Shambhavi Anand, Economic Times

New Delhi, May 24, 2023

Retailers and shopkeepers will soon not be allowed to seek phone numbers of their customers while generating bills, according to a diktat by the department of consumer affairs, a senior government official said.

Taking the numbers of customers without their “express consent” is a breach and encroachment of privacy, said the official, without wanting to be identified.

The official added that such a move will be classified as an unfair trading practice defined as any business practice or act that is deceptive, fraudulent, or causes injury to a consumer.

Most large retailers mandatorily take down buyers’ phone numbers while generating the bill for their purchases and use them for loyalty programmes or sending push messages.

The move has come after the department received several complaints from consumers about retailers insisting on getting their phone numbers. This will be communicated to all retailers through industry bodies representing retailers soon, the official added.

While the implementation of these new rules may require some adjustments and initial costs for retailers, it is seen as a necessary step towards protecting consumer privacy and ensuring fair business practices in the retail sector, said experts.

While retailers will have to rework their systems in case this becomes a regulation, this won’t stop them from asking for phone numbers of consumers as their loyalty programmes run on these numbers, said Devangshu Dutta, founder of Third Eyesight, a retail consultancy firm.

He added that retailers also use numbers for sending e-invoices and so this could have a cost impact and environmental impact.

(Published in Economic Times)

Shinmin Bali, Financial Express

Mumbai, 21 February 2016

Having created quite a stir at the time of their launch, hyperlocal companies are now witnessing a dampened mood. While several have folded up operations in some cities, others have downsized staff, tweaked the services they offer and even made alterations to their business models. A recent example is Grofers shutting down operations in Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.

TinyOwl last year was in the news for a poorly-handled downsizing operation in Pune, with a dramatic hostage situation involving its co-founder Gaurav Choudhary. PepperTap also recently shut down operations in six cities.

Ironically, giants like Amazon have not only aggressively entered the hyperlocal space, they are building on it. Amazon is currently offering the service in Bengaluru, Amazon Now, after running a pilot project, Kirana Now, in 2015.

The investor sentiment in India is also on a decline, as was reported earlier this year. Investments by venture capitalists have dropped from $2.12 billion (October-December 2014) to $1.15 billion (October-December 2015), according to a report by CB Insights and KPMG International. This leaves an even shorter window of opportunity for players to retain investor interest.

Albinder Dhindsa, co-founder, Grofers, states that differing levels of technology literacy among the majority of merchants and consumer adaptation to the online platform are concern areas for the company. In 2016, the company is looking to bring over one lakh merchants aboard and ensure that turnaround time stays under an hour. Grofers delivers more than 35,000 orders per day on average. In Q4 2015, the firm acquired teams of SpoonJoy and Townrush to bring dynamic learning to the table.

For Swiggy’s co-founder Nandan Reddy, the focus is currently to grow the market, while catering to a wide demographic of consumers. He admits that in the early stages, the brand had trouble educating even its partners. Furthermore, operating a delivery fleet in an on-demand service offering sub-40 minute deliveries is a challenging task, given that there are at least 15 points of failure in an average order. Swiggy currently owns a delivery fleet of 3,800 delivery executives. The brand’s repeat consumers contribute to over 80% of orders.

Debadutta Upadhyaya, co-founder, Timesaverz, says some of the major challenges in a hyperlocal market are optimum resource utilisation and matching locations, price points, and other specific requirements to customer needs. Timesaverz currently has a service range spread across 40 categories, aided by a network of over 2,500 service partners across five metros. Its revenue model is commission based, where 80% of earnings from consumers are shared with service partners.

Vinod Murali, MD, Innoven Capital, points out that as the hyperlocal industry is in its nascent stages, it needs a fair amount of time to grow. “One aspect to keep in mind is that a large sized equity cheque does not imply that a company has achieved operational maturity or robust business metrics, especially in this segment,” he notes.

Given the recent consolidation in this category, the survivors have the opportunity and time to focus on improving unit economics and demonstrate that their businesses are viable and valuable.

Devangshu Dutta, CEO, Third Eyesight, is of the opinion that hyperlocals make the mistake of borrowing business models and terminologies from Silicon Valley, without adequately understanding the real context of the Indian market. “Is there an existing or even potential demand for the service claimed to be provided? Or are you just going to introduce an intermediary and an additional link in the chain, with additional costs and unnecessary administration involved?” he asks.

(Published in Financial Express)

Devina Joshi, Financial Express

Mumbai, 8 September 2015

Recently, there was news of restaurant reservation site EazyDiner expanding operations to Mumbai from the National Capital Region, having secured Series A funding worth $3 million led by existing investor DSG Consumer Partners, and Saamna Capital.

As per a PwC analyst, investors have pumped more than $150 million into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy, Zimmber and HolaChef, among others. Judging by the patronage showered upon them by customers and investors alike, it would appear that hyperlocal start-ups are all set to create the next big boom in the Indian retail sector. But is it really all that rosy? Probably not, as can be amply witnessed by acquisitions taking place in the nascent yet already overcrowded market.

Between November 2014 and February 2015, the Rocket Internet-backed Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured to be in acquisition mode with TinyOwl. Restaurant search app Zomato, which recently got into the food ordering space, is also reportedly looking to acquire minority stakes in food-ordering firms.

While investors are attracted to hyperlocal start-ups, controlling logistics well is key to sustained growth for these businesses — all of these will definitely go through a constraint in the supply of delivery boys, for example. In India, organising fragmented labour is a challenge and, hence, a services-based hyperlocal needs to figure out the mechanics of human capital even more than a traditional, product-based e-commerce firm.

For services, another challenge is customer stickiness. If a user uses an app to obtain the services of a plumber, for example, he may not go through the app to contact the plumber next time if his services are found satisfactory. Discounting can induce trials, but just like in any other business, prove fatal in the long run. Like what led to the end of HomeJoy in the US — excessive discounts to dissuade direct contact between servicemen and customers.

Even for product-based start-ups, maintaining data quality is a big hurdle as stock and prices may not be updated by retailers in real time, making it difficult to track offline sales.

Since the game is hyperlocal, you need to be physically present in the city to bring retailers aboard. For that, you need a city team. Other challenges include retailer verification and assessment, given that hyperlocals deal with small city retailers.

Stickiness is needed on both sides, and each locality will certainly evolve into having a market leader and a follower, with other players falling far behind. “So the critical success factor for a hyperlocal is being able to rapidly create a viable model in each location it targets, and then—to build overall scale and continued attractiveness for investors—quickly move on to replicate the model in another location, and then another,” says retail consultant Devangshu Dutta of Third Eyesight. As they do that, they will become potential acquisition targets for larger ecommerce companies, which could use acquisition to not only take out potential competition but also to imbibe the learning and capabilities needed to deal with microcosms of consumer demand.

(Published in Financial Express.)

REVIEW: FLIP THE FUNNEL: Joseph Jaffe (John Wiley & Sons)

I’ve read Joseph Jaffe’s book across multiple air journeys, nationally and internationally. I agreed with the principles described and saw parallels with excellent services businesses over the past few years. However, the implications didn’t quite strike me in the gut until I realised – while writing this on board an aircraft – that the journeys I had taken with this book had also been with just one airline.

My loyalty to this airline is not because of the mileage card I hold, although their mileage programme is certainly among the best in the world. It is not because they were the cheapest or the most on-time, though they compete favourably with other comparable airlines.

My loyalty to them is because of what they did during the Mumbai floods in July 2005. Those who remember the chaos, through personal experience or through media, wouldn’t blame airline staff for abandoning their counters, and leaving the airport to try and reach home as early as they could. Certainly most of them must have felt helpless in the face of increasingly desperate passengers who couldn’t expect to depart any time soon. Jet Airways stood out as being the only one in Mumbai’s Terminal 1-B whose team felt responsible enough to stay back at the airport to be available to the passengers. Not only did they ensure that the passengers stuck in the terminal were safe, but that all waiting passengers got three meals a day! Whether or not they were flying with Jet Airways.

Now, in telling you about incident, I have closed the loop and given you a living example of the “flipped funnel” that Jaffe describes in the book.

The normal marketing funnel is described by the process Awareness, Interest, Desire and Action (or “AIDA”) which underlies the spray-and-pray approach of traditional marketing. The result of AIDA is that a lot of customers become aware of a business, brand or product. Some are interested enough to seek out the product. However the number who move on to the next stage of actually expressing desire to buy is lower, and those who actually buy are fewer still, as amply demonstrated by carts being abandoned before actually checking out.

Jaffe points out that the AIDA principle was created in times of abundant growth in the US, but is a suicidal funnel to fall into when resources are scarce. It is lopsided, with more money being spent on customers who will not buy. It is linear and does not capture the complexity of buying behaviour. It is open and incomplete because it only handles potential customers up to the point where they become actual customers, but does nothing with them thereafter. AIDA also inherently assumes customer churn, hence the opening focus on creating awareness among potentially new customers.

The alternative principles Jaffe describes are simple: getting more customers to buy from us and more often (repeat purchases), to spend increasing amounts with us (loyalty), and finally, to recommend us to their friends and associates (referrals). However, to do this requires dramatically different thinking from AIDA spray-and-pray. Jaffe’s alternative model – ADIA (Acknowledgment, Dialogue, Incentivisation and Activation) – focuses on customers more than prospects.

Acknowledging customers itself is such a major stumbling block for so many companies, such as the retailer whose front-line staff would prefer to fold and put away garments than meeting the eyes of the customer who has walked into the store. In some cases it may be about using technology effectively rather than as a barrier. When the taxi company can recognise the number you are calling from and close your order in less than 120 seconds, why does the telephone company that issued that number make you jump through burning hoops for 5-10 minutes before they will allow you to request a duplicate bill?

That acknowledgement should lead to an on-going dialogue, before, through and well after the purchase is done. This would be supported by constant incentives for the customer to buy more from you. It is not about having a loyalty programme, as Jaffe quotes studies that demonstrate that loyalty programmes alone don’t produce loyalty; in fact there are enough businesses that do not run loyalty schemes but have what can only be called fan followings.

The final link in that funnel is building that community of evangelist enthusiasts who will carry your brand message farther and far more effectively than any traditional form of marketing could. Religious organisations have known this for thousands of years – it is high time that businesses and other organisations recognised the power of the community as well.

Jaffe acknowledges that Seth Godin actually came up with the term “flipping the funnel” over 3 years ago, when he released the e-book of that name (available on sethgodin.typepad.com) primarily about using social media effectively. Jaffe, to his credit, has applied the principles more fully across the marketing and customer service process.

Jaffe recently sold his business, crayon, but has kept his title “Chief Interruptor” at the acquiring company. If you want to make your marketing really pay, you’ll find it worthwhile letting “Flip the Funnel” interrupt your normal marketing thought-process.

(This review was written for Businessworld.)

A keystone of a retailer’s business is the loyalty that customers show in shopping at his or her store.

Loyal customers help to sustain a basic level of sales and reduce the need for expensive broadcast-style marketing spending that the store may otherwise have to do in order to keep the traffic and business flowing. This is as true for chain-stores as it is for independent mom-and-pop stores.

Therefore, as competition increases along with the number of stores selling the same products within a common catchment, retaining the loyalty of the customer becomes crucial, both in terms of strength of relationship (which is reflected in how much of the total spend the customer spends at the specific store) as well as the duration of the relationship.

In some parts of the more developed markets regulation may prevent the overcrowding of grocery stores and supermarkets. However, in markets such as India, one can see as many as four or five mini-supermarkets coming up on barely a kilometre along a busy street, before you even count the numerous kiranawalas. How can a store ensure a continued loyal custom from a certain share of that catchment?

Managers at modern chain stores may draw some comfort from studies which suggest that customers with higher incomes tend to be more “loyal” than customers with lower incomes. Since Indian chain stores tend to be targeted on high-income customers when compared to the traditional kiranawala, they may benefit from an intrinsically more loyal base of customers.

The variety of factors behind this “loyalty” may essentially boil down to the fact that with rising incomes the perceived benefit – lower prices, potentially better products or service – from comparing alternative stores may be outweighed by the perceived cost (time) of seeking these options and the personal adjustment involved in shopping in an unfamiliar environment. (Or, perhaps, to put it more bluntly: “rich customers couldn’t be bothered”?)

However, as the number of competing offers increases, promotional noise draws the consumer’s attention to benefits they might be missing out on, whether this is through flyers in the mailbox, kiosks set up near the consumer’s primary store, or even a full-blown ad campaign across multiple media. With every new offer or promotion, there is a temptation to try out an unfamiliar retailer.

This is more acute during recessionary times, when just about every competitor is shouting out deals to lure the customer to at least step into their store. And don’t think that high income customers are immune from the “toothpaste-discount” bait. During such times, whether they acknowledge it or not, everyone is down-shifting. It is at such times that loyalty is truly called upon. And it is also at such times when retailers start to think of loyalty schemes.

Most loyalty schemes are focussed on the objective of retaining existing customers through the use of incentives that are available only to loyalty programme members. They will ask a customer to provide some personal and contact information, and will provide some reference – a set of coupons to be redeemed during future purchases, or a card (index, swipe or smart) – that must be presented during subsequent transactions. In almost all cases, there is an attempt at getting the customer to return to the store because, as we all know, when we step into a store to redeem anything, almost without exception we end up shelling out more money than the redemption is worth. Since the value of the cash-back equivalent can be anywhere between 1 and 10 per cent (sometimes higher) customers are happy with the bribe, while the store is happy to ring up the additional sales.

However, it is surprising – or perhaps not – how many loyalty schemes turn into shams. In many such cases, the true benefits and the liabilities during the life cycle of the loyalty programme or of the customer’s relationship with the store have not been considered deeply enough. We all have multiple examples from our personal lives, which offer valuable lessons on such shambolic “loyalty schemes”. For instance:

• An oil company’s “membership card” that you pay for, whose points can never be redeemed because you never get the points statement nor a list of rewards, and the last time you see the card is when the petrol pump attendant takes it with the promise to check the status with the company.
• “Reward points” which offer a customer a second-rate bag or an uncertain brand of electrical gadget for points PLUS a cash amount that would be the equivalent of what you might spend with a pavement retailer buying a similar item.
• A credit card that looks attractive with discounts at certain merchant establishments, until you discover that someone who doesn’t hold that card is getting the same benefit even on cash payment.

Very often we find that a loyalty scheme has been conceived by an executive in charge of advertising to get the message out more cheaply (?) and focussed on a set of frequent customers. There is little link with the other parts of the operation, such as merchandising, store planning, or even promotion management, and certainly no influence. Thus, a second and potentially more powerful objective – using customer shopping data to tighten merchandising and improve the targeting of promotions – is virtually ignored.

Some companies have decided that managing a loyalty programme would offer lower benefits than the cost of maintaining the scheme, and decide to pass on the amount to the consumer directly in the form of lower prices. However, given the times, and the prospective goldmine of consumer purchase information that consumers willingly provide through such transactions (despite all vocal concerns about privacy) I would expect loyalty schemes to mushroom in the next few years.

The fact is, whatever our income levels, evolution has deemed that we become creatures of habit. Once a certain path has been followed successfully, a berry has been eaten safely, a transaction has been made satisfactorily, we are inclined to return to it again and again.

Trust, predictability and precedence are huge factors in developing loyalty, and when translated into the modern life of shopping (especially for food and groceries), this translates into the phenomenon that has been called first store (or primary store) loyalty. This can lead to as much as almost 70 per cent of grocery shopping being carried out at one store. Typically consumers will have a strong secondary store, and the balance grocery shopping would be split between multiple stores based on product availability, convenience and opportunity, deals and other factors.

But just because customers are genetically wired for loyalty to the familiar, the retailer should not treat this loyalty with contempt. Or even laziness. Because that can tip over the loyalty scheme into being a loyalty sham. And that is it only one letter away from “scam” – a dangerous label in these times of the consumer-activist.