The First wave of Retailing in India – Rajendra P.Gupta
India is being seen as the world’s destination for setting up retail outlets. India today has about 12 million or so retail outlets and is the hottest market in the world. Though it goes without saying ‘India is a poor country but Indians are rich’. Global players see their own markets reaching a point of saturation so their level of interest in India is more of a compulsion as well. Suddenly, India will not give a steep growth. Indian market is witnessing the first wave of retail inputs. The customer psychology is gradually changing; the government is flirting with the left parties to get through FDI in retail. Everything will not become positive over night. Let’s examine the first wave of retail opportunity & some important factors for success of retail in India.
India as a market: The biggest mistake people do for India is to conclude that India is one market. Infact, north, west, east & south are four different markets. With different customs, weather, geography, soil and market. Adding to all these, the outlook of people is different. Urban and Rural market further complicates the scenario. Most of the marketing people do a cardinal mistake by assuming that rural India is the India with Somalia kind of population, hostile infrastructure etc.to… Infact, India today can be divided according to its buying capacity into three major regions.
· Developed / Media focussed markets: Like Delhi, Mumbai, Bangalore, Kolkata, Chennai, and Pune etc…. They have anywhere between 10-20 % of the super buying class
· Developing markets: Indore, Kanpur, Kochi, Vizag, and Ludhiana, Meerut etc. These towns account for approx.30-50 % of the buying class
· Untapped markets / underdeveloped markets / unfocussed by media markets: Anyone’s guess –Towns with about 100,000 population & Villages, to be precise 100,000 out of the 627,000 villages. They have approx.30 % of the buying population.
While, any company that is in its first seven year of its operation is in the crawling or walking stage and need not foray beyond the first two categories. Once, the company reaching the running stage it can look at the last strata of the buying population. Entering the last strata means, you have middle-income consumption products that are fast moving and the company has deep pockets to withstand the cash burn.
Who is the customer: A lot of people will tell you that the customer is the ultimate boss, the chairman of the company, the CEO blah…blah… The reality is different. The customer is a moving target. It is a butterfly. Now it is easy to figure out what it takes the customer to get attracted to your business. You know what drags the butterfly to the flower. The ABCD for the success of your retail business:
A ttention
Benefits
Credentials
Deal
Remember, the first thing that you need to give to your customer is a ‘great smile’ and a bonus offer of ‘great attention’. This is for acknowledging that the butterfly has come in. This is the first product that all the retail businesses should sell. Though you can’t bill this. But your customer’s bill reflects this product was brought.
The first gesture of the sales man is the first product the customer looks at. If he is okay he proceeds for further shopping. Indian customers prefer being attended with respect & great attention (they like getting importance).
So the customer follows ABCD. If he gets attention, you get to tell him the benefits of the products, once you tell the benefits you get a chance to speak about the credentials. If the customer passes these stages then you can do the deal.
USP Vs LSP: I am believer of the fact that all businesses need to have an USP (Unique Selling Proposition). It can be anything that delivers customers to your door and profits to your cash box. I am not too sure how different can be your USP. All major retail businesses entering or starting in India should definitely consider LSP. I don’t mean Lowest Selling Price. LSP Stands for
Localisation
Specialization
Personalization
Localisation: India is a mix of four different countries. If you want to sell coolers or diesel generators or woollen clothes in Mumbai you know what will happen? Similarly, if you open Habib’s Saloon in Amritsar you know your fate. Even in the same town the population is clustered. You can’t run a Ganesh –Lakshmi idol gift scheme in Mahim or Malad or Bandra in Mumbai during Diwali season. You know what is the outcome. Localisation holds the key when it comes to local store marketing. This is the most critical factor for the acceptance of the retail outlet. It is not just the scheme. It also includes the location of the store and the category / product offering. People in north are more flashy about their possessions and this leads to more sales of expensive brands especially in areas of Delhi and Punjab (also counterfeiting), Coffee sales are more in south India as compared to tea etc…
Specialisation: All markets operate by the rule of three as they mature. The leader outlet, the follower outlet and the niche segment outlet. The leader is the best store in the area, followed by the second most preferred outlet. Third is the one that caters to a particular segment of customers or for a particular product line USP. Rest of the outlets become the acquisition and merger candidates for bigger vultures or operate at the cost of their profits. The first two are often known for their specialisation either product mix or different offering.
Personalisation: This key factor is the single most important factor if you cater to a particular locality. Incase, your store attendants know your customers well. You are insured against failure. I keep telling my friends in retail. Please keep your top four people for 2-3 years for sure (COO or CEO, Head of Marketing, Head of sales & Head of Finance) and the lowest cadre people for a longer duration. Logic is simple. If the top people remain for 2-3 years, the people down the line have enough faith to stick for long. If the people at customer interface stick for long. Your customers are insured to some degree. And this is the level where personalization plays a key role. Some customers only buy the products because of your friendly sales man / girl. So marketing and training will be the most important areas of retail operations for any product category.
LSP will also be relevant in India for a different reference: With the flooding of big malls and super markets. The Kirana and other local stores will get affected negatively to an extent of 60-90%. The locality store profile will get changed. I personally believe that a lot of small entrepreneurs of today may opt for franchisee of Locality based Specialised stores that offer Personalised service or may upgrade to better product offering or may even rent them out to ATM’s / extension counters etc…
India will see a major investment coming in the retail sector. This is invariably leading to steep rise in real estate. This also creates a lot of opportunity for employment for all categories of people. Organised retailing has led to introduction of new products in India. Which has lead to increased consumption of these newly increased products. The customer has become more demanding. He takes more time to decide. The mentality of the customers is also changing. It is not just shopping but an outing for the family. The new class of consumers is emerging in India. With the 12th pass students getting into call centres and BPO’s they earn and spend recklessly. The consumption of life style products is bound to hit the roof. Also, with this trend to continue, other segments that will increase as a natural progression of this consumption led economy would be entertainment & Preventive Health. This will be amongst the fastest growing sectors in the next 10 years. The other segments that will continue steep growth would be, lifestyle products, liquor, entertainment, electronics, vehicles (especially small size and mid size four wheelers), Health care products, insurance ,Media - advertisement, hospitality, tourism & aviation.
The industry is replete with a number of examples that the local players will start the game of retail, the corporate will enter later and finally the multinationals will enter consolidate the industry & dominate. But we have a decade of fast track exciting days ahead for the consumers, investors and the employers as well…………..
Rajendra P.Gupta is senior retail professional and can be reached at E-Mail: rajendra.India@g
