BackWeb Exclusive | Changing Indian retail story: Issues and solutions
Web Exclusive | Changing Indian retail story: Issues and solutions
PremiumDattaguru Hegde, head retail solutions and delivery, MindTree Consulting
New Delhi: Imposing glass buildings with posh interiors, huge discounts displayed right at the entrance, customer service executives holding loyalty card forms and seeking a few minutes of your time: is any of this familiar? Given the way malls are sprouting across our cityscapes and retail outlets fast multiplying, most of us are going to experience these moments.
According to industry estimates, the organized retail sector in India occupies around 4% of the $350 billion retail market, which is expected to hit the $635 bn mark in 2015. Large Indian corporate houses like Reliance, Tatas and Birlas have diversified into retail and are expanding in a big way to capture market share.
Top global retailers like Metro, McDonalds, Wal-Mart, Staples and GAP are not lagging behind in expansion and have entered, or are entering, India through cash & carry, franchise, licensing or single brand formats. Even the few mom -‘n’- pop stores which are there are fast modernizing store layouts to buck the trend.
However, during expansion, retailers need to have a long term view to address important business and technology issues, so as to enhance customer experience and improve market share and profit.
Appropriate formats to suit the Indian market
In developed markets like the U.S, large formats like hypermarkets and super centre stores work well. However, considering Indian customer shopping patterns, small to medium store (with few items) formats such as convenience stores and supermarkets would be able to drive customer traffic in the city centre and developed localities of tier-1 and tier-2 cities.
Mid-segment and price-sensitive customers still purchase their grocery on a daily or weekly basis, compared to upscale customers who do it on a monthly basis. So they look for such formats to shop in their neighborhood within one or two kilometres.
In specialty segments like electronics, home furnishing and merchandizing, large store formats would be successful. Here, the customer shopping style would be different, wherein he enjoys his weekend shopping and also looks for varieties (breadth and depth).
Enhancing customer experience
To attract customers, retailers have been focusing on promotion schemes, loyalty programmes and few in-store strategies. However, they need to focus on enhancing customer experience in areas of points of sale (POS), customer complaints and parking spaces, too.
Adequate parking space in stores
A time-conscious customer who wants to do quick shopping and sees a ‘No Parking’ sign in front of a convenience store or supermarket would try to locate another store in the neighborhood where there is ample parking space. Only a few retailers have copied convenience and supermarket formats from markets of developed nations, but not all elements.
A large parking space for the customer is one of the key parametres while designing store environments in the west. As per industry standards, at least five parking slots for four-wheelers are reserved per 1,000 sq ft of a store. Convenience/supermarket stores with enough parking spaces during peak hours would definitely drive customer traffic.
Currently, fuel stations that house convenient stores or fast food joints are creating traffic problems in the neighborhood, without having enough parking spaces for shoppers and also for those filling fuel in their vehicles.
Increasing strength of quality staff for customer help
Few off price and discount retailers put up a weekend sale to attract customers during weekends. Most price-sensitive Indian customers (in mass category) visit such stores to take advantage of promotion schemes. They look for help even though prices are displayed and direction is provided to identify departments within the stores.
Against this backdrop, shortage of quality staff in the stores for providing adequate help to customers would immediately lead to customer dissatisfaction. An increase in the number of quality staff would help to manage confused customers about promotions and where they would find specific items in the stores. The handling of customer complaints and returned items (due to manufacturing defects) need to improve substantially to be able to match western standards and enhance customer experience as well.
Some retailers employ part-time workers like students during weekends. However, store managers would have to face challenges in optimizing the workforce. This could be addressed effectively by having appropriate labour optimization applications/tools across stores.
Using state-of-the-art systems at points of sale
Retailers typically look for low-technology investments to maximize the return on investment (ROI), taking a short-term view. Most of them still use the old point of sale systems (software and hardware), which might not have been enabled to manage new services, sending real-time demand information to the head office. Providing additional services such as selling airline tickets, at POSs is also catching up.
It is not difficult to lose a customer to an establishment next door, unless the retailer starts using state-of-the-art systems at points of sale, in order to avoid queues and enhance customer experiences. They would need to look beyond traditional strategies and use self check outs, shopping carts with scanners, mobile commerce, etc for convenience in shopping.
Suitable investment to drive multi-channel strategies
Most specialty or merchandize retailers target customers using physical store channels, while postponing other channel strategies to a later stage. But retailers need to have an aggressive sales/marketing strategy in multi-channels, including online, mobile, mail and call centre, if they have to drive customer traffic effectively.
Indian upscale and mid-size customers who have been employing online channels for banking and travel products, would definitely find it convenient to use them in retail as well.
Mobile is a new channel in multi-channel retailing and is the channel of the ‘future’. Initially, it started with the market for ring tones, and later moved on to text-based ordering, etc. But now, m-commerce solutions have been piloted in quick service restaurants, and among online retailers and entertainment retailing across the globe. The power of the mobile channel should be harnessed more as part of a multi-channel strategy.
Selling merchandize and specialty goods in various channels with appropriate technology would help increase sales. It is a fact that online retailing is a mere 0.1% of the retail market in India, whereas it is around 4% of retail sales globally. Analysts project that by 2011, online sales would account for nearly 7% of the overall retail sales. Clearly, there is huge potential for India to catch up with the rest of the world.
All the above-discussed business and technology issues need immediate attention in one of the fastest growing sectors in India - retail. In addition to promotion and loyalty schemes, appropriate formats, enhancing customer experiences, adequate investments in multi-channels would drive the market share of retailers in this changing retail landscape.
If 100% FDI is allowed, this sector would take off like the IT sector boom witnessed in the late 1990s, and would have a positive impact on all the other related sectors as well.
The author is head, Retail Solutions and Delivery, MindTree Consulting Limited, Bangalore
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