Starstruck: Mall Owners Relocate others for Starbucks

Brands that are being shunted to less attractive locations to accommodate the coffee chain are not amused

A joke doing the rounds on Twitter these days is that the wait outside Mumbai’s first Starbucks coffee outlet at Horniman Circle is so long that a smart alec has started selling tea to those standing in the queue.

Starbucks Coffee Logo

Starbucks Coffee Logo

This kind of consumer frenzy is music to the ear of mall owners in India’s big cities. Sensing a huge opportunity, many of them are offering the American coffee chain preferred locations within their malls, sometimes even at the cost of relocating a brand that is already present at the location.

It’s not as if the mall owners are expecting premium charges. They just want Starbucks as an anchor tenant as such iconic brands can bring home the much desired footfalls; and also inspire other quality labels to set up shop in their malls.

Starbucks had said that it plans to open 50 stores by the end of the year in Delhi and Mumbai. That plan may or may not materialise, but the coffee retailer surely is on the fast track to sign up new spaces. “For some international iconic brands, mall developers will be willing to bend backwards as they can improve the tenant mix,” says Jaideep Wahi, director, retail agency at Cushman & Wakefield India, a property advisory firm that helps companies such as Starbucks find store space.

The Ambience group has signed up Starbucks for two of its malls in Gurgaon and Vasant Kunj in the capital. At the Gurgaon mall, a brand that was on the ground floor is being relocated to another part of the mall to accommodate the coffee house.

“I am relocating a brand for Starbucks as we wanted to give them an indoor-outdoor combination,” says Deepti Goel, head of leasing at Ambience. Starbucks is negotiating for space at another mall in south Delhi. Arjun Sharma, the director of Select Citywalk mall in Saket says he would love to move brands around for the iconic brand. “It’s a relevant brand. It’s a great brand. We always seek marquee brands to improve our tenant mix,” he said.

Another developer in Mumbai, requesting anonymity, said he was even willing to compensate an existing store operator if he vacates his current location.
A Tata Starbucks spokesperson declined to comment on queries sent by ET.

The enthusiasm to put up Starbucks has caused heartburn among a few brands that have been asked to relocate. “We were asked to move to a less-attractive location within the mall, even though the mall owner agreed to give us favourable terms. But it still can’t make up for losing a premium location,” says a manager with an apparel brand, who did not wish to be identified for risk of antagonising the mall owner.

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Retailers pitch for loyalty in tough times.

LOYALTY pays, even during a slowdown. At a time when consumer spending is on a decline, leading retail chains are either expanding or restructuring their loyalty programmes. The retailers expect such a strategy will help them increase footfalls, conversion level and ultimately drive their topline growth.

While the likes of Future Group, Shoppers Stop, Westside and Reliance Retail are driving the focus on customer relationship management (CRM), restaurant chains like Speciality Restaurants (SRPL) are also gung-ho on the same. “The CRM programmes are important for any retail chain and they work, especially during a recessionary trend. They give customers some comfort and ensure that they keep coming back again and again,” SRPL chairman and MD Anjan Chatterjee told ET.

SRPL’s loyalty programme currently has 70,000-odd customers within its folds, who account for 30-35% of their sales. “We are now planning a marketing blitz to penetrate into 70% of our target audience by July-August,” said Mr Chatterjee.

Within six months, Future Group is planning to roll out a single loyalty programme that spans across formats. The group is currently investing heavily on the IT backbone. Currently, the group’s Green Card loyalty programme at Pantaloons accounts for 55% of sales.

“As the first step towards a uniform loyalty scheme, we have rolled out a prepaidcum-loyalty card in Pune and Kolkata. We’ve clocked nearly Rs 15 crore business out of this. Eventually, we expect 70% of our sales from lifestyle formats to be generated from loyalty scheme customers,” said Future Group president-customer strategies Sandip Tarkas.

Interestingly, Reliance Retail already operates its ‘RelianceOne’ loyalty programme across formats with four million customers. “We see a significant percentage of our sales coming from our loyalty card holders,” said a Reliance Retail spokesperson.

Shoppers Stop has just launched a new loyalty scheme for its hypermarket ‘Hypercity’. “The loyalty programme is a long-term strategic initiative, which drives repeated purchases. We add nearly three lakh customers under loyalty every year,” said Shoppers Stop MD BS Nagesh. As of end-2008, the retailer had more than 11.8 lakh loyalty members.

Westside has relaxed the entry norms for its loyalty programme ‘Clubwest’ to cash in on the large footfalls the store is witnessing due to Nano bookings. Earlier, to become a silver member, one had to shop for Rs 2,000 on one occasion and register. “Now, a customer can enrol for the programme even by shopping for Rs 500 and subsequently get upgraded, if he completes Rs 2,000 billing within three months,” said Westside marketing-head Smeeta Neogi. The chain currently has over eight lakh members, who generate over 50% of sales.

Visual merchandising (VM): a makeover or a massacre?

VM is an art, science and business of presenting merchandise in a state of the art retail environment. It is a very powerful tool that can be effectively used to program, channel, and lure customer into impulse buying in the world of cut-throat competition. It is a silent communicator and a bridge of a retailer to connect a customer reinforcing its vision, brand and seasonal themes. And when used successfully, it creates a feel good shopping experience. When I say connecting a customer, it is a very important phrase. It has to be understood that VM should be on the same page as a customer. Overdoing it, will scare customers away with a mind-set it is out of their league, poor show will keep them away for future visits. Having said that since India is riding on aspirations, VM should also implicitly induce raising the bar feel. In my findings, I have seen poor VM efforts across all organized retailers barring a couple of instances. Looking at quality of overall scorecard of VM, you can almost sense old and stale sab chalata hai attitude. In my opinion it is a very important key result area (KRA) to treat like a step-child. Before discussing VM further, let me touch briefly on its inseparable triplets: store design, layouts; space optimization and planogramming.

Store design and layout: A good store design; interior and exterior, is optimized on types of merchandise, store format, available area, location, demographics, estimated traffic (footfalls), scalability factor, customer circulation plan, browser to buyer ratio and other broad based factors like retail brand and vision,. There are quite a few standard store layouts available labeled according to its customer circulation in aisles in a store.

Popular once are radiator, race-track, grid, herringbone, spine and free flow. Wal-Mart layout is a rough herring bone, while Target USA uses race track. For grocery supermarkets, radiator type is very popular. Department store usually uses grid type. High-end luxury retail usually have free-flow layout. All of these layouts have advantages and disadvantages which need to be analyzed while selecting an appropriate one. Unlike western countries, India has very complicated neighborhood customer profile. Along with that, demographic and population shifts are high. So stores have to be designed to facilitate frequent planogram refreshments and high scalability. So I believe combination of layouts with a good use of displays, end caps, frames and other portable modes of presenting a product will be effective. For presenting a product, there are number of ways; shelving, hanging, stacking, pegging and dumping. An exterior store design need to work very closely with facility planning for parking space, smooth logistics to receive goods and entrance walkway.

Space planning and optimization: A first step towards space planning is analyzing non-selling and selling space. Non-selling space includes aisles, backroom (storage) and functional spaces like customer service office/desk. I have seen aisles in many of the retail stores are not appropriately designed to move customers with baskets and shopping carts/trolleys. Backroom/storage room has to be designed to store maximum and needs an adaptable planogram to facilitate quick restocking. Other important factors in designing non-selling space are product movements, perishable & delicate goods.  For optimal use of selling space proper store layout, storeware (fixtures, displays and merchandise presentation mode) and a planogram is must. Profit per square footage is one of the main KPI of space allocation. Space planning needs to work toward eliminating cold areas of low sells. Space planning should also be modular, so that any subsequent store layout and planogram changes would be easily supported.

Planogramming: A planogram/plan-o-gram/POG/schematics is a pictorial representation of merchandise in as is fashion of retail store. It is a one of the most critical assignment as available selling space is limited and available potential products are always increasing. Just to make planogram decision more interesting, there are following factors, historical sells, demand trends and seasonality, anticipated schedule receipts, category, sub-category, top brands, high margin brands and private labels, product margins, relations with suppliers, financial budget, number of facings and depth, timeline. Attempts have been made to obtain optimized planogram using optimization techniques of operations research. But defining these parameters and assumptions, constraints are almost difficult and henceforth formulation of a planogram problem. There are no standard types of planogram but few retailers do use a loose standard within category to create a planogram. There are various types of planogramming softwares available which are very productive and make the process faster. Along with planogram, communication on how to do set up is very important, as “lost in translation” has been frequent occurrence. A detailed instruction guide; fast and accurate form of communication medium is very important. It is always good to have trained VM representative carry out initial planogram reset and also train couple of store floor staff on how to restock. The communication gap between corporate VM team and store personnel is easy to iron out but have always seen challenging process even in countries like US and UK where organized retail has been around for few decades.

Visual merchandising (VM): As I said earlier, VM is an art, science and business of presenting product in retail store. Since it is no exact science also relies on creative and business aspect, there are no strict rules. It is broadly defined by objectives which are usually result of customer feedbacks, business strategy, retail chain vision, demographics, promotions and other increased sells opportunity in the form of events and festivals. VM is just not about displaying products but also about method of displaying like fixtures, displays. VM helps store and chain create its unique image in the minds of customers. It also makes decision on colors, music, lighting, housekeeping as it is geared toward creating conducive environment for impulse buying. It is geared for converting browsing into buying, so the focus has been made to create one on one interaction between a product and a customer. VM also educates and communicates to customer about why customer should purchase a certain product in subtle fashion. With-out bringing out value addition features of a product; customer will not have that fulfilling shopping experience, so VM could effectively be used to connect with customer in that respect to cement long-term relationship. VM should also be done in centralized manner so that there is an overall harmony and customer could easily transition from one state to other state of mind. This is essential especially in big stores. Another aspect of VM is sourcing and making right storewares (Fixtures, displays, hardware used to present the product); there are so many method of presenting a product. It is very important to use the right method depends upon product, type of business, financial budget. VM when managed productively can be used as the most beneficial and cost saving tool to the retail business. Since VM is a cross pollination of art and business with loosely defined objective, success of VM team lies in practical projects with a manageable scope.

Realistic performances of measures (KPIs) are also needed to attest its success to the organization.

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