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December 6, 2008
By Zainab Morbiwala
Images Retail
December 2008
THE HISTORY OF CATALOGUE RETAILING IS INTERESTING. WHAT BEGAN OUT OF NECESSITY, SOON DEVELOPED INTO A CHANNEL OFFERING CONVENIENCE OF SHOPPING FROM HOME. WITH THE TREND OF CATALOGUE RETAILING YET TO GAIN MOMENTUM IN INDIA, MOST RETAILERS – STILL FOCUSSED ON THE BRICK AND MORTAR FORMAT- ARE YET TO FULLY EXPLOIT THE TRUE POTENTIAL OF THE MEDIUM.
THE ROOTS
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.”
INDIA STORY
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.”
PHYSICAL PRESENCE
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.
INTERNATIONAL PERSPECTIVE
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.”
CHALLENGES
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.”
GETTING IT RIGHT
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.”
FUTURE EDITIONS
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.”
