the basics of organized retail
TRANSCRIPT
Consumer Experience @ Retail
Peshwa Acharya
Areas to be touched upon ….
1. The Retail context 2. Definition of Consumer Experience3. How to build the consumer experience .. 4. How does it help in building the brand and business
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Organized Retail Story Organized Retail Story –– India India & &
Retail Basics Retail Basics
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Some StatisticsSome Statistics
India is the 4th largest economy in the world in Purchasing Power Parity terms (PPP) after USA, China and Japan.India’s GDP growth has averaged about 6% per annum in the last 10 years (1994-2004)India’s GDP growth forecasts for the years 2005-2010 in between 7% to 8% per annum.annum.The private final consumption expenditure in India was estimated at INR 1,690,000 crore (USD 375 billion) during 2003-04.The services sector – led by IT, telecom, healthcare, and retailing - accounts for l t 50% f th t t l GDPalmost 50% of the total GDP.
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Some Retail StatisticsSome Retail Statistics
Retailing, at INR 930,000 (USD 205 billion) crore in 2003-04, accounted for 35% of the GDPthe GDP.Organised retailing at INR 28,000 crore in 2004 is only 3% of the total retail market, but is growing at over 25% per annum.It is estimated to be 10% of the market by 2010 at INR 140,000 crore.The sector is fragmented with over 12 million outlets and only 4% being larger than 500 sqft in size. In comparison there are 0.9 million outlets in USA catering to more than 13 times the marketthe market.
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A Nation of Small RetailersA Nation of Small Retailers
• We are a nation of small shopkeepers with a shop for every 84 people. Over two thirds of the 12 million outlets are located in rural areas.
• Paan-Beedi shops : 3 million plus outlets nationally- The Indian version of convenience store (Besides the ubiquitous Kirana store)
• Largest selling format for a few consumer products and beveragesg g p g
• Weekly Bazaars / Haats / Melas- Traditional open ‘Malls’ of India serving 10-50 villages
• Destination for textile apparel household food & grocery for rural and semi-urban IndiansDestination for textile, apparel, household, food & grocery for rural and semi urban Indians
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To illustrate : Outlets in ChennaiTo illustrate : Outlets in Chennai
Shop Type Number
Grocers 13691
G l St 1911General Stores 1911
Chemists / Druggists 2170
Pan/Beedi/Cigarette shops 7395
Hardware Stores 935
Co-op Departmental Stores 86
Private Departmental Stores 174
Others 5762
Total 32125
Source : KSA Database
So many channels – in the city with the highest share of
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So many channels in the city with the highest share of organized retail
Total retail marketTotal retail market
Rs. 9,30,000 crore
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Organized retail marketOrganized retail market
Rs. 28,000 crore (3%)
Pharma2%
Books, Music, Gifts
Entertainment1%
Food & Grocery14%Health & Beauty
1%
Watch/Jewelry
3%
Watch/Jewelry17%
Footwear13%
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Clothing & Text36%
Home3%
Durable10%
Features of Indian Retailing till dateFeatures of Indian Retailing till dateFeatures of Indian Retailing till dateFeatures of Indian Retailing till date
Geographically distributed and diverse market with poor infrastructureInefficient supply chain with many intermediariesDistributors have enjoyed a lot of powerSituation well suited for small convenience stores
Manufacturing dominated economy; largely a sellers market until recentlyService sector coming of age only now
Strong presence of unorganised / small outletsTax avoidance has been endemicBarrier for organized retailers to offer convenience & value
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Features of Indian Retailing till dateFeatures of Indian Retailing till date
Many communities made retailing their family profession for generationsexcellent in service and customizationlargest drawback is scalability and consistencylargest drawback is scalability and consistency
Infrastructure for organized trade poorbusiness constraints…cost of real estate, multiplicity of taxes, supply chain complexity, power deficits etc
Mostly under-CapitalizedCost of capital has been high Not considered an industry yetNo significant international know how & best practices available as negligible FDI in this sectorNo significant international know-how & best practices available as negligible FDI in this sector
Many Reasons why big box formats have been slow to emerge
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The Changed Retail LandscapeThe Changed Retail Landscape
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Change in the last decadeChange in the last decadeChange in the last decadeChange in the last decade
A few organized retailers to a Rupees 30,000 crore industryFrom 10x6x300 days to now 10x7x365 daysFrom unknown companies to Retail companies amongst the top 500 retailers in AsiaFrom father son shopkeepers to several retail rupee billionairesFrom father-son shopkeepers to several retail rupee billionaires From supermarkets to department stores, discount stores, hyper-markets, specialty malls all virtually at the same time
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The Change of Guard PostThe Change of Guard Post--LiberalizationLiberalization
Pre-Liberalization Post-Liberalization- Bata- Raymond- Titan
- Foodworld - Food Bazaar - Big Bazaar - Giant- Subhiskha - Star India Titan
- Garden- Vimal
Bombay Dyeing
Bazaar- Shoppers’ Stop - Lifestyle
Westside Globus- Bombay Dyeing- Canteen Stores- Co-operative
- Westside - Globus- Pantaloons - Vivek’s- Crossword - Planet M
supermarkets - MusicWorld - Tanishq- Wills Lifestyle - Health & Glow- Ebony - Be
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y
Emergence of largely retailers from manufacturer-retailers
Experience in relevant markets justify the sentimentExperience in relevant markets justify the sentiment
30%35%40%
15%20%25%
Share
0%5%
10%
d il d aShare
Thaila
nd
Brazil
Poland
China
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10-12 years for organized retailing to achieve 20% share
Change Drivers : The ConsumerChange Drivers : The Consumer
Changing demographicsA younger earning population, brand conscious54% belo the age of 25 ears54% below the age of 25 years81% of population below 45 yrsMore acceptance of new conceptsChanging aspirations, lifestyle orientation
M l f ili ith d l iMore nuclear families with dual incomeHigh income households has grown by 20% p.a. since 1995 totaling 44 million More money to spend and easier financing optionsMore positive outlook to spendingTime poverty : “Convenience over-riding price consideration”p y g p
Lifestyle valuesGlobal lifestyle : media exposure and overseas travel
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Consumer Class MapConsumer Class Map
Climbers ( $500 - $900)Cash - constrained benefitRich (Above $ 4,500)
Benefit Maximisers: Own Cars, PCs
Cash constrained benefit seekers:Have at leastone major durable (mixer, sewing machine / television)
Consuming ( $900 $4 500)
television)
Consuming ( $900 - $4,500)Cost -benefit optimisers : Have bulk of branded consumer goods, 70% of two wheelers refrigerators
Aspirants ($350 - $500 )New entrants into consumption : Havebicycles radios fansof two- wheelers, refrigerators,
washing machinebicycles, radios, fans
Destitutes ( Less than $400)
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Destitutes ( Less than $400)Hand - to - mouth existence : Not buying
Income classes across India by sizeIncome classes across India by sizeMillion Households (Pop)
1995 -96 2001 - 02 2006 - 07
URBAN
Million Households (Pop)
The very rich 1.2 (7) 2.6 (15) 5.2 (30)4.0 (23)1.9 (11)
0.8 (5)
The consuming class
32.5 (186) 46.4 (265) 75.5 (432)40.8 (230)26.5 (150)16.6 (93)
The Climbers54.1 (312.2) 74.4 (429) 81.7 (472)
13.7 (77)17.4 (98)16.8 (94)
The aspirants 44.0 (253.9)33.1 (192) 20.2 (117)
0.7 (4)3.9 (22)7.1 (40)
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16.5 (95)
0.9 (5)2.6 (16)5.3 (30)
Change Drivers : Macro EnvironmentChange Drivers : Macro Environment
Easy availability of creditBanks and financial institutions are lending aggressivelyC t f f d h dCost of funds have come downCustomers attitude to credit has changed
Globalisation of MNCs (Retail & brands)- Lifestyle Gautier Shoprite Marks & Spencer Metro- Lifestyle, Gautier, Shoprite, Marks & Spencer, Metro- HLL, P&G, Nestle
Easing of import barriers- India is importing a large array of ranging from food to furniture- Ease of restrictions would further accelerate growth
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Change Drivers Change Drivers -- Entry of serious playersEntry of serious players
FDI not fully allowed yet, still several international
Indian corporates leading theshow
Relianceplayers
- Dairy Farm, Singapore (F d ld)
ReliancePantaloons
-Trent- K Raheja Corp(Foodworld)
- Landmark, UAE (Lifestyle)- Medicine Shoppe, USA
Metro Germany (cash & carry)
K Raheja Corp- RPG-Zee Group- Nicholas Piramal- Metro, Germany (cash & carry)
- Shoprite Hyper, South Africa- Marks & Spencer- Benetton
- ITC- Godrej- Hathway InvestmentsBenetton - Raymond- Apollo Hospitals
M Oth t ti t
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• Many Others testing waters-Tatas, Bharti, UB, Jubilant, HLL,
Mahindra..
Other Change DriversOther Change Drivers
Successful Retail ModelsThe last 3 years have seen successful, scalable and profitable retail models in many categories
Retail InfrastructureExtensive investment is taking place from 2004-2007
• Approx 340 Malls under development atavg investment of US$ 15 million $5.0 Billion
• Brands & Anchor investment $5.0 Billion• Total Investment $10.0 Billion
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Change Drivers Change Drivers -- In supportIn support
Financial institutions upbeat on the sectorFinancial institutions upbeat on the sectorSeveral Indian & International FIIs setting up specialized division for retail funding
Government support taking shapeInfrastructure developmentInfrastructure developmentPolicies favouring growthTax and duty structure rationalization (VAT)FDI policy?
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Organized Organized –– The Next Sunrise IndustryThe Next Sunrise Industry
Growth of Organized RetailGrowth of Organized Retail
20.0
bn
2125.0
5.0
10.0
15.0
$ b
4 26.0
7.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Y
4.2
Year
Organized retail is projected to grow at the rate of 25-30%Estimated to exceed USD 21 bn by the end of the decade
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Estimated to exceed USD 21 bn by the end of the decadeContribution to retail sales is likely to rise to 9%
Great growth aheadGreat growth ahead
India moving at faster pace towards consumer driven economyDemand for competitive goods & services by Indian consumers like global counterpartsOrganized retail can be a major driver of our economyOrganized retail can be a major driver of our economyIt can attract large Investments (India ranks # on the 2005 AT Kearney’s Global Retail Development Index)
Japan
HK
Singapore
Germany
Taiwan
Indonesia
R t il P
US
UKPhilippines
China
India
Retail Power
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Industry driven
Distributor controls
Consumer driven
Retailer controls
Consumer dictates
India
Definition … Consumer Experience
Consumer Experience is the entire experience the consumer gets from entry to exit in our store. It includes actual and perception y p pbased experience.
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Why Consumer Experience
Consumer Experience is the key differentiator ……….
An excellent execution of consumer experience will lead to many directAn excellent execution of consumer experience will lead to many direct and indirect benefits.
Consumer stay time will increase in the store
More stay time leads to more opportunity for up-sell/more-sell thus leading to increase in avg. bill value
Higher chance of repeat purchase and loyalty
Positive word of mouth
Makes the customer less price consciousMakes the customer less price conscious
Consumer experience is very key for competitive edge.
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Consumer Experience – Strategy
SSales Interaactions
Consumer Experience
Post purchase hand holding Store Design & Brandingp
Acctual P
urch
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hase
Elements – Sales Interactions
Customer Welcome
Store staff manners, grooming and availability at the right
time
Store staff knowledge and helpfulnessStore staff knowledge and helpfulness
Easy billing and product dispatch to the car/home
Staff trainingStaff training
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Elements – Post Purchase hand holding
Loyalty program
After sales service
Product install/demo and problem solving
Product Knowledge
This leads to repeat visit and positive WOM
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Elements – Great PurchaseP d t il bilitProduct availability
Correct product assortment based on the consumer profileProduct price and latest promotionsD d t t i th d tDemo and content running on the productProduct informationProduct hygiene
Honest pricingCompetitive prices on all products and servicesLatest promotionsSpecial Deals
Actual purchaseSimple and quick billingProduct delivery and installation
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Elements – WOW ! Store designSt l t d d iStore layout and design
Easy identifiable departmentsProduct adjacenciesPlace to keep bagsPlace to keep bagsRight height fixtures and product display
Comforts within the storeComforts within the storeAmenitiesSpace to move aroundComfortable lighting and temperatureTrolley or basketSoothing colors
Proud to visitStore covet valueLatest Technology and Fashion displayExperience zones
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Experience zones
Store Design
Store Design is key to consumer experience and to give the WOW effect.
What percentage of the store area be allocated to the consumer experience zones ? p
Recommended : 10 - 40 %.... Depending on product category
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Store Design… the science behind ….
S Ti t St D iSome Tips to Store Design :1.Shopping Science : Racetrack works 2 Comfort Zones : “ butt brushes “ avoid2.Comfort Zones : butt brushes avoid 3.Eyes Right : usually 4.Location, Location, Location : Product adjacency4.Location, Location, Location : Product adjacency5.Finish Line: E-POS provides data mine.
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exceed expectations = experience
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exceed expectations = experience
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customer experience is at the core of a successful Retailer’s strategy
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customer experience : meaning
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customer experience : thrusts
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