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Retail on the Swing

Retail on the Swing

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Published by Nataraj Viswanathan

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Published by: Nataraj Viswanathan on Jan 12, 2010
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09/27/2010

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INDIAN RETAIL

ARTICLE
PREFACE

V.NATARAJ Bangalore 4 September 2007

In today’s age the Retail or the consumer purchases, can be interoperated in various ways. 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 common cause. 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 fronts have 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 actually trying 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 demand for 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 that customers 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 they are 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, family status, occupation. Occasion for purchasing a product can be any thing, Birthday, Wedding, Wedding anniversary 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 the customers 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 same Indian 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 can find 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 would collect 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
COMPANY
MAN UFAC TURE MAR KETE R

R

C & F AGENT

STOCKIST DEALER CONSUMER The actual retail experience area MAJOR RETAILERS

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.

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 the transparency 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 demand always 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 product recall brand.

CUSTOMER- DREAMS AND ASPIRATIONS
Dreams 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 generally spreads 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 these unbranded 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 changed from “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 efficient handling, 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 the creator 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 culture still 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 to handle such programs can help. The next revolution after agricultural, industrial, white (milk) it’s the time for India to take 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

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