Catalogue Retail in India – Work in Progress


December 6, 2008

By Zainab Morbiwala
Images Retail
December 2008


As the name suggests, Catalogue retailing is a non-store retail format where the retail offering is communicated through a catalogue to the consumers. Mail-order catalogues debuted in 1856 when Orvis began selling fishing gear in USA. In 1872, Aaron Montgomery Ward made an arrangement with the National Grange, America’s largest farming organisation, to offer 163 items of merchandise under ‘The Original Wholesale Grange Supply House’. Ward’s catalogue was followed by one published by Richard Waren Sears, who started selling watches in 1886 through mail-order business. Elaborates Devangshu Dutta, CEO, Third Eyesight, “Catalogue retailing evolved in the west to meet the needs of far-flung towns and rural settlements since regular retail stores could not be established or profitably run in each area.

Since then, catalogues and other forms of non-store retailing including television and the internet marketing have evolved in different markets.

Adds Dutta, “Very often, retailers use catalogues as a complementary channel to store retailing. UK’s Argos, now also in India, evolved its unique catalogue-stores, that turned the model upside-down, making physical stores a walk-in opportunity for the much bigger catalogue from which customers could place orders.” Sharing the success of Argos UK, Andrew Levermore, CEO, HyperCity, says, “Argos UK has annual sales of close to 2.6 billion Pounds annually and the catalogue is present in over 70 per cent of UK homes.”

It has been only about 10 months since the launch of Argos in Mumbai. HyperCity Retail India Ltd, along with Shopper’s Stop Ltd, entered into a franchise agreement with Home Retail Group, UK, to offer a unique multi-channel shopping experience under HyperCity Argos. Currently operational only in Mumbai, the concept will be introduced across India when HyperCity debuts in other parts of the country. Talking about the HyperCity Argos operation, Levermore says, “For us it is the retailing of products through the medium of a book with more than 300 pages, listing over 4,000 products. Catalogue retailing is ‘not’ a promotional leaflet of a few pages that is inserted in the newspaper. It still requires the customer to visit a physical store to purchase the product.” Apart from HyperCity Argos, there is Lovy Khoslfs Elvy, which offers high-end home decor and interior products through a catalogue. An offshoot of export major, Stalwart Creations, Elvy introduced a mail-order catalogue in India three years ago. While HyperCity Argos’ catalogue is currently restricted to the customers in Mumbai, Elvy facilitates customers across India to place orders through their catalogue. Kh9sla says, “Catalogue retailing in India did not really exist when Elvy started out. It was very demanding’ and a very challenging task. We had to be thorough with our processes to meet the high expectations of our customers. “Prior to Argos and Elvy, Otto Burlington was operational in the Indian market (about 15-17 years ago) with Catalogue Burlington. Despite being a pioneer in India and popular in UK, it was phased out very soon. Explaining the reasons for Burlington’s failure, Khosla says, “The three infrastructural properties required to support catalogue retailing – effective telecommunication, easy mode of payments (e.g. credit cards) and a structured distribution set-up – were not in place.” Dutta observes, “Catalogue management sciences are probably not being applied effectively. The shopping dynamics and the operational success factors differ in home shopping and physical stores.”

It is interesting to observe that both HyperCity Argos and Elvy have their standalone stores as well. Shares Levermore, “Having store presence cements the brand in the consumer’s eye and allows the customer to feel the product. When starting out, store presence ensures credibility and safety in the consumer mind.” The catalogue stores of HyperCity Argos offer customers the facility to browse through the catalogue and view the products before making the purchase. High involvement and high investment products across categories such as furniture, technology, jewellery etc. are available on display. Customers also get to see other products at the special viewing and demonstration areas in the store. Sharing whether catalogue retailing can survive without a physical store, Khosla feels, “Yes, it possibly can. However, it might take longer to penetrate the larger database present in the country. For us, a combination of both works.” Commenting on the catalogue design, Levermore says, “There is much science around this and can be learned only with years of experimentation.” As for Elvy, Khosla has made sure to bring out a catalogue based on international standards. Both Elvy and HyperCity Argos launch their catalogues every six months.

According to Khosla, the resistance to catalogue shopping is much higher in India than in any other country. “We need to work much harder to build a comfort level for our customers.” Adds Levermore, “For the Indian consumer, going out for shopping is still very much a leisure activity as there is little competition for leisure in the form of sports clubs or parks. In the West, shopping is often seen as a necessary but somewhat painful experience. This will evolve to be the case in India, but only eventually.”

According to Dutta, the primary challenge to successful catalogue retailing is logistics. “Merchandising, space management, frequency of mailings, offers and promotions need to be managed differently. But possibly the biggest challenge is logistics. Most modern retailers in India are still establishing their logistics framework around the country; and their entry into catalogue retail would take the complexity to a whole new level. Not to underestimate the issue of handling returns. In fashion merchandise, for instance, catalogues can run a return rate of as high as 40 per cent in some products,” he points out. Pumendu Kumar, associate VP, Technopak Advisors, says, “Any kind of non-store retailing, of which catalogue is also a part, is based on the credibility of the seller. The second thing is the range of products being offered and its prices vis-à-vis the market operating price. Unless the retailers are established as strong retail brands, customers will not be very experimental with catalogue retailing. And since prices change constantly in India, printing of catalogues at regular frequency is also a challenge.” Samar Singh Sheikhawat, VP-marketing, Spencer’s Retail Ltd, underlines the two key challenges, “Lack of domestic expertise to run catalogue retailing as a function, and the right merchandise – stock needs to be available to run catalogue retailing as a profitable business proposition and the right category of product needs to be chosen for this format.”

Levermore feels that furniture and large-ticket appliances are the strongest categories for this type of retail. Khosla, on the other hand, believes that as long as the customers have confidence in the brand, the movement of a specific product category is of no relevance. “For a brand to be a part of a catalogue, it must fit the target consumer profile, offer products that fit the assortment and should be able to deliver sufficient margin for the retailer to be profitable,” Levermore states. Dutta observes, “Brands internationally consider catalogues as a retail environment, which is in someone else’s control – so while the additional market footprint is welcome, the margins could be lower and the brand’s image is impacted by other brands in the catalogue.” Giving a brand’s perspective on being a part of HyperCity Argos’s catalogue, Nilotpal Mrinal, brand manager, Remington, says, “Argos is Remington’s largest catalogue retail partner in the UK. We are happy to work with them in India too. However, the concept of catalogue retailing is yet to take shape in India to the levels where it can contribute a considerable share to Remington.”

Technopak Advisors’ Kumat asserts that the catalogue business in India will have higher potential in the years to come. “The key enabling factors will include: customers having less time for shopping, established retail brands, better customer service etc. As the Indian market is spread over a large geography, brands can target thousands of consumers through a catalogue.“

Dutta adds, “Product integrity, predictability, and customer service are key success factors at the ‘frontend’. Customer service needs to be process and systems-driven. And with so many BPOs today, India is probably better geared for back-end customer service infrastructure and management practices to support catalogue retailing. From the point of view of standardisation, products such as mobile phones or durables meet the criterion of standardisation but price dynamics vary hugely – a catalogue can become non-competitive as soon as it is launched.” Levermore feels that India is still very much in the experimental stage and it will not be not possible to clearly predict the model’s full potential for some time.

Sharing suggestions for those in the business of catalogue retailing, Dutta says, “Most Indian retail catalogues have the look-feel of a business-to-business order guide, with a limited grid layout and no excitement! If retailers want to succeed with a catalogue, they should consider it as much a living environment as a physical retail store. In fact, it is a bigger challenge to create a catalogue that is as dynamic and alive as the store itself, considering that the customer’s only interaction with the brand are the pages.” Kumar’s checklist of do’s and don’ts for retailers reads as: “Do’s – price benchmarking with the market, good product range, dynamic catalogue, delivery on time and after-sales service; Don’ts – focus only on building the catalogue without proper attention to fulfilment.”