Retail Essentials

The future of organized Retail in India :

• All of us believe that ‘Organised Retail’ is going to grow in India like no other industry has ever grown.

• The Reason : Out of an estimated $300 billion retail business just 1 % is ‘Organized’.

• Even though the growth would come, there is a basic flaw with the cause to which it is being attributed.

• Consider this – 90 % of the Retail business in the US would fall into the organized segment so can we conclude by the same logic as above that the unorganized retail would be high growth sector in the US???

• A convenience store is by definition a convenience store and no one can take that away from it. The ability to maintain JIT Inventory, Higher degree of CRM, Localisation of product mix, Motivation of Owner Manager are unique to a small format stand alone store and are almost non replicable by any model that looks at scale of operations • So what it is that is going to sustain the growth of Organized Sector ?Surprisingly it is consumer behavior.As the economy grows and more and more people climb up the socio economic ladder the equation : time = money will get more and more pronounced

• Wal Mart failed in Korea and the one reason : consumer behavior. Koreans prefer to shop in the market where they enjoy the discovery and surprise element with a chance to haggle for prices and come back satisfied at having made a killing.

• The reason why retailers fail or succeed directly depends on their customer focus which simply translates to where the customer figures in their scheme of things. While we may assume that it is a natural choice that customer should always be number 1 it is very easy for a retailer to loose focus in the maze of 50000 SKU’s,300 Store locations and 10000 associates.

• Most retailers do not even realize that they are losing customers till it actually starts showing on their top lines in a way that it cannot be attributed to nothing else than footfall ,conversion and customer apathy.

We will focus on two major aspect that matter for a retailer :

1.How to get customers

2.How to Retain them

There are certain key elements as to how customers behave and we shall take these one by one not necessarily in order of ‘top of the mind’ but as a step by step process if you wanted to set up your own stores and run them.

Name of your store..• Depending on what segment of the market you wish to cater you have to come up with a name

that begins your relationship with your customer. Let us look at some examples :

Lifestyle, WestSide, Shopper’s stop, Ebony Big Bazaar, Vishal Mega Mart, Apna Bazaar Choupal Saagar, Hariyali Home Store, Home Centre, Home Stop

We can also look at some other examples from across the world

Target, Macy’s,Bloomindales,SearsK Mart, Wal Mart, Value CityLinen n Things,Bath and Body Works,Home depotSam’s Club, Costco Price Club

• Clearly each name establishes what it stands for and gives an idea to the customer what to expect from it. Depending on what the customer needs she will choose the store. That is to say that even if you are new to a city and you are looking at a directory of stores you will know just by looking at the name where you should be headed if you wanted to buy home improvement product for you’re your new home.

• In India the Organized Retail concept is new but as the market grows customer will become more educated and will be able to identify stores with their names. The retailers too will face challenge how to differentiate themselves from competition just by naming themselves a little imaginatively.

• It is therefore critical that you spend time,energy and may be money to get the right name.

Tagline …..Look at the following Taglines –

Every Day Low Prices Wal MartExpect more Pay less - TargetIsse Sasta Aur Achcha Aur kahan ? – Big BazaarFrom Manufacturing to Retailing – Vishal Mega MartChoupal Saagar – Zarroratein Anek,Jagah Ek

• While all other Tag lines aim at addressing some part of consumer psyche the one of Vishal Mega Mart does not mean anything to anyone. It is obvious that that they cannot manufacture products in the various categories that they stock in their stores and so their relationship with all customers external as well as internal is at a high risk of getting misunderstood

• A tag line not only states and establishes a relationship with your customer it also helps your suppliers and Associates in relating to the objective of the retailer. Depending on your positioning it is obvious that your customer demographics will be defined but what is not so apparent that similar suppliers will approach you for business.The suppliers Designing, Price and Quality will all be aligned to the kind of customers it serves

• Talking about your floor associates – it is very important they know and believe in the philosophy of the company which is going to define their interaction with the customer. Many times the Tag line will give a common goal to everyone working in the company which will help build a culture which is so very important in the people driven business of retail. As soon as one says Every Day low Price or Expect more Pay less the whole DNA of the organization begins to take a new shape. The values that define your purpose of doing business change with such a simple thing such as a group of words that follow the name of your store.

Store Design, Layout and Fixtures

• Wal Mart Caters to Low Prices every day and so their store reflect the same philosophy.They are big Boxes with Shelves of products. Fixtures which are mostly rows and rows of shelving are very basic in design and the Aisle space is reduced to convey that one can buy merchandise which is cheaper than anywhere else.

• But if we look at other stores especially Target which has a theme of servicing the customer with Designer merchandise at affordable prices (like Westside in India) we will find that they use more elaborate fixtures and layouts, wider Aisles and high end lighting to enhance customer experience.

• As Wal Mart has started to address the ‘selective’ customer it has felt the need to change the In store Design Layout and signages and therefore many of the old stores have been remodeled and almost all new stores look much more upscale from traditional Wal Mart’s.

• We can see a similar trend if we look at Big Bazaar where they try and give the customer a Bazaar feel so she gets encouraged to go ahead and make the deals and buy product that is stacked high and being sold cheap. We do not have an example of high end Discount Store environment in the Indian Market as yet but it is only a matter of time that companies will realize it.

• Allocation of Aisle Space,fixtures,signages and other elements of In store look and feel form a critical element in positioning of the store in consumer mindscape therefore they must be given adequate thought by a retailer.

Ambience and Color schemeTo compare some of the stores on above counts we will notice that :

• The color schemes used at Wal Mart (Blue and White with very little color) reflect trust calm and confidence while Targets choice of corporate colors of orange and red reflects their philosophy of offering an exciting shopping experience to their cutomers in a fun, fast and friendly manner.

• We can see a similar trend in signages – While Wal Mart drives low prices ,at Target you will find that their concentration is in bringing forth the design element as they know that you can get similar but not the same stuff at Wal Mart at a lower price.

• Music also is a critical factor is influencing consumer behaviour. You would have noticed how a Mac Donald would play the latest Pop chart busters as they want the customer to grab the fast food finish it off in least possible time and get going against a fine dining restaurant where they will play Jazz or lounge so that the customer gets a relaxed feeling and comes back to distress at their place again and again.

• Announcement on a Public Address system also in a way help in creating a wet Market feel with Deals going on at every nook and corner of the store but as it interferes with the concentration level of a shopper trying to make a product- price decision many retailers shy away from engaging into this .It may be good idea for special occasions such as Independence Day Sale, New Year celebration bonanza where you can direct customer flow to products that are going slow compared to others.

• Many stores have started adding a play pen or a children’s play area within the store with a caretaker to enable the Mom’s to shop in peace.

Remember the less hassled she is the more will be the items on the bill !

Visual Merchandising..

Jo Dikhta hai who Bikta Hai literally translates to What shows,Sells !

Visual merchandising can play a pivotal role in establishing the image of thestore in customer’s mind which is in sync with your larger corporate objective.It can lok fun and friendly,up market,economical or simply out of this world depending how we want the customers to feel about

What Visual merchandising can do for a retailer can be summed up as below :

1.It helps to sell by showing and promoting2.Tempts the Shopper to try either the store or the product3.Educates Customer on a new concept or a trend4.Helps to cross sell and up sell5.Establishes,Promotes and creates stores image

The key elements of visual merchandising are :

1.Planogram is a visual map of how exactly a certain area of the store should be merchandised in context of categories,minimum display units and customer movement.2.Impulse Fixtures :The best time to sell an extra item is at the Cash desk.A simple experiment of Cashiers wearing Band Aid on the their Thumb improved the Band Aid Sales across the Chain manifolds.Usually these are items with marginal cash outflows and maximum consumer appeal,things that we buy everyday and would pick them up if we got reminded.3.Stack High sell Low : Stacking high or creating a pile of stocks of a certain items gives an impression of abundance and if the Prices are attractive customers tend to pick One or two just like that.The retailer can look at low margins but high contribution through increased numbers4.Demand Merchandise : If you have something unique in terms of Quality,Value or Price then the retailer can take the risk of putting these products in spaces that would compel the customer to walk the store looking for them.5.Related Merchandise or adjacencies – Basically take advantage of the way we shop.Toys can be placed near Kids apparel,Locks next to Luggage,Belts near formal Trousers.Retailers call it market basket and the data is derived from analyzing bills of several customers.It is a time consuming process but the rewards are worth it.6.Lighting – High and uniform lighting gives a sense of simplicity and efficiency whereas low and varied lighting gives a sense of sophistication and exclusivity.Lighting can effect sales by as much as 20 % so it is one element that a retailer cannot ignore.7.Color :is a crucial element in purchase decision and people decide color before they buy size,fit or Price.While considering store interiors one must look at what mood one wants to create.Blue and white represent simplicity and are more suited for discount or hypermarket formats while red,black and orange would probably go with a more boutique kind of a feel.

Store Associates …• Sam Walton had a “10 foot rule” which simply stated that a store associate must greet

the customer with a smile as soon as they are 10 foot apart and later Wal Mart also introduced a concept of store greeters who would stand at the entrance and greet every customer who walked in with an offer to help with a trolley.

• It is almost critical to the success of any Retail operation that its “troops” believe in serving the customer as the most important entity of the business and go out of their way to add that extra bit.Over a period of time you find that you as well as your competition are selling the same stuff at similar prices but what is going to make a difference is the service the customer gets at your store.Just imagine the bond it will create if the store associates asks “What can I do for you Today Mr. Kumar”.It not only tells the customer that we are ready to offer help but also acknowledges the fact that we know that you are our valued customer.

• Keeping the store Neat,clean,well organized and In stock is also a function of employee motivation.No amount of supervision can achieve these simple objectives and you can hear excuses as to why it was the way it was.The fact is that customer would reward the store that is well kept and makes shopping a pleasurable experience,albeit sub conciously.

• The store associates if well informed and motivated can double the sales by upselling and cross selling – the customer needs someone who knows better than him and if the trust is developed he is most certainly going to listen to advise from a good friend.

Promos, Marketing, Media … There are 3 steps to running great retail operation – Create the Value,show the value

and Deliver the value.

• Let us elaborate on the word value. What does it mean? Does it only mean the money that can be saved by shopping a certain store or does it go beyond this. To my mind Value is anything that drives the customer to the store first time and everytime. It could be Price but it can also be Design,Ambience,uniqueness of products on offer or just great service. Therefore it is essential that you ponder over what is it that will begin and sustain your relationship with your customer.

• Once that is done and you are sure that you can deliver the value on a long term basis it follows that you take upon Showing the value to the customer.

• Most companies in retail fail at this so you can see store start with a Boom and shut shop with a Bang.

• Footfalls are the lifeline of your business and it is imperative that your marketing department does a great job in luring customers to the store.

• A marketing plan for the entire year must be drawn at the beginning of each financial which has something going on every now and then to have the excitement level high in the customers mind. Once the trial element goes away no customer is going to Walk in just to check out what you are doing by the way.

She must have reason to walk in sometimes traveling for miles when the sunk cost

also plays at the back of the mind.

• The promos you advertise must be catchy enough to tell the customer that she will not waste time and money by coming all the way.• It could very easily communicate especially in case of staples and grocery that the cost of acquisition will be offset by the “free” portion of the promo.• You can look at having one Big “mother Promo” that beats all competition and let the customers question themselves that how the hell you can sell so cheap and they will come just to check what’s going on. You can loose money on this one – true but you can have dozens of other offers and great prices around the store so that by the time she checks out you have succeeded in loading the cart with ten times the amount of promo value.

• Media mix is again a factor that helps getting mindshare and keeping it that way. You will never have unlimited Advertising budget so you must put your money where your mouth is. • It might be a bad idea to do a national campaign on TV if your presence is not Pan India. You can choose between radio ads and TV tickers after mapping customer habits and also the recall from both media. A press ad may not be as cost effective as fliers if you want to reach a limited Target Audience. For the customer content is important , not how it is delivered. Ends do justify means ….

Image building – Community and CSR• Stores thrive on the catchment area they serve.It is recommended that they build a relationship with the community and demonstrate that they are there not only to make money but to be a part of the local population.• It is not a bad investment to give a little something back to the society which shares its hard earned money with you. Social initiatives such as helping schools with stationery and books,Setting up swings in the near by park,Lanscaping Traffic islands ,Maintaing parks are just some examples.• These might not give a large dent to your bottomline but they do create a positive and friendly image of the store.Depending on what you have done and what value people award to it one can generate tremendous goodwill and trust.• No one wants profiteers in their backyard but everyone would welcome a friend who is ready to help in the time of need or even just like that !

Loyality Programs • We are basically talking about a reward for continued patronage and addressing the various touchpoints that the customer has with the store.• 80 % of the sales are contributed by 20 % of the customers in many hypermarkets therefore it makes a lot of sense to know and reward them by sharing a small portion of the money the retailer makes out of their decision to come back.• CRM is at the centre stage of retail operations today and retailers are coming up with more and more innovative programs for customer retention