Demystifying the Retail Bonanza Akash Khurana grinned as he examined the food tray brought by the airline stewardess.

The late morning upma en route to Delhi looked fresh, the sambhar was not the lumpy mess it used to be in the past, and there was tetra-sealed yoghurt too! Domestic airlines were turning in to consumer preference, he mused. India was getting exiting, he thought. But Shishu Pant, an old school friend he met a few days ago, who was now a sales trainer in Bangalore, had doubts if the consumer in India would ever be king. Akash, head of market operations for an FMCG major in Europe, had worked overseas for over 20 years. Recently, he had been toying with the idea of returning to India to set up a chain of hypermarkets. Yes, that was a big plan, but Akash was also hoping to find a partner from the Indian retail industry. In essence he wanted to enter retailing as he knew India was brimming with opportunity for retail business; and given his 20 years in the sales, marketing and general management, it was probably the best asset he had to bring ti this business. So he decided to examine the retail scene in India and met supermarket owners, boutique owners, dealers of white goods and cars across all the Indian metros. The scene looked very ripe to enter the retail business. All of them said similar things: craze for consumption, lots of money, shopping is recreation, discerning consumers and accent on food and fashions. A few consultants he met, too, gave similar encouragement. And on the last lap of his trip he stayed with Shishu Pant, also with a view to examine grassroots evolution in sales management since Shishu was a trainer. But Shishu overhauled not only his perception, but also his business idea. As Shishu said, What retail? There are only shop owners in India. And, thus, Shishu methodically demystified the retail boom. Who do you think are the big retailers in India? asked Shishu. Where are organisations of that weight in India? When you look at global benchmarks, the M&As, the Tescos, where are organisations of that weight in India? Real retail is a big business, a big aggregated business, but in India, a retailer is a shop owner. Typically, he is a businessman whose father invested in a shop in a market and he is leveraging that real estate by being a franchisee of a brand. So you have millions of people leveraging real estate and that is called retailing in India. And since real estate is available, lots of manufacturers are using that as an outlet. So thats what I call disaggregation. Its not like I am Raymonds and I own 100 retail outlets or I am a Tesco and I have 400 supermarkets or I am a Pizza hut and I have 1,800 restaurants. Thats an aggregated retail business. When you have aggregated retail business of that size and nature, you have certain kind of investment and attitude in sales training, quality of people, sales management processes, etc. Then it is in your control and it is a viable size to invest money in. As a keen Akash listened, shishu went on: its not as if the retail market does not exist, but the structure is very complicated. The structure of an industry determines the kind of valued services it will receive, which, in turn, will make it interesting for a lot of people who supply expertise need those inputs to make retailing valuable! Today, for a lot of people who can provide structure of the retail industry is not very interesting. Today, I can go to an standards for 20,000 insurance agents. It will happen as that man can take a decision and this offer is meaningful. but if I go into a Raymonds retailer in Bareilly, it is ultimately a franchise business, a channel business, a disaggregated business. The man is the owner of the shop, he is not

a Raymond employee. Raymond may have some technical control, but after a point Raymond is not interested in spending money and effort on it because they expect the franchisee to do it. but the numbers are large, pointed out Akash, the opportunity is there. No doubt, agreed Shishu, there are millions of retail outlets and people working in them. Its a huge data of millions of disaggregated shop owners doing disparate selling. It is interesting, but it is not easy to navigate or get any coherent direction from it. Retailing in India is dependant on franchising; it could be distribution, channel servicing, where there are lots of other people involved, like the real estate owner and the shop business owner, and in a country like India, because of the background of the person and the motivation for business, there can be a very different approach to business than that of a principal. For example, in Jaya Nagar, there is a shop owner. He is in business because he owns a piece of real estate and he is leveraging that. The MNCs say, Very good, I want to sell my products through this outlet. He is welllocated, ect. So now, he is retailer for FMCG goods. What drives him? my shop, my 600 sq ft of space, am I making enough money? if you go into sociological analysis, then he might say, is there enough money so that my son can also work here? those motivations are very different from are we 100% customer-oriented? Are we processional enough in our customer management? those are things he does not understand, nor does he care, because there is no motivation! Those are not called retailers! take the example of a Maruti dealer. The turnover of an average Maruti dealer in the metros could be Rs 300-400 crore. They are into retailing cars, because if you can walk into a showroom, sigh a few papers and drive out your new car, its a retail business. He is also motivated by factors like real estate and family being absorbed in the business., his scale of investment is very high, he invests close to Rs 100 crore and turns out five times as much business. He has other businesses like a guest house in Ooty and a cinema hall. Yet, it has taken huge effort to get them to see the need for some very fundamental things like hiring the right kind of people, paying them a certain level of salary, creating incentive schemes to motivate them and run the business in a professional manner. Akash was surprised. I dont understand, he said.why would they resist? THESE guys understand anything that belongs to them. Said Shishu. if you tell a dealer, Look, often a customer has to wait while you fill forms and numbers, why dont you invest Rs 20-30 lakh in a home theatre so that he is entertained? he will readily do it. Why? Because in the end, he is only creating assets for himself. He owns it. Then when you tell him, increase salaries by 50%, that way you will get better people, he wont do it. Any shift from cash to assets, he is okay with because he perceives that as generation of owned assets. But salaries, training? No. he does not see that as investment. He comes up with very imaginary blocks like, whats the point? They wont stay or just by paying more is se achcha kya mil jayegaa? they would rather hire a relative and, thus, also pay less. its a slightly cultural thing, this attitude to business. Retailing is, after all, society in a different form. So, cultural influences are clearly visible in the service that you get.

When you arrive at the Delhi international airport in the middle of the night and hire a taxi, you have two blanket-clad men driving you and you feel different from when you land in Chennai and there is a freshly laundered white trouser and shirt-clad Englishspeaking man who saysgood night, sir thats the citys culture. It reflects the people who inhabit that place and how much they expect the services to serve them. The retailer is only representative of that! Thats what I mean. its the approach to business, to life. A dealer in Delhi believe business is about networking. So he knows all the politicians, the big names. He can fix a dealership or a quick urgent delivery. Thats his approach to business and it is exactly those networks he leverages on and it works for him in that culture. Now look at attitudes in western India. A Mumbai or Gujarat dealer will even bring his wife into the business, she will also participate in the training programmes. But a north Indian dealers wife will not be part of the business. That impacts the quality of thinking in the business because a wife who is partnering the business brings in a womans approach to business. That is a very valuable input because a lot of consumer to give genders to businesses, services is about care, warmth, concern; very right-brained. Service is, therefore, a feminine business. Akash grew pensive. He had been hoping to shortlist some prospective partners from among the big dealers, who could bring in property for the retail business, since he wanted to set up a chain of hyper markets over time, while he would bring in knowledge, not-works and money. But now he realised there was this cultural angel to partnering. As Shishu said:Given these varying attitudes to business, in retail specifically, it is even more important how you select your business partner. A chap may have property, but does he have the vision and the attitude for a business like this? Voltas and Pepsi partnered; one had market familiarity, the other had the vision. But when push came to shove, Voltas could not partner Pepsis vision because voltas had not envisioned how far and deep Pepsi was planning. One was looking at opportunity in the here and now, the other was looking at the opportunity to come, see? SO THERE ARE NUMEROUS aspects to partnering, more so in retailing. In some cultures, a businessman will spend on pre-delivery inspection and postdelivery inspection, but in others, he wont, in order to save money! Again, a south Indian dealer believes he must not cheat a customer. Elsewhere, they feel if you can shaft a customer without his realising it, no harm. Or they feel, there is no margin in selling this product; the company is shafting me, so might as well pass it on to customer. All this comes out in the business attitude. What kind of people whey will hire, how much they will pay. Finally, this influences the consumers retail experience. And what you have to deliver is a 100% retail experience. cultural attitudes and ethos are all subsets of the sales-management process. Companies assume that getting a franchisee to fix the showroom- put some granite and glass and an AC- is equal to customer service because, even at the top, they have not internalise what aggregation means. They do not believe or recognise the need for aggregating their outlets and dealers under common ethos. So what if the individual franchisees are owned separately? The brand is your! But that itself was the main issue. Until now, there was demand, products were manufactured and retailed out of all kinds of outlets. With demand came the need for differentiation and, hence, more brands and therefore, more outlets and more

desegregation. In the case of multi-crore single-product companies like a petroleum company or a Maruti, Shishu did not see much problem because they were highinvestment, high-involvement businesses, so the transfer of technology was not just in manufacturing, but also in good business practices. But many other businesses he had met did not have the sales drive, he said. one growing chain of restaurants with some 20-25 outlets said they want to improve, said Shishu, so they hired a CEO from a tea company. Even if he was from the best FMCG company, where was his exposure to customer service? The kind of customer service is exposed to as a supplier to channels is vastly different from the kind of customer service you need at the retails level, where you are dealing with the end consumer directly. In his perception, it is difficult for him to understand that there are cultural issues, skill issues, recruitment issues, and the like naturally, he does not even perceive a need to invest in it and is seeking simplistic solutions to customer service. So what is he doing? Advertising! He is not investing in the shop situation, the buying situation, but he is creating great advertising around the product and trying to get the consumer to the outlet. But its after you eat at this outlet that your real experience with the brand begins. You like it, you dont like it, or you are surprised by some price changes, withdrawn offers and others. (in the case of white goods, you discover post-purchase that your washing machine is not drying the clothes as well as the ad promised, or your freezer is not very efficient . what happens to your perception of the brand?) such CEOs comes form the mid-80s era of marketing, where a good-looking outlet was considered necessary for sales. They are marketing people, with more of a marketing penchant that a sale background. Typically, there ware more guys marketing guys trying to drive a sales and service business that service guys. India didnt have to sell all these years. Understand that. Simply marketing was dying for, differentiate it from competition, enough! Marketing drove sales at the outlets. But now, in India, we have reached a stage where most brands within a category are nearly on the same technological level, which means not much real differentiation. Given this brand clutter, you can no more be marketing-driven. a marketing drive also does not think about investing in the HR processes that go into the channels. That, he assumes, is somebody elses job. The moment we are talking sales, because there are human beings involved, it readily becomes an HR overlap area. It is no more like marketing form a cabin on the tenth floor. Suddenly there are salesmen, sales,,, manager, and their managers and their processes which enter the picture, which does not happen in marketing. Now with sales coming to the fore, this whole human dimension of recruitment, incentives, training, competency and skills becomes important. I do think a marketing orientation is redundant. Marketing does not work through people, it works through media. Through communication, through mailer, brouchers, PoP material, promos. It is not delivered through people! It is disconnected. Its about watching and waiting. Not online. It creates a marketing pitch and puts it out there in papers, on TV and waits for consumer to react. Thats where its job ends. Opportunities are created for the e consumer to know the brand. But now the consumer has done all that and he has also seen and felt and heard the competitors brand now he is standing in the shop and not buying your product. Your salesman at the outlet is ratting off the

same marketing spiel you put out in the ads. Its not working. He is toting up numbers and showing the economics to the consumer. The sales pitch is not working. But the sales pitch has to work! Because it is during this encounter with the consumer that the product you marketed has to be bought from the store and taken home. Its and online opportunity has to have the intuition to guess the consumers mind and meander through his thoughts beforehand. Sales is delivered through people, cant you see? Its direct, one to one. And in a supermarket environment, what the manufacturer has said about the brand is not enough. Your men on the spot have to create that enticement! but Akash had already thought through his business carefully. His chain would be a sort of hypermarket to match Indian shopping situations. So, he would have a white goods section too, with topline brands. Therefore, a CEO with a simple sales background would not be enough. Because this shop was going to be a different experience. I also have to get consumers to come here to look for their appliances, their music systems and pick up their toiletries, see what I mean? he said. it must be marketed! shishu nodded. Okay, so your marketing; man creates mailers, hoardings, and TV adds to get people to your shop. All that is real estate! A sales guy uses people, who interface with other people. Thats where the tyre meets the road! Therefore., if your head of retails business is a marketing man, you will have a good ad campaign, a good slogan, and you will think you are headed in the right direction. You will believe that your are becoming customer-oriented. But when the customer enters the showroom and meets the guy selling that product to him, he will have a completely different experience. When someone delivers that refrigerator to his house, he will have a completely different experience. Indian consumers carry the bad memories of their retail experience. How will you change that? That is your challenge. Akash wasnt sure he understood that. what bad experience? he asked. Okay, said Shishu. I will show you how the present retail experience is not 100%. Lets say there is this refrigerator called Freezy and you are a consumer. You have seen this ad and now want to buy it so you go to a dealer. ; you arrive there and find you have a parking problem in that area. Odd days right side parking, you didnt know. Then you walk into the outlet and find that what you see is very different from everything else you had imagined through that ad. Because what you have walked into is actually real estate owned by guy who has now become a distributor for this refrigerator. So while Freezy is doing up the showroom, there is a Mr Goyal who is sitting centre stage for whom this is yet a real estate he is leveraging, its just incidental that today it is Freezy; tomorrow it could be BPL, or Benetton or even a Barista, whichever makes money. Then he will call out to a boy and say, see what he wants. And now you, who has walked in with your credit cards and chequebook, are dependant on this boy for product information, comparisons, quality check, whatever. And this boy tells you, yeh best hai. He has not been trained for it, he has no information, nor has anyone told him thats his job. Now he is being trained for it. ANYWAY you buy the refrigerator and pay for it. You are told it will reach your house in one hour. So you go home feeling happy.. but the refrigerator does not come even after three phone calls. By then you are annoyed. Finally, late at night when you are having dinner, the refrigerator arrives. There will be two delivery boys, who are probably on piece work employment, who have nothing to do with Freezy. Even so, you direct them where to place it; chances are they will ask you to help with it. Then

you find one wheel at the bottom is missing. You ask why is this missing? They will say; we dont know our job was to deliver this. Okay we will talk to the shop, can we use your telephone? Anyway, by sometime tomorrow your wheel arrives and gets fixed. Alls well, you are relieved, you say bad experience lets forget it. A year passes. One day a light wont work. Then you start calling the outlet from where you bought says call the service centre. When you call, either you wont get through, or its a call centre agent. This girl says someone will come tomorrow as the maintenance guys have left for the days jobs. You get annoyed and say, I pay Rs 50,000 for a refrigerator and your man does not have a beeper? Then the guy arrives the nest day, no fixed time , just anytime he happens to be around your area. You are in the middle of cooking dinner and he arrives. He says the light to be replaced, cost Rs 2,000. you are surprised, you say, hey, I bought this fridge only last year! He says, what can I do, sir? Shall I take the light back? So you curse and say, fine, fix it. this is reality. This is the level of customer service even amongst the biggest brands. And now I am saying retailing is about customer service, complete 100% care and service at a one-stop point, single- contact where all data about my purchase is available and where service is almost immediate and a none-stop point which will forever, repeat, forever service its customers. Thats true blue retailing. Are you going to have that? Look, you cannot have different retailing standards for different departments in your store. Your brand has to be kwickshop or whatever you call it, and should not have to depend on LG or HLL or Nestle. Once you decide to stock and LG or Liril, you take ownership for that choice. Now these are your goods you have to sell them. Therefore, ;you have to please the consumer 100%. Can you? Its a huge investment that goes beyond property. Not just economically, but ethically too. Think about it. Akash, get to the bottom of this. You are yet skimming the surface like a regular shopkeeper. What is retailing? Its a sales and service experience. If you want to excel in it, you have to see your business strategically and your core competence as sales and service experience creation, not stocking rice or refrigerators. You need to rebuild your vision and beliefs towards unbeatable customer service and invest in all a the related aspects that will deliver this vision. Your business strategy should be around investing in all this be it the retail outlet itself, the technology you buy, the stock, the recruitment you do, the training of staff- all flows from here. In a competitive environment, where markets are opening up, where customers have choices, a Freezys manufacturing vision or your vision as stockist is incomplete. That cannot be your stated core competency. When you see it as your main vision, then you will have the kind of experience you had with the refrigerator. But as I said, its very disaggregated in India. One man produces, another sells, a third services,. Aggregation is about taking responsibility and ownership for your business ethos, even as a retailer, so, coming back to the expected retail boom, it is an opportunity but it will pass us by. ;yes, there will be retailing, there will be shops, people will buy, you will have glossier shops, more, shopping plazas, but no t the retailing experience. It will happen in bits and pieces. It will not be 100% and the root cause of this is that it depends on

local entrepreneurship, real estate ownership, and that brings in local culture, smaller people with; small visions, who have shops and properties, but who have not been exposed to learning and running high quality competitive business on the selling front. Plus there is huge marketing thrust than a sales and customer service thrust. And this whole drive will ensure it remains at that mediocre, uninvolved level. so in this so-called retailing boom, we will have more shops., better-looking shops and you will also find that some shop which was a Benetton shop once has now become an Allen Solly shop, but to benefit from some great retail experience requires a completely different kind of ethos and investment. Understand that there is no business like retailing. There is no such thing as a supermarket, worse, hypermarket. There is a business called creating a world class buying and servicing experience. That is the business that you will actually be in. it will be incidental that you will be selling CocoCola and soaps and toiletries. and that retailing will have some thing to do with acquiring a customer and some things to do with retaining a customer. Its the whole experience from the moment I think about your store to when I unpack my shopping bangs. So, when you say retail boom, what do you mean? Many shops will come up? Yes, many people will get employed? Right, Anything more than that, no. Or at least, not without ethos and investment.