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:
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.)
‘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.)
By Sushmita Choudhury
March 18, 2009
When you know you are not getting an increment this April, does it make sense to splurge on a designer dress? What if it’s a Rs-26,000 Versace dress being offered at half the rate? On hearing about this sale, 25-year-old Bhavna Krishnaraj had only one question: “You mean I get to own Versace for the price of a month’s partying?” Adds the sales executive and part-time actor who divides her time between Delhi and Bengaluru: “I spend over Rs 13,000 on dining out, discotheque fees and weekend driving holidays.”
When the recession started in the second half of 2008, luxury retailers predicted that high-end brands would be immune as their target group would neither tighten their Chanel belts nor compromise on their lifestyles. Six months on, terms like recessionista and chicko-nomics are in and the Richie Rich club is shying away from luxury. This only means it’s party time for aspirational customers like Krishnaraj because high-end brands, desperate to encourage footfalls, are rolling out unheard of discounts, some even going up to 70%.
Some good bargains may be over as this is the time retailers typically start unveiling fresh stock, but don’t lose heart. There are plenty of end-of-season sales that show no signs of ending. Says Abhay Gupta, executive director, Blues Clothing Company, that represents several top labels in India, including Versace: “Discounts encourage the undecided, aspiring customers to be drawn into the client base. India offers a very large aspiring class that wants to get into the luxury bracket and these promotions help.”
|“Given the current economic situation, every retail segment, including luxury, is getting impacted.”
– Devangshu Dutta, CEO, Third Eyesight
Apart from Versace, Ashish Soni and Corneliani are also trying to tempt impromptu purchases by offering 50% discounts. Crave Armani? The world-famous suits at the Delhi outlet are now 40% cheaper. At the Malini Ramani outlet, last season’s creations probably cost less than your mobile phone bill. For example, a dress costing Rs 9,500 last year is now going for Rs 2,000. The good news is that most designer brands also have accessory lines. So even if you can’t make place in your wardrobe for a high-maintenance designer outfit, consider picking up add-ons, be it belts or bags. They cost less than apparel, yet carry the same snob appeal.
In addition, Delhi’s Emporio Mall, which houses only luxury brands—Dior, Harry Winston, Louis Vuitton and Tarun Tahiliani, to name a few—has an exciting month-long promotion under way. Shop for at least Rs 10,000 at the mall, which should not be difficult given the price tags, spin the fortune wheel at the lobby and walk away with guaranteed gifts, ranging from a discount voucher for one of the stores in the mall to free gifts. In addition, if you participate in the lucky draw, you may drive home in a BMW.
The cut-price couture mania is not limited to the capital. Many a luxe store at The Collection-UB City in Bengaluru has announced a sale. For instance, Moschino is selling its inventory at half the marked price. Also at Bengaluru, Samsaara, the multi-brand luxury boutique housing collections by top Indian designers, is offering a 50% discount. If you don’t think Rs 1,500 is too steep for a negligee, then Etam is the place to go. The luxe French lingerie brand has a flat 70% off on its entire stock at its Bengaluru and Delhi outlets.
While recession-proof luxury has been globally established as an oxymoron, the India story stands out. This is one of the very few retailing hotspots where high-brow brands that, as a rule, don’t mark things down, have been compelled to offer rebates. For instance, Versace CEO Giancarlo Di Risio recently commented that the brand’s core customer did not queue up for bargains at post-Christmas sales, but was “on the slopes in St Moritz or on a boat in the Caribbean”. Yet, the outlets in India have not balked at catering to bargain-hunters.
Interestingly, most luxury retailers cringe at linking these bargains to recession. Gupta, for one, quotes surplus choice to explain lower same-store, year-on-year sales. “The same customer is being chased by too many brands in a particular product category. Our margins are impacted by higher costs on rentals and other operational overheads rather than recession, which is more of a mediagenerated hype than reality,” he adds. So some brands are calling it the end-of-season sale, while others term it a promotion and most of them don’t advertise it loudly.
Whatever it’s called, it’s probably your first chance to own designer labels without robbing a bank. You’d better hurry, though. These offers are open ‘only till stocks last’. Also, the bargain bonanza is not going to be there for much longer. Industry experts are unanimous in their belief that demand will pick up again in the next six months.
What if consumers continue to play scrooge? According to Devangshu Dutta, CEO, Third Eyesight, a specialist consulting firm for the retail sector, brands have three backup strategies. One is to mark down off-season merchandise (so there may be another round of sales before the winter collections are launched). Another option is to open discount outlets so long as the brand can generate enough leftover merchandise to keep such outlets running round the year. A luxury retailer may even consider destroying leftover inventory since the loss incurred will be less than the cost of damaging the brand image. One can only hope that the discount store format emerges as the preferred beat-therecession strategy in India.
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.
By Radhika Sachdev
Tuesday March 10 2009
Guess what is clearing off faster on eBay India than the proverbial fresh baked cakes? Jewellery, pen drives, flash memory cards, hard discs and anti-virus software.
Had Sigmund Freud been alive and kicking today, the father of psychology would have read "recession anxiety" in this trend. For despite the low internet penetration in the country (4.9%, according to the Manufacturer’s Association for Information Technology) certain commodities are flying off faster on the net than offline.
Statistics gathered from eBay India (formally Baazee.com) reveal that one of the top-sellling category is jewellery and watches (Rs 8,000 crore). Every sixth minute, a piece of jewellery is sold on the auction site. Other hot categories are clothing and accessories (Rs 18,000 crore), sporting goods (Rs 106 crore), collectibles, home furnishings and musical instruments.
"Lately data portability devices are doing extremely well," says Deepa Thomas, senior manager, Pop Culture at eBay India.
These online shopping trends throw two big myths out of the window. One that the lack of the "touch and feel" factor is the biggest constraint in the path of e-commerce growth in India. And second, that only low value items peddle on the net, namely old books, cassettes, CDs etc.
"During a slowdown people look at buying or disposing off assets in the most cost-effective manner. They want to pay commissions that are a norm in offline transactions," reasons Satya Prabhakar, CEO, Sulekha.com, that projects itself as the online yellow directory of India.
"Shoppers these days are also looking for great offers," says eBay’s Thomas. "Our deals are at least 20-30% cheaper than the store price," she adds. Add to this the missing hassle of finding parking place, running up fuel costs, food and beverage costs etc, and you end up saving quite a bundle. eBay’s ‘price challenge’ and ‘deal of the week’ initiatives kicked off early this year and already, Thomas claims, the site is doing better than the industry rate of growth of 30%, year-on-year.
"Thirty per cent growth rate for the e-commerce industry is not unbelievable," concedes Devangshu Dutta, chief executive of Third Eyesight, a specialist firm in the retail and consumer products space. "Travel has been the biggest driver of e-commerce in the past three-four years. Other drivers are the number of offers, improving connectivity, and growing numbers of consumers who are now comfortable with making online transactions."
According to statistics available with the Internet and Mobile Association of India (IAMAI) based on a study conducted by IMRB, formerly known as the Indian Market Research Bureau (see box below), the e-consumer market (B2C and C2C) in 2007-08 was Rs 9,210 crore. The main driver for the industry, points out Dutta, was online travel (Rs 7,000 crore) followed by e-tailing (Rs 1,105 crore that clubs revenues of online retailers and auctioneers) that now contributes around 12% to the sector. Top players, according to Dutta are Yahoo!’s shopping website, Rediff, Indiatimes, Futurebazaar and TV18’s in.com.
Defining e-commerce as "buying and selling of products and services on the internet or on any other application that relies on the internet," the IAMAI study crumbles the cookie into online travel, e-tailing, classifieds (job portals, matrimony, property and automotive sites), sites dealing with paid content subscription as well as the market for digital downloads, from the internet and mobiles.
On surface, these numbers may appear small compared to the offline organised retail (around Rs 78,400 crore, according to India Retail Report 2009). Says Sankarson Banerjee, CEO, Futurebazaar.com, the e-tailing outfit of Future Group, "Numbers are no indication when organised retail is also just 6% of all retail in India." Banerjee concedes some impact of the slowdown, especially, in high spending categories such as consumer durables, but he hurries to point out that apparel and books have the potential to move even in a downturn. Agreeing with him, eBay’s Thomas says that response to certain categories on the site is so encouraging that overall, these categories are doing better than the industry average of 30%.
"On the classified side," reveals Vivek Pahwa, CEO of Accentium Web, the company that runs Secondshaadi.com and Gaadi.com, "Jobs have the biggest share (Rs 200 crore), followed by matrimony (Rs 100 crore) real estate (Rs 50 crore) and automobiles (Rs 10-20 crore). "Our auto business is hit but matrimony is recession proof," he chuckles.
Again, export-oriented categories continue to do well on eBay, perhaps with access to a wider global berth through the internet. Top on this list is horse saddlery from Kanpur, maritime collectibles from Bhavnagar, sporting goods from Jalandhar, brass trumpets from Meerut and ethnic wooden furniture from Jodhpur. Lately, movie and cricket memorabilia have also begun to do well on the site.
In 2008, eBay set up a separate division by the name of Pop Culture that creates campaigns, autographed merchandise etc for movies and sports companies.
"We did it for Slumdog Millionaire, Sarkar Raj, Jodhaa Akbar, Drona, Contract etc and the response was good," says Thomas. The commission that eBay charges is different for different categories. It’s lower for fast-moving goods, such as technology products and electronics (1%), higher for lifestyle and collectibles (5%) and the highest for books (6%), where there is no listing fee as the category demands bigger display and variety.
As for demographics, 85% of eBay subscribers are male in the age bracket of 18 to 40, mainly from top metros. In addition, Futurebazaar targets housewives. "Over 40% of our deliveries are made outside the top 10 cities," says Banerjee.
Summing up, Dutta says, "Convenience, including the ability to compare prices and products, is possibly the biggest driver for this industry. This is what makes them recession-friendly businesses."
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.
By Raghavendra Kamath
Mumbai March 2, 2009
Raheja-owned department store chain Shoppers Stop Limited (SSL) is pulling out of unviable new ventures and shutting loss-making stores to conserve cash for the company in the ongoing economic downturn.
The retail firm had announced on Friday that it has closed three of its book stores ‘Crossword’ – one at Mumbai Airport, and two others in Chennai and New Delhi. The company also closed its airport retail store ‘Stop & Go’ at Mumbai Airport.
“They were not profitable. We open new stores without much information but, when we close them, we have complete knowledge about operations,’’ said BS Nagesh, Managing Director of Shoppers Stop, while not specifying how many stores the company has closed in the last one year.
Shoppers Stop recently pulled out of a catalogue retailing venture with UK’s Home Retail group under the Hypercity-Argos brand. The decision to wind up operations was taken “…as the business did not meet planned performance levels, (and) to support investments required in the current economic climate,’’ Shoppers Stop had said recently.
The company has also moved out of food business after announcing that its Café Brio outlets would be replaced with Café Coffee Day outlets over the next couple of months. Another brand, Fresh Basket, has become a private label of group firm Hypercity Retail.
“We cannot say that new retail ventures do not work
in the country. Crossword is a profitable venture,’’
In late December last year, Fitch ratings downgraded a Rs 30-crore short term debt and Rs 50-crore commercial papers of Shoppers Stop due to ongoing margin pressures resulting from slower sales growth and losses from new businesses.
“The company’s business has been impacted by slowing growth in same store sales, and the ongoing slowdown in domestic consumer spending,’’ Fitch said.
The company had reported a net loss of Rs 47 crore in the first half of FY 2009. As of 30 September 2008, SSL had a debt of Rs 220 crore as compared to Rs 207 crore in March 2008, Fitch said.
“Indian shoppers still prefer traditional forms of retailing. New formats are yet to catch up in the country,’’ said Devangshu Dutta, Chief Executive of retail consultancy Third Eyesight.
Some of the biggest retailers – such as Reliance Retail,
Aditya Birla Retail, Spencer’s and Future Group –
have closed down their stores and are going slow with expansion
plans as consumers downtrade and defer their big ticket purchases.
While Reliance Retail has closed down 30 stores, Aditya Birla has closed 45 of its unprofitable stores in the last one year. Retail major Future Group’s CEO Kishore Biyani, who was targeting a retail space of 30 million square feet by financial year 2011, now expects to have the space by FY13.
“Retailers have closed stores which are not meeting their expectations. In the current scenario, they are being as conservative as they were being optimistic 2-3 years ago,’’ Dutta said.
Even a report from Edelweiss Securities pointed out how across the board expansion plans are being re looked at because of capital scarcity and reassessment of catchment.
“Given high debt levels and an almost dormant equity
market, the capital for growth has become scarce,’’
the report said.
If Pantaloon added 0.3 million sq ft of space in the December quarter of the current financial year compared to 0.9 million it added in the corresponding quarter last fiscal, New Delhi-based Vishal Retail added only 0.2 million sq ft of space in the just-concluded quarter compared to 0.5 million sq ft it added in the year-ago period.
However, Shoppers Stop added the same amount of space in the December quarter of this year compared to last year’s corresponding quarter.