RETAIL ROLL CALL: of indian retail

Visual merchandising (VM): a makeover or a massacre?

2008-07-03T23:58:00.000-07:00

VM is an art, science and business of presenting merchandise in a state of the art retail environment. It is a very powerful tool that can be effectively used to program, channel, and lure customer into impulse buying in the world of cut-throat competition. It is a silent communicator and a bridge of a retailer to connect a customer reinforcing its vision, brand and seasonal themes. And when used successfully, it creates a feel good shopping experience. When I say connecting a customer, it is a very important phrase. It has to be understood that VM should be on the same page as a customer. Overdoing it, will scare customers away with a mind-set it is out of their league, poor show will keep them away for future visits. Having said that since India is riding on aspirations, VM should also implicitly induce raising the bar feel.

In my findings, I have seen poor VM efforts across all organized retailers barring a couple of instances. Looking at quality of overall scorecard of VM, you can almost sense old and stale sab chalata hai attitude. In my opinion it is a very important key result area (KRA) to treat like a step-child. Before discussing VM further, let me touch briefly on its inseparable triplets: store design, layouts; space optimization and planogramming.

Store design and layout: A good store design; interior and exterior, is optimized on types of merchandise, store format, available area, location, demographics, estimated traffic (footfalls), scalability factor, customer circulation plan, browser to buyer ratio and other broad based factors like retail brand and vision,. There are quite a few standard store layouts available labeled according to its customer circulation in aisles in a store. Popular once are radiator, race-track, grid, herringbone, spine and free flow. Wal-Mart layout is a rough herring bone, while Target USA uses race track. For grocery supermarkets, radiator type is very popular. Department store usually uses grid type. High-end luxury retail usually have free-flow layout. All of these layouts have advantages and disadvantages which need to be analyzed while selecting an appropriate one.
Unlike western countries, India has very complicated neighborhood customer profile. Along with that, demographic and population shifts are high. So stores have to be designed to facilitate frequent planogram refreshments and high scalability. So I believe combination of layouts with a good use of displays, end caps, frames and other portable modes of presenting a product will be effective. For presenting a product, there are number of ways; shelving, hanging, stacking, pegging and dumping. An exterior store design need to work very closely with facility planning for parking space, smooth logistics to receive goods and entrance walkway.
Space planning and optimization: A first step towards space planning is analyzing non-selling and selling space. Non-selling space includes aisles, backroom (storage) and functional spaces like customer service office/desk. I have seen aisles in many of the retail stores are not appropriately designed to move customers with baskets and shopping carts/trolleys. Backroom/storage room has to be designed to store maximum and needs an adaptable planogram to facilitate quick restocking. Other important factors in designing non-selling space are product movements, perishable & delicate goods.
For optimal use of selling space proper store layout, storeware (fixtures, displays and merchandise presentation mode) and a planogram is must. Profit per square footage is one of the main KPI of space allocation. Space planning needs to work toward eliminating cold areas of low sells. Space planning should also be modular, so that any subsequent store layout and planogram changes would be easily supported.
Planogramming: A planogram/plan-o-gram/POG/schematics is a pictorial representation of merchandise in as is fashion of retail store. It is a one of the most critical assignment as available selling space is limited and available potential products are always increasing.
Just to make planogram decision more interesting, there are following factors, historical sells, demand trends and seasonality, anticipated schedule receipts, category, sub-category, top brands, high margin brands and private labels, product margins, relations with suppliers, financial budget, number of facings and depth, timeline. Attempts have been made to obtain optimized planogram using optimization techniques of operations research. But defining these parameters and assumptions, constraints are almost difficult and henceforth formulation of a planogram problem. There are no standard types of planogram but few retailers do use a loose standard within category to create a planogram. There are various types of planogramming softwares available which are very productive and make the process faster. Along with planogram, communication on how to do set up is very important, as “lost in translation” has been frequent occurrence. A detailed instruction guide; fast and accurate form of communication medium is very important. It is always good to have trained VM representative carry out initial planogram reset and also train couple of store floor staff on how to restock.
The communication gap between corporate VM team and store personnel is easy to iron out but have always seen challenging process even in countries like US and UK where organized retail has been around for few decades.
Visual merchandising (VM): As I said earlier, VM is an art, science and business of presenting product in retail store. Since it is no exact science also relies on creative and business aspect, there are no strict rules. It is broadly defined by objectives which are usually result of customer feedbacks, business strategy, retail chain vision, demographics, promotions and other increased sells opportunity in the form of events and festivals. VM is just not about displaying products but also about method of displaying like fixtures, displays. VM helps store and chain create its unique image in the minds of customers. It also makes decision on colors, music, lighting, housekeeping as it is geared toward creating conducive environment for impulse buying. It is geared for converting browsing into buying, so the focus has been made to create one on one interaction between a product and a customer. VM also educates and communicates to customer about why customer should purchase a certain product in subtle fashion. With-out bringing out value addition features of a product; customer will not have that fulfilling shopping experience, so VM could effectively be used to connect with customer in that respect to cement long-term relationship. VM should also be done in centralized manner so that there is an overall harmony and customer could easily transition from one state to other state of mind. This is essential especially in big stores. Another aspect of VM is sourcing and making right storewares (Fixtures, displays, hardware used to present the product); there are so many method of presenting a product. It is very important to use the right method depends upon product, type of business, financial budget. VM when managed productively can be used as the most beneficial and cost saving tool to the retail business. Since VM is a cross pollination of art and business with loosely defined objective, success of VM team lies in practical projects with a manageable scope. Realistic performances of measures (KPIs) are also needed to attest its success to the organization.

Dude, where is my customer?

2008-06-01T00:24:00.000-07:00

I belong to one of those Indians who are very optimistic about India’s coming golden age. An organized retail is poised to change people’s lifestyles quite considerably. But at the same time, who can deny calling a spade a spade? In this episode of retail roll call, I am sticking with basic issues in devil’s advocate style. My views are based on watching, observing, shopping (sssshhhh, I never said window shopping) and comparing retailers of different formats in India as well as in USA and Canada.

At the outset, I am very happy to see organized retail business in India is warming up.
Almost everybody & their distant sassy aunt & an ugly fat friend want to come to India to mingle with us i.e. Indian consumers.
I agree, we are getting modern day by day; imported cheerleaders at IPL are a perfect indicator of that but we could never forget what our grandma recommended us in saying Athithi devo bhavah! Also, our average homie is making more and more money and totally capable of buying whatever retailers have been planning on selling.
It does sound like a pretty perfect picture from a romantic Indian movie where romance oozes out thru green fields. But looking at the consumer market for chain-retailers, the romance is in miserable quantity. Along with a teaspoon of the romance, a super size of break-up seems to be around the corner as well. Talking straight, after visiting retailers, I could not help but noticing poor customer turnouts especially on weekdays in comparison with its true potential. In my findings there are lots of factors and issues that need attentions. All of these issues will eventually get ironed out but faster resolution will help a great deal in making our organized retail a deserving success. Following factors I believe are more critical than others, so I am sticking with them for now.
* Real estate
* Store expansion strategies and customer identification
* Store appearance& shopping experience
* Store traffic and Connection building
* Supply chain disconnects
* Customer service
* The exit experience

Real estate
I don’t want to dwell detailed on this much discussed issue as saying anything would be cliché. I agree that retailers say that real estate is a party pooper. They are also doing a great job in combating that evil but I would like to see some efforts in understanding population shifts as urbanization is happening fast. So along with their current endeavors, tapping on to those newer areas should be of a fair consideration.

Store expansion strategies and customer identification: A good store location selection is all about finding where your customers are. In my opinion poor store expansion strategies was a major reason behind K-Mart, USA in 2002 bankruptcy filings.
Bad location store becomes a leech on a retail chain. Most of the chain retailers in India have a disguised shotgun syndrome; they behave as if everybody is their customer. Albeit exaggeration to say that, but I have not seen retailers taking advantage of a type of a customer. A customer in India can be classified into many traits because of religion, geography, caste, rich, poor, urban, rural, language, age, sex, weight, occupation, hobbies and etc. Thorough demographic studies not only would create a certain edge to their store expansion strategies but will also help retailers merchandise and create promotions better. Along with who is buying, who is not buying is also an important analysis to create future opportunities.

Store appearance& shopping experience: One of the greatest opportunities of organized retail lies in capitalizing on freedom-shopping experience to channel customers to buy things they were not really intended to i.e. impulse buying. Freedom shopping is a very psychological ball-game especially when customers have lots of choices for different products and different retailers. Visual merchandizing (VM) plays an important part in that game. Effective VM can greatly leverage impulse buying. I have seen poor performance of VM team all across the board. Poor quality of displays and shelves has been used all around. Overstuffing is another problem; it is a 101 in VM not to make products look ugly by overstuffing. End-caps and pop (point of purchase) displays are much underutilized. Also, I have seen lots of dirty shopping baskets and carts; I really urge some efforts need to be put improve overall hygiene and look everything nice and clean. Overall store appearance greatly reinforces a company’s brand image.
Store layout and facility planning is another problem area. If I have to buy a couple of things, most of chain retailers do an excellent job to stop me from coming into their stores. Most of them do not have parking problem figured out. In my opinion if a consumer on road wants to come into the store to buy something, store has to be designed to facilitate that he will be on the shelf in the least possible time.
An entrance walkway and gate is literally designed to enter at the most one small family at once. Shopping isles pretty much become like traffic-jam in a major metro-city if two shopping carts have to cross simultaneously. I understand square footage issue but there is a obvious scope for improvement.

Store traffic and connection building: The main reason behind success of Wal-mart is its ability to keep high store traffic all the time, at all locations.
If you to go to chain retailers on weekdays, you wonder there are so many things to buy but where the customer is. I really think making a customer into habit of visiting store on regular basis should be high priority. In US, this habit is already fully developed and you can see it yields great deal of impulse buying opportunities to retailers. I would recommend once store opens up in a neighborhood; it is an important aspect that it does a steroid effort for first six months to integrate into the community. Make them feel this store is a part of their life so that when they visit it they will feel home. Giving a good neighbor club card or welcome coupon for inviting them to store for the first month of operation is a good gesture. Smart promotion is a great tool in periodically improving store traffic. I have to applaud an Indian retail on sales promotions. We could teach the West a lesson or two in creating excellent promotional programs. Even though an average store personnel is very co-operative by nature but a simple smile when they come across a customer would enhance that inviting and welcoming vibe. A cash register person not asking if customer found everything OK is like a loosing an opportunity in a connection building.

Supply chain disconnects: Indian retail still has to wake up with the most effective and a greatest savior of American retail industry; a retail business management strategy called vendor managed inventory (“VMI”); where a vendor/supplier manages and ships inventory direct to the stores. I understand inadequate electronics support at vendor (supplier) and absence of strong vendor compliance/integration program is a major no-no for such undertakings in India. VMI is very beneficial tool to be ignored for may be not for all products but definitely more than a few. I would be focusing in detail on Supply chain topics and VMI in my coming segments of retail roll call but here are quick benefits of having a VMI program.
Inventory cost savings through elimination of a bull-whip effect by reducing inventory storage points. It improves inventory turns. It eliminates ill practice to push out excessive inventory stored at a retailer’s DC. It helps backroom staff at store to have optimized inventory to merchandise better. Reduced shipping costs by eliminating supplier to DC shipping as a supplier directly ship to stores. It helps to gain a greater control over issues such as excessive inventory and stock-outs. It helps a retailer’s management resources focus more on analytics. Optimized inventory facilitate frequent planogram (POG) changes to be effectively adaptable to customer needs. Shrinkages and loss preventions are greatly reduced. Discrepancy in a perpetual vs. physical inventory gets enhanced. And I could go on. No matter how intelligent a retailer category manager (buyer) is supplier/vendor knows better about their own product. The real opportunity for retailers lies in capitalizing on a better profit margin by selling the products in its store by not owning excessive inventory at DC.

Customer service: A poor customer service takes the cake home for all retailers. Not only they lack product information but also lack basic customer service etiquettes.
It would not hurt to have a corporate level “SWAT” squad till store makes its mark; where SWAT squad will ensure highest level of customer service and will help store gain an edge. Once people fall into habit of coming to the store and permanent store staff is effectively trained under their supervision, then SWAT team could be moved on to where it is needed next. If a store can not make its success in first six months it would be a great opportunity lost. I have always heard pessimists owing poor customer sales to this and that; bottom-line if you don’t take care of your customer someone else will.
More than necessary staff also has a negative impact on a freedom-shopping experience, as I do not like being watched when I am strolling in a shop; it makes me get out sooner. The more customer spends time in store is always good. One thing is it increases opportunity sales. It also adds to healthy store outlook as more people in a store at time it projects a good image.

The exit experience: The purpose of putting a stamp on a receipt and peeking into a shopping bag by exit security guard is very misleading especially when the store is not crowded. Obviously store wants to keep shrinkage in the form of shop-lifting in check. But I would rather monitor that with store surveillance personnel in the backroom.

As I said earlier, freedom shopping is a very psychological ballgame. When customer exits from store, sub-conscientiously he/she does the calculation and decides under what circumstances he/she would visit the particular store next time. An organized Indian retail is in its infancy with a great promise. Majority of the players have different priorities than fully matured retail chain. But opportunity not gained is opportunity lost. And also some of these issues have a termite effect on a business. I am purposely trying to highlight only few issues in our dirty laundry which give us strongest odor in this episode of retail roll call.