Cost Reduction in Supply Chain for Retailers

Contributed by Charu Gupta

Today, retailers having chain stores and numerous distributors face a big challenge of giving best services to their customers and making timely delivery of products. This problem can only be solved once a retailer’s supply chain is responsive enough to meet the consumer’s growing demand.  

A retailer needs to strike a balance between maintaining a high level of service along with low costs. As the retailers have spread their wings globally using multi-channels and have also ventured into new categories, the supply chains have become much more complex and hard to handle. This calls for understanding the complete supply chain process and identifying the loopholes and cost occurring points in the whole cycle. 

DMAIC process by DHL which stands for Define, Measure, Analyse, Improve and Control is an ideal way to understand the supply chain. As you can’t control, what you can’t measure, retailers need to know the rationality behind each supply chain activity. 

Integrated Planning is another approach which could be helpful for the retailers in a big way. Unlike in traditional approach, where each supply chain partner whether it is at retail level, distributor level or manufacturer level creates a forecast of its own needs independent of its partners, in integrated planning forecasts are being shared between the trading partners with the goal of effective collaboration throughout the supply chain. One of its distinct advantages is that it provides scope for re-calibration. If the plan doesn’t work, the entire supply chain can be planned accordingly at one go. 

Such integrated supply chains drive out uncertainties giving enough time to the suppliers to deliver the required material and also help in proactive replenishment planning. Such futuristic projections also provide planning information to other areas of organization too.

The demand forecasts done for each unit, projected inventory balances and supply schedules can be converted to cubic feet for each store to make a rough capacity scheduling plan too. Similarly, using pricing and cost data for each item, each supply chain partner can project its cash flow and profits for future. Thus, some numbers could drive the whole supply chain and reduce your costs dramatically.

There are majorly 4 types of activities which drive supply chain costs i.e. Inventory, Transportation, Facilities and Information. Accurate forecasting and reduced lead times could decrease the investment in Inventory. Given the increased cost of fuel, scarcity of qualified drivers and congested transport networks, attention needs to be given to the transportation cost. Some retailers have installed transport management systems to improve and streamline the routing plans to reduce the costs of transporting goods. Location of factories and warehouses had to be planned in order to minimize the costs related to facilities. Using the right technology and softwares to get the right information and process it could actually make the life easier for the retailers and help in making the supply chain more efficient. 

All supply chain activities are directed towards fulfilling the expectations of customers and be responsive to their demands but at the same time retailers need to watch the costs involved and work on reducing the same.

 

Milagrow in its endeavour to serve the needs of modern retailers has come up with a Unique mPartnering model under its Milagrow Retail Practice in which devising a sound Supply Chain Strategy forms an essential pillar. At Milagrow, we believe coordination and collaboration among channel partners, which can be suppliers, intermediaries, third-party service providers, and customers, is quite essential, in the absence of which it is the retailer who suffers the most while the customer can easily make a switch. We help the retailers in planning and managing all the activities involved in sourcing, procurement, conversion, and logistics management. In essence, we help the companies in integrating supply and demand management effectively so that their back end operations (supply chain and logistics) are able to support their front-end operations (timely service to the customers).

Reference:

SupplyChain Standard.com

Improving Supply Chain Efficiency in Retail Sector, All Business.com

Frugal Marketing Strategy in Recessionary times

Contributed by Ankush Garg

When recession hits hard, consultants are the first ones to be shown the door. The next are the marketing teams. 

Organizations worldwide slash marketing budgets in difficult times. While the some purists contend that recession is the best time to strengthen the brand and get a competitive edge, the question is how? The funds are scarce and they need to be channeled into the essentials of the business to keep it running. 

While increase in the marketing budgets in difficult times may continue to a distant dream for most marketers, the circumstances offer opportunity to become more effective. The adage necessity is the mother of all invention never works better that it does in current macro-economic environment.. 

So how can marketers become more effective and get more bang for the buck? The first step is to segment your customers by the product categories and allocate the marketing budgets to different segments depending upon its profitability. Then develop a marketing strategy for each segment depending upon the customer profile or its behavioral traits. Seek synergies by identifying segments with similar customer profile. Reduce corporate campaigns and launch product category focused marketing programs as it would help improve profitability and enable the company to endure difficult times. 

It is always cheaper to retain existing customers that to procure new customers. Hence, a very strong customer relationship program is the need of the hour. It is important for marketers to integrate with the overall business and not operate in isolation. This will help them create new customer offers at low cost to the company. For example, if the company is carrying huge inventory for certain product categories, CRM program can create attractive offers for the existing customers using these product categories. This can help liquidate inventory without having to drop the prices in the market which can have deleterious consequences on the brand equity. The communication costs for CRM program should be closely monitored and reduced as far as possible. Email marketing, mobile marketing or social media networks (e.g. facebook) provide communication channels at no cost. 

No sector or industry has been left unscathed by the recession. There are many businesses that are looking for avenues to utilize their existing capacity. Marketers should collaborate with them and offer them benefits that cost nothing. In return, they should get higher visibility for their brand. For example, retailers can distribute discount coupons at its billing counters for a famous restaurants or clubs in the city. In return, they can get high visibility through placement of tent cards at the tables of the restaurants or through setting up kiosks at the clubs. 

The art of negotiation can always add the much needed strength to the marketers. Whether it is the airtime or column area in print media, there is tremendous room for cost reduction. One must not forget that marketing budgets are down and media companies are probably running helter-skelter to fill airtime or column space. And they would go lengths to retain you as a customer.

If airtime is extremely essential for your brand, an effective PR strategy can help gather lot if airtime literally free of cost. For example, a company in education business can voice its opinion on education policy of India or release papers on related subjects. This followed by effective networking with media personnel would lead to opportunities to participate in debates or forums where such issues are discussed. 

With every problem comes an opportunity. It is clearly a very opportune time for the marketer’s to break the shells and think creative, and frugal. It is a different matter that this is not longer a choice , but the need of the hour. 

Retail Chains all geared to fight Slowdown

Country's leading retail outlets are coming up with startegies to fight from the overall slowdown in sales. Though the promotions at the year-end have given a little cheer to otherwise slowdown-hit retailers but there has been a fall in the overall sales in the Oct-Dec. period. Here too, the advantage has gone to the value-formats while high-end stores were the worst-hit. 

Retailers Association of India(RAI) feels that the growth of the organised retail which stands at Rs.27000 crore as against the total retail market of Rs.20 lakh crore will fall down from 35% to 10-12% in 2008-09.

Suspecting this, most of the big retailers are implementing various strategies like inventory optimization, supply chain efficiency, better product assortment, reducing number of SKUs, lowering the operating costs, etc. For example, Future Group is taking initiative towards customizing the product assortment according to a particular locality to suit the requirements of the people residing there. Shopper's Stop is focusing on making it supply chain more efficient by scaling down their back-end infrastructure. Tata's Landmark, the books-music-gifts retailer is looking into optimising its inventory to prevent losses and ensure better cash utilization. 

Reference: Economic Times

Pricing Strategy for Small Retailers

Contributed by Richa Kapoor

One of the most crucial areas of decision making for retailers is pricing. Yet, we have found that small firms often do not have well-conceived pricing plans. A retailer's prices influence the quantities of various items that consumers will buy, which in turn affect total revenue and profit.
Hence, correct pricing decisions are a key to successful retail management. Key to small retailers prosperity in today's discount-oriented environment is guaranteed only if they have a good understanding of their niche in the marketplace.

With this in mind, the retailer should first prepare a checklist of questions that will assist him in making systematic, informed decisions regarding pricing strategies:

What is the overall pricing philosophy of the company: It's critical for the retailer to define the overall price positioning of the store… A choice has to be made between high-end…. Low-end

Target Consumer and Retailing Mix: Before fixing up the prices of the products a retailer must focus on his target consumer…. His characteristics, identify reasons of their choosing a retail store (for low prices, for convenience, for service, etc.) then a comparison should be made if the target consumer is consistent with the overall pricing philosophy.

The Central Concept Pricing: Before starting to price the products the retailer needs to decide: how do you compute prices…. When calculating prices do a retailer take is operating cost into account??

Supplier and Competitor Considerations: Before pricing the products in one's store a retailer must study the prices, price margins etc.. Costing done by its competitors… This can be done by visiting competing retailers to check on their prices, checking competitors' ads for prices, and plan a reaction strategy. These points emphasize that a retailer must watch competitors' prices so that his prices will not be far out of line--too high or too low--without good reason. Of course, there may be a good reason for out-of-the-ordinary prices, such as seeking a special price image.

Initial Markup: A retailer must look inside his business, taking into account sales, expenses, and profits before setting prices. The point is that the initial markup must be large enough to cover anticipated expenses and reductions and still produce a satisfactory profit. Retailers should estimate sales, operating expenses, and reductions for the next selling season, establish a profit objective for the next selling season

After estimating sales, expenses, and reductions, plan initial markup
This figure can be calculated with the following formula:

Operating expenses + reductions + profit
Initial markup percentage = ----------------------------------------
Net sales + reduction (Reductions consist of markdowns, stock shortages, and employee and customer discounts. )

Nature of the Merchandise: Retailers must consider the effect of selected characteristics of particular merchandise affect planned initial markup. Retailer must consider the wholesale price of merchandise, popularity of the item, handing and selling costs, reductions expected due to markdowns, spoilage, breakage, or theft, If the answers of these questions is yes, then a larger than normal initial markups is required

This check-list will help the retailer in laying down solid foundation of effective prices and build retail profit

Online marketing a buzzword today!!!!

Contributed by Charu Gupta

I was just checking my mails and found a forwarded link from my friend.
http://india.makemytrip.com/chidyaud/cidiyaudi.html

It was an animated video where a girl was playing game of ‘Chidiya ud” with her brother which we all used to play in childhood. It was great fun watching the video but at the end it turned out to be an ad from ‘Make my trip.com”. Watching the video was fun while the company was able to send its message of “now anyone can fly with their lowest airfares” very clearly to its target market.

This is a kind of online marketing also called as “Viral marketing” that makes viewers laugh and the advertisers smile. Viral marketing and viral advertising refer to marketing techniques that use pre-existing social networks to produce increase in brand awareness, through self-replicating viral processes. A two-minute animated Interactive advertising agencies like Webchutney, Media2win and Virtual Marketing are shifting focus to create online ad campaigns around animated viral videos and a lot of major brands are falling for it.

Big names like Lenovo, TataSky, Cornetto and Happydent are exploring online marketing beyond placing banner ads on various sites or pasting text on social networking sites. They are eyeing potential customers, essentially through animated viral videos, to create brand equity, eventually targeting an increase in sales.

“Animated viral renders the fun element which the Indian audience is able to relate to. Also, it is something one would like to forward to family, friends and colleagues and also has a higher recall value. By using animation as a tool, we get the freedom to create favourable situations which may not be the case with film videos,” says Webchutney creative director Prabhat Bhatnagar.

An animated viral can cost Rs 50,000 to Rs 8 lakh. Since there is only one-time cost of producing the video and the distribution cost is nil, virals are increasingly being preferred as a medium of online marketing.

The one from TataSky is ‘jingalala’ campaign’, the purpose of which is to invite more people to be a part of the TataSky family and their animated virals have helped to reach across a number of target customers.

Moving one step ahead are brands like Pepsi and NGOs like CRY, who create online games to ensure interaction with the target audience and engaging themselves in such activities. Animated virals not only register forwards from anywhere between 50,000 and 5 lakh, the ad spend turns out to be cheaper too and the message is also clearly floated across making it a favourite in interactive advertising.

Daddu Ki Amanat, a viral created by Webchutney for Perfetti Protex Happydent chewing gum, saw almost 3 lakh views. Similarly, Chidiya Udi for Makemytrip and Thakur ka Inteqam for Orbit chewing gum were also circulated in lakhs.

It is claimed that a satisfied customer tells an average of three people about a product or service he/she likes, and eleven people about a product or service which he/she did not like. Viral marketing is based on this natural human behaviour. Viral promotions may take the form of video clips, interactive Flash games, images, or even text messages.

Online marketing is not only restricted to this. One of the traditional ways is sending mails to the customers informing them about the retailer’s latest schemes, discounts, trends, etc. These mails are sent to the privileged customers to give them the advantage of checking out the latest merchandise and availing the special offers first than anybody else. The links to various other sites which we see on the top of our mail box or any other site per se is also a form of online marketing which the retailers are using to connect with their target market and make them aware about their offerings.

With 65 million PC literate population in India and 32 million being the active users, this virtual space can be exploited by the retailers to reach their customer base and talk to them in fun and interactive way.

So, this we say is combining Business with Fun!!!

Leaving you with some pieces of viral marketing. Check them out and see their impact. Are they able to strike a chord with you?

References:
http://www.happydent.in/protex/viral/index.html
http://hcl.in/humor/
http://www.viralad.in/2007/12/29/alibaba-advertisement/

Experiential Retailing

Contributed by Richa Kapoor

"Be everywhere, do everything, and never fail to astonish the customer"

Retail in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. Today the customer experience is fragmented. Prices, inventory, promotions and policies often differ between channels. Yet, customers want a seamless shopping experience across all channels. They want to order products online but return them to the store. They want to browse products in the store, yet order online, from a kiosk or a catalog. They want prices, return policies and promotions to be consistent across all channels.

To meet the demands of today's consumers, a solid understanding of "the customer experience" is necessary. Consumers today expect their favorite retailers to offer "experience" along with good service and a good product.

The old saying, "You never get a second chance to make the first impression," most definitely rings true in retailing. Whatever advertising and promotion precedes it, the in-store experience is where it all comes together. Creating a friendly, comfortable and professional retail environment will sets a retailer apart from the box stores.

The face of our retail landscape has been changing rapidly and with it, the strategy for communicating with consumers. We are taught that we should communicate "features and benefits" in the context of direct marketing. While this is a sound advice, it is incomplete. Consumers do not approach "shopping" from a purely logical basis, seeking rationale, and functional value. Consumers want to be excited, entertained, and educated. People want to belong, they want to be admired, they want to be secure…Customers seek meaning beyond the base-level selling proposition offered in most catalog and direct marketing product presentations today.

So how does a Retailer, distinguish himself ……. One answer is to make the absolute use of every in-store sales opportunity through experiential retailing

Experiential Retailing is a type of marketing that attempts to evoke a strong emotional response, often by the use of sensory techniques, to create an affinity between a product and a potential buyer.

Experiential Retail is used to enroll consumers in programs focused on total lifestyle experiences. Also, helps in focusing on selling beyond "features and benefits" rather Selling customer solutions-not selling a trimmer or edger but a finely manicured lawn.

Importantly, the idea of experiential retailing reflects a right brain bias because it is about fulfilling consumers' aspirations to experience certain feelings – comfort and pleasure on one hand, and avoidance of discomfort and displeasure on the other.

Experiential retailing is more than an opportunity to show off all the bells and whistles of a product, however. "It's all about emotions and feelings, achieving some sort of feeling,"
Experiential retailing means making connections with consumers who come to interactive stores for more than merchandise. "One has to win the hearts and minds of consumers by doing something that benefits them and showcases the product"

Retailers know experiential retailing allows them to empower a consumer to connect physically or emotionally with a product or service. The consumers are engaged and entertained and subtly sold to by providing enhanced experiences. As a result, consumers buy lifestyle associations and not products, thus encouraging them to spend more.

The interactive approach means higher traffic and longer stay than typical, the finest example of
In-store experimental retailing is American Girls Place the little girls who arrive at American Girl Place dressed like the dolls they hold in their arms show what's possible when merchants take an experiential approach to retailing.

In addition to museum like displays of the upscale dolls and their accessories, American Girl Place stores include a café with special booster seats for the 18-inch dolls. Then there's the on-site theater featuring young actresses as characters from the company's books, and a salon
where girls might queue up for more than an hour to get their dolls' hairdos made over.

It's all about providing a rich experience for customers, many of whom travel from out of state to visit the three stores, in Chicago, New York, and Los Angeles. "For an American Girl fan, coming to American Girl Place is like a pilgrimage of sorts. Little wonder that experiential stores are sometimes called destination stores.

By focusing on what the customer wants to get out of the retail experience, experiential marketers strive to engage customers with more than raw product. The goal is to create an interactive experience that no one else can replicate.

For an experiential strategy to be effective, it's obviously important to know what the audience
is most interested in. In India where Retail is still nascent stage similar products are available
across multiple stores – EBOs as well as MBOs, which offers the consumers with a wide choice in terms of products and location of purchase but lack the memory a consumer would like to carry home with himself and cherish for many coming years. In such a scenario the only way to differentiate for a retailer and emerge as a winner of consumer trust, remembrance and attach to himself with superior quality shopping experience rather than a product or service experiential retailing could prove to be instrumental in deciding the fate of the already crowded Retail Space in India..

Delhi to host first brand licensing conference in India

Licensing experts of the world, including Tommy Hilfiger's CEO Shailesh Chaturvedi, LIMA Managing Director Kelvyn Gardner, would participate in a two-day conference starting from November 29 in New Delhi to explore the potential of the licensing industry in India.

The Brand Licensing India Conference 2008, which is being organised by Franchise India Holdings Ltd and supported by International Licensing Industry Merchandisers Association (LIMA), would focus on growth of the licensing industry in the country. "The conference will be a great platform for Indian companies to learn from Global industry professionals, to leverage best practices and knowledge in the Indian licensing industry," Franchise India Holdings President Gaurav Marya said.

The emergence of modern and more organised retail in India, estimated at USD 200 billion, has been projected to grow at five percent per annum and has set the pace for new collaborations between International licensing companies and Indian business houses. Licensing industry worldwide is estimated at USD 187 billion. Retail sales of licensed merchandise in the US and Canada in 2007 reached USD 71.25 billion and that in Western Europe has been estimated to be worth in excess of USD 26 billion.

Source: zeenews