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.

IBM Buys Retail Forecasting And Merchandising Software Company

IBM has made a major purchase today in the commerce and retail world—DemandTec, a retail marketing and merchandising software company. IBM is acquiring DemandTec (which listed on the Nasdaq) in an all cash transaction at a price of $13.20 per share, or approximately $440 million.

DemandTec provides retailers and e-commerce companies with tools to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s cloud-based analytics software allows businesses to examine different customer buying scenarios, both online and in-store, so retailers can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

For example, retailers can predict how consumers will respond to a price change before making the change. Or a merchant and supplier can work together to understand how one shopper segment differs from another to create a targeted merchandise plan.

DemandTec’s use of cloud-based price, promotion and other merchandising and marketing analytics helps companies better define the best price points and product mix based on customer buying trends. Essentially, DemandTec uses data analysis and forecasting to make the retail world smarter.

DemandTec customers include Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith. DemandTec also has a portfolio of 31 patents in the areas of pricing, response analysis, and promotion analysis.

For IBM, the acquisition is all about its smarter commerce initiative. IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone.

IBM’s recent acquisitions include Algorithmics, and Tririga.

The small-store owner is too important, nimble and innovative to be bumped off by big-box retailers in India.

Kirana RIP? Not Yet.

The arguments for and against FDI in retail are, at a generic level, valid on both sides. However, since the devil is usually in the detail, the facts about India’s small retailers and suppliers, the conditions stipulated for FDI, and recent experience with the effects of domestic modern retail need to be viewed together before the likely outcome pronounced. The big fight is about whether this new policy will kill small shops, massively destroy livelihoods and take away GenNext’s opportunities. Facts suggest otherwise. Consider the kirana, the one most feared to be at risk. About 5-6 million of the 8 million FMCG-stocking kiranas are in rural India, and are totally safe, as the new ones can only come into the top 53 cities.

R Sriram, founder of Crossword and retail expert, tables two insights. One, in many big cities, kiranas are already not participating in the growth offered by the newer settlements like Gurgaon or Powai, because without their advantage of historically-priced real estate, they are not viable. Two, increasingly, small shopkeepers’ children are getting better educated and want to exit ‘sitting in the shop’ as soon as possible, just as small farmers’ children are exiting farming. Sadly, the country’s retail density has been increasing in recent years, not driven by passion or profit, but because of lack of options — hopefully that will change. It is true that traditional income streams of small shops in the vicinity of a large supermarket plummet; but we have seen that they soon recast their business model, exploiting the inherent advantages they have that the supermarket cannot emulate: free, prompt and no-conditions home delivery, superior and customised customer relationship management, khaata- credit and willingness to stock small quantities of something used by only a few people in their catchment — a classic ‘long-tail’ strategy. Notice two more things: even in upper-class areas in large cities, despite large retail chains in the vicinity, the small vegetable vendor and kirana continue to find a place in the household’s shopping basket. The kirana also continuously morphs, and is already moving to a more specialised and selective portfolio. We will find them variously choosing to become more of a convenience store (7-Eleven-type), or fresh-food store, a home-delivery store, maybe even express-format franchisees of large retail, and so on.

Another reality check: how much consumption capacity do even the top 50 cities have? Seriously, how many more Ikea, Zara, Walmart, Tesco and Best Buy can a Surat, Kanpur or Indore absorb, in addition to more Big Bazaar, Megamart and Croma? Further, foreign specialty retailers targeting the rich consumer will create never-before custom, and not at the expense of existing shops. Two decades ago, we had the same hue and cry that Indian brands would be wiped out; but they got better and bigger than they would have had they been left unchallenged. Now for the suppliers. Large suppliers will lose the pricing power they had with small retailers and nobody on any side of the FDI debate is grieving for them. Small suppliers, even without FDI, are being mercilessly squeezed by middlemen. The hope is that large retail chains, unlike the broker middleman, have more incentive to pay more because they have customer loyalty and a brand to build; in exchange for steady, loyal, consistent quality supply, they will pay more, guarantee offtake, improve product and production efficiency. The FDI norm of at least 30% sourcing from small scale pushes this further. Walmart potentially could kill the small suppliers of anything by importing 70% from China cheaper; but loads of small traders are already doing the same, flooding our markets with Ganesh murtis, chappals, clothes, watches, etc.

The Achilles’ heel for a lot of skilled artisans, specialised producers, grass roots innovators, etc, is market orientation and marketing. Producer collectives have managed to organise themselves on the supply side using government assistance schemes, but they struggle to manage the demand side. That is the missing link that large retailers in vendor development mode can provide, just as the auto industry has done to ancillary suppliers. Both sides agree that customers will gain because large chain retailers can provide better for cheaper, given the discounts they get through buying large quantities and sourcing smartly. Customers will also get a wider range, more innovative products and more comfortable, truthful and informed shopping environment. Poor customers won’t get discriminated against, because the hypermarket is anonymous, transactional, classless and nonjudgemental. They may not get better service because the small Indian retailer is the champion of good service, from atta to electrical, the likes of which we haven’t yet seen any big retailer match, anywhere in the world. That’s another reason why he will always survive.

Before we fight further, consider this. This network of commercially-savvy supplychain linked small retailers is an invaluable asset: as one report said, they are not ‘unorganised’ by any stretch of imagination; we agree and have refrained from using this phrase in this article! It is unlikely that Indian jugaad will let this network disintegrate. Perhaps in rural India, where they would have been more hard hit had the big-box retailers been allowed, they would have been garnered by banks as new extension counters for financial inclusion.

economictimes.com: RAMA BIJAPURKAR INDEPENDENT MARKET STRATEGY CONSULTANT

New Stop & Shop concept store opens in Chelmsford

New Stop & Shop concept store opens in Chelmsford with following convenience options:

An on-site nutritionist: The company has hired a professional nutritionist who will be available for consultations. The cost, according to Robinson, will be $25 an hour, but the customer will get that $25 back in the form of a gift card.

Day care services: Stop & Shop is introducing “The Tree House” – a room where supervised day care is provided for up to 90 minutes for free, for children ages 3 through 9.

Curbside pickup: Customers will be able to order groceries on a computer and pick them up at the store without leaving their cars. They can pull up to a designated curbside pickup area where a Stop & Shop employee will process the payment and load the shopper’s car.

British supermarket chain tests iPad-ready shopping carts.

Want a side of Apple with your supermarket runs?

Shopping Cart with iPAD interface

Shopping Cart with iPAD interface

British grocery store chain Sainsbury’s is testing out new shopping carts with solar-powered iPad docks and speakers (iPads not included).

The trial, first rolled out at a Sainsbury’s location in Kensington, West London, will allow customers to watch live sports and sports-related news after docking their tablets to holders affixed to their shopping trolleys, the Telegraph reports. A built-in battery with a self-charging solar panel keeps the tablets from running out of power, and a sensor on the front bumper will beep if an engrossed shopper gets close to crashing into another cart.

The carts have been developed by broadcaster Sky TV to shine a light on its Sky Go service, which serves up television on the go on Apple devices (an Android app is reportedly coming soon).

Sainsbury’s said in a statement that the shopping carts, which may be rolled out to other stores in Britain if successful, could convince more shoppers to patronize a store.

“We strive to make our customers’ lives simpler, which is why we’re looking at these new trolleys,” said Brett Hart, the supermarket chain’s shopping cart buyer.

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