Which Tomato will win?

Can a Lowly Tomato make you win the battle of retail? If it is sounding silly, let me explain, there is nothing silly about it.

Look at the two Photographs. These are tomatoes from two  different stores in Chennai. One is a successful exclusive Fruits and Vegetables store (sells Rs100lakhs worth of produce a month from 3000 sft ! Is that successful enough?), and the other from a large Hyper market. Which one is likely to win the consumer's heart? The one on the right was Rs. 2 more expensive than the one on the left.

The one on the left though is less red is also a different variety, but is also bruised and cut. There is no doubt that the one on the right is the winner. 

This speciality store is not cheap, but wins on quality and range. 

Every retailer has to understand the right mix of Price and Quality. 
I have seen retailing in India for over a decade now and I think the consumer is now maturing to pay for Value other than paying for Price.  This is indeed good news for everyone - FMCG companies, and retailers alike, and of course farmers. Conversely, it is a wake up call - Wake Up you price mongers, here comes the time to be counted for the lip service that you have always rendered. Price reduction will no more have the same elasticity it had earlier. Consumer will pay as per value (Price x Attribute). The ones who are truly good in Relevant-Quality must rejoice, for they have lived through the difficult times; their time has arrived.
In retrospect, Modern trade must change what they are now. What in grocery terms have they done all these years that is different from the kirans? The main difference has been only 2 things - larger choice (transferring power from FMCG companies to the consumer to cast the vote on the brands), and air conditioned shopping. There has been little or no approach to Solutions for the consumer like supermarkets have provided abroad. Super markets and FMCG companies in India are very weak in the category level thinking. Let us take an example - bakery. What solutions have they provided for bakery? No supermarket carries a full range of breads and buns at reasonable prices. They have not taken the trouble to create categories - instead have continually dug deeper and deeper in the same Red-Ocean, by competing for a share of the milk bread market! There is no mind set to create a Blue-ocean in bakery. Meat and Fruits and vegetables are similar.
Retail competition just simply steal consumers from each other, and don't create new consumers! There may have come a time now when Blue Ocean can be created by not lowering differentiation when price is lowered!
Oh! What are you saying? Can a super market create consumers?  Well now even Life seems to have been created, then why not new consumer?
 Yes they can. Next blog!

Who are You ?

The Topic sounds almost insulting.
I speak in the realm of retail but this topic is equally relevant to any product or service. It is not new, but it is given little attention, or rather as much attention as may be needed. Let me cut to the chase.
It is POSITIONING I am referring to.
Wikipedia has a good note on this topic
http://en.wikipedia.org/wiki/Positioning_(marketing)
Having been around in the retail scene for a while, I have seen attempts at serious Modern Trade Retailing in grocery by large Indian corporates. In all cases I have seen that senior leadership have lacked clarity of thought about "what are you", and  what  they want the retail outlet to be. Positioning is the most significant one pager that the senior leadership must "literally write", laminate, and distribute to anyone who has anything to do with decision making in the company. This clarifies at a high level the identity of the retail outlet.

To write the Positioning statement needs Clarity on the following necessarily in this order:

1. Vision of the Promoter. Lets not fool ourselves. It is the one who spends who calls the shots! I may choose for some or any reason, that I want to be a Gourmet Food retailer (high end value added foods), or someone else decides that they find Mass retailing to be the market they want to play in. It also gives a peek into the mind of the promoters of their risk appetite and expectation of the horizon of investment pay back. Having an endless tranche of cash flow also does not guarantee success in Indian retailing. Learn from Sam Walton and the subsequent CEOs after him in 1996. He never ever since he started nor to this day had any confusion of "who are you", he is the ultimate mass retailer - Pile high let Fly.
2. Who are we talking to?  Clarity from 1. above then begs the question - "if I know what I want, then who is my target Audience?" A mass low price retailer setting up average quality merchandise in Causeway Mumbai, or Malabar hill, or Vasant Vihar in Delhi or Boat Club road in Chennai, is in the wrong place with the wrong concept.
3. What do we sell to them? Clarity from 2. above forces category managers to understand and look for merchandise that suits the price, quality, and range requirements of the target Consumer. Need i say more? Well i need to say a lot more. I am not sure how many senior category heads in this county will pass the test of writing a category plan. Do they understand what CDT means, Mind Mapping, Assortment and Promotion efficacy? If they don't pass this test then they are the captain of the Titanic!
4. How do I serve them? Clarity from 2. and 3. above will tell you what kind of outlet will be suitable for the consumer - glitzy, funky or functional? What kind of outlet might sell Disney products of MTV memorabilia, and what kind onions? I had seen a gourmet outlet in HongKong called Great - with truly high end food (the only gourmet worth its definition, to some extent Jaisons in Singapore).
5. What else do I need to know? Clarity from 3. above raises many new questions- how do i get products to them- supply chain, promotions philosophy, visual merchandising, etc.

Positioning, as you can see, is the core to everything. Even for individuals at the age of 47 it is not too late to try to rediscover your calling and competence (corrected after Ninad's comment, below). But Early in life we must understand we must study and work for gaining Competence, and Capability. And this comes only from direct hands on experience. What is your Positioning? Write down the things you are good at, and that can make a difference to the people around you or to the company you work in. Don't be a John Doe! 

Can a Retail Store Influence the Country

It is disconcerting sometimes when one sees the low level of restraint and sense of responsibility that is exhibited by Indian public figures, be it the Captain of the Indian cricket team or the Minister of Environment making snide remarks at a matter of national importance and sensitivity, or the leader of one party calling some other party leader a "dog".

Have we ever heard a Chinese leader make a statement that leaves the nation embarrassed? I am not so well read but I think not.

Of what use is personal freedom if individuals cannot exercise judgement and restrain in private and public life? Of what gain is education if it does not teach forbearance and patience towards weak and impatience to get work done and not the other way around?

When will we be seen, individually and collectively as a people who pride in following the law and rules if not for the sake of pride, at least from fear of punishment? But then who are we to fear if we drive on the wrong side of the road, or litter the street?

This has always bothered me when I have dealt with store managers. We leave stores of 2000 to 100,000 sft to a store manager in his/her late 20s. The store is a like Country by itself - has a boundary to protect, goods to guard, staff to motivate and train to follow the rules of the store, serve the consumers, make profits and manage the stocks and costs. There is but that much the company can do to train them, but a lot of the foundation of his (using the male gender only for convenience - read her as well) action is built on the innate personal beliefs and values. What we personally believe is also highly influenced by our national beliefs and that of the community that we live in.

The store manager is influenced by many layers of influencers

1. level 1- parents and family
2. level 2- immediate community (society) - friends, neighbours, and colony
3. level 3- company- how they train, and practise the values
4. level 4 - political- news papers and channels - what politicians say and do

A Store is very much like a sailing ship. that is why mariners are considered very resourceful people - no one to turn to other than to they themselves for any help on high seas. A store in this sense is much less isolated but equally self contained. So a store manager must be well rounded not only in the processes of the store, but also in the values that the company wants the manager to imbibe. It is very possible for a Company to instil values that are different and better than some of the values that the store manager sees around him. For example, punctuality, and hard work. The company can inculcate standards that are different from what the store manager sees from some government employees around him- may be even the way his father of mother who may be government opine about certain issues or work.

The point is, the Retail store can be the unit that changes values in society and not only the other way around. Hence, if organised retail employs 1 million people, can influence as many households and four fold the number of people.
Let me therefore, entreat all companies to begin the reverse Influence, much like the "jago re" campaign of Tatatea. 
So lets remember what J F Kennedy said. Think what you can do for the country and not the other way around. JaiHo, JaiHind !

Price War: Strategy of the Dying Over the Dead

In the Classic of H G wells, ”War of the Worlds” he says the wars are the Victory of the dying over the dead. Nothing can more effectively describe Price wars either.


Price wars happen between competitors under the following circumstances

1. The market is not growing and there are already well entrenched players or there are new entrants into an industry and there is pressure to gain share. Too many eye-ball to eye-ball situations.

2. The market is potentially big but the price is a barrier to enhanced consumption, and therefore competitors try to grab share by placating consumers and there is a spiralling downward direction of prices.

3. The competition is “stupid”, does not know any other way of grabbing market share and thinks price reduction, which is the easiest implementation strategy, can solve all the problems. That is why Michael Porter, says that it is better to have clever than stupid competitors.

Those companies who don’t understand the consumer’s real assessment of Value are the ones who start the downward spiral. This begs the question, what then really is Value? I will do the next blog in more detail, but it will suffice here to say this..

Value is Price + Consumer Experience of Attributes

Attributes is the functional benefits that the consumer can expect to get from as promised by the manufacturer of the product or service.

Companies must realise that Price reduction has the most dramatic impact on profitability, and therefore it is preferable to attempt to make the consumer see the attribute value of the product (and we are assuming that the product really has intrinsic attribute vale). When the consumer sees the value in attributes of the product, it insulates the product against the downward spiral of price.

Price decisions are the most important in a company. In FMCG companies and product companies, this is taken seriously, and the highest level of management takes the pricing decisions and it is also because price changes are not so frequent.

However, in retail in India at least, pricing decisions are left to very inexperienced junior merchandisers of the company. The pricing decisions are so many and so frequent, that it gets delegated. The method of pricing decision control is often margin % review that the CEOs do and this is clearly inadequate. Pricing control using margin management is always too little too late because price changes distort the value presentation to the consumer. Margin % can be managed by compensating errors- increase price of A by 20% and decrease B by 40% - is compensating margins, and if A is the top seller then it is possible that the final margin is still the same. But the price reduction changes the “pricing experience” of the consumer, and in the short term will result in changes in quantity sales and loyalty of the consumer. It could seriously damage the “positioning” of the retail format in the mind space of the consumer

So retailers of the Country, don’t let a Fresher wet behind the ears, steer the ship into the ground. Let the ERP systems build in escalations, and authorisation, merchandisers must be trained well enough to grow into pricing experts.