Talking about Service sectors in general, where exactly do we see 'Retail' figure out? I mean, should we not try to understand where exactly is the point where we see Indian Retail as a mix of being both a Product and a Service, and where exactly does this fall on the Service spectrum?
Retail in India is one where we are always confused about what to categorize into which factor. Thus, one might be ready to accept that 'Ready to eat' food available at a 'Food Bazaar' is a part of 'Retail', whereas getting food served in a restaurant is actually 'Dining', and not 'Retail'. Is it? Or are we just trying to compartmentalize things which can be very broadly understood in a much easier manner.
Retailing is everywhere. It has been here for ages. Whenever anyone buys anything, be it a product or a service, it is 'Retailing'. So, even when we are trying to sell merchandise, or serving food in a restaurant, its all 'Retailing'. The Indian consumer needs to understand this. And she needs to understand that retailing is not new to our country. We have, knowingly or unknowingly, been into retailing always. So, why then do we need an answer on whether Indian retail is actually different from the rest of the Service sector?
It is important. It is important to note that retailing is just a small part of the overall service scenario in India. The 'tangibility' part is quite large in retailing, as the customer always expects the best product being served and made available to her. While it is important to note that the manner in which this product is made to reach the customer, is absolutely important, but the product is still one of the prime factors in any retail purchase. One cannot just get back home with an 'experience'. It needs to be an 'experience' moulded with the right product at the right price. This is where the Retail sector gets an edge over any other sector. Retailing is, as I said, all about making the right product available at the right place at the right time. The rest of the sectors, more or less, focus on just making the right 'product' for the customer. But thats not the complete solution. Is it? Hence, the right mix of service coupled with the right product is actually the success key behind retail.
With a large part of the Indian workforce employed in the Service sector, Retailing has taken an edge, as customers themselves (half of who today are a part of the service sector, in one or the other way) have started to understand the need for quicker delivery times, faster availability timelines, shorter lead times, and better supply chains. This is where Indian retail gets an edge over its western counterparts. With a large chunk of population being employed in this bright sector, and understanding the need of the customer in a better manner, Retailing in India is surely one of the most sought after professions, and has hence seen a large spurt in activity due to the same. However, to get anything right in the market, what one needs is a close understanding of the customer, but alas, we are not the best at it!
so, our next point of discussion will be...
What should the retailer focus on to get more customers? Is it really that difficult to get more customers? Lets try to answer these, and more in our next post.
And ya, for people who have just started to notice this blog (if there are any!), then put in some comments. (Otherwise I might start thinking that the opinions that I have, are accepted by all!!)
Thursday, March 19, 2009
Saturday, March 14, 2009
Is Retail different?
So how is retail different from any other sector in India?
Are we really trying to find a consistent answer to this question? If we are, then we need to first ask ourselves why is it necessary for Retail to stand out from the rest of the service lines present in our country currently. While talking about Service, it is always important to understand the core concept, wherein we need to understand the thin line that determines a Pure Service from a Pure Product offering. Within the Tangibility spectrum, retailing comes at a place, where the service part of it today has become more important than the product part of it. The reason being multiple operators (read: retailers) are trying to cater to the same customer with the same products at the same places and at the same time, and of course, at nearly the same prices.
So it becomes necessary for us to focus on the service part of this retailing process, and this is what makes Retailing different from any other sector in the country. But why only India? Isn't 'retailing' the same worldwide? 'Providing the customer the right product at the right time at the right place.' Isn't this what Retailing is all about?
No. India, as a matter of fact is governed by a lot more factors that have been prevailing in our western counterparts. Retailing has been present in ages since ab-initio (only was it earlier known as Barter, then came coins, and then trade!). With Indian consumers being always exposed to the age old format of companies producing and customers consuming (as was the case pre-1990s), it was always a Product marketing approach. With the advent of Liberalization, and Globalization, newer players could enter the market, and with them entered players that didn't have a product of their own. Rather they focused on the cons of the supply chain, which pointed at Slower delivery times, conventional pricing methodologies, High Lead times, corrupt officials, which eventually led to higher costs and poorer delivered quality to the consumer.
Here came in the need for Modern Retailing format, that tried to remove most of the unnecessary hurdles that elongated the supply chain, and tried to minimize the costs related to inefficiencies in the system. People were now given a chance to see for themselves to try and compare products on their own. With FDI flowing in almost every possible route, education and knowledge standards of consumers started to increase. TV, Media helped in the process, and educated the consumers to go out and break the age-old chains of buying from the neighbourhood Kirana shop, and approach the new stylish and efficient departmental store that could provide better value to the consumers (with its direct tie ups with the companies, and focused Supply chain systems). IT helped in putting the hitherto unsolved pieces of the puzzle together, and formed a close network that could provide the customer with a Fast and Efficient service system. So now, an Indian consumer, who always had to buy from his neighbourhood kirana wala (as he had no other option earlier!), was suddenly given a chance to experiment, and see for himself what was best (in terms of availability of products in the market, as well as of the Service, that he did not know existed till date!)
So India, a country that had since been bonded by the Munimjis and Lalajis, was now getting an opportunity to look for his own choice of product, and followed by his own choice of service (from different retailers). Now sectors such as Manufacturing, etc that had been in the forefront of running the Indian story till date, started to feel pushed back, as this new sector 'Retail' presented the country with new opportunities in employment, and revenue. Earlier, when Retail was yet not considered a 'sector', it was clubbed with 'Textiles'. However, time and efforts of people like Rahejas and the Biyanis (only to name a few) gave retail a new deifinition, and helped it stand as a separate entity altogether. Today, retail is providing food to a million homes (literally as well as through new employment opportunites). Retail is one sector that has attracted the most from remotest places of Gujrat to Kerala to Bangalore to Delhi to Ludhiana, and even to the mountains of Shimla! India, a country of countries could now be bound with one common thread - Retail. Something that connects people by providing them what they need at the right place at the right time, and at the right price. Isn't that the same mantra of Retail with which we started this discussion?
To be contd.
Are we really trying to find a consistent answer to this question? If we are, then we need to first ask ourselves why is it necessary for Retail to stand out from the rest of the service lines present in our country currently. While talking about Service, it is always important to understand the core concept, wherein we need to understand the thin line that determines a Pure Service from a Pure Product offering. Within the Tangibility spectrum, retailing comes at a place, where the service part of it today has become more important than the product part of it. The reason being multiple operators (read: retailers) are trying to cater to the same customer with the same products at the same places and at the same time, and of course, at nearly the same prices.
So it becomes necessary for us to focus on the service part of this retailing process, and this is what makes Retailing different from any other sector in the country. But why only India? Isn't 'retailing' the same worldwide? 'Providing the customer the right product at the right time at the right place.' Isn't this what Retailing is all about?
No. India, as a matter of fact is governed by a lot more factors that have been prevailing in our western counterparts. Retailing has been present in ages since ab-initio (only was it earlier known as Barter, then came coins, and then trade!). With Indian consumers being always exposed to the age old format of companies producing and customers consuming (as was the case pre-1990s), it was always a Product marketing approach. With the advent of Liberalization, and Globalization, newer players could enter the market, and with them entered players that didn't have a product of their own. Rather they focused on the cons of the supply chain, which pointed at Slower delivery times, conventional pricing methodologies, High Lead times, corrupt officials, which eventually led to higher costs and poorer delivered quality to the consumer.
Here came in the need for Modern Retailing format, that tried to remove most of the unnecessary hurdles that elongated the supply chain, and tried to minimize the costs related to inefficiencies in the system. People were now given a chance to see for themselves to try and compare products on their own. With FDI flowing in almost every possible route, education and knowledge standards of consumers started to increase. TV, Media helped in the process, and educated the consumers to go out and break the age-old chains of buying from the neighbourhood Kirana shop, and approach the new stylish and efficient departmental store that could provide better value to the consumers (with its direct tie ups with the companies, and focused Supply chain systems). IT helped in putting the hitherto unsolved pieces of the puzzle together, and formed a close network that could provide the customer with a Fast and Efficient service system. So now, an Indian consumer, who always had to buy from his neighbourhood kirana wala (as he had no other option earlier!), was suddenly given a chance to experiment, and see for himself what was best (in terms of availability of products in the market, as well as of the Service, that he did not know existed till date!)
So India, a country that had since been bonded by the Munimjis and Lalajis, was now getting an opportunity to look for his own choice of product, and followed by his own choice of service (from different retailers). Now sectors such as Manufacturing, etc that had been in the forefront of running the Indian story till date, started to feel pushed back, as this new sector 'Retail' presented the country with new opportunities in employment, and revenue. Earlier, when Retail was yet not considered a 'sector', it was clubbed with 'Textiles'. However, time and efforts of people like Rahejas and the Biyanis (only to name a few) gave retail a new deifinition, and helped it stand as a separate entity altogether. Today, retail is providing food to a million homes (literally as well as through new employment opportunites). Retail is one sector that has attracted the most from remotest places of Gujrat to Kerala to Bangalore to Delhi to Ludhiana, and even to the mountains of Shimla! India, a country of countries could now be bound with one common thread - Retail. Something that connects people by providing them what they need at the right place at the right time, and at the right price. Isn't that the same mantra of Retail with which we started this discussion?
To be contd.
Friday, March 13, 2009
Expansion into Tier 2 and 3 cities
I believe Linked-in is actually a wonderful place to see how some people can keep on discussing things without even understanding the basic facts of where the market is headed, and how things are shaping up. In another discussion where some people were trying to put forward their ideas on how Indian retailers are making good of the plunging real estate prices in the country, an idea of looking at Tier 2 and 3 cities when there already is a substantial correction being seen in real estate rentals and commercial variables in the Tier 1 cities, seems to be quite at odds. The current time frame is somehow not specifically best to look at Tier 2 and 3 towns/ cities, when a tremendous amount of Retail real estate supply is already available, and is going to be made available in days to come in the Tier 1 cities.
With most retailers seeing a crunch in their sales in Q4 2008, and markets continuing to follow a similar pattern in Q1 2009 as well, many retailers are currently shutting down their unprofitable stores in prime locations (signed at unbelievably high prices in the past), and are relocating to high-street locations in less known markets in the city. These spaces being vacant, and developers feeling a cash pinch at the same time (owing to them being leveraged in the market, and giving answers to stakeholders becoming more difficult with each passing day), they are bound to offer better and more attractive commercial terms (apart from rents, that have already seen a dip of more than 10-15% in almost every location). These vacant locations can actually be seen as potential opportunities for the late retailers that are looking at entering the market right now (who could not get the right spaces because of high rents, or otherwise in the past). With this in mind, I feel that there is still a lot of scope in the Tier 1 cities of Delhi, Mumbai and Bangalore, before people starting to look at Tier 2 or 3 cities at this point in time.
The High street markets are also not too safe, with most retailers that had signed up in premier locations in the city are finding it difficult to keep up with the promised rentals due to falling sales, and are trying to renegotiate their store rents with their landlords. Also, most retailers are now seen to look forward to 'Revenue Share' arrangements, which helps them pass on a considerable amount of risk across to the landlord. Hence retailers may also be able to get good high street locations (where sale turnover is usually 10-15% higher than that in malls) in this market.
Though most Tier 2 and 3 cities have actually seen a lot of activity owing to reports that have in the past shown them on the bright side, underestimating the Supply side of the game (for Tier 1 cities) has actually landed the Tier 2 cities in trouble. And undergoing a thorough analysis for a Tier 2 city, to understand Affluence and Opulence levels, when there already is an available market in a Tier 1 city ready still to be exploited to a deeper level, would certainly not be a very good idea.
Hence retailers should now concentrate upon finding the right places where competitors are vacating,and should focus on contacting the right people who are there in the market, and know the market pulse, and are able to give them right directions on Where and When to sign a property. This is not a time to waste in discussions, rather making the right moves might actually help a retailer get the Right space at Right price, and within a Right market.
The link is available for public notice at http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=108564&discussionID=1932518&commentID=2210758&trk=NUS_DISC_Q_ncuc_mr&goback=.hom#commentID_2210758
Expansion of a Retailer
"Cookie Man plans to invest Rs 25 cr in 5 yrs"
I came across this news article today in Linked-in, where some retail experts had put forward their comments on where exactly Cookie Man should aim at opening its stores.Understanding retail in India is a completely different ball game altogether, and people should be made aware of the fact that retail in India is quite different from what it is abroad. Retail had always been in our blood and soul, the only part of it that we could not understand was the nature of the large pool of customers that behaved unconventionally when exposed to the retail environments of the Americas or the European nations. An organized structure of retail is yet to be fully acknowledged and accepted by our own people, so as to portray the Indian image of retail correctly to our western counterparts. Just organizing a tie-up to expand a business line in India will not work, as India is not one country. It is a country of countries where opinion leaders vary from city to city, and state to state. Demographics change every 8 to 12 kilometers. Then, should it be a decision taken in a haste of how to expand Indian footprint by any retailer based in Australia, or otherwise?
When I saw this interesting discussion taking place in Linked-in about the best locations possible for Cookie Man, I couldn't help but put forward my views on what people think to be such a simple task, and hence commit mistakes that prove to be quite expensive in the long run. A professor here wanted to prove his point about which income class to cater to, without completely giving importance to the fact that what exactly the brand wishes to portray, and where exactly is the brand positioned in the mind of the consumer. I'm sorry, but I believe some basics of marketing may actually shed some good light on how to take a brand and its positioning (both in the mind, and in the physical space consistently) in the market. Gaining an insight into a retailer's understanding of his brand and of the market where he sees his product being displayed is grossly important before commenting on the 'Where' to find real estate space for the brand.
And hence I believe that before commenting on a particular brand's expansion plan in an Airport or a Shopping Mall (for instance), we need to understand why exactly a brand should open up a particular shop in a particular location. And here comes our age-old concept of STP (Segmentation, Targeting and Positioning). If we try to understand what is the segment of the market that Cookie Man wishes to target, we will see that Cookies are something that doesn't see whether a person is going to come from a Middle-middle, or an Upper-middle, or a Lower-Upper class. Branding a commodity like cookies is actually a very bold step that Cookie man has done, and to follow it up to agree that the Indian consumer is ready for such a format, would actually need a good amount of consideration.
As currently stated, a brand like Cookie Man will not like to segment the market based on a Geographic segmentation, rather a Demographic segmentation might actually be of larger help. Understanding where exactly its customers (and consumers as well) come from, is the core idea, and a demographic profiling may actually show an image of a 20-30 year old, frequent shopper, experimenter, educated, active, enthusiastic person who likes to check out the latest product in the market, and understands what exactly is Cookie Man able to provide him what any other 'biscuit' cannot. A middle income group lady, who has to purchase her monthly grocery from a particular mall, even if she belongs to an upper-middle income group, might actually not go and buy a pack of cookies from a 'Cookie Man'.
Cookie Man, at the same time would like to associate itself with the young, and vibrant and the next generation crowd that is going to buy everything packed and ready-to-eat from the market in future. This is where Cookie Man will target its end users, as it would comprise not only the class that I am talking about, but also the one that is going to drive its sales in the future, i.e. the end consumer (the kids of tomorrow, who will get used to it in days to come). But this is going to happen only in places where the current user is fully convinced of the product, and is ready to offer it to her child. And this consumer needs to have the profile that I have tried to describe above.
Hence, here comes the prime question of where exactly to place such a brand in the market. Where exactly to open outlets that might actually lead to results, rather than simply focusing on 'High Class' people. A 'Cookie Man' finds its place in Malls where there is a ready footfall of Young crowd. Places that are close to Colleges, IT/ITES companies, etc. It should never be a part of a Food Court (No use of cookies there anyway!). It should try to be in a location centrally visible, and preferably before a Coffee Shop in the mall. People having a Cappuccino should be able to see this shop when they sit inside the Cafe. Kiosks should be preferred over Standalone formats as they give the independence of moving the stall to a better location (if needed), and give a central visibility (vis-a-vis a locked-in visibility of a fixed store). It also gives a 'Quick-service' appeal to the store, which will actually be appreciated and looked forward to by the customers.
Airports of-course are a very good location, but that is not the only place where people wait for something (Thats where you try to get a cup of coffee and cookies to kill time). Metro stations are also a very good idea. Having a space close to a Cinema hall can actually return good results. Bookshops is another alternative. Locating close to an existing Coffee shop may get quick results (would see people who would like to try something new than the conventional cookies available in their Coffee Shop). Gossip zones close to school and college campuses can be seen as a viable option (where kids of the rich frequent). These are some locations that should be seen as imperative zones for Cookie Man to be present in India, as this is where Young India goes.
The link is available for public notice at http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=108564&discussionID=1861597&commentID=2223442&goback=.hom#commentID_2223442
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