Emerging Consumer Insights

01

Opening Remarks

02Incredible diversity of consumer segments in India. A few examples:

1. Urban <20 yrs – don’t tune into TV / Radio / newspapers.  Communicate thru data not voice.

2. The traditional consumer who shops once a month, but ‘tops up’ once a day.

3. The 35-55 salaried – ‘caught’ between two generations.

4. The retired upper middle class, who travel cross-continent to spend time with grandchilren

In addition to segments, additional complexities are introduced by the Urban / Rural dimension, the Rich / Poor dimension, the Gender dimension.

Consumer insights are temporary and evolve over time.

How do you identify your customer?

03• Through our Loyalty Program – First Citizens Club

•3 mio customers and 72% of sales from FCC.

• We know them, but can increase the intimacy of that knowledge.

• What we track:

• Buying habits.  What’s in vogue.

• In 2001 – 70% of FCC sales was Apparel. Beauty was < 2%, is now more than 10%.

Growth comes to those retailers who are able to mirror customers aspirations in merchandise mix.

What are the trends in consumer behavior that Food & Grocery Retailers have witnessed?

042 strong trends in the last 10 years

From women to men.

• 7 years back 60% of shoppers were women.  That has now reversed.

• Men are embracing grocery detail.

• Implications for the business in terms of store layout and assortment.  Categories like Liquor are now fast growing.

Premiumization

• About 4 years back – average cash memo size in Skincare was Rs 500 – that’s increased to Rs 2000.

• Have seen this in Personal Care but also in Food.

• As long as you ‘play’ the balance of merchandise mix – you can surf this ‘premiumization’ wave.

Will e-tailing grow or bleed to death?

05• International experience with Amazon shows that profitability, eventually, is possible.

• E-tailers adopt predatory pricing because there is capital available, which allows them to fund losses.

• They are disruptive in terms of what they do to consumer behavior.

• The e-tailing business is where customer engagement is the highest.

• Customers want access.  To merchandise to prices, to devices.

It’s no longer possible to think about customers linearly.  The Attention -> Interest à Desireà Action model of consumer behavior is dead.

If you leave the shopping decision to the shop-floor it’s too late.

What can India learn from the UK market –  on e-tailing. 

06• In the UK market, small retailers were initially threatened by e-tailing.

• Today – two key trends.  Because times are tough, at the top and bottom ends of the market, customers are “trading down”.  That leaves a gap in the “middle income segment” – that’s where e-tailing is thriving.   Small retailers are using market-places, or setting up e-commerce sites to cater to this “middle of the pyramid” segment.

• The second trend is “buy local” – there is a move on across the UK – consumers want to buy from local retailers who are serving the community.

• A retailer like John Lewis is known for having successfully integrated “bricks” and “clicks”.

• They too, started with outstanding ins-tore experience.  Using technology to sell online was an EXTENSION of their basic proposition of “Never Knowingly Undersold”.

• That’s what smaller retailers whether in the UK or otherwise have to learn.

• For smaller retailers, the biggest problem they face is sourcing consistent, credible online content. Smaller retailers are also run by business men who are 45 plus –  so content creation is not a focus  area.

• Suppliers and manufacturers have begun to offer not just product, but content.

• Retailers are able to “mass customize” this by adding local flavor – e.g. local interest, “face book” type stories.

How is the customer  of today / tomorrow different?

07• Concepts like “bio-degradable”, “organic”, “sustainable”, “fair trade” have begun to find favour.

• Younger customers are thinking environment , health and sustainability

• There is a loyalty creation plank there.

• For example – a retailer in Sweden uses  Health as a Loyalty Tool :

• In addition to tracking what the consumer purchases,  they also provide a personalized page online with nutritional information for the purchases and customized recipes which use those purchases.

• Customer can pre-register their health profiles and the retailer uses it to recommend what should be bought.

Customers are willing to provide profiling information where they see benefits.

They are “speaking” with their wallets.

• “Nectar” – Sainsbury’s loyalty program in the UK also uses health to provide personalized discounts.

• Based on purchase profile, offers are created for the customer, which provide discounts at the POS.

• These are personalized discounts – available only to the purchase pattern logged on the loyalty card.

Research shows that customers are willing to alter store selection based on these personalized loyalty programs.

That change in behavior comes about only after the retailer is able to demonstrate a superior knowledge of buying habits together with sensitivity in how they treat customer data.

03• The Indian customer has not changed as much or as fast as we would like to believe.

• The popular refrain in Fashion retailing is “Zaara ne maara”.  The reality is, Zaara sells to men, and to a very limited segment of women – because their sizing is not India specific.

• The mainstream customer in the top 50 cities is not yet their customer.

• There is still room for “Fast Fashion” department and lifestyle stores to make a dent in this market.

We’ve found that consumers are not necessarily as “fickle” and “capricious” as the media and research would have us believe.

Offline v/s Online – is there  a conflict?

05There is a price differential between what we sell online and offline.

It’s perhaps not as sharp as Flipkart, but there is a difference.

We will live with this until we integrate the post sale experience with the convenience of online.  For smart phones, post sales experience is THE key.

That would create the value to the customer, and get rid of the pricing differential.

The battle is not “online” versus “offline”.  The question is how do you create and integrate “multi-channel”? How do you integrate the post sale and service experience so that you can do away with the need to maintain price differentials?

Audience Question:

Does e-tailing affect the size of the store?

05Directionally – Yes.

As retailers – there is a need to build an omni-channel presence rather than multi-channel.

The brand expectation has to be consistent and seamless. That comes first.

Its logical that the delivery points will get smaller and newer (including  petrol stations etc)

Instead of rushing into e-commerce, we have to think how the brand will transition from channel A to Channel B.  The delivery point will be based on what the customer wants and that will evolve and change over time.

Audience Question:

Does e-tailing affect the size of the store?

03Irrespective of omni-channel, retailer are reviewing their space models

Retailer are looking at the right size to create the right business channel.

SKU’s and space would both become tighter as well as more distributed.

Audience Question:

Does either screen size or bandwidth pipe impact the pace of market adoption of ecommerce?

 

06Four facts about the UK market in terms of  market maturity:

1. Every UK resident has a bank account

2. 76% of UK residents have smart phones

3. All families have a tablet

4.  The courier / postal system covers most of UK.

In spite of that online sales at a market level is at 10%.

Audience Question:

Does either screen size or bandwidth pipe impact the pace of market adoption of ecommerce?

05That old saying that “We over-estimate the pace of change in the next 2 years and under-estimate it in the next 5” is WRONG when it comes to Mobile phones.

I see de-growth in the feature phones (simple basic models) segment and in the TABLET segment – due to lack of innovation.

Screen size is not the issue – lack of innovation is.

The simple fact is that the mobile device you carry is going to be very important in the next 2 to 3 years. That’s irrespective of size or shape.

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Retailers Association of India (RAI) is the unified voice of Indian retailers. RAI is a not for profit organization (registered under section 25 of Companies Act, 1956), works with all the stakeholders for creating the right environment for the growth of the modern retail industry in India. RAI is the body that encourages, develops, facilitates and supports retailers to become modern and adopt best practices that will delight customers. RAI has a three charter aim of Retail Development, Facilitation and Propagation.