Retail Dude

This news did bring a wide smile to my bearded face http://www.indiaretailing.com/news.aspx?topic=1&id=2755

No, it was NOT the comment by Mr. Goenka’s, who generalised “his or his group’s own pov” as that of the Indians’! I am surprised by his “understanding” of the Indian “Consumer-Set” at the same time.

Anyway, what does make me happy is use of the following sentences, by very “qualified” retail managers:

1. it is the bottom of the pyramid where innovation will lead to sustainable consumer markets,

2. An encouraging regulatory environment and more physical investments are required to stimulate development,

3. No such thing as ‘average consumer’ exists in today’s consumer markets. It is very important to understand the diversity in terms of the type of consumers along with connecting to the consumers locally,

4. Customisation according to the local needs of the customer and simultaneously tapping the existing global opportunities is a big challenge facing the Indian retail business today,

5. Several resource constraints will provide the opportunity to rethink existing business and product models. Diversified product range, recreating value chain according to consumer needs & that India needs more innovative models like e- chaupal developed by ITC.

Though I am no visionary, I must blow my dusty, rusty trumpet sometimes!

It was around Jan/Feb’08, when I floated the idea of retail and real-estate entering dead-end-ahead lanes, on my Linkedin page. I also, in the same breath “publicly” offered a “fresh & unique business-model”, which could (and still would) add real-bottomlines to the retail business. If implemented, the model would have added at least 800 Crores to the wise retailer’s kitty, this fiscal. WITHOUT adding almost any cost! The messages should be available even now, in case you’d like to verify claims from a minnow.

Though I took pains to send the proposal to ALL retail big-wigs in India, no one bothered to even reply! As a matter of fact, my good friend Rajeev Karwal, who was tuned-in to this model, went to the extent of suggesting that I go ahead, on my own!

Today, when the big guys are feeling small in front of the mounting debt burdens, skyrocketing interest costs & dwindling productive footfalls, I do feel a perverse sense of vindication. Though it’s not really a sentiment I admire, there’s little I can do to be stoic about it!

Along with the times, the dimes that “can” keep organised retail “rolling”, if not “rocking”, have switched wallets…no, pockets!

Well, loose-change, in India, will always be the ONLY constant!

- Arnab

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From the above pie it’s very clear that our readers are very positive about Retail and they don’t think that there is a slowdown in retail. 56% of voters said that there is no slowdown, 20% voted in favor of slowdown where as 12% preferred to wait and watch. As per the polls there is no slowdown. In Retail rather these are happening as people are panicking from US recession. This is a temporary situation which has been created as people jumped into Organized Retail band wagon in an unorganized manner and so closures and decline in sales are part of long awaited corrections and consolidation in Retail. But a major chunk of voters are of opinion that the hold in expansion plans and closures are due to slowdown in retail as consumers have started spending less and market size is decreasing. Well no body agrees that losses in balance sheet of retailer are a proof of slowdown.

- Team: RETAIL DUDE.

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No, I hardly qualify for anything, leave alone as a “Shrink”.

Guess many of you have read the article today, on Retail Shrinkage? For the uninitiated, this term has nothing to do with the economy or trend! In simple words, it is the Thefts / Pilferage phenomenon that plagues organised retailers, the world over.

Read more at: http://thedailyretail.com/Retail_news/Indian_rn/article/index.php?article_name=18nov01&mailer=1

However, my take from the article is a bit different. I will also take refuge under some number-crunching in the process. Given my limited education & complete absence of professionally acceptable suffixes, there are chances that the arithmetic will be full of errors. So, start reading with E&OE as embedded, please.

India has the highest “Shrinkage Rate” - 3.10%, among 36 countries covered in the study, followed closely by Mexico, Thailand, South Africa & Malaysia.

The lowest rates of shrinkage were found in Japan, Austria and Switzerland (all 1.01%), Germany (1.10%) and Denmark (1.20%).

The total shrinkage in India in 2008 is a US $ 2.543 billions (1000 Crore+) which is equivalent to 3.10% of retail sales – an increase of 6.9% as compared to 2007, when the figure was 2.90%.

Customer theft contributed around 44.7% of shrinkage losses, employee theft was responsible for 23.7% as compared to 8.4% by Suppliers / Vendors. Rest are mostly accounting / admin errors.

Further among the Internal retail theft; merchandise theft was thought to be responsible for 27.8% of internal fraud, whereas cash, coupons, vouchers or gift cards contribute 32.0% of internal fraud, refund fraud and false markdowns contribute 14.6% of internal fraud with a collusion of 19.1%. Besides this large financial frauds were responsible for 6.5% of the internal retail theft of 2008.

In the Asia-Pacific regions including Australia, India, Japan, Malaysia, Singapore & Thailand; highest average rates of shrinkage were seen in apparel/clothing and fashion/accessories(1.71%) followed by vehicle/autoparts/DIY hardware/building material retail (1.70%) and cosmetics/perfumes/beauty supply/pharmacy (1.66%). The lowest rates were in footwear/shoes/sports & sporting goods (0.66%), jewellery/watches (0.83%)

This data is indeed very interesting & might be a pointer to the following possibilities:

1. Shrinkage is considerably lesser in “developed” countries,

2. The thieves (customers + employees + vendor resources) are likely to be from middle / lower middle households,

3. Many of these may constitute of casual visitors who turned to lifters rather than shoppers,

4. The most popular stolen items are NOT essential commodities or food! and

5. Therefore has a large enough “buyer” base.

Once I add the possibilities with Fin Min PC’s request to “Reduce MRPs” & our yesterday’s debate (Gates Syndrome), that sinking feeling gets very strong!

Hope we ARE thinking, differently, for our own sake!

- Arnab

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I remember watching a live broadcast few years ago. Mr. Bill Gates & co were addressing the press, most probably at the launch of an OS or something similar. Now, I am not quoting verbatim of course, but more or less the gist of the discussions.

One lady, who looked Asian, asked a question very close to my heart: “We all know how piracy is affecting legit sales of software. Why can’t MS reduce sticker price of their OS to $10, instead of $100 & bring a true fight to this menace?”

The answer, however, wasn’t & still isn’t one of my favourites: “It does not make business sense to sell such a sophisticated (???) product at such prices! We would rather sell limited quantities, unlock the value quicker & keep using the same to provide more sophisticated products to the world (???). Who has the time, infrastructure or wherewithal to make commercial sense of a $10 product?”

In short, Gates & Co. were happy to sell, say 1 million official OS discs & also made enough money thereby. IF the rest of the 9 million users were operating their cheapskate PCs off pirated software, so be it!

If we look at MS’s POV clinically, it does make “some” sense. After all a software is NOT soap! It’s NOT supposed to used by anybody & everybody. And even if they aspire to, they should NEVER forget that they CANNOT ever AFFORD the “real thing”. Come on, inclusive is a word that belong’s in the Dictionary of Political Democracy, right?

Wrong.

Remember T Series in the eighties? They literally upgraded the Indian radio junkies to Compact Cassettes & portable tape-recorders! Yes, SONY, HMV & their ilks did have their archives on audio-cassettes, before T Series did, but cassettes, for them, were “sophisticated” products….like Windows may be?

Ms Moser Baer was absolutely on the ball when they took on the “DVD” format a-la T Series. However, their front-end failed to sweat and muddled things up quite a bit, during the 1st few years. Today Moser Baer has got the reins back and I am certain they will have their act together, pretty soon.

What am I driving at? The same! Just as pirated / spurious goods do not contribute much to a nation’s vital economy, “elitist” products too end up fattening a very few hand-picked wallets.

Unless we address the mass, grow usage exponentially (of all consumables), our economies will inevitably keep getting cyclically top-heavy & then topple.

We need to cure our Gate’s Syndrome & push Rs.10 as the most monetizable MRP. The sooner, the better.

- Arnab

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Hey Readers!

Time for some serious fun. Here is a Retail and Branding quiz for all you guys. The quiz has been prepared to let you know your RBQ. And thats your Retail and Branding quotient. Another First from Retail Dude Team.
Get the presentation here at

http://www.4shared.com/file/71772231/a7ca13c0/Retail_Quotient_Tracer-Quiz.html

Do let us know your feedback and we will be more committed towards bringing you the best and more interactive learnings.

Dude it up Guys!

- Sudip

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Slowdown, share market crash, real state downturn is tuning the fortunes of kirana stores. Kirana stores have seen increase in sales by 25% in the present quarter. Kirana stores which were victim of organized retail and see a massive decline in their sales over a period of time are thankful to slowdown as consumers prefer them over organized retailers. Consumers are trying to be less extravagant and so are refraining from overspending in malls and organized super markets and convenience stores.

Generally when a consumer goes to a mall for his monthly grocery purchases, he ends up buying many products as an impulse purchase and not a necessity. But with this slowdown and salary cuts in picture, they are not willing to overspent and stick to their shopping list. So, we may see attracting offers in coming months as retailers will try to lure consumers to visit them.

- Rajeev Damani

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As the store rents have dropped as much as 35% in last one year, retailers across the verticals have decided again to expand. But I hope this time they are doing their complete homework before reaching to any conclusion. Otherwise it won’t take much time for things to change. And we have already seen effects of such unplanned expansion earlier with closures in Ahmadabad and many other parts of country. I agree that rentals form a substantial part of a stores expense sheet but it’s not the only part. Apart from rentals there are many other expenses which a store needs to meet effectively like human cost, inventory cost, infrastructure cost, maintenance cost, electricity, etc. And at the end purpose of opening a new store is not just meeting expense but is to earn profits.

Here is expansion plan of some of the retailers:

SOURCE: http://www.rediff.com

-          Rajeev Damani

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At this time of great global economic hit, where everybody is trying to predict the future of retail, I thought to look back and have a peek into the history.

So folks, let me ask you a question – “Which is world’s first original department store?” I know answers will vary from Walmart to Macy to J.C. Penney but none of these are right. However, department stores were not conceived by Americans. Those were French who created Department stores and then Americans followed their example. Allow me to introduce a man who had the first real department store in Paris, France. A man named Aristide Boucicaut. His dry goods store was called Bon Marché and it was transformed into what we now call a department store.

Aristide Boucicaut, born on 14 July 1810,the son of a banker, he began as a simple clerk in Bellême before he left to become a fabric salesman selling shawls. In 1829 he settled in Paris. He set up Le Bon Marché as a goods store in 1838, but his innovations in distribution became most noticeable after 1852. After this the store grew to be among the, if not the, largest in Paris, where he spent the rest of his life. The World’s Fair in 1855 gave him further ideas on how to innovate. These involved the notion of browsing, greater advertisements, fixed prices and in 1856 a catalogue. His wife also played an important role in expanding the business.

Bon Marche differed from the specialty and dry goods houses that came before in four significant ways.

First, the initial theory of dry goods houses was to sell items with a high mark up and a slow turnover of goods. Boucicaut sold his merchandise at a small mark up. Compensating for this smaller profit margin was the high turnover of goods. The volume of goods sold and the speed at which they were sold differentiated department stores from the ordinary specialty shops and other dry goods stores. Another difference was that goods were offered at a fixed price in Bon Marche. The prices on goods would be the same for every shopper; a certain kind of equality was offered. Previous to this, bargaining in stores was not only allowed but expected. The third conceptual change made by Boucicaut was the custom of free entrance. Every person could enter the shop, inspect the goods, and be free from the obligation of purchasing anything. This denoted a shift in expectations; people were obligated to buy something upon entering the specialty and dry goods stores that came before this. The last major change that was instituted by Boucicaut involved the idea that customers could return the goods they had purchased. If they wanted their money back they could get it or if they preferred to exchange their returned item for something else they were allowed.

Boucicaut’s success was impressive. He went from a total of a half- million francs in sales in 1852 to five million in sales in 1860. Because of this boom, Boucicaut diversified his lines of merchandise. He started by selling only piece goods, and expanded to offer dresses, ladies’ coats, underwear, and shoes. These new lines were carried in the same store but in separate departments. This change occurred around 1860. Boucicaut’s new handling of goods and how they were offered represented the first real department store.

The United States was the first country to follow the French example. Though there were many successful apparel and dry goods stores, many of them did not immediately follow Bon Marche’s model. Stores like Lord and Taylor (1826), Jordan Marsh (1841), Macy (1858), Wanamaker (1861), and Marshall Field (1866) still limited their merchandise to dry goods and the traditional retail lines. The first stores in America that followed the Parisian example were A.T. Stewart of New York (that was later a part of Wanamaker), Wanamaker of Philadelphia, and Marshall Field of Chicago. This occurred in America in the 1870’s. These stores refer to Boucicaut as their source of inspiration.

Source: Virginia University

-Prateek Katiyar

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There has been tremendous change in Warehousing Model in past few years. Traditionally Warehouses were required only to deliver goods to stores. It was responsibility of stores to future make it available to customers. But with changing retail business and growing multichannel retailing, warehouses also need to deliver it to store as well as to customers placing order online or through catalogue or any other model. So, with this the traditional idea of having few big warehouses doesn’t work anymore. This led to evolution of Regional Warehousing and Multi-Warehousing. The idea is to have multiple regional warehouses to meet demands of customers.

With multichannel retailing, lead time for deliveries has also changed significantly. Traditionally stores use to order a week in advance, but with online retailing and all, consumer want their product in three days and even next day in many cases. Not only this, they even expect it to be gift wrapped. So, this requires regionalization of warehouses.

 This trend has not only changed warehousing, but has also changed the transportation used for delivery. Traditionally, LTL (Less than Truck Load) and Large Trucks delivering to multiple stops were used. But now with this new model of warehousing, smaller trucks and straight trucks are used more. These trucks are used as there are lot of residential deliveries these days.

This shift in industry has also led to growth of 3^rd Party Warehousing and Collaborative Warehousing.

-          Rajeev Damani

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Since we at Retail Dude are committed to help out our new young brigade to learn more and better about retail, here is a small presentation that is shared in the download section. The presentation very easily is a thought provoking one which talks about some essentials in retail. These are basic pointers if you are to open up a retail store. This is just to facilitate more learning’s. This presentation is a big thank you to Global Purchasing Inc.

Retail up guys!

- Sudip

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