Highlights of the event included the release of 6 reports on Retail – the largest single Knowledge compilation on Retail in India, ever.

Delivering the inaugural Chairman’s Address, B S Nagesh, Chairman RAI, Founder, TRRAIN said: “In every major retail market globally, Retail features in the top 10 richest companies. Retail drives value. Indian retailers have used the last three years to correct past mistakes and aggressive over-expansion of the previous decade. In the future, one of the key value drivers will be Corporate Governance. Well-governed retailers will command a premium. There is no space for a “dukaandari” mindset, when it comes to Governance”.

Well-governed retailers will command a premium. There is no space for a “dukaandari” mindset, when it comes to Governance.

– B S Nagesh, Chairman RAI, Founder, TRRAIN

The keynote address was delivered by Sanjiv Mehta, CEO & Managing Director, Hindustan Unilever Limited. “E-tailing is to retail, what the steam engine was to horse-manure in Victorian England – it’s revolutionary, not evolutionary”, he said, adding that “There is enough market play for all channels – Traditional kiraanas, Large kiraanas, Modern trade and E-tail – to grow. Each faces different challenges. The kiraanas need to become experiential, e-tail needs to fix supply chain and modern trade needs to find “local” relevance”.

Build for Value, not Valuation.
– Kishore Biyani, Founder & Group CEO, Future Group

The Keynote panel discussion was on the theme of “Decoding market evolution”.

Kishore Biyani said “Previously our addressable market was 30 crore Indians. In the last 10 years, another 15 crore new voters have come in. This segment is young, democratic in its thinking, yet wants to “fit in”. They will buy organic. They will also buy frozen for convenience. The frozen french fry at home costs Rs 10 – at McDonalds it costs Rs 30 – they see value in both formats”.

“Value for the customer of today is CONTEXTUAL. That’s the single biggest change in the last decade of growth”, he said adding that retailers must  “Build for Value, not Valuation”.

E-tailing is to retail, what the steam engine was to horse-manure in Victorian England – it’s revolutionary, not evolutionary.

– Sanjiv Mehta,
CEO & Managing Director, Hindustan Unilever Limited.

• It’s now or never. The young Indian consumer (‘millennial’ henceforth) is smart, aspirational and impatient. Unlike their parents, they are not prepared to wait indefinitely for material satisfaction. As the economy continues to open up, the millennials are embracing the change whole-heartedly, getting brand-aware at a younger age than ever (Economist 2011). It is forecast that by 2020 this group will account for nearly 75 percent of the total spend.
• Tech’s fun, but won’t throw caution to the winds. The last few years have witnessed a surge in mobile and Internet adoption in India. Most millennials were born digital natives — 60 percent of them own a smartphone. And more millennials — 22 percent — had their first experience of the Web via their mobile or tablet in the last year than via a desktop — 18 percent. At the same time, they care a lot about data securit y, clearly indicating they will share personal information only if its privacy is promised. Eighteen percent of millennials and 20 percent of non-millennials called reassurance on security their primary need. However, 24 percent of millennials indicated they would not share personal information under any condition.
• There are holes to plug. There is a huge gap between awareness of and participation in loyalty programmes. Seventy percent of millennials and 74 percent of non-millennials have heard about loyalty programmes, but only 54 percent and 56 percent, respectively, are actually members of any programme. While some of this gap can be attributed to the socio-economic context, there remains a more fundamental issue. Young Indians are not dancing to the loyalty beat because it simply doesn’t excite them at the moment.
• We identified four core reasons for this discrepancy: (a) Propensity for a quick buck. Seventy-two percent of ‘in a hurry’ millennials believe they should be able to earn rewards in under three months, which is distant from reality; (b) Infra woes. The weak Internet infrastructure makes it challenging to access loyalty programmes enough to see adequate value from them;
• Lack of meaningful rewards. Loyalty programmes need to better answer the ‘What’s in it for me?’ question. Thirty-five percent of millennials and 40 percent of non-millennials reported that relevant rewards would encourage them to join a loyalty programme; and (d) Insufficient point-earning opportunities. We feel a robust loyalty programme proposition for India would include the ability to earn across multiple purchase points. Many programmes in India are currently restrictive in these areas. Not everyone can, or wants to, have a credit card.

COMING UP TRUMPS

• Keep it simple. Complexity is a turn-off, especially for the time-poor and information-inundated consumer.
• Facilitate early redemption. Waiting for months, let alone years, for rewards is not going to work.
• Mobile-optimise. Manage customer relationships through smartphones. It’s not the future – it’s the present.
• Promise privacy, keep word. The Indian consumer typically starts from a position of active mistrust. One slip-up, and they are gone.
• Forge alliances. Joining forces with non-competing organisations can help overcome the barriers to participation. One plus one is bigger, better and more noticeable than one on its own.

By Akash Sahai, Managing Director, Aimia India

RLS saw the release of 7 Knowledge reports. Key insights are highlighted here – full details are available at http://rls.net.in/Knowledge_Zone.html

RAI – TCS: Retail Operations Benchmarking Excellence Survey (ROBES)

There has been an increased e-commerce adoption by consumers during 2013. Brick and Mortar retailers have begun to view multi-channel strategically, instead of considering their e-tailing counterparts as price predators.  This report benchmarks the multi-channel practices of 40 Retail brands against e-tailers.  Key insights which emerged:

• Brick and mortar retailers are looking at multi-channels as one of the top 5 priorities for 2014.
• Ecommerce channels (non-store channel ) of brick and mortar retailers are yielding higher growth, higher cash memo size, and lower returns.
• For example, on an average, brick and mortar retailers find that their online cash memo size is 12% higher than in-store.
• Online returns of Brick and mortar retailers are <3% – significantly lower than pure-play e-tailers.

For brick and mortar retailers, multi-channel is about “on-demand retailing” – about giving the consumer better access and deeper range. Unlike their ecommerce counterparts, it is not a ‘pricing’ game: most retailers have a uniform pricing policy across all channels.

RAI-KPMG: Emerging Consumer Segments in India

This report identifies new segments of consumers including – the urban time starved consumer, the rural ‘windfall’ consumer, the “Value conscious” customer etc.
Key insights:

• Leveraging technology is the key to reaching the consumer.
• Supply chain innovation is needed to provide ‘stripped down’ service models.
• Hybrid models – using a mix of online and offline are emerging.

RAI-AIMIA India Millennial loyalty survey

Millennials are defined as those between the age of 19 and 29, and are expected to be the generation that will force brands to change the way they build sustainable customer loyalty.

AIMIA loyalty survey profiles the buying habits of this segment of customers. Key insights:

• Today’s customers are more ‘social and vocal’: 60% of millenials use social media and 41% seek opinions of their network before buying.
• They are willing to share data, but need transparency on what that data would be used for.
• They are more willing to engage than their counterparts in other countries.
• They are interested in more than just cash rewards.
• They want loyalty programs to provide ‘faster’ rewards.

RAI –PWC: Total Retail:  A change is underway

This quantitative survey of 1000 Indian online consumers profiles buying habits.  Key insights:

• Online shopping is driven as much by “trust” as by “price”.
• Online is about convenience.
• The customer experience matters even in an online context.

RAI-GP2WW: Great Places to Work in Indian Retail

This ‘first of a kind’ report surveyed 50 retailers to answer the question “Which retailer is the best employer?”. The Great Places to work with uses a proprietary framework which includes employee surveys and interviews as well as representations from management.

Lifestyle International emerged as the top retailer in India, followed by Titan and Shoppers Stop.

RAI –JLL: Emerging trends in retail spaces

This report profiles cities which are emerging as retail destinations in Tier 2 India.

• Retail realty in India is driven by income growth, a demographic ‘dividend’ and the fact that available space is polarized as regards quality.
• Mumbai, Delhi and Bangalore continue to mature.
• Emerging markets include Pune, Chennai, Ahmedabad, Chandigarh, followed by Surat, Amritsar, Ludhiana and Jaipur.

RAI – WWF: Sustainability in India Retail

This report profiles global practices by retailers in terms of creating sustainability in the supply chain and business practices.  Key insights:

• The world is today consuming 1.5 planets worth of resources annually.
• Demand for certain commodities such as palm oil, milk and beef (buffalo meat) is threatening India’s biodiversity.
• Owing to its direct contact with consumers, the retail industry is in a position to drive change towards sustainability.
• Experience with mature markets shows that the ‘tipping point’ towards structural sustainability is when consumers adopt and are willing to pay for sustainable products.

The John Lewis story is characterized by success on three fronts – sales, online and people.

They have ridden out the recession in the UK and have used their online channel to script a successful, “Brick and Click” strategy. Sales as of December 2013 were £ 11 bn, with the online channel contributing £1 bn.

The company is entirely owned by the employees. There are no external shareholders.

Laura Whyte, Personnel Director, John Lewis delivered the Key Note speech at the session on “Emerging People Management practices” at RAI’s Retail Leadership Summit in February 2014. STOrai presents some insights from that speech.

Employees are partners: John Lewis is entirely employee owned, and is one of the largest retailers in the UK – sales of £11 bn. The People management Model is based on the principle that “A happy, engaged workforce and a long term focus delivers shareholder value”.

The proposition to employees is about outstanding leadership and training. John Lewis believes that employees, will then deliver a customer satisfaction proposition, sufficiently differentiated as to create value.

Profits are either ploughed back into the business, or redistributed back to the employees. Everybody gets the same percentage of profits irrespective of grade / level.

The nomenclature used to refer to employees is different. They are consistently called “Partners”.  The Partnership model has three key principles:

• Purpose: Empower Partners with the knowledge and desire to provide outstanding service
• Power: Generate incremental sales through customer loyalty
• Profit: Enable the development of deeper customer relationships

Leadership Compass: John Lewis has internally developed and articulated a “Leadership Compass” (see image). The compass measures the balance between Strategy vs. Execution on its vertical axis, and the ability to keep the balance between “Legacy v/s Change” on the horizontal axis.

The Leadership Compass recognises the contradictory pressures that Partners are expected to manage. By measuring both sides of a skill set (i.e. strategy AND execution / Legacy AND change) – it acknowledges the fact that these will not always be in perfect balance. Partners are expected to use the compass to maintain a ‘creative’ tension, while driving business towards a goal.

Partners concerns can range from advertising to the environment

The John Lewis Own Brand swimsuit campaign:
Please could you confirm the stance the Partnership takes on using models smaller than UK dress size 10, and whether these models used fit the Partnership’s criteria?

Business expenses:
We have recently seen a lot in the media about the abuse of financial allowances and MP’s expenses. Can Partners be reassured that controls are in place to ensure no abuse takes place in the Partnership at any level?

Plastic bags:
As a responsible retailer, why are we not leading the field
All concerns are carefully debated, considered and voted upon.

Implementation: Partnership principles are implemented through the following:

• Each week – two magazines are published in-house – a local, store specific edition and a national magazine.  Any Partner can write in anonymously to these magazines and their manager must respond. No editing of the letters is permitted – unless the Chairman approves. Partners concerns can range from advertising to the environment – and all concerns are debated carefully and publicly and then voted upon.
• Employee attitude surveys are used to gauge feedback. Feedback must be implemented, if this is the opinion of the majority of Partners.  Response rates to these surveys are 88%.
• Partners decide the final % of profits to be redistributed.

Does it work? If the ‘proof of the pudding is in the eating, then the John Lewis model does work’.

“Most UK retailers reacted to the 2009 recession classically – they cut inventory and head count. John Lewis decided to continue its approach of focussing on the long term. “Let the profit takes its course” was the majority view of the Partners” says Laura.

In 2009, the company did not make money for 5 months – but the Governing Council decided to continue with the strategy of using online as a low cost channel for growth. They saw the online channel as an opportunity, and in 2010, increased SKU’s from 45,000 to 200,000.

Over the next four years, the channel became a growth engine – 2013 online sales crossed £1 bn.

What next: The Company’s focus now is to consolidate and expand its online success.  “We expect that by 2020 – Bricks and Clicks will be equal contributors to sales” says Laura. The next part of the story is to go mobile – in 2013; the company spent £40 million on its website and mobile offerings.

Online success is about controlling the supply chain on an ‘end to end’ basis – John Lewis is building the second fully automated distribution center @ 750,000 sq. feet to match its twin.

A large segment of the online customer is young – 39% are less than 35 yrs. old. This is good news for a brand that has often been considered, “solid, stable, middle class” in the UK market. To cater to this demographic, the company has created designer collaborations – and developed a master brand in Fashion & Home.

• Over 2,000 Partners registered for an external qualification in 2013
• Address concerns that retail is not a “proper job”.
• 335 Partners achieved a qualification in Distribution
• 215 Partners achieved a Contact Handling qualification
• New JL apprenticeship programme

“Entrepreneurs in retail should build businesses because they see value, not valuation” – B S Nagesh, Chairman RAI, Founder, TRRAIN

Retail is Value
“The last 10 years has seen positive and negative changes. There has been growth and in some cases, it has tipped  into aggressive business expansion. Some retailers have used the slowdown of 2010-2013 to rectify the mistakes. More importantly, there are now thousands of companies and sub-segments of industry who have joined the retail bandwagon,” said Nagesh.

“Amongst the top 5 companies in every country, there is at least 1 retail company. The time will come when an Indian retailer too will feature amongst the top 10 retail companies in the world.” He added.
The politics of Retail
“Whichever government comes to power, retail will benefit. If, after elections in May 2014, the government moves for FDI –5% of retail which is organized retail will benefit.  In the Long term, the 95% of retail which is not part of Modern Retail will still benefit. And if, after May 2014, the government chooses to defer FDI, the sector will still grow”, he noted.
The next 5 years are likely to be golden years in terms of consumption he said. RAI believes that from the learning of last 10 years, the next 5 years are golden years in terms of growth and opportunity.
Do not build a business for FDI
“Entrepreneurs in retail should build businesses because of the market opportunity, not because of valuation” he said. It’s important that the people who build businesses focus on value, NOT valuation.
What will change
There are few major changes that we expect. One is the presence of online.  While it’s still 5% of retailers top line, and less than 2% of the overall sector, the simple fact is tommorrow’s consumer is online.
People Power
People power is going to be important in the next decade. There’s a need to develop skilled professionals and RAI extensively works on this and “Manning Modern Retail” is one such platform where we discuss on this bringing in together India’s retail fraternity.
‘Real Power’ v.s ‘Power of Power’
The Power of Power – refers to the fact that power cost has gone up, power is scarce. At the same time, some governments are slashing tariffs.   Retailers need to track developments and manage this dimension – as electricity costs impact the business.

Well-governed retailers will command a premium.  There is no space for a “dukaandari” mindset, when it comes to Governance. – B S Nagesh, Chairman RAI, Founder, TRRAIN

Future focus: Governance
“Governance in retail is no longer ‘dukaandari’ governance. It’s about building structurally strong and well governed companies.
There’s no more space for a “khandani” mindset. Well-governed retail companies will create value – and will command a premium over peers. “- he noted.