Experimentation Still 'ON' in Indian Retail

The last few quarters have been quite trying for the Indian Retail sector, and though the consumer demand and overall outlook has improved but certain fundamental issues still plague the industry. I will try and list a few of them,

First issue seems to be the one with regard to the right format for the Indian market, experience till now shows that just copying the international formats will not work, like initially the larger formats were thought to be the the best, as it made sense for the retailer in terms of economies of scale and operations, and internationally large size formats were more acceptable, but then does it suit Indian consumers. With the slowdown many of the large formats were closed down , but now they are back in fashion, with Aditya Birla Group starting 6 new hypermarts, and Shopperstop with its Hypercities. Related new link.

And not that the so called "Indian Formats" are succeeding in , failure of subhiksha being the case in point and now the news that Vishal Retail is also in a similar kind of situation, the problem seem similar across both of them, too much of borrowing to expand faster and then.... Hopefully we should be able to save Vishal..

Next is the aspect of trained manpower, initially seen as a sunrise industry it attracted many professionals across various industries, but then with the slowdown and the realities of retail operations hitting hard, many of these people have packed their bags and gone back to their older companies. And the problem manpower is even more acute at the junior levels where people with right skills and training is a huge challenge..

Last issue though might seem a little ticklish to an outsider is the fact that India has topped the ranking in retail theft, the shrinkage put at 3.2 per cent of sales. And in a industry which runs on wafer thin margins this is huge and sufficient to tank many a retailers. More on Indian retail theft link.

Though it might seem that all is negative but along with these challenges the potential is also enormous , which is why it is attracting so many players, and many more waiting for the change in FDI regulations to make an entry.

Big Bazaar Versus Kellogg's

I should start with an apology that I have not updated the blog for more than a month now, will try and be more regular from now on....

I observed this new item a few days back and thought about writing about it, the fight between Big Bazaar and Kellogg's , and it is not first of the kind that Big Bazaar is involved in , some time back it was with Cadbury’s and even before that it was Lay's. All the three were removed from the shelves of Big Bazaar, and reasons given were the differences Big Bazaar had with the margins that were being given.

Some people might see it as a normal routine affair, bargaining between two parties for better margins, but it is not. It is part of the larger plan which big Bazaar has and the reality which marketers are walking into, the world which will be dominated by Dealer owned labels. In the news you can also read about how Big Bazaar is not too worried about the fact that Kellogg’s would not be there on its shelves, it has it's own Brand Tasty Treat which would be there as an substitute.

Now the typical FMCG marketer in India is used to be on a enviable position, the retailer being small and unorganized and at the mercy of the Brand marketers, who could afford to play from the position of strength. But this all will change in the near future.

The other day I had an opportunity to listen to Mr Manish Tiwary, who heads the Modern trade Division at HUL. a the division which deal with the organized retailers like Big Bazaars, Spencer’s and he shared his concerns how the dealer brands increasingly put pressure on the brand marketers. He said that the time when you could keep getting more customers just on the basis of cosmetic improvements to your brand is more or less over, and only those brands which have a very strong proposition and value for the customers will be able to survive.

Though in India the proportion of organized trade itself is very small and the proportion of the business of dealer owned labels even smaller, but one can see these events giving us a preview of the future holds for brand marketers.....

I had written more on Dealer Owned Brands earlier also , Link1,
Link2

Wholesalers in India..Necessary Evil?

Last few weeks have been busy looking at issues related to distribution channels in India, thought will share something out of that.

The post today talks about a very old intermediary in the distribution channels in India, the wholesaler. In an era of the Big Bazaars, Reliance freshes and Spencers many of us would want to believe that the days of the wholesaler are numbered and end is not very far. But this is far from truth , and the death for the wholesaler as an intermediary has been predicted for a very long time even in developed countries but they continues to thrive....

Wholesaler is an intermediary who buys goods for resale usually from company distributors or stockists. He buys from various companies and stocks all major brands in the category in which he operates. He has the ownership of the goods he sells and the operations are run like a typical store where the resellers (could be retailer's themselves or bulk buying individual customers) who come to him with an elaborate list and buy. To answer the question why he survives as an intermediary, he is willing to provide smaller lots of goods, provide credit if needed and is a one stop shop for all the brands in that category....

Many companies deal with them as a necessary evil, in an ideal situation they would like to avoid them totally , but the fact is that inspite of the negatives like loss of control, and lack of transparency, they have an important role to play in Indian distribution channels. They are the ones who provide substantial reach for various companies (though the degree of dependence wholesale varies across product categories, like very high in FMCG high volume and low value products) especially in rural markets. In my own research I have found that rural retailers more than three-quarters of the time rely on the wholesaler for their purchases.

Though some companies of late have started realizing their importance and started working with them pro-actively to engage with them. Companies like HUL have very specific wholesaler-activation plans to push their products through the wholesale channel. And a recent example shared with me was how some companies have been working with the boys who work at the wholesalers, by providing them with very small incentives like taking them out for a pizza treat and other small incentives and have got positive results out of that....

One could conclude that as much as the unorganized nature of Indian retail is going to part of the reality in marketing in India , so would be the reliance on wholesaler....

Oct 2nd...

A Mela During Dussehra - Photo Blogging

Visited a Mela organized around Dussehra, photos to tell the story...

Push Carts as Retail Options

When one talks about retail most of us would start thinking about the plush interiors of an air-conditioned large format retail outlet. But in India the diversity in retail is very high. A few days back I saw this retail option , where VCDs were being sold by a cycle push cart. Now this itself is not new, if you were to be in the ice cream business then push carts form a substantial portion of your retail reach. You can have them at strategic locations across the city, like India Gate in Delhi , in parks ...

But these push cart selling Moser Baer CDs and DVDs located near various shopping complexes in the city forced me think why would a company/distributor look them as an alternate means of reaching the consumers. And the company is the world's second largest manufacturer of optical storage media....

One of the reasons why they would have resorted to this would be looking at the buying habit of consumer buying movie VCDs and DVDs. They are low-priced Rs40/- for a CD and them 99/- for a DVD (appro.), and the company wants to offer a non-pirated and cheap option (pirated ones would be still cheaper). For that they have to be physically present in those places where consumers look for these low-priced VCDs and DVDs. And once the prices are low means the overall margins you can get would also not be very high, thus ruling out the expensive and time-consuming activity of setting up your own outlets, so that is where these push carts become a very good alternative way of reaching your consumers. You reach where your typical buyer would go looking for these kind of VCDs and DVDs and that too at a fraction of the cost of setting up your own outlets...

Even when Nokia initially came to India, they had to rethink the distribution channel strategy, because the typical consumer dealer network did not want to stock a category like mobile phones. They were used to handling larger bulkier products (with low pilferage)and were not willing to work with a new product which might require more hand holding and service issues. And thus Nokia had to look at the small mom-pop stores for stocking of their products, and rest is history...

But innovative alternatives of reaching customers would yield results.....

Celebrities and their contracts, Vijender Singh and Saina Nehwals enter multi-crore contracts...

In my earlier posts on the topic I had written how marketer had started looking at using celebrities endorsements better by tie-ing up with the celebrity beyond advertisements to other activities which he is involved in, and improving product placements link

I have also been against the limited imagination that marketers have had in picking and choosing celebrities, sticking to a limited number of people out of Bollywood and cricket. Infact the day Abhinav Bhindra won the gold in Olympics I had written about the possibility of him getting a endorsement in the tune of at least a couple of crores. The latest data from Business Standard shows that after almost of year, he is getting contracts worth a crore a year, but the surprise is Olympic bronze medalist Vijender Singh who has become one of the country's highest paid non-cricket sportsman, with an estimated contract in the tune of 2-3 crores (though Infinity which is currently managing Vijender Singh is said to have objected against the new deal with perpect, Link)

Though the cricketers are commanding much contract fees, but the trend is encouraging and the fact that we have started working with celebrities beyond cricket and bollywood is a positive trend, As it helps break the clutter and also hopefully encourage youngsters to take up new sports ...??

Jet Airways Strike Customers pay the price...

Was just watching the press conference on time now, where the Jet Airways management addressed the press on the strike crisis and thought should write about it...

Just to give a brief idea about the impact the current strike is having on airline passengers - Jet Airways is the largest airline in the country, with 26.3% market share. This means almost one out of four airline travellers would be impacted by the strike, in absolute a total of around 35,000 air travellers (both domestic and international) would be adversely impacted. Though close to a quarter of them have either been accommodated in other airlines or the flights still being operated by Jet, but all of them would have go through the harrowing experience of not being sure if their flight would take off or not.....

And for passengers whose flights have got cancelled, the impact would be much worse. Reliability and timeliness would be a top priority for travellers by air. And when one fails on the core promise to it's customers we are looking at very serious long term implications for the brand. A look at the awards and recognitions which Jet Airways has got in the last year shows that the airline has been doing well...

The management while assuring the customers told that the Jet airways website will be the centre of managing the crisis by acting as a main source of information for customers on the flight status, but a visit to the website does not give that impression, apart from a small link to check the flight status there is not much information the in the site. An opportunity lost to leverage the website ??

Overall, it is said about the word 'crisis' in Chinese is composed of two words one meaning danger and other meaning opportunity (though latest entry in wikipideia disputes that ), is very appropriate here. Many companies have gone through such crisis and have come out stronger by showing that they have the customer interest at the centre of their operations, experiences of jet blue and others show that , but will Jet Airways be able to do the same??

Twitter Updates 04.09.09

Brand Comm thru Cinema still strong in pockets in the country, case of Sumo Victa being promoted in a Bhojpuri Movie http://bit.ly/vWCoh

India is a sachet market, now OTC drugs are also planning to use the same route, http://bit.ly/X45ko

Nokia Music Store India http://bit.ly/SSJyv

Will Dish TV’s tie-ups help? http://bit.ly/3dwBo

More on Tata Tea's "Jaago Re" campaign http://bit.ly/Pi7gG

Tata Ace story, how they have redefined or rather created a new category, http://bit.ly/lKFlI

Kaya Skin Care Clinics Slow and cautious expansionhttp://bit.ly/HRFb7

Hero Honda's "Har Gaon, Har Angan" rural campaign for rural push http://bit.ly/YltwS

RT @futurescape: You might want to have a look at this regard state broadcasters http://bit.ly/4t62Ni

Yum! Restaurants India has aggressive expansion planshttp://bit.ly/3ZGTYm

Festival Season and Cars http://bit.ly/UHZ5f Honda plan to launch festive civic http://bit.ly/rc3Ry

Retail looking up http://bit.ly/kjPx1

Nestles Spoof ads against Cadburys Pay day adshttp://bit.ly/y6cEV

Media planners focus on individual show than channelshttp://bit.ly/R6Fvn & recent study - doordarshan is most watchedhttp://bit.ly/fFRhd

Tata DoCoMo in bid to 'do the new' campaign http://bit.ly/Xr5v8

HUL cutting down on proms http://bit.ly/s85Sw

i had written on ipill on my blog http://bit.ly/8oGwd & now National Creative Director FCB Ulka also wriote on it http://bit.ly/2UZmb

Bata on the reinvention path http://bit.ly/fMEiR wants to become a serious player in institutional markets

More on the Airtel DTH Ad http://bit.ly/2BAMsy

Paid location services still forms a very small part of VAShttp://bit.ly/4wrJ0

India is still a low cost location for many businesses ,http://bit.ly/2t4wVE

Radio Companies on Social Networking sites http://bit.ly/CUmIu

Samsung Star S5230 becomes fastest to touch 5 million sales in 4 months http://tinyurl.com/mtozff

flavors have come full circle, when chips were launched 10yrs back international flavors were rejected,now we can see them making a comeback

Tried Aliva of Frito-Lays and found it be good but a tad expensive at 12/-

New Blog Post : Emergency Contraceptive Pills , are they being marketed too well??? http://rajeshaithal.blogspo...

Harley Davidson bikes be will be available in India from 2010 onwards, price more than Rs 7 lakhs..

RT@emergingfutures:RCom’s blueprint to drive mobile phone in rural market http://bit.ly/Db607 Yes I also think rural India next battleground

According to Tom Peters Design is..an understanding that all the senses were created equal more on this on his blogposthttp://bit.ly/4hwn3d

Rural Telecom in India, Still a long way to go http://bit.ly/Unf3i

Tata Jago Re Campaign gets into fight against corruptionhttp://bit.ly/z6Mfy

Airtel Digital's campaign - bollywood film style http://bit.ly/4zp32P, do read the comments

Chlorophyll story http://tinyurl.com/kkjvzh

Vodafone rebranding http://tinyurl.com/lwll3b

Godrej No1 Story in India http://tinyurl.com/kmc8lx

New blogpost - Regional brands in Indian markethttp://rajeshaithal.blogspo...

Jaipur foot, Indian ingenuity at it's best, http://www.jaipurfoot.org/

V-Guard Story http://bit.ly/aD4Du

Thums Up and the 20 year old campaign still running and giving results http://bit.ly/16tQsi

Mahindra Scorpio the number one SUV in India, http://bit.ly/7c1DH

Emergency Contraceptive Pills , are they being marketed too well???

The topic which I will touch upon today is something which marketers would generally avoid discussing .... the ethical angle in marketing. We one could also call it the dark side of marketing .....

Marketing is very powerful and quoting what was told to spiderman "With great power comes great responsibility" :)

We marketers should also be fully aware of the responsibility which comes along with yielding such a powerful force on consumers. The case in point is the aggressive promotion of emergency contraceptive pills which is happening in the country currently.

The fact that they have been made into OTC (over the counter) drugs by which it means that they can be sold without a doctor's prescription and companies can directly communicate to consumers is one which has lead to the issue. The two companies , ipill of Cipla and unwanted-72 by Mankind Pharama ltd are promoting their brands through aggressive ads which can be seen on many TV channels during peak hours and this has lead to....

..a spike in the sale of these pills in many cities across the country, like this report from Lucknow says that there has been a 40% spike in the sales of these pills over the last six months and the increased usage has been seen in the 16-35 age group, report.

There has been a lot of media reports on the side-effects that these pills and how this promotion is increasing the rampant use of the product. This report in Indian express shares the increased and indiscriminate use of these pills by teenagers , report.

There has been public discontent about the content and frequency of these ads too, like this report in times of India tells us, report.

The negative fall-out of this sort of all out ad-campaign would be an indiscriminate use of these pills (seen as a substitute for other means of preventing pregnancy), leading to two other problems, one this could lead to reduced usage of condoms by their partners, increasing the chances of transmission of HIV and other sexually transmitted disease and the second more complex problem would be the one linked to the continuous usage of these pills leading to long term problems with women in terms disturbed menstrual cycles and problems in conceiving. Though many of the side-effects are mentioned along with the product but .............

Just to reinforce my point , I will quote directly from Marketing Guru Seth Godin's Blog post "Is Marketing Evil?"

"Marketing is beautiful when it persuades people to get a polio vaccine or wash their hands before doing surgery. Marketing is powerful when it sells a product to someone who discovers more joy or more productivity because he bought it.....

Marketing has more reach, with more speed, than it has ever had before. With less money, you can have more impact than anyone could have imagined just ten years ago. The question, one I hope you'll ask yourself, is what are you going to do with that impact?

........Just because you can market something doesn't mean you should."

This debate can be extended to the sale of many products like cigarettes, liquor, fairness creams and cola drinks. But maybe somewhere we should be able to a line ???? Not sure if many of you would agree with this line of thought..............