Off the Shelf provides a platform for Retailers and Consumer Packaged Goods companies to discuss and gain insights on the pressing problems, trends and solutions.

August 7, 2015

Inform, Cajole, Coerce - Field tips for CPG distributor sales executives to sell their brands to Mom and Pop retail outlets in emerging markets

Abstract

 

A distributor or a CPG company sales executive is an important element in ensuring penetration of CPG brands in the traditional mom and pop stores retail channel, especially in emerging markets. With as many competing brands within each product category and the peculiarity of each mom and pop retailer, the sales executive's task is complicated.

 

We present a few field tips for the sales executive to improvise and sell to the traditional retailer. These tips along-with sales history, inventory forecast, recommended order quantity, brand sku prioritization and "what if " margin calculation enabled by mobile technology and product training will enable the sales executive to achieve targets in an efficient manner.

 

Overview
 In emerging markets, a mom and pop retailer purchases Consumer goods based on a host of factors such as perceived credibility of the sales executive, time, space, working capital, consumer demand, margin and credit period, attractiveness of competing brands, distrust in a new brand or brand extension etc..

While considering all these factors, the distributor or CPG company sales executive has to engage the traditional retailers in a sustainable and profitable relationship and juggle with the entire portfolio of brands keeping in mind the retailer preference, store size and location, consumer profile, retailer working capital, schemes, new products, competing brand offerings.

Here are some often heard challenges that sales executives face during their daily routine and some street-smart tips to overcome them

Sales executive woes and tips to overcome them

 "Competition is offering better margins to trade......." "Net profit on product is marginal due to price under-cutting by Retailers....." "Retailers always expect the same margin if not more for the same order quantity, even in the absence of schemes or special incentives..."

·         Attack the Flanks: Dominate in outlets where competitor presence is minimal.
·         Illustrate for impact: Illustrate the margins made by the Top 25 outlets on the sale of these brands at the same price.
·         Keep competitor intelligence handy: Know your competitor. Understand their trade schemes. Take photographs of shop displays or marketing collaterals. If the offers are genuinely better, concede. This will build trust. Inform your distributor.
·         Communicate risk: Recommend the right price to sell to consumers and the risk of price undercutting - margin loss and reduced perceived price of the product brand.
·         Negotiate Hard: Compare margins with other retailers supplied by you or competing brands and show the retailer that his deal is the best one can get. Convince him on his potential to sell. Negotiate hard and do not drop your guard.
·         Compensate with additional incentive on other brands: Cover the perceived margin shortfall by offering additional incentive or cashback on brands in other product categories.

"Retailers demand for extended credit period in next ordering cycle, as product movement has been slow..."

·         Analyze inventory movement: Extend credit period only if it is the last resort. Monitor stock movement on a regular basis. Analyze the reasons for slow movement such as: No consumer enquiries, product complaints, competitor offers, no display, retailer not promoting the brand etc.
·         Transfer stocks: If the movement is genuinely slow, transfer stocks to other outlets where the movement is relatively faster and move in other substitute brands.
·         Improve visibility: If the Retailer is not proactively selling the brand, explore display through fixtures or attractive presentation or bundle the stocks with other brands which are imperative.
·         Illustrate and provide confidence: Compare with a like product brand which has the same lifecycle but was successful eventually and thus build Retailer confidence and avoid extended credit.

"Unable to sell some of the price variants"..." Almost impossible to sell less popular brands or brands with Low Retailer preference...."Retailer is willing to stock but only as a pilot and on consignment basis...."

·         Additional not substitutes: Promote less preferred brands as necessary additional orders and not special orders. Do not promote them as substitute brands. Explain on paper, the additional margin that can be made from selling these brands.
·         Cross-sell with the Winner: Bundle orders of less preferred brands with the power packs. Position them as mandatory without budging.
·         Gradually step on the gas: Increase order quantity and off-take incrementally until the desired order quantity is met.
·         Be cautious about consignment stocks: Supply stocks on consignment only if you are confident about the Retailer's credibility and ability to sell.

 "Need to maximize orders to achieve targets....." "Pressure to push stocks is leading to multiple invoices and delayed payments..." "Appeal by Retailer to not push for payments as other payments with higher priority have to be made first..." "Order quantity is same on every purchase..."

·         Have your Hat in Hand: Maintain a cordial relationship with the Retailer. Step into his/her shoes. Empathize with his situation, provide recommendations to improve stock rotations and tips to display and sell.
·         Challenge the regular ordering norms: Stretch the order quantity through rational explanation. Explain the lost opportunity by not stocking sufficiently.
·         Stay within the retailer's radar and execute your promise: Watch out for the slightest opportunity to promote your brands within the outlet. Ensure prompt delivery of order, participate if possible in displaying stocks and in selling to customers.
·         Avoid salesman productivity paranoia: Before the cycle begins, get the Retailer buy-in for the planned orders. Don't push the stocks too early to achieve your targets. Monitor the sales and schedule the distribution as per weekly sales and coverage frequency to gain Retailer trust.
·         Personalize every order: Communicate only those promotions or schemes which will be relevant to the Retailer in the ordering cycle.
·         Optimize the orders: Forecast and logically communicate the right order quantity based on past history and current schemes.
·                     Keep an eye on Competition at large: Monitor Competing brands new product introduction, volume, trade schemes and pre-empt any move to reduce your volumes.

"Appeal by Retailer to not push for payments as other payments with higher priority have to be made first...."

·         Collect Partial payments: Split the collection of larger invoices into convenient sums to ease the pressure on the Retailer.
·         Extend Credit period only where required: Collect partially and extend the credit period if required, for the balance amount.
·         Distribute with exclusivity: Don't generalize and push all product brands everywhere. Provide exclusive schemes only to those Retailers who are willing to pay on time and those who will provide the volumes that you had planned.

"Focus is always on few key Retailers, hence less chances and time to play around with the trade budget or stock to develop other Retailers..."

·         Improve penetration: Expand the distribution network to remove dependency on a few retailers.
·         Create Clusters: Create clusters of outlets with common characteristics. Plan schemes for targeted clusters rather than one-fits-all schemes. Distribute incentive/promotion budget across clusters over time.
·         Develop Mascots: Develop a network of key retailers who can influence smaller retailers to join the network and/or purchase the brands, thus improving the overall order quantity.

 

Wear the ICC rule on your sleeve: "Inform, Cajole & Coerce" !

About the Authors 

 

Krishnakant Kasturi (KK) is a Principal Consultant Infosys Consulting.. He as 15 years of cross-industry and cross-functional experience spanning Retail Sales, Operations, Marketing and Business Consulting. He specializes in helping Retailers and Consumer Good Companies in business process improvements and building solutions in the areas of Sales Operations, Merchandising, Consumer Insights, Loyalty program management and Brand Management. He can be contacted at Krishnakant_k@infosys.com.
 
Sriram.R is a Senior Consultant in the Industry Solutions Group of Infosys. he has 10 years of hands-on experience of Sales and Distribution of leading CPG cos. in the Indian Market and 5 years in Business Process Consulting. He specializes in Sales and Distribution Strategy and Merchandising. He can be contacted at R_Sriram@infosys.com.
 
 

 

January 9, 2015

Deciphering the right ecommerce model for India

ecommerce Models2.jpg

















Multiple ecommerce models have evolved in the market starting from Pure Inventory Model (capital intensive) on one extreme to Pure Market Place Model on the other (technology based agent model that is light weight on capital).  In US 3 models dominate the space, they include

-      Pure Inventory Model

-      Hybrid+ Model- ex: Amazon

-      Pure Market Place Model - ex: eBay

However in India, while the market initially started off with Inventory led ecommerce model the capital intensive nature of business, concerns from stakeholders on profitability and scale as well as threat from International bigges like Amazon has led to emergence of new class of ecommerce Model namely

  1. Hybrid Model
  2. Managed Market Place Model

Each model has come into existence for similar reasons but with different intentions. The Managed Market Place Model has been adopted by Flipkart, Snapdeal and Amazon to circumvent FDI Laws and bring foreign money to beef up capital. While there are debates on whether it is legal to bring FDI under the Managed Market place model, for the time being it is seen as a quick source of much needed capital for these companies.

On the other hand Myntra (in early 2014) also introduced (but did not switch completely) to a Market Place model while retaining the Inventory based ecommerce model. Per one of the earlier announcements from the company, Myntra will continue to operate both models (one needs to read this with caution as Myntra got acquired by Flipkart in mid 2014) - src: www.economictimes.com

       Sell premium and private label brands through inventory model

       Sell Local and Boutique Brands through Marketplace model

While managed market place model is one sure way to scale profitably without needing too much capital and providing right level of control towards customer experience, there are still multiple problems to deal with

       Limited or Lack of control over Product availability and quality  from third party sellers

       Humungous task of managing a large supplier base that is fragmented and Limited ability of 3rd party suppliers to scale and meet demand fluctuations

       Delays in shipment and marginally higher shipping costs as multiple products in an order needs to be fulfilled from multiple suppliers consolidated at a Fulfillment center and then and shipped to customer

       Loss of competitive advantage over the long run as the technology platform offering (for managed marketplace) can be replicated by other players leaving little or o differentiation between various players in the market

Managed MarketPlace.jpg











In my view the model followed by Myntra** in India (hybrid model) or the one followed by Amazon in US (hybrid+) has greater appeal over the managed marketplace model for the following reasons

       Provides leverage to sell premium and exclusive brands through their own inventory

       Focus on private labels and improve margins

       Provides an option to the company to scale and sell other products/categories (from their own inventory) when 3rd party sellers are not providing the right quality of product or service

       Utilize marketplace to derive trends and insights on new products and gaps in current offering and use the Inventory model to exploit those gaps.

       Strikes a fine balance between Capital Requirements vs control on product quality, inventory and fulfillment

hybrid model.jpg











To summarize, in the near term the market in India will move towards the Managed Market Place model for ecommerce for obvious reasons. However once the restrictions on FDI in online retail (B2C) are removed and when capital is available at acceptable rates most players will settle for a 'hybrid' model where Inventory and Market Place models will co-exist on their ecommerce platforms allowing players to exercise right amount of control on product quality, inventory, price, fulfillment and order tracking. Think about a hybrid model where high value-low volume and designer goods are sold through inventory model and categories that have high volume/low value and low margin goods are sold through marketplace model.

Other interesting proposition to consider would be that of Brick and Mortar retailer like Reliance Retail or Tata*** to build or acquire one of the ecommerce platforms and provide a compelling business case. A player like Reliance Retail has the following advantages

       Established supplier network for multiple categories as they already operate various formats like Fresh, Hypermart, Digital and Fashion - helps scale the business faster

       Faster rollout into Tier-2 and Tier-3 markets by leveraging well established store network in these cities.

       Availability of capital from parent company which will help scale the business. Deep  pockets and easy access to capital ensures staying power in the low margin online business

       Omni channel support by leveraging stores as fulfillment centers ensuring faster deliveries and improved customer experience

Clearly these are exciting times for online retail in India. The extent to which any model succeeds will depend on positive policy changes, efficient usage of available capital, trust quotient, scale, optimal customer experience and supplier network management and tight control on operations (price, quality, availability, fulfillment and returns).

* Includes Control on Product Quality, Inventory, Price, Logistics, Fulfillment and Tracking

** Myntra got acquired by Flipkart in Mid 2014 and hence their business model might be subject to change

*** Tata has already made investments in Bluestone, UrbanLadder and Snapdeal in 2014

January 2, 2015

Bridging the Physical and Digital Worlds

I am a technophile, and I believe sincerely that technology is going to make tomorrow's world better than the one today, just like it made today's world better than yesterday's. The retail shopper will be among those who enjoys increased conveniences and better shopping experiences with the technology trends sweeping the Retail industry today.


One such trend - a vital piece of the Omnichannel puzzle - is interconnecting the physical and digital customer touch-points, thanks to various technologies including geo-fencing, NFC tags, GPS and mobile devices like smartphones. By bridging the physical and digital worlds and allowing them to interact with each other in a seamless manner, the Retailer can improve the customer's shopping and service experience resulting in increased conversions.


Let's take an example from a real life situation. Say I want to buy a smartphone and I research various smartphone brands online, select one and add it to my shopping cart or wish list. The next time I walk into a store, an alert can be made to appear on my smartphone asking if I need assistance buying the smartphone in my abandoned shopping cart or my wish list. The customer experience could then be taken further, by paging a customer service rep to come help me or by allowing me to navigate to the electronics section using my phone. The experience could be completed with price comparisons, a mobile checkout and feedback on the product and experience.


This is just one example and the possibilities are endless - including personalized in-store offers, price and availability alerts, proximity based product information, showrooming and analytics of in-store behavior; not to mention upcoming technologies such as Automated Shopping Trolleys, 3D Printing and Augmented Reality. And while Retailers improve their experience, Shopping Mall operators are also starting to connect shoppers to the digital world, for added conveniences such as automated parking garages and price comparisons.


Shoppers may look forward to an exciting future where their shopping trips resemble a sequence from a science fiction movie. Retailers already have several tools to launch themselves on the way to that future.


To learn more about the various ways for Retailers to bridge the physical and digital worlds, meet our experts at Retail's Big Show. Schedule a meeting now. Visit www.infy.com/NRF15.

Continue reading "Bridging the Physical and Digital Worlds" »

December 29, 2014

Retailers need to re-invent loyalty programs

Loyalty of a customer is a gift for any business. Much has been done to increase the number of loyal customers and maintain the loyalty of the existing customers. It seems like whatever the retailer does, the customer expectations keep increasing. Does it mean that retailers need to forego the existing methods and adopt new methods to enhance customer loyalty? The answer lies in determining how much to re-invent and what to enhance. Customer loyalty is one of the topmost goal that each retailer wants to achieve - as a loyal customer has higher ROI than a normal customer.

Today, retailers run a number of offline and online loyalty programs. Retailers such as GAP and Nordstrom manage their cross-sell and up-sell through loyalty programs

      GAP uses cross-sell opportunities via pop-ups, based on user's online shopping behavior;

      Nordstrom makes it convenient for customers to manage their wish list by allowing customers to:

·         Share their wish list with friends and family through an email and /or find their friends and family's wish list to give gifts they want

·         Save multiple addresses, up to 150 of their favorite items and set privacy settings

·         Nordstrom emails their customers when items in the online shopping bag are about to be removed (reminders are not sent out for wish lists, but emails can be sent to friends and family)

Customer loyalty is managed and maintained by almost all the retailers, but a continuous improvement on their current offerings can be achieved by making the loyalty programs easier to adopt and with higher incentives to the customer. Nordstrom has taken customer loyalty a step further - it has tried to understand its customer better and provide a personalized loyalty program:

  1. Nordstrom's "Loyalty Program" is a service where customers can enroll themselves to avail benefits based on purchasing pattern
  2. A professional services team across the channels is in place to work with customers
  3. A point system is in place to drive traffic

As retailers continue to expand the usage of technology such as LBS (location based service), 'Design for self', bluetooth technology iBeacon, etc., it is clear that such innovative technology would be very helpful in enhancing customer loyalty.

·         LBS services are being used to notify consumers about promotions / offerings in nearby stores. These services need to be more personalized based on customer's buying pattern

·         'Design for self' enables the consumer to customize and design their products online. A few organizations - Nike (Apparel, Accessories) and Toyota (Auto Manufacturer) have empowered their customers to design their products online. Fulfilling each customized requirement may not be an easy task. To begin with, retailers can prioritize the customers based on the number of loyalty points of a customers and delight the customer by fulfilling their customized product

·         Bluetooth technology such as iBeacon is being used to provide contextual promotions to the consumers in store. Based on customer's aisle movement and selection of products, these promotions need to be targeted to enhance customer experience and thus increase customer loyalty

Targeted promotions to loyal customers would result in a higher ROI, but retailers need to keep reminding themselves that their customer has become much more tech savvy. Hence, retailers need to be a step ahead and use latest technology innovations to revamp and enhance their existing loyalty programs.

 

To know more about how you can use various integrated technology innovations to enhance your existing customer loyalty programs, meet our experts at Retail's Big Sow 2015. Schedule a meeting now. Visit www.infy.com/NRF15.

December 22, 2014

Smartphones and Smart Consumers

 

There was a time when if you went to a retail store and the prices seemed a bit high, you would have to drive to a competitor to compare rates.  If it turns out the initial store was cheaper, you could drive on back and make your purchase.  Then the internet came along.  If you wanted to compare prices, you could do some online research comparing different retailers' prices, before printing off your MapQuest directions to the store offering the lowest prices.  Now, we're in the mobile era.  From a retail store you can quickly look up the price of a consumer product offered at every single competitor from your tiny computer that you take everywhere that happens to make a phone call once in a while. 

How do retailers satisfy these knowledgeable consumers?

                Armed with smartphones, consumers demand lower prices and have the power to seek out less expensive alternatives, including buying from online retailers like Amazon.  To compete, many retailers have offered to match the lowest prices from physical and online retail stores alike.  This can prevent a retail store from losing the customer, but a cost.  Retail stores lose revenue by lowering their prices to match low-cost competitors, but they also must deal with the uncertainty in forecasting associated with selling a product at various prices.  Price matching also allows some shrewd bargain hunters room to pull a fast one over retailers.  Recently some customers created false Amazon pages to purchase Playstation 4 consoles at less than 25% of the going rate.

Where does this leave retailers?

                Retailers use this price-matching to practice price discrimination.  They offer lower prices to the bargain-hunters who pull up competitor prices on their iPhones, but offer standard rates to those who are satisfied with the listed price.  This strategy allows retailers to stave off the low prices of online retailers a little bit longer, while also extracting the most revenue from most customers.  Trends are moving in the direction towards consumers gaining more and more information about consumer products value and quality, so physical retail stores must begin to offer more benefits to the in-store experience if they wish to remain profitable.  The Apple Store is the pinnacle of this in-store experience.  Customers enjoy trying out the latest products, receiving one on one assistance from "Geniuses", and lounging around in the sleek-looking stores.  There is still a reason to go to these physical locations.  Price-matching is nice short-term band aid, but retail stores must continue to offer premium experiences if they expect today's consumers to choose in-store purchases over the convenience and experience of online shopping.

December 18, 2014

What can retailers learn from consumers' online behaviors in shaping the in-store shopping experience?

Jane is walking through her local market when she passes by the hair products aisle and she remembers that she's running low on hair gel.  She wants to try a new, higher-end product, but making the selection is daunting, and she is not sure which product to buy.  She wants to do some quick comparison research before she spends 30 dollars on a product, so she takes out her phone to read relevant product reviews.  It takes a while to locate all the products, and reading the many reviews for the various products are overwhelming.  After five minutes of frustrated searches, she decides to settle with her generic option.

For the average shopper today, Jane's experience is likely to be a common one.   Indeed, a recent consumer survey found that the majority of people prefer to begin their journeys online, with 88% of shoppers webrooming--or looking at products online first, before purchasing in-store.  Such practices are not relegated to just high value purchases like electronics alone; modern day digital shoppers are increasingly price and value conscious, and they are used to easy access to reviews during their online shopping experiences, hence they tend to be less impulsive while purchasing, than ever before. 

It is the job of retailers then to meet consumers' increasing demands for external sources of information during their in-store shopping experiences.  To do so, retailers must focus on enhancing capabilities on mobile devices.  For example, to help shoppers like Jane, retailers can attach QR codes to products which allow consumers to easily access reviews for the product by simply scanning it with their phone.  On the same page, there can be reviews for related products as well. Also included must be tools to help Jane locate a product she indicates interest in. 

Repeated surveys indicate that despite the usual habit of starting shopping journeys online, consumers still overwhelmingly prefer to make actual purchases in-store.  Leveraging mobile content to supplement the traditional in-store experience, can create a simpler and faster journey that caters to the consumer's demands and save him/ her time. 


1)     To know more about providing seamless and engaging in-store customer experience, meet our experts at Retail's Big show 2015. Schedule a meeting now. Visit www.infy.com/NRF15


 

The case for Online Grocery

 

 

Online retail is a very important channel today, on which every retailer is trying to gain a foothold. Giants like Amazon, Ocado, and Flipkart etc have established their online business and are trying to tap into a larger market share across the globe. Be it the retail or consumer products for new or used products, everyone wants to be on the web and doing business.

 The next big thing in the online business is Online Grocery. Online business has its own advantage on cost, but is it cost efficient? Grocery retailers today are striving hard to become unique in form of the service they provide, the range they carry or the omni-channel presence allowing easy access to the customer. But there is a definite amount of cost involved in being unique, which is a major concern for any grocery retailer. The margins are very thin and tight control on operating costs is required to meet the top and bottom line. However the buzz around going online in grocery segment remains a major thrust area in 2015.

Customer's wants are never ending and companies too are trying to satisfy them with innovative methods like click and collect, drive through, home delivery and centralized lockers, to service the customers and retain them, apart from the online offering.  There are retailers who have a physical store and also provide home delivery, drive through - these services win customers but they also mean additional cost for the retailer to manage these services. That's why online retailers have  a minimum cap of purchase for customers to avail these services.

Going online sets the retailer free from the real estate cost which occupies a major chunk of the P/L statement of any brick and mortar retailer. And added to it are other costs like power, human resources, shrinkage etc.

The advantage in the online grocery business is the use of limited manpower who could be trained to handle sensitive categories and make sure the product stays intact till it reaches the customer. Also, when a customer sitting anywhere, places the order, gets to pick it from a location near to his/her work place or home or gets it delivered, it gives enormous customer satisfaction, which is most important today. The only thing online retailers need to do is to market their services, try to reach all types of customers and make their supply chain efficient. Once the supply chain for home delivery, drive through and click-n- collect is in place, the online retailer can enjoy the cost advantage and scale up.

In conclusion, in having only a physical presence, there is always a limitation in targeting only the customers available in the catchment area. In an online business, the retailer has a better reach and the retailer can provide other services too, which improves customer centricity, apart from  benefitting both parties monetarily.

 

 

 

Digital wallet and self-check-out - are they the answer to shorter check-out queues.

Market Size projections for Mobile Wallet Range from $41 B (per Forrester Report in 2013) to $64B (emarketer report in 2014) in US by 2017.  There is an even more impressive report card for Global Mobile Wallet market with estimates ranging from $ 191 B for 2017 (ABI Research for NFC Mobile payments) to $ 1602 B (Transparency Market Research, Oct 2014) by 2018 with a CAGR of 31% from 2012-18.

As we debate the correctness of various estimates, the writing is clear - these are well and truly exciting times for Mobile Payments in general and Digital Wallets in particular.

While there is a huge potential to transform the payment space, even at current levels of maturity the market is crowded and fragmented (at least in the US) with many players aiming to take a slice of the pie - see image below on who the players are and what are the various types of offering  (US Context)

DigitalWallet Ecosystem.jpg























Image1: Overview of Different Types of Wallets and Players


One would imagine that with the plethora of options,the awareness and adoption rate will be quite high, however the reality is quite contradictory - there is a high awareness (~ 80% in US) but a dismal adoption rate (< 20% in US) (src: Yankee Group 2014 report)

So what is really the problem - does the wallet not provide the convenience or benefits? Are consumers worried about security and data privacy?

Let's now consider the benefits of a Digital Wallet. Many proponents of the digital wallet will argue that usage of wallet results in shorter check out queues. While there are really no proven data points to quantify the actual saving, on the contrary there are some examples where different digital wallets have failed miserably on usage and performance that they had to be discontinued eventually ex: Starbucks Failed Square Wallet Rollout in 2012. Also, more importantly there's nothing particularly inconvenient about traditional card payments at POS / checkout. Given this kind of a scenario, the Mobile Wallet as a replacement of Credit Card with marginal improvement in checkout times will not be a great business case.

So now let's look at critical success factors that will help in adoption and in providing better benefits to customers. These factors fall under 3 different heads:

1. Superior Customer Centric Design -Foundation of any good mobile wallet offering
2. Address Customer and Merchant Concerns

Key Concerns.jpg






Image2: Key Concerns


3. Provide Value Adds

Value Adds.jpg







Image3: Key Value Added Functionality


In short rather than limiting the benefits of the wallet to just faster checkout times (yes this is absolutely needed but it is the bare minimum), the focus has to be more on looking at the digital wallet as a customer experience enhancement platform with built in components to address concerns and provide value adds so as to enable smooth payments by the wave or tap of a phone.

The success of any digital wallet program will depend on the extent to which it scales across the 3 dimensions of design, handling concerns and providing value adds to customer (see image below)

Attributes of a Good Wallet.jpg
















Image4: Attributes of a Good Digital Wallet Solution

 

To know more about Digital wallets and how your innovation investments can help you achieve business value meet our experts at Retail's Big Show 2015 (Jan 11 - 13, 2015) Schedule a meeting now. Visit www.infy.com/NRF15

 

 

 

 

Sales-Consultant, not Salesmen in the brave new Digital World

 

Picture this scenario - a passionate photographer wants to buy a high-end laptop for his work. He goes to websites of all the top manufacturers like Dell, HP, Lenovo, and Asus, and compares various products within his price range. This enables him to short-list his query to 4 laptops. He goes to various e-commerce websites to check the offers present there, and reads up all the 350 odd reviews across the 4 products. But since he intends to buy a high end laptop, he prefers to buy it from the shop, as he wants to see the product before he buys it, and even though price is slightly higher in-store by 1-2%., He  also wants to see which other add-ons are suitable for him.

This customer is what an omni-channel customer looks like. They enter the store with consideration-set ready and researched, and they come in ready to buy, unless the store is giving him a reason not to buy.

The salesman in this case will need to be well-versed with different makes, significance of technical specifications, advantages of having higher RAM over a better processor, and details of after-sales service. He would also need a tablet wherein he can compare the laptops and discuss if the customer needs better Video-RAM or a better Hard-disk capacity. In case the salesman knows a bit about photography, he can even convince the customer to buy a good quality printer/scanner along with the laptop.

Thus, an omni-channel customer looks for a shop where he can find sales consultants, and not salesmen. These sales consultants need to be aware of what is being said by the reviewers across platforms, and need to be aware of the latest technologies. They need to know not only the price of Xbox-One and PS4, but also the price of games popular on these machines.

In case the customer is happy with his experience, this shop will be his first visit when he wants to buy an upgraded lens for his camera, or when his younger brother needs a new laptop for his MBA.

Every retailer knows the importance of the Lifetime Value of a customer. The importance of Life Time Value is probably best explained by using the Amazon Kindle example. A Kindle Fire costing $200 has components worth $165 according to estimates*. The margin is no-where close to covering the R&D expenses. Yet an average Kindle owner spends $433 extra per year on Amazon**, making Kindle a very profitable business.

Thus, providing -customer-centric information, without actively selling, can convert a walk-in into a repeat customer with high Life Time Value which results in a satisfied customer and a satisfied retailer too.

 

 

To know more about how retailers and sales associates can leverage all forms of innovation to decipher and deliver on customer needs and wants, meet our experts at Retail's Big show 2015 (Jan 11 - 13, 2015). Schedule a meeting now. Visit www.infy.com/NRF15

December 16, 2014

2015: THE YEAR OF ONLINE GROCERY? (PART - 2)

With the U.S consumers' wallet share on ONLINE GROCERY growing rapidly, there is a subtle battle brewing between traditional retailers and e-tailers to capture their share of wallet. Given this is an industry typically characterized as highly price sensitive, hyper-competitive with razor thin margins and high purchase frequency - 'How to drive profitable revenues and build a sustainable, scalable (mass-market) online grocery business model?' is a key conundrum faced by U.S grocery retailers today.

Without a doubt, the U.S Online Grocery industry is experiencing a structural shift [see Figure 1] in the way consumers shop for groceries today. Few key trends defining this landscape, worthwhile to note are: price-to-value continues to remain an important driver for consumers who are seamlessly shopping for food and beverage across various store formats (no longer shopping at just one stop shop supermarkets), local and private labels are gaining popularity (better assortment mix), and last-mile delivery continues to be more challenging for retailers with diversifying consumer needs. So, what drives a consumer to shop online?[1] 

 

Grocery Image_3.jpgGrocery Image_4.jpg 

 

 

 


Turns out, Convenience still remains their primary motivation, though not the ONLY reason [see Figure 2] - according to a U.S Grocery Shopper Trends 2012 - Executive Summary published by Food Marketing Institute (FMI). Clearly, some of these reasons are easily replicable by the traditional retailers making it a level playing field for them. So, how can grocery players tap onto this opportunity today and make MONEY at the same time?
 
A Grocer's Perspective
 
De-constructing the P&L of a grocery business model [see Figure 3] shows that the overall economics of this business mainly depends on: the type of fulfillment model used (meaning productivity in number of units picked per hour), basket size, consumer demand, and population density.[2] 
 
Grocery Image_5.jpg
Clearly, a one size fit all approach where-in an e-tailer offering only a home-delivery or a traditional brick and mortar retailer offering only an in-store pick-up might not be viable and profitable. Instead, both e-tailers and traditional brick and mortar retailers, will have to strategically innovate to harness the given market opportunity. Consequently, rather than having a home delivery model across all geographies, brick and mortar retailers can play it by the consumer demand and population density to leverage a combination of fulfillment models e.g. in areas of low density and low consumer demand they can offer variations of click-and-collect models (in store, curbside pickups, delivering to your cars - Volvo seems to be innovating on this front), areas of high density with high consumer demand can leverage dark stores (dedicated warehouses) to offer home deliveries. E-tailers too, can leverage a similar strategy in offering variations of click-and-collect models (car deliveries, specific location pick-up) to drive up their revenues. Having looked at the "last-mile" logistics of the food delivery, now let's look at the consumer side of interactions - how can grocery players engage better with changing consumer needs?
 
A Consumer's Perspective
 
Offering a "differentiated digitally connected seamless" shopping experience today will entail: brick and mortar retailers looking at leveraging location based services to offer a more contextualized, and personalized in-store experience. E-tailers can explore the possibility of offering virtual grocery stores, and contextualized basket building features to match the in-store experiences offered by a brick-and-mortar retailer. In my opinion, some of the key capabilities [see Figure 4] emerging for grocery players today are:
 
Grocery Image_6.jpg

Given the relative economics of grocery business, offering a right combination of click-and-collect and home delivery models that "seamlessly" integrates with a "differentiated digitally connected shopping" experience will be the key to position the grocery retailers for success ahead. Grocery retailers to realize this first will continue to stay relevant to take it all.

As traditional retailers build upon their omni-channel capabilities to be more "online-like" and e-tailers continue to expand their offerings to be more "store-like", it will be interesting to see who wins in this unclaimed territory. Whom do you think will win? 
 

To know more about trends in online grocery and how you can leverage various innovative technologies to provide a seamless and truly engaging customer experience, meet our experts at Retail's Big Show 2015 (Jan 11-13, 2015). Schedule a meeting now. Visit www.infy.com/NRF15



[1] U.S Grocery Shopper Trends 2012 - Executive Summary by FMI: www.icn-net.com/docs/12086_FMIN_Trends2012_v5.pdf

[2] Online grocery winners emerging - A Report by Bank of America Merrill Lynch

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