Monday, September 29, 2008

Retailer seek discounted rentals as prices of real estate decline

With realty prices sliding, retailers are looking to renegotiate rentals signed in better times. In some cases, they are even shutting and relocating stores to offset the drag on profitability. Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, India’s biggest publicly traded retailer, said store rentals are down by 25-50%. “We are renegotiating the rentals in some cases,” he said, but declined to elaborate.

However, Thomas Varghese, chief executive officer of Aditya Birla Retail Ltd, which operates the More retail chain, said while rentals have softened for big stores, they remain unchanged for smaller shops.

The latest to join the pack is The MobileStore Ltd, a venture of the Essar Group that sells telecom products such as mobile phones. “We have signed deals on high rentals a year back and now the rentals are coming down by almost 50%,” said chief executive officer Rajiv Agarwal. “We are renegotiating with the owners and whoever is refusing to revise the prices, we are relocating the store to a viable location having lesser rentals.” The company currently operates some 1,200 stores and plans to shutter 5% of those—primarily in metros—if rentals can’t be renegotiated, Agarwal said. Three stores have already been shut, even as the company plans to add another 600 shops across India, because volumes have gone up, he said.

The company is not alone in walking away from contracts signed at a time when the economy looked better, oil had yet to cross $100 (Rs4,640) a barrel and inflation was in single digits.
Rentals typically are 15% of gross revenues for small properties, 5% for hypermarkets and 7% for departmental stores, said Shubhranshu Pani, Mumbai-based managing director of retail services at realestate consulting firm Jones Lang LaSalle Meghraj.

Other retailers Mint spoke with also said they were trying to take advantage of cheaper commercial space and moving to more affordable places when renegotiations fail.
“We have started renegotiating the rentals with property owners where it is unreasonable, especially in places like Bangalore, Chennai and other metros,” said Suresh J., chief executive officer of Arvind Brands Ltd, which operates the Megamart retail chain. Rentals have come down by around 50-80% depending on location, he said.

However, the company will not close shops should negotiations fail, since they have long-term agreements with property owners and could face lawsuits if it terminates such deals, he clarified.
Samar Shiekhawat, vicepresident of marketing at Spencer’s Retail Ltd, an RPG group company, said that since rentals have started declining by around 20-25%, the company is renegotiating with owners.

The retailer plans to relocate some 46 stores this year, of which 20 have already been shuttered, a key reason being high rentals, Shiekhawat said.
However, the company will continue with plans to have 300 more stores by next March, in addition to the 365 small and 35 large shops it now runs.
Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, agreed rentals are falling in select malls and smaller stores.
“Only in those malls where the turnover was less, the rentals are coming down,” he said.
“However, rentals in malls like Select Citywalk in Delhi, Inorbit and Phoenix in Mumbai and a few others in Bangalore are not coming down since the sales turnover is very good in these malls.” For smaller stores, rentals are down by 15-20%, he said, adding that prices are likely to be stable and unlikely to fall further.
Puri said retailers who got small stores in malls last year typically paid between 35% and 40% more than the anchor—the largest store in a mall. These rents are now coming down by 25-30%, effectively reducing the gap between the smaller stores and anchors.
But the profits of retailers that are relocating will be impacted negatively, he said.
“Already, the margins are squeezed and to continue with high-rental outlets does not make sense. With the rentals coming down by around 40-50%, I want the reduced rentals,” said Agarwal of MobileStore. “Why should the company carry on with properties which have been signed at unreasonable rentals?”

Source: Livemint

Monday, September 22, 2008

How to create an Effective Brand Message in Retail

Contributed by Charu Gupta
Markets have been flooded with lots of brands these days but there are only few who are able to register a presence in the consumer’s mind. The Retail organizations should take utmost care of what their target segment is and create a brand message which does not create any ambiguity and is easily understood by their target audience. To create an effective brand message, Retail organizations should follow the concept of Brand Prism. Brand Prism mainly comprises of six attributes and is an effective tool to create a brand message which matches the company’s ideologies and persona and helps it communicate to its consumers. Following are those six attributes:
Brand Physique: What are the unique features and associations are you offering? What are your points of difference and what makes you stand out of the crowd?
Brand Personality: If you visualize your brand as a person, what are the key characteristics of your brand's personality? For example, is your brand young, confident, daring, trustworthy, innovative, etc. like Pantaloon’s brand message says “Fresh Fashion” which means the brand is offering new, fashionable, young and fresh products.
Relationship: What kind of relationship you aim to set up between the brand and its users...long term build on trust, admiration and respect. For example, Insurance companies always try to communicate a brand message which instills confidence and long term relationship to its audience.
Culture: Values guiding the brand and its energy should be exhibited in the organisation's brand message. For example, Reliance Retail says “Growth through value creation” which suggests that the company is growth oriented and aims at delivering value to its customers at each stage. Now, this culture is the guiding principle of the organization and is incorporated in the brand message.
Reflection: How users of other brands see my users? It is necessary to understand as it helps to know your brand's strengths and weaknesses and tells you the areas to improve upon.
Self Image: How do the users of my brand see themselves? This is necessary as you get to know the effectiveness of your brand message and the consumer perception about your brand. All the above things should be taken into consideration for creating an effective brand message and should be delivered through all your internal and external communications.
Most companies just focus on launching various marketing programs but if the same brand message is not delivered at the store level through your employees' behavior and services, it could turn off your shoppers instantly.

The importance of brand message is highlighted by the fact that even Mc.Donalds which has always been successful in its branding strategy has once failed with its “Arch Deluxe” which was especially made for adults. It was Marketed as the ‘Burger with the Grown-up Taste’ but the problem was that nobody goes to McDonald’s for sophistication and taste, people visit Mc.Donalds because they prize it on friendliness, cleanliness, consistency and convenience.
Thus, a brand message should be consistent in its values and physique as customers do not want to see different messages being communicated at different intervals of time by the same brand.

References: pospel.vox

Wednesday, September 10, 2008

Factors that affect Merchandise Assortment

Contributed by Richa Kapoor

The retailer has to act as a surrogate buyer for its customer. While shopping at a store, the customer in effect should say, "I like what you have to offer to me" then if the customer continues to shop at a store and starts to echo that phrase again and again. At that point, the retailer becomes the surrogate, a substitute purchasing agent of sorts who represents the customer while planning his merchandise assortment.

Thus, it is very important for retailers to carefully consider what they buy for selling in their store, because through this a retailer is seeking to win the loyalty of a customer and not just his money.

The retailer should take great care in planning this merchandise plan, He should choose compatible products, so that there is some degree of consistency and predictability for the consumer.

Some of the factors that a retailer should bear in mind while planning his merchandise mix are:

Some important terms:

  1. Substitutes are those products which can be used as an alternative for as product, for eg: Tea and coffee.
  2. Complements, are the products which compliment each other and enhance another each other's salability… hot dogs and ketchup, or snack foods and beverages.
  3. Unrelated products, which are products that have nothing to do with one another. Sometimes, though, the products may appear to be unrelated when in fact they are shrewd product additions

The product line attributes:

  1. Bulk--weight and size. How big is the item? How much selling space will it require?
  2. Standardization--special needs of the product. Can the item be stocked alongside competing items, or does it need special shelving, etc.,
  3. Service levels--what is expected and needed. Does the store need to be prepared for returns, warranty work, repairs, etc.?
  4. Selling methods--how much personal selling is needed. Will the item "sell itself," or does it need a knowledgeable salesperson to assist in the process?

Product profitability:

This is a function of the gross margin on the item, as well as sales volume, selling costs, and inventory holding costs. Gross Margin Return on Inventory Investment (GMROI), inventory turnover and sales forecasting are some of the important tools used for ascertaining the product profitability and planning the merchandise mix. GMROI is a tool that helps the retailer plan and evaluates the performance of the merchandise. The GMROI for a specific category of merchandise is calculated on the basis of the overall financial objectives of the retailer, which are further assigned to specific categories. The gross margin percentage in combination with the inventory turnover evolves into a useful tool for managing merchandise.

Other Factors to Consider:

  1. Market Appropriateness. Is the product a good fit for the market?
  2. Product should be categorized as a Fad, Fashion, Staple or a seasonal item.
  3. Competitive Conditions: what is the competition doing? What type of strategy is he adopting are some of the important factors which a retailer should keep in mind.
  4. Supplier Considerations. If suppliers cannot be located easily, or they cannot serve certain markets, this may preclude setting up shop in a particular area.
  5. The ITO Rate. Items that turn quickly will need to be replenished quickly and vice-versa.

Determining a merchandise strategy is a crucial issue for a retailer. It involves establishing a trade-off among the varieties offered, assortment provided and the availability of the products. A thorough analysis of this trade-off helps the retailer answer the most significant question.
Thus, an assortment plan tends to be the amalgamation of the GMROI plan, the inventory turnover plan, sales forecasting, and assortment planning.


Malls getting less lucrative for restaurateurs now

Ever since the mall culture crept in and malls presented themselves as lucrative retail environs, restaurant owners are divided on whether to set up shop within malls or to opt for high streets.

However, there are examples galore that increasingly, restaurants outside malls are pipping those within them in the revenue stakes. And if some players are to be believed, malls’ high operational costs (rentals and ancillary costs) are impacting feasibility of restaurants, driving them away.

According to industry estimates, there are up to 50-60% more expenses attached for restaurants in malls as compared to those in other retail locations. Take the case of the home grown brand Nirula’s which has only 15-20% of its outlets in malls. Their share to the company’s overall revenues is also the same.

Says Sudipta Sengupta, senior VP, marketing and sales, Nirula’s: “We conduct studies before opening outlets and have found that in malls, the operational costs increase as we have to pay substantial additional charges, over and above the rental. At present, our outlets outside malls are doing better business. We have the first mover advantage while setting up in high street retail locations, and manage to get preferential rates.”

Similarly, Tapan Sinha, COO, Republic of Chicken (ROC) feels that premium retail locations other than malls are the best bet for opening fine-dining restaurants, especially in tier-two towns. Although currently 60% of our revenues come from restaurants within malls, in future the ones in other retail locations will overtake them. This is because there is greater scope for business in restaurants in other retail locations.Even in the tier-B towns it is more viable to open restaurants in premium retail locations outside malls. We will try to maintain a 50:50 ratio of restaurants in future.”

The Alchemist group promoted Republic of Chicken, a chain of fine-dining restaurants has five restaurants inside malls and an equal number in other retail locations. The company plans to open upto 200 restaurants by 2010. According to industry sources, on an average if one restaurant opens up in a mall there are three which shut shop.

Besides the higher rentals in these malls, it is the low footfalls which drive restaurants to close down. It is widely held that standalone restaurants with high proportion of sales through food delivery, are better off coming up in ‘catchment areas’, places that are easy to reachwhere consumers have high spending power (read disposable income).

Agrees Zorawar Kalra, MD, Punjab Grill and Street Foods of India (SFI). “Operational costs in malls are very high, with common area maintenance charge itself being upto 100% of rental. High street locations are ideal for fine dining restaurants. For SFI, 60% of our revenues come from standalones within malls and the rest through those at high-street locations. The reverse is true for Punjab Grill,” he informs.

Punjab Grill is a fine dining restaurant, SFI is a chain of Quick Service restaurants. (QSRs). Kalra plans to set up 25 more SFIs and two more Punjab grills by the year-end. Many restauranteurs in the Rs 25000 crore Indian Food & Beverage industry like Dominos India feel the need to set up shop in catchment areas, irrespective of being within a mall or without. The company has 210 restaurants at present, with only about 10% of them in malls.

“For us, the location is not as important as providing value to consumers in terms of the product and service. Oflate, malls have seen a decline in footfalls but we have been insulated from it because of our delivery oriented business model and strong consumer perception,” opines Dev Amritesh senior VP marketing, Dominos Pizza India.”We will continue to set up shop in very good catchment retail areas. Those are the ones that drive our sales,” he adds.

Source: The Economic Times

Slowdown turns Ahmedabad into 'retail graveyard'

Once a darling of retailers and a hot new destination of modern retail, Ahmedabad is turning into a “retail graveyard”. Apart from glaring vacant spaces in the swanky city malls, the first visible downturn seems to be the closure of two Big Bazaar outlets.

Be it a heterogeneous product mix, inviting ambiance or other cosmetic benefits of modern retail like air conditioning, all have failed to sustain the interest of Gujarati consumers looking for functional benefits from the retail experience. The result: closure of ambitious retail projects across the city. Brands like Nike, Tea Centre, Conizza, etc, have already closed

“Not just prohibitive rentals, but consumption pattern of local consumers too has been a roadblock to modern retail in Ahmedabad. Although the cash-rich Gujarati consumer has lured brands to Ahmedabad, low acceptability of modern retailing will turn the city into a retail graveyard,” points out sector analyst Harish Bijoor of Harish Bijoor Consults Inc.

The closure of two Big Bazaar outlets, the ambitious hypermarket format of the Pantaloon Retail (India) Ltd, in a span of six months, the last being in the process of winding up, could just be the tip of the iceberg.

While the company had closed down its Big Bazaar outlet in Bapunagar (old city) earlier, its outlet at Shyamal Crossroads is all set to down shutters. However, western zonal chief of the Pantaloon (Retail) India Ltd, the promoters of Big Bazaar, Anand Adukia told ET that the closure has more to do with consolidation rather than shutting shops in totality.

“While we have closed two stores in Ahmedabad, we are strengthening the capacity of the remaining three stores. The 22,000-sqft Big Bazaar outlet in Bapunagar has been shut down with the idea of expanding Big Bazaar at 10 Acres Mall in Maninagar, whose size will be increased to 1-lakh sqft to accommodate the entire customer base in the area,” he insisted.

Retail analyst and marketing faculty at IIMA Piyush Sinha says retail consolidation is a natural phenomenon. However, this is not the first instance that retail boom has been a dud in the city.

Ahmedabad could see withdrawal of more brands in future, retail analysts predict. The Sarkhej Gandhinagar Highway that once prided itself in housing a congregation of malls has now the likes of Gallops, Dev Arc, Fun Republic, all nursing their failed relationships with various brands.

Source: The Economic Times

Scattershot Strategy-

The risk is the possible loss in the integrity of the original brand and inability to hold on to core consumers.

I’ve been a fan of Fabindia for many years now — for their furnishing fabric, their clothes — and the odd knick-knack. So, when it was time to redo our curtains I decided to abandon our usual practice of tailored curtains for Fabind ia’s delightful ready-made drapes. As a for-profit with the mission of providing sustainable employment for Indian craftsmen, Fabindia has grown steadily since it was set up in 1960 – from an exporter of home furnishings, it now retails apparel, home furnishings, organic food and body care products.

Over the last fortnight I visited over six Fabindia shops — I was pleasantly surprised to find their outlets punctuating every other residential neighbourhood in the city. A few years ago, you had to trudge to Delhi or one of the solitary outlets in a few metros to get your fill of Fabindia products — today I am told there are over 86 outlets dotting the country — and more to come, I am sure. Their range of products has also widened. Apart from the typical apparel and furnishing items, each store now keeps an interesting variety of furniture — smart, contemporary designs fashioned from solid wood with quality craftsmanship. There is also a surprising entry into food products — muesli, herbs, salad dressings, brown rice – the few that I sampled were excellent in quality.

All this was great news. The downside is that with the huge surge in the range of products, there has been fallout in the depth of stocking of the core items leading to a rather inconsistent retail experience. My curtain-quest, for example, has remained unsuccessful because each outlet just does not have a wide enough range of colours and pieces. I rarely found more than a few options of patterns or colours — and when I did find something I liked, the sales girl looked apologetic that there wasn’t enough stock to fulfil my modest order. If I asked whether I could order them, there was an even more apologetic response saying that it could take a long, long time. The food range differed from outlet to outlet and no one had a clue where the yummy muesli was available or when the delicious lime pickle would make its entry.

I felt a bit conflicted about the experience. On the one hand, I am delighted that the ubiquity of Fabindia’s presence allows loyal customers to partake of their offerings more easily and the new products are also a welcome addition. Yet, I was a tad disappointed that the depth of offering had visibly reduced making it a bit of a scattershot approach in stocking — a sampling of items, and not too much of anything. One sales girl took pity at my disappointed reaction and told me to go to the largest store in town where I might be luckier — which made me wonder what benefit the new stores had given me. Earlier, I could wander into one of the large well-stocked stores confident of wandering out with a purchase; now, it seems I need to have serendipity on my side.

I had a similar dissonance with Landmark. Again, I’ve been a faithful Landmark customer since 1990 and I credit it with having changed the way books are retailed in India. However, with growth has come a change in the Landmark experience.

There was a time when the trained and knowledgeable staff made book-buying a pleasure. During the last year I have had the dubious pleasure of being sent to the food section when I asked for the travelogue Butter Chicken in Ludhiana and to the yoga section, when I requested the book of short stories called Karma. Clearly, the sales staff is not as clued in as before. Earlier, when I placed orders the greased-wheels system ensured a rapid response — my last request for a bunch of audio CDs has elicited no response so far.

It could be because books today are just one part of the range – a huge variety of random products, many of them pure kitsch, now fill the shelf space and you can’t wander past one counter without an offer to be spritzed with a perfume.

Of course, these items have huge margins and must be the profit drivers for the range, yet each outlet has morphed into a mini-mall offering everything from jewellery to clothes and perfume — in the process the essential promise of the book-buying experience has suffered. The chain is growing fast and while that deserves celebration, it would be a pity if the original promise of Landmark as a destination store for book and music lovers is lost in the process.

A blitzkrieg of new stores and a rapid widening of the product range offer a glamorous and dramatic approach to growth as compared to a slower, more focused approach. The risk, of course, is the possible loss in the integrity of the original brand and inability to hold on to core consumers. It’s a dilemma that every business faces when it looks for profitable growth: what are the limits of diversification? Will the change in the offering impact the core consumer adversely, and if so, is it worth the risk?

Of course, both stores are doing well, so one could well argue that these complaints are minor compromises in what is a presumably profitable growth strategy. Yet, there are some learnings from Starbuck’s scorching growth path that made it the poster boy of retail innovation and growth. The cost of the growth was an erosion in the basic vision of Starbucks as “the third place” after home and work.

Growth brought with it change that valued speed of delivery rather than a personal experience, and new products that diluted the focus on coffee, all resulting in alienating erstwhile Starbuck loyalists. Starbuck’s recent announcement that it will be closing 600 stores is testimony to the fact that random growth can be hazardous.

Retail in India is still relatively nascent, and retailers, especially those who began as niche stores with a strong fan following, would do well to introspect and ensure that their short-term growth does not end up eroding value in the long run.

Radhika Chadha is a consultant in strategy and innovation and the co-author of `Innovative India: Insights for the Thinking Manager'. Karate-gy is the proprietary name of the strategic exercises conducted by Paradigm Management Knowhow Ltd.

Source: The Hindu Business Line

Retail keen on evaluating business structures with high-end cos

The slowdown in the economy and archaic rules on real estate may have affected the mainstream retail industry, but there is a flurry of activity on the high-end retail segment, as existing players actively explore business structures to tie up with global high-end retail majors.

Mandates with consulting firms, including those from the Big Four, show that players such as Reliance Retail, Aditya Birla Retail, Shoppers Stop and others are keen on evaluating business structures with high-end firms such as Marks & Spencer or Armani or a Moschino to tap demand from the growing number of HNIs (high-networth individuals).

According to sources, growth in demand for luxury items is pitched against a slowdown in mainstream retail as high inflation pushes back purchase decisions. The main driver is an increase in the number of individuals in India, who can afford to fly abroad to splurge on high-end accessories ranging from Rs 80,000 and above.

Business structures being considered include a franchisee model to start with, which could later be converted into a joint venture if the two partners consider it worthwhile.

Firms such as KPMG, PricewaterhouseCoopers and Ernst & Young are working on such structures and also advising on possible tax-efficient structures, as there are grey areas in levying value-added tax (VAT) on items such as a diamond-studded watch or a high-end leather jacket. For a diamond-studded watch, if the item is categorised as a watch then VAT levy is a high 12.5% compared to that on a gold or a diamond item where VAT could be just 1% or less.

Recently, many UK retailers, including Marks & Spencer, have been looking to gain a presence in India. Consulting firm KPMG’s tax partner in India, Amarjeet Singh, is expected to advise such high-end retail clients who are planning to move to India, especially as there is a strong demand from European clients for advice on the tax and regulatory environment around investing in India.

Speaking on the robust interest in high-end retail, KPMG manager strategic services C Ravishankar said: “The market for high-end luxury items in India is growing. Since it is difficult to build a luxury item from scratch, there are efforts to bring established global brands into India. In such cases you have to be clear on the type of business structures that can be formed,” he added.

India’s fast-growing high-end retail market is expected to increase from the current $3.5 billion to $30 billion by 2015. According to sources in Reliance Retail, the key driver for luxury retail, apart from growing HNIs, is that the margins are also very high, as much as 70% to 80%. The luxury retail market is roughly estimated to be about Rs 2,000 crore and expected to grow at 20% in the next five years.

Although the pace is slower than the mainstream retail, which had been growing at the rate of 30% to 40%, the value of the luxury market is much higher.

According to KH Vishwanathan of Astute Consulting, firms are currently involved in doing a concept study to highlight the compliance part and tax efficiency of a proposed business structure.

Nielsen Company director (retail consulting division) Asitava Sen says the move to prepare the business structures between Indian retailers and high-end global players is vital when there are strong brands. “Most foreign players are very protective about their brands and won’t allow their Indian partners access to these brands,” he said.

The business model that such ventures would work on is in allowing the foreign company to own the back end in a retail venture while leaving the front end to the Indian company. In such a structure, the foreign company would have complete control over the price and packaging.

Source: The Economic Times

Story of Private Labels

Contributed by Richa Kapoor

With India on the cusp of a retail revolution and discount stores riding high on the wave, the only way retailers can create moolah for themselves is having their "Private Labels".

But the only caution for retailers is that there should be a clear understanding of what a Private Label strategy mean and what are the different types of labels which can compete in the market:

Store brands – The goods produced by the retailer himself, to transfer the cost benefits to the consumer are called store brands. The retailer's name is very evident on the packaging. for eg: Shoppers' Stop : STOP

Store sub-brands - Products where the retailer's name is low-key on the packaging.

Umbrella branding - A generic brand, independent from the name of the retailer.

Individual brands - A name used in one category, this is only used to promote a "real" discount product line.

Exclusive brands - Again a name used in one category, but to promote "added value" products within the category.

Copycat private labels - brands owned by a retailer which use similar trade dress, i.e. packaging as a leading national brand.

Reference: The Free Dictionary
Wikipedia, about retail

Inflation addressing strategies by Retailers

Contributed by Richa Kapoor

Retail is one of the most badly affected industries in the current inflationary conditions, and is experimenting with various schemes and strategies to keep up the footfalls and sales graph.
Retailers are using these strategies in combination to make sure the consumer sees value in the offering and decides to visit the store in this lean time. In the recent past the retailers have been focusing on the following:

Flat Discounts: This is one of the most widely used promotions technique by the retailer, under this a retailer offers a flat percentage deduction of the price of a commodity.

Happy Hours shopping: is a period of time during which some restaurants offer discounts for alcoholic drinks for promotion of the venue in the quieter times. The same is being replicated by retailers some retailers are offering happy hours discounts during the day when all the merchandise is sold at rock-bottom prices

Buy One, Get One Free: Originally, "buy one get one free" was a random, end of season or stock clearance method used by stores who were left with a large quantity of stock that they were looking to sell quickly. More recently it has become a popular, planned and considered marketing method to sell high-end brands

Coupons: These have become a standard promotion tool with retailers for inviting consumers at the store; this not only invites a consumer to the store but also leads to a higher conversion rate than what is allowed for. Under this many retailers are tying-up with Corporates to give away their sales coupons as rewards.

Free-Standing Insertions: Insertions in the local newspaper showcasing best and lowest price deals is emerging as the biggest crowd puller.

Rebates: To attract huge footfalls retailers are rewarding consumers through offering rebates like additional discounts, assured gifts, money back, holiday trips for carrying with them a cutting of newspaper advertisement of the store or past purchase bills.
Retailers are becoming much more flexible and agile than they used to be. It would be interesting to see some new techniques and strategies by the retailers to adjust to the global slowdown.

Reference: Wikipedia

Mall Promotions

Contributed by Charu Gupta

In this competitive retailing environment, pulling the crowd has become a daunting task for retailers. Even mall owners have to implement new strategies and promotional tools to bring in the crowd as they want greater footfalls and more business for their tenants.

I recently visited Ambience Mall in Gurgaon during the festival of Teej which was also coinciding with friendship week. Ambience Mall, which boasts of being India’s largest mall with 1 km shopping floor, was totally abuzz on that day. The mall was totally in sync with the festive mood. At the entrance, there were people in traditional Rajasthani costumes singing and playing dhol welcoming visitors.

The atrium of the mall was replicated into a Teej fair running in a village. Swings decorated with flowers were placed where children as well as adults were waiting for their turn (yeah…even I was one of themJ). Various small shops selling hand-crafted and wooden toys were set up along two rows. A vendor giving “gudiya ke baal” free to children, puppet dance running in one corner, astrologer with his parrot giving free advise to people (was a busy man..this shows astrology services is a big business in India), Mehndi wala sitting at other corner, bangle shop, vendors selling “ek tara” and traditional perfumes and lots of other stuff, professional Rajasthani dancers dancing to the beats of folk music was all adding to the vibrancy of the place. Also, there were cots placed around adding to the village feel where people can sit and relax.

The atmosphere was filled with festive mood. Even the retailers were capitalizing on the festivities, various outlets and department stores were running “Sale” for increasing the footfalls in their store. One soft toy shop, on the event of Friendship Day, had organized games outside its shop and winners were being awarded Rs.100 gift voucher which could be redeemed at the shop. This was not only an enjoyable experience for the participants and passers by but has also brought additional sales for the store.

On that day, the whole mall was abuzz with fun activities going around lighting up the place. This all suggests that mall owners are realizing the need to bring out timely strategies to keep the footfalls increasing in their malls. Carrying out promotional activities during festive season and special occasions, organizing events and shows, food festivals, handicraft exhibitions, etc. are becoming regular feature for mall promotions.

After choosing the right tenant mix, mall owners’ responsibility is to sustain and increase the footfalls in their malls to ensure that the tenants do not make losses due to low footfalls.

One of the other examples is Simon malls in Indianapolis which is using “experiential marketing” which provides entertainment in addition to shopping. Simon, which owns six malls in the Atlanta area, develops promotions and events in partnership with radio and television stations, retailers, charities and celebrities. Simon has sponsored events for children and concerts by teen performers as part of a back-to-school promotion. The company also sponsors after-hours events to raise money for charity. [1]

Developers can work on drafting marketing strategies for individual malls to meet the needs of the local consumer base and the challenges of local and in some cases, regional competitors. A “Mall events” calendar can be made and shared with retailers so that they could organize their merchandise accordingly in tandem with the event. Such promotion events not only increase the popularity of the Mall, but also increase the value of the space available in the mall. Such events make the mall more popular and help the mall in attracting better brands at better prices.

Reference: [1] BizJournals

Loss Leader Strategy in Retailing

Contributed by Richa Kapoor

Loss leaders is a time honored pricing strategy adopted by retailers worldwide to attract consumers to the stores. The intent of this pricing strategy is to not only have the customer buy the (loss leader) sale item, but other products that are not discounted. The rate of success of this strategy has been enormous worldwide which is being replicated in the Indian Market too but with the Indian Retail market opening up, retailers introducing newer product categories and many retailers entering the market.
It has become crucial for retailers to adopt strategies like loss leaders. But, to be able to understand the concept thoroughly.

What is a loss leader?
A loss leader is a pricing strategy which involves selling a product at a low price (at cost or below cost) to stimulate other, profitable sales. It is a kind of sales promotion, in other words marketing concentrating on a pricing strategy. This is a commonly used technique to attract customers via bargain on necessities and sell to them products which they don't require; this will help in generation of profits.

Some Common Strategies:
Usually retailers place the loss leader at the end of a store, so that purchasers walk past racks of other displayed goods which have higher profit margins.
As loss leader item is a product that customers purchases frequently—thus the retailer ensures that the offered price is a bargain.
Retailers offer limited items as loss leaders, which discourages stockpiling by customers, which compels consumers to make repeated visits.
The retailer sets limitations on the quantity that one purchaser can make (e.g., " Buy One Get 20% off on second").

When and Why a Loss Leader Strategy is used?
Move Overstock: A retailer can use the loss leader strategy to encourage the sales of products which are the declining stage of their life cycle or if a retailer has inventory that isn't moving or if he is overstocked on a particular item, a loss leader can move it. By cutting the price of such an item, a retailer not only frees up the shelf space and reduce inventory, but also increase cash flow.

Increased Footfalls: Using loss leaders as a marketing tool can help gain new customers and increase return visits. Consumers like a bargain and will likely come back to shop.

Attracting Customers from Different Sectors: Retailers use loss leader strategy to attract customers from different age groups, backgrounds and demographics.. For example, recently a leading supermarket introduced the sale of jeans from a leading jeans manufacturer. The clothing was purchased from a wholesaler and priced competitively which results in low profit. This helped in attracted young consumers who are not the target consumers for a supermarket.

Loss Leader Precautions
Though there have been successes in loss leader pricing, but a retailer must be aware of some obstacles to the process. If done incorrectly, loss leaders can actually cause the business to lose money.

§ A loss leaders strategy should be used only when it's assured that the lost profit can be countered by the sales of other products or services. It should be made sure that there is a significant quantity of the sale item in stock

§ Not all manufacturers and suppliers allow their products to be priced under their minimum advertised price or less than what their other dealers are selling the same item. As it may be perceived as damage to the brand image of the manufacturer. Thus, it may be good idea to contact the manufacturers or suppliers before proceeding with the strategy.

§ In some states it is forbidden to sell products below cost. In recent years, lawsuits have emerged claiming loss leader pricing strategies to be equivalent to illegal business practices.

§ Competitors can take advantage of a retailer's bargain and purchase the loss leader goods from the retailer to sell in their own shop. In which case, they could further reduce the price giving them a competitive advantage over you, or sell it at a price with a view to making a small profit.

The loss leader strategy is used primarily to attract customers to a retail store through the introduction of a bargain. Implementing the loss leader strategy can be risky and therefore needs to be considered that it is the right approach for penetrating the market.

Bizhelp24, Retail.about, Wikipedia

Tuesday, September 9, 2008

TiE Retail Summit

Contributed by Charu Gupta

On 1st August, we attended the TiE Retail Summit held at Sheraton Hotel, Saket where Milagrow conducted a panel discussion on “How Small will Become Bigger” and mentoring session.

The Indus Entrepreneurs (TiE), is a global not-for-profit organization, dedicated towards fostering entrepreneurship. TiE provides a platform for entrepreneurs, professionals, industry leaders, investors to interact with one another & forge long lasting relationships.

This time the summit was focused on finding out the challenges faced by the Indian retail industry and bringing out solutions through mentoring and knowledge sharing workshops.
I got a chance of attending the summit being a part of the organizing team from Milagrow which was altogether a great experience. In the morning, we reached the venue and set up the things for the panel discussion. The tent cards were placed and the standees were put up at strategic locations.

The summit started at 9 a.m. where the industry people shared their experiences and talked about the growing retail sector, the challenges and the way forward. Following were some key learnings:

  • The rising consumerism and huge potential of the market will drive the retail sector in future.
  • Small retailers do have an edge over Big Box Retailers in terms of better understanding of market, low operations cost, flexibility, customer knowledge and services.
  • There is an increasing influence of Bollywood on the lifestyle of consumers.
  • How product innovation and adapting to the need of local markets is important to modern age retailers and international players coming to Indian market.
  • The retailers today need to provide “shopping with fun” experience to their customers in order to retain them as sustaining in current competition only on the basis of products is hard. The consumers seek a WOW experience once they enter a store which the retailer needs to provide.
  • The organizations should be more process driven rather than individual driven.
    Milagrow conducted a workshop on “How Small will Become Bigger” in which Mr. Rajeev Karwal along with Mr. Sanjay Sahani of Ritu Wears and Mr. Ashish Kapur of Yo China spoke about different strategies which small retailers should adopt to fight Big players.

The key points which came out of the session were:

  • Location strategy is very important. Be where your consumer is whether it’s a high street or neighborhood market. The small retailers can also try kiosks as a good value proposition to retail their products. This can help them to reduce their operational cost as well as increase their presence and visibility across different locations.
  • Plan years in advance as to where you want to open the outlets to get the best real estate price deals.
  • Store Layout and Design should be such which is customer friendly and encourages browsing. The aspects like store atmospherics should be given due consideration to enhance the customer experience.
  • Make your store a brand and enhance its image so that wherever your customer goes, he search for your store and buy your merchandise.
  • Manage your manpower effectively. Selection of right people for the right job is the key. As retail is a customer facing industry, the employees need to be trained so that they can effectively communicate to their customers.
  • Stocking the right products and having a proper merchandising plan in place is very essential to avoid the stock out or overstock situation. The customer demand and buying behavior needs to be tracked and the merchandise should be kept accordingly.
  • Think unique and give your customers an experience and product/service which is unparalleled in the industry. This would drive the customer traffic in your store and gives you a distinct positioning in the industry.
  • Venturing into online retailing haphazardly would not give fruitful results. Plan judiciously according to the product offered and viability of selling it online and then go ahead with it.
    We also released a White Paper on “How small retailers are facing onslaught internationally” which talks about the strengths and weaknesses of small retailers as compared to big players in the industry, the strategies adopted by them and how they can improvise.
The workshop went very well and the audience gained a lot of knowledge on the topic. They got a lot of their queries answered in the QA session regarding online retailing, location planning, etc.
The workshop was summed up by Mr. Rajeev leaving the audience with 10 point suggestions as to how small retailers can grow their business and be successful in their market place by capitalizing on their strengths.

After that, we had a mentoring session where the budding entrepreneurs seeking guidance were mentored by Mr. Rajeev Karwal. This session helped them to know their road ahead and how they should strategize it.

All of the sessions were centered on the theme of how to make one’s business a successful business proposition and were an eye-opener for existing and aspiring enterprisers as to how to conduct their businesses and make them successful.Overall the TiE Retail Summit was a good learning experience and a great day for Milagrow!!