Factors Influencing Store Openings + Expansion

We have already seen the diversity and the extremity of the Indian Retail Market. We would like to discuss some of the factors that will help in opening or launching nationwide chain of stores. You should first read and understand the consumer spending habit across the most lucrative Indian states on Food and Non-Food items and how they rank against each other. Again, just because UP ranks number 1 in the rank, you can't go ahead due to the wide geography making it little lesser lucrative market. [Not to forget the local politics ;-)]

However, we have other deciding factors that will help you in your rollout strategy,

Store Format - Store formats, layouts, positioning and other relevant aspects should be in line with the identified target market and customer segments.

Location & Selection - Locations (state, district and center) with a well-defined
catchment area and the sales potential of the identified region. Finally, Ease to serve - the total cost [minimized] and effort required to serve the catchment area.

Logistics & Reach - An optimal network with intermediate storage points, warehouse rationalization, ideal inventory levels at each node and an appropriate transportation mix needs to be designed.

Product Mix - should be in line with customer expectations, needs and aspirations, which vary significantly across segments.

Promotions & Advertising - The design of promotions, offers, events and loyalty
programs to increase awareness on the store, its products and benefits to customers in the catchment area is important. Try to use the channel with which you can major the effectiveness of the Ad campaign.

Value Added Services - Additional services at stores will drive significant
customer footfalls in rural areas. As such, it is useful to identify and set up additional value-added services such as clinics, play areas, banks, restaurants etc.

Your objective must be to have a structured approach that addresses each of these dimensions. Got more to add ?

Related Reading:
Elements that determine the consumer shopping experience.

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Pantaloon / Future Group - Restructuring for Growth + Big Plans

The Pioneers and largest Retail chain of India - Pantaloon Retail is recalibrating its business strategy to ride the second large wave of retail boom in India. Mr. Biyani believes that market dynamics in the current environment are working in the company's favour.

The objective of this exercise is to create different entities or pure play investment vehicles with their independent risk-rewards offering, excerpts from the management meet are as follows,

• Reorganize Pantaloon Retail India Ltd as a pure play retail company
• Reduce PRIL's stake and financial obligations towards its finance subsidiaries Future Capital Holdings and Insurance subsidiaries
• Unlocking shareholder value in non-retail business operations
• Future group is benefiting from improved consumer sentiment, low competition, lower rental costs and lower input costs. [Recall Mr. Biyani's famous e-mail - Garv Sey Khao Hum Kanjoos Hey ? They got on their toes very early during global meltdown and steps taken like rental re-negotiations, supply chain, procurement, and rationalization of suppliers etc are paying off now]
• Direct results of the above exercise in the past - increased store productivity, margins, inventory levels, working capital, full price sales and ultimately in improved return ratios and cash flows
• Future Group's Home Town and Furniture Bazaar are the largest formats in home furnishing vertical. Plans to launch 12 month EMI scheme to ride the realty boom of first time home buyers. This initiative is apart from the aggressive launch of Future Privilege Card.
• In the tug of war between Kellogs and other cereal manufacturer, Future Brands will launch its own private label to cater to this segment. Future Brands earns 3% royalty. PRIL's stake in Future Brands will be transferred to a promoter company for some monetary consideration.
  
• Future Group will not enter the cash and carry business at present.
  

Future Group has grown beyond expectations and it is the best approach to restructure businesses now, to pursue independent growth. Hopefully current shareholders will be given stake in hived of entities proportionately. Got any suggestions for Mr. Biyani ?

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CASIO's Watches + Calculators + Musical Instruments - Helps Double Revenue

CASIO India, the 100% subsidiary of Japanese company CASIO has witnessed tremendous growth [over 80%] in the past few years and is all set to scale the business.

Casio primarily operates in thre verticals - Calculators, Watches and Musical Instruments [synthesizers] and enjoys a high brand recall amongst Indian consumers. With its blue print ready for expansion Mr. Seth, Head Casio India said,

Our biggest challenge is to make products relevant for the Indian market. We are setting up music clubs in schools to promote instrumental music. We will also scale the Technical Support call center.

The company's sales in India is expected to touch INR 150 cr [ Guess, the non-invoiced sales in markets like Pallika Bazaar is also significant as it reaches Tier-II / Tier-II cities as well]

The company has presence in India for over a decade now and it doesn't have any manufacturing facility yet here as it requires more volume to sustain.

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How does the Rural Market Stack up - An Insight

Rural India accounts to 45% of Indian GDP. Rural India accounts for 70% of all Indian Households and cloe to 40% of the total consumption pie. So we'll see how the rural market in India stacks up.

Diversity Dispersed - The rural market comprises over 4,000 towns and more than half a million villages spread across India. This presents a significant challenge when decisions on store footprint and distribution need to be taken.

Market concentration - While a large number of villages exist, the size of individual markets and their market potential is significantly skewed. Of the 600,000 villages, 17% account for more than half the population and 60% of total rural wealth.

Categorization of Customers - It is widely assumed that rural market is homogeneous. However, there are significant variations, Multiple varieties of customer segments exist, each with distinct attributes relating to aspiration and purchasing decisions and patterns. For example - landlords with large landholdings, government / service personnel, traders and farmers.

Products Sought: - Typical rural consumers seek products with a low price point without compromising on product functionality. Nano [small] packaging is common. FMCG purchases are more frequent with a lower ticket size, so also the same saga in telecom - Low-value recharge coupons. Coke introduced Rs 5 small bottle to tap this consumer :-)

Purchase Decision: - Unlike the Urban Consumer where you BUY what you Like, it is different in Rural India. Buying decisions are mostly collective, involving a varied set of people: the influencer, decider, buyer and the consumer. A big ticket consumer durables purchase will involve most family members, neighbors, creditor and of course the shop owner.

Isn't it cool that how this Pyramid is structured and now how Retailers are trying to go where they are to get Business.

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Luxury Brand Watch Tag Heuer comes Insured at Ethos outlets

It is commendable to see that Luxury Brand retailers have went an extra mile to understand the second line of Indian customers who would want some kind of security on the Luxury products they buy - like Tag Heuer watches. Ethos Summit, the retailer of all Luxury brands state of art time-pieces has tied up with Oriental Insurance and is giving away free insurance with the watches purchased at their outlet.

Mr. Saboo, CEO of Ethos told us that,

It is a unique concept in India where a watch retailer is giving Free insurance. The premium Ethos pays is in the range of 2% of the cost of the brand and these watches sell for anywhere between Rs 50,000 and Rs 300,000.

Ethos has also found out that many owners of luxury time-pieces are reluctant to repair because of the high cost involved and the company has struck a deal in such a way that Insurance will now cover some repairs too.

Ethos has 18 stores spread across Tier-I / II cities in India - Bangalore, Mumbai, Delhi NCR, Ludhiana, Chandigrah etc.

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Elements Determining Consumer Experience - Design your Score Card

Bottomline is a must for any business, however in the retail business, it is the consumer experience that will directly determine the bottomline and the long term business proposition.

In order to help SMEs, Showrooms and Franchisees in the retail business, we interacted and brainstormed with several professionals in the Industry and Consultants and put together a list of Elements that determine the ultimate consumer experience. Based on this list, you can design a variant for feedback and weigh yourself on how well are you doing :-)

Store Ambience:

• Size and Space - Shoppers may not like it to be seen crowded
• Appearance - Must be well done with interiors, well lit and clean
• Display & Stocking - Good Display of SKUs and Organization based on some logical means

Sales Support:

• Staff must be courteous [no excuse] and try to be friendly
• Must co-operate and help in locating or providing information required by the customer [Remember, he will not always ask, but once he is asked and you provide the right answer, he is going to come back to your store again]
• Give a demo of product if asked for [Electronics] This will make the consumer interested in the product. Freedom to touch and feel
• Sales must demonstrate the available range of products - just don't think of margins, but try to make a SALE
  
• Transparency in pricing and if necessary match to your competitors offer
  
• Processes - Billing must be quick and give him choice for modes of payment - Credit Card, EMI etc
  

After Sales-Support:

• Ensure you deliver the goods on time [if not, keep the customer informed before he calls you. If it is delay beyond wait, offer goodies, like a gift hamper or something because you are at fault]
• Professional Installation if any
• Honor Warranty , Repair and accept Complaints

Others:

• Ensure good parking facility around your store
• Engage kids with games or candies & older people with assistance and water
  
• Offer to carry the goods until the car for heavy products or for consumers who are unable to handle them
  

Now design your own feedback card taking these points into account. Elements from top to bottom rank from high to low in priority. What say ? Got any more to add ?

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Mall Showrooms - Rental or Revenue Sharing Model an Insight

The initial euphoria on retailing in India has calmed down in the past 12 months as retailers slowed down and even shut down non-viable stores. To survive and grow, retailers are now looking for cost cutting measures from controlled staff spending to rationalized property rentals of showrooms. Even after a healthy 30% correction on retail rentals, retailers are still finding it difficult to run the show and hence emerged the new business Model - Retailers sharing Revenue with Mall Owners.

Lets first here the Mall Developers. They argue that, they invest huge funds in developing shopping malls by selling units for developing the project. once sold to investors, the mall has no right to give out space to retailers on revenue sharing. Unreasonable land costs have made mall development an expensive
affair.

Additionally, realty developers doubt on retailers as they are yet to establish themselves as as totally professional outfits with transparency in operations. They further question if retailers have revenue share agreements with suppliers, multiplex operators, producers / distributors ?

On the other hand, retailers argue that they are fairly nascent industry in India and are paying as high as 12% of sales as rentals compared to 3% in the west. Such exorbitant rentals put pressure on retail margins and thus end the year in red.

Additionally, retailers are concerned that the developer may abandon the mall after construction and sale. A mall owners stake in retailer will ensure more responsibility and participate in mall management and promotions. Revenue sharing will also help retailers expand in untested waters as rent pay-outs will be lower and will be tied to sales.

Ultimately, they need to strike a synergy on which both can bank upon and grow.

Related Reading:
Brand Franchising in India on Revenue Share Model

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Promising Formats + Chains in India

This is the part two of the two post series [ Read Part-1 here]. The two chains that I had hinted and none of you were able to get it was Ethnicity by Biyani and Mom & Me by Mahindras.

The other 6 concepts that made to the Innovators list areas follows.

Ethnicity: Kishore Biyani promoted retail giant launched its first store in October-2008. The central idea behind these stores is to retail Indian Ethnic and fusion wear, jewellery, handicrafts, home decor, beauty products and accessories. The stores are fairly large and their are 3 in operation [Ahmedabad, Mumbai and Indore] with a combined retail area of 54,000 sft. Company plans to enter
tier-II and tier-III cities with stores of 12,000 sft in size.

Mom & Me: Mahindras launched this unique retail concept for expecting mothers, infants, kids up to the age of 9. product SKUs in the storee rage from maternity wear, infant and kids fashion, educational and activity toys, games and wellness products for moms and babies, furnishing etc each store varies in size between 5000 to 12000 sft. Stores are located in Ludhiana, Ahmadabad, Pune and Delhi

Helios: The concept is targeted at retailing premium watches for the discerning in taste and highly brand conscious. It is a high end mutli-brand format with over 35 international brands like - Xylys, Roberto Cavalli, DKNY, Esprit, Hugo Boss etc.

Mocha Mojo: Tasting the success of retailing coffee with Hookah in its first format Mocha, Riyaaz Amlani promoted Mocho Moja with the theme - dining restaurant with superlative food offerings. Emphasis is on F & B segment - beer, wine, tea, healthy fruit and vegetable drinks beside raw and indulgence food items.

Tanishq Mega Store: Again from the house of Tatas has launched the largest jewellery store with all brands of Tanishq under one roof. Located on Usman Road, Chennai the showroom is 20,000 sft in size spread across 3 floors with each floor catering to specialized global shopping experience - Gold, Studded and Diamond jewelry.

Mother Earth: You can call this a Green initiative in retailing by Mr. Biyani. The theme of this store is to sell merchandise that helps build environment and social sustainability under the categories of Home, Apparel and Food. It sources large part of its merchandise from rural producers and fair trade partners encouraging green, artisan skills which helps in providing non-farm based income to rural masses. Earth Food is the Organic food brand while Earth Home caters to home needs and Earth Fashion is their brand for apparels.

Can you think of any that is much more promising than these ? You will be the Retail Entrepreneur of the year 2010 :-).

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