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
October 23, 2009
Trade, of course, has been global for millennia, so it seemed hardly unusual for retailers in the US, and in Europe to begin sourcing from distant countries in Asia where certain items were more readily available or significantly cheaper. Imports have also been encouraged as a political and developmental vehicle to aid friendly countries.
So, on the sourcing-end, large retailers have been comfortably operating beyond international borders for several decades even while the stores-end of their business was entirely domestic.
For most large modern retailers however, after the post-Second World War economic boom their core markets have grown relatively slowly (and rather predictably). While the sheer size of the US market kept American retailers busy domestically, planning and legal restrictions in terms of store size, locations, market share etc. limited manoeuvrability for retailers in Europe.
Among the current major retailers, the early retail explorer, Carrefour set out into neighbouring Spain in 1973 and then into distant Brazil in 1975. Soon after, Dutch retailer Ahold landed in the USA in 1977.
However, it took the opening up of East European economies in the 1990s to really prime the pump for growth of international retail. Suddenly, many more millions of consumers became available to European retailers close to their existing markets – both geographically and culturally – and western European retailers jumped at the opportunity.
At the same time, China seemed to have become steadily more open over the previous decade and in the early-1990s India looked accessible again. Some of the Latin American markets were also steaming up.
And, obviously, the prospect of 3-4 billion new consumers in emerging or developing markets was clearly not going to be ignored. In 2001, post dot-com, another inspiring idea hit the business world that was desperately looking for hope – the golden BRICs – the four countries focussed upon by Goldman Sachs as the biggest economies of the future: Brazil, Russia, India and China.
As incomes grew in these “developing” or “emerging markets”, the hypothesis was that consumer would want products and services similar to those in the more developed markets, creating the opportunity for retailers to cross borders. In the last 15 years or so, retail internationalization (and gradually “globalization”) has become an increasingly acceptable theme – in conceptual thinking, in retail boardrooms, in white papers, and finally in trade and mainstream media. The world has witnessed a network of retail subsidiaries, joint-ventures, franchise and other relationships spreading across continents.
Certainly, through the 1990s and 2000s, growing tele-connectivity, fashion, portable TV programming concepts, movies and print media seemed to give the impression that consumers around the world are becoming more similar, and can be reached by common formats and brands. Led by the FMCG companies on the one hand and fashion brands on the other, insights, concepts, products, formats, advertising campaigns are routinely extended across countries. (Unilever’s TV commercial for Close-Up in West Asia is a great example of this – an Anglo-Dutch company’s international brand of toothpaste, Indian models in Thailand, an Arabic voiceover and a Hindi song (“Paas Aao” – “Come Closer”) by Sona Mohapatra – surely you don’t get more global than that?)
But wait! Is the picture really as clear as that?
In 2006 Wal-Mart pulled the plug on its €2 billion German business that was a combination of German chains that it had acquired. In Russia it still has only a development presence since 2005, though it is reported to be looking at opening 10-15 stores in the following three years. According to Newsweek, Wal-Mart’s 13 year old Chinese business – even after an acquisition that is still to be approved – will have fewer stores than it would have opened in the US just in 2009. In the past it has struggled in Japan and Brazil.
In June 2009, Carrefour opened its first 86,000 sq. ft. hypermarket in Moscow, and a second one soon after that. In September, the company affirmed that the BRIC markets were its highest priority for international growth. However, in October it announced that it was pulling out of Russia. Within 4 months of the first store, Russia has gone from a market with “outstanding long term potential” to being a market to exit. In previous years the company has moved out of Japan, South Korea and Mexico. The Economist reports that significant Carrefour’s shareholders are forcing it to look at selling its Chinese business as well – obviously a move that would be politically very sensitive in China. The same shareholders are also reported to be urging a sale of its Latin American business. For now, the official statement from the company maintains an ongoing interest in all these markets.
Ikea has decided to freeze further investments in Russia, and has decided not to enter India until the Indian government allows 100 per cent foreign ownership of retail operations. It entered China in 1998, and has only 7 stores so far.
Even as Carrefour and Ikea announce plans to pull out of Russia, Russian retailers have pulled out from Ukraine, while Metro is cautious in its outlook about that country. French retailer Auchan has opened three stores in Ukraine since 2007, while the German retailer Rewe has opened all of nine since 2000.
Could the juggernaut of global retail be slowing, stopping or even – shock! – reversing? Are the BRICs and emerging markets falling out of favour?
Before we jump to conclusions, as they say in the television world: please don’t adjust your sets. As the French author Karr wrote: “plus ça change, plus c’est la même chose” (the more things change, the more they are the same).
It is a fact that, no matter how international or global a company becomes, when it gets to the business of retail, it needs to be intensely local. While elements of the business – concepts, products, people, money – can travel across borders, it is extremely difficult to take across an intact retail mix and expect to address a significant portion of the population in the new country. And given how important scale is to mass retailers, lack of localization would be a significant hurdle.
A company sourcing products from a developing country can fully expect his suppliers to adapt to his practices and customs. On the other hand, the same company entering that country as a retailer needs to do exactly that – adapt to the customers – rather than expecting them to fall in line because the “best practice” manual dictates certain processes or because central merchandising found some deals that were great for the home market which are totally irrelevant in the new market.
However, there are encouraging signs that retailers looking to grow internationally understand this more and more. Tesco, for one, has been following a localized approach in Thailand and South Korea, while Carrefour, Ikea, Wal-Mart have all steadily modified their approach in China and other markets. Wal-Mart’s cautious steps in India, including the stores opened by its joint-venture partner Bharti, are a complete contrast to the aggressive “plans” that were being reported in the press 2006-onwards. Recently Wal-Mart’s international chief C. Douglas McMillon was quoted by BusinessWeek as saying “we know you can’t run the world from one place”.
For the larger international retailers this means that, the benefits from international scale would be limited by the amount of localization that they carry out in their operations. For smaller and local competitors that are based in an emerging market this means a fighting chance to remain in business and even remain market leaders.
Lastly, as far as all the dark clouds gathered over international retailing and all the retreats being announced – stay tuned – this weather will change, too.
Devangshu Dutta
October 8, 2009
Here is a summary of the Sustainable Fashion Forum, and some more pictures from the afternoon.
And here is a previous article on sustainability and corporate responsibility.
Devangshu Dutta
September 14, 2009
The dark clouds of recession and rain seem to be lifting just a little bit. Governments have been energetically throwing seeds of stimulus and economists are eagerly spotting “green shoots”. The festive season is around the corner, with anticipation of higher sales.
So perhaps it is time to cheer. Or perhaps not.
In the recessionary environment during the last year or so, ‘cutting back’ rather than ‘building’ has been the philosophy for most businesses.
The implications of these cut-backs are not always visible in the place you have originally made the cuts. But, unfortunately, they inevitably impact the area which should be the last to be touched: customer experience!
The problem arises not so much from the cut-back. Obviously if the business prospects are looking negative or less positive, the management needs to adjust its expectations and also its expense and investment framework.
No, the problem lies in the fact that most such initiatives are internally focussed. Whether it is supply chain (“lean inventory”), operating strength (“fewer people”), merchandise rationalisation (“narrower range and fewer brands”), the implications and benefits that are identified are mostly internal to the business. The driving philosophy is that “a penny saved is a penny earned”.
During the navel-gazing we forget the fundamental principle that the purpose of a business is to deliver a set of goods or services to meet the customer’s needs and expectations; if those needs are not served, the business interest is not served either.
Here are a few examples from the recent past:
These are all companies that have spent millions on store-fronts, real estate, IT systems, brand logos and hip advertising. After all, those are the visible vehicles for the brand and the brand promise.
Unfortunately, because of the internal disconnect between the strategic intent and the operational reality, these millions are now dripping down the drain, one customer relationship at a time.
Which brings me to one significant area of concern – the people who interface with the customer.
In western economies, due to the high cost of manpower, consumer-facing businesses are run on the basis of highly system-driven processes, lean staffing and a self-help orientation, whether the customer is interfacing with a call-centre or with a physical retail store. There are also significant cultural and infrastructure differences that make these models work in those economies.
In modernising countries such as those in Asia, it is quite understandable that the new consumer-facing companies are trying to emulate western “best-practice” models. However, often they falter on two accounts.
Firstly in these relatively hierarchical societies, customers don’t want to feel “help-less”. They may not exactly enjoy an intrusive sales associate, but they enjoy even less the feeling that there is no one around who can help when they want it. A number of retailers have failed this “quantity” test in the last few months.
Secondly, it is not just a “warm body” that is needed to ask a polite question and smile brightly, but someone who is empowered and feels accountable to solve the customer’s specific issue. That is a “quality” issue. Part of it is related to the huge gap between the personal context of most consumer-facing staff and their customers’. The other, significant, issue is the culture of accountability – that the salesperson or the service executive makes the effort to understand and solve the customer’s problem, rather than only focussing on following the law laid down in the operating manual. These needs can only be addressed through training – lots of it, and repeated liberally – and creating a culture that, top to bottom, is focussed on the customer.
Analysts have said that recessions are a great time for the good companies to separate themselves from the rest. That is true to an extent.
However, I believe that in recessions many companies, bad or good, suffer due to circumstances beyond their control – it is in the recovery after the recession that is a much tougher filter.
When the customer’s mood is beginning to move up, so are his or her expectations. Companies that have not cut muscle along with the fat, companies that have not only focussed on themselves in the downturn but have remembered the customer at all times, are the ones which will manage to retain their customer relationships. And will grow faster.
Devangshu Dutta
August 9, 2009
At the end of 2006, in an article about market segmentation, I’d proposed a customer segment called “Cafe Workers” who look at coffee-shops as inexpensive real-estate to work out of. These include professionals, start-up entrepreneurs, small businesspeople and travellers into a city. (Click here to open the PDF file of the article “Slicing the Market“.)
But now, amidst the recession, apparently it is one positioning that some coffee shops don’t want to buy into. The Wall Street Journal reports that there is a backlash from many coffee shops towards customers who enjoy the use of free wi-fi and spend hours occupying tables that should be turning over more. (No More Perks: Coffee Shops Pull the Plug on Laptop Users). Many of the comments on the article are sympathetic towards the cafe owners, calling such customers “moochers”.
While the dismay of cafe owners over customers who abuse the facilities is understandable, could they be doing themselves harm by actively discouraging laptop use? Wi-fi is just one of the sticky aspects of a ‘hanging-around’ culture that the cafes have encouraged in the first place as part of their business model.
By and large, wi-fi enabled cafes around the world are more expensive than the ones which are not. Wi-fi goes along with the more premium positioning, and they should be able to balance the space premium lost on long-term wi-fi users with the grab-and-go customers who are paying higher prices without using the facilities.
That said, in specific cafes or at specific times of day or days of the week when there is a bottleneck, they should be able to limit the length of the IP-lease.
All it takes is a bit of thought and a tiny application of technology, not total disruption of the business model.
