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Festive discounts, online shopping and retail evolution in India

October 9th, 2016 by Devangshu Dutta

P. Karunya Rao of Zee Business in conversation with Devangshu Dutta, Chief Executive, Third Eyesight and Narayan Devanathan, Group Executive & Strategy Officer, Dentsu India, about festive discounts, the evolution of ecommerce and retail business in India.

 

Posted in Apparel, Branding, Consumer, Customer Relationship, e-commerce, Footwear, India, Lifestyle & Fashion, Market Research, Marketing, Retail, Soft Goods, Strategy, Technology, Textiles, Uncategorized, VIDEO | No Comments »

Café Coffee Day – steaming or sputtering?

April 24th, 2016 by Devangshu Dutta

(Published in the Financial Express, 10 May 2016)

In about 20 years, Café Coffee Day (CCD) has grown from one ‘cyber café’ in Bengaluru to the leading chain of cafés in the country by far.

In its early years, it was a conservative, almost sleepy, business. The launch of Barista in the late 1990s and its rapid growth was the wake-up call for CCD — and wake up it did!

CCD then expanded aggressively. It focussed on the young and more affluent customers. Affordability was a keystone in its strategy and it largely remains the most competitively priced among the national chains.

Its outlets ranged widely in size — and while this caused inconsistency in the brand’s image — it left competitors far behind in terms of market coverage. However, the market hasn’t stayed the same over the years and CCD now has tough competition.

CCD competes today with not only domestic cafés such as Barista or imports such as Costa and Starbucks, but also quick-service restaurants (QSRs) such as McDonald’s and Dunkin’ Donuts. In the last couple of years, in large cities, even the positioning of being a ‘hang-out place’ is threatened by a competitor as unlikely as the alcoholic beverage-focussed chain Beer Café.

CCD is certainly way ahead of other cafés in outlet numbers and visibility in over 200 cities. It has an advantage over QSRs with the focus on beverage and meetings, rather than meals. Food in CCD is mostly pre-prepared rather than in-store (unlike McD’s and Dunkin’) resulting in lower capex and training costs, as well as greater control since it’s not depending on store staff to prepare everything. However, rapid expansion stretches product and service delivery and high attrition of front-end staff is a major operational stress point. Upmarket initiatives Lounge and Square, which could improve its average billing, are still a small part of its business.

Delivery (begun in December 2015) and app-orders seem logical to capture busy consumers, and to sweat the assets invested in outlets. However, for now, I’m questioning the incremental value both for the consumer and the company’s ROI once all costs (including management time and effort) are accounted for. The delivery partner is another variable (and risk) in the customer’s experience of the brand. Increasing the density through kiosks and improving the quality of beverage dispensed could possibly do more for the brand across the board.

The biggest advantage for CCD is that India is a nascent market for cafés. The café culture has not even scratched the surface in the smaller markets and in travel-related locations. The challenge for CCD is to act as an aggressive leader in newer locations, while becoming more sophisticated in its positioning in large cities. It certainly needs to allocate capex on both fronts but larger cities need more frequent refreshment of the menu and retraining of staff.

An anonymous Turkish poet wrote: “Not the coffee, nor the coffeehouse is the longing of the soul. A friend is what the soul longs for, coffee is just the excuse.” There are still many millions of friends in India for whom the coffee-house remains unexplored territory, whom CCD could bring together.

Posted in Branding, Consumer, Customer Relationship, Entrepreneurship, Food & Grocery, India, Market Research, Marketing, Product Development and Design, Retail, Strategy, Supply Chain, Uncategorized | No Comments »

Hyperlocals, Aggregators: Developing the Ecosystem

January 21st, 2016 by Devangshu Dutta

Aggregator models and hyperlocal delivery, in theory, have some significant advantages over existing business models.

Unlike an inventory-based model, aggregation is asset-light, allowing rapid building of critical mass. A start-up can tap into existing infrastructure, as a bridge between existing retailers and the consumer. By tapping into fleeting consumption opportunities, the aggregator can actually drive new demand to the retailer in the short term.

A hyperlocal delivery business can concentrate on understanding the nuances of a customer group in a small geographic area and spend its management and financial resources to develop a viable presence more intensively.

However, both business models are typically constrained for margins, especially in categories such as food and grocery. As volume builds up, it’s feasible for the aggregator to transition at least part if not the entire business to an inventory-based model for improved fulfilment and better margins. By doing so the aggregator would, therefore, transition itself to being the retailer.

Customer acquisition has become very expensive over the last couple of years, with marketplaces and online retailers having driven up advertising costs – on top of that, customer stickiness is very low, which means that the platform has to spend similar amounts of money to re-acquire a large chunk of customers for each transaction.

The aggregator model also needs intensive recruitment of supply-side relationships. A key metric for an aggregator’s success is the number of local merchants it can mobilise quickly. After the initial intensive recruitment the merchants need to be equipped to use the platform optimally and also need to be able to handle the demand generated.

Most importantly, the acquisitions on both sides – merchants and customers – need to move in step as they are mutually-reinforcing. If done well, this can provide a higher stickiness with the consumer, which is a significant success outcome.

For all the attention paid to the entry and expansion of multinational retailers and nationwide ecommerce growth, retail remains predominantly a local activity. The differences among customers based on where they live or are located currently and the immediacy of their needs continue to drive diversity of shopping habits and the unpredictability of demand. Services and information based products may be delivered remotely, but with physical products local retailers do still have a better chance of servicing the consumer.

What has been missing on the part of local vendors is the ability to use web technologies to provide access to their customers at a time and in a way that is convenient for the customers. Also, importantly, their visibility and the ability to attract customer footfall has been negatively affected by ecommerce in the last 2 years. With penetration of mobile internet across a variety of income segments, conditions are today far more conducive for highly localised and aggregation-oriented services. So a hyperlocal platform that focusses on creating better visibility for small businesses, and connecting them with customers who have a need for their products and services, is an opportunity that is begging to be addressed.

It is likely that each locality will end up having two strong players: a market leader and a follower. For a hyperlocal to fit into either role, it is critical to rapidly create viability in each location it targets, and – in order to build overall scale and continued attractiveness for investors – quickly move on to replicate the model in another location, and then another. They can become potential acquisition targets for larger ecommerce companies, which could acquire to not only take out potential competition but also to imbibe the learnings and capabilities needed to deal with demand microcosms.

High stake bets are being placed on this table – and some being lost with business closures – but the game is far from being played out yet.

Posted in Apparel, Consumer, Customer Relationship, e-commerce, Entrepreneurship, Food & Grocery, Footwear, India, Lifestyle & Fashion, Market Research, Marketing, Retail, Soft Goods, Strategy, Supply Chain, Technology, Textiles, Uncategorized | No Comments »

The Relationship between Consumers and Brands

April 17th, 2015 by admin

Panel Discussion moderated by Mr. Devangshu Dutta, Chief Executive, Third Eyesight at the Indian Retail Congress 2015 (17-18 April 2015). The panel included Mr. Manish Mandhana (Managing Director of Mandhana Industries with the brand Being Human), Mr. Sanjay Warke (Country Head of Toshiba India), Mr. Tanmay Kumar (Chief Financial Officer of Burger King India), Mr. Kinjal Shah (Chief Executive Officer of Crossword Bookstores) and Mr. Ranjan Sharma (Chief Information Officer of Bestseller India, with the brands Vero Moda, Only, Jack & Jones).

Retail India and Etail India conference - Manesar - 2015-04-17

Posted in Apparel, Branding, Consumer, Customer Relationship, e-commerce, EVENTS, Food & Grocery, Footwear, India, Lifestyle & Fashion, Market Research, Marketing, Retail, Soft Goods, Strategy, Textiles, Uncategorized | No Comments »

The Business of Government – An 8-point agenda for Growth

May 17th, 2014 by Devangshu Dutta

(If you’re in a hurry, go to the Slideshare presentation, and bookmark this post for a complete read later.)

These pages usually focus on the consumer and retail sector, its constituents, its problems and the opportunities therein.

The consumer and retail sector is all about choice, and it is worth noting that we’ve just concluded what was possibly the most massive consumer event in the world.  I’m referring, of course, to the Indian elections, where more than 500 “consumers” were bombarded with above-the-line and below-the-line marketing by various organisations pushing their brand, product (candidate) and services (ideology and manifesto).

The sum total of analyses of India’s 2014 election results already exceeds what one sane person can read in a lifetime. The BJP and its allies have won a majority of seats unprecedented among non-Congress alliances, in the first-past-the-post system. While opinions may be fractured, the Parliamentary mandate is clear.

In this context and in this spirit, it is also relevant for us to take the big picture view. Retail is a sector that touches the lives of virtually every citizen of this country on a daily basis. So anything that affects their lives and their aspirations have a direct bearing on the retail business as well.

India’s citizens are creative and entrepreneurial. They are hungry for growth. While they are respectful of heritage, they are also devastated by the decline that has come about over decades, centuries, and are determined to change this situation. What they need is the government to shoulder its responsibilities.

If there is one narrative that can pull diverse, divided strands of opinion together, it is “inclusive growth”.  Throughout his campaign Narendra Modi has repeated the mantra: “Sabka Saath, Sabka Vikas” (literally “all together, development for all”).  In recent weeks, on more than one occasion he has extended this to mean pulling together the efforts of leaders across the political spectrum as well. At the time of this writing, the Prime Minister elect Modi has already set out to manage expectations. He has positioned himself as “mazdoor (labourer) no. 1”,  and is asking the electorate for 10-years, making it amply clear that there is no magic broom to remove the dirt of corruption overnight, nor a magic hand that will conjure out ever-increasing incomes out of bottomless magic pockets.

While there are many problems to be tackled at the macro and the micro-level, I think the “business of government” can be captured broadly in an 8-point agenda, and each of these has a significant bearing on the consumers of this country, and the businesses they transact with:

1. Healthcare: While India’s average life-expectancy has improved steadily since Independence it still hangs in the mid-60s while China’s and Brazil’s is over 73. India offers less than one bed for every thousand of its citizens, while both China and Brazil are well over 2. The United Kingdom, whose National Health Service is constantly lambasted as being “overstretched”, offers about 4 hospital beds per 1000 people, and the average for former British colonies is also around 4. Public healthcare infrastructure in India – from primary to speciality – remains critically under-funded, and the public hospitals that exist are chronically under-equipped and under-staffed.  Where equipment exists, it is underutilised, as commission-seeking individuals refer patients to the burgeoning private clinics and hospitals. Over the last decade or so private healthcare providers have achieved prominence in the media and among investors, and concessional access to public infrastructure and assets such as land, but they have proved to be consistently out of reach of the general public. Livelihoods and family savings are routinely destroyed in the search for better-quality healthcare in the new, profit-maximising business models. Health should be every citizen’s fundamental right, as one of the foundation stones of a strong nation. It is a right that is denied daily to hundreds of millions. Providing health support is the core business of the government, and needs urgent attention and substantial investment dispersed nationally.

2. Power:  India’s power consumption average is about one-third of the Chinese average and less than a tenth of the USA, and this is not only because Indians have smaller homes or live more frugally, but because hundreds of millions of Indians spend most of their days and nights without electricity. If you think you can get a sense of the deprivation from a household that gets power a few hours a day, you actually have to visit one where power availability has improved due to grid power or micro or off-grid availability through solar or biomass units – the enormous impact that the improved power availability has on the lifestyle, livelihood and quality of life can only be truly gauged then. Across the nation, private participation has been invited into the power sector at different times, but the execution has been mixed.  Private companies would also like to serve those areas where population concentration and decent financials allow the private provider to create a profitable business. Large swathes of the Indian population lie outside of such areas, and the onus is upon the government to provide the required electricity for households to live a fuller life, for students to complete their lessons, for healthcare and administrative facilities to run effectively, for small entrepreneurs to be able to grow their businesses.

3. Clean water: Imagine one train crash every day of the year, each killing all passengers on board. Sounds catastrophic, doesn’t it? Wouldn’t that get some serious attention? Well, it is estimated that around 1600 deaths are caused every day by diarrhoea alone (higher than the train wreck fatalities), and that 21% of communicable diseases in India are related to unsafe water. The problem is not only in far flung villages, but acute even in the largest cities of the country. Both those numbers are shamefully high for a nation that wants to see itself as a global superpower. There are no technological gaps for effectively harnessing the existing water resources, and for maintaining cleaning, distribution and recovery systems – only management gaps.

4. Transportation infrastructure: While India has one of the largest rail networks in the world, at about 20 kilometres per 1,000 sq km of land area it compares unfavourably to highly industrialised European countries (Germany: 115 km per thousand sq. km., UK: 65, France: 53) or even the large less densely populated USA (26 km per thousand sq. km.). On road development India’s picture has improved in the last 15 years, but it still trails world-leading economies in terms of length as well as quality.  Poor transportation systems cut people off from economic opportunities, and force them to migrate to already overloaded cities, perpetuating problems in both urban and rural areas. Historically, all strong nations, democratic or otherwise, have flourished due to extensive, superior transportation networks.  Where people and goods can move quickly and freely, both trade and culture flourish, and build the strongest ties that bind people together.

5. Education: This is another area which has systematically been under-invested in by the government.  From pre-schools to universities, the growth of educational institutions for the last 30-40 years has predominantly been in private hands, where affordability is not the prime driver.  The number of seats in government-run institutions has not grown in proportion with the population, let alone in correlation with the demand. Access remains a problem, as does the quality. There is no reason why government-run educational institutions need to be bad – there are enough examples around the country within government schools and colleges, where organisational systems and individual intent produces excellence. Without immediate and adequate government focus on education, the massive young population of India will go waste, at worst it would be a ticking time-bomb of under-skilled frustrated underachievers.

6. Environment: This might seem like a strange inclusion in this “development-oriented” list. However, it is essential that the environment should be on a list of core items that the government needs to manage well. The government is usually in the news for either not doing enough (such as not monitoring the systematic encroachment in and destruction of the Aravalli Hills) or, at the other extreme, getting in the way by holding back environmental approvals to development projects. Another term for the environment is “the commons”, reflecting that the natural resources belong to the people, together. The commons need not just protection, but regeneration, resurgence. Defence and political experts around the world list climate change and clashes over natural resources as among the highest conflict risks in coming years, and the evidence is frequently visible. When “growth” is measured only by those activities that extract and deplete the common resources, support and encouragement is provided for those individuals and companies that do this the “best”.  It is short-termism and selfishness of the worst sort.  Evidence of large scale climate-related changes and the debilitating impact on civilisations exists around the world and across the span of history; the closest might be the Ganga-Saraswati civilisation that is said to have dispersed due to the depletion of one of its greatest rivers. We don’t even need to forecast huge impacts far into the future.  Millions of Indians increasingly are born and live with chronic diseases that are related to deteriorating air quality, depleted water resources, polluted soils and disappearing vegetation. Indigenous natural species of plants and animals are declining, mostly invisible to the nation at large. A comprehensive, evolving framework is needed that goes beyond short-term planning and management by knee-jerk reactions.

7. Competition: This is an area which requires little investment, relative to the other items on this list, but a huge amount of intent and follow-through.  No economic system is perfect and, indeed, it is the imperfections and discontinuities that provide business opportunities.  When the imperfections are exploited by many, competitive forces balance each other out.  The need to diversify is well-understood by people who care to think about risks.  Concentration of efforts, resources, power behind a few initiatives or organisations can bring about disproportionately good results, but also creates the risk of wipeout.  Diversity is a challenge because it creates fragmentation, but it is also an essential source of innovation, combating not just present risks but future threats as well. Self-moderation is too much to expect from even the most enlightened of large business leaders and even the most progressive of industries. Anti-competitive and customer protection frameworks have improved in recent years, but are still understaffed and underequipped. As the economy grows, so does the need to provide oversight against unethical behaviour by large organisations.

8. Accountability: None of the above can truly happen without transparency in governance, and productivity in public service i.e. respect for schedules, budgets and commitments.  Measures such as Right to Information (RTI) have moved the country several steps up the transparency ladder, but accountability to “service deliverables” is still missing in a vast number of people employed in government departments. Entry into “government service” is seen as a ticket to a reasonably comfortable employment if you are inclined to not rock the boat. The idea is to not question the status quo as far as possible, and to ensure that the outcomes for the “overclass” are taken care of. This attitude needs to change. In fact a small start could be made by replacing the phrase “government service” with “public service” – the business of government is to serve the public at large, and this needs to be recognised and acknowledged by everyone involved in it. Efforts in all the other areas will fall flat if accountability and productivity are not embedded into the money and efforts invested. (Imagine if we could sign SLAs – service level agreements – with each and every individual hired for public service roles!) The roles that accountability brings with it include “upholding the law” and “enabling an environment where each citizen has a fair chance of success”.

Someone else might come up with a slightly different list – this is mine, the seven pillars and the overarching beam. I’ve not listed the areas in any specific order of priority. Some of them need more government intervention, some need less private intervention, a few (such as education) need both.  These are all areas that are the foundation on which everything else is built.  These are the areas which, to a very large extent, determine the levels of dignity with which a country’s citizens lead their lives.

In this day and age, the government is not needed to run steel mills, airlines or even handicraft retail stores.  But without high quality and high availability ensured by the government in the above areas, even the most capable individual will find it easier to build a life and even the best private enterprise will find it more profitable to do business elsewhere in the world.

A much-followed new-generation business leader recently rhetorically asked in a social media post that, if we have an economy swinging towards services with a large chunk of it being technology, “Why do we need government?”

The reasons above, my friend, are why and where we need government, because business is not delivering on these areas in an equitable manner, and these are areas where technology will not necessarily provide all the answers.  We have years of evidence of this, in some cases decades, and it is time we choose to move.

By and large, most people would rather choose to move something, than move somewhere (else). And the retail business will be one of the first to benefit.

 

Posted in Corporate Social Responsibility, Customer Relationship, Entrepreneurship, India, Leadership, Retail, Strategy, Uncategorized | 4 Comments »

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