It's not different enough
Posted By V Rajesh (vr.office@gmail.com)
What can guarantee a store’s success? Location is important, but it’s not everything.
The basic retail model is really basic and once retailers latch onto this self-sustaining cycle, the store will attract customers and sustain and succeed as each of the elements would feed off the other and also contribute to and build the other elements.
How different is your store from another?
V. Rajesh
There is an old story about an illiterate businessman who is interviewed by a media person. It goes like this: The interviewer was very impressed by the achievements of the businessman and also knew he was illiterate. Towards the end of the interview she said, ‘Sir, you have achieved so much without a formal education. If only you were literate, can you imagine where you could have gone?” Said the businessman in an instant: “I would be the head clerk of a trading firm.”
This person used to be a faithful clerk in a family-owned trading firm. As part of a modernisation process, this illiterate person was found not to fit into the scheme of things. So he was given a generous settlement and asked to retire. Walking back home after his last day, he was amazed to observe new facets to the streets as he had usually been lost in thought before. He started feeling hot, tired and thirsty. When he failed to find any shop along the entire stretch of a very long road, an idea was born and he opened a shop selling cool drinks and other refreshments on that road. He went on to open several such shops on similar roads and thereby became a very successful businessman.
So, what does this have to do with today’s context of retail in India?
The above story has a crucial element of retailing embedded in its turning point where a retired illiterate person transforms into a successful businessman.
It’s all about location. The clichéd statement most retailers would state is that there are three important success factors in retail: Location, Location and Location.
Now, imagine a twist to the same story. Supposing this person had spotted a store selling something to drink and had noticed the crowd that was flocking to it, whereupon he decided to open one himself. What might have happened? Or for that matter, if others started opening similar stores because the first one seemed to do well? Does that mean that if there is a store or business in an area, there is no scope for another such business or store? Does it mean that the first operator who opens stores in all the important localities is going to dominate the market?
No. The answer lies in understanding a basic retail model and realising that although location is crucial to success, location by itself does not guarantee it!
Essentially shopping is a habit and any new store needs to provide a compelling reason for the customer to switch from one store to another. Otherwise, the law of inertia would not offer any scope for a new retailer to open in a locality where similar stores exist.
Truly different store: The first step in creating this self-sustaining cycle of success is to create a truly different store. This could be in terms of the offering, ambience and services, the underlying principle being that the customer should perceive the difference when they come to the store and it should add to the overall experience. I have read of a supermarket in the US where they had a series of unloading docks abutting the store, with large shutters. Farmers were encouraged to drive into the premises and back into these openings and an impromptu market yard was created. Same product but presented differently, creating a truly differentiated store.
5–10 per cent better value: Value is not price! Many operators mistake value to be price and assume that by dropping prices, customers would flock to a store. Value is the cumulative benefit that a customer perceives vis-À-vis the effort and cost that they expend for the purchase. Research has shown that a housewife is ready to pay extra for cleaned rava or peeled garlic compared to wanting the most competitive of prices for rice; the perceived benefit that she gets from cleaned rice is not noticeable as she anyway would have to clean and rinse it before cooking. This thought needs to drive ‘value’. Value is what the customer perceives and experiences.
Appropriate and differentiated assortment: This is a very powerful part of the retail model. The core to any retail is products and the customer’s desire to purchase. Unless the customer gets a relevant range, there is no reason for them to patronise a store.
Most supermarkets today offer a very similar range of products. As a customer frequenting the modern formats, one tends to look for new products. It has been proved that at least a third of what a customer buys in a supermarket or hypermarket was not a part of the original shopping list or intended purchases. Apart from display and promotions, this is influenced by the differentiated range offered. The differentiation can be in terms of imported products, unique products and most importantly through private label. This is one of the key reasons why private label is core to any retailer’s success.
Memorable experience: Last, but not the least, the last mile connectivity in retail is the experience. The primary tipping point for consumers to start experiencing the self-service formats was the ‘touch, feel & see’ factor. Although an integral part of the experience, this was not the only element to deliver an outstanding experience. A successful retailer manages to deliver an experience that consistently exceeds customer expectation. This need not be something elaborate or complex. Something as simple as ensuring the presence of friendly and trained staff is a good start. Or adequate air-conditioning, especially near the cash tills. After all, this is one place where the customer has no choice but to wait and I write this from experience!
The basic retail model is really basic and once retailers latch onto this self-sustaining cycle, the store will attract customers and sustain and succeed as each of the elements would feed off the other and also contribute to and build the other elements.
Now, let’s go back to the story and the most important factor in retail: Location.
Nowadays we find stores of several different supermarket chains on the same stretch of road and in some cases next to each other or opposite each other. Yet, some are doing well while others are not. Why?
If location is indeed so crucial and it is, every store in the same or similar location should do well. Yet, it is not the case.
Also, in any neighbourhood the number of households are limited and might increase marginally, unless one is in a newly developing locality. In such situations the captive consumer base is suddenly offered a choice of stores with very little or no differentiation, coupled with the reality that some or all elements of the retail model might not be in practice. The customers have very few reasons to choose between these stores and be loyal to them. Therefore, often the purchase decision is based on availability, pricing and promotions. This leads to fluctuating sales and obviously a poorly performing store in the long term.
Location, Location, Location is very important, only if a retailer leverages the location to offer the customers a strong enough reason to shop and be loyal to that store. Switching stores is a zero-risk game for the customer.
Lastly, a friend of mine, a regular supermarket shopper, recently lamented: “When these supermarkets started, it was so nice. It would be different from my old shops. Nowadays, I often wonder which store I am shopping at. Each looks and feels almost the same. The only thing is that there are different boards in different colours. If you removed that, what is different?”
I think this customer has captured one of the most important and crucial issues that dog corporate retail today. It is not different enough!
Let me end with a thought that used to be a successful operating motto in the early days of Indian retail: “It is not rocket science. Think like the customer. After all, you are also one!”
The writer is a retail professional with extensive multi-format exposure in India. He has been a part of the team that pioneered organised retail in India and has been associated with most retail organisations.