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Multichannel for Multifold Growth – Panel Discussion at the Delhi Retail Summit 2013

Organised by the Retailers Association of India the Delhi Retail Summit this year (10 May 2013) focussed on multi-fold growth for retailers utilising multiple channels to the consumer, with panel discussions and presentations by industry leaders who shared their experiences in exploiting the opportunities and dealing with the strategic and operational challenges of their varied businesses. Some snippets from the first panel discussion, comprising of the following panelists:

  • Devangshu Dutta, Chief Executive, Third Eyesight (Session Moderator)
  • Aakash Moondhra, Chief Financial Officer, Snapdeal.com
  • Atul Ahuja, Vice President – Retail, Apollo Pharmacy
  • Atul Chand, Chief Executive, ITC Lifestyle
  • Lalit Agarwal, Chairman & Managing Director, V-Mart Retail Ltd.
  • Rahul Chadha, Executive Director & CEO, Religare Wellness Ltd.
  • Sandeep Singh, Co-Founder & CEO, freecultr.com
  • Vikas Choudhury, COO & CFO – India, AIMIA Inc

 

1. Devangshu Dutta, Chief Executive, Third Eyesight (Session Moderator)

 

2. Atul Ahuja, Vice President – Retail, Apollo Pharmacy

 

3. Lalit Agarwal, CMD, V-Mart Retail Ltd.

 

4. Atul Chand, Chief Executive, ITC Lifestyle

 

5. Rahul Chadha, Executive Director & CEO, Religare Wellness Ltd.

Facebook: Log In or Out?

Retailwire raised a pertinent question recently about social media and marketing. In marketing as in life, it is all about timing. The question was whether retailers and brands should be concerned that they are moving to Facebook at a time when large numbers of teenagers are abandoning it? 

I believe it’s horses for courses. Marketers of teen brands should definitely be concerned about teens exiting or reducing their usage of Facebook, as they have done with other social platforms in the past. However, there are plenty of others for whom the Facebook audience is apparently becoming more relevant than ever. Facebook reports 400+ million users as of February. According to them, 50% of the active users login on any given day. That’s impressive stickiness.

Having said that, I’d like also to take a different look at those stats. Demographics and physically addressable market aside, the question is what proportion of your potential customers are receptive to the brand in that environment.

At the moment, Facebook is not a medium amenable to classic interruption marketing. (Although it may become that in the future, just like Youtube, with Google ads popping up across the bottom of the video.)

Neither is the Facebook user’s primary purpose brand loyalty or looking at marketing messages. The average Facebook user has enough to keep him/her busy or distracted, without getting on to a brand’s page. That video of a mother with laughing quadruplets is far more likely to get viewed and shared than any of your marketing messages.

If your brand isn’t interesting, engaging, and open, you can’t have the conversations that a platform like Facebook facilitates. If there’s no on-going conversation, your chief Facebook officer is wasting the company’s time, money and internet bandwidth. Logout. Now.

The entire discussion on Retailwire is here: “Marketers Move to Facebook As Teens Move Away” (needs a free sign-up).

Customer segmentation – Learning from the Vedas

Advertising Age recently carried an article titled “The Death of Customer Segmentation”, by Michael Fassnacht.

He questions the traditional marketing hypothesis that the better we segment consumers, the better we know what is relevant and the better we can market to them.

Fassnacht argument is that:

  1. Segments are becoming more volatile [totally agree!]
  2. Consumers are never part of just one segment [fashion companies discovered that a few years ago, and began marketing to “purchase occasion segments” rather than plain-old consumer segments defined by demographic and static psychographic profiling], and
  3. Consumers are preferring to choose what information would be relevant and of interest.

This last point is of particular importance, since electronic media – especially websites that customize themselves based on analysis of the users behaviour and history – are becoming more prevalent communication platforms. In fact, for the last few years “mass customization” and “a consumer segment of one” have been fashionable phrases thrown about in marketing circles.

Fassnacht quotes Amazon, Apple and social networking sites such as Facebook and MySpace to support his well-structured argument.

However, it may be a challenge for traditional retailers and brands to apply the learnings from these brands in their physical stores.

Going further and on a lighter note  – or perhaps not 🙂 – if we are to believe the philosophy of the Vedas, the Universe has a head start on “self-segmentation” and “customization of consumer experience” technology. According to it, the world and our experience of it is “Maya,” an illusion product of our mind, and we are free to create and mold it, and experience it as long as we hold the illusion.

If that’s the case, our modern techies and marketers have a long time to go before they climb that technology curve.

The original article is available here: The Death of Consumer Segmentation?

User Customization of E-commerce Websites

Online retailer Zappos is planning to introduce customizable web pages, and that has attracted all kinds of commentary – warm & welcoming as well as dismissive.

The big question is “what is the customization and how it is being offered”.

My rule is simple: web-page customization has to drive simplification of the shopping experience.

Changing skins, page layout, and other cosmetic stuff may keep novelty-seekers happy – for some time, that is. But the average user will find that it is just another thing too many on the already over-full to-do list.

Simplification of the user-friendly sort has to be heuristics and analytics-driven, and behind-the-scenes. It has to be driven by not just stated preferences (through options / settings, through drag-and-drop etc.), but unstated – by studying past behaviour in both purchase and browsing. Imagine if you had every customer stating their preference for a physical store layout. In fact does everyone even know what they really want?

The flip side is that this kind of monitoring may sound creepy and 1984-ish to some people. But probably those would also be the people who are blissfully unaware of the fact that in today’s world the only way to remain totally untracked is to not use any form of electronic / communication device at all, or to build each such device (hardware AND software) yourself from scratch. If you use social networking sites, and have “friend suggestions” on your page, you are being tracked!

There is also the balance to be kept in mind between the boundaries the customer defines and promotions that the retailer wants to drive. The consumer may want to control completely what reaches her; the retailer may take the view that there are incredible deals which the consumer just wouldn’t know about if she built impregnable walls around herself.

For those who’re interested in customization, the British Broadcasting Corporation’s (BBC) document from 2002 about their 2001 website redesign (“The Glass Wall”) is a great resource to refer to. It doesn’t seem to be available anymore on the BBC website itself, but copies are available elsewhere on the web.

Online vs Off

The internet seems to be as much alien territory for bricks and mortar retailers as catalogues are. Bricks and mortar retailers seem to struggle with the medium – most of them try to graduate from their corporate web brochures to transaction sites, and end up doing injustice to both. Many of them are not able to figure out how to create the traffic to their online store, how to create the excitement and liveliness to convert their traffic into transactions, and how to take the transactions to their final closure in terms of payment and delivery in a delightful way.

Of course, there are some notable exceptions – but possibly they are notable because they are exceptions rather than the norm. Many bricks and mortar retailers are also tied down by systems and processes that work very well for their physical store and distribution network, but fail miserably during the online experience.

However, what’s surprising is that even the basics of e-business seem to be escaping bricks and mortar retailers. Starting with search results.

Retailwire quotes a recent study by a search service provider which found that “online retailers claimed 38 percent of the search listings in 2006, 30 percent in 2007 and 35 percent in 2008. The next biggest category was shopping comparison sites at 25 percent in 2006, 26 percent in 2007, and 19 percent in 2008. Brick-and-mortar retailers lagged at 8 percent in 2006, and 12 percent in both 2007 and 2008.”

However, the study does show a steadily improving share of search listings on the part of the bricks and mortar retailers the last three years. It would be interesting to see whether the pressures of the market will push them to get more aggressive and strategic with their online presence to show a marked improvement in share in 2009.

Staying with the fundamentals: customer experience is another such, and it’s amazing to see what “attention to basics” can do for business. Amazon.com has bucked the recessionary trends displayed by other retailers in the US, with an 18% sales growth in the last quarter of 2009 and a 9% growth in profits.

I’ve shopped on Amazon.com since the year they launched. Every experience has been completely satisfactory, some delightful. On some occasions Amazon has picked my pocket – made me spend on stuff that I wouldn’t have bought otherwise, by their very helpful suggestions of what others had bought while they were browsing my selections. On other occasions they’ve saved me money, time and heartburn by providing comprehensive customer reviews at a click.

In my experience, Amazon’s sustainable advantage is their customer-orientation – the technology, the supply chain, the design – everything is geared to making the buying experience as good as possible. A Retail 101 principle that many other retailers – online and offline – seem to ignore every day.

At the end of the day, e-commerce is another channel to reach out to customers – some existing customers who may need to be connected with during additional shopping opportunity windows, others who are completely new to your wares and may never walk into your physical stores. But treating it as an additional graft that will work with your existing operating DNA is a mistake –  the online channel is distinctive and needs fresh thinking on the business model and consumer interaction from beginning to end. At the same time we shouldn’t throw out the baby with the bath-water, and forget the basics of understanding and addressing the needs of consumers.

The Brave New (Old) World

Over the past few years, the Internet has been revolutionising the way we interact with each other, as individuals, as companies or corporate entities, providing a mass of information keeps growing with no end in sight. With cheap and direct access, we can quite simply move around with a few clicks, most of the time locate what we want, make an informed (and even comparison-based) decision, and exit. Surely, as many pundits forecast, the Internet should bring an end to intermediation of any sort. Well, yes. And no.

Yes, the Internet makes information more easily accessible to everyone. Every week there are literally thousands of websites, hundreds of portals and at least a few dozen exchanges that spring up. These get hit upon either directly, or via the many search engines that, in turn, are also constantly updating and fine-tuning their search algorithms, pushing to create sensible shortlists that are useful for the researcher. One is even named after the butler created by P. G. Wodehouse, with the implicit claim that it will anticipate your needs even before you know of them! However, these are only attempts at generating intelligence (at best), more often just information, quite a lot of which is unintelligible, and very far from the “knowledge” that we human beings seem to create in our minds quite automatically as we go about doing our tasks. Just a few days ago, I was searching for hotels in the US – what I downloaded was a morass of information, and I spent a whole day sorting through it. In this case I could have just as well requested a trusted travel agent to come up with a few appropriate options for me, from which I could have booked my choice.

Our minds are, yet, the best-known computer to man, in terms of versatility. Our minds can store enormous amounts of data – a surprising amount remains in long-term memory (despite the fact that often we can’t seem to remember the name of the person that we just met in the lift!). More importantly, we can connect and inter-relate seemingly unrelated items of information, for example, creating travel itineraries covering flights, hotels and various other details into a plan that is most effective and efficient keeping in mind the time constraints, costs and our objectives for travelling. We are still not fully-there from robot programmes which will automatically find you the best prices, and the most convenient locations or times, let alone do that for hotels AND flights AND trains and any other items that your itinerary contains. Travel is actually probably one of the simpler examples – you could still create parameters which, provided the base information about price, time or location is provided by the service providers, can be used in programmes that can analyse patterns of new and past data, and revert with some shortlisted options.

Let us think of a more complex example – the textile and apparel supply chain. It is one of the most fragmented industries, and possibly one of the most global in terms of trade flows. There are multiple layers of raw materials and intermediate products, most of which pass through some sort of intermediaries (such as commission agents, stockists, importers etc.). In such a form the industry is a prime candidate for opening out to the Internet, where suppliers can create their websites, or store their information through other platforms (such as “exchanges”) which can be accessed by buyers from around the world – easy to set up, independent of time zones and very very low cost. Get rid of the multiple layers that mostly add costs, book orders directly, get rid of stocks… sounds like a heaven-sent opportunity!

Well, that is how it is being seen by the 70-80 exchanges that have come up around the world, or are in various stages of being set up. Some of these have been set up by existing industry players, some by technology companies, and yet others by people who have set up exchanges in other sectors who believe that similar business principles can be applied to the textile and apparel supply chain as they have applied in the other sectors. This should dramatically raise the direct access between suppliers and customers – be the end of agents and other intermediaries – and basically make millions for the companies promoting the exchanges!

Yet, around the world, retailers and brands that buy finished products and raw material do not seem to be rushing to stake any significant proportion of their purchases to web-based sourcing. And there are multiple reasons for that.

Firstly, such a proliferation of exchanges seems to be only a reflection of the fragmentation, and there does not seem the likelihood that any clearly dominant player will emerge in the next few months. There is little or no differentiation between most of these exchanges – most of them offering a sophisticated yellow pages capability, while others offer possibly a few add-ons such as functionality that allows buyers to bid for stocks, or suppliers to quote for products.

Secondly, in certain areas, buyers or suppliers themselves have got involved in setting up exchanges. Some of these are private web-based initiatives (such as Wal-Mart or Littlewoods on the retail end, or LiFung.com or TheThread.com on the supply side), while others apparently are more public and collaborative, such as World-Wide Retail Exchange.

Closed web-based systems are excellent for the company that is initiating it, because it enables the company to streamline operational processes. However, it does create another platform for people to adapt to, though web-based systems are less painful certainly than EDI or other proprietary systems, which require specific investments. Also, occasionally it brings up the question of conflict of interest. For example, how comfortable would one supplier feel in sharing internal information with another supplier who has taken on an additional role?

Other initiatives, such as the WWRE, have got off to a good start, but here internal stumbling blocks are inevitable due to the composition of the groups. Consider the WWRE: 27 retailers currently, in four separate areas of operation (as diverse as food and clothing), with different geographical bases, which make the business imperatives very different for the various participants. Add to that the fact that people are loath to share knowledge that is considered proprietary by them, whether process knowledge or supplier contacts. It is a long-drawn process of consensus management in such a large initiative.

Thirdly, what kind of a service offer is the best? As of now, there is are options available from various B2B service providers, offering varying areas of benefit, from listing services to “software solutions” for various applications, to loose working relationships. Not only do the service offerings actually vary, there are varying degrees of claims and counterclaims that muddy the waters further.

The scenario is actually as confusing as it seems to be – players, whether exchanges, portals or any other kind of company, are dynamically evolving their business models, with changes seemingly almost every week, and new players emerging all the time. In such a scenario, buyers (who are early-adopters) will get into as many exchanges as possible to get the maximum choice, and to hedge their bets. On the other hand, the majority – which comprises of buyers who adopt new technologies later – will hold back to see which exchanges come up as the most widely accepted or most appropriate for them.

Finally, whether we like it or not, textile and apparel products are inherently emotional products. They are, of course, driven by specifications, and those specs can be defined fairly precisely. But what the specifications cannot ever completely convey is how a buyer feels instinctively about including a product in a range. Or, indeed, what the impact would be of making some minor adjustments that can be visualised, discussed and decided in an interactive session between a buyer and a supplier. Or, for that matter, what is the best way to reconfigure a supply chain, under pressure of a new order, or an unforeseen delay in the process. Intermediation is something that has become ingrained in the textile and apparel supply chain.

In such a scenario, it is unlikely that intermediaries will disappear immediately. What is certainly happening, however, that while previously buyers were willing (or forced) to pay for having access to information, pure information itself is being made a commodity. In this frame of reference, companies are seeking out “genuine value-for-money” before they will shell out a buying or selling commission. Process or domain knowledge is an absolute must – only this can enable web-based companies to create unique and genuine value-adding web-solutions. Simply putting up a ‘telephone directory on the web’ will fetch very little in return. Even though a telephone directory has hundreds thousands of entries, how much do you pay for it? Relationship-management and process-management capability will remain in demand, and many of the existing intermediaries certainly show a lot of that.

Vertical integration

One of the most important developments that will certainly be an accelerated outcome of the internet, will be the vertical integration of the textile and apparel supply chain. While, in the past, the very diverse nature of the stages of the supply chain has created and maintained multiple layers, web-based technologies are now enabling companies to structure and manage the apparel supply chain from as early a stage as they wish to, be that fabric, yarn or even fibre. It is more feasible to exert control, without actually physically owning the different bits of the supply chain.

Breaking down size barriers

Another significant outcome is that the web breaks down “size” barriers. Large retailers typically bought from large suppliers, while small retailers typically did business with small suppliers. Any “criss-crossing” (i.e. small companies dealing with larger companies) needed middlemen – individuals or companies that broke bulk or consolidated orders, for small or large retailers, respectively. This had more to do with operating systems, management capabilities and the scale needed for relationship management than it did with actual barriers. Now, however, web-based systems can allow some parity between organisations of different size, because at a low cost the same level of functionality is available to companies of all sizes, This is significantly changing the balance of power, and the overall structure of the industry. Scale was never the only surrogate measure of capability in this industry, but the correlation between actual scale and perceived or actual capability is getting even more vague over the Internet.

The impact of the web on the textile and apparel industry is not going to be immediate – it will take a while to permeate the hundreds of thousands of companies that make up the supply chain – so there is some breathing space.

But surely, in the next five years, the textile and apparel supply chain that we shall be seeing, will be structured quite differently from the existing supply chain. There will certainly be some casualties. What is important is that you – whether you are a supplier or a retailer – should start taking cognisance of the changes to come, and begin changing your own business to avoid being one of the casualties.