Drivers of Retail Change in India

Retail is the new buzzword in India. Buying ritual has become shopping experience. It is a celebration and entertainment. Lifestyle is changing rapidly. The concept of value for money is gaining importance. The information that the Indian consumer has access to is immense which leads to the freedom of choice and in turn the demand for the differently organized retail formats. The traditional way of retailing is also organized but differently organized. The changing income profiles, change in consumption patterns, changing demographics, diminishing difference between rural and urban India demand the change in the way the retail business is carried out in India.

We all witness to the change in retail in the country. The local Bania has gradually transformed himself into a small supermarket. This change is not only restricted to metros but has rapidly spread over to a smaller cities and towns. The reason for this change is due to the most important element in the whole process i.e. the Indian consumer.

Population

The size of population in India has always made it a large market. 1.10 billion People and almost 40 % of the population is youth which makes it more lucrative market. Aspiration, wants of these people thought are different but it definitely creates the opportunities for the retail trade which keep growing every day. One more aspect of this population is that the 26 % of the population is still below the poverty line but still catering to the basic needs of these people (As per the Maslow’s Hierarchy of Needs) is daunting  task which creates enormous opportunities for retail.

Changing Income Profiles

The definition of income classes vary from one study to another. According to NCAER the average middle class family’s disposable income rose by more than 20% from 1993 to 2006. The middle income and the upper income categories are likely to witness the most significant expansion in the coming decade. The upper and middle class are likely to increase their share in the population from 19.6% in 1995 – 1996 to 42.6% in 2009 – 2010. , a substantial increase, while the middle income group likely to witness an increase from 32.9% to 39.8% in the same period.

Diminishing difference between Rural and Urban India

Rural India amounts to 70 % of India’s population and this itself offers a tremendous opportunity for generating volume driven growth. It is interesting to note that LIC sold 50% of its policies in Rural India in year 2005-06. Of the over two million BSNL mobile phone connections more than 50 % are in small towns and villages. This kind of phenomenon is evident in all type of products and services. So the diminishing difference between the Rural and Urban India is pretty evident. This makes it easier for the marketer to develop and market new goods and services for the Indian consumer.

The rise of the self-employed

Rural India has always been largely self-employed. But now the proportion of the self-employed in urban India has risen to 40% plus, replacing the employed salary earner as the new 'mainstream market'. A Hansa Research Group (HRG) study shows that even in the 'creamy layer', comprising the top two social classes in towns of 10 lakh plus population in urban India, 40% of chief wage earners of households are shopowners, petty traders, businessmen and self-employed professionals.

Unlike the salary earner, the self-employed use products much more to signal success and are also fast adopters of any productivity tools, like cellphones and two-wheelers, that can help them earn more.

Striving

Most Indian consumers, whether rich or poor, want to get ahead in a hurry. From being destiny-driven and resigned, they are now destination-driven and striving to grasp opportunities to earn more in order to construct a better life for themselves and their children. If one were to segment the country into the Arriving, the Striving and the Resigned, the proportion of Resigned has definitely decreased and become geographically concentrated, rather than well-dispersed, as it was earlier.

The rise of the woman

Like the self-employed, women too are saying "I can and I will," and emerging as partners in family progress. Not so much from earning the second income (a mere 23% of Indian households have working wives and that proportion decreases as incomes increase) but by being CEOs of households and intellectual nurturers of their children.

Consumer India

The Indian market is a collection of unique little markets, each with its own values. The forces acting on these little India's trigger different changes for each. There is a rural India in Urban India and rural India in urban India. A rural district in state of Maharashtra is a big market for luxurious cars.

Better connectivity and communication, and the literacy leap, are together increasing the aspiration of the Indian consumers at every level. The reason why these changes drive aspiration is lucidly explained by the well-known anthropologist, Arjun Appadurai, of Yale University: "Imagination is not about individual escape. It is a collective social activity. Informational resources are needed for people to even imagine a possible life, weave a story and a script around themselves, and place products in emerging sequences. Imagination may not always lead to action, but it is a prelude to action."

Most Indian consumers, whether rich or poor, want to get ahead in a hurry. From being destiny-driven and resigned, they are now destination-driven and striving to grasp opportunities to earn more in order to construct a better life for themselves and their children. If one were to segment the country into the Arriving, the Striving and the Resigned, the proportion of Resigned has definitely decreased and become geographically concentrated, rather than well-dispersed, as it was earlier.

That's why, the size and opportunity of the Indian market is not a simple find. Therefore, the question that businesses need to answer is: "What is my target India?" Understanding the target segment is very important while doing business in India so that the product offering is made suitable for the consumer. Changing markets needs new basis of segmentation rather than usual income segmentation or rural/ urban segmentation. For example there is huge market of well being, youthfulness and strivers ready to be exploited. The focus should be on utility of the products to the consumer, usage pattern, drivers of buying behavior needs to made basis of segmentation and then the products to be developed accordingly.

Rationalizing the Dreams

Managing growth is more difficult than managing the downturn. In these difficult times of economic slowdown one has to rationalize the dream to remain competitive. Rationalizing the dreams is also important when you are growing as well. A cautious start in terms of investment, selection of markets, product mix etc could save the marketer from go error which would lead to undesirable results.

Think big, dream big, aim for high is something that we keep reading and listening. There is no harm in thinking big, dreaming big but one also needs to understand where to stop if things do not happen accordingly. Once needs to learn to accept the failures and get on with the life.  One should be able to transform the dream into vision and mission statements and this mission statement should in turn be divided into short term goals. The most important thing is; all this should be measurable and achievable.

Rationalizing the dreams does not mean being pessimistic but being realistic. Understanding what the core competency is? And capitalizing on the same rather than trying to work upon the something very new. A very few corporations have been able to successfully diversify their businesses. Others failed drastically. Dewoo is very fine example of the same. Such was the failure of the Dewoo that they could not even retain their core business. It was a result of Dreaming unrealistically big. There are many of such examples in the past.

In the last few months’ retail investors have lost huge capital in stock market, everything was fine till the market started showing downward trend. People who lost money expected unrealistic profits and in the end traped in to the “Chakravyuv” (a trap). This is one more incident of not rationalizing dream.

We see lot of companies, people coming up very fast the limelight and become the talk of the town but most of times these do not able to manage the growth and then become extinct in no time. This is also due to unrealistic expectation and unrealistic growth.

One needs to accept the facts, have trust in own and organization abilities and clear idea about one’s reach so that the threat of becoming extinct can be avoided. Rationalize your dreams to survive, compete and then conquer.

Small is Big in India

India is complex market to understand. What works elsewhere not necessarily work in India.  Kellogs and KFC are just some of the examples. Then what works here? Shampoo sachet, Nokia1100, Subhiska super market, tier II and tier III cities. What is common among the all? All these are small.

Shampoo sachet was introduced in Indian market to capture the party pack market. People in India do not shampoo every day. It is used on occasions or week ends. So buying 60 ml pack of shampoo for Rs. 70 is definitely not wise decision for a consumer to make. The solution came in the form of sachet. There was always a demand for shampoo; there was a need for that demand to be exploited by removing the bottlenecks that prevented this demand to be visible. What worked in this case was small. Now there is huge market for these products. Consumption of shampoo has gone up by almost 25 % after the introduction of the sachet. Same case is with some other products like Rasna, smaller chocolates, tooth pastes etc.

As far as low priced products are concerned; there are lots of success stories e.g. Nokia 1100, Deccan airways (now Kingfisher Red), Reliance cellular services and many more. Most of these products and services are very successful due to the lower pricing strategy. As far as core benefits are concerned there is no compromise at consumer end but giving up additional benefits at additional price was acceptable. Again what worked was small in this case it was price.

Marketers today are talking about rural market, tier II and tier III cities. The next destination for corporate India is rural India. Even today 65% of India stays in Rural India.

Same case is with the smaller formats in retail. When we compare various retail format (Supermarket, Departmental Store, Exclusive Showrooms, Hypermarkets) in India with that of international counterparts we notice one major difference and that of size. e.g. average size of hypermarket in Europe or US is about 200,000 sq. ft. whereas average size of hypermarket in India is 85,000 sq. ft. This again proves the hypothesis that what works in India is small.

A marketer needs to understand one thing that “Small is big in India”

Feel Good Syndrome

I remember Mr. P. Chidambram’s statement; then finance minister immediately after the debacle of Lehman Brothers and US market collapse. He said that India is decoupled and isolated from the recession fear in US and global financial crisis, our economic will still grow at the rate of about 9%,we have our fundamentals intact and so on so forth. But we all have witnessed what happened thereafter. Indices have gone down almost by 100 %. We started the feeling the heat, slow down in industrial output, job market going down, retrenchment news started coming from different industry, talk about small industry getting into trouble, liquidity crunch. We have hardly heard any good news in the last three to four months on economy front. Was this impact not anticipated? Or it is just the feel good syndrome that we Indian have always been suffering. Even today when we listen to the experts they all still talk about the situation being better than others around the world.

We are a great country; we are a nation with great talent, great culture, great values and great history there are no two things about it. But if something is good that needs to be appraised by others; in our case we only blow our trumpet. My view may sound pessimistic but I think that there is a need to think about it. The above mentioned incidence is not an isolated case. Even recently when Satyam scam came in light, we passed immediate judgment that this is just an isolated case and then followed the news of five IT majors blacklisted by world bank. In the past also an incumbent government lost an election due to the same feel good syndrome. After Mumbai terror attacks, there were talks about resilience of people of Mumbai. We are forgetting the fact that Mumbaikar today is not resilient by choice but by force. For a Mumbaikar it is question of his bread and butter. Same is true about other terror attacks in the last two decades or so, most of the time we see that there is system failure but we are still not ready to accept that there is something wrong in the intelligence information gathering or communication between various security agencies.

I think it is good to be optimistic and we must be proud of our strengths, at the same time we need to learn to accept facts. There are lots of things that we are not good at, lot of things we need to improve. That is only possible when we start accepting things as it is and act accordingly in the best interest of the nation. If we do so the whole world will look at us as a great nation and we do not need to blow our trumpet. Let us get out this feel good syndrome.

Quality for Marketer

One of the most difficult questions for me to answer for last so many years has been: What is Quality? There are hundreds of definitions given by the various books on Quality Management; each one sounds perfect in the given context but generalizing the term is very difficult. Quality is a subjective matter, but very important for any organization to survive and make a mark in the fiercely competitive market. A producer and a customer can view quality differently.  Some of the technically best products may not be commercially successful and vice a versa. For example if you ask people about best wheeler available, you probably get as many answers the no of bikes available. It is very difficult for a marketer to decide what is quality?

Quality needs to be defined in a producer and customer context differently. Let us look at some definitions

Business has tried to define quality in a producer-consumer context, with the following variations:

1.     ISO 9000: "Degree to which a set of inherent characteristic fulfills requirements." The standard defines requirement as need or expectation.

2.     Six Sigma: "Number of defects per million opportunities." 

3.     Philip B. Corsby: "Conformance to requirements." The difficulty with this is that the requirements may not fully represent customer expectations.

4.     Noriaki Kano and others, presenting a two-dimensional model of quality: "must-be quality" and "attractive quality." The former is near to the "fitness for use" and the latter is what the customer would love, but has not yet thought about. Supporters characterize this model more succinctly as: "Products and services that meet or exceed customers' expectations."

5.     Rober Pirsig: "The result of care."

The best definition is given by Dr. Joseph Moses Juran. He was a 20th century management consultant who is principally remembered his work on Quality and Quality Management, writing several influential books on those subjects. He says quality as “fitness to use” and fitness is defined by customer.

This definition is best suited for marketer to understand the term. Here marketer needs to understand what is a best solution to the target customer problem? May not necessarily be the best in terms of technology. e.g. the immensely popular product of the past in two wheeler category  ‘Bajaj scooter’ was not the best technical product but successful as it was for fit to use for its target market. Understanding the target market and what would be suitable for the same is the key for successful launch of new quality product.

Word of Mouth - An Effective Ad Tool

Positive word of mouth publicity is very important of any product to succeed in the market. To take advantage of the same one needs to understand why do people talk about the product and in turn influence the buying behavior of reference group. There are few reasons why I think people are interested in talking about the product.

1.      As a natural tendency of human being every one likes to give a suggestion to others. When they like the product and happy with product performance they want to inform others, in turn spread positive word of mouth for the product.

2.      People like to show off their knowledge to others. This is one of the reasons even if the product is not bought or used, people talk about it. e.g. all the people talking about Mercedes or Bentley it is not necessary that own one. It is quit possible that they have not seen it ever, but they talk about the same.

3.      People like to associate themselves with certain product. Some products are considered as status symbol and prestigious, so when you own one you will talk about the same and inform people that you own the product. People are actually talking about themselves but end up advertising the brand.

4.      People also talk about the product that they buy to check whether their decision of buying the product was correct, and some one has bought the same product for the same price. This is result of post purchase dissonance when customer is not sure about the performance of the product.

Marketer needs to have product which lives up to the customer expectation, brand which is considered to be the prestigious or best in terms of quality and the product which suffers no post purchase dissonance to take advantage of the positive word of mouth publicity, which is free of cost and needs very little marketing effort by the marketer