Carrefour's search for Partners

Carrefour's Plans in India
According to news reports, Carrefour , the 2nd largest(by revenue) retailer in the world is holding discussions with other retailers in India namely , Reliance Retail, Spencers Retail and Aditya Birla Retail for possible alignments and partnerships. So far Carrefour has been talking to Future Group , India's largest retailer though no deal could mature in spite of months of negotiations. It is rumoured that the most likely partner for Carrefour in India would be Reliance Retail as discussions are in an advanced stage..
It is however also believed that Carrefour plans to open its first whole sale store by 2010 in the NCR areas irrespective of any local partner emerging.

This Weeks Promotions

Big Bazaar has decided to get aggessive this summer on durables. In a hardhitting full page ad in the Times of India, the focus is on huge buying - 3 lac DVD players, 77,000 Televisions, 70,000 Digital Cameras, 23,000 laptops with the headline talking of 33,000 ACs - the implication - huge quantity buying translates to drastic drop in consumer prices. The ad goes on to highlight some very competetive and aggressive prices of the offering - 21" TV at Rs 4790, 190 ltr Fridge at Rs 6990, 5.1 channel DVD player at Rs 1299.

Home Town has a 40% off on Living Room items. They call it the 'Living Room Week'

Big Bazaar has a 20 pe 20 offer too going - buy 20 items worth 1499 and get a gift hamper of 20 items ( items and price not mentioned)

Vishal Mega Mart has launched its " 1000 ki shopping karo, 1000 Muft Pao" . Excellent offer as this means a discount of 50%. Should get a good response unless there are riders attached.

Not to be left behind, Reliance Digital have launched the AC Chill bill on airconditioners. Offers range from a lucky draw of an A Star Car, refund on electricity bill and additional cash backs.

Hariyali Kisaan Bazaar has launched an aggressive promotional campaign consisting of 85 offers spread over merchandise categories of food, lifestyle ( apparel, footwear and home linen) and household. Two important offers are - 'Buy 2 get 3rd item free Offer' in the household category and 'Cash Voucher of Rs 40 on purchase of Rs 500'.

Trade Fairs

Visiting trade fairs on a regular basis should be a an essential part of functioning for anyone involved in buying and sourcing. Trade fairs enable a buyer to have access to a very large pool of manufacturer's and suppliers. They also give one an opportunity to do benchmarking exercises in terms of price, quality, designs, specs etc of the products that one carries or propose to carry in outlets. I am giving below a link to a site that gives information on all trade fairs around the world. Can be very useful to plan visits.

http://www.biztradeshows.com/

Store Negatives

A big store negative is having empty shelves. This is a sure way to turn customers back. The picture below is shouting out that there is no merchandise in this store. Remember, a customer that returns because of empty shelves will never come back. The pictures below are actual shots of a chain of stores.

Never mix product categories when planning displays and planograms. The display in the picture above is totally wrong. You cannot have sports goods , cleaning aids and plastic products on the same plinth. The only exception is when a mixture of products are being offered as a combo. These 2 pictures represent all that is wrong and should not be done.

The backend store where excess stocks are maintained is equally important. Goods should be properly stacked and labelled. On no condition should the backend store be maintained as the picture above shows.

The Pull of Rural Markets

"RURAL MARKET ATTRACTIVE FOR MANUFACTURERS: THE ASSOCIATED CHAMBERS OF COMMERCE AND INDUSTRY OF INDIA
The rural market is becoming increasingly attractive for manufacturers of consumer products and automobiles, as well as organised retail businesses, according to a report by the Associated Chambers of Commerce and Industry of India. In the report titled ‘The Rise of Rural India’, Assocham said companies in the fast moving consumer goods (FMCG) sector have recorded higher growth in rural market, which has contributed substantially to their bottomlines. India’s FMCG industry is currently estimated at Rs2 lakh crore. Of this, domestic consumption accounts for Rs17,189 crore.
Traditionally, for the auto industry, the rural market has been largely restricted to tractors and two-wheelers, though the penetration of scooters and motorcycles in villages is only 10 per cent, as compared to 25 per cent in urban areas. he reasons for low penetration in the countryside: the high investment involved, poor conditions of rural roads, lack of finance facility and the shortage of service network.
The report said the growing liquidity in rural areas was on account of subsidies to farmers and increase in output of agri-products. Another potential area, Assocham said, was the rural retail market — currently estimated at $112 billion, or around 40 per cent of the $280-billion retail market. "
Source - The Hindu Business Line: April 12, 2009

Product Presentation - III

PACKAGING
In continuation of my earlier 2 posts on product presentation, packaging and its importance, I would like to add the following
Development of Packaging
Whereas, there would be a high proportion of merchandise which would come pre packaged, sizeable no of products would either need to be repackaged or require fresh packaging. In such cases, the buyer, once he decides on the product, will need to organise the design and development of the packaging. The importance of packaging cannot be overemphasised. At this stage the supplier too becomes involved as the packaging needs to be done by him.
The first stage in developing the packaging is to decide the kind of packaging that is required which could vary from
- cardboard boxes
- blister packs
- shrink wrap onto card
- polythene bag and header card
-sealed bags etc etc
The next stage is to decide on the matter that is to come on the packaging. Whereas the description etc of the product is a given, it is important that legal compliances such as
- MRP ( Maximum Retail Price inclusive of taxes)
- Qty/Wt
- Name and address of Manufacturer
- Customer Care No
- Epiry Date
and any other information which is a statutory requirement is clearly printed on the packaging.
It is important to note that the packaging of the product should be based on the method of presentation of the product that is decided by the buyer.

REMEMBER , A POORLY PACKAGED AND POORLY DISPLAYED PRODUCT WILL NEVER ACHIEVE IT'S TRUE SALES POTENTIAL.

Prospects for retail in Rural India

More news on the retail front in Rural India

RURAL INDIA PROMISES GROWTH FOR RETAIL
There may be a slowdown in urban retail, but `Bharat' is still shining for retailers. The next phase of growth is expected to come from rural markets with rural India accounting for almost half of the domestic retail market, which is valued over $300 billion. Rural India is set to witness an economic boom, with per capita income having grown by 50% over the last 10 years, mainly on account of rising commodity prices andimproved productivity. In rural markets, consumers are practical and price sensitive. Even though consumers at the bottom of the pyramid do not seem to have predictable income (which affects purchasing dynamics), the rural market proved to be surprisingly loyal. So if companies get it right they could really reap the rewards, experts added. This is particularly true as changes in the rural economy such as people moving from agriculture into manufacturing, which pays better, are likely to lead to a economic boom. In order to earn brand loyalty in the rural market, product design will need to go beyond ideas like smaller sizes (such as single use sachets) to create genuinely new products that appeal to this segment. Also, with most of the retail markets in cities getting saturated, rural markets offer a sea of opportunity for retailers. Retailers have devised different models to serve rural markets. For instance, ITC promoted `choupal sagar' has a hub-and-spoke model involving farmers. Other examples include Pantaloon Godrej's joint venture (Aadhar), Reliance Retail (Fresh & Fresh Plus), Hindustan Unilever (Shakti), DCM (Hariyali Kisaan Bazaar) and Mahindra & Mahindra (Shublabh).
Source : Times of India: April 08, 2009

The Buying Function - OTB

'OPEN TO BUY' - some very important and relevant points that all buyers and planners need to keep in mind.

For any retail organization , buying is an extremely critical function in merchandising. This process begins with the preparation of the buying plan called the ‘ OPEN TO BUY’ or OTB.

The importance of OTB cannot be overemphasized. Proper OTB planning prevents over-buying, eliminates confusion and consequently enables maximizing profits.

What exactly is OTB ? OTB refers to merchandise budgeted to be purchased during a particular season for which stocks have not as yet been ordered. OTB is a planning tool for any retailer.
An efficient OTB plan has the following elements

1. Forward Sales Planning : Sales plan for the full season or the year with monthly phasing needs to be prepared. This enables one to react to variations in sales plan, reschedule deliveries and cancel and alter purchase orders for the future deliveries as the case may be.
2. Forward Cover : This is based on the planned stock turns. For instance if the planned stock turns for the store is 6 times a year, then the ideal stock holding at any point of time should be equivalent to 2 months stock cover.
3. Opening Stock ; The value of the opening stock is a flow calculation. In OTB planning, the first entry is an estimate. From the 2nd month onwards , the closing stock of the previous month is the opening stock of the current month.
4. Stock Required : This is based on the forward cover planned. If the forward cover is 2 months and the current month is Month 1, then the stock required would be the sum of the forecasted sales on Month 2 and 3.
5. Intake Requirement : Difference between required stock and opening stocks.
6. On Order : Stocks already ordered and due for delivery during the period.
7. Open to Receive : Figure arrived by deducting the stock on order , if any, from the intake requirement. This figure indicates the OTB quantity.
8. Closing Stock : Arrived by taking the opening stock, subtract sales and add the on-order and open-to-receive quantities.

Advantages of an Open to Buy Plan
- Enables calculation of working capital requirement in advance
- Ensures right inventory level to support planned sales and to attain the best Gross Margin return on Inventory (GMROI)
- Enables fresh flow of merchandise at the desired times
- An efficient OTB provides the organization more opportunity for profit.

More News on Private Labels

Private labels are gaining importance in retailers plan - particularly when it comes to bottomlines. Some retailer's plans are outlined below

" RETAIL MAJORS SOLD ON PRIVATE LABELS
With slowdown biting, retailers are now looking at private labels to boost their sagging bottomlines. Most retailers expect their private label offerings to contribute between 20% and 40% to revenues. Lifestyle International Ltd, part of the Dubai-based retail firm Landmark Group, is betting big on its private labels. executive director at Lifestyle International Ltd, said the company's apparels labels — Forca, Club Hopper, Fame Forever, Ginger, Junior and Melange — and furniture label Home Centre will contribute 25-30% to total turnover in a year or two. To stimulate sales, the retailer is looking at the lower price point strategy. Lifestyle stores will sell women's t-shirts, kurtis and men's shirts starting Rs99, Rs299 and Rs199, respectively. Bharti Retail Ltd., a wholly-owned subsidiary of Bharti Enterprises that owns the Easyday chain of stores, is bullish on its private labels business, too. One of the newest entrants to the space is The MobileStore, the Essar Group-owned mobile retail chain that will launch its own handsets in a month. The MobileStore is looking at Rs10,000 crore revenues from this venture in another 3-4 years. Future Group, one of the largest retailers in the country, has already launched a host of private products in most categories. At a recent industry event, founder Kishore Biyani said that Big Bazaar's potato chips brand, Tasty Treat, accounts for 20% of the grocery retail's total chips sales. Croma, Infiniti Retail Ltd's consumer electronics chain, last year entered the business with products like foot massagers, air-conditioners and microwaves. It has launched laptops, too, and expects its private labels to contribute 20% to revenues next fiscal.
Source : DNA Money: April 02, 2009 "

Role of Buyers and Planners

ROLE OF A BUYER AND PLANNER IN RETAIL
The Buyers Role

In any retail organisation, Buyers and Planners play an extremely important role. It is therefore important to understand the accountability and responsibility of these two positions.
The buyer’s main responsibility is purchase of merchandise. This is done through a process of range planning for a specific season wherein he would consider the following
- Sales planned based on historic data and opportunities existing to increase sales
- Selection of merchandise based on a planned price architecture to reflect the good, better and best selection of merchandise for the season
- Planning for gross and absolute margins for the category which would drill down to the SKU level.
Buyers select the range, type and quantity of merchandise based on
- customer demand ( price, quality etc)
- trends
- budget
- store/company policy
Buyers need to understand customer needs to enable providing a commercially viable range of merchandise at competitive prices to maximize profits for the organization. Buyers need to source new and review existing merchandise to ensure products are competitive and current. Keeping abreast of market trends and reacting to demands are key elements of the role.

FOR A BUYER TO BE SUCCESFUL, HE MUST KNOW HIS CUSTOMER , HIS NEEDS, HIS LIFESTYLE AND HIS DESIRES. THE CUSTOMER SHOULD BE THE CENTRAL FOCUS ON ALL BUYING DECISIONS

Activities of the buyer would typically involve the following
- analyzing consumer buying patterns and predicting future trends;
- regularly reviewing performance indicators with sales;
- managing plans for stock levels, reacting to change in demand and logistics;
- meeting suppliers and negotiating terms of contract;
- maintaining relationships with existing suppliers and sourcing new suppliers for future products;
- participating in promotional activities;
- writing reports and sales forecasts, and analyzing sales figures;
The Planner’s role
The Planner takes over after the buying decisions are made and through the planning system takes the following action
- Creates an input plan for each DC
- Through the planning system loads the range plan via store clusters into individual store weekly estimates to season end.
- phases the input plan depending on supplier lead times
- checks and controls replenishments, checks reforecasting and reorders or cancels accordingly
- Monitors slow moving merchandise and recommends action to be taken in terms of markdowns or special clearance activity to clear stocks
- Ensures final clearance to liquidation of merchandise
- Accountability of store and DC stocks
- Management of Gross to Net Margins by minimising stock levels, primary and secondary freight and markdowns
- Ensures Ideal Stocks are maintained at outlets

Competencies of a Planner
- Interest in the relevant section.
- Numeric skills paramount.
- Data analysis
- Excel knowledge.
- Good at planning
- Good team worker.
- Good PC skills.
- Working to deadlines.
- Time management.
- Good communication skills – liaison with stores.

I would welcome any suggestions additions to the roles that I have defined .

New Solar Products for Rural Markets from Philips

The importance of rural markets for corporates is once again highlighted by the plans of Phillips India who are eying the huge and growing rural markets for their new set of products. Also an opportunity for retailiers in rural India to offer a new and utility product to their customers.

PHILIPS SET TO LAUNCH SOLAR PRODUCTS FOR RURAL INDIA
To cater to the rural markets of India, Philips Electronics India is set to launch a range of solar products specifically aimed at rural markets. These include solar and battery powered lanterns, rechargeable and fuel efficient wooden stoves and torches that run without a battery.
The upcoming products would be in the price range of Rs 1000 to Rs 2000. of which the first product would be a Rs 1000 priced solar lantern. This would hit the markets within a month. These would be followed by a range of wooden stoves based on reneable sources of energy.
Source : Hindustan Times – 21st March, 2009

Product Presentation -II

PACKAGING
The method of product presentation is as important as the product presentation and packaging forms a critical part of this presentation.
Given this importance, it is essential that buyers are involved in the development and management of a products packaging. This involves 3 key stages
1. Identifying the purpose of the packaging
2. packaging policy if any of the company
3. the development process.
1. Purpose of Packaging
In a retail environment, packaging serves several purposes . These can be outlined  as

• protection of the product - both in the store as well as in transit
• communicate the brand and product specifications and benefits
• enhance the product
• attract the customer

For packaging to be effective and purposeful, the above criteria should be met
2. Packaging Policy
Packaging policy is normally a reflection of the buying strategy of a company. The approach to packaging could reflect the strategy of convenience, ease of purchase and speed. This is what one would find in a chain of convenience stores that would sell packaged products that are easy for the customer to pick up. Alternately , packaging could also reflect the strategy of service, premium products and quality.. It is important to remember that 'The packaging needs of each product should be identified at the development stage so that the cost of packaging can be taken into account and the style developed in time for the product launch'

Will take up Development of Packaging in my next post.

Samsung and rural markets

Would like to reproduce information on Samsung contributed by Manoj and data on rural markets in India contributed by Manish.
Samsung Electronics :
Chennai, Feb 5 (IANS) Consumer durables major Samsung India Electronics Ltd,
which reported a turnover of $1.7 billion in 2008, is targeting 25 percent growth this year, a top official said here Thursday. 'We don't see any serious slowdown in our sales owing to the economic slowdown. We are confident of achieving our targets this year' with the government's measures stimulating demand and banks easing lending norms, Samsung deputy managing director R. Zutshi told reporters after launching a range of air conditioners. The company is also targeting to double exports to Rs.10 billion (Rs.1,000 crore) in 2009, he added.
'We will invest around $20 million in our Noida and Chennai plants in machinery and moulds,' Zutshi said. Towards achieving the aggressive targets, the company will double the number
of Samsung Plazas to 600 (all franchisee-owned) and increase the penetration of its products in higher number of multi brand showrooms across the country. Speaking about the air conditioner market, Zutshi said the industry sold around two million units last year and the expectation for the current calendar year is 2.4 million units. Samsung India is targeting to increase its air conditioner sales volumes by 200,000 to 600,000 units this year.
Contributed by Manoj
Rural Markets :
According to MART Rural, the rural market accounts for 53% of FMCG sales and 59% of consumer durables sales in the country. Televisions, refrigerators and ceiling fans have gained over radio and bicycles. Data released by market researcher ORG-GFK, showed that television sales rose 29.3% to 10.3 million sets, while growth in refrigerator sales was 12%. Washing machines sales grew 15% while microwave ovens and air conditioners grew 26% and 17%, respectively.
Contributed by Manish

Product Presention - I

SHOW YOUR PRODUCTS TO CUSTOMERS
Buyers spend lots of energy in buying and developing the merchandise before it finally hits the stores. Sometimes, however , it is forgotten that one very critical aspect is the way the product is presented to customers in the store and overlook issues such as packaging and in-store display. The importance of the saying ‘ JO DIKTA HAI WOH BIKTA HAI’ cannot be overestimated. Proper display and presentation can make all the difference between achieving or not achieving sales targets. Remember the following
1. Visual Merchandising : Be involved in the planning of the in-store presentation of your merchandise. Adequately plan the MDQ’s ( Minimum Display Quantities).
2. Communicating Ideal presentation standards :
Effectively communicate to the store staff on how the merchandise should be displayed and the ideal presentation standards. This could be by way of talking to sales staff directly, sending mail before the merchandise arrives at the stores or making a detailed manual at the beginning of each season.
Remember to Look for ways in which the job of the sales staff can be made easier by improving packing and display methods of the product.

Bharti Retail's plan on Private Labels

BHARTI RETAIL EXPECTS PVT LABEL BIZ TO HAVE 40% SHARE IN REV
Leading retail chain, Bharti Retail expects its private label segment to contribute up to 40 per cent of the company's total revenue over the next five years on the back of good consumer demand, a company official said. At present, the private label segment contributes 8-9 per cent to the company's revenue. Bharti retail has private labels in categories including food, apparels and groceries. A wholly-owned subsidiary of Bharti Enterprises, Bharti Retail's neighbourhood format stores operate under the 'Easyday' brand, while its compact hypermarket format stores operate under 'Easyday market' brand. The company has nearly 24 Easyday stores and one compact hypermarket store.
Source : Press Trust of India - News: March 19, 2009

LG Electronic's Plans

Some more news on the action on Consumer Durables. Should be noted that LG is planning a low cost washing machines, TVs and solo micro waves for the rural markets.

"LG TO INVEST RS.600-CRORES
LG Electronics India is looking to invest Rs600crores in marketing and new product development this year even as it alters its overall strategy for India yet again. Having migrated from a "mass" brand to a premium label over the last two years, LG is now once again trying to expand horizons by focusing on the semi-urban and rural markets to generate growth during these times of slowdown. This earmarked investment will be used for developing India-specific products, increasing marketing and advertising spends, and also in expanding sales and service network in the hinterland and in semi-urban areas. Sources instead pointed to the fact that LG is looking at a 15% growth in 2009, to close the year with sales of Rs12,500 crores. As part of its rural focus, LG will launch low-priced washing machines, solo microwaves, CRT (cathode ray tube) television sets and air conditioners while increasing area offices. About 35% of its sales came from the rural market last year and this share would increase to 40% in 2009.
Source : DNA Money: March 16, 2009 "

Private Label Strategy

Comments by Navneet and Manish are valuable and give further insights on the importance of private labels in todays scenario. I had worked on the Private Label strategy and it's formulation some time back which could be interest to you all
Check out this SlideShare Presentation:

Private Label Strategy

View more presentations from chesterp.

Private Labels by Retailers

Retailers are increasingly looking at private labels as a means to increase margins as well as volumes by offering products at prices lower than brands. The latest news on this :

"ADITYA BIRLA RETAIL TO LAUNCH PVT LABELS IN DURABLES, PERSONAL CARE "

"Aditya Birla Retail, the retail unit of Aditya Birla Group, plans to launch private labels in a number of personal care products such as hair oil, hair styling gel, shaving creams and gels, toothpaste under its brand ‘Enriche’ by March this year, to take the advantage of down trading in the economy, said a top company official. The Company is also planning to launch private labels in consumer durables and electronics once it takes the number of its hypermarkets to 14 by FY11, the official said. The Company runs 670 supermarkets and two hypermarkets, under the name ‘more’ and plans to open 200 new supermarkets by FY11.Currently, the company sells consumer durables in its hypermarkets and has tied up with Essar Telecom’s The MobileStore for retailing mobile handsets in its supermarkets. The Company currently has more than 320 private labels in categories such as processed foods, personal care products, detergents etc. These products sell 10 to 15 per cent lesser than that of national brands in respective category. "
Business Standard: February 04, 2009

Ethical Behaviour

Does the acceptance of gifts from a supplier to a buyer constitute unethical behaviour. The questions  that arise
                  What gifts can be accepted ?
                  Should acceptance be associated with the value ?
                  Should promotional material like pens, diaries etc with the suppliers logo and name be acceptable as gifts ?
                  Is it OK to accept a suppliers product on the pretext of trial ?

These are questions that all buyers should ask themselves and answer.

WHATEVER THE COMPANY POLICY, REMEMBER THAT AS A BUYER , YOUR REPUTATION GOES WITH YOU FROM JOB TO JOB. WHEN YOU ARE OFFERED A GIFT, ALWAYS ASK YOURSELF WHAT MOTIVATES THE SUPPLIER TO MAKE THE OFFER AND WHAT MOTIVATES YOU TO ACCEPT.

Let me have your views on this
                   

High White Goods Sales this summer

Seasonal products that do well in the warm summer months in India can expect some healthy sales this season because of the early onset of summer. Leading consumer durable companies like LG, Samsung, whirlpool etc as well as beverage companies like Pepsico, Coke, Bisleri etc are all preparing for an action packed season.
White Goods market leader LG, is expecting over 30% growth in Refrigerators and ACs in the April -June season. ' New product categories supported by intensive marketing and advertising will drive the growth. ' says LG India Director Marketing Mr V Ramachandran.
Samsung too is eyeing a 40% growth in sales of home appliances this season. The company says that categories like refrigeraters and ACs will drive sales.
Source - Economic Times - 14th March 2009
Retailers too need to plan for the coming season and ensure that this spurt in demand is taken advantage of and make up for loss in business in recent months.