Reliance Brands to Market Timberland Products in India

Reliance Brands a subsidiary of Reliance Retail has entered into an alliance with Timberland Footwear and Accessories of the US to license and distribute its products in India. Timberland caters to the premium segment of the market with environmental friendly and Green product as its selling Mantra. They also come with a unique nutrition index.

This is Reliance Brands' third such deal after Diesel and Paul & Shark. Timberland's products range between Rs 4,000—15,000, with strong presence in the European and Asian markets. It has patented its waterproof leather shoes or iconic yellow boat shoes which are a must for any outdoor activity.

Timberland is also known for lot of Green causes declaring the carbon emission, making all its factories green thus reducing the greenhouse pollution by 27% and lastly products coming out of the recycled material. Hopefully, Reliance and other Indian retailers will take cues from this Green company.

No More Standalone Small Formats - Future Group

I guess our contributors / writers have tuned in to the teaching mode from the past week as we write again about another lesson, what Future Group has learnt from the slump and how it has changed its strategy on small format retailing.

Mr. Biyani has made it clear that Future Market and Consumer Group Ltd will now focus on 6 large formats Pantaloons, Big Bazaar, Food Bazaar, Central Malls, eZone and Home Town. All the smaller standalone formats like Fashion@Big Bazaar, Lee Cooper, Dori, Ethnicity, Celio, Staples and Navras will see their operations merged with one of the 6 large formats. However, this does not mean the end of these small formats, they will continue to be expanded by means of shop-in-shop concept. This is unlikely to dent the bottom-line as the smaller formats can encash upon the footfalls of their larger cousins. Also, incremental costs of establishing these shop-in-shop will be lower compared to that of standalone. The strategy will also hold good for forthcoming specialized store openings.

Mr. Damodar Mall, Executive Director of Future Group said,

After the slowdown, we felt while the smaller formats had potential, opening more standalone stores may not be productive, given the huge investments in setting up the store and in creating a brand preference among consumers. Hence, we've decided to focus on growing them through the large formats we have, including Big Bazaar, Food Bazaar, Pantaloon, Central, eZone and Home Town.

You should note that group has shut down some Lee Cooper and Depot stores and employees being absorbed in other operations. The group is all set to add upwards of 3 mn sft in retail space by next June with this new mantra :-)

Do you think that other large Indian retailers will follow into the footsteps of Mr. Biyani ?

Related Reading:
Complete Restructuring Strategy for Biyani's of Future Market and Consumer Group.

Lessons You can Learn from Kiranas / Mom-Pop Stores

We already know from the ICRIER survey that local retailers popularly known as Kiranas haven't had an impact as projected or estimated by most. We would like to enhance one some the key business lessons practiced by these Kiranas that can be incorporated by organized retail chains who are back to the drawing board chalking out new strategies on how to win the Indian market. This is with refrence to your neighborhood Kiranas which can be small operated by just a owner and few boys or little large enough offering you the convenience to pick and shop, yet doesn't scale to be a supermarket.

Kiranas seem to have an edge on choosing the most strategic location for business in residential area or community, even before it is occupied. This case is evident not only in India, but wherever Indian communities live across the Globe
-Americas, Middle East, etc. Kiranas are well known for stocking products in demand in that locality, compared to their competitors who have to push what is in their central database. Customer service in Kiranas is exceptional [you can even get the owner to address your issues], sometimes goods delivered to your home at no cost. The store boys exactly know the location of each and every product SKU.

The second generation of Kiranas who are bent upon giving the feel of supermarket yet unable to scale, have got technology savvy to implement POS with Bar Code Scanner only to embrace the advantages of technology that they can no longer use paper-pencil to keep track of their store merchandise and accounting.

Lastly, cases like that of Food Bazaar vs Kellogg, where the former is refusing to stock Kellogg brand below some margin and is trying to push its own private label Tasty Treat Cereals, a practice not seen with Kiranas as long as the product sells in the neighborhood, he happily stocks them. This business approach will not work in its favor as their are lots of consumers who would want global established brands over newbie private labels.

These could be some reasons why the Kiranas didn't have to close down, compared to their posh cousins who never made it to black on balance sheet and ultimately wound up.

Note: Kiranas is a Hindi word for Local Mom and Pop store.

Organized Chains not Hurting Local Kirana Stores

The myth about Organized Retail Chains throwing your neighborhood Local Kiarana like stores out of business is not completely evident yet, as per a report by ICRIER. The majority of the mom-n-pop stores are keen to compete and stay in business. Additionally, there is no evidence that employment has declined in this unorganized sector.

There is some decline in the employment in Northern and Western regions, which has weakened over period of 3 years. Rate of closure of unorganized retail in gross terms has been at 4.2% and unorganized players in the vicinity of organized retail stores witnessed decline in volumes and margins initially and are determined to compete. As a direct competition of these large chains only 1.7% of retailers have shut down.

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.

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 ?

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.

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.

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.

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 ?