Just another manic monday?

As online retail traffic continues its upward trend with every holiday season, new business terms keep getting defined to explain the phenomenon. The latest addition to the list is "Cyber Monday". Created by the National Retail Foundation it represents the first monday after the Thanksgiving weekend when consumers return to work and spend time shopping online to make purchases for the holiday season. I came across a very interesting article on how cyber monday sales can be boosted by not just online ads but by complementing them with non online ads. The article says - "One limitation in the search space is volume. There are only as many searches as there are people multiplied by the queries they do." The publisher of the article found that - "20% of all search volume can be correlated to TV GRP volume. So, while we've always known that TV creates an interest that search can fulfill, this gives us sufficient evidence that it creates a volume of interest which can substantially move the impression needle, and therefore increase CTR and potentially CVR for your campaigns". So in a time where ad spends are progressively shifting to online media, looks like there is still some steam that can be driven off of traditional media to drive traffic to online sites.

Get it to your doorstep for free

As holiday season is getting closer and closer, and consumers are shifting more and more to buying online, a host of retailers are offering free shipping. A recent report by CNBC interviewing Shop.org president, Scott Silverman talks about how nearly 50% of the US population will make online purchases this holiday season. An interesting part is that free shipping is become very common. A random check on the websites of top retailers (Macy's, Targer, Neiman Marcus, JC Penny's) shows free shipping offers of some kind. In most cases they are conditional upon the total purchase. The shipping option is however restricted to only standard shipping. Any kind of expedited shipping will be charged. Also if the boxes are to be shipped to multiple addresses, only the delivery to one shipping address is for free. In some cases, the option of free shipping is available only if you choose to put the items in minimum possible boxes which is very intuitive since most parcel carriers charge by the box, unless you exceed their 100 wt requirements. So it seems like free shipping is no longer a promotion, its become a cost for doing business. This entails, the retailers to rethink their contracts with standard parcel carriers. Another aspect of free shipping is service level - how soon is the customer going to receive the package. Standard UPS Ground shipping can take anywhere between 5 - 7 business days. So is the customer going to buy something that he needs to gift and choose a free shipping option? One way to support a high service level and still provide free shipping is by doing what is referred to in the small package industry as zone-skipping. The idea is to identify regional parcel hubs and sort your packages by those hubs and line haul (fill a truck) it to the regional hub. Basically, you are avoiding your packages going through multiple sortation points in your parcel carrier's network. At the same time this strategy can help the retailers negotiate better rates as they are effectively doing a lot of the sortation work that the parcel carrier would have to do. Of course with more retailer joining the free shipping bandwagon, the rate negotiation advantage might tilt towards the parcel carriers.

Introducing Retail 101

As part of my effort to cover diverse areas of retail, I am planning to include a post once a week which will describe some key concept in retail using published articles or information gathered from academia. The idea behind it is that it will help better understand some of the terms which are often taken for granted in standard industry white papers and news briefs. So starting this week with the concept of Demand Forecasts . In retail there are 2 key things customer satisfaction and lesser inventory. Now if you always had full stock of every item that you had to offer, there will never be any stock outs and thereby a customer will never go back not being able to buy what he wants to. But there is a cost to it - till the time that someone buys the item, your money is locked into that item. That money could have been invested somewhere or kept in your savings account and would have earned some intrest. So what am I getting to? If you could read the minds of all your customers in terms of what they want (kind of like Mel Gibson in What Women Want) then there wouldnt be a problem. You could place orders accordingly and satisfy your customers and keep your inventory low. Sadly, very few people (or maybe no one) has that kind of clairvoyance. Thats where forecast comes into picture. So like in every relationship, as time goes by you begin to understand the other person/party better, as time goes by you gather an idea of what your customers buy, how much they buy and at what time they buy. And using this information you start predicting what they would want in the near future. That is in some way a forecast. Ofcourse its easier said than done. Several forecasting models have been created and its as much an art as a science to select the correct forecasting model. There are other factors like promotions etc. which can change your forecast. I came across a very good article in Supply and Demand Chain Executive by Atul Mandal who is a project manager with Plan4Demand a boutique consulting firm. Mr Mandal is ofcourse more experienced in forecasting and explains very well some of the underlying concepts behind choosing a forecasting model. Thats our Retail 101 for this week...stay tuned for another one next week.

Less is more

I came across a very interesting white paper by Kaon Interactive on how to create a "wow" factor in the retail customer's experience. The paper begins with citing some very common obstructions to achieving this in the retail stores. A summary is given below

1. When too many product features or categories are available, customers find it difficult to understand and evaluate options. This results in them either choosing the cheapest product as price is something they can easily evaluate. This leads to them being dissatisfied at a later stage due to lack of features.
2. The space available on the shelf is insufficient to provide a informative presentation of the product assortment to the customer leading to an underinformed customer
3. While overcoming customers’ inconsistencies in decision making and physical space limitations are both challenges for retailers, finding the sales support to help customers make a purchase, and more importantly, make the right purchase is perhaps the retailer’s greatestconcern.

The paper talks about generating a positive emotional response in the customer while shopping - "Emotional response is also kindled when consumers better understand and appreciate the product they are about to purchase. While providing product information that details how a product is used, or clearly explains why a feature is present sounds obvious, it’sactually a rare occurrence in the retail world"

The first factor cited by the paper is corroborated in a recent presentation "Re-imageering Retail" given by Thom Blischok of Information Resources Inc. As per Mr. Blischok "84% of shoppers are fully satisfied with 23% of the merchandise at a typical store". This is also seen in terms of a trend towards "express" store formats which is expected to "grow from around 20 locations today to 4,000 by 2010"

Global Effects

Retail is probably as old as civilization itself. From the time that our ancestors bartered grains in exchange for cloth, the idea of retail has been in existance. However, the growth in globalization has led to it being governed by so many diverse factors. A large proportion of everday retail pertains to basic needs like food. I came across a very interesting article in the Boston globe on how the grocery bills are rising in the US due to a multidimensional supply-demand tug-of-war. On on side you have rising oil prices leading to increased transportation and packaging costs which are passed down to the consumers. On the other side you have growing demand for basic food commodities like oil seeds due to economic emergence of BRIC (Brazil, Russia, India and China). An interesting fact was cited in this article - "China will import almost 50 percent of the world's oilseeds within a decade, becoming the world's largest importer, according to estimates from the Organization for Economic Cooperation and Development." I wonder if another green revolution of some sort will be required to dramatically increase productivity so that the growing demand for food commodities can be satiated. At the same time efficiencies in storage and transportation might be required to curb the seeming growing spiral of increasing costs.

Crumbling Wal?

For the last decade or so the retail landscape has been dominated by the Bentonville giant. Numbers from as recent as 2004 reflect the hold it has on retail market. But like changes in every field, the one in retail also came swooping and W*M has some challenges on its plate. I came across a very good article by Paula Rosenblum of Retail Systems Research on the challenges facing the giant. Some key observations cited by Ms. Rosenblum that I found interesting were pertaining to how retailers have responded to W*M's presence - "In a post Wal-Mart world, retailers could not differentiate on operational efficiencies, or selling commodities. Wal-Mart owned that space. Retailers like Target, who made hay by selling really cool stuff cheap (or somehow making commodities seem cool), Costco who made warehouse shopping chic, and Whole Foods, who gained its customers trust by being at the forefront of eco-friendly and healthy, started knocking the ball out of the park by NOT being like Wal-Mart". The article goes on to recommend how W*M can use IT to bring back its "mojo". One very interesting part of this recommendation was the use of RFID instore to track stock movements. However given some of the technological (hardware) problems related to RFID, I am not sure how practical that is. Only the future will tell if the Wal's crumbling or the Mojo's Risin.....

Glocalization

A very interesting report on the future of Retail in 2015 was published jointly by TNS Retail Forward and Retail practice of PriceWaterhouseCoopers. The report talks about 2 distinct groups of people emerging based on the age profiles - the Baby Boomers: 65 and above who will still go for the big box retailers and the The Millenials: 35 years of age who are more environmentally conscious, technologically savy and purchase based on lifestyle. Another interesting prediction is the growing diversity in the population where more than half of the population under 25 identifying themselves as non-whites. The study talks about how "The 'one-size-fits-all' approach of the 1980s is not going to work as the population becomes more diverse and tech savvy during the next decade.'' The report talks about trend as "The best way to define this trend is through the term 'glocalization:' retailers will need to serve customers across major geographic, cultural, legislative and regulatory boundaries, all while catering to local tastes, traditions, lifestyles and economies."

Consumer Behavior

Continuing from my last post on "Active Design", an interesting article appeared in the NY Times on how more and more marketers are using consumer behavior rather than consumer perceptions obtained through market studies and then figuring out what fits their profile the best. Behavior based marketing is taking a step further and looking at what the consumer actually buys and identifying correlations to design the product offerings. In other words, if you know how your consumers "Acts" then you can design for her to act and offer her what she acts for. The article talks about the role of new media in helping identify consumer behavior and also market product offerings identified through an understanding of consumer behavior - "The ability of new media to monitor what consumers are doing — like keeping track of which Web sites they visit — is fueling the interest in behavioral targeting"

Active Design

Retail consumers are a changing bunch and its very important for a retailer to stay on top of what her choices are and how to make her "Act" on those choices. A very interesting article by Jonathan Dodd of G2 Worldwide published in the Hub Magazine delves into the idea of "Active Design".

The Need: Mr. Dodd says that experience based shopping can no longer be restricted to the high end retailers like Printemps, Slefridges etc. "....in a world where virtually every product category is suffering from brand proliferation and time-pressured shoppers are being enticed by ever more sophisticated retail offerings, effective design has to do more. It must work for the benefit of the shopper as well as the retailer and brand owner. It has to sell actively." An interesting statistic provided in the article states "According to POPAI, supermarket shoppers are exposed to 1.6 pieces of instore material every second. And yet less than one in five is noticed"

In the article, Mr Dodd enunciates some basic principles of "Active Design" through the example of Apple stores and says that the same idea can apply to supermarket stores which carry a much wider assortment.

Green is in

This month a lot of industry magazines seem to be focusing on the emergence of green trends in retail. Chain Store Age had a green theme for its October issue where it discussed several trends emergining in green retailing. A few interesting findings from the perspectives section

1. Cost of Going Green: An interesting excerpt on cost of going green - "Despite popular notions to the contrary, it does not cost more to build an environmentally conscious facility than a traditional building, according to a recent report by Davis Langdon, a San Francisco-based consulting business that helps architects and building owners manage construction costs.Green building, however, does require a different mind-set, advised Langdon. Sustainable features are too often tacked onto a project as an afterthought, making them appear as an added cost that can be easily cut.“Until design teams understand that green design is not additive, it will be difficult to overcome the notion that green costs more, especially in an era of rapid cost escalation,” according to the Davis Langdon report, “Cost of Green Revisited,” which studied 221 new construction projects." With the fuel prices rising by the day, the recovery even for an added investment into greener technology might be fast
2. Young Generation's Perspective: The young generation seems to be spilt into half when it comes to retail preferences based on whether the retailer has green/environmentally friendly policies and infrastructure. An excerpt from a recent survey "According to the latest Maritz Poll, “Environmentally Friendly Retail Marketing—All Hype or Consumer Preference?,” Gen-Y shoppers (defined as being between the ages of 18 and 30 for the purposes of this survey) are split down the middle on influence of retailers’ environmental policies on their spending habits.Of the 1,062 Gen-Y shoppers surveyed, less than half (46%) said they would shop at a retailer more if the retailer were to go green. The research also revealed:Fifty-four percent said green doesn’t influence their buying decisions;Nearly half (47%) said they would pay more for environmentally friendly services, products and brands"

As green trend continues due to changing customer opinion and lifestyle, sooner or later going green might become a necessary criteria rather than just a differentiation strategy. Like technology trends, it might have its own leaders, followers and laggards but an eventual adaptation might become a reality - probably sooner than later.

Smart Cart - Post Script

As a follow up on my earlier post on Smart Cart, I found an interesting take on it featured on the Store Front Back Talk website in reference to its feasibility/useability in the US market.

Of Gigabyte Spreadsheets and More - II

Continuing with the details of the seminar on 3 Pillars of Store Operations Planning, Marianne Gregory of Retail Benchmarks shared some of the best practices linked with the 2nd pillar - Payroll Planning. Payroll expenses are one of the biggest source of expenditure for a store. Not just that but the right staffing of store personnel helps in maintaining the level of customer service. An interesting finding from the benchmark study showed that leading retail companies had HR involve in owning the payroll plan in addition to corporate ops and finance. Now as more and more speciality stores are opened, a store associate is not just a person who helps out the customers to locate a box of cereal in an aisle. Well trained service staff can be an asset and establishing customer relationship and improving the level of customer service. Another interesting finding was that the leaders planned the payroll and staffing not just by forecasted sales but also considered the anticipated traffic. When selling items on special promotions, this becomes critical as more then expected number of people will show up needing not just customer service on front end but also increased replenishment to avoid promotional item stock outs on the shelf. From the above 2 results, its very clear that leaders dont look at their payroll as an expense line item only. They look at it as an investment that if planned well can be leveraged to provide greater customer service.

Of Gigabyte Spreadsheets and More - I

I had a great opportunity to watch(and listen) to a webinar given by Marianne Gregory, President of Retail Benchmarks and Dean Tarpley, Sr. VP of Palladium Group as part of the Stores Knowledge Series organized by Stores magazine. The webinar was titled "Fortifying the Three Pillars of Successful Store Operations". I went into the webinar expecting for the presenters to talk on store level details but it turned out to have a very strategic angle to it. We all know how People, Processes and Systems(or Enabling Technology) - PPS or PPT are crucial to running a retail organization. Mr. Tarpley gave a very interesting perspective on the PPS alignment from a Store Ops perspective. He mentioned that with the exception of Merchandising and Store Operations there is not much difference between a retail organization and any other organization (e.g. manufacturing). But its the planning and execution of precisely these two functions that differentiates one retailer from the other. Now the 3 pillars of Store Ops Planning are

1. Sales and Margin Planning
2. Payroll Planning
3. Other Expense Planning

Lets look at the first one - Sales and Margin Planning which is basically allocation of what target revenue and margins are expected from what stores. Mr. Tarpley shared from his experience with several retail clients that this aspect of planning in a retail org is essentially carried out in a silo-ed fashion. So you will have the financial organization doing their annual planning using a certain idea and then you have your merchandizers who plan differently and then at the store level its planned differently. All this happens mainly through spreadsheets where layers and layers of planning logic has been built and in some orgs these sheets almost measure a gig in size!!!! So essentially there is no alignment in information and process and ofcourse the people involved (financial analysts, merchants, store managers) arent communicating on a common platform. The impact of this fragmentation of process and information is that each of people involved in planning spend most of their time preparing the data that they are going to use to draft their plans and communicating the new plans to the other groups. This leaves them with barely anytime to actually measure and update their plans for meeting the strategic goals. Mr Tarpley suggests that the retailers who follow best practices(and not common practices) in retail planning have a common information platform like a common datawarehouse with BI that gives each function specific view on data and helps them build their plans collaboratively with the other functions. A change in the plan by corporate will be trickled down to a correponding change in the merchandiser's plan. Similarly an updated promotional event at the store level is aggregated back up to reflect on the margin for a specific category.

The seminar also had some insights on Payroll Planning (2nd Pillar) best practices. I will discuss that in my next post.

Technical Detail

I have added an RSS feed to my blog. You can copy and paste the following URL - http://feeds.feedburner.com/Heads-o-retail in your Google or other Feed Readers to get updates.

Smart Cart

Continuing with the trend towards retailers going green a concept of a smart cart with an installed computer is being explored reports the Wall Street Journal in this article (subscription maybe required). A study by EDS as per the article indicates that this cart can be used by customers to scan the barcode to get most of the nutritional information which would otherwise be crammed into excessive packaging on the items and thereby taking up more resources. The other side to it is that it will help a health and environmentally conscious customer be better informed on the contents of the item from a calorie, ethical treatment perspective. So in a way its another extension of service to an increasing creed of customers who are more health and environment conscious. But does this end here? So what do retailers have to leverage out of this? The details of the on board computer arent revealed to examine its capabilities but some of the things that come to my mind are

1. Item correlations: If there is a way to store the information on what items were scanned by the customer in a specific aisle, it gives some good data to plan assorments in a specific department
2. Travel time: The computer data can possibly be used to identify how much the customer travels on an average between picking up items. Can the aisle/shelf positioning be improved so that the customer can get to what he needs faster saving her some time?
3. Promotions: On scanning an item, can the computer display any special promotions that are going on for that item
4. Private Label: For every branded item scanned by the customer, can the system reveal the price and location of an equivalent private label item.
5. Recipes: Can the computer suggest some quick meal recipes in which the scanned item can be used. If the customer finds it interesting, maybe it can lead her to buy the other ingredients to complete the purchase and also print the recipe.

Maybe I am reading too much into the smart cart computer. I will watch out for more details on it and follow up with the post.

Shopping Portfolio

I alluded to the US retail market possibly moving to more innovative store formats driven by greater diversification of the customer base due to more varied life style choices in my previous post. I found a very interesting observation made by Brian Gildenberg of MVI in this article featured on the Hub magazine. Mr Gildenberg explains how Tesco could be capitalizing on the rapid change in the US markets indicated by the following 4 trends
"1) The apparent end of retail consolidation; 2) fragmentation of consumers and retail formats; 3) shoppers using a portfolio of formats to meet their needs; and 4)natural foods, energy efficient processes and an environmental message." Each of the trends are discussed with insightful details but the part which struck the most was an interesting statistic
"store sizes are becoming more polarized. When you aggregate stores that are more than 100,000 square feet and stores that are less than 15,000 square feet, both are actually growing markedly faster than the market average".
This might indicate that there are big store formats getting created to cater to a certain segment while more innovative formats are getting created at an equal pace to cater to a different demographic. A unique buying pattern is seen to be emerging where a customer uses a collection (portfolio) of stores to meet their requirements -
"The continued proliferation of the U.S. retail landscape into a variety of formats is leading to what we call a “portfolio theory” of shopping behavior. A typical shopper might visit a combination of club store, supermarket, specialty grocer and chain drug store to fulfill a variety of specific needs based on which format meets each need best."

Re(t)a(i)l-Politic

The news of Reliance Retail shutting down operations in northern state of Uttar Pradesh(UP) and other states is being looked upon as an eye-opener to the landscape of organized retail in India. I did some online research to see how the agri suppy chain in India looks like. I found a presentation made at Images Retail Forum by Ashok Singhal who is the chariman of KSA-Technopak, a leading consulting company in India in the retail and CPG verticals. A snapshot of the different players in the agri supply chain from Mr. Singhal's presentation is shown below

As agricultural produce moves further from the producer (farmer) there is wastage happening at every stage and margins added to the costs which eventually build up to 3.5 times the cost at which the farmer sold his produce. The table below (obtained from Ashok Singhal's original presentation) gives the breakdown of the margins at every stage.

So the claim of the Reliance Retail (through its "farm to fork" strategy) is that by bypassing the intermediaries it can provide value to the end customers and offer 'fair' prices to the farmers. In an ideal world that makes sense but the existing Indian retail environment is much more complex with many socio-political forces at play. I came across a very insightful article by S.A. Aiyer (Editorial contributor to Times of India) on the agricultural landscape in India. In a gist what Mr. Aiyer explains is that over the past decades as Reliance was building its businesses, it had to mainly deal with politicians, bureaucrats, bankers etc but with retail a hotch-potch of trade groups, comission agents and most importantly farmers have to be managed to get the operations going. Inexperience in dealing with such a complex group is back firing on Reliance. Its not that no one has managed in such a tough environment. The e-choupal scheme run by ITC is cited as an example of a successful model.

Club Loyal(e)

I came across one of the most comprehensive and insightful research (signup required for access) on Customer Loyalty Programs. The research was conducted by RSR by interviewing a wide range of retailers some of whom ran a customer loyalty program and others who did not. They have essentially categorized the respondents along several axes

1. Winners, average performers and laggards: This is based on their average same store sales growth, GMROI etc.
2. Length of time for which the retailers have been running the loyalty program: More than 5 yrs, Less than 5 yrs
3. Whether the retailers had any kind of loyalty programs

Some of the key points as per the research:

Purpose of the Loyalty Program: "Loyalty programs pull two of the most effective levers in retail performance. They have the opportunity to increase basket size, and also increase the frequency of shopping trips for existing customers. The original marketing rule of thumb is that it costs more to acquire new customers than it does to increase the value of existing customers – and loyalty programs offer an opportunity to do exactly the latter."

An interesting paradox elicited by the research (which rings true in today's cut-throat retail environment): "retailers are challenged to figure out how to appeal to“loyal” shoppers, while also reducing the costs to acquire new customers"

According to the research - Retailers who have been running a loyalty program for more than 5 years did so to provide a higher value proposition to their more frequent customers and to understand what their needs were and to provide better customer service. Customer data as such was not considered that much of a benefit or objective of the programs. However in recent times more and more retailers are looking at loyalty programs to get customer data which can be analyzed using latest data analytics tools and designing new promotional offers.

Having said that the research emphasizes that like everything else in retail - "Having a loyalty program is not nearly as important as executing a loyalty program well, should a retailer decide to pursue it as a customer service strategy."

One interesting fact that the research found was an across the board lack of good metrics to measure how well a program is doing. A loyalty program is no good if it’s not leading to an increase of avg basket value (top line growth) and at the same time not losing huge amounts of margin and affecting the bottom line growth. Also with the emerging trend of multi-channel retailing, a need to reflect the loyalty program across all the channels is not being executed well by most retailers. The research gives an idea of this through an interesting statistic - "barely one third of respondents let their members check their loyalty program status online, and only 20% of respondents credit loyalty program members for purchases made across any channel"

To summarize, the retail space is full of retailers that run as well as do not run a loyalty program. Loyalty programs by themselves cannot make one any more profitable. Recent instances of Albertsons and Borders significantly reducing their programs is a case in point. On the other hand groceries like Publix without a loyalty program are still able to get fiercely loyal customers. The challenge is really in executing a program by measuring its performance and improving it through a good organizational structure and technology.

Green-Back

I used to always think that going green (i.e. to adopt more environmentally friendly processes in business) on the part of retailers was a branding or a corporate philosophy thing. But an article here talks about a CA based organic food retailer United Natural Foods making it into a revenue generating proposition. UNF has a distribution warehouse where they have installed a solar power generating unit generating 1.5 million kilo-watts of electricity in a year. The unit not only generates power for the facility's needs but trades excess power to the state electricity supplier for which it gets credit. Add to that other tax incentives that they might get because of their green energy policy.

Virtually Real

A very interesting article by Ellen Brown was featured in Wall Street Journal on Kimberly Clark and other CPG companies investing in building virtual reality studios to test store display concepts and how consumers would respond to them. The idea is that rather than testing a concept in a store which takes longer time and is more costly, virtual reality prototypes can assist the manufacturers and retailers to gauge consumer responses. The article talks about a test where a customer is made to walk virtually in a store and pick up a pack of Huggies diapers. Now if the idea is to determine how easy it is to locate the product with the new display then probably this might work. Also it may give a good 3-D visualization for executives considering ideas. But what is not intuitive to me is how does this enable them to determine a consumer's choice. Now when we walk into a store, its an overload of stimulus in all forms - visual, audio, olfactory etc. Add to that group dynamics of a collection of people in a store. So just by having a sample consumer do a virtual reality walk through an isolated display and checking the eye movement would not be sufficient. There is no other display to attract the consumer's attention. There is no nagging baby on the cart diverting mommy towards the candy aisle. Human mind and its interaction with the surrounding is much more complex so I wonder how much a virtual reality gizmo will help.

Climbing the Wal

As Walmart's same store sales growth has slowed down, some interesting insights have been done on the reasons behind it. I found one such insight on Reveries.com website based on an article in Wall Street Journal by Gary Williams. One thing that I found interesting was "The pricing gap between Wal-Mart and rivals has narrowed, and more customers are now choosing convenience over wading through a supercenter". I used to wonder if I was the only one who got lost and confused in a gigantic WalMart super center. There was just too much signage and the one in my neighbourhood was so crowded that it would be difficult to find an associate to help out. Which brings in another interesting point - on an average (as per a study which I need to dig up and link it here) a shopper spends 22 mins in a Wal Mart store but how much of that is spent searching and how much is spent doing aisle crossover (which is what the super centers are counting on to up their avg top line sale)? I wonder if this is a fundamental issue with the supercenter format itself? As life becomes faster (can it get any more faster???), if its time for more smaller lifestyle dedicated convinience based formats? Do I see a Tesco lurking somewhere!!!!!

Carrying Forward

I came across a news article on Carrefour entering Indian market with Cash N Carry business. While a lot of foreign entrants are looking at domestic JVs to get into the retail space in India, this move by Carrefour seems to be more cautious and sensible. The round about way to get to one of the world's largest pool of consumers is mainly because of Indian laws that prohibit foreign retailers from running 100% ownership ventures unless they sell single brands. But the interesting part is that setting up a cash and carry operation helps in creating the supply chain infrastructure that can be easily ramped up to support retail network when it is put into place. Currently the Indian retail environment is in a state of flux where retailers like Reliance are facing a stiff opposition from smaller mom and pop stores who happen to form a large political constituency. A wait and watch game might be the right way to go till the promised land starts reaping retail bonanza

Real Time to Change

I came across this excellent article publisher by RSR (Retail Systems Research) on how technology has been an enabling factor in helping retailers react faster to customer demands. What I liked though is found in the last part of the article - "Technology companies love to talk about technology. Retailers love to talk about their people. Finally, process – empowered and accelerated by information and the technologies that deliver it – is finally getting a hearing in retail". How many times have retailers thought that just putting a technology will resolve their problems. Well technology is a solution that can enable a better process but cant substitute for it. On the other hand being able to use technology to adopt quickly to a changing business environment can be critical in a business like retail - "In his 1999 book entitled Adaptive Enterprise: Creating and Leading Sense-And-Respond Organizations, author Stephen Haeckel took the position that the rate and discontinuity of change in the business environment overwhelms organizations’ abilities to correct mistaken assumptions in their business plans. Therefore, he argued, businesses must architect their processes and supporting technologies to be able to respond very quickly to changing conditions."

Creature of Habit

Something very interesting that I came across in an NY Times article referenced on one of the retail e-letters that I subscribe to. Retail customers (that includes most of us) seem to be creatures of habit. So much so that a lot of them were upset when Macy's decided to do away with coupons as part of an initiative to make it easy for customers. Retail customers apparently like to get a deal even though most retailers actually budget for promotions so its not that someone is really getting a bargain. It was already accounted for to yield that much margin. I have also heard that some retailers like to give a treasure hunt kind of feel to shopping in their stores where some unannounced deals are selective placed in different aisles which give their customers a sense of achievement when they find them adding to that "I got a real smart deal" feeling. Its like "you win when you let them win".

Check this out ...fast

I promise this one is going to be my last post that involves Whole Foods for sometime to come. I came across this article in NYTIMES a few months back and couldnt help but recollect my grad school queuing theory class. This was such a simple application of that which I have never seen in a grocery store here in Atlanta. The challenge however is how do you manage the perception of the customers when they see a longer queue. It is not intuitive directly that longer doesnt mean slower. Infact having a common line means the next open counter is available to you and you dont get stuck because someone has loaded a pile in his cart ahead of you. In queuing theory lingo M/M/n queue is faster than n M/M/1 queues!!!!