Did you ever imagine that one day, Aditya Birla, Future Group and few other big shots in the retail industry would be shaking hands together to achieve a common interest??
Well well....................... this is business we are talking about, anything is possible.
Cut-throat competition in India’s organised retail industry seems to have paved way to harmony, with top players such as the Future Group, Aditya Birla Retail, Spencer’s and Reliance Retail coming together to cut operational costs and improve margins. The retailers have formed a rainbow coalition that will align their sourcing operations and share private labels, logistics, warehouses and hiring details on a transactional payment basis.
“We may fight at the front-end but we need not compete at the back-end,” is the norm they have applied. Collaboration is the way forward in retail and they have taken lessons from telecom players that share towers. “Our infrastructure and resources are designed to be shared with others,” said Kishore Biyani, who runs Future Group, the country’s leading retail player. Retailers are hoping to improve their operating margins by 2-3% by sharing back-end resources. Most players in the Rs 30,000-crore plus organised retail industry are affected by teething problems and the economic downturn. Grocery formats have recorded huge losses, forcing retailers such as Reliance Fresh, Birla’s More, Indiabulls and Spencers to shut down unviable outlets and halt expansion.
The retailers clarified that this move doesn’t amount to cartelisation, as the cooperation among players is limited to the back-end . The players are discussing ways to sell private labels to each other and collaborate on shrinkage—essentially a diminution in inventory due to shoplifting, employee theft or supplier fraud. The collaboration can be extended to include sale of each retailer’s power brands, not necessarily store brands. The move essentially focuses on how to cut costs in supply-chain and third-party manufacturing. It is a common practice abroad where the eco systems are far developed. Retail companies are currently focused on bringing down distribution costs by eliminating intermediaries and transport delays between the sourcing point and point of sale.This idea would solve many problems faced by the retailers.
But is it a complete solution?
In grocery, burdened by consumer expectations of more frills compared to no-frills kirana shops, modern formats had to shell out 30% higher costs on rent, energy, bar codes, air-conditioning, bright lights and other aspects. Also, lifestyle retailers were forced to mark down prices to move volumes as consumers traded down to more affordable brands in a challenging environment. The collaboration also addresses issues such as unused furniture or design and completion of shell space—that instead of lying unattended in warehouses can be sold to fellow retailers. Then there is the issue of modern retailers who are keen to promote their own private labels. Under the new concept, retailers may have to sell such labels to each other.
It is a welcome concept but needs to be complemented by developing the systems and procedures as the Indian retail sector is still growing. There are various issues also that need to be tackled parallely for the model to be finalised. Such a joint proposal would also need to address nimble mom-and-pop stores that are swifter in merchandising and understanding local nuances and requirements. Modern formats with their regional and central sourcing structures typically are unable to compete in such a situation. While the plans seem extremely smart, very often issues crop up during the implementation stages. Retail is a business of detail and when there are too many players involved, issues of funding and ownership tends to derail the progress.
So, let us keep track on the moves of the big giants of the retail industry – as to whether they have gone ahead with this model or planning for something new.
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Retailers did everything possible to attract buyers over the holidays. From educational sessions to discounts, coupons and special offers, retailers used their ingenuity and marketing smarts to make the best of a dismal season. Nonetheless, numbers were down and every indicator pointed toward an even gloomier 2009. Perhaps the very profile of the retail environment has shifted as consumers settle in for what may be a protracted economic change.
Here are some ways in which retailers can survive through the second half of the 2009 buying season and keep their business on track.
Don't Take Your Foot off the Gas: Remember the hectic holiday season while you did everything possible to make your business a success? No matter how tired you are or how discouraged you might feel, it's time to keep your chin up and continue marketing to your customers. A reduction in marketing efforts is simply not an option. Marketing keeps you in front of your current customers, enlightens prospects and positions you well for when the economy recovers. Those who stop marketing often find themselves losing precious momentum and having to make up ground in the long run.
Make Every Customer a Repeat Customer: You forged new relationships over the holiday season and strengthened old ones. Now is the time to take better advantage of those relationships and transform one-time buyers into frequent customers. Though statistics vary by type of business, product and service, it's clear that it costs more to acquire a customer than to retain an existing one. Whether asking customers to sign up for your product newsletters or offering frequent-user discount cards, you have ways to re-engage buyers.
Intuition Is Not Enough: Customers make or break your business. You must cater to your clientele and that means knowing what they want. Use resources such as your newsletters, brochures, etc. to distribute an open-ended customer survey. Actually read customer feedback and make adjustments accordingly, so customers can see you're making real changes based on that feedback. But make sure you track the effectiveness of those changes in your marketing strategies on a monthly basis.
ROI: Stop any spending that isn't directly resulting in customer acquisition or sales. Your rupees are tighter than ever, so managing them is critical. Examine your marketing mix and invest wisely. There are plenty of low-cost communications channels that have significant return on investment (ROI).Talk to your customers about what resonates with them and where they are now, and make decisions from there.
Think Thematically and Theatrically: Retailers are great at this: They find a seasonal hook and exploit it - pulling together displays, product offerings and so on - so that entire campaigns are tied together. However, this approach shouldn't stop at product marketing. marketing communications should reflect the same cohesive thinking. Timing each communications piece - press announcements, online ad campaigns, etc - to work in sync with the overall campaign can increase the effectiveness of your efforts and your overall brand resonance. Retailers should surround their customers with the right message, both online and offline.
So, Plan ahead!
Thus it can be concluded that today’s customers are different from those you encountered even a year ago. They expect more of everything - more information, more choices and more convenience. The energy, enthusiasm, and efforts retailers put into their holiday and festival campaigns can continue to pay dividends this year if they continue to face each day with the same vigor and determination displayed over the holidays and in the festive season.
When Sam Walton started his first retail outlet, even he would not have been sure of where it would take him and the paradigm shift he would give to the age old tale of retailing. From the sixties to this millennium, retail has evolved from being “the monkey” to being a “homo-sapien”. The evolution has been swift primarily because of the turnaround from supply side economics to demand oriented economics. One base learning that has been deeply enrooted in me during the course of my curricular studies is that “Customer is the King”, or more appropriately, “A profitable customer is the king”. On a pure philosophical level, the shift from capitalism to consumerism is something like the patriarchy giving way to democracy, and one thing is for sure: it is here to stay.
The questions that this evolution is posed with are multiple, but the need of the hour is to find the perfect retail mix or whether it even exists or not. Romantically speaking, the current economic crisis has opened more possibilities than ever. For the real hero an adversity is more of a testing ground than something to give an excuse about: Darwin’s theory of survival of the fittest thwarts the same fact. In this light, what is really that would make “the fit”-“fitter” can be viewed in the following ways:
Collaboration Vs. Competition
In the retail industry, it is common to have high footfalls but low conversion. To tackle this issue an alternative approach can be reengineering the supply chain not only on a company level but on an intra industry level. Integrating competitor resources together would only add buyer’s power to the cumulative retail sector. Common sourcing can be one way of going ahead. This would be helpful in getting better margins from manufacturers and would also be helpful in developing the organised retail market. The solution may be similar to the collaborative approach that is adopted by the banking sector in interbank ATM transactions that has made a tremendous improvement in terms of reach and more importantly market penetration.
Technology as facilitator Vs. Technology as value provider
Technology has always been looked upon as the facilitator of business activities but now looking at the expectations of consumers, technology should be looked at as a value provider. The new role of technology would impart it an unprecedented position in the coveted retail mix. This requires a fundamental shift of position driven by change in consumer perception towards technology. The awe that consumers had towards technology in the 20th century has been replaced by an expectation of consumers that stores should minimally have “state of art” IT infrastructure. This new demand for technology can only be captured by surprising the customers with an altogether new standard of technology. Not only would it add to the value proposition of the retailer it would also help tapping the new information age, tech savvy customer.
Employees Vs. Business Facilitators
"It's ironic that retailers and restaurants live or die on customer service, yet their employees have some of the lowest pay and worst benefits of any industry. That's one reason so many retail experiences are mediocre for the public." Howard Schultz
When someone enters a shopping arcade one of the biggest turnoffs is the undernourished, exhausted looking employees that retail stores have. In this information age the role of sales executives has to change to being purchase facilitators in the true sense of the phrase. A major boost to this idea will be revaluation of the compensation structure. The training of employees at the grass root level is important and would only enhance the conversion rate.
Drawing conclusion from the above mentioned ideas, the tale of retail would have a “happily ever after” continuum when the entire concept of retail is restructured, renovated and rejuvenated with greater enthusiasm. Eventually the shopping experience has to be enriched by enhancing quality through conscious endeavours of innovating and adding value. Lastly, the way to a resurrected retail sector in terms of quality of shopping experience can be elucidated by the following lines by William A. Foster
“Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skilful execution; it represents the wise choice of many alternatives."