Check it out yourself

A month or so back I had put a post on how Whole Foods is using a different approach to minimize check out times in its Manhattan stores. What I had noticed about Whole Foods was that they did not have any self checkout aisles. To me self check out is a very convinient option as I am very conscious about how many bags I use to fill my groceries. Often baggers at full service aisle, double bag and dont optimize the number of bags they use. But what I have often noted is that often a lot of customers get stuck with a bad label or produce item without PLU etc. That always use to make me wonder what is the benefit of this system. A full service aisle will help you checkout faster with experienced clerks entering and scanning your ticket items. The only explanation I could come up was perhaps the labor savings offset the investment. Turns out that self checkouts (SCO) isnt perceived any longer as a technology that helps you save some dollars but more of a customer habit. A very interesting article by Retail System Research's Nikki Baird talks about her experience at a user conference on self check outs. Some very interesting observations made by Nikki are summarized below,

• "...many of their customers are already trained on using self-checkout, and so are coming to expect that SCO is part of the shopping experience – at least for groceries. To these retailers, SCO is a customer service play required to keep up with larger chain competitors. They view it as a customer service benefit, increasing the amount of choice a consumer has over how they go about buying their groceries"
• "Consumers expect all of the same services at SCO as at any other register ". This is cited through an example of cash back transactions on debit cards. This is very convinient for a consumer as he doesnt have to take the trouble of stopping by an ATM. A lot of retailers dont provide this facility at self-checkout thereby affecting the customer convinience
• "There needs to be enough space within the “pod” of self-checkout stations so that carts can maneuver – not less than seven feet and more like eight". This is an interesting observation and more important in a self checkout scenario since all the material handling is done by the customer. Now this reminds me of this neigbourhood grocery store who had their SCOs facing the entry/exit doors. Well you'd think that is convinient but during winter time I saw many a troubled customers as every time someone stepped into the store a cold breeze would sweep the SCO sending shivers through potentially loyal customers!!!

India Retail contd...

I had a chance to listen to a webinar on an India Retail tour done by a Retail Forward analyst (Subscription maybe required). It was a very interesting approach where the analyst went to 4 major metro cities (Mumbai, Delhi, Chennai and Bangalore) and took a tour of some of the major stores in apparel, grocery and general merchandise specialities. It was more of study by observation then really looking at major statistics but regardless there were some interesting numbers thrown. Some key highlights

• India is among the 6 fastest growing retail markets with a CAGR of 10.4 % for non-auto retail.
• The more interesting part is that 96 - 97% of the retail sector is unorganized with over 12 million small mom and pop retailers. There is one exception to this - apparel, where the organized sector penetration is about 20%
• About 65% of the retail sector comprises of grocery. The spoliage rate is extremely high for produce going upto 35% of the total inventory.
• World over the real estate cost component comprises about 3 - 6 % while in India it is in the range of 7 - 27 % (!!!!) of the total operating costs.

Beyond the above numbers, some interesting observations were made by the analyst on what Indian retail does right. I am listing a few that I could note down

• India seems to offer a very high degree of development in visual merchandising. Right from the street fruit and flower vendor to the bigger departmental store, there is a big emphasis on making the merchandise visually appealing. Shopping is viewed as a family outing and retailers tend to make their store fronts as attractive for them as possible
• In addition to the visual appeal of the merchandise, smaller retailers seem to be very good at space utilization. Perhaps the higher than average cost component that the real estate has in the cost component is responsible for this. The report cites the example of a local panwallah (betel leaf vendor) shop where colorful merchandise is hung vertically to make as much use of space and at the same time display it to the potential customer
• There are some stores which are somewhere midway between organized and unorganized retail. Saravana stores in Chennai is cited as an example. This store targets lower to middle class customers with multiple levels selling apparel, consumer goods etc. Its unorganized aspect is its high reliance on manual labor to process orders where one associate packs, other provides a counter receipt, another is a runner who takes the ticket merchandise to the front desk for customer to claim. Its organized aspect is the fact that they have cut all middlemen and directly buy from the producers. Their model is low margin and high volume.
• From a branding perspective there is a trend of Indo-Western fusion. This is seen all the way from apparel to foreign fast food restaurants adapting a more local flavor and providing wider vegetarian options.

How India shops

A special report was published by Mckinsey Quarterly on the retail climate in emerging economies (Brazil, India and China). An article here talks about the apparel buying behaviour in India. I probably already mentioned before that more than 95% of the Indian retail sector is unorganized. Apparel however has a slightly larger component in the organized sector. Some of the key findings from the report,

• "nearly 40 percent of the mass-market Indian shoppers surveyed said that their most important shopping occasions revolved around special events, such as weddings and annual religious festivals—a figure dramatically higher than the one for shoppers in the other emerging markets"
• "greater extent than elsewhere, shopping is a family activity in India: nearly 70 percent of its shoppers always go to stores with family, and 74 percent—more than twice the average of Brazil, China, and Russia—view shopping as the best way to spend time with family." - this I think is unique. In most developed economies, shopping during annual holidays is seen more of a stressful activity while in India it seems like an activity for family fun.
• And this one is the most unusual - "India is unusual in that the market for men’s apparel is larger than the women’s market, where traditional Indian apparel still dominates". Somehow growing up in India I never noticed this. I always thought the women in the household has many more clothes/accessories. I would definitely like to see the numbers around this.

One interesting thing about the report is that they have surveyed only women to study the purchasing habits citing that - "women in many markets not only decide what clothes to buy for themselves but also influence clothing purchases for their children and husbands". I wonder what the basis for that assumption is but on a lighter note I was reminded of this ad from childhood while I was growing up in India. It centers around this quintessentially Indian family woman who is justifying why she chooses a specific detergent for her family. Its in Hindi and unfortunately without sub-titles but was one of the early TV ads on detergents and the ad agency looks like had the same idea in mind - that women make the key buying decisions in an Indian household.

Day after Black Friday

As reports trickle in about the performance of various retailers about their performance on Black Friday some interesting finds through anecdotal findings and expert opinion where reported in this article on WSJ. Some key takeways,

• "Based on early feedback, Friday's results likely matched expectations for flat customer traffic but small growth in sales" - It will be interesting to see if this is just an effect of retailers being cautious on how much to discount by resulting in the average ticket sales to go up a little.


• As per one of the Accenture experts cited in the report - "It looks like retailers are hoping to make up margin dollars on the higher-margin items while pushing smaller products at deep discounts" - Sounds contradictory to me considering that the big lines on the electronic item shops was for big ticket high margin items like HD TV and Notebook computers


• "Some retailers highlighted cheaper merchandise in their ads this year, giving cautious spenders more of a reason to show up. Best Buy, for example, devoted the front of its advertising circular to products such as a Dynex 32-inch LCD HDTV, discounted to $449.99 from $749.99. Last year, Best Buy's ad for Black Friday gave more prominent billing to TVs that cost $1,000 and more." - This is a no brainer. I think retailers would have had to do this to attract more traffic.


• Some interesting numbers on online sales - "Online sales hit $52.9 million on Thanksgiving, on 1.09 million orders, according to the Chase Paymentech Pulse Index, which tracks payments generated by 10 of the top 30 U.S. Web merchants as ranked by Internet Retailer magazine. Last year, online sales reached $42.3 million, and 863,880 orders were processed" - considering the fact that store traffic was flat, this may come out impressive.

Lastly my own anecdotal report on this years Black Friday. I resisted the urge to go to Best Buy but the more I looked at the Sony laptop deal, inspite of heavy lunch, I dragged my self out to a nearby Best Buy in Kennesaw, GA. Reaching there made me realize that I moved 5 hrs too late. The below picture was taken at 10 pm on Thursday (pardon the bad quality). I wasnt surprised though with the outdoor tents and the gas burners used by enthusiasts to keep them warm

Black Friday coming

Before the early morning craziness begins and lines of shoppers rampage through stores, one last look at the holiday season outlook. This one by WSJ(subscription maybe required) speaking about the cautious approach to markdowns by most retailers. It might seem like the weakening economy might propel retailers to do faster and steeper markdowns but they are using IT tools to slim their inventory and use past data to forecast demands and perform more planned markdowns - "The industry has embraced price-optimization software that looks at past sales trends to determine where to set the initial price and when to trigger markdowns. The aim is to help store managers avoid panic-driven discounting if early sales are weak". It looks like apparel is one area where steeper markdowns might be seen cites the article - "Clothing is a prime candidate for more discounting as warm fall weather has discouraged purchases. John D. Morris, a specialty retail analyst at Wachovia Capital Markets LLC who tracks sales racks at clothing stores, says there were 5% more in his latest survey than a year ago". On the other hand high end speciality retailers are bucking the markdown trend and figuring out ways to increase traffic - "The most upscale stores, whose shoppers appear to be least threatened by the slowing economy, are eschewing discounts in favor of testing ways to increase store visits.". Some of them are offering gift items for bigger purchases.

Orderly Black Friday????

Looks like all the mad rush that you encounter the morning after Thanksgiving might be handled in a much more orderly way if retailers are going to successfully implement what is described in this news brief. Best Buy and some other retailers are planning for handling the line of customers that go all around the block in an orderly way with ample hands manning the check out registers to provide a good customer experience. One of the store managers explained it as "Just like a football team, if you're running to the right, the blockers need to know which way to block," he explained. Except Best Buy's employees don't aim to block anything; rather, their goal is to orchestrate an orderly flow". One of the things which is difficult to control however is the customer desperation to get to the sweetest deals before they run out. A few years back I remember waiting outside the Best Buy store the day after Thanksgiving and they did something very sensible. There were about 20 HP laptops which were offered at deep discount deals. Half an hour before the store could be opened, the store manager walked along the line asking for who were there for the laptop deal and handed out tokens. Once the tokens were over, anyone down the line wouldnt get the deal. Otherwise you can imagine two customers pulling a laptop from two ends and the store manager tearing off his hair. What I keep wondering is what if the store published a floor plan and the deals are mapped on them. If I am looking for a flat screen TV, wouldnt if be better if I knew exactly where it was so that I dont end up coming in the way of anyone else rushing for a deal in another area? Just a thought...havent been to a crazy Friday morning since a few years. Maybe someone has already implemented this idea.

Boomerang

I came across this interesting article in Store Front Back Talk magazine talking about the phenomenon occuring as retailers are moving towards a coordinated selling across multiple channels. The transition is not complete and the results are far from what the article refers to as "utopian" world of multichannel retail where a store manager can look up articles browsed by customers from in-store kiosks to determine what to order. Many retailers are using emerging channels to drive customers to in store purchasing. Example are cited of Wal Mart sending out alerts of instore items available over text messaging or an upcoming store in Madison allowing customers to read user reviews of product through a bar code scan. So where does the boomerang come from...well what is boomeranging is the movement of customer first from online to get information on products, promotions etc then to the store to try out products and again to check its user ratings back online. Now why exactly is this happening? could be multiple reasons - one of them being retailers still havent figured the right IT architecture to synch up the multiple channels at play. But is IT the only challenge here? there could be more - one of which is cited by the article as - "Such true merged channel data exchange would also require political changes, with senior management ordering that walls between channel business units be either brought down or at least made ultra-porous." In an environment like retail where distinct departments like merchandising, store ops, ecommerce, logistics, marketing have to work together change management effort and its successful implementation is critical for multi-channel success. Till that time customers will keep boomeranging!!!!
On a very separate and a very conventional note, the article states that "studies show that 25-30 percent of footwear customers leave the store as the sales associate goes to the back room to retrieve the specific size footwear for the customer." Something as simple as a handheld with software functionality to check back room stock and create a task to have the desired item retrieved from the shelf by alerting a runner could work as the store associate continues to engage the customer. Even in the emergining world of cutting edge retail technology good'ole scan gun and a personable associate can go a long way.