Shop till you drop

Thursday, August 31, 2006

Nobody would have betted on India being the world’s number one retail market; it’s a slight change now – Everybody does!


When was the last time you sauntered across the road in front of your house to a Wal-Mart to buy a pair of sneakers? And then ambled a block away to a Target supermall to grab grocery for home? And then scampered a block further to the Macy’s superstore to buy a set of Chanel’s top-line perfumes? Let me guess the answer... Never! But hey, this dreamy vision just might come true, right here in India, where a retail boom is sweeping across with astounding velocity.

The retail industry has been estimated to be around Rs.90,000 crores – which, according to some, seems a very conservative estimate! India seems to represent the most compelling international investment opportunity. According to A.T. Kearney’s 2005 Global Retail Development Index (GRDI) India moved from the second place to the first, displacing Russia as the top hot spot for investing in retail. In 2006 too, India retained its top spot in the index. If things go as planned, then organized retailing in India has the potential of creating over 2 million new (direct) jobs within the next six years.

The market is surely bursting with growth potential, and retailers are queuing up to grab a portion of the retail pie. So while luxury retail chains like Louis Vuitton, Christian Dior & the new entrant Versace have gingerly placed their feet on Indian shores, vast numbers of others are waiting in the wings; in fact, the likes of Gucci, Armani, Jimmy Choo, Tumi Luggege are just starting to unfold their plans. But what’s interesting is that by 2015, India would have over 550 million people under the age of 20, making it a vast playground for kids and teen retailers. No wonder, in India the Walt Disney Company has decided to launch its range of toys, clothing etc designed around the popular Disney show “Power Rangers” in collaboration with Shopper’s Stop, Archies, Funskool etc.

The wonder of it all is that those are not just the foreign brands and chains, but Indian retail chains too, which are gearing up for a huge expansion plan. No one wants to miss the opportunity of growth that India is offering now. If global behemoths like Wal-Mart and Carrefour are planning to come to town, the RPG group – with its Rs.200 crores planned investment and long creditworthy Spencers brand – might be the least of worries they’ll have to face. The biggest headache, a debilitating one in all probability, for these international leaders would definitely be Mukesh Ambani, who plans to invest an eye popping Rs.25,000 crores, and employ a soul stopping one million employees over the next few years on retail. Reliance could well be the Indian Wal-Mart. And I’ve not even started talking about companies like Pantaloon, which have already started consolidating their presence in the retail sector. In fact, even companies like Siyaram – one of the few brands that was able to give Raymonds a run for its money – are planning to introduce retail outlets across the nation. Indian corporations surely seem to be in the know of phenomenal gumption and confidence to fight foreign brands on home-turf. Retail is surely in!

On the food front, while McDonald’s has already invested Rs.800 crores, it plans to invest an additional Rs.300 crores in the next three years and open at least 100 more outlets! While no MNC has been able to stand up to the might of Amul, the company is taking no chances and it too has expansion plans up its sleeve and plans to increase its ice-cream outlets from 60,000 to 80,000 this year. Not to be left behind, Shopper’s Stop has been keeping an eye on the changing food habits of youngsters and is planning to set up food carts, which would give tough competition to the likes of McDonald’s, Pizza Hut & Barista etc.

With almost everyone planning huge expansion plans, what exactly are the various factors that are key to operating a successful retail chain? Especially given the fact that retail is a “people oriented” business, and the way one interacts with customers is of paramount importance – the customer of today is very aware, very discerning; he is more demanding and winning his loyalty is tough – so how do you keep them flocking in?

Location

If there are three things to keep in mind while opening a retail outlet, they would be (1)Location! (2)Location! (3)Location! Yes, that’s how important it is. While there perhaps can be no location better than Oxford Street for a retailer to ensure that people pop in at least once to take a look, Wal-Mart, on the other hand, located itself in small towns – which none of the other big retailers were targeting – and soon became a roaring success. In straightforward terms, the outlet’s location should be within easy distance of the target audience. ITC made its e-chaupals highly successful by locating themselves near their target audience – the villagers who earlier had no shopping opportunities. The corollary is that one needs to understand extremely well the demographic profile of customers residing within the geographical area in consideration. Simply said, open a high-end store in the high-end part of a town; and a low-end one, in the low-end part. Take time to choose the right location. It’s worth it!

Image

In 2002, the Minneapolis–based Target Corporation leapfrogged over all other competitors to become the number two discounter – just a few steps behind the colossal giant – Wal-Mart. Today, its giving Wal-Mart a few lessons in retailing. Target realized there was no point in taking Wal-Mart head-on. It needed to make its own position. So while Wal-Mart had got the price advantage and was perceived as the ‘Everyday Low Prices’ outlet, Target had to build a new image for itself. Target very cautiously started to build an image of ‘Cheap-chic’. Clever partnerships with designers, and creative advertising made it sure that young, better educated and more affluent customers started frequenting Target. The supermarket soon made a name for itself as a happening and fun-place to be. So much so, it made Wal-Mart look old and frumpy. Target became hip and cool.

The image people have about your retail outlet is very important in ensuring customer loyalty. So Big Bazaar is known as a no-frills-discount store. If you are looking for a great buy, then this is the place. Shopper’s Stop, on the other hand, is for the upwardly mobile and trendy. And the fact is that you need to weave your advertising strategy around this image too. Years ago, Bloomingdale’s did this by using the tag line, ‘Like no other store in the world’. It immediately cast an aura around the store and set it apart-so much so that when Queen Elizabeth visited USA, she stopped at Bloomingdale’s!

Supply-chain management

This store made retail history when its founder Kresge started a ‘Five & Dime Store’ and introduced the world to the concept of a discount store. The concept was a super-hit and soon, in just one year, this chain grew to a smashing 63 stores. That was 1963. The same store created history once more when in 2002, it filed for bankruptcy protection. The store was K-Mart.

Both K-Mart and Wal-Mart started in the same year; yet, what is it that caused K-Mart to go bankrupt and Wal-Mart to prosper? In certain terms, tt was the poor supply-chain management of K-Mart, which was the cause for its downfall. Wal-Mart used information technology to keep track of its sales. It knew quickly when to order which product, which product was a best seller, which a loser. It developed a sophisticated hub & spoke supply-chain system, innovating (then) the global usage of bar code tracking, and (even now) RFID tags. K-Mart, on the other hand, relied on quasi-manual systems. As a result, goods were not ordered & delivered on time. Shelves stayed empty. Managers had very less clue on which goods were doing well, and which weren’t. The outdated technology often resulted in goods sitting in trucks parked behind stores, all because there was no storage space. By 1983, while Wal-Mart was spending only 2 cents per dollar in getting goods into stores, K-Mart was spending a pathetic 150% more. No surprise then that Wal-Mart could offer products at prices that were 3% lower than those offered by K-Mart; this soon eroded K-Mart’s customer base substantially.

Shopping experience

The customer is “gold” and should be treated like that. Treating customers with respect and going that extra mile for them, always helps build loyalty. Those are the small touches that ensure that the shopping experience of customers is exhilarating, and that they come back to your store and go nowhere else.

H&M, one of Europe’s most successful fashion chains, takes care that its stores are brightly lit, there is trendy music playing always and the shelves and goods are placed in unobstructed straight lines – all for the benefit and comfort of the shopper. In fact, outside some Japanese malls, one can even find numerous bicycle sheds. There, people cycle a lot and sheds are a convenience being offered to them. If that’s giving a lot, think about this Swedish furniture company, which was ranked 11th, not in terms of its furniture business, but for being one of the best-earning ‘eateries’! Furniture giant Ikea lures customers with cheap warm meals! One out of every 20 euros spent at Ikea goes into its cheap meals menu. It’s not just a hot dog for €1, the company also provides free baby-sitting services, so moms and dads can shop in peace.

Clearly, the customer should not just be well taken care of, but also be provided an environment that astounds their experience pleasurably.

Your employees

Sales are made not so much with low prices as with emotions. Get enthusiastic young turks to manage your shop floor. Their energy and emotions will rub-off on the consumers too. Take care of your employees they in turn will take care of your customers. Have in–store award programs, acknowledge special achievements. Give them responsibilities and reward them frequently.

The Merchandise

While profits of stores like GAP and Marks & Spencer fell, things seemed to be going great for the Spanish retailer Zara. Today, its founder has become one of the richest men in Spain. His policy was straight and simple. People were looking for fashionable things – not necessarily things that would last for ages. So he gave them clothes that were different and fashionable without the hefty price tag, and kept changing the range constantly. The word-of-mouth about Zara’s excellent merchandise kept customers pouring in. In short, select your merchandise carefully. It should be in-sync with the image. Have an assortment of things to meet the needs of the people. Knowing what to keep & what to discard is the key to an expanding customer base.

Retailing is definitely an art. It’s the art of charming your customers. You need to be creative, you have to make them want to own what you have to sell. So put on your thinking hats and rework your retailing strategies. If you want to survive – make them shop till they drop.