Just back from spending a family holiday in Mumbai, India after two and a half years and I decided to hit the ground running visiting a few malls and giving the current organised Retail market a review under the lens.

So which places did I visit?: Oberoi Mall in Goregaon, Phoenix Market City in Kurla, Phoenix Mall in Lower Parel and the Reliance Fresh supermarket in Santacruz (West). I also made it a point to do a quick word of mouth review of the big 3 ecommerce websites in India: Flipkart.com, amazon.in and snapdeal.com.

Let’s get the websites out of the way first. All the three websites offer everything under the sun with Flipkart.com having the slight edge when it comes to presentation and the fashion range they carry (thanks to Myntra.com).

The general feedback from friends and family though is that snapdeal.com has been caught out a few times in the area of after sales customer service. I personally found Amazon.in offering the cheapest prices and seamless delivery when comparing items generally found on all the three websites. If it is a consistent experience that you are after then Flipkart.com has the edge.

But it was refreshing to see how much the ecommerce market has moved in India since my last long visit. Buying online comes naturally to today’s teens and youth and the space is full of new ideas and models being trialled out currently. With plenty of investors funds available entrepreneurs should take care to build ideas with a solid revenue generation model and avoid directly copying ideas from the West without tailoring for the myriad combinations that needs to be considered for the Indian market. And I would really love to see an Indian startup making big at the world stage aka Alibaba.

Now moving on to the brick and mortar organised retail. The malls generally have a similar model to the West wherein there are anchor department stores which bring the footfall into the malls and a number of brand signature stores that sit alongside it. The customers are spoilt for choice as every brand conceivable – American, British, European, Asian and home grown have a fair amount of presence and representation.

Here is the challenge though: Unlike in the West where Department stores have invested heavily in creating their own private brands and designer lines, the Department stores rely heavily in having in-store concessions of the very same brands that are being sold in individual stores. There seems to be a lack of clarity and strategy for the big department stores to grow their business organically through solid promotions of their own brands.

And in a similar breath there is a lack of clarity with many of the boutique brands that want to scale and grow quickly through opening franchise stores or own stores without giving thought to cannibalisation and demographics. I found instances where a 2-3 stores of the same brand where within 50-100 metres vicinity to each other.

The stores are still finding their feet with the range they carry and especially international brands such as Mothercare and Debenhams have got their pricing strategy incorrect. There were several instances where items has the UK price printed with the India price printed below – and the India price was a premium to the UK price! Can’t imagine why an item either manufactured or sourced from India or the sub-continent has to be more expensive to buy than in the UK.

A few brands do have got it right though. M&S had their strategy all over the place when they started off in India and they have made a complete turnaround. The range is localised and the pricing is just about right. An interesting thing a heard from a few people is that the M&S brand inhibits prospective customers from walking through the door – a clever branding and marketing strategy is required to get the footfalls to increase. The Zara store looked well organised and had the right blend of range and price – although the staffs were being pushy.

The runaway success though has to be Forever21. The store is big and vibrant, the range extensive and the price point spot on for fast fashion. Just as you would find everyone carrying a Selfridges bag if you are in Oxford Street, I could sense everyone wanted to be seen carrying a ‘yellow’ Forever21 bag! Forever21 has got their branding, range, demographics and pricing spot on in India and the footfall in the stores tell its own story.

So that was a quick round up of India Retail 2.0  – now in its trial and maturity phase. The question is how to keep the instore experience vibrant enough to not fall into the trap that Western Retailers have got it into and keep the stores relevant!

Buying online can save you lots but is not easy to track down the best deals and can be frustrating when something specific needs to be bought at a specific time.

Being an avid online shopper for some time now, here is a quick piece on the different price comparison websites that would come very handy. A quick stroll through these websites will ensure are getting the best deals around and get some extra brownie points when showing off your loot to friends and family.

There are the usual websites that everyone would generally get directed to such as hotukdeals.com, comparethemarket.com, gocompare.com, wowcher.co.uk, moneysupermarket.com and uswitch.com. They are good, does their job and known to everyone. But we need to get into the inside track and what smart shoppers use to steal a deal. Some are known and some are lesser known. A world of advice though, if a price is too good to be true then it is too good to be true! It is best to stick with known retailers and online retailers with a good review record. Here goes the list:

General Online Shopping:

PriceRunner (http://www.pricerunner.co.uk/)

PriceRunner is a good all-rounder when it comes to comparing prices. The website lets you search across categories of products, give a price range, access to reviews. A great feature is that it lets you set price alerts to inform when a particular product reaches a price point you are looking for.

Tracking Amazon

CamelCamelCamel (http://camelcamelcamel.com/)

I am a big fan of Amazon and shop regularly on the website. A good idea is to buy products that ship directly from Amazon and avoid buying form the marketplace unless a seller is reviewed exhaustively. With the breadth of products that Amazon carries it sometimes gets intimidating and a little help wouldn’t be bad. The three camels come to the rescue here. The website lets you track price history of products on Amazon and set price alerts to spot those sweet deals that keep popping up in Amazon regularly.

Air Travel

Cheapflights (http://www.cheapflights.co.uk/)

Planning holidays has become more time consuming that the actual time spent on a holiday. And with airfare rising frequently the earlier you plan the better deals you would be able to bag. A good starting point is to book your flight tickets early and then plan the rest of your itinerary around the travel dates. There are a number of airfare comparisons around, but the one I end up using most is Cheapflights. Clean interface, ability to search deals to decide on your travel dates and price tracking through email alerts keeps me on top of things and help decide.

Special interest in Photography

CameraPriceBuster (http://www.camerapricebuster.com/)

Anyone interested in Photography and planning to invest a small fortune in starting or expanding their kits must have this website on a click. Not the best of interfaces, but gets the job done. I used this website exhaustively to get the best price for my Nikon D7000 and Lenses.

Grocery Shopping

mySupermarket (http://www.mysupermarket.co.uk/)

Here is a wildcard which has caught my eye recently and I would love to hear if anyone uses this website regularly. It is always difficult and not practical to compare individual grocery prices and go supermarket hopping to fill your basket. This website lets you pick the best prices for products across ASDA, Sainsbury’s, Tesco, Waitrose and Ocada and facilitates the online buying process. However, with online Grocery shopping applying constraints such as minimum order value, delivery costs and slots, I am still not warmed up to this idea. Any thoughts?

An eMarketplace, simply put, is an arrangement by a Retailer to offers its customers an extended range and choice by allowing thrid party merchants to sell through their online channels. The Retailer takes a commission for enabling the sale and hopefully build customer loyalty. The idea at first glance makes a lot of sense – to leverage existing investments in the online channel for further monetisation. Lurking beneath the novelty of the idea are several key matters of principles that must be addressed correctly to get the most out of this model. This complexity and dilema is evident by the fact that amongst the big retailers in the UK only Amazon and ASOS have a marketplace in place and Tesco has announced plans for a marketplace to go live this year.

eBay is the worlds biggest example of a pure marketplace. Let’s leave out eBay for this discussion as the business model is completely built around the marketplace in contrast to a multichannel retialer.

Amazon and ASOS have followed different model and philosophy for their respective marketplaces. The Amazon marketplace describes itself as:

‘Amazon.co.uk Marketplace provides a venue for you to buy and sell new, used, collectable and refurbished items–live on our website–on the same page that we display the item new. Marketplace is not an auction–sellers set the price of each item they list.’

Three  important points to note about Amazon’s model:

• First, the seller has to be accredited by Amazon before they are able to sell their wares through Amazon. Amazon encourages both small and large volume drivers.
• Second, Amazon offers its fulfilment infrastructure to be extended to the seller for an additional fee – this is very powerful but may not be suitable for low margin products
• Third, the seller products are sold alongside products directly sourced and fulfilled by Amazon

ASOS describes it’s marketplace as:

‘Where anyone who loves fashion, anywhere in the world, can sell fashion, to anyone who loves fashion, anywhere in the world. ‘

Three important points to note about ASOS’ model:

• The model is centred around social outreach in addition to enhancing monetisation i.e. to spread the word of ASOS around and drive more traffic through social networking
• Marketplace items are sold separtely from ASOS inventories – this is due to the nature of the products and perhaps a strategy to draw distinction
• ASOS promotes its popular sellers through their blog ‘The People’s Runway’

While the rewards are plenty, the biggest issue with Marketplace is twofold:

Branding & Trust: The primary question when deciding upon going down the marketplace route for Retailers what is the acceptable level of risk the brand is able to undertake whilst extending the brand to services and products delivered by virtually anybody and how to minismise this risk.

Retailers need to think through carefully the impact of the failure from the marketplace participant with respect to time, quality or promise on the retailer’s brand. This risk appetite would primarily drive the level of accreditation a seller would need to go through before being able to participate in the marketplace. Equally important is the communication about the marketplace and its intention to the customer both explicitly and implicitly to the customers. Retailers need to clearly define the benefit and boundaries of the marketplace.

Amazon’s positioning is very clear – Their intention is to offer the widest possible choice to the customers through the marketplace and they have integrated the marketplace seamlessly with their own stock for customers to discover (search), explore and purchase. This integration also asserts clear distinction to the customers about the source, seller and other details about around the sale.

Similarly ASOS’ positioning too is very clear – The message is about empowerment and giving the fashion designers and manufacturers a voice. The marketplace is clearly serparted from their own wares but get equal branding and design treatment on the website.

Experience & Logistcs: The other important consideration is how to build the infrastructure and policies to ensure that overall promise of the Retailers offering with respect to customer experience is preserved while operating a marketplace. In order to put an effective marketplace together retailers need to focus on the following areas to pull it all together:

• Integration with the online channel – How are the marketplace products presented? Are the sellers and their terms clearly identified? Is there a good seller profile available? Can customers rate and provide feedback about the sellers?
• Integration with the Sellers – How are sellers onboarded? What facilities are made available for sellers to upload and manage their inventory? How are orders communicated to the sellers?
• Packaging and Delivery – How are the sellers packaging and delivery aligned to the Retailers own packgaging and delivery standards? How to vet the sellers packaging and delivery infrastructure? Can the Retailer extend their own infrastructure to the seller?
• Payment – Who takes the payment? What fees and commercial terms to offer the sellers? How are the payments reconciled with the sellers? What MIS needs to be put in place to ensure transparency?
• Complaints and Customer Service – How to monitor and enforce quality with the sellers? How to receive and manage complaints regarding the sellers? How to promote a culture of competing for quality amongst the sellers?
• Size and scale – How do you forecast the growth of the marketplace? How to scale the infrastructure with the growth of the marketplace? Do you impose restrictions on the size of the marketplace? What to do if a seller in the marketplace becomes or has the potential to become a competitor (think Facebook and Zynga)

The rewards of creating a marketplace are many – increased revenues, better terms with suppliers with increasing clout, building customer loyalty and creating an entry barrier for competition.

The road to creating a marketplace though is riddled with many complexities and the strategy has to include difficult decisions around boundaries and policies that must be adhered by all participants in the ecosystem. The bold and innovative take the plunge and reap the rewards!

Financial Statements for GROUPON INC (GRPN)

Year over year, Groupon, Inc. has seen their bottom line shrink from a loss of $1.3M to an even larger loss of $389.6M despite an increase in revenues from $14.5M to $312.9M. An increase in the percentage of sales devoted to SGA costs from 74.97% to 155.69% was a key component in the falling bottom line in the face of rising revenues.

The above is an excerpt from the Bloomberg Businessweek website summarising Groupon’s Financicals.

A recent report by Deloitte on ‘Switching Channels Global Powers of Retailing 2012’ pegged the composite net margin of the Top 250 Retailers at 3.8% in 2010. This is a testament to how competitive the Retail Industry is and how difficult it is to make money. There were stark outliers in the list though, who stood tall in the list including: Ikea, LVMH, H&M, PPR, Apple, Limited Brands, Liberty Media Corp, S.A.C.I Falabella, AutoZone, Next, Compagnie Financiere Richemont SA, El Puerto de Liverpool, Steinhoff International Holdings.

The outliers are mostly speciality retailers operating in niches such as high fashion, high technology own brands or have very tightly controlled supply chains. The market is difficult for resellers and generalists. Here lies the first problem for a model such as Groupon. The model is a generalist model trying to do many things at once and neither does it deal with its own brands which can enable it to tightly control supply chain and hence margins. The model depends about charging a commission or a percentage of the cost of services being offered by the merchants. The services/products are already discounted by the merchants and hence the margins delivered back to the model are always challenged.

The second and the biggest problem for the Groupon Model is alluded in the opening comments of Bloomberg Businessweek’s summary i.e. the SGA costs attributed to sales. The Groupon model is highly dependent upon building a network of mostly small to medium sized merchants across vast geographies that can at many times be very unreliable. This reach requires huge investment in a distributed sales force that need to be trained on the model and need to bring in substantial volumes to earn their commissions. Attrition is often times very high and the model inherently does not attract the right type of sales talent. The scale required to make the model worthwhile will always demand very high costs to build, motivate and expand the sales force in order for the business to scale.

The vastness of the scale of the model – offers that are local to the customers – essentially translates into a very complex online real-estate of websites. High investment in technology not just to present the offers to the customers but also to manage tracking of the uptake of offers, collection of commission from the merchants and management of cancelation and refunds. The model attracts significantly higher number of cancelations and refunds than the traditional retailer and the process, because it involves third party merchants, in inherently more complex.

The last but critical piece of the puzzle is to honour what is promised to the customer. The model makes it extremely difficult to verify the promise offered by the merchants to the end customers. Customers are often times caught out by the fine prints or are not satisfied the product/services they receive in the end. The complaints process again is very complex as many times there is very little small merchants can offer in terms of compensation or genuine care for their customers. In the process, the brand value and perception of the organisation running such a model suffers and can be damaging in the long term. This is compounded by competition from a lot of me too players who may wish to operate only locally and not deal with many of the issues of scaling.

The Groupon Model may look glamorous and present itself as the new business model of the internet age. However, inherent in the model is reselling of products and services that merchants are ready to offer at a discount because of the shortcomings in their business. Added to this the complexity of the scale required to make this model successful makes it an unviable model in its current form.

Facebook with its over 800 million user base is speculated to generate around $4.27 billion in revenue this year. This is more than double its previous year’s revenue. One thing that is evident from this statistic is the models that Facebook has put in place to monetise its user base has started to bear fruit. This figure still however represents roughly a contribution of only $4/active user and there is plenty of headroom for growing – more so considering around $3.8 billion of this revenue will come from advertising. A lot of attention within Facebook must me on creating new and innovative revenue generation models.

Retailers must take notice of this huge opportunity to drive sales using the social network medium and not just be content to use social network as a branding and loyalty building medium. The power of social networks should be used as a medium to influence buying decisions and increasing conversion rates and eventually basket sizes across channels.

Here are 5 ways on how Retailers can monetise Social across its Channels and improve their proposition to benefit both the customers and its topline:

The ‘Like & Buy’ button

This one has the potential to go viral if executed correctly. Similar to the Facebook’s like button Retailers should publish their own ‘Like and Buy’ button linking to a simple one-step buy process on their online store. Here is how the concept will work: Say I bought a product from a fictitious retailer called ‘Crown Suits’. I liked the product and would be happy to recommend the same to my friends or generally to anyone who may be interested to buy the suit. I post a ‘Like and Buy’ button from ‘Crown Suits’ on my blog providing my honest review and endorsement for the product. The ‘Like and Buy’ button empowers me to become the shop front for ‘Crown Suits’ and facilitate the sale process through me. Crown Suits may potentially get a sale and I as a promoter for the product get rewarded either monetarily or credits for future buys or in other ways for the endorsement.

Power of Ratings

Ratings have been used heavily online to influence buying choice with many online service providers of aggregating user ratings and reviews. The next logical step would be to take the Power of Ratings to the store through the innovation that has been taking place with Electronic Shelf Edge Labels.

Electronic Shelf Edge Labels need to be connected to the back-end social hub to deliver product ratings direct to the shelf label in the store. This is already being trialled out by a few Retailers but needs to become mainstream where such ratings are available for a product and should form an integral part of a Retailers strategy when defining the roadmap for an Electronic Shelf Edge Label form and use.

This idea can be furthered if there is a mechanism for a customer to scan the bar code of the product in the store and get a more personalised review/rating from a social network that the customer trusts.

Trending Display

The internet allows you to aggregate the gamut of customer ratings and reviews provided either within social networks or independently. This data can be used to create trending charts and displayed in the stores either centrally as a large display or in aisles or on Personal Digital Assistants (PDA) mounted on the shopping cart or even on a smartphone app where a user can ‘check-in’.

This could also be used as an input into range and promotion determination within stores to ensure a targeted range based on trends generated by the customers.

Live Demonstrations

The power of social networks on sites such as Facebook or the Retailer’s own website can be use to create ‘interest hubs’ of like-minded customers. These interest hubs can request Retailers to provide demonstrations in the store of specific products e.g. new 3D Television Technology or a task e.g. How to do a £100 Christmas make-over for the house or a method/process e.g. How to cook the perfect Baked Alaska at home!

The Retailer can weave the products it sells as part of these demonstrations and get a interested set of customers through social networks.

Though demonstrations do take place today, however, they are not frequent and do not have a definite strategy behind them.

MTR in India is trialling this concept, albeit in a different way. They have showcase stores that showcase and promote their products and as part these stores have a permanent demonstration kitchen where they hold regular ‘Cooking Recipes’ sessions using their products. Customers walk-in, get their questions clarified with the chef and the products are bought either in the store or through their other channels.

Staff Picks

Staff Picks is an old concept that has to be updated and connected to social networks to influence buying behaviours. Customers are always inquisitive to know if the Retailer’s employees actually use the products that they sell.

Retailer’s need to turn this on its head and encourage all staff to participate in creating a social network of their own on the Retailer’s online channel that captures what the staff are buying and recommending.

This should not be a single recommendation or a chart of recommendation that has been picked and has traditionally been the case, but a freewheeling opinion of the staff that gets aggregated for the customer to have a peek. This could be tied into the Trending Display discussed earlier in the post.

There are many innovative ways a Retailer can look to monetise the Social Network for the benefit of the customer. The list above is a sample to generate models that will work best for a Retailer’s given circumstances and business. A definite social monetisation strategy is a must as buying behaviour will increasingly be driven based on these influence groups and presents an opportunity to drive its range based on the needs of its customers and thus optimise its operations while increasing its topline.

Have a physical store or chain of stores? Don’t have any transactional online presence? There is good news and bad news.

The bad news is that there is a huge online market that you are not tapping into and your competition has already got a head start in winning customers online.

The good news is that many of the brick and mortar retailers with online presence are either only showing topline growth while making a loss or are cannibalising their in-store customers and moving them online without any real benefit to the business.

You may have the benefit to learn from the mistakes from the retailers who have taken an early plunge in eTailing and there are many more interesting models available today to jumpstart your eTailing strategy and ambitions. Let’s focus on 5 secret strategies available to you today to get a headstart to you eTailing strategy and jump ahead of your competition where it really matters: the profits and new markets you can tap from eTailing. These tips can also be used by Retailers that already have an online presence to improve their eTailing offering.

1. Set-up a Facebook store and engage in f-commerce

With over 800mn users Facebook today is a large marketplace on its own. Facebook store offers a fantastic opportunity to build and promote your eTailing channel in quick time with great visibility.  Here is a link to the most popular UK Retailers on Facebook as on July 2011. The interesting thing and the great opportunity is that with some good design, promotion and branding it would not be too difficult to find yourself breaking into the top 10! Retailers have not been paying focussed attention to this channel and those present are treating it as a ‘me-too’ strategy rather than having a serious plan.

2. Be innovative about shipping and deliveries

A new service provider that has great potential is Shutl. They have a model to aggregate the power of local delivery providers and offer a service that promises delivery within 90 minutes or within a one hour window of the shopper’s choice. If your Retail business is in and around the locations that Shutl serves they might just have the solution for you to quickly and cheaply setup a delivery service that matches and betters the best in the land today.

3. Marry iOS-Android-Windows apps and online voucher sites

It is far more easy to build a good app on the iOS, Android or the Windows Phone platform that a full-fledged website. The apps market for Retailers is still less competitive than the traditional web channel and presents an opportunity for new entrants to make their mark.

A good way to build momentum on this channel is to have a sustained focussed campaign that takes benefit of the many online voucher sites and bring the traffic to the apps for conversion. These websites will offer free listing of the vouchers and may take a fee for referral thus offering a low cost distribution and marketing channel.

4. Be smart in using Google AdWords

I heard this fantastic podcast on The Power of Spread Sheets by sitevisibility that talks about using simple but powerful Excel and Google Docs plug-ins to do keyword research. The tools allows for doing comparison and understanding rankings before you make a decision on which keywords to place your bet and get the most out of your Google AdWords budget. These complement the already rich analysis capabilities offered by Google AdWords. A little bit of good time spent on keyword research and combining this with subtle changes made to your website can go a long way to drive traffic and improve chances of conversion, all with a modes AdWords budget.

5. Use innovative ways to stay connected with your customers

The eTailing strategy should focus as much as driving traffic and conversion as it should on ensuring that you build a relationship with your customers that brings them back to your offer repeatedly. Retailers have adopted various means to build and sustain this relationship by implementing their own loyalty programmes, offering personalised promotions and simply by sending regular newsletters for customers who opt-in. All these have a high cost associated. Remember, one to the goals of eTailing is to make it highly profitable as compared to the tradition store.

A good way to trial newsletter or mailings to customer is to use of innovative start-ups such as mailchimp that offer an online service to at a fraction of the cost of building your own system ground up or invest in products with costly licence costs associated with them.

So these are my top 5 secret strategies that new entrants to the world of eTailing can adopt to quickly build an online offer that complements your brick and mortar stores and give the established big boys a run for their money.

Periodically I try and venture into the world of buying groceries online. I buy lots of things online regularly but the truth of the matter is I have never got around completing an order online and getting it delivered. To put it mildly, the task of buying grocery online today is at best difficult and at worst just not worth the effort. So here’s my top 5 reasons on why I am still far away from crossing the tipping line and by groceries online:

Delivery Charges

One would require a Maths degree to go through the complex tables that each online Retailer provides to choose when they can get the order delivered and is a bit like playing Russian Roulette. The best slots are always the most expensive and there is a different rate offered if a minimum order value is reached. It reminds me of the recent uproar caused in USA when Bank of America decided to charge customers for using Debit cards. The bottom line is I don’t like to get charged to get my groceries delivered let alone sit and prod on which is the best time slot and weigh that against the amount of money I need to pay.

I realise that Retailers cannot offer free delivery and a compromise should be reached. The best model that I see winning a lot of friends is Amazon Prime. It offers a Flat fee and increasingly a lot of more value getting added such as with Amazon Prime and Kindle Fire. Why can’t grocery retailers adopt a similar model? Ocado has given it a try; however, it is a much complicated version of Amazon Prime with different options depending on when you want the order delivered.

Delivery time slots

The beauty of shopping for groceries inside the store is that you can do it pretty much at will with many Retailers having stores that are open 24 hours or close late at night.

Buying groceries online takes away that freedom and instead engages you in a complex dance of available and no-available slots and charges.

Pick-up from instore

Offering online groceries poses the Retailers of where to pick the stock from. The most logical model would be to pick the stock from your local store, where you would have shopped otherwise. However, this raises many complexities such as not being able to offer an extended range, insufficient stocks, substitution and issues with logistics. A central fulfilment (or regional) centre solves this complexity for Retailers, but increases the distance between where stock is picked and eventually delivered and is partially responsible for the complex Delivery time slots issue.

From a customer’s perspective the option to order online and pick-up from a store of choice (usually the local store either near home or place of work) would be nearly as effective as the convenience of getting the order delivered at home. This solves 2 issues for retailers of not having to deal with the complexity of delivery time slots and delivery charges leading to happy customers.

Online experience does not match in-store experience

This is an age old argument that Online retailing does not offer the same experience as the real life experience of being in the store. This is further accentuated when shopping for groceries as it is always very interesting for me to walk through the aisles, looking at the various choices, bumping into friends and regular shoppers and the fascinating change in the decor as we move from one festivity to another through the year.

Online shopping technology does not offer ‘Aisles’ to shop from but grids, lists and search boxes to interact with. Searching from products in aisles is more natural for me than combing online lists. The improvements in display technologies will make this less of an issue in the future. Fair credit needs to be given to Ocado who are trying their best to improve shopping online as easy as possible through the use of Avatars, shopping profiles and recommendations.

Online is NOT my local store with my familiar aisles

The final reason in my list is that my local store offers a range that is customised to the demographics of the area. So even though there is a Tesco and a Sainsbury’s near to where I live, I tend to shop always at Tesco because they have an aisle dedicated to Asian groceries. Upon reflection for more than 90% of my visits I do not buy from the Asian aisle, but psychologically and subconsciously it is reassuring that the aisle is there.

It would be great if groceries online can offer to load a template of my store of choice with similar aisles to make the experience that much more familiar and easy. After all much of Retail from a consumer’s perspective is to do with intuition, trust and a sense of comfort than Science!

The past few years have been exciting for Retail. It has been a time of changing customer needs and preferences, economic gloom, broadband revolution and plentiful choice. In a nutshell we can broadly spot 4 main agents of change in the way Retailers conduct their business:

The Return of the Brick-and-Mortar Retailer

It has been the comeback of sorts for Brick-and-Mortar Retailers fighting their way to retain customers against the pure play online Retailers – and they have been winning.

Leaving out the Giants of the online world – Amazon and eBay – it has been tough going for pure play online Retailers to match the combination of convenience, touch-and-feel and experience that traditional retailers with a serious online presence can offer. Take a look at the success of JohnLewis.com in the UK Close to about 20% of their revenues come from the online channel. BestBuy in the US is another good example. They are riddled with the success of various multi-channel initiatives such as:

• Reserve Online and Pick-Up in-store
• Sharing wish-lists and shopping lists across channels
• Store Refunds for purchased made Online

Smartphones in every hand

Smartphones are now mass market and the mobile channel as a serious customer sales and outreach platform is now mainstream. Customers can locate stores, receive personalised promotions, navigate within the store and in some instances complete a transaction using their Smartphones. The most revolutionary aspect of Smartphones is perhaps the delivery of Location Based Services enabling consumers to receive promotions, offers and content based on their location.

Social Retailing

Nearly every Retailer serious about growing their business have invested time and effort in creating and executing a Social Strategy to engage their customers and leverage the collective good will of the social circles to either enhance their brand or create a new ‘Social’ sales channel. Facebook and Twitter has been in the centre of this change by creating a market of their own – big enough for all Retailers to sit back and take notice.

Emergence of NFC

The latest and soon to reach critical mass is Near Field Communication (NFC) technology. Many retailers such as Subway, Pret A Manger and McDonald’s have started trialling and accepting payments using devices that use NFC. This combined with Location Based Services offers a potent weapon for Retailers to attract your attention and for consumers to get the best promotion in the quickest possible time.

The big question now is what is NEXT? The unfortunate outcome of the recent changes is that it would take considerably little effort for all to emulate and replicate each other’s innovations and business models in a short span of time. Retailers need to be thinking now on how they would be differentiating themselves from competition in the coming years.

I have picked 5 trends that could lead this differentiation for Retailers:

Event based Promotion

The problem with Location Based promotions delivered today is that they are not cognizant of the personal preferences or state of the consumer. It favours the Retailer or the service provider i.e. because you are passing by a coffee shop the coffee shop offers you a promotion to come inside and buy a cup of coffee. This does not take into account whether you as a consumer prefer to drink coffee!

The next evolution will be offering consumers promotions based on a combination of their location, preferences, state or stage in life, social network, demographics and the need for a particular service or goods. In other words, Event based Promotion and not promotions that depend on the consumer’s impulse alone.

Foursquare is a good example of a service modelled around the beginning of what would eventually become Event based Promotion adopted by savvy Retailers.

In-Store Transformation

Imagine walking into Debenhams and finding that the one Toaster model that you want is out of stock on the shelf. However, the shelf has an electronic display that suggests that there is additional stock in the store’s Back Room. You click on the display and the shelf is replenished automatically. The store capitalises on what would have been a lost sale and you walk out of the store happy with the product of your choice.

The store experience is the next frontier of change in how products are merchandised, replenished and operations made efficient. The learning that Retailers have developed from completely automating the Warehouse would come is full display in the store. This is quite exciting as the in-store experience, other than the cosmetic change seen so far, will undergo a complete overhaul. So don’t be surprised to see Robots whizzing around in the store trying to replenish the stock on the shelf or your evening gown given the finishing touches in-store through a menu of options you are presented on a kiosk.

Virtual Store meets Physical Experience

This one’s quite exciting and breaks all conventional thinking. Pop-Up stores will have a different meaning all together when virtual technologies meet common public spaces. The use of technology will enable Retailer to create innovative new sales channels as Tesco has just proved by opening a Virtual Store at a Railway Station in South Korea. Such stores require little capital investment, do not have to carry stock and eliminate any wastage. Retailers will increasingly bring their store closer to the customer.

From a consumer’s perspective the advancement in display technologies such as 3D, holographic and projection technologies will mean that everyday devices such as the Television, Smartphones and Refrigerators will be able to virtually provide an experience that mirrors closes viewing and experiencing the product physically. This will enable the Retailers to achieve far greater conversion rates on these devices that what is achieved today.

Rise of the Single Person Retailer

The advancement of technology and services offered in the Cloud would mean that a single person will have the entire armoury to connect and manage the entire supply chain from sourcing products, merchandising and selling the products and delivering the products through drop-ship vendors.

This shall greatly empower the single person artisan, producer and entrepreneur to effectively compete against Retailers who sell mass produced produce by selling unique, individually crafted creations.

The long tail will further get infinitely longer and equally benefit all who want to participate in the trade.

Retailers and Service providers offering ‘Even More Unique’ Services

We have already started to see Retailers changing their business model to offer multitude of additional services to customers such as Banking, Pharmacy, Insurance, Telecommunications and others in an attempt to build loyalty with the customer and up-sell a range of services.

This trend will continue further to Retailers offering ‘Even More Unique’ services such as providing:

• Electricity, Water and Gas tariff plans in-store
• Electronic voting services over self-checkout tills or Kiosks
• Online shopping at the Gym
• Loyalty points conversion to Banking products e.g. Bonds
• Cooking lessons in-store
• Used car Pop-Up showrooms in the parking lots
• Airline ticketing/hotel booking/car rental services over self-checkout tills or Kiosks

Retail has been exciting over the past few years and the pace is only just beginning to pick-up. With the success of the iOS and Android platforms Smartphones have become commodity devices. Add to this the power of internet, robotics and new display technologies are providing a heady mix of opportunities for Retailers to capitalise and differentiate themselves in the future!

Please do write-in with your comments and views on what would you see as the next big trend in Retail.

The Model & its Benefits

Utility (Gas & Electric) companies in the UK and many other countries use a unique pricing & collection model for billing their customers. The companies assume consumption and hence the amount due for the consumption for a defined period e.g. 12 months. This amount is then is then charged to the customer is equal monthly installments through direct debit. The bill is reconciled at defined interval either quarterly or six monthly against actual meter readings and the monthly bill is adjusted accordingly.

The Utility companies typically would use the number of members in household as a measure of ascertaining what the assumed consumption and bill should look like.

Another strategy used by Utility companies is to fix the tariffs for the services for a period of time, albeit for a small premium, so that the customer is cushioned from price increases.

This model has several benefits:

• The Utility Company is able to better forecast collections over a longer period of time
• Makes tasks such as payment by due date easy for the customer through the direct debit route
• As there is no manual intervention required in the process makes the task of the customer thinking of switching suppliers a thought that arises only in the event of a problem or billing discrepancies
• Price fixing for a period of time is a clever way of losing customers to competition by making the customer sticky to their services

With intense competition in the Retail market, customer loyalty – how to develop and maintain, is a top concern for Food Retailers.

Similar Industries

Food Retailers or Grocers such as Tesco, Asda, Morissons, Coop, Waitrose, Aldi, Lidl, SPAR & Netto in the UK and other similar retailers across the geography have several similar traits to the Utility Industry:

• An average basket analysis would show similar month on month consumptions similar to consumption patterns for Utilties
• Consumption is in linear proportion to the number of members in the household
• Product is largely undifferentiated from competition
• Is essential to the customers

This similarity lends to the idea that the Food Retailers can explore the pricing and bill collection models used by the Utility companies as an effective way of building customer loyalty and building confidence is collections over a larger time horizon.

Adoption of this model is a long drawn process and a major strategy shift to reap the utopian benefit of forecasting revenues for the Food Retailers. However, building customer loyalty using this strategy can be looked at more as short to medium term goal.

Favourable Trends

There are a few trends in the Retail Industry that today more than any other time in the past lend itself to adopt the Utility model:

• Essential food items becoming commoditized and undifferentiated
• Increase in the use of the internet channel for doing grocery shopping
• Strong adoption of multi-channel strategy by the retailers
• Increase in the delivery options and reduction in the overall delivery prices
• Efficiency being derived by Retailers from effective route planning and logistics

Unique Traits of Food Retailers

In applying the Utility model for Food Retailers there are a few unique traits and complexities that have to be looked at in adopting and adapting the model:

• Whereas the Utility companies can rely heavily on the number of consumers in the household, a food retailer would have to look at a few more parameters such as sex, children, location and other demographic details
• Frequency of re-pricing the consumption and reconciliation would be different for the Utility companies and food retailers
• Determining the contents of the basket for assuming the monthly charge and making it known to the customer clearly is of importance to avoid large discrepancies during checkout and reconciliation
• The Food Retailer can do a lot more cross-selling with the range of products available with them as compared to the Utility companies and hence promotions linked to this model have to crafted by the Food Retailers

Implementing the Idea for Food Retailers

The idea is a relatively simple one. Look at your customer’s typical consumption pattern and basket either through historical analysis or perceived consumption based on demographic details such as area, number of members in the household and other odd parameters.

Derive a value of the basket and extrapolate it for a period of time e.g. 1 year. Agree with customers a fixed amount every month that could be settled through direct debit. The customer buys groceries through the online channel without having to make payments for each transaction. The customers direct debits are reconciled against the actual value of purchases at set intervals e.g. every 3 months or 6 months.

What’s in it for the customer and for the Food Retailer?

The customer would want to see a clear benefit to adopt such a model. The Food Retailer can create and encourage customer participation through a number of strategies:

• Link the adoption of the model to increased benefits in the loyalty program. E.g. Tesco can give customers additional Club Card points for adopting the model.
• Offer customers discounted pricing for the products that they buy regularly and forms part of the basket used to arrive at their monthly payments
• Offer personalized promotions for the customer based on their buying behaviour through the model
• Easy movement in and out of the model

Retailers have much to benefit from the model:

• Build strong customer loyalty as customers volunteering to enter the model would find it more difficult to switch retailers
• Build confidence in their revenue forecasts as the number of customers in the model increase lending to increased investor confidence and company performance
• Increased revenues through cross-selling products through promotions and impulse buys

Looking at other Industries and models and practices being followed can throw interesting possibilities for Retailers. In times of economic downturn, customer loyalty and revenue forecasting have heightened importance and this model of adopting Utility companies strategies can be one solution towards an innovation for a Food Retailer.