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Asians in America & the new (old) Indians

March 31st, 2009 by Devangshu Dutta

New American Dimensions and Asian-American advertising agency interTrend Communications has just put out a report titled “Asian Indians in the US”.

It is amusing to come across the term “Asian Indians”…only in the USA!   :-) )

That aside, the executive summary has some interesting insights including:

  • Though relatively new to the U.S., first-generation Indians show many signs of advanced acculturation. However, they often go through an intense retro-acculturation later on life as they begin to realize the uniqueness of their culture. 
  • This group champions American individualism. They respect this value, as it allows them a greater freedom to succeed. Females appreciate this land of opportunity as it creates more possibilities for them to get ahead in life. 
  • Although highly acculturated and proficient in English, most express the desire to preserve their native culture through food, music, entertainment and language, and to pass it along to the next generation. 
  • Though they use a lot of media in English with American content, they still consume a considerable amount of Indian media both in-language and in-content. The younger segment (18-34 yr.) consumes the most Indian media, including television, radio and internet; while the 44-54 group reads the most Indian newspapers.

Retailers in the US might draw a leaf out of British retailers that have significantly tailored their product mix to suit specific immigrant populations. Sure, the UK has a higher proportion of Indians (and other South Asians), but there are enough areas in the US where the South Asian population is high enough to warrant more specific merchandising and marketing. 

When I think of the “Indian stores” owned by someone of Indian or South Asian origin in concentrated catchments of high-income South Asians (LA, Houston, Boston etc.), I can’t help thinking of the opportunities missed by the chain stores.

On a separate note, the study says that some respondents “felt that the Asian classification was negative, an attempt to lump Asian Indians in with the rest of Asia when they have a distinct, rich culture that should stand by itself.” 

I’m sure other communities would also take exception to such “lumping”. 

It is indeed interesting that marketers tend to use the term “Asian”, throwing together diverse cultural and linguistic backgrounds from Turkey in the West all the way East to Japan, and throwing segmentation disciplines out of the window.

(The executive summary is available here.)

Posted in Consumer, Market Research, Uncategorized | No Comments »

Private label price warriors

March 23rd, 2009 by Devangshu Dutta

‘Refrigerated and Frozen Food Retailer’ magazine wrote about price wars in food and grocery retail, between retailers, or between retailers’ private labels and national brands.  

The comments about the difference between retailers’ own brands and national supplier brands are particularly interesting. The question, whether retailers’ own brands necessarily need to be cheaper and whether they can catch up later, is also very acute.

To me, the price difference here is really reflected by the difference between whether you are creating a brand (albeit one that is available only in one chain of stores) or a lower-priced private label. 

A brand needs distinctiveness, a private label is mostly a me-too. A brand needs to build its own relationships and desirability beyond the store it is available in, while private label sells because there is an existing customer for something else that it is knocking-off. (Of course there are private labels that are not me-too and that are distinctive, but they are the exceptions proving the rule, so I would much rather go with the simplified view of the world for now.)

Finally, migrating up the price curve is difficult in the best of times. Believing that it can be done quickly after an introductory low price, in the current economic scenario, would be highly optimistic. 

Price-optimization solution providers believe that retailers can increase private label prices:

DemandTec’s Derek Smith is seeing smaller price gaps between national brands and private label, with private label also adding more tiers. This allows one tier to fulfill the opening price point in a category, with the other tier playing roughly on par with the national brand or even priced above it…

“You also have to understand what price gap is necessary to get the consumer to trade up or down,” depending on your strategy, he adds. For example, you might want to incent shoppers to trade down to your private label, so you get more margin. So… do you raise the price on the national brand, lower the price on the private label, or do a bit of both? Once again, it will depend on your customer set and their purchasing history…

Lyle Walker, VP of marketing, KSS Retail, has seen some of the retailers he has worked with raise prices on their private label without losing sales – thus significantly increasing category profits. ”We build demand models with two years’ worth of POS history, and then dynamically adjust elasticity values based on weekly updates of POS data,” said Mr. Walker. 

Of course, Mr. Walker also qualifies the argument by saying that the increment may be “pennies here and pennies there,” implying that the discount for private label may still remain large enough for the customer not to notice the “pennies” being added on gradually.

Which sort of negates the whole question about whether retailers’ private label can really compete by pricing on par with national supplier brands, doesn’t it? 

(The original RFF article is available here.)

Posted in Apparel, Branding, Food & Grocery, Footwear, Lifestyle & Fashion, Marketing, Product Development and Design, Retail, Soft Goods, Strategy, Textiles, Uncategorized | No Comments »

Exotics Within Reach

March 13th, 2009 by Devangshu Dutta

The Indian consumer market remains one of the most attractive and sustainable markets for international companies. It has even been described as a market of a lifetime by some, meaning that a brand can live through a whole lifecycle of decades if it launches in the market today. The last decade has made the Indian consumer even more visible and desirable to consumer goods companies from around the world.

So it is hardly surprising that many international food and beverage brands have entered the market in the last few years, either by appointing wholesalers as their distributors in the market or, occasionally, establishing a more direct presence through joint ventures or subsidiaries. 

These companies have been helped along by the growth of modern retail chains. These offer a familiar sales environment to most of these companies who sell through supermarket and hypermarket chains in other countries. 

However, the market presents international brands and their distributors with two challenges. 

First, the question whether they should stick to only selling through the more “organised” retail chains. If they do so, they could focus commercially on a limited number of larger business accounts, and service them efficiently as they do the large retailers in other markets. It would also provide them – in the Indian context – an upmarket environment where the display and promotional means allow a more premium positioning.

However, even the largest store chain has a limited footprint, while India’s vibrant mom-and-pop retailers form a much larger platform and continue to reach out to a much larger market than the modern traders. So by focussing on the chain-stores alone, international brands would miss out on the majority of the Indian consumers who do not have a chain store near them, or choose to continue shopping at the traditional stores. 

On the one hand you might think that it is logical to reach out to as many customers as quickly as possible. On the other hand, “foreign” equals “exotic” in the dictionary, which equals mysterious, interesting, glamorous and so on. So some of these brands actually benefit from maintaining an aura of exclusivity, and it helps if their distribution is limited. 

This challenge, therefore, needs to be addressed by each company specifically, keeping its brand and business objectives in mind.  

The second concern is more widespread and includes both the branded supplier as well as the retailer, whether chain-store or traditional mom-and-pop. It is a given that the international brand will share a store environment with local brands. Unless, of course, an international brand creates a separate exclusive branded store (easier to do in fashion and lifestyle products than in food and grocery), or it is only sold in stores which sell only foreign merchandise (of which there are very few).

So the second question is: in the shared retail environment, should the international brands be mingled with local brands and products, or should they be displayed apart from local brands? This question is relevant even if a brand is only present in the modern Indian supermarkets.

Prices of imported merchandise of international brands tend to be high, because the base price can be high to start with, and import duties and other costs push the price up further. So a popular option so far has been to bunch imported brands together at the retail store on one or a few shelves. The reasoning is that these are speciality products, expensive and with a limited consumer base. Shoppers who know about these brands will seek them out, and they are likely to also shop for other imported brands at the same time, so it makes sense to display them together. 

Some brands are happy with this display strategy, because it makes a clear statement that their brand is a premium “exclusive” brand, and it prevents a one-to-one comparison with lower priced local competitors.

However, brands that want to be visible to a wider set of consumers would be unhappy with this arrangement.  Their take would be that by bunching high priced merchandise together, the retailer is creating an area which becomes a dead zone that is avoided by most shoppers. Thus, a brand that could be otherwise sold to more consumers is forced to become a niche product due to the limited visibility.

Regular readers would know that our approach to creating or judging strategy is dogmatic only in one aspect: “to avoid the cookie cutter”. Whether you’re selling meat snacks, exotic meal packs, kettle chips or iceberg lettuce, multiple factors determine whether a particular international product should be segregated or displayed alongside local brands. And that strategy needs to be dynamic.

The first factor to consider is how familiar is the product itself to the customer frequenting the store. Let’s take an imported salsa as an example. In a location where the customers may not be familiar with Mexican cooking, it makes sense to not just display tortillas, salsa, sour cream and beans together, but also to offer samplers and give away recipes. While the salsa may be of an imported brand, the beans may be of an Indian brand, and the tortillas and cream may be from a local supplier. 

In this case, where each component of the meal originated is less important than the fact that the complete meal needs to be presented together to the customer. Putting the imported salsa with other imported products when most of them may not be sure how to use it does not encourage customers to buy it. 

In any case, as familiarity increases with time, the product may become more widely available, other international and national brands may also appear on the shelves, and segregation becomes a non-issue.

The tendency of the store’s consumer to compare and decide on the basis of price – as mentioned earlier – can also be an important factor. In some cases, the product may need to be insulated from this comparison, and placed in a defined area with other high-priced imported brands. In other cases, if the brand is strong enough to stand on its own, it could be placed in high-traffic locations with higher-volume lower-priced brands.

The overall store positioning and product mix have a very large role to play in the decision about segregation. If a supermarket has an upmarket catchment, and carries a higher proportion of premium products, intermingling may be the norm rather than an exception. The customer who is serving herself would probably find it most convenient to have the local and imported baked beans or olive oils displayed together. The price premium may even play to the imported brand’s advantage in such upmarket environments and catchments, conveying some form of qualitative superiority. 

If a store has a wide enough assortment of imported products which are significantly higher priced than local variants, then it may make sense to do an “international corner”. But for this to work, the customer base must already be reasonably aware of the individual products being sold. The international corner also needs to be kept fresh, with new brands and new varieties of product to keep the foot traffic alive and the products moving. Even then, “packaged solutions” and demonstrations are needed to maintain visibility.

Let’s understand one fact – people adapt exotica into their consumption culture so deeply until it you can’t differentiate between the local and the international. Indian cuisine would be incomplete without potatoes, chillies and mangoes. However, the varieties of all three crops available in India today are reported to have been brought from the Americas and west Asia a few hundred years ago. Among companies, Colgate, Vicks, Horlicks and Bata are all international brands that Indian consumers commonly accept as their own. 

Most international companies want to target the millions of Indian middle class households, but their pricing, distribution and retail strategy is too exclusive, conservative and totally contrary to this objective. 

Our suggestion would be: go out as wide as you believe is appropriate, because being invisible does no good to the brand. Put your exotica within the reach of the consumer, alongside competing local products. 

As long as you’re prepared to support the brand, and sustain efforts to encourage consumers to try the product, there would be a time when your brand is no longer treated as exotic. And that would be a good thing, if you’re looking for large numbers.

Posted in Branding, COLUMN-Progressive Grocer, Food & Grocery, India, Marketing, Retail, Strategy, Uncategorized | 1 Comment »

Finely Targeted Advertising on Cable TV – Shades of Big Brother?

March 5th, 2009 by Devangshu Dutta

New York Times reports that Cablevision will provide targeted ads to selected homes based on a variety of criteria. (Cable Companies Target Commercials to Audience).

Department store pioneer John Wanamaker is reported to have said that half his advertising was wasted, but complained that he didn’t know which half it was.

With such targeted advertising on cable, he would have not only been able to tell which half was being wasted, but would have also been able to reschedule it to reach the right audience and avoid the waste. Cable companies with a good consumer database and analytics should be able to figure out who would be watching what shows, and target the ads accordingly (e.g. late-afternoon may trigger fast food ads in households with kids).

The article says: “…Cablevision will use its targeting technology to route ads to specific households based on data about income, ethnicity, gender or whether the homeowner has children or pets…viewers may not realize they are seeing ads different from a neighbor’s. But during the same show, a 50-something male may see an ad for, say, high-end speakers from Best Buy, while his neighbors with children may see one for a Best Buy video game.”

This could, of course, sound very creepy to an average customer who doesn’t want to know that he or she is being tracked.

If fact, the article quotes Marc Rotenberg, the executive director of the Electronic Privacy Information Center, a Washington-based civil liberties group, as saying that the company needs to show that the information “can’t be reverse-engineered to find the names of individuals that were watching particular shows”.

But let’s face it, in today’s environment, if we’re online or on a communications device, there is a good chance that we can be / are being tracked.

We can expect the tug-of-war about consumer privacy to continue, but this is too seductive a tool for advertisers to ignore, especially in a downturn. 

Posted in Consumer, Market Research, Marketing, Strategy, Uncategorized | No Comments »

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