Retailers are a busy lot too. They are constantly creating strategies to sell their products -- always toiling to excel.
What makes retail business rock? What plans set the cash boxes ringing? Does Indian retail business still have a long way to go? What do Indian retailers need to do to compete with their foreign counterparts?
Professor Nirmalya Kumar answered many such queries during a live chat on Friday. Kumar is a professor of marketing at London Business School, where he is also faculty director for executive education, director of the centre for marketing and co-director of the Aditya Birla India Centre. He is also the co-author of Private Label Strategy: How to Meet the Store Brand Challenge, published by Harvard Business School Press.
Here is the chat transcript:
Nirmalya Kumar says, Welcome aboard! Let's chat. Pls send in your questions
Manoj Sharma asked, What is the future of departmental stores Vs speciality store in field of garment?
Nirmalya Kumar answers, Both dept and specialty stores will always exist in garments. More recently, in the developed mkts, specialty stores have been more successful. Dept stores have been caught in the middle between specialty stores in the high end and discount stores in the low end. But in Asia, dept stores continue to be strong as consumers seem to have a preference for them.
bala asked, Will cash and carry format succeed in India? Metro is supposedly struggling and will Wal-Mart make it work for them?
Nirmalya Kumar answers, C and c always has a place in the retail environment of a country but it depends on consumers/shopowners travelling substantial distance and buying in large lot sizes. This means a car is very necessary for the concept to work as well as good roads so that the travel time is not too long. In India, roads and car penetration among middle classes/kirana storeowners is still a barrier to the success of this format.
Shiju asked, In one of ur presentations u have said that "Retail Chains should not hire MBA's".Being an MBA I was intrigued.Can u elaborate?
Nirmalya Kumar answers, Of course I was being a little flippant when I said that. What I meant was in discount retailing, MBAs tend not to have the cost discipline needed. Also, they tend to be less detail-oriented and reluctant to get their hands dirty. Having said this, most top retailers like Tesco and traditional dept stores increasingly hire MBAs, especially to manage the retail brands.
santosh asked, taxation/octroi rates being different accross the country,how do you think this will affect the distribution and procurement of goods for the big retailers like Tesco, Carrefour & Walmart wanting to enter India
Nirmalya Kumar answers, It is true that state level taxation prohibits retail cos from developing and optimising a national supply chain. A retailer's competitive advantage is in how efficiently they can take the product from the manufacturer to the consumer. Having trucks wait at state borders for taxation clearance does not allow them to exploit the full potential that national logistics chain should have.
ASHWIN asked, What is the future of small time kirana or mom & pop stores in india with the entry of reliance and in the near future Walmart in this space.I can already see a lot of vegetable vendors shutting shop because of relaince fresh?
Nirmalya Kumar answers, In retail, one consumer need is convenience as described by being the nearest store to them. The kirana store will occupy that position though we may need less of them inthe future as the consumers use them only for 'top up shopping'. However, it's true that the regular shopping basket of the consumer will move to the organised retail sector.In the end, it's not Reliance that will kill the kirana store but consumer preferences.
tappi asked, Can you tell us a bit about your childhood, your education and how have you landed up here etc?
Nirmalya Kumar answers, I grew up in Kolkata, went to La Martz and did my BCom from calcutta University. I left for the US to pursue an MBA and continued to do a Phd at Kellogg. But to land up here is not the education that alone does it because many people have the same educational background. As a professor, it's the quality and originality of your published ideas that get you fame.
srinivas asked, How important is the Wireless and RFID technology in retail business. Do think that retails will opt for these technolgies in furture. What is the trend right now in US or Europe on this.
Nirmalya Kumar answers, Wireless and RFID are being used extensively by Wal-Mart. It is believed that there will be substantial impact on retailing from these technologies in terms of making the supply chain more efficient, reducing shrinkage and lowering labour cost (for example automatic check outs). Also, it should give a better understanding to retailers and manufacturers what consumers are buying, why and when.
askumar asked, Hi Prof Kumar, with very attractive pay packages for the staff on one hand and very expensive infrastructure of the store on the other can these big name retail chains of today sustain the these high operating costs?
Nirmalya Kumar answers, It is true that retail works on much smaller margins than manufacturers. Even world class retailers like Wal-Mart work on 3 per cent net margin. Therefore, retail has a low cost culture. The high Indian cost in some sense should not hurt because all retailers in India have to bear the same cost. Though they will be less
efficient when compared to their global counterparts. Domestically, it will only impact if some Indian retailer develops a formula that allows them to use cheaper infrastructure and pay lower salaries.
Anurag asked, Prof. Kumar Your thoughts on top 3 things that a retailer should focus on please
Nirmalya Kumar answers, 1) Know your consumer value proposition. Does the customer come to you because your the cheapest, nearest, the best (best merchandise and selection) or the biggest (having the largest assortment)? 2) Systems that are effective in controlling the business. This means that they should help you manage the business rather than just audit what happened. 3) Control expansion - it's better to dominate a small area than spread yourself with same no of stores across the country because you dilute your supply chain and mktg expenses.
realslimshady asked, DO you think the volume of INDIAN buyers is too big that even 3 % margin will run into billions of profit.
Nirmalya Kumar answers, The retail model for many world class retailers like Wal-Mart, Tesco, Ikea, H&M and Aldi is to reduce margins and more than compensate for that in increased volume. For example, Wal-Mart makes 3% margins but $10 billion absolute profit.
career asked, Sir either your typing skills are really poor or u r having some thing else in parallel
Nirmalya Kumar answers, It's not me. Beautiful Indrani is doing that.
SWAPIL asked, WHAT IS THE FUTURE OF ONLINE RETAILING IN INDIA ?
Nirmalya Kumar answers, Online retailing in some specific industries like travel can get relatively large soon but for the most part, it will only have a small share in the next five years. Long term of course online retailing has a very bright future.
mayuk asked, dear sir, how u see the recent boom in the modern trade business in the fmcg industry? will it change the entire landscape of the traditional channel management in the industry ?
Nirmalya Kumar answers, As retailers get large, the biggest change for manufacturers is to acknowledge them as their equals. Traditionally, manufacturers have seen retailers as being unsophisticated businesses. When retailers get powerful, manufacturers have to develop new competencies to partner effectively with them. In the developed world, FMCG cos have had to retsructure themselves around their largest customers. For example, Wal-Mart accounts for $10 billion worth of annual sales of P&G. No wonder, the head of the Wal-Mart team at P&G is as imp a position u can have in the company.
Krishna asked, With reference to online retailing, Can India grab all the outsourcing services in this sector in future?
Nirmalya Kumar answers, There are backend services for online retailing including CRM, assortment planning, referral systems and order processing which can be done out of India.
William Zale asked, Hi Doc. Do you think there is scope for me open Luxury Jewelery Retailing in India, I am from Zale Corp.
Nirmalya Kumar answers, There are already several jewellery retail chains. Since jewellery consumption is very large in Indian and consumers are looking for a trusted source, branded national player is a big opportunity.
bala asked, Prof.,It is estimated that we lose almost 15-20% of produce in the food supply chain in India due to inadequate storage and distribution facilities. FLAMBOYANT announcement of Relinace to have a fleet of aricraft and even railway wagon's for transportation, is taking on the ownus of supply chain the correct model for retailers in India and will they succeed?
Nirmalya Kumar answers, A retailer who does not control the logistic portion of the supply chain in supermkt format is unlikely to have any competitive advantage in the long run. Having more sophisticated supply chain will reduce waste but I don't know enough about the Reliance model to comment about.
kishore asked, professor,kindly explain what makes big MNC (irrespective of the industry) to enter the indian market, is it only bcoz of huge market potential alone?
Nirmalya Kumar answers, In retail, with the exception of USA and China, it is hard to imagine another country where we can as many stores as India. It is only these 3 countries one can imagine having 3,000 or 5,000 stores. Suppose u make Rs 50 lakhs in profit per store per year, imagine what 5,000 stores does for you.
kotlar asked, what is the future of india?
Nirmalya Kumar answers, India has fantastic potential but nothng in life goes straight up so in between we will se some corrections in the stock mkt, property mkt and art mkt. We have to be careful that the salary escalation does not reduce our competitiveness too much. And the infrastructure does not hold us back. The latter is crucial for retail development in a country.
Devesh asked, Do you forsee any market for the home improvement products retailing in India? Can the likes of The Home Depot,Lowe set up shop in India in the near future?
Nirmalya Kumar answers, Home improvement broadly defined has very good potential. Not only home depot type of concepts but also soft furnishings like curtains, carpets, crockery, lamps etc. Several new concepts inspired by home depot, Ikea, Carpet Right, Bombay Store will develop.
naina asked, hay who will be ur future wife
Nirmalya Kumar answers, Well, naina, I am not married. With my looks, it's not possible.
Nirmalya Kumar says, I am sorry I could not answer more questions. But I appreciate your enthusiastic response. Wait until the next Web chat with rediff in July.
