Panelists for the session included Sunil Sanklecha – Founder, Nuts‘n’Spices; C K Kumaravel, Cofounder – Naturals Beauty Salon India Pvt Ltd; P Subramaniam – Consultant RmKV; Ganesh Subramanian, COO, Myntra; Suhail Sattar- Director, Hasbro Clothing and Moderator: Vikas Choudhary – COO, AIMIA.
Why multi channel is a necessity?
“Traditionally retail was about buying and merchandising. Now its interaction based.”
– Vikas Choudhary – AIMIA
“Customers want to shop using your store, using TV channels and online. You have to go where the consumer is.”
– Suhail Sattar- Director, Hasbro Clothing
The role of mobility
Mobility and apps have created the need for retailers to engage customers – at a brand level – before and after the purchase transaction.
Pre-Purchase
- Apps such as Four-Square which help consumers identify ‘stores’ based on location
- TV programs which allow customers to comment on social media and buy merchandise worn by on-air celebrities.
Post-Purchase
- Nike’s fuel band which measures activity level through the day.
Creates a need to invest in mechanisms for continuous brand engagement.
- If your target customer is between 18 and 30 – you have to invest in multi-channel.
- In addition, in smaller cities, a large number of online customers are from the older age groups.
Who is your customer?
“There are now 13 crore people who go online regularly in India. 2.5 crore have shopped online.”
– Ganesh Subramanian, Myntra
- 80% of online shoppers in India are between 18 and 26.
- 450 towns, 10,000 pin codes are active online.
How do you go online?
- The easiest way is to list on a market place.
- Don’t start your own ecommerce site without listing and ‘feeling’ the pulse of the market.
- Creating an ecommerce portal takes effort. It is not about the investment – it is the management time that it sucks up in terms of creating relevant content.
- On Myntra – content is the product. Unknown brands fight with large national brands because of superior content.
Franchising as a way to think multi-channel
“Franchising works on the“Other Peoples Time”/ “Other Peoples Time” model. It has to be used responsibly for it to succeed” –
C K Kumaravel, Cofounder – Naturals Beauty Salon India Pvt Ltd
- For high involvement categories such as designer silk sarees – online can still work.
- It works because the basic brand promise has already been established in the consumer’s mind.
- The core of the multi- channel strategy has to be to deliver a CONSISTENT experience across all channels.
P Subramaniam – Consultant RmKV
Online – virtual national reach
“We set up our online channel because of customer demand for repeat purchases – within Chennai as well as nationally.” –
Sunil Sanklecha -, Founder, Nuts‘n’Spices
Online / Offline integration
“Use the analytics provided by online behavior to create tailor made offers offline, to the same customer segment.”
– Vikas Choudhary – AIMIA
“Acquiring a repeat customer is about making sure that his experience is good up to the point of time he gets the item that was purchased online. That means fulfillment is part of sales, as is the returns policy.”
– Ganesh Subramanian, Myntra
The role of analytics
- Sainsbury in the UK, used the online behavior of the “Middle Aged Health Conscious behavior” to generate targeted offers at the POS in the brick and mortar store, aimed at the same customer segment.
- They saw a 20% conversion on the offer.
- Fastforward – a retailer in Germany uses digital windows in its offline stores. Customers can order by moving items displayed into a virtual basket – which is physically delivered to them the next day.
- Food brands have begun adding intelligence to the POS billing system. Along with the bill, the system generates recipes for the items physically in the shopper’s basket.
Challenges in the Indian context
- Fulfillment used to be considered – logistics – i.e. operations. It is actually part of customer acquisition – i.e. it’s part of the sale process.
- The biggest challenge is sizing. Therefore the returns process is where your multi channel strategy is truly tested.
- Customers have evolved to the point where they are willing to use the online channel for returns.
- Today, 30% of returns have been converted into exchanges.
- Continuous evolution in technology – e.g. Fitiquette – virtual fitting rooms.
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The changing retail scenario
- From the small kirana and mom-and –pop stores the Indian retail industry has become one of the pillars of the economy.
- The conservative Indian consumer is now spending and giving importance to the words like “Brand, Quality, trends etc.” – researching before buying a product.
The digital connect
- Customers are looking at new channels like Internet, mobile, social networks etc. to explore brands and improve shopping experiences.
- Absence from any of these channels may mean that consumers are missing out on your offerings/brand
- This condition made Multi Channel Retailing (MCR) a mandatory practice for the retailers.
Growth of digital retailing in India
India has over 130 million (13 crores) Internet users and is the world’s 3rd largest Internet market.
At the current rate of growth India will have around 370 million Internet users in 2015.
India’s e-tailing market in 2011 was about $600 Mn, crossed $1.6 Bn in 2012 and is expected to be around $8.8 by 2016. By 2020 it is expected to cross $70 Bn – at an estimated CAGR of 61%.
What is Multi Channel Retailing?
- Multi-channel retailing is a retailing strategy that offers your customers a choice of ways to buy products.
- The channels include- Purchases from a store, purchases from a website, telephone ordering, mail orders, interactive television, catalogue ordering and comparison shopping sites.
Various Channels of MCR
- E-retailing (e-commerce)
- M-commerce (mobile)
- Social shopping
- Research & purchases at kiosks
- Research & purchases over phone call/IVRs
- Information & shopping on TV
- Traditional shopping in store outlets
- Coupon & gift-cards – own/partner outlets
- Catalogs – leaflets, magazines & newspapers
- Direct selling agents
The World has adopted MCR
- Majority of consumers in developed economies like UK & USA perceive the ability to purchase from a retailer from different channels as critical.
- Consumers regularly use the Internet to research products before purchasing from a local store.
- Consumers frequently use reserve and pick-up services in developed economies.
- The proportion of consumers shopping through their mobile phones has doubled in the UK and US since 2011.
Digital & Offline is getting connected
- 80% of UK shoppers have reserved products online for collection in stores in the past year (up from 74% in 2011).
- 44% of UK shoppers always research purchases on the internet before buying offline
- Only 4% never use the Internet for product research.
- 43% of UK shoppers now use smartphones while on the move to compare prices and read product reviews (up from 19% last year).
Cross-purchasing is a real phenomenon
Studies across US show that consumers like to move across channels during the shopping process for research as well as purchasing.
Typical Cross-Channel Services Being Deployed Today
- Buy online, pick up in store
- Check store item availability online
- Cross-channel offers/promotions/gift cards
- Browse and purchase from e-commerce site while in store
- Online registration/scheduling for store events and consultations
- Multi-channel gift registry
- Cross-channel returns
- Online access to account/loyalty program information
- View and order from inventory in other channels/stores
- View and edit customer profiles/history from the store
- Access cross-channel customer/order information from call center
New trends among consumers
- Consumers in India/China walk into stores to touch/feel products but research pricing online to close the purchase.
- Interactive experiences through digital QR codes, in-store kiosks, order booking through phone/kiosks for home delivery or pick-up – are rapidly becoming popular in Latin America and other geographies.
Why MCR?
UAE’s first virtual store @ Mall of Emirates Metro Station – Powered by MartJack
Benefits of MCR
- Reach more customers at lesser costs
- Improve “presence” before consumers
- Improve consumer experience & convenience
- Compete effectively & across geographies
- Grow the business efficiently
- Balance risk, costs & revenues smartly
What is needed to implement MCR?
Multi-Channel retail relies on three pillars –
- Coherent & Inclusive Strategy
- Relevant Capabilities – Digital & offline processes
- Complete Operating Model
Retailers of all sizes need to adopt MCR
- Smartly stay competitive with larger competitors
- Drive multi-channel strategy from a senior corporate level
- Develop deeper insight on customers’ evolving needs and shopping flows
- Understand the costs of individual activities in each channel
- Prioritize investments through careful balancing of value and cost/risk
- Establish clear metrics and track results
- Foster cross-channel and cross-functional collaboration by aligning incentives
- Build an open, flexible IT infrastructure
Increased relevance of MCR in India
- Over 11% of population already online
- Increasing adoption of broadband, smartphones
- Increasing cost of rents/property is making physical expansion difficult
- Increasing consumer need for convenience & information access 24×7
- Consumers are dispersed across a large geography – including Tier II and Tier III towns
- Availability of local partners for technology & operations is making MCR feasible & affordable
Indian consumers are already purchasing online!
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From L-R: K. Radhakrishnan, CEO, KB FairPrice & President, Future Freshfoods Ltd. (FFL); S. Raghunandhan, Chief Executive Officer, Retail, Prestige Group; Subhash Chandra, Chairman and MD, Sangeetha Mobiles Pvt. Ltd.; Shubhranshu Pani, Joint Managing Director, Retail, Jones Lang LaSalle; K. E. Venkatachalapathy, Chief Executive Officer, Arvind Retail Ltd, Megamart; CA Aroonkumar R R MRICS, Chief Financial Officer, Express Infrastructure Private Ltd.; Prashant Chopra, Director, PS Group & PSSrijan Realty and Rafiq Sait, Managing Director, Gatsby Collection Pvt. Ltd
The session “Brick by Brick” – The Mallification of South Indian Retail” @ CRS 2013 was moderated by K Radhakrishnan, CEO KB Fairprice,. The eminent panelists were S. Raghunandh
Three reasons malls get built
“Malls usually get built based on geography (market potential), consumer behavior or speculation”
Shubhranshu Pani, Jt MD, Retail, JLL
Malls in the South
- With 59 malls in pipeline, southern cities represent 56% of the country’s future mall supply between 2012 and 2016.
- All India level, mall space per capita is 2 sq feet. In Chennai its less than 1 sq foot per capita.
- Bangalore has almost the same population as Chennai – but has 18.5 mn sq feet of mall space versus Chennai’s 4.5 mio sq feet.
- Within the Bangalore market – mall performance is variable. The top 4 malls account for most of the market and are profitable. The others, including shopping centers are not.
5 things to get right while setting up a mall
Factors determining the success of a mall:
- Location
- Mall Design
- Zoning and mix of retailers (local versus national, parking)
- Mall maintenance, promotion and tenant relationship management.
- Pricing – needs to be appropriate to the location.
“Without doubt, location is the single most critical factor for a mall to be successful.”
S Raghunandan, CEO, Retail, Prestige Group
“You have to create a destination and an experience. At the same time your mix of tenants should be relevant to the local catchment.”
Aroon Kumar, CFO, Express Avenue Mall
Do all retailers need to be in malls?
“We have 215 stores and in all markets except Chennai we are in the malls. In Chennai, we have not been able to find space, the number of available malls are few.”
Subhash Chandra, CMD, Sangeetha Mobile
“As a value retailer, the fundamental issue for us is whether the mall generates enough footfall to justify the rentals. We have 25 stores in Chennai, one is in a mall, and it does well.”
K E Venkatachalapathy, CEO, Arvind Retail, Megamart
“We are a stand alone apparel retailer – we find malls expensive. Unlike other retailers for whom visibility in a mall matters, for us high street stores in Chennai give us better return on rent.”
Rafiq Sait – MD, Gatsby Collection Pvt Ltd
What price rental?
- Rent is a function of the quality of the product and cost of execution.
“Rent as a cost has to be compared against total value delivered including profit share and the cost of providing power in markets like Chennai, where 90% of load shedding happens during peak shopping hours.”
Shubhranshu Pani, JLL
“The biggest misnomer is that malls are expensive for retailers. Rent is 15% of sales, when sales are good nobody worries about rental.”
S Raghunandan, CEO, Retail, Prestige Group
“Retailers need to understand both catchment and merchandise range when they chose a mall. The propensity to pay is a function of the kind of turnover that retailers see.”
Prashant Chopra, Director, PS Realty (Grand Mall)
Malls v/s traditional markets
- Malls will not replace traditional markets. But they create new micro-markets.
- The economics of traditional markets are sound and cannot be substituted.
- Shopper habits in Chennai are still skewed to traditional markets.
“We have learnt from markets like T. Nagar . We were keen to have one of the brands from that market as our anchor – and that role is played by RmKV”
S Raghunandan, CEO, Retail, Prestige Group
“Traditional markets work on a cost plus model, keep overheads low and because of historical shopping habits generate extremely high turnover”
K E Venkatachalapathy, CEO, Arvind Retail, Megamart
“Malls are a good for entertainment – serious shoppers still head for the traditional markets. The historical / habit factor should not be underplayed”
Rafiq Sait – MD, Gatsby Collection Pvt Ltd
In Conclusion:
“Rentals will always be relative to location and potential.”
S Raghunandan, CEO, Retail, Prestige Group
“As mall developers we can focus on design, tenant mix – but after that the retailer has to get their marketing math right.”
Prashant Chopra, Director, Grand Mall
“Malls help cater to new segments and demographics which are being created.”
Aroon Kumar, CFO, Express Avenue Mall
“One of the areas where retailers and malls need to collaborate is in making sure that renewals are mutually beneficial. Otherwise, “Mallification” can become “Maulification”
K Radhakrishnan – CEO, KB Fair Price
“Malls and traditional markets offer different experiences, there is no competition between them”
Shubhranshu Pani, Jt MD, Retail, JLL
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From L-R: Anupam Bansal, Executive Director, Liberty Shoes Ltd.; Kishan Bherwani, General Manager, Kings Lifestyle; B. A. Srinivasa, Jt. Managing Director & Chief Executive Officer, Vivek Ltd. and G. Venugopal, Managing Director, Naidu Hall Family Store
In addition to integrating professionals in to the business, you need structures to socially integrate them into the family without compromising the family’s social fabric.
Decoding this concept was the objective of the panel discussion on-Professionalizing Family Managed Businesses @ CRS 2013. Panelists for the session included –Anupam Bansal, Executive Director, Liberty Shoes Ltd.; B. A. Srinivasa, Jt. Managing Director & Chief Executive Officer, Vivek Ltd.; G. Venugopal, Managing Director, Naidu Hall Family and Kishan Bherwani, General Manager, Kings Lifestyle and Moderator: B. S. Nagesh, Chairman RAI & Founder, TRRAIN.
How do family managed businesses handle transition?
“Role mapping is the key in the transition to the second generation. You bring in ‘professionals’ only for specific areas of competence which are missing within the family” –
Anupam Bansal – Liberty Shoes
Its not about whether a FMB is professionalized or not – its about getting the balance right between skills and experience.
“Your responsibility as owners is to handover a great business to the next generation. Professionals don’t have this view.” –
B S Nagesh, Founder TRRAIN
The single biggest difference between owners and professionals
- Decision making by owners can seem subjective – because they will consider hard and soft factors – “SOPs” and “relationship” factors.
- On the other hand, scale requires standardization of process, policy and decision making.
“Professionals don’t always bring in a sense of ownership – in such cases, the owners intuitive solution works better than the skill set of a professional” –
G Venugopal – Naidu Hall
How do you empower the professionals?
“The debate is more about finding someone with the right mindset for the business – someone willing to learn constantly. He could be an owner or he could be a professional” –
B A Srinivasa – Viveks
- Its critical to ensure that the professionals feel empowered. Information about the business including metrics and financials should be freely shared.
- Create processes by which owners and professionals are engaged in a regular, two way, dialogue.
- Consider remuneration structures which give the professionals a share in the value creation AND the risks of building a business.
- Once empowered, owners have to ‘let go’ and let the pro’s do what they are good at.
“In our case we have 9 family members running the business, but other family members set the measures by which we are measured as success or failure” –
Kishan Bherwani – Kingslifestyle
Creating performance management standards
- Decision metrics for family members and professionals cannot be different.
- When the business is growing, its easier to manage the creative tension between KRA’s for professionals and family members.
“You do tolerate a disgruntled family member more than you would a professional. You would let the professional go.” –
G Venugopal – Naidu Hall
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This was the perspective provided by Prof. S Sriram on the process of professionalizing Family Run Businesses (FMB’s) @ CRS 2013.
Some facts around Family Managed Businesses (FMB’s):
- Nearly all firms start as family businesses. No firm on earth started out as a corporate.
- 33% of S&P listed companies still have 1 family member onboard. Globally, 70 to 90% of GDP comes from family run businesses.
- FMB’s are more stable during economic recessions. When compared against non FMB’s on profitability parameters – they tend to outperform, especially during downturns in the economy. However, during the uptick in the economic cycle, they also grow slower than their non FMB counterparts. This is a function of the inherent conservative DNA and focus on capital preservation.
“Family Managed Businesses are more stable and profitable during economic recessions, but they also grow less during economic upturns.” – Prof S Sriram, Great Lakes.
Professionalization: The word “Professionalization” has different meanings. In many cases, FMB’s believe that if they get an outside CEO they have “professionalized”. In other cases the word is applied to any structure which separates ownership from management. However, we believe that Professionalizing is a mindset and an attitude – it’s about how you think and take decisions. It has nothing to do with ownership / management or structure (i.e. whether the company is a private or Public Sector Company). “How objective you are in decision making determines how professional you are.”
“How objective you are in decision making, determines how professional you are” – Prof S Sriram, Great Lakes.
Why companies professionalize: The usual motive is to deal with the pressures introduced by growth. Growth vs control is the classic dilemma that family businesses face especially, because in India, not only are 80% of businesses family owned, they are also privately held. Some businesses look at the listing process to introduce not only external capital but also governance. Making a company list-worthy usually involves bringing in an external ‘professional’ CEO – this is one of the popular definitions of ‘professionalizing’.
Challenges: Key challenges are around success planning, “letting go” and finding a convincing answer to the question “Why professionalize?”.
Succession planning: 15% of FMBs globally survive to the 3rd generation. The biggest challenge is therefore succession planning and management – i.e. changing from an entrepreneurial mindset to a managerial leadership mindset. This change is evidenced when the decision making process moves from individualized to a data based, consensus making decision process.
“We believe that the definition of a professional entity is one which places the interest of the consumer and the organization above self-interest. The decision maker may or may not be the owner of the company. This is easier said than done”.
“The challenge of ‘letting go’ – at its simplest level is answering the question of “What am I going to do with my time, now that I am no longer actively managing the business?”” – Prof S Sriram, Great Lakes
“Letting go”: Once the owners professionalize the second challenge is about ‘letting go’ – at its simplest level its answering the question of “What am I going to do with my time, now that I am no longer actively managing the business?”. Any attempt to professionalize will not work unless there is a concrete answer to the above.
“Why professionalize”. Often this is the biggest challenge to starting the process. While the usual answer is “scale is the tipping point” – most entrepreneurs chose control over growth. The internalized, often un-articulated reason is also because they believe that “if something isn’t broken, don’t fix It”. In other words, scale can be subverted to control.
“The unarticulated reason for not professionalizing is that many entrepreneurs believe that scale can be subverted to control” – Prof S Sriram, Great Lakes
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