Ingredients of a successful retail recipe

businessgyan's picture

familymart01.jpg

KSA Technopak is a premier global management consulting firm offering integrated strategy, process and technology deployment solutions to the retail, fashion, food & grocery and healthcare industries. Dipankar Halder, Associate Director, spoke to us in detail about the intricacies of launching a new product.

 

How do they help their clients…

 

We work with two types of clients, startup companies with new business ideas and established companies getting into new ventures. The client comes to us with a basic idea and we begin with checking out the market scenario to see its feasibility. Right from preparing the business plan, we give complete shape to the newly conceived product.

 

Recent assignments

 

M S Ramaiah Group approached us for setting up their first project, the Valdel Retail division. They wanted a unique retail model within a massive space of 40,000 sq ft which was neither a mall nor a supermarket. This supercentre was supposed to be a one-stop shopping destination for the entire family complete with department stores, entertainment center, food court, music store, bookstore, bakery, photo shop and beauty salon, alongwith adequate parking.

 

We developed the business model, looked at various product categories and brands to be displayed, designed the pricing and margin strategy, specified the number of branches and their exact locations, recruited their personnel, worked out a supply chain model and defined the process of store operations. From the idea to the execution, we got into every aspect of retailing including designing the interior décor and customer service standards. So finally the Family Mart came up in 110,000 sq ft in a much larger space than envisaged. Similarly Marshals, a mall in Chennai and Wills Lifestyle from ITC also approached us.

 

Any assignments in fashion retail…

 

The evolution from the tailor oriented to ready-to-wear is now complete with people first looking for a dress in a showroom. Infact ITC approached us recently after a Mckinsey study suggested that they should get into fashion retail. We stepped in to execute the business model right from garment sizing to the visual merchandising in the showrooms.

 

What goes wrong when we launch a new product…

 

Timing- when you think of a product today and develop it to be launched in the market in the next one or two years, the consumer mindset might have changed

 

Consumer focus- Most entrepreneurs have an inside out view and expect consumers to behave the way they do. But as you know each individual is different and the tastes are different.

 

Market study- Most of the SMEs that I have known, don’t believe in market research. You need to look at current consumer behaviour and then project a future trend

 

Consult a specialist- Competent people need to take up responsibilities and not family members. If you need, you can get a specialist consultant to look into various aspects

 

namdhari.jpgGo all out- Also they go in a phased manner, launching their product in an inferior packaging, doing very little promotional activity and don’t build user experience. Your market expansion can go in a phased manner, but use your resources!

 

To simply put it, no thoughts go into developing the essential ingredients of a product. A product just cannot be a new thing with a great USP. It should focus on its target customer and cater to a felt need.

 

What are the solutions then…

 

The key ingredient is to listen to the market. We force our clients to look at their product from the customer’s perspective. It may have the essential ingredients, but there may still be a need to fine-tune the product to fit the consumer need. There are two angles to look at when you launch a product. One is to keep a pulse on the consumer and find a growing need. Another one is to bring in supply of a commodity which is highly in demand.

 

Core benefit with value additions-If you look around even a vegetable shop has evolved now. Take the example of Namdhari Fresh outlet in Bangalore where people buy vegetables paying a little extra for the excellent service and ambience. The core benefit is to get all kinds of Indian and imported vegetables and fruits under one roof. The value addition is the ariconditioned ambience.

 

Supply chain management- If your product is of mass volume and is competing in a crowded market, then distribution and logistics will be the key issues. Here consumer perishables and durables will have different channels of operation. If you are an unknown brand with little marketing budget, you can choose to go with a larger chain of stores like Shoppers Stop or Big Bazaar. There are many private labels available only in such stores.

 

Put money in, take profits out- Not having sophisticated technology, big marketing budgets or brand names are no more good excuses for losing out on market share. The overheads of huge organisation are of the same ratio as of small shop. I would say, if money was the key ingredient, then Persian Gulf with all its oil money would have owned all the brands in the world!

 

Effective communication- The consumer has to be reached out and effectively communicated. Effective means cost effective also! Advertising and marketing promotions can happen both on top and below the line. For instance Amway India within a few years of operation has earned Rs 600 crore without any advertising. That doesn’t mean they don’t spend money on marketing. Anything in media works as long as you reach out to your target audience.

 

Innovative ways of marketing- Housewife network is now becoming a major marketing strategy for new entrants. You go to any residential complex, you will find notices posted about sale of Lucknavi dresses, handloom sarees, kashmiri shawls, herbal cosmetics, etc. We have suggested to one of our clients to try out this Peer-to-peer marketing route to sell their new line of women’s wear.

 

Pricing- Pricing has to be thought over very well before venturing out. If you keep a low margin it will surely work out when the volume increases. For instance 12% gross margin works out fine with grocery business. The easier way to decide prices is to leave it to the consumer. Normally, the market decides the price and you have to manage your cost within that.

 

Prices are anyway going down in most of the FMCG goods. For instance the paints segment always operates below the MRP because they are only bothered about a smaller margin which takes care of all the cost. Moreover, it is a contractor driven market where ‘larger volume lesser price’ is the game.

 

This thumb rule on pricing works out fine provided it is a competitive market.

 

But there is one thing which can still fetch a premium, that is a clear cut USP. For instance Anoop Hair Oil, now marketed by Godrej, claimed to be the surefire remedy for hair growth was selling at five times higher price than others.

 
 

KSA Retail Summit 2004

 

ksa.jpgKSA Technopak has always been taking a lead role in bringing together business leaders in retailing and consumer products through a forum that aims to set the direction for the development and growth of organised retailing in India. The 6th KSA Retail Summit 2004 is happening in February 2004 at New Delhi,India. The theme for 6th KSA Retail Summit 2004 is “Innovation led Growth”-highlighting the challenge that most Retailers face today of growing through continuous reinvention and innovation, both at the front end as well as back end.

 

In tradition with their previous five Retail Summits,outstanding speakers have been invited from leading retail organisations from the US, Europe and South East Asia besides India. This year KSA Retail Summit 2004 will be concurrent with the Images Fashion Forum 2004, and AsiaShop, India’s largest Retail Industry exhibition at Hotel Ashoka, New Delhi, India.

 
 
 

Contact: T.V.Gomathi KSA Technopak India Tel: 91-11-2629 1111, 98182 43770 Fax: 91-11 2629 1112 Email: RS2004@ksa-technopak.com

Issue BG35 Feb04