The Hindu Business Line : Add strategy to retailers' shopping list

THERE used to be a time when marketers and economists had a folksy view about the role of retailers in distribution. Their view was that retailers are mere ciphers, "working as intermediaries just to smooth the flow of goods and services between suppliers and consumers," write Jonathan Reynolds and Christine Cuthbertson in a book they have edited: Retail Strategy, from Elsevier (http://books.elsevier.com). But that was when retailers too were suspicious of strategy.

Over time, however, it has become clear that retailers are "active agents in their own right within the value chain," and retailers also have realised the need for strategy. A belated realisation, rue the editors, because "business strategy text books have contained few references to the sector until relatively recently." That becomes the rationale for the sub-title, `the view from the bridge,' for the book aims to bridge the gap "between retailers and academics."

Attracting and keeping customers is the first topic, written by Richard Cuthbertson and Richard Bell, based on research by KPMG. "Customer loyalty is not only difficult to gain; it is difficult to define," they note, because "customers have choice, and are empowered by information, such as price comparisons." According to one study (Reichheld and Sasser), "a 5 per cent increase in customer loyalty can increase profits by between 25 and 85 per cent."

The chapter on `Collaboration in the Retail Supply Chain' explains how the `push supply chain' controlled by the manufacturer can lead to wide fluctuations in stock levels, and cause erratic changes to production schedules. The alternative to `production push' is `consumer pull,' but the latter demands `full visibility' of consumer sales, product movements and stock levels, to all participants in the chain, explains the book.

Ross Davies writes on `Planning Policy for Retailing,' where there's no mention about India in the section titled `countries of restraint' as also under `countries in transition.' A lacuna that is made good later in the book, by Elizabeth Howard, in a chapter titled `Ready to Scale Up: India's Shoppers' Stop.' In another chapter, titled `Retail Internationalisation: How to Grow,' Howard argues the `for' side, but cautions that many international ventures are rather tangential to the main concerns of management teams.

Those bullish on e-commerce may find a dampener in the book's statement that e-commerce will be only a small proportion of the sales of most retail businesses that engage in the practice. What would be a more important use of technology for the sector, according to the authors, would be "cost-effective integration of distribution channels ... even for those businesses with the deepest pockets."

Accountants may like to delve into `The Financial Implications of Retail Strategy' by Dmitry Dragun, where Oxford Institute of Retail Management's `financial model' is discussed at length. Tech buffs would love to read the interview with Armin Meier, the IT and logistics director of Migros (Switzerland's largest employer, with over 80,000 personnel). Meier explains, "If shelves are empty, then the logistics may be at fault, but if it works, you don't see it. That is real success." He also speaks of `reverse logistics,' that is, taking back re-usable crates, pallets and packaging material. "Backstream is around 80 per cent of the forward stream at Migros," says Meier, and anticipates that in time "consumers will be forced by law to return products such as batteries and electrical devices."

Insights of Dick Dijkstra and Eric Polman should help in "bridging the gap between IT and the business," and you'd learn about WWRE (WorldWide Retail Exchange) and CPFR (Collaborative Planning, Forecasting and Replenishment). The chapter on Legoland parks is for a relaxed reading, as it is about leisure and retailing. There's more fun in the chapter on `music and movies,' but don't miss the China angle, the focus of more than one contributor. And also, the `portents' about how retailing will be in 2012.

A book worth shopping for. For retailers, though, the message is clear — that they need to put strategy top in their shopping lists.

BookMark@thehindu.co.in

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Add strategy to retailers' shopping list