Wednesday, September 10, 2008

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

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