Objective: Customer Reach Strategies
Objective: Customer Reach Strategies
Objective: Customer Reach Strategies
Scenario in India
The boom in the sector has been fuelled by the flood of new players,
Indian and foreign, looking to cash in on rising incomes, increasing
indulgence and greater frequency of purchase. It’s not enough
anymore to be merely glitzy; stores have to have the right blend of
ambience, products and, most important, customer service to keep the
customer satisfied.
Growth Drivers
The growth in organized retail is being driven by a number of
structural, social, and demographic and macroeconomic factors. The
increasing globalization of the Indian economy has led to growing
exposure to foreign markets resulting in increasing demand for
international shopping experience in India. Availability of credit cards,
increased ‘lifestyle spending’ and higher mobility due to increase in car
/ scooter owning families for whom shopping also becomes a family
outing, have also helped in driving the growth of organized retailing in
India.
Ascending the learning curve: With most of the players operating for
over 5 years now, new formats have been tested and back end
systems have been put in place. Not only are footfalls growing, but
conversions are rising and so are average ticket sizes. Most of the
players have raised capital either through private placement, rights or
public issue and are in the process of executing their aggressive
growth plans.
Players
Major retail players having prominence in the organized retail market
include Shopper’s Stop Limited, Pantaloon Retail (India) Limited, Trent
Limited etc.
Trent Limited
Hypermarket to drive sales growth
Trent’s past concentration was solely on life style retailing
(Westside), which kept its sales growth at a modest growth rate
compared to its competitor Pantaloon. The company met with good
success with its recently launched hypermarket store “STAR INDIA
Bazaar”. However, the successful foray into hypermarket should
give its sales a much-needed fillip.
Shoppers’ Stop
Pioneer in organized retailing
Shoppers' Stop, commenced operations in 1994, and is one of
the pioneers in the retail industry, with 16 stores across major town
and cities. It now intends to consolidate its position and expand its
operations in new cities. The recent public issue would give it
enough capital to jump on to a higher growth horizon.
Slow in expansion
Shoppers' Stop has been relatively slow in adding retail space in
the last 2-3 years, while competition has breezed ahead. Although
pace of expansion is expected to pick up with funding in place, it
may have lost out few strategic locations to competition.
Business model
There are four stages in retailing:
• Communication — where you attract the customer through
advertising.
• Store experience — this embraces ambience, facilities, layout
and products.
• Interaction — ensuring that customers receive top-quality
service.
• Post-purchase experience — keeping the quality of your goods in
the highest bracket.
Issues
Traditional form of retailing is inefficient for almost all the entities:
Retailers themselves (the average retailer earns less that
Rs. 10,000 per month for all his effort, as data shows);
Consumers (who typically end up paying substantially
more while getting practically little or no service)
Small/medium manufacturers
India has amongst the lowest per capita retail space availability in the
world. India needs to create at least 110 Million square foot of
additional retail space per year for several years just to meet the
demand created on account of a sustained GDP growth rate of about
6%. This space crunch is leading to a situation wherein prime retail
space commands exceptionally high rates. With the retail boom, the
government must realize there’s extreme mismatch between supply
and demand for space.
Managing growth - the key challenge : The fast pace of growth throws
up major worries and players inability to manage the growth and high
inventory write-offs could be the key risk.
Profiling
Personalized Campaigns
Customer Retention
Payment
Payment through credit cards (plastic money) has become quite
widespread and this enables a fast and easy payment process.
Electronic cheque conversion, a recent development in this area,
processes a cheque electronically by transmitting transaction
information to the retailer and consumer’s bank. Rather than manually
processing a cheque, the retailer voids it and hands it back to the
consumer along with the receipt, keying digitally captured and stored
the image of the cheque, which makes the process very fast.
Internet
Internet helps to remove the need of a consumer to physically
visit the store.
CRM system
The rise of loyalty programs, mail order and Internet has
provided retailers with real access to consumer data. Data
warehousing & mining technologies offers retailers the tools they need
to make sense of their consumer data and apply into business. This,
along with the various available CRM systems, allows the retailers to
study the purchase behavior of consumers in detail and grow the value
of individual consumers to their business.
Visual Merchandising
The decision on how to place & stack items in a store is no more
taken on the gut feel of the store manager. A large number of visual
merchandising tools are available to him to evaluate the impact of his
stacking options. The SPACEMAN Store Suit from AC Neilson and
ModaCAD are example of products helping in modeling a retail store
design.
E-Commerce
E-commerce in India ha almost doubled in size in the last few
years, despite of relatively low Internet penetration of 15%. The
number of Internet users grew from 5 million in 2000 to 16.6 million by
the end of 2002, a rise of 232% over a span of just 2 years. In 2003-04,
B2C (Business to Consumer) turnover was up by 76% from the
previous year.
Pareto's Principle talks about generating 80% of sales from 20% of the
customers, which can be identified through data mining. The variety of
activities together play an important role in bringing repeat customers
and in turn generating positive word of mouth to also increase new
footfalls into the store.
Pantaloons
Known as the ‘Green Card' it is divided hierarchically into One star,
Three star and Five star. Every point generated at all the levels is
equivalent to Rs.1
Criteria for points generation are:
Upto 399 points – One Star – 1 point for Rs.50
400 or more additional points - Three star - 1 point for Rs.40
800 or more additional points – Five star - 1 point for Rs.25
It also stays in touch with its loyal customers through Mailers, SMSes E-
mails and Telephone informing them about the developments and
promotions.
Shoppers Stop
Known as the ‘First Citizen Card'
Classic Moments – Earn 1 Reward Point for every Rs.100
purchased.
Silver Edge - Earn 1 Reward Point for every Rs.50 purchased.
Golden Glow - Earn 1 Reward Point for every Rs.34 purchased.
Every point generated at all the levels is equivalent to Rs.1
It has a special scheme wherein it offers private label reward points to
its silver edge and golden glow members.
Lifestyle
Known as the ‘The Inner Circle'
For every Rs.50 spent at any of the stores, 1 point is earned.
For every 100 points earned, gift voucher of Rs.100 is received
Westside
Known as ‘Club West'
It offers Classic and Gold membership
Offers 25 and 50 as the bonus points to Classic and Gold
members
Classic - For every Rs.50 spent at any of the stores, 1 point is
earned.
Gold - For every Rs.40 spent at any of the stores, 1 point is
earned.
Piramyd Megastore
Known as the ‘Piramyd Power Club'
It offers Silver, Gold and Platinum cards.
There are discount % which is offered on both Piramyd Store and its
supermarket. As one moves from Silver to Gold the discount percent
also increases. Piramyd Power Points are offered on all purchases.
Silver, Gold and Platinum are awarded 1 point on every Rs. 80/-, Rs.
60/- and Rs. 40/- spent respectively.
Globus
Known as the Privilege Club card
An enhanced version with larger offerings is the ‘Gold Card'
The monetary benefits which it offers is a holiday package depending
upon the amount spent. The larger the spending higher is the value of
the gift.
II. Loyalty point redemption system: The loyalty points earned by the
customers can be reimbursed any time after minimum specific
points are generated by the customer.
VIII. External offers: This would mean a retail store offering another
discount coupon or some freebie which is connected to a different
brand. For e.g. Pantaloons store offering a discount to any
merchandise purchased from Liberty.
X. Special Counters
To facilitate and serve the loyal customers better, stores designate
special counters both for cash and customer service so that the
premium customers can be attended with ease.
ONLINE RETAIL
The segment of online shoppers has increased dramatically in recent
years due to the convenience of shopping in the comforts of the home
and the accessibility of the Internet. The firm can offer online shopping
services and partnership opportunities. The products that they can sell
include an array of audio, video and book titles, greeting cards, online
auction, toys, electronics, health info, grocery, sports items, pets,
software, magazines, prints, posters.
New Entrants
There are different barriers such as distributing capabilities and the
variety of the selection offered that are supposed to be hurdled. One
can pioneer on first mover advantage. Solution: A network of "actual"
retail spaces to make it easier for the consumer to return or exchange
the products they were not satisfied with it.
Buyers
Consumers also tend to compare prices among the retail leaders such
that buyers are able to buy products with very big discounts compared
to ones bought in "actual" retail outlets. The bargaining power of the
consumer is based on the competitive strategies of each active firm in
the industry.
Life Cycle
Initially the industry had shown negative income due to the high
distribution costs, but with the popularity of the concept and consumer
acceptability gives the operating system more flexibility. Costs
constraints are taken care by the sales volume. Amazon, in its first
years, had negative income but the rise of e-commerce sites and being
the pioneer made the succeeding years led to boom time for them.
With the entire industry flourishing, we see heavy investments being
made to take care of the initial cost issues.
Degree of Vertical Integration
Retail firm’s primary value chain includes purchasing/sourcing,
marketing, distribution and after-sales services, which includes returns
and exchanges from unsatisfied customers. Their main focus is in the
purchasing/sourcing and in the distribution of the products to the
consumers. Their investments are therefore, geared towards
warehouses in key points of high consumer demand areas and an
efficient delivery and distributing system to service all its consumers.
Key areas
wide selections
international shipping
An all around online shopping experience
Ability to go to store location to exchange or return
products.
Brand name
Competitive parameters: discount schemes, faster
delivery, quality, selection base
An established selection base in the retail operations
Scope for globalization
Low government regulations on online retail
Alliances with the local products
Highly sensitive business cycle due to speed of technology
involved in the services offered
Venturing in retail options
Hurdle: need to touch and feel the product before purchase
Marketing, Innovative inventory and distribution systems,
and brand recall
PRE-MARKETING ACTIVITIES
Consumers today have a growing choice of shopping destination which
includes freestanding stores, retail parks, malls, specialty and festival
centers, and ancillary retailing, as well as an increasing variety of
home shopping by mail, computer, television and telephone. Shopping
centers can no longer rely on a captive market, and there is an
increasing need for centers to compete and to market themselves
effectively.
Department stores
TRADING Supermarkets
AREAS
Apparel stores
Gift stores
Huff’s Law
Huff’s law of shopper attraction delineates trading areas on the basis
of product assortment (of the items desired by the consumer) carried
at various shopping locations, travel times from the shopper’s home to
alternative locations, and the sensitivity of the kind of shopping to
travel time.
Economic Base
• Dominant industry
• Extent of diversification
• Growth projections
• Freedom from economic and seasonal fluctuations
• Availability of credit and financial facilities
Competitive Situation
• Number and size of existing competition
• Evaluation of competitor strengths and weaknesses
• Short-run and long-run outlook
• Level of saturation
Current practice shows that most mall operators use the brand name
and logo of the property developer to create brand recognition across
a portfolio of centers. However, this approach misses the point
because it fails to recognize that a brand embodies much more than
name and a logo
GROWTH STRATEGIES
With overall growth of the retail industry generally reflecting
population growth rates, meeting the financial markets expectations of
growth is a major challenge facing every retail CEO across the globe.
However the rewards from actual intrinsic growth are huge, as studies
have shown that the market values incremental profit dollars that are
earned from revenue growth 30% to 100% higher than those earned
from cost reduction.
Retail Logistics
Trade-offs between cost & service, and changing business needs, e.g.
new selling channels mount pressure on logistics operations.
Warehouse Management Systems (WMS) and Event Management
deployment, distribution network design, development and
deployment of RFID solutions within retail and operational process
optimization are few methods to improvise on the existing systems to
gain the following;
Operational Excellence
To achieve: