[Reader-list] the mindset of the retailer

[Isaac D W Souweine]

Dear all:

Am doing some research on Indian grocery stores and came across this 
little missive from the head of Westside chain of stores. A rather 
fascinating if chilling look into the mindset of the retailer (who 
needless to say takes it upon him or herself to be the creator of the 
mindset of the consumer).

If anyone has other good info./leads/articles etc. about Indian 
grocery stores, please pass them along - souweine at hawaii.edu.

-Isaac  
 
Spurring super-shopping
Simone Tata*

The world of retail merchandising has come a long way since the days 
when general stores, that stocked everything from groceries to 
stationery, and small shops that sold limited varieties of products, 
reigned supreme. There is a movement now from the unorganised to the 
organised sector. There are now more modern retail formats such as 
supermarkets and malls. Several companies are setting up exclusive 
showrooms and large format stores such as Westside and several others 
are expanding. The whole concept of shopping has altered in terms of 
format and consumer buying behaviour, ushering in a revolution in 
shopping in India.

These trends indicate that retailing, as an industry, has come into 
its own. According to a study by Economic Times Intelligence, the 
Confederation of Indian Industry and Tata Strategic Management Group, 
organised retail sales in India were Rs. 135 billion in 2000 and are 
estimated to grow to Rs 460 billion by the year 2005. Organised retail 
stores are characterised by large professionally managed format stores 
providing goods and services that appeal to customers, in an ambience 
that is conducive for shopping and agreeable to customers.
Taking their cue from foreign retail outlets with their focus on 
creative display of merchandise, a number of general stores donned a 
new garb. But the transformation was far from complete. The attitude 
remained the same. The traditional consumer, initially overawed by the 
new look and used to equating glitzy with expensive, refrained from 
entering the store. But newer consumer segments, including single 
women, collegians with allowances and working couples, 
enthusiastically took to the new concept.

A number of big players are entering the market. However, in spite of 
the momentum that the retail segment is experiencing, it is still seen 
as very nascent and unorganised. The per capita retailing space in 
India is very small in comparison with that in other countries.
There are many different retail stores in India -- convenience stores, 
supermarkets, hypermarkets, departmental stores, brand stores and 
discount stores. The consumer can choose between different stores for 
different needs.

Till the early nineties, the organised retail industry had not 
evolved. There was no consumer culture, there were limited brands and 
people bought what was available. There were no ‘shopping areas’. The 
retail industry lacked trained manpower. It was also difficult to 
compete with the unorganised sector because they operated with minimal 
labour costs and overheads. Tax laws and government restrictions added 
to the problem.

Liberalisation is changing all this. The customer has evolved. He has 
more spending power, is better educated, and most importantly, exposed 
to brands and products through television and foreign trips. The 
Indian customer now has the desire to acquire. Personal consumption is 
on the rise. Customer segments, already diverse, have been sub-divided 
with joint families giving way to nuclear families, and the increasing 
number of working couples.

These changes, along with increased availability of retail space and 
qualified manpower, have had a positive impact. New players are now 
entering the market.
In food retailing, the traditional method of shopping is changing. The 
Indian customer, who was used to shopping at the neighbourhood kirana, 
has a choice of going to a supermarket. While kiranas had their 
advantages -- they sell goods on credit and offer home delivery 
service – they suffer due to shoddy display, poor hygiene and bad 
ambience.

The management of kiranas involves minimal labour costs since the 
entire family works there. The focus is on creating and retaining 
clients, since it is the only source of livelihood. The business 
passes hands down generations. As a result, shopping at a kirana, 
where the owner knows one’s shopping habits personally, has been 
ingrained in the psyche of the Indian consumer.
In contrast, a supermarket appeals because of its pleasant 
surroundings, better product display and the availability of a wide 
variety of brands. The store has accurate measure controls and allows 
economies of scale. A shopper also has the option of shopping for all 
household necessities under one roof.

In the days to come, supermarkets will face competition from kiranas. 
Perhaps, the Indian customer will go to the supermarket for his bulk 
needs and to his local store for his daily necessities.
A new concept in India is the hypermarket, exemplified in the Big 
Bazaar, the first of its kind in Mumbai. It is perceived as being 
successful because of its low pricing and the convenience of shopping 
for all items in one place.

The retailing boom in foodstuff has caught on only in urban India. 
Semi-urban areas, non-metros and rural areas are yet to feel the 
impact of retailing. Whether this will change will depend upon how 
near the supermarkets are located. Most people still associate 
supermarkets with "expensive" rather than "cost-effective". A number 
of stores have sought to counter this notion by projecting themselves 
as "value for money" stores.

In the apparel and consumer items segment, the retail industry has 
seen many changes. The Tata Group entered the retail industry in 1998 
with Westside as it saw a growth opportunity in this sector. Today it 
has nine stores across the country. The metros now have exclusive 
shopping areas and upcoming malls.

Despite the aura associated with malls, they have not taken off on the 
scale they were expected due to space and cost constraints. Malls 
require a lot of real estate, something not easy to find in a prime 
location. The high overheads and labour costs make their setting up an 
even more expensive proposition.

The promoters of a mall must realise that they have to create a 
shopping destination. Globally, malls are built by real estate 
developers, who take the help of retail experts. Malls must have the 
right tenant mix so that the clientele gets a good blend of products. 
There cannot be designers and bargain corners in the same place.
It is too early to say whether malls will be successful in the long 
run. Most malls have many small shops with one or two anchor stores, 
consisting of the large format stores.

In the Indian context, success would involve attracting diverse 
customer segments, including nuclear families, working women etc to 
the mall. What would attract all these groups of buyers would be the 
wide choice and the comfort of being able to shop for everything in 
one place.

The only way in which the retailing industry can hold sway will be by 
being innovative and understanding the needs of the consumer. Since 
the scale is too large to build one-to-one relationships, the option 
is to create brand loyalty through promotions.
In order to achieve success, the retailing industry will also have to 
counter competition from the unorganised sector. Traditional retailing 
is too well established in India to be wiped out. Besides, traditional 
retailers have negligible real estate and labour costs and little or 
no taxes to pay. In contrast, players in the organised sector have big 
expenses to meet, and still have to keep prices low to be able to 
compete with the traditional sector.

Space and cost constraints have caused shopping areas to move to city 
suburbs. For instance, malls are being built in Gurgaon in the hope of 
drawing in customers from south Delhi. But once south Delhi gets its 
own malls, it will choke traffic that is going towards Gurgaon. The 
malls then become non-sustainable, unless they create a retail hook 
that will make people drive. Bluewater in London, built outside the 
city, is successful because the builders focused on tenant mix and 
designed the mall according to the tenants’ requirements. They also 
ensured all service facilities and amenities for customers, including 
ease of accessibility with good transport services.

There are other issues that are needed to make the retailing industry 
a force to reckon with. Qualified manpower is required to look after 
day-to-day operations and cater to the wide spectrum of customer 
expectations. A consumer research study, commissioned by Westside 
revealed that women in the south are smaller than those in the north. 
So the Westside store in Chennai stocks more small-sized garments. 
While retaining a common look and economies of scale across the 
country, you have to localise your products to suit the needs of 
customers.

Westside, which caters to the upper middle class segment, has built 
its customer base through its USP of affordable style. If customers 
are looking for style, they will probably go to Westside and buy 
something for Rs 400 rather than go to Mango (a UK-based chain). 
Another issue is convenience of parking space. Almost everyone in 
major metros has a car and doesn’t want to go through the hassle of 
finding parking space.

Success will depend on selecting the right location, which will depend 
on the customer target and store positioning, focus on merchandise in 
terms of the selection of suppliers, quality of goods and correct 
pricing and managing the inventory to ensure that products are 
available.

The store experience is what will bring the customer back. The layout 
should make browsing convenient, product display should encourage 
customers to try, and the billing interaction should be quick. The 
retailing industry also needs people with the right management skills 
to enable good customer interaction.

Also, one must remember that there is no right retail model. The 
perfect model is a question of management. The large scale of consumer 
diversity, in terms of size, geography, culture and socio-economic 
background, would necessitate a varied type of successful models.
Shopping in India is a family event and is seen as a kind of 
entertainment. In the West, departmental stores are spacious places, 
where one can shop at one’s own pace. In India, the per capita 
retailing space is very small. When entire families shop together, the 
store tends to get crowded.

Making the shopping experience more pleasurable seems to be the 
driving force in the retail industry. This is seen from the move to 
combine shopping with food and entertainment. But whether this 
combination will work will depend on customer segregation and needs. 

Ms Tata is chairman of Trent, which runs the Westside chain of 
stores.  

The text of this article was clipped from - 
http://www.tata.com/trent/articles/20030305_spurring_super_shopping.htm