Survival of the fittest


June 25, 2009

By Sangita Ghosh & Sarimul Islam Choudhury

Thursday, June 25, 2009

By how much has the consumer’s pocket been impacted by the economic crisis? This is a question that has been troubling consumer goods manufacturers and retailers over the past few months. Thoughts on how to emerge from the crisis slowdown stronger and more resilient are keeping most modern retailers busy these days. How the Indian retail industry navigates the current challenges will determine its character and shape in the coming years, experts say.

It has been suggested that investing in innovation during a downturn helps retailers counter depressed consumer sentiments. But it is also said that instead of investing in innovation, concentrating more on value addition of the existing products could result in higher benefits. According to most experts, organisations should focus more on their sales and marketing efforts during a downturn. There are organisations who fortify their positions by investing more in innovation, and there are others who choose to make the same investment in R&D on value addition, during such times.

So, which strategy works better? Last week, IndiaRetailing opened the following statement to debate: "Marketing during a downturn should focus on value and not so much on innovation." The subject received a positive response of 70.49 per cent and a negative from 29.51 per cent of the total respondents.

To further nitpick on the thought, IndiaRetailing opened the floor to individual retailers as to what should be appropriately implemented in the situation.

Sharing his views, Balvinder Singh Ahluwalia, president, Koutons Retail India Ltd, states, "When a market hits a slump, that’s when we realise how it gets into its shell just as a cocoon does. However, I believe that a downturn is no time to stop spending on marketing." On the contrary, it’s the best time to invest in value marketing rather than putting more emphasis on innovation, Ahluwalia advised. "To my mind, brands that increase advertising during a downturn can improve their market share and return on investment thereafter."

Ambeek Khemka, group president, Vishal Retail also believes in this strategy. Echoing Ahluwalia’s opinion, he says that in the current scenario, marketing strategy should be value-driven as consumers are particularly conscious about the worth of currency they are spending.

But the word ‘value’ somewhat can be misleading and can become synonymous to only discounting on prices. Therefore, Asim Dalal, MD, The Bombay Store, doesn’t believe in offering value in terms of discounts at the cost of brand value. "There are supermarkets and hypermarkets, which are selling products at cheaper prices in the mistaken belief of giving value to their customers," he stated. According to him, a slowdown doesn’t necessarily mean that each and every retailer should sell products at lower prices. "One can’t suddenly change one’s focus because of a slowdown. Also, without being innovative, how can a retailer survive?" Dalal argues.

On a similar note, Shriti Malhotra, GM, The Body Shop, iterates, "Without being innovative, how can a retailer offer value to its customers?" In this context, she instances the example of The Body Shop’s marketing initiative during the first quarter of 2009. "We at The Body Shop lowered prices of some of our best selling products in March 2009 and invested heavily in advertising and translating PR communication in regional languages, besides English, to offer value to our customers as well as to reach out to as many consumers in the cities we are operational in." Following the implementation of the strategy, The Body Shop received ‘satisfactory and positive response’ in these markets, Malhotra informed.

Elaborating on the points that the retailers should consider during a slowdown, Ahluwalia states, "A downturn also creates opportunities in the market. Companies should be more efficient at turning marketing investments into revenue, as competition is much lowered overall." During these times, marketing budgets might scale down significantly broadening space for creativity of the marketing professional to come into play, Ahluwalia pointed out, while analysing the situation. "It is the best time to step up your marketing strategy and that too in terms of quality, not quantity. We at Koutons view the downturn as an opportunity to develop an aggressive marketing strategy in response to it."

Devangshu Dutta, chief executive, Third Eyesight remarks that ‘value’ is a much misused word and it gets misused even more during economic downturns. "For many people ‘value’ seems to have gotten equated with ‘discount’. If I were to look at the statement, I would rather re-state it as, ‘marketing during a downturn should focus on true value, and not just discounting on prices’."

According to Dutta, what is important and more significant is that retailers and brands should concentrate more on evaluating the term ‘value’. "For some, innovation in products or services may be termed as value but for many, still, the term is synonymous with discounting on prices," he notes.

It is incorrect to assume that all consumers trade down during an economic downturn and only want cheaper products, Dutta pointed out. "There are also consumers who want the best of the offerings and may even trade up to more expensive products so that they get a better ‘return on investment’ during the time," he concludes.