retail on the swing

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INDIAN RETAILARTICLE

V.NATARAJ

Bangalore

4 September 2007

PREFACE

In today’s age the Retail or the consumer purchases, can be interoperated in variousways. Earlier it used to be a family driven concept, and slowly moved to nuclear family,

and further its moving up to individual decisions be it what ever age group the consumer

belongs to. Friends and or office colleges going out to shop is generally for a commoncause.

Now day’s individual choices are also looked in detail with regards to family going out to

shop.

Every BRAND woes the consumer in some or the other way to create a selling platform

for their product, be it a product for the KID or for a YOUTH.

India is a unique market place where the changes in the shopping culture have been the

maximum. Reason since Colonialism to the present age, the economical, socio frontshave changed tremendously and thanks to democracy giving every political head a

chance to prove.

This is one of the reasons why Multi National Company’s were at one point of time not

looking at our country as an emerging potential. In today’s scenario they are actuallytrying to dump the Indian market, seeing the varied potential.

India as a democratic and secular country with multi lingual states, mixed culture, varied

tastes and preferences, is now giving room to so many retail investors be it Multi

national, NRI investments and or local investors.

You go to any part of an Indian suburban, the market, shopping area is located to the

nearest historically renowned place and or surrounding that. These historical places can be any thing from a Temple to a monastery. Even in major cities this used to be the

scenario earlier, but today it has decentralized itself to different pockets of a city or town.

Many retailers have grown multifold today,

The growing population is a major factor because of which the retail is booming, reason

varied customers, huge databases for tele marketing and or tele shopping and the demandfor a good shopping mall is also in the upsurge. The age group cluster growth is also a

factor.



Every industry and their products are predetermined to cater to a segment be it a age

group, income group and or number of households.

I am trying to give in my various observations I had made being in the field sales and in

store. I am also not dealing with customers who buy for industrial use and or for

CUSTOMERS

This has become more like a “Mantra” to all those who are manufacturing and or

retailing the products for them. We have also heard saying and also do believe thatcustomers are GOD, the final decider.

Customers are again not the final consumers too. They buy a product either for their own

consumption and or for somebody else. Most of the time the customers too keep in the

mind the liking of the end use consumers before they venture into shopping be it a father purchasing for his son or a corporate buying it for its employees or associates.

Most of the time these corporate customers have a well-defined budget, and the entire

search for the products or mix of products settles within a particular range. Individual

customers who actually buy in for their own use are predetermined about the product theyare going to buy and also take a longer time within each product range to decide before

they actually buy the product.

Categorization of customers happens generally by age group, Income group, familystatus, occupation.

Occasion for purchasing a product can be any thing, Birthday, Wedding, Weddinganniversary of self or some one. Festive related purpose, Impulse buying e t c..

Immigrant customers from different state do shopping some times without purpose also,reason, they probably will not get that product for the quality or price in their own state or

nearby areas.

Most of the customers plan well their purchases; wait for a windfall gain, or expected

money and they freak out buying their products immediately. This is true with salaried

class when they go for big buys when their company declares a good bonus amount. Even

agriculturists for that matter do the same way after harvesting their paddy or crops.

This kind of retail experience have been well captured by industrialists, marketers and

retailers, when they come out with good offers and discounts and trying to help thecustomers for the best buy for the money they have in hand.

Window-shopping in larger or medium outlets is not to that extent in India. But the sameIndian customers do a lot of window-shopping when they go abroad.



The Per capita income of a individual or a house hold in India is the basic reason for

these kind of window-shopping culture. Most of the developed nations, basic amenities of an individual is well met within their income levels, purchasing power being high in

these nations, they venture into buying newer products, luxury goods and hence the

window- shopping culture to a maximum extent.

Since the days of barter system, to the present age of currency based purchases we canfind out lot of changes in the customer behavioral pattern. Even today in India the culture

of village markets once a week (generally called as “HAT in Hindi” and “SANDHAI in

Tamil”) does exists across the village corners of the country. These are some times

named based on the day in which it operates for example Sunday hat or Monday hat etc.

INFLUENCERS BEHIND CUSTOMERS

Apart from the customers own decision of buying a product there are lot of influencers in

the system who cast their shadow, some times customers ignore them, but some times

they become vital part of the entire purchase process.

I am actually talking of the credit card factor and also hire purchase schemes. Hire

purchase started long back in the country’s retail system. With saving potential being low

for such customers and want of a product (necessity) these customers do opt for hire purchase. These hire purchase options were generally part of villages, and semi urban

areas of the country.

This was operational based on a guarantor or in case the customer was well known to the

retailer. Most of the times this used to be a door-to-door concept too. The retailer would

source the said product for the customer and deliver the same at his residence and wouldcollect the EMI”S every month. A marginal interest part of the product value would be

recovered in every EMI. EMI options were just one or two, the retailer used to decide on

that.

The EMI payment date will generally fall on 1st week of every month since the retailer

was sure about his recovery of money once the customer receives his salary or wages for

the month.

Most of the financial institutions were operating the same scheme along with the retailers

in bigger cities and urban areas.

Thanks to the advent of Credit cards and the retail took a different trend in cities and

urban areas especially by middle class and upper middle class families. Today the same people are also offering easy EMIS for bulk purchases you make using the credit cards.



There are lots of risk factors involved in credit card based purchases, even then in India it

has actually accelerated the Retail operations and increased the impulse buying. The risk is finally on the customers since in case they default the onus is between the Credit card

issuer and the customer but the retailer is safe and the transaction has happened.

Till the mid eighties one could have not seen much of professionalism in the retail

operations. By professionalism I mean both from the retailer point of view and also

customer satisfaction.

Selling, after sales operations were also sailing in the same boat. Thanks to the Media,

Opening up of the economy, word of mouth strategy, and awareness increased across the

country. Demands of a customer have increased many folds owing to these.

THE FLOW CHART

The above flow chart has been the norm of flow from the manufacturer to the end

consumer in India.

The biggest guy missing out here is the Intermediary (Commission agent or the broker).

These guys can appear any where in between the company and the end consumer.

MAN

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C & F AGENT STOCKIST

DEALER

MAJOR RETAILERS

CONSUMER

The actual retailexperience area



The intermediary’s have been playing a very great role in the process. They have been the

backbone of the Grey market or the non-professional market segment.

BUSINESS ETHICS

This has been a topic of debate long since. Every thing is centralized towards selling of a

product from different channels to the end consumer purchasing.

Business ethics is basically a practice in any channel from the manufacturer to the end

retailer. This core concept is all about the dealings and relationships an organization has

with its both internal and external customer. More of such practices brings in thetransparency and soothes the relationship.

This culture in the modern era castes its shadow through out, which helps even the

customer or the end consumer to question if some thing goes wrong in between.

It can be differentiated on a three stage views. The ethical procedure followed is

narrowed down or some times parallel from top to bottom, the flow is shown below.

SEGMENT 1 SEGMENT 2 SEGMENT 3

The most of the top premium branded consumer products automatically fall into the

Segment 1, the slate is almost clean in all respects from manufacturing to the final

customer satisfaction. Hitherto chances of non ethical practices can happen some times

on the bottom line but it doesn’t hinder the brand reputation since once the customer comes to the grievance cell he gets a clear picture. The chances of loosing such customers



for a premium brand and chances of loosing shop reputation some times reduces the

chances of un ethical practices.

Segment 2 defines the category wherein the ethical practices narrow down from the

manufacturer or marketer to down retailer. These products are those wherein the demandalways is there; the manufacturer and or marketer’s supply is elastic. The economy to

scale is followed for the top guy. He doesn’t bother about the bottom line consumers and

in the bargain he allows lot of intermediaries who’s practices differ from one another.

In the long run these manufacturers and or marketers switch from one product to the

other and or diversify and hence they are safe. The final end consumer has no clue about

the manufacturer or the marketer and hence these products never emerge out as a productrecall brand.

CUSTOMER- DREAMS AND ASPIRATIONSDreams and aspirations are part of every human being. Aspirations are generally desires,which gets developed in an individual, based on influencers and or aim. This influence

can be the individuals surrounding environment and or the media itself.

In between the three Desire-Aspiration-final consumption there is lot of factors, which

cast their shadow. Family background, Income level, usage of the product, Luxury/ Non

Luxury segmentation are few factors.

These factors on the adverse side prompt retail of imitation products too. When a

customer is affected he opts for the imitation product of his desire, and this generallyspreads and imitation or look alike of different product categories flood the market.

Such customers do not look at the quality in a bigger way. They are ready to pay a

smaller price for the big label and hence convinced for the product life.

This has mushroomed the growth of unbranded products in almost all product categories.

Thanks to the growing population in India this will take a longer period to stop theseunbranded parasites.

The branded segment finds its way out to sell their products. To achieve this they take

help from the media, look for conversions wooing desirous people to aspire and buy their product.

RETAIL – THE CHANGING TREND

RETAILERS



Every retailer has got an eye on his next-door or Next Street competitor. Few retailers’

frame new schemes and ideas, but the entire retail chain of the same product enjoy its

benefits.

These schemes are ideas are well defined on a step-to-step basis from welcoming a

customer to the store to saying “thank you welcome again”. The thinking has changedfrom “Any thing to be offered” to “What is to be offered” be it a smile or a gift-wrap

Retailers though in India have grown multifold in terms of operations and efficienthandling, they are still not able to satisfy the “all in one roof concept”.

Few MNC giants and Indians are trying to capture this platform, since they only have the

infrastructure and or source for such investments. They have the expertise, if not they can buy the same at a price.

The manufacturer and or marketing companies who are more retail oriented follow a

unique method of sales, customer satisfaction levels, uniformity across all stores from presentation to selling, be it a company store or franchised.

CUSTOMERS

Extreme changes have happened in the retailing front because of customers. He is thecreator and he is the destroyer too.

Customers thronging the same retailer used to be the earlier phenomenon. They used to

wait for days for the product of their choice to be procured by that retailer. This culturestill exists in India in villages and small towns.

Urban shopping culture has changed totally. You have a outlet for each product range or category. If a customer plans his shopping day he will travel to all directions of the city to

get that product.

The window-shopping earlier used to be a common phenomenon. Today most of the

window shoppers have become impulse purchaser; thanks to credit cards they have a

baking.

Bargaining on price front, or looking out for a free bee, still continues at some stores or

retail outlets which or not high profiled.

Even in high profiled walk-in outlets too customers do look out for such offers. The

customer always feels that the time he has walked into the store is the apt time for such

offers but in India mostly schemes offers are generally festive oriented and or occasion based.



Customers also tied up with lot of membership formalities with different stores or chain

of stores. The retailer is happy about that since the customer will always frequent his

place or chain of stores regularly.

On the other hand such memberships have increased the expectation level of the

customer. New infra structural development on managing databases and good agencies tohandle such programs can help.

The next revolution after agricultural, industrial, white (milk) it’s the time for India totake up this Retail Revolution. It has almost started but right now on the slow gear.

After Y2K this decade is surely set to celebrate this retail revolution.

We need to celebrate this because this is going to boost the economy from its preliminary problem of unemployment crisis. This is also going to give most of the small retailers a

chance to change for the good if not now at least gradually.

Every smile is important, be it from the Seller or the Buyer

Hence every one should smile for this good revolution

V.NATARAJ

retail on the swing

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