Retail Story

Retail in India saw a quick U-turn in plans largely due to “Retail Cannibalization”. While the retail entrants  had the best in class  consultants who came up with recommendations based on macroeconomic models, but they lacked consumer understanding, something that numbers can’t always predict.

A small case study can show this as a real life example.

Thakur Village (http://en.wikipedia.org/wiki/Thakur_village),is a relatively new residential area in the northern suburbs of Mumbai, off The Western Express highway. A well developed area of close to 4 Sq KM densely populated with around 10,000 upwardly mobile SEC AB young Indians families. The area has some of the best restaurants and clubs but only two MR Super Markets catering to the affluent middle class.

But that wasn’t the situation; with retail boom like any other place, in Thakur village, all the major brands tried their luck. D’mart had the first mover advantage. It came in just when the area was developing. The first MR store that trained people on how to shop at a MR, sort of first love.

Seeing the success all the other major players followed, in no time the area had all the major brands opening their stores. RPG: Spencer’s, Spinach, Reliance Retail, Godrej nature’s basket and Aditya Birla group’s more. However in a phased manner except D’Mart and nature’s basket all the brands had shut their shop.

 Now the question is why the brands failed when prima facie everything was favorable. The location based on parking, space and distance/time to travel was appropriate and even the population demographics were suitable, when most of the mom-&-pop stores are doing well, more coming up every month, eateries growing, unorganized trade at its boom and the number of banks increasing.

There’s no single answer to this problem. But one thing that comes to my mind is lack of consumer understanding. And as a result there wasn’t any strong proposition that could differentiate one rand from another.

Almost all the brands copied the international formats and replicated the same, without getting down to understand what was lacking in consumer’s life. Unlike D’mart which due to its first mover advantage had a strong differentiation as it was compared to the next door mom-and-pop shop and Godrej Nature’s Basket with a small format catering to the niche audience with international & organic brands.

What could have been the strategy?

1.       Understand the difference between Consumer, Customer & the Shopper:

In Thakur Village most of the families are either living with a full time maid or elderly parents, & since there are two bread earners in the family, the daily shopping was left to either Elderly parents or with the live-in maid where the Home Delivery & the next door “Wala” (Bhaji wala, Kirane wala etc.) came more convenient.

However, the brands lacked the TG understanding. There was a need for segmentation

TG	Type	Need Gap
Consumer	The entire family consisting of self, kids & Elderly parents	New Ideas, New Menu & New Solutions for Home care
Customer	The home maker	Deals, offers, pride of shopping
Shopper	Domestic Help, Parents and sometimes self	Intimidation, Shy, price conscious, Limited understanding, Traditional approach , less experimental, simplicity, approach, language

The need gaps were different, the psyche is different and even the knowledge is different. You can’t have one communication fist all strategy here.

2.       Customized offering:

The residential area is cosmopolitan and the eating joints have realized it very smartly, there are 4 Bengali restaurants, One Bengali Sweet shop but the retail brands failed to understand this. The staff was largely Marathi would not understand any other language and in some cases even Hindi.

Here there are various solutions but one of the most evident that I would suggest is the staff should have been made more approachable by mentioning the language he or she understands beyond Marathi, at least by hiring staff that represents the majority of the population (Bengali & North Indians) in this case.

3.       Counter Home delivery & Unorganized Trade

“Social capitalism” i.e. a mechanism giving these vendors space within the premises the co-existence of the un-organized and organized retail works as a symbiotic relationship and helps both the entities

4.       Weekend/monthly shopping

There’s a concept of weekend/monthly shopping among a lot of young couple which is combined with outing and ends with a sumptuous meal. This is possible in a mall and on weekends these couples would not like to shop in the same area but to venture out. This is one of the most difficult barriers; the size of the format could have helped counter this situation.

All the above reasons suggest that retail I is more like “Destination” & that seeks “appointment” from a consumer/customer/shopper, marketing the same is a complex and cannot have one communication fits all solution.

The earlier model where retail location/format would be based on the following factors:

a.         Pop strata/Captive market & potential

b.         SCM

c.         Infrastructure (Retail space, layouts & waiting areas)

Phase II

The following questions must be answered while designing the value chain blue prints.

1. What is life style of your consumers?

2. How much time they plan for shopping?

3. What is the key driver for shopping (passing time, Money)?

4. What vehicle they use usually to travel?

5. What is their disposable income?

6. Are they brand, Price or value conscious or a subset of it (BPV Analysis)?

At the same time, this is still on paper; in reality things can be different. As India is said to be a unique country there’s another unique thing about Indians is that they love to cook and hence shopping for food stuff is at the core of daily shopping. However, the society is going through a transition with two generations co-exist. Hence the needs are evolving and the demand is diverse.

Retail, will have to work harder to understand the market beyond macroeconomic understanding through research and understand the psychographics and consumer behaviors before venturing the market.