Jun 1, 2012

HOUSTON, WE HAVE A PROBLEM!


Is big-box electronics retailing a thing of the past? - This question gets me all wired up as I see the electronics brick and mortar stores struggle to maintain their grip on the consumers pulse as well as their bottom-line numbers.

As we move further into 2012, we can see that the pressure from the online-only retailers on specialty brick and mortar electronics retailers have increased considerably over the years. Do they press the alarm bells yet? Well, the analysts and investors already have. The farsightedness and the tenacity to look into the future, asking some hard questions and doing course correction is a virtue most of the retailers could use at this juncture. There has not been a greater threat to their existence than Amazon-the 800 pound gorilla in the room, which is breaking down all previously held sacrosanct tenets of retailing and every electronics retailers are running helter-skelter not really knowing how to fight it. 

The online retail boom has, in a way, revolutionized the industry as well as the buying behavior of people. The game, rules and the playing field have changed. If current trends are to be extrapolated, the time is not far when the existing big box electronics stores would struggle to stay profitable and ultimately would serve no other purpose other than being glorified showrooms for online retailers. One thing that hits you, as you enter any retail store, especially the big box electronics retailer is that they have decent footfalls but the conversion rates have consistently been on the southern side. The root cause lies in the heady mix of higher prices, online deals, and customers coming to check-out the products and compare prices in their mobile apps and then buying it from the vendor offering the best deals. If we add together the Inventory carrying cost, Opportunity cost of capital as well as the margin pressures, there is no logical way they can sell their products at a lower price than online-only retailers. This might look like doomsday prophecy but we cannot ignore the tectonic shifts happening in this industry where online shopping is becoming big, real big. It has attained critical mass which is leading to a new and irreversible development in the retail space and is increasingly bringing consumers from the traditional retailers into its fold. 

So how does the Best Buys, Staples, Fry’s, Radioshacks and HH Greggs of the world fight back? – Do they sit back and look hapless at the rate at which software and virtual stores are eating away a quintessentially traditional business? Do they even realize that the Tipping Point has been reached and in the aftermath they have to find a strong raison d' etre to remain in business? Study of Consumer behavior tries to explain the when, why, how, where people buy or do not buy a product and the entire decision making process. It is as much a psychological decision as an economic one. Price will, ceteris paribus, be the most dominant of the marketing metrics in the post-apocalyptic scenario (for big box retailers at-least!) where online retailers will call the shots. How are they going to fight with the likes of Amazon, other e-commerce sites, daily deal and auction sites as well as the physical discount retailers like Wal-Mart and Target eating into their market share? Too many questions, answers… not many! 

If specialty retailers like Best Buy, Radioshack continues to focus on their brick and mortar stores and don’t go all out on their online business that would be the utmost dis-service they can do to themselves. The one most important metric of any brick-and-mortar retail business is Sales per Square Foot and after the economic downturn this is not going up anytime soon. Simplistically put, there are no USPs of note which can shoot up sales; no amount of customer service, pick up at store, experience centers can make a customer to pay higher dollars for the same product which is available online at a lesser price, coupled with good customer service and faster delivery. The number of substitute products also means that one cannot charge a premium for a product which is also available online at a reasonable price. Best Buy, once the blue-eyed boy amongst the American specialty retailer of consumer electronics, accounting for 19% share faces the same uncertain future as many of its competitors. If it cannot bring the customers to their doorsteps it should make its product available where the customers are heading i.e. online. When it comes to online sales, Best Buy remains a laggard, which will continue to be so as long as they don’t address the central issue of Pricing vis-à-vis the competition. 

Remember the times when buying a camera meant visiting the electronics store and buying one after a few minutes of deliberation and consultation. Nowadays, it is a far more complex process- as consumer electronic sales begin with comparison shopping/browsing on the internet, extensive product research, visiting physical stores to check out the product, do an in-store price comparison using smartphones and then buying it from the vendor (both online/offline) which offers the best deal. The growth of m-commerce due to greater smartphone usage and the fact that consumer electronic sales start on the internet and more often than not end on the internet provides a sliver of opportunity for these traditional retailers to join the online bandwagon with a newer zeal. According to a Branding Brand study, in 2014, 26.4 billion in sales, or 53.2%, will stem from smart-phones. Moreover, more than 80% of shoppers access online product reviews before they buy electronics goods. All these points to the fact that sales of electronics goods, m-commerce and online sales share a close synergy. 

The winds of change have also shown up during Black Friday sales as well. Traditionally, this has been a day where major retailers open up their doors with promotional sales to kick off the shopping season but now people have increasingly warmed up to the idea of visiting online retail sites on Black Friday. Although not yet a huge number, yet all trends indicate that the fortress has been breached. Black Friday sales boast of $816 Million in U.S. Online holiday spending. This might look like small change as compared to the $11.4bn in sales reported by traditional retailers but they only grew 6.6% YoY as compared to the 26% Percent growth YoY witnessed by online sales. During 2011 traditional retailers did ramp up their online efforts to compete with the usual suspects like Amazon and other online retailers. 

The future of the big box electronics retailing doesn't lie in the big box anymore. As per the changing trends, their marketing mix should focus on the 2 Ps of Price and Place. Lower Price can happen if they cut costs and be more efficient, Place- Isn’t online the most frequented place by consumers for electronics goods? What will happen to their brick and mortar stores? Well, the emphasis should be on opening smaller concept stores to showcase big ticketed and popular items, complete with experience zones and carrying minimal inventory and facilitating instant/deferred delivery of items purchased at the store. They should let go of the big box stores (or at-least some if it) and adopt a lean(er) strategy and then pass on the cost savings to the customers in the form of price reduction and focus more on engaging with the online customers. Sounds too simple, ain’t it? 

Will they still be able to out-fight and out-box Amazon’s clout? Well, let that be a story for another day!

Apr 27, 2012

Deal or No Deal?


I saw this Groupon kiosk at Navy Pier, Chicago. Catering mostly to the 'touristy' crowd I presume, who could explore and buy location/time specific deals.

What got me thinking was that it serves two very important stimulus to buy-
  • Instant Gratification- providing buyers what they want right 'now'; not later and not making them to wait. 
  • Deals, Discounts!! 
Will it be a success? I'm not quite sure... I just browsed the kiosk to see if the interface worked properly! :-)

But the realist in me find it quite hard to believe in the business model of a daily deal site (like Groupon). Afterall, the business of business remains the same i.e. to make money. As long as it doesn't lead to customer retention where is the return on the investments made in the form of deep discounts? Without any stable customer relationship there cannot be any Customer Lifetime Value (CLV) to start with, isn't it? 
All I can see is a bunch of 'deal hunters' moving from one deal to another. Neither Groupon is winning nor the advertisers.

Mar 30, 2012

Day-Accomplished: Folder of Dreams

Day-Accomplished: Folder of Dreams: There is nothing like returning to a place that remains unchanged to find the ways in which you yourself have altered.  ~Nelson Mandela...

Nice post by Asmita!

Mar 23, 2012

Agent Vinod- The original movie :)


Synopsis:
The kidnapping of a prominent scientist, Ajay Saxena (Nazir Hussain) prompts the Chief of Secret Services (K.N. Singh) to assign flamboyant Agent Vinod (Mahendra Sandhu) to this case. While on this assignment, Vinod meets with Anju Saxena (Asha Sachdev). Together they confront the abductors of her dad, Madanlal (Iftekhar), with the help of Chandu alias James Bond (Jagdeep) and his gypsy girlfriend (Jayshree T.)

Amazon.com deals


Just enrolled for an Amazon Prime membership which gives the following benefits-

1. Free Two-day Shipping
2. Instant Streaming of movies/TV shows
3. Instant access to '000s of Kindle Books

While still under the no-obligation period I tested it out by ordering some car accessories for my Honda Accord. The package arrived in 1 day flat! Can there be anything closer to that? Awesome is the word!! :)

Being regular shoppers in Amazon, I try to look at various coupon sites to get the best deals. Some of the websites that I trust are-
These sites aggregate all the deals the net has to offer and frankly speaking it saves me time, money and gives me the information that I need without any gimmicks.
With revenues topping $48 billion in 2011, and constant innovation to stay top of the competition curve it seems  Amazon will continue to remain as World's Biggest Online Marketplace!

Mar 15, 2012

Intelligent Analytics- Beyond the form factor

As someone who works on Business reporting along with the whole continuum of metrics and reports catering to multiple business functions, we are not immune to the paradigm shift happening in the BI and Analytics space. A shift brought about by two fairly recent developments- the phenomenal growth of iPads and tablet PCs usage over the last couple of years and the renewed business emphasis on making quicker business decisions- based on seamless data discovery in a convenient, easy-to-use format. Mobility and convergence are the key themes; the advent of tablets and iPads are incidental yet vital to its cause.


Video: Apple iPad TV ad

Read more at- Link

Feb 23, 2012

Luxury retailing in India- it's haute!


"Do you wanna know what comes between me and my Calvins? Nothing."
--this iconic line by a certain teenager named Brooke Shields catapulted her into instant fame and, in a way underlined the influence of brands in defining our social fabric.

DLF Emporio Mall, New Delhi
A gentle breeze swept across my face as I entered the DLF Emporio Mall in New Delhi. For one moment it felt like I was in another world- someplace like Milan's Via Monte Napoleone, London's Bond Street, or the venerable Fifth Avenue in New York... a smorgasbord of everything fashionable and haute! Emporio is India's answer to other International fashion capitals-- concierge service, 5-star ambience, presence of revered brands like Dior, Gucci, Armani and Louis Vuitton and a shopping experience that is purely world class. Having said that, Emporio Mall is targeting only the creamy layer of people in the Wealth pyramid, but it serves as a shining example of the good things happening with Indian Luxury retailing at present.
Every brand has a story to tell... and the aura of exclusivity coupled with high income elasticity of demand takes care of the economics for premium goods. Gone are the days when the typical well-heeled Indian had to travel overseas to buy their favorite designer labels or ask their non-resident friends to grab the stuffs from Duty-Free stores. Almost all major Indian metros are now warming up to premium and ultra premium retail experience although retail space still remains a prime concern. Due to prohibitive real estate prices, many of the premium labels are increasingly looking at operating from luxury malls than from 5-star hotels.

Key Challenges:
  • Lack of dedicated retail Space; fashion high street
  • Expensive real estate; which significantly hits the bottom-line
  • Increasing the client base; target the high income population
  • Improve service offering
  • Establishing 'Luxury' as a need among Indian customers
  • Focus on affordable luxury for Indian customers
Read the full article at:

Feb 18, 2012

FDI in Indian Retail- Lost in translation!

Victor Hugo once famously wrote- ‘One cannot resist an idea whose time has come’. 
FDI in retail in India would have been one such idea. As India is eager to make the transition into a developed nation with a robust economy and infrastructure to sustain the growth, opening up the markets in the retail sector would have been the next logical step. But then history has its way of scripting a twist in the tale.

India as a concept of nationhood is quite paradoxical- we have some of the poorest people in the world surviving on zilch and some of the richest people in the world who feature prominently in the FORBES billionaire’s list. Just like we cannot translate western ethos into an Indian setting and hope that it will work every other time, similarly we cannot afford the type of Western influenced Pareto efficiencies in India where the competitive forces will work their way to some sort of efficiency equilibrium without intervention or supervision or guidance. For a nation of billion people what we really need is an all-inclusive equitable growth keeping in mind the needs of the bottom-of-the-pyramid socio-economic groups amongst others; this is not a matter of choice or convenience or dogmatic one-upmanship but a matter of polity based on our socialist moorings.

TIME magazine named 'The Protester' as the Person of the Year for 2011. India also had its share of protests with the common people getting together to voice their anguish and resentments. Some of those protests were bonafide, some were ill-timed and some were utterly uncalled for. The protest against FDI in retail by a vested section of the population was one such rare aberration. There has been a deluge of arguments and counterarguments from all the estates of the realm; everybody worth their value in salt is debating the introduction of FDI in the retail sector in India. If we were to believe the top brass of India Inc. then 51% FDI in multi-brand retail sector was meant to be a boon and would have provided maximum benefits to the farmers and the consumers (the set of people whose welfare should be of paramount importance). Alas! For now, we will continue to see pesticides being used by the farmers for all the wrong reasons going by the statistics in Maharashtra, Andhra Pradesh and a host of other states!!

The Indian retail market, which is pegged at $450billion, figures prominently in the boardroom discussions of all major retailers and CPG manufacturers. The burgeoning middle class population and increase in disposable income has made India a strategically important and a lucrative market for the foreign retailers to join in. Moreover, it is still a monumental challenge to address the supply chain dynamics in the agriculture/aquaculture sector in India. Some of the pain-points are-
  • Under-developed infrastructure
  • Over dependence on weather Gods
  • Numerous intermediaries without much value addition
  • Colossal losses due to lack of storing facilities
According to conservative estimates, close to 30-40 percent of India’s fruits/vegetables perish before they reach the end-consumers because of insufficient cold-storage facilities and poor transport infrastructure. These losses in turn, are passed on to the consumers who end up paying more than they bargained for. The wheel that can set the whole efficiency thing into motion is healthy competition- domestic or int’l. Foreign retailers would have brought their proven and effective supply chain methods, efficient inventory control, economies of scale and backward integration to the Indian retail scene. The homegrown retailers would have scaled up their operations to match the competition or risk being marginalized. The retail pie would have increased and positively impacted the food inflation rate, created countless jobs and resulted in the expansion of the realty sector in India with the creation of shopping districts and malls.

Contrary to what the anti-FDI lobby wants us to believe, the small retailers have always thrived in all other geographies where they already have modern format retailers. They are irreplaceable for the kind of service, inventory, unique credit system (salaried people could buy throughout a month and pay during salary day at zero % interest), free home delivery, and most of all- convenience!! Nothing can beat the neighborhood kirana store for those quick shopping needs. Realistically speaking, the small sundry retailers will survive, but we will definitely see some traction in the fledgling Indian large retail chains. Either they will be up for grabs or will have to constantly innovate to stay in business. By conservative estimates modern format retail stores would require a catchment of at-least a million people to make their venture profitable. This leaves out 72% of India which lives in the rural areas and smaller towns and they would continue to shop from the neighborhood retail shops.

The policy makers, through means of legislations can ensure that the legitimate rights of the 175 million farmers for better prices doesn’t get lost in the chaos. These agricultural producers are waiting to get a better deal for their yield- a gap that the organized retailer can fulfill through means of technology and economies of scale. Hence, throwing the FDI baby along with the bath water of opportunistic, myopic policies isn’t something that is advisable. Vested lobby groups representing the ill-informed group of wholesalers, retailers, middle-men and the lack of a political might put us back by eons. FDI would have given real benefits to the Consumers and the farmers and would have removed the unproductive, money wasting bottle-necks. Consumers would have saved money while shopping; farmers’ would have got a better price for their produces, jobs would have been created in the retail sector, Government would have got back millions in taxes which are evaded by the sundry retailers. Can we ask for more?

I’m not entirely sold out on the idea of FDI as a cure-all remedy for all thing retail in India. They must be regulated, controlled in such a way that the SMEs are not marginalized by means of cheaper imports alone. Level playing field is what is required so that we give consumers the choice- to buy better, cheaper, quality products. Having said that, I don’t prophesize the Wal-Marts and TESCOs of the world coming to India and closing down the neighborhood kirana store, the hole in the wall Mom and Pops, the mithaiwallah, the standalone saree shop. I am pretty confident that they will improvise, innovate, provide better service and continue to thrive. The existing distribution system is archaic yet it provides life’s essentials to places where there are no roads, no means of travel. That is India- we always have a jugaad way of managing things.

Change is not always bad or for that matter good- and more often than not there will be resistance against change- maintaining the status quo is part of our Indian-ness and in a queer way defines us. We need to look at things from a neutral frame of reference- the greatest good for the greatest numbers most of the times. FDI in retail is not a zero sum game between the foreign retailers and the home grown retail/wholesale businesses; it was never meant to be that way. Obviously as with every change there will be a bit of collateral damage and we will all have to live with. Let us give consumers the choice- the flexibility to make their choice- with whom they want to do business with.

I have high hopes for India and surely it deserves better in the coming days.

Feb 17, 2012

Soap-makers of the world, unite!


Recently I have written a blog on SKU Optimization which I would like to share.

Henry Ford once famously quipped about the Model T car in 1909- Any customer can have a car painted any color that he wants so long as it is black. As I hurriedly move around the aisle of the local Kroger Grocery store looking for a particular brand of I-forgot-what; I couldn't help but think that this was perhaps the best instance of SKU optimization ever done!

But this is 2011, and things have become a tad more complex ever since. CPG companies are looking to hold on to their market share- at the added cost of increasing their SKU portfolio; retailers are looking to streamline their aisles, lessening clutter and increasing their efficiency; and above all- customers are looking for simplicity in the choices they have once they enter the retail stores rather than the overwhelming assortment of confetti colored, similar looking products that craves for attention across the aisles.
Read more at-
http://www.infosysblogs.com/retail-cpg/2011/11/soap-makers_of_the_world_unite.html