listed across its pages. The Amazon trust is expected to attract many more customers and in the short term, Amazon may also build large warehouses and extend direct sales to its customers, subject to Retail FDI regulations. And there has been speculation that sooner than later, Amazon would compete heavily with the likes of Flipkart. Within the online space, perhaps yes but not in the consumption space. The e-tailers have to compete directly with the physical Retailers, both Organized and Unorganized. They are the main competition for the ecommerce companies. Together, Amazon, Fipkart and hundreds of other sites would fuel up consumption using the internet. However, with low penetration of Broadband Internet and 3G on mobile phones, it is unlikely that this retail landscape would change drastically over the next five years. Afterall, half a decade is a long time in business...