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December 4, 2009
Reported by Diwakar Kumar
4 December 2009
"Rather than trying to fit the world to our business model, we need to fit the business model to the real world that exists," comments Devangshu Dutta, chief executive of Third Eyesight. At present, in the midst of a tough (but recovering) economic climate, when shoppers appear to have become even more conscious of value for their money, retailers need to re-engineer marketing strategies to trigger growth. Some analysts believe that the focus should be directed on retention of existing shoppers rather than tapping new shoppers who may or may not stay with them in these fickle times.
All retailers spend a significant percentage of their business outlays in engaging shoppers (consumer engagement programs in support of sales promotions, discount schemes, contests and raffles, product bundling and promo items and such). So the adoption of a strategy to repose on existing shoppers – during a slowdown – reduces the risk of drop in revenues in case a plan to attract new shoppers fails.
Additionally, existing customers don’t need to be educated for product offerings and the cost of marketing to them (existing shoppers) is even lower. Hence, at least on paper, it looks less burdensome for a retailer to rest on its existing shoppers until such time the market looks up.
However, depending entirely on existing shoppers does also reek of complacence. While customer retention is critical to any business, all retailers and brands constantly look for ways to appeal to a wider demographic and broaden a potential consumption base. But, where should energies – and monies — be directed during a crunch?
We found some answers through an open poll question we threw out some weeks ago on the website.The question: It’s easier — and cheaper — for a retailer to build on existing customer relationships than to attract new shoppers; The answer: 80.95 per cent of the respondents supported – while 19.05 per cent of them negated – the question.
Responding to the question, S. Sivakumar, chief executive, Agri Businesses, ITC Limited, says, "Insights on existing customers are deeper, leading to superior and personalised offers that deliver greater value to those customers, in turn bringing higher margins. Cost of engagement with the existing customers is also lower than connecting with new consumers. Any retailer`s portfolio, however, has to be a mix of existing and new customers."
Echoing this view, Ravi Pahuja, VP – Operations, Odyssey India Ltd. says, "It`s certainly easier and cheaper for a retailer to build on existing customer relationships than to attract new shoppers. For new customers a retailer has to first attract them to come to the store and then build on the relationship. Having said that, it is important to build relationships with old as well as new customers to run the show."
"Retailers who work on their existing customer relationships also draw in new customers because of the positive word-of-mouth publicity by these customers, so it’s building relationships with old and new customers at single cost," he adds.
"In this era of high customer churn, what is essential is brand loyalty. Once a brand has cemented its relationship with its customers, there is immense opportunity to communicate with this loyal base – allowing for value-adds like customisation and on a one-to-one dialogue basis, which makes the experience much more personal and interactive," comments Manjula Tiwari, chief operating officer, Esprit.
She further opines, "It stands to reason that this method is also cost-friendly as it involves direct communication as opposed to mass media. That being said, one cannot dismiss the signifance of attracting a newer customer base, without which the brand begins to stagnate."
"It is of paramount importance for retailers to build on existing customer relationships (though it is not necessarily easier or cheaper). A positive word from one customer can get you 10 new customers while a negative word can cost you an even larger number of customers," concludes Viney Singh, MD, Max Hypermarket India Private Limited.
Devangshu Dutta
November 23, 2009
Just after noon, on a weekday, I bumped into a family acquaintance at one of the more successful shopping malls in the city.
The question, “What are you doing here?” was underlined by a mildly accusatory look and the subtext, “Why are you spending a week-day shopping?”
My response that I was “working” wasn’t enough; the further explanation that I was doing “research” received a dismissive smirk and ended the conversation. The fact is that I was repeating the time-honoured ritual of RBWA (research by walking around), with its seemingly aimless strolling, sidelong glances, and possibly turning over a hundred items in a dozen shops without reaching for the wallet even once. This is a ritual that is not taught in our temples of management learning. In fact, it is one of the many tens of methodologies that seem to be missed out during the course of our formal education. And very often, what we do get taught is so remote and opaque to most people that they will promptly forget it the moment they walk out of the examination hall.
I was reminded of this walk-about incident during a conversation with two members of the faculty of a professional institute on the subject of research. Most of their students, I had observed, had a narrow interpretation of research – focussed only on consumers being interrogated through a questionnaire. The students were working from the guidance they had received during the previous semesters at the institute.
Unfortunately, the students are not alone – this is also how too many people identify research, including many executives in decision-making positions. I have been frequently puzzled by the confident (brash?) statement I have heard many times: “We don’t need research.” It is only when I probe further do I, and they, discover that while they perhaps don’t need consumer surveys, there are large gaps in their decision making toolkit which can only be filled by inputs from various other kinds of research.
Sometimes the roots of that statement lie in the perception of research as an impenetrable jungle in which it is easy to get lost but difficult to find something immediately useful. Researchers, like all other vocations, have their own professional shorthand (also known as “jargon”) which they sometimes use to identify their own kind, and perhaps sometimes to exclude people who are not from the trade. Very often this jungle is created by “research-as-a-foreign-language”, which many executives are just too apprehensive or too busy to tackle.
But before you pick up the axe and start cutting away at the creepers of bi-variate analysis, quota samples, correlation and projective techniques, let me give you my very simple definition of research which I like to keep in mind when I am asked the question: “Do we need research?”
To me, research is the discovery and collation of diverse pieces of information from various sources, so that it can be analysed using multiple tools, to discover relationships, patterns and directions that can be used to draw conclusions and take decisions.
There is a purpose for which we would discover or collate that information. There may be a set of questions that we need to answer. We need to understand what are the various places where that information may lie, the different forms it might take or the different ways in which we might need to look at the information before anything useful emerges.
And, in the business context (as in many other situations), research is meant to come up with something that is applicable and directly beneficial to the business. So once we’ve got most of the answers we were looking for, it is certainly useful to stop and apply the newly gained knowledge rather than try to refine and perfect it to the infinite degree.
If this definition of research frames the context well enough for you, then you’re on the way to doing and using research well.
Despite the wealth of information available today, far too many bad business decisions are being made in the absence of good information, either because the executives have not bothered to carry out research, or have not had the capability or the time to question the research which is being presented to them.
Worse – perhaps because of the abundant data and the ease of access to it – today many business decisions that turn bad are taken on the basis of information that is presented by someone else (“secondary research” in research language), without questioning the validity of the conclusions, the structure of the study, the context in which the data was analysed. It’s almost as if we couldn’t be bothered to think, because someone has apparently already done the thinking for us – especially if it comes from a “reputable source”. (Ok, that might be smart sometimes. So let me give you a more graphic analogy – could you think of an adult bird regurgitating pre-digested food to feed the chicks? Hmm, not so pleasant an image after all, is it?)
Also, research (especially the number-oriented kind) seems too dry for most people to take in. And I think that is one place market researchers could do themselves a huge benefit if they could tell the story – especially a story with a moral at the end. That is, create the picture for the user as to what all of that information means in simple language, and also show the user how to use the information in the context of his situation or problem. Bedtime stories during childhood and good movies in adulthood work well because there is a coherent narrative, a start, a middle that is interesting and an ending that stays in the mind. You can see the relationships between the characters, and the consequences of those relationships. A good research project report could be seen as something very similar.
Having said that, of course, there are also some researchers go far beyond, who would never let boring facts get in the way of a good story! Apparently a letter to the editor of the National Observer (London) as far back as 1891 complained: “there are three kinds of falsehood: the first is a ‘fib,’ the second is a downright lie, and the third and most aggravated is statistics.” (Mark Twain famously paraphrased this in his autobiography as “lies, damned lies and statistics”.)
How many stores can you think of which are located at sites where their chances of success are exactly the same as that of a snowball in hell? How many products or brand launches come to mind, where you wondered, “what is this company thinking?!” Of course, there would have been pre-launch studies which would have showed just how successful these would be, where the stories were possibly based more on imagination than on facts.
For a decision-maker, the only way to tell the difference between bad statistics (lies) and the true story of the market is to make sure that he or she is equipped with multiple sources of information, and various tools with which to analyse them. Also, if you recall my earlier definition of research, the starting point was the definition of the objectives which a research is supposed to fulfil – if the objectives are vague or undefined, so will the research outputs be.
Numbers (quantitative research) and narrative (qualitative research) can tell us many wonderful stories about the market. Some of those stories are highly imaginative “fairy tales” because of a bad study – that shouldn’t lead us to ignore all the others which can direct us to our objectives.
Devangshu Dutta
November 13, 2009
For someone who loves books and dislikes naming favourites, it’s tough to quickly make a list of only 10 must-read books. There are so many valuable books an entrepreneur can learn from that this list is only a starting point, rather than “the Top-10”. But, then, one of the most important things an entrepreneur can do is to overcome his or her own resistance at some of the most inconvenient times. So here goes!
The thing about lists is that even if you find one item on the list that makes a substantial difference to you, the list has been useful. Among the above, I believe you will find more than one that will create such an impact. Happy reading!
[Column written for The Economic Times, 13 November 2009]
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October 27, 2009
27/10/2009
 Mr Bruce E Bergstrom VP, Vendor Compliance,Li & Fung |
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"Sustainability is a great concept like liberty. We are in a world with many problems and sustainability is the solution. This is the answer given by Bruce Bergstrom, VP vendor compliance of sourcing giant Li & Fung, who tackled the difficult question of What is Sustainable Fashion? at the first-ever Sustainable Fashion Forum held earlier this month. |
Session One:
Moderating the first session, Michael Lavergne, director-Asia, Worldwide Responsible Accredited Production (WRAP), posed to the panel "What does it really mean to be sustainable and what is best practice?"
Adding to his big-picture view of sustainable fashion, Mr. Bergstrom says economics play a strong role in the current approaches to sustainability, while solutions taken from social and environmental perspectives are sure to come.
"Sustainability is now a retailer and brand-driven initiative, but we need to convince the manufacturers to see the benefits of sustainable operation starting with raw materials,’" said Hong Lee, manager of Asia Pacific, Control Union.
But when widespread consumerism drives disposable fashion, is there really a place for sustainable fashion? The answer is yes, according to Janvier Serrano, creative director and founder of The 091/091’s Eco Couture brand, which features bags made from recycled scraps.
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"Although it is difficult to achieve sustainability right now and it is a big challenge, we must do it. We must be open, we must be proactive. We must educate the consumers to go for quality and not quantity," advised Serrano.
Agreed Amy Small, Creative Director at Green2greener, a b2b trade platform for eco-fashion: "Sustainability is a continuous goal, it is to put back the same amount as what you take out". In her opinion, small companies, successful in sustainable production, can inspire big companies to follow.
"Fashion is not only in clothing but it is a lifestyle and attitude of life. We have to be vigilant on sustainability in day to day operation and living. It is important to impress upon the students of today the concept of sustainable living so that it can be passed down to the next generations", said Mary Yan Yan Chan, director of Style Central Ltd, the exclusive agent of Perclers Paris.
Taking questions and opinions from the floor, the panel and audience agreed that a paradigm shift is needed for the fashion industry to tackle sustainability effectively. There is a need to drive innovation. Governments can also play a part, through education and green policies.
Session Two:
Devangshu Dutta, chief executive of Third Eyesight led the 2nd session panelists to discuss "Is Sustainable Fashion Profitable?" He commented that sustainability is not viable in the long term without financial returns and a good business sense.
"Sustainable fashion can be profitable because shoppers today are looking for something more meaningful. Consumers are accepting the concept of reuse and recycle in a creative way", said Olivier Grammont, founder of eco fashion brand Francs-Bourgeois. He described how his company uses second hand materials for handbags and the finished products are selling well in boutiques.
Concurred James Ockenden, director of publishing house Media Karma which specializes in the environmental technology, energy and finance industries. Ockenden citied the case of an olive oil company that used olive pits to generate energy for the plant. The company has now expanded to processing palm oil waste to produce a power supply to 400 households. Ockenden strongly believes that green legislation is the way forward but subsidy for new technology is necessary. He proposed adding ‘government’ to the three pillars of sustainability, that being economics, environment and social.
 Session 2 Panel: Mr Olivier Grammont, Mr James Ockenden, Ms Cassandra Postema, Ms Dong Shing Chiu |
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Meanwhile Carolina Rubiasih, VP sourcing & product development of the SAK questioned whether today’s consumers, who want value-for-money products, are indeed ready to for sustainable options that generally incur greater costs. The younger generation, however, is adopting healthier lifestyles that will likely encompass sustainable fashion. As time goes by, sustainability will be the norm and a way of life and perspective.
Offering ideas on how to be profitable with sustainable products, Ms Rubiasih advises to produce only what you can sell, improve on the design to reduce wastage, use less packaging layers, increase efficiency in logistics and study the tariff code to tap lower tariff categories with minor adjustments to the material & design. Her privately owned company took such steps and yielded good results, outperforming their previous year’s revenue.
Echoing Rubiasih’s emphasis on the importance of design, Cassandra Postema, director of fair trade fashion brand Dialog said "As designers, we have to design a product that can sell and sustain and compete with the regular products. It took People Tree, an eco-friendly company, 10 years to breakeven."
Some audience members felt that sustainability must be price neutral if not cheaper to sell to consumers and noted that supply chain efficiently is critical to profitability, while innovation and good management can bring costs down. It was also suggested that designers should place attention towards engineering so as to produce more efficiency.
Session Three:
In Session 3 Mr Ockenden facilitated the panel to probe into the question of "Who Wants Sustainable Fashion?" People buy fashion for various reasons, but experts often agree is linked to an emotional element. Companies can encourage sustainable fashion purchases by strengthening its ‘feel-good’ factor.
Sustainable fashion is in-demand among fashion brands, but under the financially low-risk terms of cost and time-efficient production, says Mr. Lavergne. NGOs are nudging the concept of sustainability onto the brands and retailers and the social climate is ripe for them to take such a stand.
Meanwhile Mr. Dutta says that general perception of fast fashion is quite wrong; it is actually not about throw away clothing but a management system that can improve the efficiency of the supply chain. Fashion is by nature not a sustainable concept but how can we make it sustainable? He hopes that in 10-20 years time we will truly have sustainable fashion.
 Moderator: Mr James Ockenden, Direct, Media Karma |
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Summary:
The panelists recognise that sustainable business is still in its infancy, and urge the brands, retailers, buyers and suppliers to take small steps towards sustainability. There is no one answer to the complex and multi-faceted issue and finding solutions will require a collaborative effort. Improvements in education, innovation, technology and government policies will make sustainable fashion possible – and profitable.
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October 24, 2009
By Ranju Sarkar
New Delhi October 24, 2009
With retailers downsizing operations, many senior executives from fast-moving consumer goods (FMCG) and telecom who had jumped on the retail bandwagon a couple of years ago are making a quiet comeback.
These include some high-profile names who were in the limelight when the going was good.
Former banker Murlidhara Kadaba, who was head of financial services at Reliance Retail, has moved back to his old industry as senior managing director, Altamount Capital Management, a Mumbai-based wealth management firm. Kadaba, who has worked with Citibank and American Express, continues to be associated with Reliance Retail as advisor.
Amit Bedi, who was the business head for Reliance Retail, has moved back to telecom as CEO for Tata Teleservices, Bihar. Bedi earlier led the marketing operations for Hutchison (now Vodafone) in Punjab.
Then again, Rohit Malhotra, who headed Future Group’s operations in the south, has moved back to Bharti Airtel. So has Harvardhan Soin, a senior HR executive, after a stint with Aditya Birla Retail.
“The slowdown brought in a reality check in retail. Companies today want to pay for a role,” says the CEO of a Delhi-based retailer, who didn’t wish to be named. The slowdown left retailers with excess people.
Devangshu Dutta, CEO, Third Eyesight, a retail consultant, believes that retailers had built a pipeline of people anticipating certain growth, which has toned down in the last one-and-a-half years. For instance, retailers were growing at 50 per cent in square footage (adding new stores) before, a rate that has fallen to roughly 30 per cent in the last 18 months.
In the absence of retail-specific talent in the country, retailers were forced to hire from consumer-facing sectors like FMCG and telecom — that is, “anyone remotely related to consumer”. It worked when retailers were expanding and the only thing that mattered was how many stores they added. The slowdown exposed the weaknesses of this hiring strategy.
Anand Raghuraman, consultant with Boston Consulting Group, says functions that many people were handling were not aligned to their previous jobs. Retailers admit there were problems. Take the marketing function. In an FMCG firm, a marketing head’s job is to create brands and run campaigns. “In retail, brand is what you deliver in the store; the marketing operations are on-ground promotion and, most importantly, your speed of response,” said a CEO.
The sector differs from FMCG in pace and focus. ‘‘It is 5 per cent strategy, and 95 per cent implementation. In retail, the speed of response has to be much faster. In FMCG, you can sit and plan, and implement it in six months. In retail, people have to take calls all the time. In retail, it is about yesterday, today and tomorrow. In FMCG, you can classify customers into Sec A, B, and C but in retail, customers within a city can be different across catchments. When it comes to nuances, it is different,’’ adds an expert.
Besides, many of these executives came from well-established organisations like Hindustan Unilever, which was different from working for a start-up where the processes were not well-defined. ‘‘Some of these executives were disenchanted and struggling,’’ adds Raghuraman.
‘‘You need a different mindset to work in an unstructured environment. The variables won’t be known to you. Sometimes, the stock doesn’t come and you have to go with cash and buy from a distributor, or sometimes even from a competitor,’’ says an executive.
The executives have a different take on their exits. Nitin Tipnis, who moved from Reliance to head Hover Automotive that is developing a sales and service network for Nissan, says he changed from one industry to another because it gave him an opportunity to do something different.
Tipnis, however, says retail is here to stay since there’s no dearth of spending — people are buying more than what they want. “What I am doing is also a retail operation, I am developing an independent marketing, sales and service organisation and deliver customer satisfaction,” he says.
Moderator: Mr Michael Lavergne
Session 1 Panel: Mr Javier Serrano, Ms Mary Yan Yan Chan, Mr Bruce E Bergstrom, Mr Hong Lee 
Moderator: Mr Devangshu Dutta 
Overview of the forum