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Sangita Joshi

The dos and don'ts about wooing customers and making them come back to your stores.

This is the third and concluding part of a series of articles on retail models in India. The first two appeared in Catalyst issues dated October 21 and October 28, 2004.

Place

Remember Tintin comics, and that `solo supermarket' Senhor Oliveria da Figueira, who can get a man living in the desert to buy a pair of old roller skates or an umbrella! So, what is the secret of his success? Yes, a booming voice aided by a megaphone, super salesmanship (the proverbial glib tongue) and an amazing assortment. But most of all, reach (location) — the fact that he goes to customers who are clearly devoid of shopping opportunities.

ITC with its e-Choupal is only an extension of that idea. But for a food and grocery shop, I think it is important to be the principal store of purchase for at least 40 per cent of all consumers living within 500-750 m of the store. The complication here is that India, unlike the West, has multiple commercial centres. But in any case, addition of better and affordable retail space will enable retailers to deliver more products and value-added services to their consumers, resulting in increased volumes and efficiencies of scale, reducing their costs in the supply chain.

There is an illuminating example from Indonesia, heard at a retail summit. There, organised retailers are promoting "malls with kiosks" where the kiosks are owned and run by individual entrepreneurs who earlier typically ran mom and pop operations. The advantages are that the mall provides the ambience and services while the entrepreneurs run their business with drive and passion.

Price

Unfortunately, in India, the attitude toward retailing has been that of spending more on creating glitzy outlets than on operational efficiencies. This is changing and retailers are becoming aware that retail is not just about image; it's about becoming an operational superstar — that's how you drive down your costs and make your profits in a situation where you have fixed MRPs. This is the competency that has made Wal-Mart the hugely profitable entity that it is, as also the world's largest company.

There are two areas regarding price: one, pricing and concomitant discounting/deals/mark-downs and reductions; and two, the operational side such as IT, SCM and related issues.

Pricing is very much a matter of target audience and strategy, but a few examples are worth noting in the Indian context. For instance, the Indian version of the dollar store has customised a price point package for India. Instead of the traditional single point pricing, there will be four price points in Indian stores — Rs 50, Rs 100, Rs 150 and Rs 200. Indian stores will also be smaller than their Western counterparts, averaging around 1,000-2,000 sq. ft.

Similarly, Big Bazaar's Food Bazaar offers all products at wholesale prices (like the mandis, or the wholesale grocery traders prevalent in the South). Consequently, Food Bazaar does a stock turn in excess of 30, which makes the revenue model attractive (the average for food retail store being 12-14). The inescapable fact is that in most cases internationally, and more so in India, for F&G formats (especially those targeting the middle class), pricing will be the single most important determinant of success. Add to that the fact that in India, typically for retailers, break-even comes later than normal, and you see the importance of tightening operations.

Which is where SCM comes in all its glory. The most critical aspect in India is the `de-tiering' of its outdated and cumbersome trade channels. This does affect the traditional mom and pops, also manufacturer suppliers like HLL, in their relationships with the organised guys. But as countless studies have shown, it is the best way of cutting wastage, and everybody wins, as overall savings are to the tune of 25-30 per cent.

This is also where IT comes in. Independent retailers started computerising in the 1980s. Computer programs specifically designed for independent retailers had key functions of ringing up sales, tracking inventory and assisting in purchasing and receiving merchandise. As technology advanced, the capability to read bar codes and manage multiple stores came into play. But even now, despite the Indian organised retail industry realising the importance of IT, the awareness about IT systems that are available is low, resulting in poor decision-making. A number of organised retailers in India have installed solutions ranging from simple point-of-sale systems to complex retail ERPs. The Indian experience in implementing retail ERPs has been difficult due to the lack of trained ERP package implementers in India. So that's an area that certainly needs attention, not merely post facto but while planning a retail store or chain.

Promotion

Recently, I visited the opening of a new branch of one of the chain departmental stores at a sparkling new mall. And I realised afresh, as I watched elegant models sashaying down the ramp while displaying the latest merchandise lines of the store, that promoting your wares is almost as important, possibly more important, as having them. In fact, I just realised how much "theatre" there really is in retailing, whether you look at these launch events with their razzmatazz, the Bose stores with their `experiential' ambience, any departmental store with its Lego blocks table for happy children, the Kempfort redemption offer coupons distributed at Bangalore airport (redeemable at the Food Court which ensures passage through the entire store), or the new Shoppers' Stop outlet in Bombay.

In the late '70s, many retail outlets in the US were conducting tent sales. They would erect a small tent in front of the store, fill it with products and announce a store-wide sale. These were hugely popular. Another popular sale was the tried and true "all night sale."

Now it is events, whether it's the Seven Wonders of the World, an exchange offer, or the hugely popular New Year Sales. At the core of all these events, of course, is the key question: what is your SCA (sustainable competitive advantage)? And defining that is what these retailers must do — not merely get caught in the rat race of `anything you can do I can do better.' Also, they should keep their eye on that marketing hierarchy, and figure out which level they are on, and whether it is getting footfalls/purchase or regular purchase.

Clearly, loyalty programmes are a way of getting the last one in, but it is important to know the objective of the programme: is it to get a database for understanding consumers or a tool for enhancing purchases and thus rewarding higher purchases or a combination? It must be designed accordingly. It is also important to constantly manage the programme (and the database) — yes, another area for IT to help.

Shoppers' Stop with its First Citizens Club is possibly the frontrunner when we talk about efficient management of loyalty programme. Most others seem to just have it there for the sake of having it.

Then there are those expert marketers like the DSF guys (now ably imitated by Malaysia and Singapore), who've made retailing such a happening phenomenon — from the BMW raffle to the advertisement campaign.

Another aspect is private labels and its management. There is a huge potential for private labels in sectors such as apparel, bakery, dairy, ready-to-eat, ready-to-fry and frozen product segments. Again, most of our Indian retailers are in the introductory stage of the lifecycle as far as private labels are concerned, and the learning curve is taking a long time to mature.

People

From R&D to store management, typically, there are thousands of people involved in the process of getting products from a blue print into customers' hands. And their jobs rest entirely in the hands of a poorly paid, poorly trained, poorly motivated employee who is selling it on the floor! So why is there such a premium placed on the other professionals but so little on the people who actually interact with the customer. After all, an energetic, enthusiastic and motivated entry-level sales clerk is much more rare than a supply chain manager. There is no significant presence of part-time employment in the retail sector in India. The country's employment laws do not recognise such work. Most shopkeepers secure the assistance of their children/spouse in times of need. There is no managerial part-time staff in India. Casual workers are hired for manual work and are paid on a daily basis, but they are not on the payroll of the company. So, 90 per cent of the employees in the retail sector are full-time employees. This in a sector which traditionally thrives on numerous but part-time employees! Clearly, work to be done in India.

Presentation

From a `first impressions' point of view, this is the heart of retailing, as this is the first point of interaction with the customer. So this recent hoopla about the new bookstores, coffee bars, music stores and malls is all to do with ambience, decor, structure, lightning. A few comments here:

Yes, the size of the retail store matters, but what matters most is customer satisfaction. So, big is not necessarily beautiful. Globus, for instance, is one notable departmental store which is reportedly not going in for big box formats, content to merely do many smaller ones.

However, it is important to get the other things right. For instance: the right balance between a helpful assistant and letting the customer just wander around in store. From Big Bazaar, we discover the importance of visual aids. Being a discount format, it cannot afford to have salespeople everywhere. It, therefore, invests a minimum of Rs 30-40 lakhs at each new store and more every year in posters and cut-outs.

The seventh P?

All this makes me think perhaps there is a seventh P in retailing. For want of another word, I'm going to call it `pampering,' or perhaps `personalisation.' Paco Underhill in his latest book mentions the bicycle sheds outside Japanese malls. The idea is to go "glocal" in retailing — bring global practices but with a local flavour which respects local market and tastes.

So if one were to sum up, and devise a set of mantras for swadeshi retail, it might encompass the following:

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