Are large Indian retailers battle ready?

In their current state of operations, Indian organized retailers are in no way equipped to compete with the likes of Walmart, Tesco or Target.

Let me re-count to you my experience based on which I have come to this conclusion.

Last week, I went grocery shopping with my wife to a large format retail store in Bangalore. I was appalled at the thoughtless design of the store and the lack of the willingness to serve the customers in the entire staff.

In my opinion, there are 2 key performance areas which are critical for a retailer to succeed in a market like India:

  1. Supply chain efficiencies
  2. Customer’s shopping experience

This retailer failed on both counts (to provide the goods at the cheapest price or to provide a high class immersive retail experience).

Before we move ahead with this line of thought, let me share my impressions  from my visit:

Customer Experience perspective: 

  1. Store design: This store was spread across 2 floors. The layout of the store was such, that you need to go to the 1st floor (non-grocery items, a.k.a, high margin items), walk all the way across to the other end of the floor, then come down to the ground floor for groceries. What this meant was that, even if I only wanted to buy groceries, I am still forced to walk through the non-grocery floor, hoping that I shall be tempted to pick something based on the promotions offered. Though this helps the retailer try and maximize the revenue per shopper, this leaves the shopper in a bad taste.
  • Cart design: The only shopping cart that they have for usage is a large size cart. There was no option of a handbag or a smaller cart. Though not bad by itself, this was a problem with the way the store was laid out. I had at least a dozen customers bump into me and me bumping into another half a dozen customers, as the space between ailes was so narrow.
  • Motivated and trained employees: The store had minimal support staff. There was no one to help. I had a few questions on the placement of a product of a particular brand. There was no one present to help. The staff whom I did find, were not able to help as they were as clueless as me.
  • Check-out experience: Now that I had collected everything that I wanted to buy in my cart, I went to the billing counters. There were about 16 billing counters. However, there were about 6 – 7 customers already waiting for billing in each of these counters. What this meant was that I had to wait for another 45 minutes to get my items billed and get out of the store. The billing clerk tried on his part to be as quick as possible, but to the dismay of the customers, he was not able to scan the bar-codes of 1 out of every 9 or 10 articles. This meant that he had to manually type these codes (I think about 16 numeric characters each) in order to complete the billing. Also, there was no separate counter for fast track billing (maybe for 5 items or less or cash billing). So, even if you only had to pick one item, you still had to go through the entire grill.

After such an experience, I doubt if I shall think of going shopping in the store  again, as I have a myriad of options for where I can go (including online stores) shopping for grocery and these options will only increase with FDI in Retail cleared.

Supply chain efficiency perspective:

  • Stock-outs: From my list of groceries, there were 3 items (cooking oil, a specific brand of Jam & a specific kind of spice) which were in a stock-out position. This was on a Saturday evening at around 6PM. Now, it is very well known that the biggest lost opportunities for retailers is lost sale due to stock-outs.
  • Price: I happen to go a mom & pop store near my home to buy these 3 items that were not available at this store. I also saw the retailer selling a couple of items (a specific brand of whole wheat atta) to a customer at a price that was lower than the price i bought at the store earlier in the evening. So, not sure if they will be able to compete on price either.

This is not just the state of this one retailer in India. Most so called organized retail stores (multi-brand, multi category stores) have more or less similar problems. Some more serious than others.

Now, the question is,  if and when players like Walmart, Target or 24×7 arrive in India, will these retailers be able to compete with them? I am not suggesting that these retailers will get all of this right. However, if i were an Indian retailer, I would not bet my survival on the assumption that they will also face similar problems. I would be ready with a strategy to compete/co-opt with these retailers before they can hurt me.

What next? 

So, the next question that beckons is the following – what can retailers do to counter this threat?

Strategically, they need to pick a field where they want to be the best. Whether it is  competing on

  • Cost (low cost or luxury or premium)
  • Customer experience
  • Speed (how fast or slow do i get new products lines on the shelf)
  • Niche (define and win the niche)

It doesn’t matter, what strategy they adopt; they will need to improve on both the supply chain efficiency and the customer experience part, as these will be the necessary battle conditions, without which, you will no longer be in the competition.

These are my thoughts on the state of organized retail in India. Do you agree with my assessments?

Please do post your thoughts as comments below or tweet your thoughts to me on twitter (@rmukeshgupta).

PS: Something extra for all you people. Watch this prank by the Improv  team at a Best buy store

Why Airlines need to re-design their loyalty programs

Today, I was reading an article “Why Airlines Need to Reconsider What “Loyalty” Is Today…”. This brought back a few questions to my mind.

I work for an MNC and my work involves a lot of travel within India. My company has a corporate deal with an airline (Jet Airways) in India to minimize the cost of travel. So, most of the times, I am required to take a Jet Air flight. I do not like flying Jet but do travel quite a bit in Jet due to the company policy. The company also allows me the freedom to choose a different airline if there is no Jet Air flights available at the time I want to fly.

Now, 80% if my travel in the past couple of months have been on a different carrier – Indigo.  How? I plan my trips in such a way, that there are no Jet Air flights available at that time and hence I am allowed to choose the carrier I want to use to fly.

There are some interesting lessons to be learned from this behaviour for both Jet Air & Indigo.

For JetAir:

  1. I did fly a lot on Jet Air and will continue to use them every now and then. This allows me to collect frequent flier miles on that airline. So, should Jet Air consider me as a loyal customer ?
  2. What kind of offers can Jet provide me in order to continue to attract me?
  3. Do they know if I am flying with them most of my trips or also using competing airline carriers?
  4. How can they find out how much could i be worth to them in terms of revenue?
  5. How can they find out if I am a loyal customer with the airline? If yes, how can they continue to keep me happy & loyal? If not, how can they convert me into a loyal customer?

For Indigo:

  1. How does Indigo know if I am a loyal customer (which I am)
  2. What could Indigo do to increase my loyalty and make a fan out of me?
  3. How can Indigo leverage my loyalty and help me spread word about how I feel about Indigo?

I think there are a few trends and technological advances which now allow organizations to be able to profile their customers to this level of granularity. The combination of advanced analytics, social media and big data capabilities now offer the power of making individual offers to select profiles of customers possible.

Now imagine the following:

  1. Jet realizes that I am only using the Jet airways when I do not have an option, they can initiate contact to understand why I do not use Jet all the time.
  2. Jet creates and delivers special promotions personalized to me to win over my business.
  3. Indigo, on the other hand knows that i like travelling their airline. So, they provide me opportunities on the social media platform to promote or atleast to show that I like travelling Indigo to my broader network.
  4. They could tailor their offers to me in order to continue to retain my loyalty.

In the end, its the customers who win and the organizations that provide true customer value (personalized) will win the business in the long run.

 

Re-inventing Customer Loyalty Programs

There has been enough being said and discussed about the customer loyalty programs and what works and what does not.

  • Maggie Starvish in his article titled Customer Loyalty Programs That Workargues that customer engagement is the key in successful loyaltyprograms in Retail industry.
  • This interesting Infographic talks about the connection between customer loyalty programs and social media and how together they can become a potent combination.
  • In this video, Second-generation vintner John Jordan reflects on the creation of Jordan Estate Rewards. Through exclusive, intimate experiences, Jordan Estate Rewards membership creates lasting wine country memories — such as lunch in their dining room, fishing on Jordan lake or a luxurious overnight stay in one of our chateau suites, just to name a few.

Add to this, the proliferation of Groupon and its clones, discount offers are galore. So, just offering some more of your product/service at a discount or free does not make any loyalty program interesting.

In my opinion, it is time for loyalty programs to re-invent themselves. While doing so, some key points that they need to keep in mind could be:

  • Trust: Build trust. This should reflect in the quality of yourproducts/services. You need to find ways to build trust in every transaction that you have with your customers. This is the foundation on which you can build loyal customers.
  • Make it personal: With the proliferation of technology everywhere, the personal interaction is somewhere missing. Use technology to make it more personal and not the otherway round.
  • Offer experiences: People forget products, services or discount offers. They do not forget memorable experiences. Make sure you give them enough opportunity to click pictures and shoot videos. That is your measure of success.
  • Closed community: Do not start selling the loyalty program to everyone. Let your customers earn to be a part of this closed community. It is a fact well-known, that the difficult it is to achieve something, the more we cherish the achievements.
  • Customer focused: Do not use the program to focus on what you want to do with the members. Focus on what the members want to do with you and other members. Be bold; be creative in the activities that you plan.
  • Celebrate: Celebrate your successes with this closed community. Nothing binds people more than celebrating success together.
  • Simple: Make it a very simple program to roll-out, manage and benefit from.

I would definitely love to be a part of such a loyalty program.

Do you know of any such program that truly wows their members? Please do let me know about them.

Why are rewards programs so boring?

Today, I have been a loyal customer for HSBC credit cards and over the past sometime accumulated some 3000 points on their customer loyalty program. I wanted to redeem the points and so logged into the program site to explore the options that I had.

I was not impressed by what I saw. They still have an option to redeem my points for a Kodak Film. Who uses a Kodak film anymore!! Maybe someone forgot to remove this from the list (that is if someone is reviewing this list at all).

Then the collection of gifts is un-imaginative. There is nothing that I would want to redeem from the program only and not buy straight from a shop. One of the other options is to opt for a gift voucher from some of the big retailers (which is what I think most people do), donate to charity or request sustainable products. 

Now, my question is does this help the bank? Will I cherish the item that I buy using my gift voucher. Will I go out and tell my friends about the great gift I got from the bank? I don’t think so.

On the other hand, what do you think I will do if I could redeem my points to get some personalized articles (like a Tee with my son’s photo printed on it or a sling bag with the collection of my favourute tweets or a laptop skin with the photo of my girlfriend/wife)? You bet when I use these articles, I will tell everyone how I was able to redeem my points to get this cool stuff.

I am not saying that the bank should change the entire list of items and replace them with an option to place an order with Inkfruit or some such vendor for personalized stuff. However, I think it will make the program wee bit more fun if they could add these to the current list as well. 

Would you want to be a part of a program that is fun or one that is mundane? 

I also believe that companies like Inkfruit should actively target all such customer loyalty programs and get themselves included in the list of articles that the customers could opt for. This will give them some good exposure and adds a new channel for sales. It is a win-win situation for these companies.


Hope the bank is listening. 

Fueling growth from existing customers

It is a well known fact that it is much more expensive to acquire a new customer than retaining an existing customer. But as they say, common sense is not so common. We find that businesses are going out of their way to attract new customers by offering them great deals. I do not think there is anything wrong in this, but when you exclude the offer to your existing customers, you are inviting trouble. 

This is a very important reason for customer loyalty to become so rare. There does not seem any  benefit for customers to remain loyal anymore as they miss out on such attractive offers in the market that are only available to new customers. So, they keep changing loyalties.

In the short term, everyone is happy. The businesses are gaining new customers and the customers are getting attractive offers. However, in the long term all of them stand to lose. The customer has to keep negotiating with new vendors with associated risks. Constant change in the suppliers can also mean in-consistencies in the supplies/services which in the long run can hurt the customers’ business.

The businesses spend so much more to attract new customers and the cost of customer acquisition goes drastically up and hence the cost of sale and the profitability starts its downward trend as businesses will need to continually come up with more and more attractive offers to attract new customers and this becomes the only way for top-line growth as repeat business starts to shrink due to lack of loyal customers.

Once businesses realize that they are in this downward spiral, they decide that it is important to retain existing customers as well and hence start offering the attractive offers to existing customers as well in addition to new customers. Still they will find that retaining customers is a challenge.  

A clear example of this phenomena playing out currently is in the Indian telecom industry. All the players like Airtel, Vodafone, Tata DoCoMo, Idea, Reliance, Aircel and the other players are all creating very attractive offers for new customers and incentivize customers to switch from one player to another. This has led the profitability of the entire industry downward. These businesses will be able to sustain their top-line growth and profitability till the overall market keeps growing. Once this stops, then we will see a shake-out of the players in the industry.You will then start mergers and acquisition starting to be considered and there will be only a handful of player be left in the market and the same cycle will get initiated with a similar result.

Now the question is “What are the alternatives?”

I think that there are a couple of alternatives that they can consider:

  1. Incentivize your customers to bring in additional customers for your business. Make your customers your evangelists.
  2. Incentivize your sales teams more on bringing in repeat business than net new customers.
Let me elaborate on both the alternatives.

Incentivizing your customers to refer additional customers for your business:

There are a few things that you will need to put in place in order to turn your customers to evangelists:

  1. Deliver and delight your existing customers by the high standards of quality and service!
  2. Make them your raving fans!
  3. Create an opportunity for your customers to refer your business/products/services to their peers, friends and family!
  4. Make it much easier, simpler, and faster to do repeat business with you!
  5. Recognize/reward all your customers who have referred your business to their network
  6. Never show new customers are more important than the existing one’s!
As you can see that this is a cultural change that businesses will need to undergo. This focus on customer delight will take time and effort but is worth all the time, money and effort that goes into this as this will create a competitive advantage that will be hard replicate. You can even go on to.

An example of one such company is Apple. In this age of declining customer loyalty, Apple customers are still one of the happiest lots and do a lot of evangelizing for Apple.

Incentivize your sales teams more on bringing in repeat business than net new customers.

Businesses often realize that new customer acquisition is of paramount importance and hence expend a lot of their energies in acquiring new customers. Sales people are incentivized for bringing in net new customers for the business. Marketing is busy creating the next great offer to attract new customers. All of this leads to the state that no one is bothered about the potential business opportunity with existing customers and their networks.

  1. Set a rewards/recognition program for sales teams where they get more rewards and recognition for Repeat business generated from existing customers, Net new customers referred by existing customers and slightly less compensation for Net new customers who were not referred by existing customers
  2. Introduce a step in your sales process where sales people ask for the customers/prospects to refer you to people in their network. Request for referrals even in the opportunities where you have not won the deal.  
  3. Reward sales people who get more repeat business transactions (irrespective of the volume of transaction).
  4. Initiate a customer satisfaction survey for 2-3 customers of each sales person. Choose the customers randomly.
This will clearly give out the message to the sales teams that it is very important to provide excellent service to existing customers. They will also learn to explore options to generate repeat business and to keep their customers happy all the time.

I know that there are businesses that have customer referral programs in place that intend to achieve the same outcome but I have not seen any of them achieve it. This by itself is a deep topic which I will discuss in a separate post. 

I have not come across a business which has implemented this system for increasing business from existing customers yet!

Happy selling !