Retail Lessons in India

by Deepak Sharma on Monday, May 28, 2007

Stores Magazine has a very good interview with Andrew Levermore, CEO of Hypercity, a K Raheja Corp, Group subsidiary. Hypercity recently completed one year of operations in Mumbai and as per Levermore will post sales in excess of $30 million for the first 12 months of operation. Upon asked What’s the greatest retail lesson Hypercity learned during the first year, this is what Levermore replied.

"The most important in the Indian context is that we have a supply-creates-demand scenario here. We have introduced new categories of product that research indicated were not in demand. Mountain bikes are the classic case in point. In India, it was believed that a bicycle was a functional item used for transportation by the so-called “service class.”

We are the exclusive retailers of Raleigh mountain bikes and have seen an immediate take-up by the young, aspirational customer, who has embraced it as an exciting way to keep fit and have fun. "
Other lessons that Hypercity learnt and I feel very relevant with Indian consumers being:
"The first surprise is that the store format [opens] with fruit and vegetables. It is traditional in the West to lead with your higher margin general merchandise and force the customer to traverse this product before getting to their daily or weekly purchase of perishables. In India, we compete against the road side vendor for fruit and vegetable sales. Forcing our housewife to walk 100 meters to the back of the store for the same would discourage many.

The second surprise is the amount of customer space we have created. Western retail tends to “sweat the space” and drive up trading densities by overloading the sales floors with product. An overwhelming majority of the more than 85,000 customer feedback forms list spaciousness as their No. 1 reason for returning. The consumer has rewarded us with a much higher transaction size and sales per square foot – 30 percent beyond our expectation.

The third surprise is our positioning of a hypermarket format targeted specifically at the upper-income consumer. Whilst the upper-income consumer is represented by just 10 percent of the [Indian] population, this is a staggering 120 million people. Although this is our specific target, our value statement is clearly stated and backed up by competitive pricing. "
Another thing to note is the use of Retail technology. Levermore says,
"We use the latest merchandise management platform from JDA. Together with the sophistication of the E3 auto-replenishment system and the Intactix space-planning software, we are fairly well equipped to manage our inventories. At point of sale, 360-degree scanners manage the customer checkout."

Direct Sales Model may not be enough anymore

by Deepak Sharma on Sunday, May 27, 2007

Dell has plans to start selling Personal Computers at 3500 Wal-Mart stores across US and Canada. While this could be first such initative with the company, looks like Dell has a strategy to partner with other big retailers also like Circuit City, Best Buy etc. Why is Dell doing this? Apparently direct sales model via the Internet, mail or phone orders is not working enough. Dell was missing out on consumers who make atleast once a week trip to Wal-Mart and can see an actual computer in working and if decided buy it right away from the store and not keep waiting for it to ship as is the case with Internet purchases. This will surely impact Dell's margins as selling via a retailer will always be less (some part will go to Wal-Mart). Also, Wal-Mart is known to place extraordinary pricing demands on its partners. It will be interesting to see how Dell copes up with that. This partnership plays well with Wal-Mart's plan to expand its selection of electronic products.

Blogging Again

by Deepak Sharma

It has been some time since I blogged on this blog. More because of a change in priorities and less time on my hand. While I want to improve on my time management skills (as always), I wanted to assure all of you that there will be more focus to the blog. I have changed the blog template a bit (courtesy: Free CSS Templates). Hope it will be liked by all.

I belive Retail as a sector is growing leaps and bounds and technology is playing an ever increasing role in giving more power and choice to consumers. In this second innings of blogging here, apart from technology applications in Retail sector, I would be focusing a little bit more on the Retail revolution in India. If anything in India is moving at this time, it is IT and Retail. Stay tuned.