Well, the easier question to answer is to ask "what keeps them away from the store?” Honestly there is very little understanding amongst retailers about the exact reason why consumers stay with a store and why they leave it. Dip stick studies and research has shown that there is little agreement on what the causes are. This is true because, reasons will change from country to country, and profile of consumers.
I can talk in the Indian context, and let me hazard a guess, (hazard is the right word since opinions that are not data driven always have Nay Sayers, even data is never conclusive).
It is my understanding that different categories have different drivers to sales
Basically, there are two relationships that determine what the drivers of sales is-
(1) the Involvement of the mind (read –“thinking” or “mind-set”) and
(2) the frequency of purchase
There is an inverse relationship between the two - Frequency and Involvement.
The Drivers of sales for each category varies, for example
Grocery - High Frequency, Low Involvement - Drivers are - Quality, Location, Price (in that order)
Jewellery - Low Frequency, High involvement - Drivers are - Trust, Price.
Electronics - Low Frequency, High involvement - Drivers are - Price, After Sales Service, Trust, Location.
It can be seen, therefore, that the success factors of each category is quite different. The mistake that some retailers make is in not understanding and applying the basics of Category Management, and trying to apply the success criteria for one category onto another.
A good example is the electronics category. There are many chains today who are majors. But the service levels are very different in each one of them. Some are price-fighters; whilst others believe that they want to play in the Price+Service+Experience segment. Clearly even in Electronics there cannot be uniformity of approach across - to sell an Electric Iron does not require a great amount of assisted selling, but a Cell phone and Video Game takes more (a) time (b) skilled salesmanship to close a deal.
Grocery on the other hand sells on presentation. If it is available then it sells if the quality is right and price is competitive.
So what keeps Consumers coming back? My take.
I can talk in the Indian context, and let me hazard a guess, (hazard is the right word since opinions that are not data driven always have Nay Sayers, even data is never conclusive).
It is my understanding that different categories have different drivers to sales
Basically, there are two relationships that determine what the drivers of sales is-
(1) the Involvement of the mind (read –“thinking” or “mind-set”) and
(2) the frequency of purchase
There is an inverse relationship between the two - Frequency and Involvement.
The Drivers of sales for each category varies, for example
Grocery - High Frequency, Low Involvement - Drivers are - Quality, Location, Price (in that order)
Jewellery - Low Frequency, High involvement - Drivers are - Trust, Price.
Electronics - Low Frequency, High involvement - Drivers are - Price, After Sales Service, Trust, Location.
It can be seen, therefore, that the success factors of each category is quite different. The mistake that some retailers make is in not understanding and applying the basics of Category Management, and trying to apply the success criteria for one category onto another.
A good example is the electronics category. There are many chains today who are majors. But the service levels are very different in each one of them. Some are price-fighters; whilst others believe that they want to play in the Price+Service+Experience segment. Clearly even in Electronics there cannot be uniformity of approach across - to sell an Electric Iron does not require a great amount of assisted selling, but a Cell phone and Video Game takes more (a) time (b) skilled salesmanship to close a deal.
Grocery on the other hand sells on presentation. If it is available then it sells if the quality is right and price is competitive.
So what keeps Consumers coming back? My take.
- Present each category in the store in a manner that accounts for its own success factors. For example, don’t be stingy in putting skilled and trained people in the apparel and furniture section, whereas the dry grocery needs less help in shopping, but the wet grocery (fruits and vegetables) needs assisted selling. Respect the Involvement x Frequency matrix of each category.
- Every category has goods that require special handling- tomatoes, to suits, to cameras. Train and train the staff till they drop!
- The word “marketing-mix” is rarely used in retailing; it should be. It is the sum total of everything that the consumer wants from each category, including the smiling staff.
Hence retailing is about “managing unity in diversity”. The one who understands that wins the consumer; and keeps them coming back. And those who drive their retailing business mainly using their P&L, will forever wonder what they did wrong!
Very True.
ReplyDeleteMy question is, are hypermarkets a relevant model for India?
Does is make sense to sell Consumer Electronics through hyper markets in India?
If yes, then what is the range of products one can look at offering to a customer visiting a Hypermarket?
Why have there been no success stories as yet in the Consumer Electronics space in Indian Hypermarkets?
Indian Hypermarkets are just finding its proper definition- the jury is still out. The answer to your question is that the Mind set of the consumer is not to buy very "involved" products from the hypers. Hence hypers must keep,for electronic products only "entry level" products at "entry level price". Is there is chance to own some part of the market? yes sure a huge opportunity to market-make at the bottom of the pyramid. How?. Next blog idea !
ReplyDeletePrincipally agree.
ReplyDeleteMy reservations are with reference to the traget markets for these Hypers. If we are talking about rural markets then I surely think there is a huge potential to market-make but if this strategy is adopted in the urban markets then I think it may not succeed since proliferation of CE dealers in Urban markets is very high.
Thus no real incentive for the customer to purchase from a Hypermarket (theoretically the argument for this will be the scale that a hyper store can achieve which will translate into lower prices and value for customer, however the flip side of the scale is the huge inventory build-up and losses in account of liquidation which may offset any potential gains).
Awaiting the next blog post for further discussion on this.
There are good no of examples of hyper formats is doing good nos for some specific Cnsumer durable categories . (eg) are entry level rice cookers, Mixer Grinders , Iron Boxes, CRT TV's , DVD Players Etc. The basic funda o Loe involvement , Commodity label is true here as well.
ReplyDeleteFirst of all all of you who are remaining anonymous, outs me at a disadvantage, i am talking to a wall. Anyway,you need to understand the structure of the Income-disparity in a city. Do you know that 85% of the HH in urban India take home less than Rs5000 per month.There is a huge market for entry level products in urban india. Rural is is growing of course. Exampes of entry level is twin tub washing machines @rs3000? Why not? so dont assume homogenity in the urban markets.
ReplyDeleteI seriously believe CE has a great role in the hypermarket business in future.The current growth of retail outlets both speciality and hyper format at the same time has resulted in a cluttered positioning for the category in both formats amongst the retailers....They are trying to do all in both places which just wont work...."Have a clear cut positioning for Consumer electronics in a hyper market and a relevant bouquet of offerings to the class of consumers visiting a hypermarket and i am sure the same will work wonders....offcourse backed by a sensible low cost approach to communicating the offers"
ReplyDeleteRakesh Kaul