After a hectic day of power packed presentations and discussions, day two of India Retail Forum 2013 (IRF) being held at Renaissance Hotel, Mumbai, began with a much needed session on the 24/7 mantra of retail success. One of the senior most Art Of Living practitioners and teacher Ms. Rajita Kulkarni guided the audience through a session on “Transformational Leadership for Excellence”- a unique program to provide tools to enhance skills that foster greater energy, clarity of mind and a passionate commitment to personal and team excellence.
The debate then moved on to ways to grow beyond the four walls where retailers discussed how success gets noticed when you are able to scale your venture and how to do it through a profitable model. The audience got to understand from the leaders who have witnessed and overcome the challenges.
The key take away from this session is that while growth beyond a certain limit can be hectic, the focus on sustainability and profitability, aligning with the environmental intricacies and adherence to basic principles of financial accounting is the key to a long term growth of the retail ventures.
Atul Ahuja, Vice President – Retail, Apollo Pharmacy started with an interesting remark that “Retail has become more about logistics than conventional retailing. Having sensed this earlier, we almost outsourced the backend supply chain and focused on the fundamental driver – How to break-even the new stores as soon as possible. The flip side of the strategy is that the focus on new stores often undermines the operational and profitability improvements of the existing stores. Hence the revised strategy is to create a new division whose only focus is to open a new store and break-even in the first year. Making sure that learning from mistakes are back-fed into the system has also been instrumental to the growth”. He also added that, “the focus of the firm should be on Return-On-Capital-Expended (ROCE) rather than profitability as a better level of control for growth”.
Focus on Unit Economics, Return Metrics and Scale are the critical things that will make a business profitable was a strategy identified by Mr. Deepesh Garg, MD, O3 Capital.
Vikram Bhatt, Director, Enrich Salons & Academy shared an insight that one needs to aim for speedy and focused transition for breaking even. For example, opening two stores in a city does not justify set up cost, rather taking a clustered approach helps improve the returns of scale. With optimize training, infrastructure costs, the asset beta improves very fast. He also stressed on aligning the promotional campaigns with the preferences of the locality around each store.
Devang Sampat, Head – Operations & Strategy, Cinepolis opined that in order to expand beyond the four walls, you need to first understand your four walls and gain control over them. It is crucial to think about and seek clarity about what business you are in, how you make profit, how do you want to grow. He shared that for Cinepolis it was important to decide whether they are in movie-selling business or pop-corn-selling business to propel the entry and growth in India. They took a long time to enter India, but entered with full conviction on what their ultimate goal was. One of the key strategies for Cinepolis is to evaluate how much space the city has for a new multiplex before they jump in.
When asked to define the flagship store, the panel almost unanimously emphasized that the flagship stores are aimed at brand-building and creating aspirational value that gets propagated to tier 2 cities and rural markets. Having said that, the panel also noted that it is important that the flagship store achieves a break-even point and is not seen mere as a cost center by the management. The money spent on flagship stores should be construed as the advertising and marketing expenses.
The power packed session on E-commerce brought together industry players from varied fields who discussed and educated the audience about e-commerce and how to grow the online retail ecosystem- the 24/7 mantra of retail success.
Harminder Sahni, MD, Wazir Advisors started the panel discussion with highlighting the issues which have been tailgating ecommerce since 1998, summarizing the online retail industry, mentioning that it has been an exciting ride for online retailers as well as people watching the industry from far as consumers and offline retailers. Though a lot of players are coming in, the number is still not sufficient enough. Many large players in the offline retail are not coming online, whether through the multi-brand route or the specialty or marketplace route. The major talk with respect to online retail has been with respect to the ecosystem. Ecosystem does not mean only technology or logistics or customer services, but also policy, availability of talent and professional tools to manage businesses.
Latif Nathani, MD, eBay India, shared couple of very interesting facts for eBay: 120 million customers, presence in 100 countries, in their 9 years in India they have 5 million registered buyers, 4306 business hubs, over 45000 sellers. On being asked where India stood in the global ecommerce scenario, he mentioned that there is a big difference in the way ecommerce has evolved in India when we compare it to, say, the US evolution story. In the US, people were already comfortable buying through catalogs, and switching to online was not a big cultural change for them. The ecommerce cycle in India is being compressed and cultural changes like reliance on touch-n-feel buying or credit card acceptability would take time to get incorporated. So a big hurdle is not only trust but comfort of the customer too. He shared that their strategy is to not own the inventory but provide the platform and marketplace for sellers to find consumers for their products.
What were the challenges in the ecommerce ecosystem? Richa Kar, Founder, Zivame.com, responded by presenting the customer perspective of online shopping. Zivame.com is an online lingerie store, and they faced a big hurdle of consumer behaviour when they started – lingerie buying online was unheard of. But since offline buying was an uncomfortable experience, people were waiting for a better experience, and they are now finding it online. Zivame.com caters to a long tail category of lingerie and innerwear, where offline retail has a limitation of choice. Her challenge is to find out how long it will take to get woman users online, same day delivery, reverse pickup, how to keep merchandise fresh in a category where there is no innovation. Also, hiring from the offline retail industry was an issue as people were not comfortable with the frequently changing promotions and merchandize.
Rajiv Prakash, Founder, NEXT IN, talked about the customer acquisition cost and his views on the issue. He compared the online acquisition cost to the offline one, stating that the online sphere had an advantage as it was like “clay which can be molded anyway you want it.” The marketplace concept of e-tailing was an important stage of the ecommerce industry, and the main face of e-tailing was now Choice of Selection. Infrastructure issues were not that big, as these can easily be tackled by new entrants, in fact, this was a big business opportunity which people are now utilizing.
Manmohan Agarwal, Co-Founder & CEO, Yebhi.com, commented that the achievement of the online retail industry has been phenomenal. Issues like customer and retailer mind-set were being addresses continuously and successfully. The next real growth now would be from Tier 4-6 cities, and the challenge would be how to reach them, both from connectivity and logistics perspective. Time poverty of consumers is increasing and the industry should not worry too much about customer acquisition costs. Any customer acquisition is actually for the industry, not just for a particular retailer, and costs of acquisition would drop significantly by 2015 with increased participation by already comfortable audience. Also, online retail can reach Tier 4-6 areas much better than offline channel, giving it a bigger advantage.
The need is to better understand your target segment, and present your value proposition.
The session on understanding the 80:20 principle and how you can your turn fad customers to loyal customers was moderated by T P Pratap, CEO, QwikCilver.
Pratap highlighted that prepaid service to customers is like a barometer of customer trust on a particular brand. The formal Indian Loyalty program industry is about 2000 Crores, of which about 70 % is oriented towards corporates. In US retail sector, prepaid business is a $150 billion industry. Consumers pay in advance for a service and therefore ecosystem is very important and technology plays a very important role in this.
Vinay Bhatia, CCA & VP – Marketing & Loyalty, Shoppers Stop discussed on how the loyalty program for customers has increased the business. He mentioned, “We have done a few basic things correctly. Prepaid card business is one of those. Citizen loyalty customer program yields 70% of our revenues and a lot more can be done in this segment. Cell phone segment is the potential future opportunity to get into the prepaid business. In India, festive based gifting is still a prevailing practice and it will continue for times to come”.
Nihar Ranjan Ghosh, ED – Human Resources, Retail, Spencer’s discussed how do employees operating at the store level make an impact in improving overall sales in a prepaid segment. Mr. Ranjan added, “It is very important to realize that customers have chosen us over others to receive a service by prepaying for the service. You might have the best technology that can be leveraged to cater to the needs of the regular customer. However when you have a prepaid customer, you are forced as a retailer to give the customer a stellar service. The customer has given up the right of choice and so expects a lot more for this “sacrifice” that they have made”.
The session concluded by highlighting that prepaid programs need to be driven from the top. The potential is huge as it has a potential 80% of the revenues can come in from 20% of the size of prepaid business. The secret is having a commitment, which is driven from the top and this belief has to be percolated to the entire organization. Everybody including the last in line front line guy will need to live by this concept.
In a session on International Leadership Guru Speak by Carol Talbot an NLP expert, master trainer and bestselling author, UAE, during the fast paced, high energy interactive session urged the retailers to discover the secrets of YOUR inner leader. What most organizations need are people who can face fear with courage, getting results is the most important. Alignment between your values & results can be like rocket fuel. Carol further highlighted what you think inside offers results on the outside. One should focus on what one wants and say it the way one wants.
The day moved ahead with a session on what every CEO should know about new-age marketing tools and it not being an optional anymore. New media and the use of new media as a marketing tool is becoming more and more relevant every day. Consumers are now leading conversations that can define brand. As the industry value chain is becoming more and more digital, it is essentially to understand the major drivers to a successful new media strategy.
Ms. Asha Sekhar, General Manager – Integrated Marketing Communication, Coca – Cola India started the conversation by emphasizing the importance of ‘listening to customers’ and using the information to drive targeted marketing effort. Coke Studio in India is the result of one such measure. By listening to their customers Coca – Cola found that there is an increasing appetite for alternative music among teenagers. So Coca – Cola not only engaged customers in Coke Studio’s fusion music but also allowed them to download content related to Coke Studio. Ten million downloads of Coke Studio content has been reported which re-establishes the power of social media as an effective tool for branding building.
Rahul Singh, Founder & CEO, The Beer Café claimed “Beer is a social product”. While a debate can be easily conducted on the social impact of beer, the beer and beach study described by Rahul was very pertinent for marketing. The value that the same customer on the same beach derives from the same beer served in two different outlets – one a resort and the other a shack, is quite different. Hence customers do not have a problem in paying different prices for the same product. The bigger question is beer being beer (i.e., an item which cannot be promoted or advertised on conventional media), how do people like Rahul promote their products and services? Rahul claimed that social media being a grey area for governmental policies provides a good platform to spread the awareness of their brand and reach out to customers with offers and promotions.
The subject of discussion shifted to discounts and the promotion of discounts through social media. Almost all the panelists agreed that no retailer in India can survive without providing discounts. The discounts offered online are higher in magnitude as the associated operational costs are much low as compared to brick and mortar. At the same time the panelists agreed that any discount offer should be properly crafted so that it does not alter the value perception of the product in the minds of the customer.
Social media is not only about positive impact and brand awareness; it can equally multiply negative impact by spreading negative news in hours. In such scenarios the solution is not to step out of social media but to be candid about the event and use honest communication through social media to retain customer trust.
One of the objectives of marketing is to create brand ambassadors. Perhaps employees are starting point of creating great brand ambassadors. Social media can play a big part in engaging and empowering employees to be brand ambassadors and influence customers. Perhaps a topic for next year’s IRF!
The session on developing the right strategy for taking your brand to the pinnacle of retail success, emphasized on bringing the strategy and branding into context.
Sandeep Ahuja, MD, VLCC, mentioned “branding in the 80s was very different – branding was created by day to day functioning. Now branding requires various other attributes. VLCC was built by consistency of communication across various channels as a slimming company. The communication was building the sales and brand was built automatically”.
Sukanya Dutta, MD, Swarovski India says, “We start with an image & try to keep the image consistently”, Swarovski deems customer mind space as self-indulgence, feeling beautiful, bright in image but not in bright jewellery, we don’t talk of price, it is just beautiful things. In premium, you tend to take a position. There are no doors only open displays”.
Ram Iyer, Executive VP – Retail, Vodafone shared interesting insight into difference between Vodafone stores in big cities and mini stores in small towns. Lal dukan use to have branding in English & was intimidating for customers, so they changed the language, now sales person speaks local dialect.
Dharmendra Manwani, CEO, Jean Claude Biguine shared his mantra for successful branding and differentiated between advertising, PR and branding. He said trust comes from delivering on time and value system and purpose. Internal communication is important and it leads to value system.
The session on retail impressions: International brands perspective in India showcased the “Top 3 challenges” that international brands face when they operate in India.
Vineet Gautam, Country Head, Bestseller – Jack & Jones, mentioned that the consumption is low and the per customer buying power is lower. Due to this, the consumers don’t switch through their wardrobe as quickly as the consumers do in other markets.
Scarcity and availability of premium retail space is a big concern. This coupled with high cost of retail space creates an economic disparity in terms of buying power for the consumer. He is convinced the e-commerce is the future growth opportunity since it negates the high costs of real estate and allows for a farther reach than a traditional shop, says Rajesh Jain, Director & CEO, Lacoste.
Manish Kapoor, COO, French Connection mentioned that the challenge is in scaling up the business to ensure the business is sustainable and the promise of the large consumer base comes true. While doing so it’s very important to ensure that your brand credentials are kept up and you don’t dilute it during the initial stage.