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January 9, 2015

Deciphering the right ecommerce model for India

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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

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

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)

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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

December 11, 2014

2015: THE YEAR OF ONLINE GROCERY? (PART - 1)

Ever imagined a scenario where we will be clicking online for our books, media and GROCERY together? Yes, you read it correctly. GROCERIES... ONLINE? Today, Online Grocery shopping is not only a reality, but also an industry that is accelerating, quickly enough, towards its tipping pointAmazon Fresh[1] and few other retailers like Walmart, Safeway, Instacart, Peapod, Relay Foods and FreshDirect have been transforming the online grocery space to carve out a market share from this unclaimed territory so far.

As a part of this two blog series, we will take a peek at how the U.S Online Grocery industry is positioned for 2015 and the opportunities ahead for the U.S Grocery Retailers.

When we think of Online Grocery as a business, the first thing that comes to mind is the implosion of Webvan in early 2000s. Thus as a concept, online grocery is not something new to consumers and retailers. Webvan's emblematic failure did leave a wary glance on grocery retailers for a long enough time though. Ever mindful of the quote "Change is the only constant in life" - two vital changes in this case are: 1. the growing evolution in the way today's digitally immersive consumer expects to shop seamlessly, both between physical and digital world anywhere, anytime, 2. more viable grocery business models attracting capital savvy investors.

In 2013, US online grocery spending reached $17 billion [see Figure 1], Grocery Image-1.jpgaccounting for only 3.3% of the total U.S grocery spending  - a $500 billion industry -    according to an article[2] by Bloomberg BusinessWeek citing a study run by online grocer and consumer analyst Brick Meets Click. Further, by 2023, it is expected to reach 11% of the total U.S grocery spending growing nearly 3 times at 13% CAGR annually. Looking forward, in my opinion, online grocery represents a significant and exciting growth opportunity that is here to stay.

So, market side of the equation is looking great. Online Grocery Industry is gaining popularity and exhibits great potential for the years ahead. But, what about the consumer side: the Grocery Shoppers? With time, not only has the grocery market and business models changed but digital consumers' purchasing preferences have too. Especially, the way today's tech savvy digital shoppers are increasingly blurring the line between the online and offline channels.

In 2013, roughly 18% of U.S. households went online in the past three months to buy food, beverages, or groceries. Of these, 75% purchased 5% or more online and 20% purchased at least half online - according to an article by Grocery Headquarters citing a study  Grocery Image 2.jpg  'The Online Grocery Shopper Report'[3] run by The Hartman Group's. Further, the article characterizes an online grocery shopper as a high-value customer, who is willing to spend and shop more every month than the offline (at-store only) grocery customers [see Figure 2]. 

The confluence of societal changes (busy urban lifestyles wanting more convenience and less time-intensive ways to shop), demographical changes (more working women, multi-person high-income households, ageing population), and technological advancements (digitally connected consumer increasingly using smartphones and tablets to complete purchases) have led me to believe that the U.S Online grocery market will soon evolve from a niche segment to become a mass-market mainstream appeal. 

 

Given the U.S Online Grocery's tremendous future market potential, the question however still remains: Who is poised to claim this unclaimed territory? Traditional retailers or the E-tailers? The race is already on. Whom do you think will win?

In the next blog, we will explore the opportunities ahead for the grocery retailers.

 

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

 

 

 
 

May 12, 2014

Power of Crowdsourcing

Crowd sourcing is a fairly new phenomenon that has shaken the basics of various industries, business models and enterprise decisions. Right from getting inputs to product designs to utilizing pictures from Instagram for running marketing campaigns this practice of leveraging collective intelligence is now becoming  main-stream.

With the success of this practice manifesting in many walks of life, we can take a look at some of the examples to see how well this model has been adapted.

a) Quirky - Adopted Crowd sourcing into their Product Development process and called it Quirky Social Product Development. Individuals submit product ideas which is then curated by the community, reviewed by a product evaluation team before its designed, engineered and mass produced. A percentage of resulting sales from the product is then shared with the person who proposed the product idea. With projected revenue of 54 Million USD by 2014, Quirky is quietly becoming the Mass Market consumer product manufacturer.

b) Wal-Mart: In 2011-12, Wal-Mart started with the Get on the shelf initiative, where it invited public to submit great product ideas and then through a review process and thrown open for voting. Finalists were chosen based on the votes and rating and their products were available online and in stores. Human Kind in 2012 and Elvis Presley Home Bedding Collection in 2013 were chosen as winners (see https://getontheshelf.walmart.com)

c) InstaCart:  Grocery service provider that leverages the power of crowd sourcing to delivery grocery to homes within an hour of order getting placed. Company began operations in San Francisco but has rapidly scaled up to cover cities like Boston, Chicago, NYC and has also expanded partnership with retailers like Whole Foods, Shaw's, Market Basket, Harvest Coop and more. With revenues rising more than 2X times in the last few months, there is a great growth story for the company.

There are numerous other examples of L'oreal, Coach and other fashion retailers seizing this opportunity to put together marketing campaigns and/or product images that borrow on photos and amateur images from social media sites like Instagram and Pinterest.

Real benefits in Crowd Sourcing? Clearly the benefits are not very hard to see

  • For brands that weave in crowd sourced images for product display or marketing the benefit is plain and simple - imaginative, original and authentic
  • Crowd sourcing helps disrupt the existing business model and creates new opportunities for startups.  A classic example is that of Instacart that has successfully launched same hour Delivery for Grocery orders where larger players were struggling with same day deliveries.
  • For companies like Quirky, it is about accelerating innovation and cutting overheads and operating costs associated with typical New product Introductions.
  • For Walmart it's about finding the next Billion dollar of sales by identifying those high potential new products and getting it on the shelf
  • For players like Utest it is unlimited access to an expanded set of skills and sometimes hard to find skillsets.

Problem Areas: While we certainly want to focus on the benefits and the key drivers of this model, there are few problem areas that needs to be addressed as well

  • The first and foremost would be that of Intellectual Property. Who owns the IP in case the idea is transferred from the founder to companies like Quirky or Kickstarter. Can there be non-exclusive license transfer instead of completely transferring the IP rights?
  • How to sufficiently compensate the founders? Is it a onetime lump sum or gain sharing or a commission on sale?
  • How do we ensure quality of product or service? Take the case of Instacart - for some orders if items are not found in a store then those items might not be fulfilled leading to lower customer experience.
  • Lack of Confidentiality
  • Lack of Proper Communication

Key Considerations: Finally for retailers, service providers and manufacturers trying to leverage the power of Crowd Sourcing the following key points needs to be considered to ensure a very effective process and resultant output

  1. A rating mechanism for the participants in Crowd Sourcing to identify their significance of past and present contributions, social influence, originality of design or ideas. Ex: In case of Instacart rating parameters could include order fill rate and on time delivery by personal shopper. Higher the rating, the better the compensation or assignment for future orders.
  2. Search Mechanism (using an extensive algorithm) for systematically sifting through enormous amount of data, photos, videos, ideas and products and also considering the rating to identify those opportunities that aid future growth, address under served  customers or geographies. 
  3. A workflow driven technology platform that will help the collaborative nature of work right from submission of ideas to reviewing, evaluating, allowing public to register vote and eventually identifying the top picks.
  4. A palatable profit sharing mechanism to reward the Founders (of idea) based on the outcome - sales of the product or service.
  5. Re-defining the various roles in the Internal Organization - Product Incubation, Marketing or service teams to adapt to the new model and to deliver creative outputs (campaign, service, product) both from within and outside the organization. 
Clearly these are interesting times for the various participants in this model - be it the contributors/founders of ideas, new age companies that aid to translate these ideas to sellable products or the retailers that borrow upon the end products for final sale. With more funding and with proven case studies on sustainability and success this model will become a huge source of disruption to as-is business models in the coming years. As they say, the collective intelligence of community (local or global) can very easy surpass the intelligence of corporate giants.

April 24, 2014

Omni Channel Retailing -Are you prepared to win?


I wanted to buy a new smartphone and my brand engagement began with a Facebook recommendation from a friend who kept raving about his new possession, Galaxy S5. Interested, I googled the phone on my tablet, went to the product site to understand new features and also watched its video on You Tube. After reading expert and user reviews on CNET and exhaustive price search, I ended up buying it online from Best Buy, and picking up the same day at a store next to my home.

Today's empowered digital consumer has dynamic, non-linear shopping journeys.   They are demanding and have more power and choice than ever before. With rapid evolution in consumer buying behavior, emergence of new technologies and constantly changing competitive landscape, retailers need to rethink their business and operating model to stay relevant. As retailers transform, they will need to focus on 4 key dimensions to successfully convert an anonymous buyer to an engaged consumer.

  • Delivering consistent Consumer experience: Consumers expect the retailers to know and inspire them at every touch point, make shopping easy and convenient while valuing them for their loyalty, influence and life time value. For this, retailers need to know their consumers and their interactions across channels, engaging them early with inspirational content and easily searchable rich product information, providing access to enterprise wide inventory alongside personalized offers and flexible payment, shipping, and return options. Retailer will need to understand different paths to purchase and be there at every touch point to optimize the buying process.
  • Flawless Execution to match consumer expectation of product assortment, location, price, delivery and service. Retailers are taking on several measures to bring in agility in their supply chain. For example, leading retailers are now shipping products for online orders from stores closer to consumer to not only improve delivery time but also reduce shipping costs Retailers are also accessing social network data to refine demand forecasts and localize assortments. Retailers are leveraging predictive analytics to ensure inventory availability at the right place and time to minimize stock outs and reduce mark down.
  • Retailers also need an integrated, flexible and scalable digital platform powered by a common data set and technology services hub, ready to be tapped into from anywhere and any device. Such a platform will enable integration of business functions often spread across different departments and enable a single view of the customer, order, product information, inventory and price across channels. This foundation is crucial in driving consistent experience as consumers suspend and resume transactions across channels. This will also bring in increased agility to add new capabilities and onboard newer markets.
  • Last but not least, organization structure needs to align to reduce channel silos. Several leading retailers have created roles like 'Head/VP of Omni channel' as a step towards eliminating channel boundaries. Other retailers have reorganized by brands in order to deliver a unified customer experience across channels. Changes in the operating model also ushers in new processes, system, and shift in roles and responsibilities which needs to be managed deftly.

Omni channel transformation has a profound impact on an organization's value chain. Hence, it is imperative to have a clear vision and a multi-pronged strategy focused on consumer, operations, technology and change management to be successful. What strategies have you focused on to enable Omni channel? I'd love to hear your thoughts, especially challenges faced in transforming your organization.













 




    1. Continue reading "Omni Channel Retailing -Are you prepared to win?" »

      April 8, 2014

      To Pause (POS) or Not

      In a recent study done by University of Arizona and Demandware it was highlighted that Traditional POS systems at Brick and Mortar stores are not able to keep pace with the expectations of digital consumers and the retailer's response in the form of omni-channel strategies.

      The reasons are not hard to see; today's POS systems are no better than siloed systems that have stores as boundaries and cannot look outside to support many of the retailer's omni-channel aspirations. Thus the tools and software available as part of traditional POS are falling short of supporting some of the key initiatives like

      ·        Single view of customer (or the 360o customer view),
      ·        Cross channel inventory visibility
      ·        Looking up inventory in nearby stores or
      ·        Assisted Selling and Product personalization
      ·        Personalized Offers

      Also added to that these traditional POS devices have a cyclical re-haul  which is to happen in the next 2-3 years -perfectly coinciding with the thinking of several CIOs to see if they should replace the Traditional POS systems.

      So what are the alternatives that CIOs or Leaders have -

      Option1: Extension of current POS to bridge the Gap

      One easy way out for retailers is a natural extension of current capabilities and investments to support future needs. Some POS vendors like NCR, Epicor and Oracle already offer capabilities like Assisted Selling, targeted up-sell and cross-sell and mobile POS.

      This option is characterized by (View image) leveraging existing investments to a large extent, lower cost, Faster Time to market, Incremental Change management and clearly Short Term Focus.


      Option2: Overhaul of the current system in favor of a common customer transaction suite

      A compelling alternative would be that of extending the best in class digital commerce architecture to support store operations. This solution will help connect all channels and implement an integrated solution that will provide a common view of customers, products, inventory, price, promotion and order information. This will also help address other in store opportunities like guided selling, and locate nearby store inventory to save the sale.

      This approach is generally characterized (View imageby a Flexible Architecture that can scale to support future needs, Significant Initial Investment, a Big Bang Approach to replace existing POS systems, Training and change management initiatives that are needed to support such a big bang and finally has a Long Term Strategic focus.

      In the not so distant future we might as well hear from the best in class digital commerce platform vendors like hybris, IBM WCS, ATG and Demandware about the emergence of a new class of enterprise software - we can call it the 'Customer Experience Management Suite' or 'Integrated Customer Transaction Platform' covering all customer touch points (from stores, desktop, mobile, tablet and Call Center) and providing truly seamless experience. 

      However replacing the Traditional POS systems cannot happen overnight nor is it feasible. Some of the broad questions below need to be answered before we can arrive at meaningful answers and way forward


      1. Risk perception of Retailers: What if it means putting all the eggs in a single basket for retailers and if they perceive a higher risk in doing that then that's a huge impediment to deal with.
      2.  Complement or Supersede - Given that traditional POS is entrenched and is a proven model, should retailers look to complement investments in Traditional POS with that from the new customer platform?
      3. Applicability for all types of Retail: Will the new POS platform be suited for all types of retail businesses? Definitely the opinion seems to be divided here - will it be more suited for High value transaction businesses compared to high volume transactions
      4. Security Concerns:  The security and PCI Compliance for traditional retail POS further augmented by Video Surveillance puts it ahead of Mobile POS and make the current offering fairly robust with very few incidence of violations. Unless the new platform is able to match up the security aspects of incumbent it is going to be a hard bargain.
      5. Reliability: Given that the new Mobile POS will run on Wireless network, questions around matching the reliability and availability of existing POS system needs to be addressed
      6. Tenders: Again Traditional POS is designed to accept multiple tender types like Cash and card at a bare minimum. Support for multiple types of tenders needs to be built in
      7. Purpose of Use - Self Service or Assisted: How should mobile POS (based on digital commerce architecture) be used in stores?  Should it be left for self-service as standalone kiosk for customers to checkout and complete payment or should it be used by the Store Associate as assisted selling tool? Or should it be a combination thereof?
      8. Business Process Re-Design / Standardization: Right from re-defining the roles of cashiers and store Associates to designing new business process ranging from providing common inventory visibility, uniform chain level pricing, common promotion definition & delivery, Guided selling, Deliver to home and many more - there is a whole lot of Business process and Role alignment that needs to be thought through and designed.
      9. Training needs: Identification of Change management and Training aspects needs to be done upfront. This will help address various aspects like for example, in an assisted selling scenario (using a new mobile POS platform) determine when exactly to approach the customer to assist and close the transaction? Approaching too early might result in wasted opportunity as customer might have other items or approaching too late will mean wasted opportunity. The roles of cashiers needs to be re-evaluated- How to reskill the current army of cashiers and deploy them as trained store associates to help in clientiling or assisted selling
      10. Choice of Technology: Several options exists for retailer that needs a very careful consideration
          1. Platform Options
            • Extension of current Platform with value added use cases
            • Re-haul of existing platform in favor of Table POS
            • Re-haul of existing platform in favor of an integrated Customer transaction platform driven by digital commerce architecture
          2. Other considerations:
            • SAAS vs On-premises
            • Single tier vs n-tier
            • Rich Website like UX vs traditional POS like UX / features
            • Global Platform vs Localization Needs (store specific, Brand specific)
            • Point to point integration vs Open Standards based Integration with ERPs

      It is now fairly evident that it needs a long drawn process where the pros and cons need to be weighed in before a final decision. For the near future we can safely assume that new POS (Integrated Customer Transaction Platform) at best might at co-exist with the enhanced versions of Traditional POS and not end up replacing it altogether.

      However in the long run once the benefits from the new systems are realized, when the risk-reward equation has been hashed out and after enough pilots validate/fail to validate the hypothesis and long after store associates are adequately trained and when Mobile Payments become main-stream - we can for sure say that the new POS platform (with much lower incremental cost) will have sufficiently replaced the existing ones.

      In my view we are 5 years from that point of inflection, but that's good enough a time for the likes of established Traditional POS players like Epicor, Oracle, NCR SAP, Microsoft and Retalix to take rearguard action and have a compelling solution offering to stifle progress of Digital Technologies in their own turf. Whichever way the pendulum swings, it's a very interesting space to observe and act in the next 18-24 months as it is bound to have far reaching impact on the future and landscape of POS technologies and solution offerings.

      November 18, 2013

      NowCommerce - We want it fast!!!

      Online shopping has continuously been gaining grounds. Today, this selling channel is competing head-on with the brick and mortar channel. In wake of this competition, e-tailers are continuously working towards reducing their fulfillment times by targeting ever elusive issues like 'Same day delivery (SDD)'. SDD popularly referred to as NowCommerce, implying online retailing of goods that can be delivered within hours of ordering.

      Continue reading "NowCommerce - We want it fast!!!" »

      March 7, 2013

      Soak Period for Store rollout - A process that needs to be standardized

      Rolling out any patch or software update to a chain of stores is always a challenge.  The complexity lies predominantly on the number of instances where the same software package is running.  While there are standard set of challenges for any software update to a stand-alone system, it has the potential to become catastrophic if they were not done with enough attention to details. This is especially applicable for roll outs involving large number of stores.  Many retailers face this problem regularly.  A package that is approved for release and performs as expected in pilot, simply causes unbelievable trouble when it is rolled out to the entire chain. Operations team is bombarded with a sudden spike in ticket volume. What went wrong?  A thorough testing was done before the release, pilot was carefully monitored - so what was missed?

      Continue reading "Soak Period for Store rollout - A process that needs to be standardized" »

      October 22, 2012

      Are you Game?

      I was intrigued when my son walked up to me with a request to order a pizza he had made on ipad game app from Dominos. The fun and excitement of playing the game coupled with pride of self-accomplishment was inescapable in his eyes...we did order the pizza and it was clear that Dominos now had a new Gen Y consumer.

      Continue reading "Are you Game?" »

      September 30, 2012

      "Mobile Apps For Faster Shopping Sprees"

       "Google Indoor Maps" has opened a whole new opportunity to retailers whereby they can enable their customers in getting easy and quick access to the products that they're looking for. In brief, "Google Indoor Maps" allows a person walking inside a store to navigate his travel within this indoor location just like what she(/he) would have done while driving a car using a GPS

      Integrating these maps with Retailer's own mobile application (app) and tagging a store's aisles by "Product Categories" on these Google Indoor Maps for a large format store, going down to category of products available by Brands may be just the beginning of the thought as to how Retailers allow their patrons to directly reach out for the product that they are looking for rather than wandering through store departments or searching for a store associate which for some shoppers may be time consuming or even frustrating.

      One of the best supporting feature on Google floor maps, is the ability to guide the user by individual floor's plans, whereby a large multi-level retail stores can also be covered easily and therefore we feel that some of the immediate exploits can be in the large scale Store or say Super Store

      Let us try to understand how one such Retailer app may make the life a Retailer's clientele much simpler and the shopping experience much better. Assume the scenario that our loyal Customer "Louise" is entering such a Large Super Store for her weekly purchases which runs across several departments of the store like fresh produce, dry grocery, apparel, cleaning supplies, bath-ware, electronics, sports goods and the list goes on. Soon after she has parked at the store, Louise logs-in to the Retailer's own native Mobile app on her smart phone. The Retailer's app upon invocation on her smart phone, detects her geographical location and the store that she is visiting today via Location Based Services (LBS) wherein this specific store's latest tagged maps can be pulled and displayed on Louise's phone's screen

      To make the whole shopping trip faster, Louise has keyed in the shopping-list beforehand in the app and a route map is prepared for her upon her check-in into the store via this app. This route map is based on the latest movement of shelves/racks in the store.  Such a guided walk cuts down the Louise's walk through the aisles a short, easy and a confortable one

      Louise was looking for a shirt for her son, but the size small does not appear on the shelf today... does the store have it? No problem... the check would be a quick one by Louise quickly getting to know this via her mobile app. Moreover, if it is not available in store right now, the app prompts her with an easy and quick site to store order which she can pick up during her trip next week 

      Another use for this app+google maps eco-system can be to integrate with the floor maps and publish current vacancies/next available time slots/expected wait times in Large Store's sub stores like ophthalmologist shops, saloons etc.

       

      This Large Super Store's sub stores are very frequently publishing a status of a vacant customer spots/seat available or unavailability of the same on the floor map which when viewed by Louise, will give her an idea whether she needs to do the shopping first or go to the sub store for a quick visit to the hair salon

      While these are just some of the initial thoughts, when pursued actively this specific technology can be utilized in umpteen ways to boost the store sales and to guarantee customer satisfaction. Overall, sky is the limit when one starts documenting the concept of such a solution/product. Customer purchase/return history and loyalty points can be utilized to highlight offers/deals when customer is approaching a specific aisle or when she has been looking for a specific product for some time

      This article has been contributed by Ashutosh Kaushal - Senior Consultant (Sterling Commerce - Infosys Ltd). You can reach Ashutosh at Ashutosh_Kaushal@infosys.com.

       

      Leveraging Social / Consumer Genome for Merchandising

      Most retailers traditionally leverage sales data from POS terminals to analyze buying behavior. In some cases, loyalty card data is also used to determine appropriate assortment decisions. These data sources and their corresponding analysis have proven reasonably helpful, though they don't convey the whole picture. With the recent explosion in social and consumer related data on the web, there is a wealth of information that Retailers should be exploiting and incorporating into their merchandising decisions, primarily around assortment and space.

      Social/Consumer genome related data provides rich insights into needs, wants and buying behavior of individuals. This data when combined with demographic and geographic data can provide a good map of consumer wants and needs for a given market for a set of product categories.

      A major input into merchandising decisions / assortment plans is to determine consumer buying behavior to identify what products sell and what potential products could sell to increase sales. Based on this analysis, assortment decisions of inclusion/exclusion or allotment of space are provided. The means to identify this buying behavior was typically the use of POS data or data from Nielsen/IRI that provided good basis for WHAT was being purchased. When married with Demographic data, there was a good proxy for WHY the products were being purchased. Even when rigorous correlation and clustering analysis is carried out, the determination of buying behavior and the reasons for the same were proxies at best.

      Now with the availability of consumer genome or social genome information, the analysis of WHY purchases are being made and what is being purchased with identification of latent and express needs becomes even more accurate as there is clear expression of wants and needs. This will significantly enhance the quality of assortment and merchandising decisions as the degree of error/approximation is reduced.

      There are however some pitfalls to the use of this data. We cannot solely rely on this data as web usage and consumer/social genome information may not fully represent buying needs and wants for the entire market population. This data usage has to be married to traditional sales analysis to augment the decision making process.

      There are no tools / application products in the market place that provide truly integrated capabilities. The holy grail for optimized merchandising would be to integrate social/consumer genome data effectively into the traditional clustering analysis and thereby into the assortment planning process. This might be a challenge for some of the retailers who struggle with traditional approaches. Asking them to adopt more advanced analytical approaches to incorporate social/consumer genome data would be a challenge.

      The key would be to devise suitable technology/process platform augmented with robust analytics shared services that can leverage necessary data to enable optimized merchandising decisions.

      This article has been contributed by Amitabh Mudaliar (Group Engagement Manager - RCL Infosys). You can reach Amitabh at Amitabh_M@infosys.com.

      Cashing in on "Order to Cash" through BPO shared services

       The Order to Cash process is at the heart of every business and I have often been tasked with asking clients and prospects to consider moving their Order to Cash processes into a Shared services delivery model with a third party service provider.  Over the years this attempt of mine has evinced myriad expressions from clients ranging from the "Have you lost it?" look to the "You just showed me business process nirvana" look. The industry where I experienced the most contrasting reactions was the CPG industry and I wanted to share some interesting learning from the experience of working with a few clients in walking the talk and sharing in their Order to Cash transformation journey over the years.

      To provide some context, the concept of Business process outsourcing in the CPG industry is not a new one. This industry was one of the earliest adopters of outsourcing transactional and back office business processes such as Accounts Payables, Accounts Receivables, Payroll processing and Procurement. The primary driver for outsourcing across all these processes was labor cost arbitrage followed by process efficiencies from consolidation; harmonization and continuous improvement. These drivers have become the cornerstone of all business process outsourcing relationships and have for long settled into becoming the marketing tagline for the BPO industry.

      With this legacy of perceived value from BPO relationships, when one has to go down the same journey with Order to Cash processes, the value equation does not necessary stack up. The most obvious reason for this skew in the case of O2C processes is Risk. To cite an instance provided by one of my clients - The entire annual cost savings delivered by a BPO relationship can potentially be eroded by one order from a large retailer being inadvertently dropped or shipped to the wrong address due to the contractual penalties involved. And one defect out of a million is acceptable even by "Six Sigma" standards!

      So two questions come up, the "Why" and the "How"? The "Why" is easy. Given that the Order to Cash process impacts not just the G&A metric but also the Cost of Goods Sold, Working capital efficiency, Days Sales of Inventory and Gross Revenue metrics, a successful shared services strategy undertaken by engaging the right partner could catalyze business transformation impacting the highest levels of the organization.

      The tough question however is the "How"? I often relate that to converting an "Art" into a "Science". The "Art" here refers to the finesse and proficiency that Customer service representatives have honed on their jobs for a number of years. The "Science" here refers to replicating that same level of service or sometimes even improving it but with a completely new team that's located thousands of miles away in a global delivery model.  Sounds like mission impossible right? Not really. It's been done before and involves the following best practices:

      ·         Create the right operating model: The tried and tested Front Office-Back Office model is a great starting point. It allows for a risk mitigated approach to the end state sourcing mix given the need to balance risk and value in a customer centric setup for the CPG industry.

      ·         Create the right performance measurement methodology: The days of adopting operational metrics such as cycle time, average handling time, Abandonment rate, First Contact Resolution etc to govern outsourcing relationships are a thing of the past. These metrics are now considered Business As Usual (BAU). Consider including business metrics and supply chain performance metrics such as cost per order/invoice, Case Fill Rates (CFRs), On Time Delivery (OTD), Truckload capacity utilization, Days Sales Outstanding (DSO) into the performance measurement framework

      ·         Create a segmented service framework: Most CPG businesses operate in the 80:20 model where 20% of customers account for 80% of revenues. Given this mix, a one size fits all shared services model will fail to deliver differentiated service experience to top tier customers. Consider a three tier service framework involving Transactional shared services, Business support services and Enterprise support services layers

      ·         Choose the right global delivery model: Most top tier BPO providers today have global presence with established Centers of Excellence. Adopt a hub and spoke global delivery model preferably aligned to customer tiers as well as the segmented service framework

      ·         Adopt a phased transition approach: A prudent transition plan is the foundation to successful Order to Cash shared services adoption. Consider creating a phased transition plan where phasing is based on customer tiers, markets, process complexity or a combination of these parameters

      While there are several other design considerations, the above five are what I could call the essential ingredients of Order to Cash BPO solutions for the CPG industry. With these best practices implemented, companies can start to cash in on their Order to Cash processes through BPO shared services led transformation.

      This article has been authored by Sushanth Ananth (Manager, Client Services - Retail, CPG, Logistics and Life Sciences, Infosys Ltd). You can reach Sushanth at Sushanth_ananth@infosys.com.

       

       

       

      July 31, 2012

      Paradigm Shift in Loyalty Card Programmes: Win-win for Retailers, CPG Brands and Customers

      Guest Post by

      Srinivasan Nithyanandam, Manager, Client Services for Retail,  CPG and Logistics - Europe , Infosys

       

      Battling slow economic growth and high costs in a difficult market, retailers are competing aggressively to increase their customer's wallet share and mindshare. The new breed of digital consumers, who want convenience, personalization, and promotion-based pricing, has made winning in this environment even more challenging. Operating within the tight confines of single-digit-percentage operating margins, retailers must continuously innovate to increase consumer foot falls and clicks. In such an environment, personalised offers, rewards, targeted communications and promotions can help heighten customer interest and encourage repeat shopping.

      Continue reading "Paradigm Shift in Loyalty Card Programmes: Win-win for Retailers, CPG Brands and Customers" »

      June 7, 2012

      Where's the "touch and feel" thing...!!

      "The world is getting lazier, and a businessman knows how to take advantage of it."

      Last Sunday when I was enjoying a fresh and cool morning walk, this statement dropped in my ears and stopped me. I turned around and saw two men gossiping. At this particular hour, normally I hear people talking about the politics, inflation, corruption, reality shows etc. every day. But today, the 'public-concern' seemed to be a little different than ever. I was in hurry so could not hear more of this conversation.

      For some time, I forgot about the words, but the statement was still in my mind, "the world is getting lazier, and a businessman knows how to take advantage of it". The only connecting link I could find to understand the matter was "online businesses" frequently called as 'e-businesses'. I figured out that they were discussing regarding the evolution of the e-businesses in India and not to forget the word, 'critically'.

      We all have always liked to go for shopping, purchase a lot of things and come back home with a tired yet happy face. But don't you think, the scenario is a little bit different now, people like to order online as many things as possible whether it's a Pizza, an air ticket, a railway ticket, a book or a t-shirt or anything else. No matter, how much time it will take to get delivered, but we do it, just because we like to sit on our benches and order for it with just one click.

      Recently, I asked an online shopper, "why do you purchase online?" and he says, "It's easy and I don't have to go all the way to the market for buying it". Then I asked, "Do you shop everything online?" and he says, "What are you talking, no matter how convenient it is to shop online, most of the things I wouldn't buy, until and unless I see them in person". It made me realize one thing, "no matter how lazy we become, for us Indians, we like to 'touch and feel' whatever we are buying".

      Frankly speaking, I am also a lazy guy. I like to do things with easiest possible way, yet I would not prefer to buy my clothes, shoes, cell phones, books, grocery or anything else, until and unless I try it myself. And I think, this is a typical case in India. People like to try things out, they like to "touch and feel" the product.

      Probably this 'touch and feel' thing of the products has made it difficult for the online retailers to spread over their businesses. However, data is evident that people in India have started liking the e-model. Now people frequently book their train and air tickets, order Pizza, book movie shows, order novels and pay fees online. But I think, there's one thing in common, all of the things which are being ordered online, are mostly beyond the "touch and feel" specifications. For railway tickets or flight tickets, we don't really bother about how it will look and how I will look with it. For novels we don't need to check if the size is perfect or it smells nice. These things would be purchased in the same way, as they are being purchased online.

      But, when it comes to Apparels, Accessories, Mobile phones, Furniture, or anything else, we really want to try them first before purchasing them. We like to see, touch and check them ourselves if it's a perfect match to our expectations. We like to try the shoes that we want to purchase whether it's of perfect size or not and whether it looks well in our feet or not. If it's a mobile, we wish to check its multiple functions/features by ourselves. All these items, where "touch and feel" is a must, we try to avoid an online purchase for any reasons.

      India is a country where people like to see, touch and feel things and enjoy their true existence. And this indeed gives the e-businesses a reason to worry.

      However, a wise businessman can never avoid taking calculated risks. He understands the market size and its dynamics perfectly. He knows how to change customer preferences, how to make a prospect a definite customer. And ultimately he knows how to answer his customers' queries no matter even if it is about the "touch and feel" as well. And todays' technology is trying all possible ways to help him. Recent researches with "Augmented Reality" features have opened up new amplitudes to the e-business prospects.

      For us, today, it's hard to make an online purchase because we want to try things out first. But, are we sure, the scenario would remain the same after one year. Let's compare ourselves with our 'previous-years'. Our preferences are changing faster than what we realize. If we wish to know what's going to happen, well, there's just one thing we can do, "wait and watch...!!"

      June 2, 2011

      Don't be fooled, it isn't thunder. Staying put would be a blunder

      Continue reading "Don't be fooled, it isn't thunder. Staying put would be a blunder" »

      March 28, 2011

      'Like' my page, but don't forget to love my food

      Recently owners of a small time fast-food joint filed for bankruptcy. The fast food joint did not have a dedicated FB page. The petition was declined by the magistrate who commented, "One who never existed can never die!" As the word goes, either you exist on FB or you don't exist at all.

      With the ever rising popularity of social networking sites like Facebook and My Space, the virtual taste of food is certainly on an upscale. I was reading an article on the invasion of social media in the fast food industry and was amazed to find that almost all known / little known restaurants and fast food chains in US today have a dedicated facebook page which is full of apps and trigger points for drawing customer attention.  An interesting example was of a restaurant called Lenny's sub shop which launched a campaign offering free half pound sub to every new and existing facebook fan for a week and tripled their fan base in 3 days. Meanwhile, it has to be seen if this fan base is converted in footfalls.

      Social media sure facilitates a more advanced and far reaching awareness of the brand and is a cheaper and easier tool these days to gain publicity. Let's list down the various advantages of having presence in social media sites:

      ·         Increased brand awareness

      ·         Reviews and feedback on regular basis

      ·         Innovative ideas at times suggested by consumers themselves

      ·         Easy place holder for promotions and campaigns

      As they say, "All that flutters are not eagle wings" we don't know if the presence on social networking sites is quite the winning stroke.

      Imagine a scenario where a small fast food chain named "Beans n Dough" develops a dedicated page on FB. The average footfall on weekdays is 500 and on weekends is 1500. It designs a campaign to attract new customers, increase popularity and improve sales. The FB page has a food puzzle game, solving which the user is entitled to a complimentary coffee on a minimum bill of $10.  The puzzle game is a major hit and has everyone on FB going gaga about it. Suddenly it has a fan base of 15000 over a period of a week and has thousands of 'likes' and innumerable 'shares'. One of the user releases the crack of the puzzle and as a result everyone who visits cracks it. The following week there is a sudden surge of customers. The promo team has done its job. Now the store faces the tricky part. The weekday footfall has surged to 1500 and the weekend rush has reached a dizzying 5000. The store doesn't have the capacity to handle such numbers and the customer service starts to get affected. The workflow is not followed to satiate the numbers and the product quality deteriorates. To fulfill the rise in demand, the store has to order raw material at ad-hoc quantities and at non-economical prices. The whiplash effect of the sudden rise in demand sends shockwaves backwards and the buying department orders large stocks of raw material for the following weeks. At the store, customers aren't happy. The existing loyal customers switch on to other fast-food joints to stay away from queues and the new customers don't bother to visit twice owing to the sub-standard product and the service. What started as a superb marketing campaign proved to be a perfect recipe for disaster for the fast food joint.   

      What could be the repercussion of such a situation on the fast food chain?  Negative publicity, customer's criticism, blasphemy. What initially sounded a cool marketing strategy, ended up creating a negative impact on sales and brand image.

      Since the nature of food industry is such that there is a need of constant marketing / publicity of products to entice the customers with something new, social networking sites serves as the perfect platform for it. Put some cool aaps on your page, let the customer explore what you have to offer through games and contests, gain word of mouth by expanding your fan base and you sure can do a lot of marketing and that too at a price which you would be too foolish to ignore.

      But is this publicity translating directly into increased sales or new customers? What the seller should not forget is that campaigning through social media can fetch one time sale or may be a few more times but an elevation in the number of loyal customers can only be achieved of the rest of the P's of marketing are not ignored.

      Unless the promotions are supported by solid pillars of product, price and place - and this holds very true in case of fast food industry - the hype of social media will not last long.

      Lets take the example of the big players like McDonalds, Sub way etc.

      When they promote the product on a face book page, the user is also made sure of the fact that the product will be fresh and of good quality, it will be easily available and the price will be affordable. The item is absolutely fresh, the supply chain and logistics are completely supporting the warehouse - store business and pricing is sensitive to the average customer's pocket.

      Any fast food player, when plans to venture into a new media platform, should make sure to get answers to the following questions:

      ·         Does increasing fan base translate to increase sales?

      ·         Do the fast food chains make permanent customers via this media?

      ·         How long lasting is the effect of every campaign launched?

      ·         Does liking the FB page actually yield in liking the food?

      ·         Is it just the freebies which attract customers?

      Marketing through social media surely has a lot of advantages these days, given the kind of penetration it has amongst the consumers. But a player has to carefully play his cards to ensure that the visibility it attains through campaigning fetches more and permanent customers instead of shoving them away.

      Going back to the stated illustration on "Beans n Dough", can we have ways to control how a viral promotion is limited like a nuclear reaction to harness its unlimited energy to good use? Your suggestions are welcome to be a part of the next blog in this series.

      Co authors: Sneha Tarang (sneh_tarang@infosys.com) &

                           Harshad Deshpande  (harshadhanumant_d@infosys.com)

      March 28, 2010

      3g smartphones: the impact on stores and multi channel commerce

      With the advent of smart phones and 3G bandwidth, from a consumer standpoint, bricks and clicks worlds are merging fast. What would this mean to the stores of the future and multi-channel commerce?

      Many retailers had traditionally kept their stores and ecommerce divisions separate, but several have jumped on the multi channel commerce and are integrating their operations and/ or capabilities. For instance, most store employees were incentivized to close the sales through the stores channel only, but the most progressive companies today have incentivized store representatives to increase e-commerce sales. “Buy online and pick up at store” is the corollary arrangement.

      Yet, the paradigm broadly is that the “Attract and Sell” event happens in one channel mainly, which is then supported by “Post-Sale” events in other channels. Post Sale events could be  returns, exchanges and customer service.

      Oncoming change: As in-store shoppers start getting quick and easy web access via 3G smartphones, I believe a paradigm shift is happening: the “Attract and Sell” event itself will be split amongst multiple channels. For instance, it will become easier for consumers to shortlist products into a shopping list on their mobile devices, walk into a store, show the list on their devices to the store reps, get store personnel to spend time helping choose the right product, and then go online to find the specific reviews, research the best price, and locate another neighbourhood store (or online retailer) to buy the product from. Throw in the possibility of the consumer getting quick pre-purchase feedback from one’s social network via twitter, and we can start imagining the complex inter-meshing of channels during the “Attract and Sell” even.

      The genie is out of the bottle. It is now up to the retailers to decide how they react and manage this change. When faced with this scenario, do they risk losing engaging with the consumer when he pulls out his iphone 3G, or can they do something to quickly redirect such efforts to their own website and close the sale?

      Making this happen would mean changes on several fronts, including:

      Continue reading "3g smartphones: the impact on stores and multi channel commerce" »

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