Consumer Experience @ Retail

Peshwa Acharya

Areas to be touched upon ….

1. The Retail context 2. Definition of Consumer Experience3. How to build the consumer experience .. 4. How does it help in building the brand and business

Peshwa Acharya 2

Organized Retail Story Organized Retail Story –– India India & &

Retail Basics Retail Basics

Peshwa Acharya 3

Some StatisticsSome Statistics

India is the 4th largest economy in the world in Purchasing Power Parity terms (PPP) after USA, China and Japan.India’s GDP growth has averaged about 6% per annum in the last 10 years (1994-2004)India’s GDP growth forecasts for the years 2005-2010 in between 7% to 8% per annum.annum.The private final consumption expenditure in India was estimated at INR 1,690,000 crore (USD 375 billion) during 2003-04.The services sector – led by IT, telecom, healthcare, and retailing - accounts for l t 50% f th t t l GDPalmost 50% of the total GDP.

Peshwa Acharya 4

Some Retail StatisticsSome Retail Statistics

Retailing, at INR 930,000 (USD 205 billion) crore in 2003-04, accounted for 35% of the GDPthe GDP.Organised retailing at INR 28,000 crore in 2004 is only 3% of the total retail market, but is growing at over 25% per annum.It is estimated to be 10% of the market by 2010 at INR 140,000 crore.The sector is fragmented with over 12 million outlets and only 4% being larger than 500 sqft in size. In comparison there are 0.9 million outlets in USA catering to more than 13 times the marketthe market.

Peshwa Acharya 5

A Nation of Small RetailersA Nation of Small Retailers

• We are a nation of small shopkeepers with a shop for every 84 people. Over two thirds of the 12 million outlets are located in rural areas.

• Paan-Beedi shops : 3 million plus outlets nationally- The Indian version of convenience store (Besides the ubiquitous Kirana store)

• Largest selling format for a few consumer products and beveragesg g p g

• Weekly Bazaars / Haats / Melas- Traditional open ‘Malls’ of India serving 10-50 villages

• Destination for textile apparel household food & grocery for rural and semi-urban IndiansDestination for textile, apparel, household, food & grocery for rural and semi urban Indians

Peshwa Acharya 6

To illustrate : Outlets in ChennaiTo illustrate : Outlets in Chennai

Shop Type Number

Grocers 13691

G l St 1911General Stores 1911

Chemists / Druggists 2170

Pan/Beedi/Cigarette shops 7395

Hardware Stores 935

Co-op Departmental Stores 86

Private Departmental Stores 174

Others 5762

Total 32125

Source : KSA Database

So many channels – in the city with the highest share of

Peshwa Acharya 7

So many channels in the city with the highest share of organized retail

Total retail marketTotal retail market

Rs. 9,30,000 crore

Peshwa Acharya 8

Organized retail marketOrganized retail market

Rs. 28,000 crore (3%)

Pharma2%

Books, Music, Gifts

Entertainment1%

Food & Grocery14%Health & Beauty

1%

Watch/Jewelry

3%

Watch/Jewelry17%

Footwear13%

Peshwa Acharya 9

Clothing & Text36%

Home3%

Durable10%

Features of Indian Retailing till dateFeatures of Indian Retailing till dateFeatures of Indian Retailing till dateFeatures of Indian Retailing till date

Geographically distributed and diverse market with poor infrastructureInefficient supply chain with many intermediariesDistributors have enjoyed a lot of powerSituation well suited for small convenience stores

Manufacturing dominated economy; largely a sellers market until recentlyService sector coming of age only now

Strong presence of unorganised / small outletsTax avoidance has been endemicBarrier for organized retailers to offer convenience & value

Peshwa Acharya 10

Features of Indian Retailing till dateFeatures of Indian Retailing till date

Many communities made retailing their family profession for generationsexcellent in service and customizationlargest drawback is scalability and consistencylargest drawback is scalability and consistency

Infrastructure for organized trade poorbusiness constraints…cost of real estate, multiplicity of taxes, supply chain complexity, power deficits etc

Mostly under-CapitalizedCost of capital has been high Not considered an industry yetNo significant international know how & best practices available as negligible FDI in this sectorNo significant international know-how & best practices available as negligible FDI in this sector

Many Reasons why big box formats have been slow to emerge

Peshwa Acharya 11

The Changed Retail LandscapeThe Changed Retail Landscape

Peshwa Acharya 12

Change in the last decadeChange in the last decadeChange in the last decadeChange in the last decade

A few organized retailers to a Rupees 30,000 crore industryFrom 10x6x300 days to now 10x7x365 daysFrom unknown companies to Retail companies amongst the top 500 retailers in AsiaFrom father son shopkeepers to several retail rupee billionairesFrom father-son shopkeepers to several retail rupee billionaires From supermarkets to department stores, discount stores, hyper-markets, specialty malls all virtually at the same time

Peshwa Acharya 13

The Change of Guard PostThe Change of Guard Post--LiberalizationLiberalization

Pre-Liberalization Post-Liberalization- Bata- Raymond- Titan

- Foodworld - Food Bazaar - Big Bazaar - Giant- Subhiskha - Star India Titan

- Garden- Vimal

Bombay Dyeing

Bazaar- Shoppers’ Stop - Lifestyle

Westside Globus- Bombay Dyeing- Canteen Stores- Co-operative

- Westside - Globus- Pantaloons - Vivek’s- Crossword - Planet M

supermarkets - MusicWorld - Tanishq- Wills Lifestyle - Health & Glow- Ebony - Be

Peshwa Acharya 14

y

Emergence of largely retailers from manufacturer-retailers

Experience in relevant markets justify the sentimentExperience in relevant markets justify the sentiment

30%35%40%

15%20%25%

Share

0%5%

10%

d il d aShare

Thaila

nd

Brazil

Poland

China

Peshwa Acharya 15

10-12 years for organized retailing to achieve 20% share

Change Drivers : The ConsumerChange Drivers : The Consumer

Changing demographicsA younger earning population, brand conscious54% belo the age of 25 ears54% below the age of 25 years81% of population below 45 yrsMore acceptance of new conceptsChanging aspirations, lifestyle orientation

M l f ili ith d l iMore nuclear families with dual incomeHigh income households has grown by 20% p.a. since 1995 totaling 44 million More money to spend and easier financing optionsMore positive outlook to spendingTime poverty : “Convenience over-riding price consideration”p y g p

Lifestyle valuesGlobal lifestyle : media exposure and overseas travel

Peshwa Acharya 16

Consumer Class MapConsumer Class Map

Climbers ( $500 - $900)Cash - constrained benefitRich (Above $ 4,500)

Benefit Maximisers: Own Cars, PCs

Cash constrained benefit seekers:Have at leastone major durable (mixer, sewing machine / television)

Consuming ( $900 $4 500)

television)

Consuming ( $900 - $4,500)Cost -benefit optimisers : Have bulk of branded consumer goods, 70% of two wheelers refrigerators

Aspirants ($350 - $500 )New entrants into consumption : Havebicycles radios fansof two- wheelers, refrigerators,

washing machinebicycles, radios, fans

Destitutes ( Less than $400)

Peshwa Acharya 17

Destitutes ( Less than $400)Hand - to - mouth existence : Not buying

Income classes across India by sizeIncome classes across India by sizeMillion Households (Pop)

1995 -96 2001 - 02 2006 - 07

URBAN

Million Households (Pop)

The very rich 1.2 (7) 2.6 (15) 5.2 (30)4.0 (23)1.9 (11)

0.8 (5)

The consuming class

32.5 (186) 46.4 (265) 75.5 (432)40.8 (230)26.5 (150)16.6 (93)

The Climbers54.1 (312.2) 74.4 (429) 81.7 (472)

13.7 (77)17.4 (98)16.8 (94)

The aspirants 44.0 (253.9)33.1 (192) 20.2 (117)

0.7 (4)3.9 (22)7.1 (40)

Peshwa Acharya 18The destitute33.0 (190.4) 24.1 (140)

16.5 (95)

0.9 (5)2.6 (16)5.3 (30)

Change Drivers : Macro EnvironmentChange Drivers : Macro Environment

Easy availability of creditBanks and financial institutions are lending aggressivelyC t f f d h dCost of funds have come downCustomers attitude to credit has changed

Globalisation of MNCs (Retail & brands)- Lifestyle Gautier Shoprite Marks & Spencer Metro- Lifestyle, Gautier, Shoprite, Marks & Spencer, Metro- HLL, P&G, Nestle

Easing of import barriers- India is importing a large array of ranging from food to furniture- Ease of restrictions would further accelerate growth

Peshwa Acharya 19

Change Drivers Change Drivers -- Entry of serious playersEntry of serious players

FDI not fully allowed yet, still several international

Indian corporates leading theshow

Relianceplayers

- Dairy Farm, Singapore (F d ld)

ReliancePantaloons

-Trent- K Raheja Corp(Foodworld)

- Landmark, UAE (Lifestyle)- Medicine Shoppe, USA

Metro Germany (cash & carry)

K Raheja Corp- RPG-Zee Group- Nicholas Piramal- Metro, Germany (cash & carry)

- Shoprite Hyper, South Africa- Marks & Spencer- Benetton

- ITC- Godrej- Hathway InvestmentsBenetton - Raymond- Apollo Hospitals

M Oth t ti t

Peshwa Acharya 20

• Many Others testing waters-Tatas, Bharti, UB, Jubilant, HLL,

Mahindra..

Other Change DriversOther Change Drivers

Successful Retail ModelsThe last 3 years have seen successful, scalable and profitable retail models in many categories

Retail InfrastructureExtensive investment is taking place from 2004-2007

• Approx 340 Malls under development atavg investment of US$ 15 million $5.0 Billion

• Brands & Anchor investment $5.0 Billion• Total Investment $10.0 Billion

Peshwa Acharya 21

Change Drivers Change Drivers -- In supportIn support

Financial institutions upbeat on the sectorFinancial institutions upbeat on the sectorSeveral Indian & International FIIs setting up specialized division for retail funding

Government support taking shapeInfrastructure developmentInfrastructure developmentPolicies favouring growthTax and duty structure rationalization (VAT)FDI policy?

Peshwa Acharya 22

Organized Organized –– The Next Sunrise IndustryThe Next Sunrise Industry

Growth of Organized RetailGrowth of Organized Retail

20.0

bn

2125.0

5.0

10.0

15.0

$ b

4 26.0

7.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Y

4.2

Year

Organized retail is projected to grow at the rate of 25-30%Estimated to exceed USD 21 bn by the end of the decade

Peshwa Acharya 23

Estimated to exceed USD 21 bn by the end of the decadeContribution to retail sales is likely to rise to 9%

Great growth aheadGreat growth ahead

India moving at faster pace towards consumer driven economyDemand for competitive goods & services by Indian consumers like global counterpartsOrganized retail can be a major driver of our economyOrganized retail can be a major driver of our economyIt can attract large Investments (India ranks # on the 2005 AT Kearney’s Global Retail Development Index)

Japan

HK

Singapore

Germany

Taiwan

Indonesia

R t il P

US

UKPhilippines

China

India

Retail Power

Peshwa Acharya 24

Industry driven

Distributor controls

Consumer driven

Retailer controls

Consumer dictates

India

Definition … Consumer Experience

Consumer Experience is the entire experience the consumer gets from entry to exit in our store. It includes actual and perception y p pbased experience.

Peshwa Acharya 25

Why Consumer Experience

Consumer Experience is the key differentiator ……….

An excellent execution of consumer experience will lead to many directAn excellent execution of consumer experience will lead to many direct and indirect benefits.

Consumer stay time will increase in the store

More stay time leads to more opportunity for up-sell/more-sell thus leading to increase in avg. bill value

Higher chance of repeat purchase and loyalty

Positive word of mouth

Makes the customer less price consciousMakes the customer less price conscious

Consumer experience is very key for competitive edge.

Peshwa Acharya 26

Consumer Experience – Strategy

SSales Interaactions

Consumer Experience

Post purchase hand holding Store Design & Brandingp

Acctual P

urch

Peshwa Acharya 27

hase

Elements – Sales Interactions

Customer Welcome

Store staff manners, grooming and availability at the right

time

Store staff knowledge and helpfulnessStore staff knowledge and helpfulness

Easy billing and product dispatch to the car/home

Staff trainingStaff training

Peshwa Acharya 28

Elements – Post Purchase hand holding

Loyalty program

After sales service

Product install/demo and problem solving

Product Knowledge

This leads to repeat visit and positive WOM

Peshwa Acharya 29

Elements – Great PurchaseP d t il bilitProduct availability

Correct product assortment based on the consumer profileProduct price and latest promotionsD d t t i th d tDemo and content running on the productProduct informationProduct hygiene

Honest pricingCompetitive prices on all products and servicesLatest promotionsSpecial Deals

Actual purchaseSimple and quick billingProduct delivery and installation

Peshwa Acharya 30

Elements – WOW ! Store designSt l t d d iStore layout and design

Easy identifiable departmentsProduct adjacenciesPlace to keep bagsPlace to keep bagsRight height fixtures and product display

Comforts within the storeComforts within the storeAmenitiesSpace to move aroundComfortable lighting and temperatureTrolley or basketSoothing colors

Proud to visitStore covet valueLatest Technology and Fashion displayExperience zones

Peshwa Acharya 31

Experience zones

Store Design

Store Design is key to consumer experience and to give the WOW effect.

What percentage of the store area be allocated to the consumer experience zones ? p

Recommended : 10 - 40 %.... Depending on product category

Peshwa Acharya 32

Store Design… the science behind ….

S Ti t St D iSome Tips to Store Design :1.Shopping Science : Racetrack works 2 Comfort Zones : “ butt brushes “ avoid2.Comfort Zones : butt brushes avoid 3.Eyes Right : usually 4.Location, Location, Location : Product adjacency4.Location, Location, Location : Product adjacency5.Finish Line: E-POS provides data mine.

Peshwa Acharya 33

exceed expectations = experience

Peshwa Acharya 34

exceed expectations = experience

Peshwa Acharya 35

customer experience is at the core of a successful Retailer’s strategy

Peshwa Acharya 36

customer experience : meaning

Peshwa Acharya 37

customer experience : thrusts

Peshwa Acharya 38