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The Non-Globalization of Retail

March 10th, 2008 by Devangshu Dutta

In a blog-post a few days ago, I’d expressed my long-held view that retail is not an easily globalized business. (Retail models are not global, and global certainly not inevitable)

Local nuances have a big part to play in the success of a retail business – they could be related to the customer, products, packaging, pricing, customer service norms, government regulation, or anything else from the hundreds of local flavours that retail success hinges on.

An example that I often use is that of Asda in the UK.

When Wal-Mart bought Asda back in the late-1990s, there were cries of doom and gloom, calls for government protection, etc. etc.  However, the reality was that Tesco clearly emerged as the leader, other UK retailers remained strong, even though Asda gained in stature and market share. Wal-Mart’s takeover of Asda may have pushed its competitors to rethink their business strategies and become more competitive. In the UK market, it’s Tesco that is seen as the 800-lb gorilla, not Wal-Mart.  While Asda is a smart retailer (to the extent that possibly even the parent company, Wal-Mart, has learned from it), it does not have the same advantages that Wal-Mart enjoys in the US.

And now comes this news item in the UK newspaper – The Telegraph. Provocatively titled, “Could Asda be kicked out of Wal-Mart?”, it talks about how Wal-Mart considered a partial or complete exit from Asda.

Wal-Mart, like many other retailers who expand internationally, have found that what works at home doesn’t always work overseas – among Wal-Mart’s burdens are Germany (exited) and Japan (underperforming). It is probably too early to tell whether Wal-Mart will achieve its objectives in China, and the Indian business is still to open its doors.

At this time, neither Wal-Mart nor Asda will give credence to the report, for obvious reasons. But the fact is that, like all smart management teams, Wal-Mart’s management evaluates its markets on an ongoing basis, and it has not let historical reasons or sentiments keep it from exiting underperforming subsidiaries (e.g. Germany).

Differences not just in the customers and the market conditions, but even different management styles among countries can throw a retailer’s global ambitions off the planned trajectory.

And these differences keep many a retailer from venturing out of their home market at all. 

Its a “big, bad world out there”, and sometimes it’s good to be just home! ;-)

Posted in Food & Grocery, Retail, Uncategorized | 1 Comment »

The Profession of Social Entrepreneurship

March 5th, 2008 by Sharmila Katre

“Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.”
- Bill Drayton, CEO, chair and founder of Ashoka, a global nonprofit organization devoted to developing the profession of social entrepreneurship

One of the exciting by-products of the increased awareness and practice of corporate social responsibility has been the emergence and growth of social entrepreneurship as a serious social and ‘business’ trend in the last two decades. The potential of successfully marrying the competencies of business generating sources and markets, with solutions to social and environment issues is the main principle that underlies the concept of successful social entrepreneurship.

Today’s social entrepreneur is a dynamic, committed and driven individual who is able to identify sustainable solutions to social problems. He uses earned income strategies to pursue a social objective, and the outcome is directly connected to his commitment to resolve the social or environmental malaise he chooses to address through this enterprise. The profitability of a social entrepreneurship is driven by both financial and social returns, with the financial returns being redeployed into the enterprise to further its growth and sustain the ‘business’.

The future of permanent and lasting social change lies in the ability of these social enterprises becoming independent and self sustaining, moving away from philanthropy and becoming financially independent.

Modern day social entrepreneurship therefore, is actually about sustaining social change and growth through self-sufficiency instead of charitable contributions and government grants and subsidies.

 

Posted in Corporate Social Responsibility, Uncategorized | No Comments »

Modernizing Retail – An Alternative View

March 4th, 2008 by Devangshu Dutta

Picture an upper-middle class consumer out shopping groceries in a large, air-conditioned hypermarket after catching the new movie at the mall.

Global best-practice is the standard here. The aisles are wide enough to allow two shopping-carts to pass each other comfortably, and are organized according to product categories. The shelves are neatly ticketed, and the products equipped with bar-codes to allow for quick checkout. The emphasis is clearly on convenience. But (surprise!) the store has apparently underestimated the demand for the conveniently pre-cut and packaged vegetables. The loose vegetables are going untouched, while the pre-cut packs are almost sold out. Looks like another win for modern retailers.

This scenario would seem plausible to most people who have observed or been part of the growth of modern retailing in a market like India.

The “organized retail boom” and “growing consuming class” are consuming miles of newsprint and eons of airtime, while the malls are the gleaming new temples at which every devotee of retail must pay respect. This is the picture of modernization or organization of the Indian retail sector that comes to the mind of most people.

On the other hand, the picture that comes to mind when one thinks about the traditional sabziwala (greengrocer) is a total contrast. A messy side-street, with the push-carts overflowing with an indifferent mix of vegetables, other than the occasional yellow bell pepper or some other such “exotic” produce. Or the typical kirana shop owner scrawling an illegible list of items and figures on a scrap of paper and handing it over as the “bill” for the groceries one has just bought. Surely, a business model that is not going anywhere fast.

So, to most people, the line between modern or “organized” retail and traditional or “unorganized” retail is quite clear, and the differences quite stark. “Organized retail” usually means large, “corporate” stores that personify the so-called “retail revolution” which apparently is about 3-5 years old, while traditional retail business usually means “unorganized” and “belonging to the past” (or at least, soon to belong to the past).

However, a revolution is when the majority starts getting impacted. When only a few create a change that mainly benefits them, it is a coup.

To anyone who has been involved in the retail sector for longer, in fact, there has been a far more interesting, widespread and ongoing change in the retail business over the past couple of decades, and possibly further back. This is not restricted to a few corporate groups. It is not even restricted to the front-end (store-end) of the business.

The change is created by the feedback loop between customer expectation and the minimum acceptable standard of service which is constantly being moved up. Of course, the newly-minted corporate retailers have a role to play in this. But, more than that, it involves many small changes accumulating organically over a period of time involving individual kirana owners, farmers, wholesale traders, market associations, the FMCG companies and even the migrant villager who sets up a hand-cart that may be stocked daily with rolling credit from the money-lender.

And that is my point. The modernization of retail is an ongoing process, and it is sustainable because it is widespread.

In recent Indian retail history, as customers we may identify a point where we saw the local shop shift from stocks in a dingy back-room to being displayed openly, setting the example for other shops in the market.

But the changes needed were not just at the retailer’s end – they also required the wholesale vendor’s approach as well as the FMCG principal’s approach to begin changing.

Certainly a shift occurred in service standards, when vegetable vendors started taking home-delivery orders on mobile phones – impossible without the wider telecom price-quality revolution. And when credit card swipe machines started appearing in the kirana, something that could have only happened with the support of the banks and their intermediaries.

And the pre-cut packaged vegetables whose demand the hypermarket had underestimated? Well, the sabziwala has that covered as well – beginning with the packs of cleaned baby-corn, this list has now expanded to include pre-shelled green chick-pea (chholiya), cut jackfruit and chopped sarson saag – vegetables that can be quite inconvenient to clean at home when time is scarce.

The impact of this modernization was brought home to me, when I observed a customer reprimanding the local sabziwala for not keeping adequate stock of shelled peas. The interesting aspect was that this was not one-half of an upwardly-mobile DINK couple. The customer here was a domestic helper, whose complaint was that he had many other jobs to get done around the house, and shelling peas was something that was too time-consuming and best “outsourced”!

So, to all those who have the question, “what is the key to succeeding in the Indian retail market”: the key may lie somewhere entirely different from where you have been looking, or the customer-profile that you have been building.

We are surely underestimating the business potential amongst India’s middle and not-so-middle classes – as we would discover if only we were to re-state business objectives and tweak strategy a little bit, and look at the market without high income-tinted glasses.

Posted in COLUMN-Progressive Grocer, Consumer, Food & Grocery, India, Market Research, Retail, Strategy, Uncategorized | No Comments »

The Politics of Organized Retail

March 4th, 2008 by Devangshu Dutta

Recently there was some discussion online about the so-called “politics of organized retailing” in India (on Retailwire).

I believe these are no different from the politics of anything else. There are interest-groups and pressure-groups with different objectives, who pull-and-push economic and regulatory policy with varying degrees of success. In that, India is no different from any other country, whether the US or China.

After China began opening up its economy in 1979, it took more than a decade for it to begin allowing foreign retailers to enter the market, and it was not before domestic retailers were given time to scale up.

Even in the US of current times, there are places where the community would be up in arms at the slightest whiff of a Wal-Mart store proposal.

Even in the UK, the Competition Commission is preparing a report on how retail consolidation is affecting the sector and the consumer.

So the answer to the question about “the politics of organized retail” is: yes, there is politics involved, and if you are an interested party then there is no option but to be part of the politics.

While on the issue about opportunities in the Indian market, I’m reminded of a couple of conversations, one with a client and another with an associate, who compared the Indian market to the US and the UK, respectively, in the 1970s.

My response to them, and to the question above, is: yes, there is tremendous opportunity in India now, as there was in those markets in the 1970s. Yes, in parts the market, the distribution structure etc. may remind you of the US and the UK in the 1970s. But to assume that it will play out the same way would be dangerous.

There are many other cultural, economic and social factors, apart from the infrastructure, to take into account.

My advice to international brands and retailers is as always: approach India as India in the 2008, don’t approach it as the US in the 1970s. Or as China, Brazil or Mexico.

Some pointers that may be interesting: “Slicing the Market” and other articles available elsewhere on the Third Eyesight website.

Posted in India, Market Research, Marketing, Retail, Uncategorized | 1 Comment »

Culture of Caring – a Trump Card for Retailers?

March 3rd, 2008 by Chandni Jain

Among the frenetic activity of large stores opening and the expressed visions of organized retail taking over the market in the past couple of years, the competition is becoming more intense with each passing month. What would set the winner apart is not just the customer experience and satisfaction but also customer loyalty – where, for instance, an “unorganized” kirana store can still beat a much-larger organized retail business due to the intimate understanding of their customer base and micromanagement of the store.

What it would take for the organized retailers to replicate that experience is the people who create a culture of caring. This may sound “soppy”, but only true concern for the customer produces fabulous service from a salesperson. And if the salesperson has true concern, then he / she is probably showing the same concern to others (including colleagues and others in his / her life), and this itself can’t exist in isolation.

Many organised retailers have already made huge investments to put the technology and systems in place in the store. The missing link, however, is bridging them and customer with care and understanding, which is an absolute essential for the front end of any retail business. When time and competition is getting tougher by the day, creating a culture of caring makes great business sense for an organized retailer.

Posted in Consumer, Customer Relationship, Retail, Uncategorized | No Comments »

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