For your convenience: 7-Eleven, others adding stores

It might seem as if there’s a convenience store on every street corner in the Pikes Peak region. 7-Eleven dominates the market with dozens of stores, while Loaf ‘N Jug and Circle K are among chains with multiple stores.

Even so, more locations are on the way as convenience store chains see continued opportunities for expansion in high-growth areas of the region, and as time-strapped consumers continue to clamor for the quick, in-and-out service that convenience stores offer:

• Dallas-based 7-Eleven, which has roughly 50 area stores, says three to four more are planned this year and another five to six are coming in 2013. Among the new sites: A former Bennigan’s restaurant near Academy Boulevard and North Carefree Circle will be razed to make way for a store, while another location is targeted on Woodmen Road, west of Marksheffel Road.

• Loaf ‘N Jug, an arm of the Kroger grocery chain that owns Kings Soopers, has about 20 stores. Another store is planned southeast of Northgate Boulevard and Voyager Parkway on the Springs’ far north side.

• Circle K, based in suburban Phoenix and with about 20 locations in the area, plans a store on the city’s northeast side, at Tutt Boulevard and North Carefree.

• Midwest-based Kum & Go has aggressively entered Colorado Springs with plans to build 20 to 25 stores over five years. Its first location opened in May at Academy and Vickers Drive. Stores are under construction east of Interstate 25 and InterQuest Parkway, west of Powers Boulevard and Woodmen Road and at Powers and North Carefree, among other locations.

• San Antonio-based Valero, which operates corner stores under the Valero and Diamond Shamrock names, has about 30 area locations. A spokesman said the company plans no additional stores in the area, but occasionally looks to remodel and expand existing locations.

“They sell time,” Jeff Lenard, a National Association of Convenience Stores spokesman in suburban Washington, D.C., said of the popularity of the stores. “When they started back in the 1920s, they sold staple items like milk and bread and eggs after the groceries closed at 5. Over time, what they have sold has changed, but they (continue) to sell time. It’s get them in, get them out, get them on their way, and do it without a hassle.

“We are becoming more time-stressed and time is money,” he added. “And people will give you money if you give them time.”

There are about 150,000 convenience stores nationwide, Lenard said. With a U.S. population of roughly 311 million, that means there’s one store for nearly every 2,100 people.
Using that ratio, the Springs-area’s 2010 population of about 634,000 could accommodate nearly 300 convenience stores — meaning there’s room for growth.

States such as Colorado and cities such as Colorado Springs — with rising populations of young people and outdoor enthusiasts — are prime targets for convenience store chains, Lenard said.

“You’re talking about people that just want an energy bar or a bottle of water or whatever,” he said. “Whether they’re in their car or on their bike, stores are where people are.”

That’s why several new convenience stores are going up in fast-growing parts of the Pikes Peak region that have been relatively under served up to now, said Mark Useman, a retail specialist with Sierra Commercial Real Estate in Colorado Springs who has represented Kum & Go in its local land acquisitions.

“We’ve had decent growth in our city, and there are areas of the city that haven’t seen the expansion or growth of these convenience stores in the last four or five years because of the slowdown of our economy,” Useman said.

Kum & Go evaluated several markets before deciding to enter Colorado Springs, Useman said. The family-owned chain, based in West Des Moines, Iowa, likes secondary cities where it believes it can have an impact, he said.

7-Eleven has sought to expand in markets where it already has large numbers of successful locations, while also acquiring existing stores in markets that are near areas where 7-Eleven operates, said spokeswoman Margaret Chabris.

The chain, a wholly owned subsidiary of a Japanese retail conglomerate, has nearly 48,000 stores worldwide, according to its website; 7-Eleven opened more than 600 stores last year in the U.S. and Canada, and expects to open another 630 this year, Chabris said.

“We’re on one of the biggest accelerated growth strategies I’ve seen in quite some time,” she said. “You will see more 7-Eleven stores. What we have found is that when there are more 7-Eleven stores in a geographic area or our market area, people are more comfortable. They know what you have to offer. They can count on you being open. It increases sales for all the stores because people just know what to expect.”

At 7-Eleven, customers have come to expect familiar products, such as the popular frozen Slurpee drink that has its own website and Facebook page; 24/7 store hours; and promotional campaigns for products that are often tied into movies or television shows.

7-Eleven also prides itself on a sophisticated retail information system that lets store operators track inventory to determine what’s selling and what’s not — allowing them to stock particular items, and their quantity, to fit a particular store and its location, Chabris said.

“In the past decade or two, we have had a real laser-like focus on what the consumer and customer wants,” she said.

Kum & Go is hoping to grab some of those customers. Its Colorado Springs stores are 5,000 square feet each and built on 1.5-acre sites — buildings and parcels that are larger than its stores in other markets and its rivals in the Pikes Peak region. Stores have full kitchens, while fuel pumping areas have more room for motorists, Useman said.

“They cook fresh food,” he said of Kum & Go. “They are coming in with a different prototype and should take some of the pie away from the other stores.”

But even as convenience stores expand, they also face challenges.

Convenience stores fight a perception that their prices are much higher than their rivals. It’s true prices can be more, Lenard said, but convenience stores have high real estate costs to go along with big electricity bills that result from coolers and freezers for cold foods and drinks. Also, because their stores are smaller, they can’t buy products as cheaply as larger groceries, Lenard said.

Still, milk, soda fountain drinks and other items are competitively priced when compared with other retailers, he said. And price isn’t as much of an issue for some customers — even in a slumping economy — if they have a need they want to fill in a hurry.

“You don’t think about your stock portfolio when you’re thirsty, you get something to drink,” he said. “And when you’re hungry, you get something to eat, you don’t worry about the economy. So, it’s more impulse items. A few bucks here to solve a need or to reward yourself doesn’t seem so bad in the scheme of things.”

Meanwhile, convenience store chains aren’t just competing against each other; they’re also fighting larger groceries and, increasingly, Walgreens and other drug stores that sell milk, soda and food items, Lenard said. Even discount dollar stores in some parts of the south are selling cigarettes, he said.

Convenience stores also wrestle with changes in consumer buying habits when it comes to two longtime profit makers: gas and tobacco sales.

Soaring gas prices have driven motorists to seek the cheapest gas they can find, even if it means saving a penny or two. Not only do convenience stores compete with service stations, but with grocery chains whose loyalty programs reward consumers with additional savings on gas. Profits on gas sales are only 3 cents per gallon to begin with, Lenard said.

Meanwhile, tobacco sales are down because fewer people are smoking.

“Your two big traffic drivers are facing a tough road,” Lenard said.

That’s why Springs-area consumers are likely to see more and higher quality food prepared the way they want it, and expanded drink items; food accounts for 23 percent of convenience store sales, while beverages are another 30 percent, Lenard said.

Despite those challenges, the overall state of the convenience store industry has been healthy; three of the last four years have been the most profitable on record for the industry as a whole, Lenard said.

“There are huge challenges when it comes to the future of fuel, the future of tobacco and all of the issues related to credit card fees. And not to forget competition,” he said. “But if you can deliver what the customer wants and solve their needs, and do it fast, you can do very well.”

Contact Rich Laden: 636-0228 Twitter @richladen
Read more: http://www.gazette.com/articles/stores-144657-adding-convenience.html#ixzz26oDmrthG

FMCG cos bank on speed to win

Cut Time To Market Amid Downtrading Fears During Slowdown

Mumbai: Fast-moving consumer goods (FMCG) companies are using speed as a competitive weapon to win in the market place, especially when talks of a slowdown bring the possibility of downtrading into sharp focus.

Growth in the FMCG Industry has not lost steam even as other sectors have slowed down, but there is concern about a possible impact considering a deficient monsoon this year. The industry believes there is one weapon which can help companies win, and that is speed.

A Boston Consulting Group (BCG) report, ‘Speed To Win’, says increased agility can solidify a competitive position, boost profitability and reduce risk. It says for standard new product development, a seven months time to market can separate the best in class from average players. But would it also work in a slowdown? “In slowdown situation it is even more important as the consumers typically start to change their consumption patterns and it is important to refine the offerings (in terms of price pack architecture, composition and packaging) to ensure alignment with the consumer requirements,” said Abheek Singhi, partner & director, BCG.

A company can outpace its rivals by increasing its market share, boosting its negotiating leverage towards trade and positioning itself as an innovator and the mantra is: standardize, prioritize and mechanize. Take the case of Nivea lipcare. Speed helped the company redefine this category with the trade in terms of merchandising and distribution. The category was treated like an “impulse confectionery” and not like a traditional skincare category. “Our actions have followed out thoughts and results are there to be seen. We have been quicker than most of competition in developing the premium lipcare category for Nivea. All our initiatives have hit before competition, be it variety/price points/distribution. This has given us leadership,” said Rakshit Hargave, MD, Nivea India.

With compressed product life cycles, especially in some of the newer categories, being quicker to the market is a great advantage. “Speed to market is important, not just with new product development but also with reaching out to the consumer and ensuring that even the remotest of corners of the country get the products in a short period of time,” said Sunil Duggal, CEO, Dabur India.

Dabur integrated its consumer care and consumer health businesses and this was the genesis of ‘Project Speed’, which was designed to help the firm cope up with challenges by leveraging the power of its combined product portfolio through a unified sales & distribution structure. Dabur has also put in place an initiative to double its rural reach. The company is hopeful that this would enable it to have a direct access to 3,000-population villages across 10 states that account for 72% ofthe rural FMCG potential.

Some other examples are brands from mid-sized companies like Paras and Emami which were successful in gaining share as their product development times were shorter than others in the sector. When Emami conceived the idea of a men’s fairness cream, it knew it had a winning concept. What was important, however, was to ensure that it was put into market at a speed before others. “We were able to go to market within just under a year from the time the idea was conceived. This requires great agility. It took our established competitors by surprise as elements of marketing were in place within the short time,” said N Krishna Mohan, CEO, sales, supply chain and human capital, Emami. As a result, Emami enjoys market leadership in the category.

“Empowered companies with flatter and decentralized decision making structures can outpace its rivals in speed to market. This, when accompanied by stronger local consumer insights can develop into a potent competitive advantage,” said Saugata Gupta, CEO, consumer products division, Marico.

Supermarkets Make a Tryst with Record Sales on Independence Day

Top retail chains posted their highestever weekly sales in the six days to Independence Day, when heavy discount offers lured buyers to splurge on daily household products, apparels and consumer durables.

Retailers such as Future Group, Reliance Retail, Bharti Retail, RPG Group’s Spencer and K Raheja Corp’s HyperCITY — helped by active participation of several consumer product companies — offered deep discounts across product categories to push volumes at a time when consumer spending is slowing and there are fears of poor monsoon rains impacting demand.
“Consumers are looking at savings more than ever before,” said Rakesh Biyani, joint MD of the country’s largest retailer, Future Group, whose 164 Big Bazaar outlets across some 90 cities saw more than 8.1 million visitors during the week ended August 15. “We have been working to integrate our supply chain to bring down prices as far as possible.”
Several suppliers, including Coca-Cola, Britannia and Procter & Gamble, participated in special Independence week deals, helping retailers to offer higher discounts than before.
Darshana Shah, business head for marketing at HyperCITY, a hypermarket format run by Shoppers Stop, said increased vendor participation as well as entire malls going for sales helped pull in the crowds. “The sale was definitely better this year as we had stronger and bigger deals since market sentiment was soft,” she said. HyperCITY also increased its spend on marketing this year at around 2% of overall sales. During the week, Big Bazaar outlets sold more than 1.4 lakh packs of a combination of 5 kg of rice and sugar each with 5 litre of edible oil, and more than 1,500 tonnes of detergent. LED TVs, mixer-grinders and induction cookers were among the other top sellers at Big Bazaar, officials said.
Spencer’s Retail said its same-store sales increased 24% year-on-year during August 11-15, driven by beverages, health and beauty, bakery products and staples that saw over 30% sales growth. Sales of FMCG household products grew over 50% while liquor sales rose 30%, Sanjay Gupta, executive director (marketing & business development) at Spencer’s Retail, said.
Such discounting, however, reflects the escalating pressure on retailers, whose sales are slowing during non-discounted periods. “Because of the slowdown sentiment, consumers have been withholding purchases, so companies are trying to push volumes through discount seasons at retail chains,” said Mayank Shah, group product manager at Parle Products, the country’s largest biscuit maker.
But those volumes come at the cost of bottom lines, he added. Earlier this month, credit rating agency Fitch said same-store sales growth of retailers slipped across lifestyle and value-based formats in the quarter ended June, adding that it expects retailers to combat slowing sales by offering discounts.
“However, this may lead to an erosion of gross margins,” Fitch said, while revising the outlook for the Indian retail sector to negative from stable for the first half of this fiscal due to sustained decline in the discretionary spending ability. A slew of factors such as economic slowdown, deepening crisis in Europe, high food and fuel prices has impacted consumer sentiment in the country, slowing sales of everything from cars to carpets.
Some retailers use inflation as a marketing tool. A case in point is Bharti Retail’s “freedom from inflation” campaign at Easyday stores, which help people fight inflation by providing quality merchandise at low prices. Retailers such as Reliance Retail used the week to increase their customer base. Reliance introduced discount offers such as ‘double the difference’ price guarantees across various product categories.

Taming the Data Deluge

Marketers and consumers struggle with the volume of data the world now generates. David Benady asks how the two sides can jointly control the tide, including the advent of brand ‘data stores’.

Data is inundating the economy, overwhelming consumers and businesses with swathes of information that they struggle to comprehend. The overload is set to spiral as social media, mobile and geo-location technologies spew forth yet more reams of data.

With billions of web searches made every month, more than 20,000 new books published weekly and more texts sent daily than there are people on Earth, data is increasing exponentially. The number of exabytes (EB – equal to 1bn GB) of information created in 2011 hit 1750, double the 2009 figure, according to IDC estimates. There is twice as much data as storage capacity.

This torrent of data makes it hard for marketers to ensure their brand messages are heard above the noise. Consumers have become reluctant to open the floodgates to receiving more irrelevant information, and some are wary of providing personal details.

Research company TNS has analysed the way in which consumers ‘eat’ at this table of information and created five consumer segments based on their readiness to absorb data. It calls the data deluge ‘information obesity’, and looks at the way people create their own ‘eating plans’.

You are what you ‘eat’
‘Fast foodies’, it says, consume the easiest, lightest data they can find. ‘Supplementers’ devour as much information as they can. ‘Carnivores’ consume only meaty chunks – whole books and in-depth research. ‘Fussy eaters’ are loath to consume information from any source, while ‘balanced dieters’ never consume too much information; what they do take comes from a variety of sources.

TNS marketing sciences director Russell Bradshaw says these ‘eating plans’ are a good way for marketers to target resistant consumers. ‘By understanding the predominant “eating plans” that exist among their brand franchises, brand managers and chief marketing officers have a tool for maximising the reach, resonance and values of their campaigns,’ he says.

TNS analysis suggests that ‘carnivores’ are more likely to shop at Marks & Spencer, while ‘fussy eaters’ tend to stock up at Asda. This gives M&S leeway to bolster its communications, giving customers big, meaty chunks of information they can savour slowly. Asda, meanwhile, would do well to deliver information in bursts and offer online nuggets such as tweets to appeal to voucher-hungry customers.

Marketers acknowledge that segmenting consumers by their propensity to consume information can be useful, but many see it as an add-on to the already tough task of identifying relevant audiences.

David Torres, global manager of chemicals technology at Shell Research, says that Shell intends to embed the TNS eating plans into its work, adding that brands need to search the data they have for clear and relevant insights.

Meanwhile, Stephanie Maurel, head of retention at Sport England, says the ‘eating plans’ could be useful if blended with other tools. ‘The TNS data obesity segmentation makes a lot of sense and rings true anecdotally. It is a great idea to segment by the information consumers are prepared to receive, although perhaps this is an extra step to be added to current tools,’ she adds.

Maurel’s role at Sport England is to use data to help various sports’ governing bodies to increase participation and attendance, a challenge for smaller sports, such as hockey. One solution is to take data from grassroots sources, such as social media, and integrate it with i n fo r m at i o n from elite sports events.

While small sports may be unsophisticated when it comes to data collection, Maurel says some governing bodies are using real-time data to build their popularity.

British Cycling, for example, gets feedback from locally organised Sky Ride mass-cycling events and feeds it through to its board meetings. This, in turn, helps it shape the way in which Sky Rides are organised.

For many brands, the UK’s data-chain is dominated by retailers. They control the all-important information about sales, which they then sell back to brandowners. Nonetheless, retailers, too, are suffering from information overload, according to Chris Osborne, retail principal at software supplier SAP. A recent survey by SAP found that more than half of retailers believe they have more information than they can handle. ‘Structured’ data – such as till receipts showing items purchased, times of day, quantities and prices – has been around for decades. Osborne advocates combining this information with ‘unstructured’ data – such as the random chat of social media – as the next great challenge for brands and retailers.

The prize will be to build a total view of each customer’s likes, behaviour and loyalty, and target offers accordingly. A crucial step is ensuring both types of data are gathered and acted upon in real-time.

Osborne believes the development that will enable this is ‘in-memory’ data analytics, where the data is stored in the computer’s memory for quick retrieval, rather than on a conventional database where it is stored on a hard disk, making it harder to access and wasting capacity.

He envisages a two-track economy where success will depend on efficient use of data. ‘The retailers that win out will be the ones that are very careful about how they use data and don’t swamp consumers with irrelevant offers,’ adds Osborne. ‘Retailers that create competitive advantage are (also) careful about how often they communicate with consumers.’

Useful data vs ‘noise’
Given the retailers’ iron grip on data, some brands have turned to comparison website Mysupermarket.co.uk to gain access to information about their own performance through mini-shops on the site. Reckitt Benckiser, Kellogg, Danone and Nivea are among those to have created such stores.

James Foord, vice-president of business development at Mysupermarket.co.uk, says brands are only just beginning to grasp the distinction between ‘data noise’ and what is useful. The site allows brand-owners to create a direct relationship with consumers and thus control their data. Brands can analyse the battle between their products and stores’ own-label versions, for example – data retailers rarely release. ‘This is the tip of the iceberg of what is possible. Brand stores will open up a whole new level of insight that has real value,’ adds Foord.

The battle for data control is about more than simply capturing as much information as possible and keying it into a database. Finding ‘smart’ data can save time and money in research and bring significant benefits for brands. The challenge is to find the pieces of information that help a brand locate its best customers and give insights into their motivation for buying a product.

Mike Dodds, chief executive of integrated agency Proximity, recalls a cat-food brand’s CRM programme in which customers were questioned about their behaviour. The question that delivered the best data was: ‘Do you celebrate your cat’s birthday?’ The responses helped the brand discover the most involved and valuable customers.

A potential barrier to the development of data-driven marketing will be consumers’ attitudes to privacy and control of their personal details. The online giants, such as Google, Facebook and Twitter, have built their businesses on getting users to give up their data in return for ‘free’ services. If the public refuse to play, this could put a spoke in the wheel of the data economy.

Chris Combemale, executive director at the Direct Marketing Association, says brands have to be upfront about privacy and make their policies simple and readable: ‘If you can’t put the policy on one page and make it clear, you have an issue.’ He also warns brands to avoid being ‘creepy’ online – by serving ads based on details consumers thought were private – which, he argues, can make digital marketing appear intrusive.

Modern marketing is essentially a battle for data. However, consumers themselves have the ultimate weapon: to switch off and stop sharing their information.

Technology was supposed to make life easier, but, in reality, it has made the world far more complex. The task of creating marketing campaigns that get heard above the din will only get harder still in a society deluged with data.

Marketing © Brand Republic

Tech Drives Growth in Grocery E-tailing

Supply-chain tech helps to reduce cost & inventory and predict user behaviour

Everyday, I learn something new,” says R Rammurthy as he picks up a netbook, an Android tablet and a paper-clip file before climbing onto the driver’s seat of a white Maruti van loaded with four neatly packed baskets of grocery and vegetables. As he slips into first gear, he pointed to the netbook screen which displayed a map where the vehicle’s number flashed. The on-screen status of the vehicle changed from idle to moving and the address to which the baskets needs to be delivered popped up.

Rammurthy’s trip ended nearly twenty minutes later at the doorsteps of a customer– mother of a three-year-old who hates to spend the little spare time she gets during weekends at the supermarket. During the drive, the 28-year-old management graduate, who now handles a small team for online retailer Bigbasket.com, started explaining how his company manages to keep near-zero inventory and fulfils hundreds of orders everyday.

Online food and grocery retailing, fairly mature in the West and showing lot of potential in growth markets like China, has not been able to capture the fancy of Indian shoppers yet. Things, however, may be changing as a new generation of wellfunded online firms — Bigbasket.com is a key example — are using simple end-to-end technology solutions to offer deep discounts on grocery items, predict customer behaviour and keep a tight leash on expenses. With technology playing a key role, they are trying to make a dent in the estimated $343-billon food and grocery market in India.

For example, these firms use a supplychain technology that allow customers to place orders through multiple channels and later predict what a customer is likely to order. Combined with applications that track everything from the time an order is placed to delivery and devices that help during procurement, technology is helping these firms to make a compelling and convenient offer to the tech-savvy shopper. For these online retailers, the most important tech application is the ability to predict customer behaviour which lets them reduce inventory and thereby, cut costs. For instance, while a traditional retailer might have to stock his monthly offtake of atta at least three weeks in advance, an online retailer ends up stocking it for less than two days. “That is mostly analytics,” says Ambuj Jhunjhunwala, the founder of Mygrahak.com which sells food and grocery online in Delhi. Predicting customer needs helps them to plan in advance and procure based on needs. Need-based procurement works ideally well with perishable goods like food not to talk about saving expenses on storage space, which is a large part of expenditure for a traditional retailer.
Analytics also involves knowing the customer better which helps retailers to make tailor-made offers for customers and increase sales. Online retailers can also eliminate a large part of their frontline staff because customers usually help themselves. Typically, large format brickand-mortar stores spend much of their attention to figure out customer behaviour on the shopping floor and arrange goods so that they catch customer attention. This can now be automated as the platform generates enough data about individual preferences. “You have complete control over knowing what your customer is buying and great level of predictability. The stickiness of forecasting can go up as you use technology to predict,” says Anand Ramanathan, Associate Director at KPMG.

Shoppers, whose experience of buying grocery online has been good, tend to very loyal. For example, Asha Liju, a clinical research professional from Bangalore buys her grocery online. “This is the second time I’m buying online because its simple and saves me nearly 10 kilometres of travel,” she says.
Here again, technology plays a key role. Grocery buying is mostly a repetitive task something technology is known to do well. For instance, when a shopper logs into the account, a history of previously bought items makes it easier to pick instead of going through the motion all over again. “At each step, simple technology is helping us save time and money,” says Abhinay Choudhary, co-founder of Bigbasket.com. Bigbasket.com, which now has 100 people on its rolls, will supply anything from milk products to fresh fruits among 7,000 other items at your doorstep at competitive prices within a few hours of placing an e-order. “Our delivery vans even have cold storage facilities. This is very new but if we do it right, it will be big,” says Choudhary. His earlier venture was shopasyoulike, a similar food and grocery store catering to residents in Whitefield, Bangalore.

25-year-old Jhunjhunwala’s Mygrahak.com now claims that they process nearly 15,000 orders a month. “The average order size is Rs 1,250- Rs 1,300 . We can at least grow 30 times in Delhi alone,” he said. He recently introduced “card on delivery,” where a customer can swipe their cards at the time of delivery to pay for the order. Jhunjhunwala comes from a family of entrepreneurs and returned to India after graduation learning how to do business from his family, the promoters of BSE listed REI Agro.Chennaionlinegrocery.com, Town Essentials and Atmydoorsteps.com also operate in this space. Scale might not be an issue as demand from a large working population, which finds frequenting supermarkets an irritant, grows.
Investors also seem to be buying into the grocery e-tailing story. Last month, private equity firm Ascent Capital invested $10 million when Bigbasket.com co-founded by a team of eight which includes Fab-Mall co-founders Hari Menon, VS Sudhakar, Vipul Parekh, VS Ramesh and Abhinay Choudhary, raised its first round of institutional funding.

The food and grocery market accounts for over two thirds of the $505 billion Indian retail market. According to retail consultancy Technopak, the retail market is projected to touch $725 billion by 2017. The organised food and grocery retail market in India is estimated at $ 12 billion in 2012 and grow at a compounded rate of 30% over next the five years. “Though e-tailing is still a very small part of retail in India it is projected to grow at a fast pace and over the next decade its presence will be significant,” said Pragya Singh, Principal Consultant, Retail & Consumer Products, Technopak. Headroom for growth comes from the fact that that e-tailing accounts for a measly. 2% or $1 billion of the overall retail market and it is expected to reach $13 billion by 2017.
But retailing food and grocery online is not an easy task. Though there are success stories, the monumental failure of Webvan in the United States back in 2000 is enough to act as a damperner.

The challenges include being able to give consumers a large number of products to choose from, achieving consistency in quality especially when it comes to perishable goods and the cost of logistics. For instance, Mygrahak’s Jhunjhunwala has already invested $1 milllon in the firm and anticipates an expense of $4 million to $5 million every time it moves to a new city. While critics often cite the example of Webvan, the story may not repeat in India. Webvan may not be the best benchmark, argues Singh. “It is an example of a company that grew too fast in middle of the dotcom boom, rapid expansion to multiple cities, gigantic infrastructure including warehouses but not enough sales to back the same,” she said.

Even as its spends Rs 150- Rs 400 to acquire each customer, Mygrahak.com will break even this Diwali, claims Jhunjunwala. Despite the rosy numbers, e-tailers looking to sell food and grocery might have to expand cautiously, suggests Technopak’s Singh.
The Challenges 

* Achieving standardisation in quality and quantity when a large part of grocery items are still sold loose in India

* Having a comprehensive product range that covers all possible variations

* Delivery across large parts of urban and semi-urban areas

* Sensory needs of consumers are not satisfied through online channels
Fulfilment and logistics costs

Shops lose 88% of customers due to poor service

Despite an overwhelming preference for in-store shopping, consumers are being turned off to high street retail by low customer service levels, new research released today reveals.

In a survey conducted by customer intelligence company Market Force, electrical retailers had the lowest customer service satisfaction score of any service industry with just 2.24 per cent of shoppers left happy.

Shops lose 88% of customers due to poor service

Clothing retailers scored only 2.69 per cent, supermarkets polled 6.10 per cent, local convenience stores received 6.48 per cent backing from consumers, while department stores got the highest score of any retail business type with 9.72 per cent left satisfied.

Of those surveyed 41 per cent said that their biggest frustration with store staff is a lack of interest in their needs and wants, and despite more than three quarter of people preferring bricks and mortar shopping to online as a many as 88 per cent will leave a shop if service is poor.

Tim Ogle, CEO at Market Force Europe, commented: “Good customer service doesn’t have to be expensive. Small, inexpensive changes can have an oversize impact on whether someone buys in your shop and how much they spend.

“For example, our research shows eight out of ten shoppers want to be taken to a product when asking about its location. It’s these little gems of insight that turn a question into a sale.”

Retailers are increasingly realising that in order to make their bricks and mortar offer as compelling as their online platforms they have to improve the experience of visiting their stores.

This morning the UK’s largest retailer Tesco announced a huge recruitment drive, which in part is in reaction to a perceived drop in the supermarket chain’s service levels in recent years.

Several simple service techniques could be employed by businesses to boost trading it seems, with Market Force also finding that 59 per cent of shoppers like products to be recommended to them by staff members.

Although shoppers like to have a personal service, they also seem open to new technologies which cut out staff interaction, with 63 per cent saying they like to use self-service machine and 49 per cent in favour of contactless payments.

In a warning to retailers keen to make more transactions automated however, the research shows that 37 per cent of consumers feel they should pay less when using self-service checkouts.

Compared to other industries retail appears to be struggling to please its consumers at present, with banks (10.8 per cent), restaurants/pubs (28.3 per cent), and hotels (31.5 per cent) all scoring higher customer satisfaction levels in the Market Force survey.

Ogle added: “These findings should be a wakeup call to retailers looking for cost effective ways to grow their business.”

Retail chains adopt prepaid cards to retain customers

Prepaid cards have become the latest retail tool to keep consumers hooked to brands. They offer convenience and safety, because customers don’t have to carry cash, and they often come with a variety of offers, including discounts.

Brands like Café Coffee Day, Pizza Hut, Provogue, Kaya, Fastrack, Gili and a host of others have launched prepaid cards. A prepaid card works like a debit card with a PIN number that can be redeemed at the brands’ outlets. The cards in India are based on the closed loop model — that is, they can be redeemed only at the brand’s stores. “When I have money loaded on the card, the tendency to come to the same place is higher,” says K Ramakrishnan, marketing president at Cafe Coffee Day. The brand’s card Cafe Moments, launched this month, offers a 5% bonus on cards with a value of Rs 100 to Rs 499, 7% on Rs 500 to Rs 999 and 10% on Rs 1,000 and above.

A prepaid card obviates the need to pay cash every time, and it also enables faster accumulation of bonus points or other offers. Prepaid cards in India are currently being used more as gift cards. Some brands have used it to launch a promotion or a service. What the prepaid gift card did for Kaya was to generate incremental walk-ins,” says Suvodeep Das, marketing head at Kaya Skin Clinic. In Kaya prepaid cards, currency can be reloaded in multiples of Rs 500 to up to Rs 2 lakh. Kaya sells about 250-300 gift cards a month.

Global Prepaid Exchange recently estimated that the size of the organized prepaid gift card and gift voucher market in India is Rs 2,000 crore and would grow to Rs 8,000 crore by 2015. “The acceptance of gift cards in proportion to vouchers has increased significantly,” says Pratap T P, chief marketing officer at QwikCilver Solutions, a provider of prepaid card solutions.

However, Devangshu Dutta, CEO of retail consultancy Third Eyesight, says growth in prepaid cards would be restricted by the fact that they can be used only at a particular brand’s outlets. “Also, a customer cannot claim the minimum residual value in the card. He will have to top it up to redeem it,” he says.

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