The Cus­tomer Call

VM&RD - - COLUMN - g.suren­der@mahin­dra-re­

The In­dian Re­tail sce­nario, de­spite sag­ging global economies, is look­ing up ow­ing to one crit­i­cal trend – the evolv­ing new age In­dian cus­tomers. This has en­gi­neered growth in dif­fer­ent for­mats of branded re­tail across In­dia throw­ing open mul­ti­ple doors of op­por­tu­ni­ties. Rules of retailing have been rewrit­ten with re­tail­ers hav­ing had to take cus­tomer cen­tric busi­ness calls to ac­quire, en­gage and re­tain foot­falls be­yond the phys­i­cal store. To par­tic­i­pate in this trend, Re­tail De­sign and Fit-out prac­ti­tion­ers have had to relook at their cre­ative and oper­at­ing mod­els.………... let’s take stock!

Firstly, the macro en­vi­ron­ment, the In­dian re­tail scene has grown steadily in the or­ga­nized sec­tor de­spite it hav­ing a mere share of 8% of the to­tal re­tail size of around $450 Bil­lion. With 300 mil­lion foot­falls ev­ery year, it’s ex­po­nen­tially grow­ing at 26% an­nu­ally tak­ing In­dia to fourth place in be­ing the most at­trac­tive among 30 emerg­ing re­tail mar­kets. This growth is hap­pen­ing mostly from ex­pan­sion of the cur­rent brands and for­mats in In­dia in the Branded, Eth­nic and Lux­ury (marginally) retailing seg­ment……. even with­out FDI hav­ing re­ally kicked in! FDI, in sin­gle or multi­brand, will cer­tainly aug­ment this grow­ing sup­ply. Col­lat­er­ally the de­mand for real es­tate, expected to reach 56 mil­lion square feet by 2013, has grown and spread in about 280 malls and 500 high streets across tier I, II and III cities. In this, the dom­i­nance of qual­ity shop­ping des­ti­na­tions by branded for­mats is sus­tained mainly be­cause of in­creas­ing con­sump­tion by the new age cus­tomer. The new age In­dian cus­tomer, the engine of this growth, is the mighty mid­dle-class which has grown to a stag­ger­ing 300 mil­lion - 20 times in the last 10 years!! 51% of this pop­u­la­tion is sub 25 years old, who have great propen­sity for branded re­tail built through ex­po­sure and ex­pe­ri­ence. Ex­po­sure from globe-trot­ting, done by 10 mil­lion In­di­ans an­nu­ally, and ex­pe­ri­ence in In­dia in prom­i­nent malls and high streets. The ex­plo­sion in choices in-terms of stores and of­fer­ings has made loy­alty rare mak­ing in­no­va­tive dif­fer­en­ti­a­tion in brand ex­pe­ri­ence a crit­i­cal busi­ness strat­egy. To achieve this re­tail de­sign and fit-out prac­ti­tioner have had to un­der­stand the cus­tomer, con­nect and en­gage in the con­stantly trans­form­ing phys­i­cal and vir­tual mar­ket place.

This mar­ket place is pre­dom­i­nantly made up of Branded, Eth­nic and Lux­ury brand re­tail­ers each ad­dress­ing a large sec­tion of the same cus­tomer seg­ment, the mid­dle class, but for dif­fer­ent as­pi­ra­tions. Let’s take a look at each……….. A sig­nif­i­cant part of the branded re­tail seg­ment is In­ter­na­tional brands like Deben­hams, Zara, OVA, Diesel, Calvin Klein etc. and expected to ex­plode now that FDI has comes in, though not im­me­di­ately ow­ing to ad­min chal­lenges of en­ter­ing In­dia. They have in­deed led the way in cre­at­ing global bench­marks in the In­dian cus­tomer con­text. Their retailing strate­gies have been put to­gether af­ter study­ing the In­dian cus­tomer in­tently. And now, the dis­cern­ing cus­tomer wants noth­ing lesser! In­dian or­ga­nized re­tail brands from play­ers like Fu­ture group, K Ra­he­jas, Tatas, Re­liance Re­tail, RPG, Aditya Birla Re­tail, Land­mark and oth­ers too have been work­ing hard on de­liv­er­ing world class ex­pe­ri­ence through qual­ity of prod­uct, ser­vice and store en­vi­ron­ment. They all have the ‘early mover’ ad­van­tage of know­ing the cus­tomer from the start of or­ga­nized retailing in In­dia. But the new age cus­tomer be­ing so dif­fer­ent has blurred this ad­van­tage. Ap­proach to Re­tail de­sign and fit-out con­cep­tu­al­iza­tion is hav­ing to be rein­vented to be­ing highly cus­tomer cen­tric, dif­fer­en­ti­ated and ex­pe­ri­en­tial and truly world class in ex­e­cu­tion. All will agree that con­sis­tency has been an is­sue in the In­dian con­text!

Eth­nic In­dian de­signer la­bels, grow­ing at a stu­pen­dous 40% CAGR, have dom­i­nated bou­tique retailing in In­dia. La­bels like Ritu Ku­mar, Manav Gang­wani, JJ Valaya, Anita Don­gre, Gau­rav Gupta, Nan­dita Basu, Ro­hit Bal and many more, have evolved to ap­peal to the new age In­dian cus­tomer with their col­lec­tions pre­sented in unique, plush, stun­ning en­vi­ron­ments lo­cated in pre­mium mar­ket places along­side branded stores. Even here the cus­tomer is de­mand­ing the same global ex­pe­ri­ence as in that of branded re­tail. The need for cus­tomer-con­nect us­ing In­dian art and cul­ture has made this the main turf for In­dian re­tail de­sign and fit-out prac­ti­tion­ers. This turf will be chal­lenged by in­ter­na­tional play­ers who have vast ex­pe­ri­ence in work­ing across dif­fer­ent cul­tures and coun­tries. Lo­cal play­ers have the ad­van­tage of de­liv­er­ing updated so­lu­tions if they keep a fin­ger on the pulse of the cus­tomer at all times. This is an im­por­tant turf pro­tec­tion call to take and fol­low through with ac­tion by keep­ing abreast of global trends. Though the lux­ury seg­ment is grow­ing at 20%, a sig­nif­i­cant por­tion of this growth has not come from lux­ury brands but from homes, fur­ni­ture/in­te­rior de­sign, cars, yachts, watches and travel. Lux­ury brands’ con­sump­tion has been mostly re­stricted to watches, ac­ces­sories and fra­grances of­fered by brands like Louis Vuit­ton, Her­mes, Burberry, Chanel, Jimmy Choo, Cartier etc. The man­age­ment of cus­tomer ex­pec­ta­tions in lux­ury brands re­quires dis­pro­por­tion­ate in­vest­ments, for both the re­tail­ers and the de­sign prac­ti­tion­ers, to the re­turns expected in a nascent lux­ury brand mar­ket like In­dia. Not sur­pris­ingly, un­like the branded and the eth­nic seg­ment, these brands don’t plan to ex­pand their busi­ness in 2012. Cur­rently the small de­mand is met al­most wholly by im­ports for their de­sign and fit-out needs. Don’t see lo­cal play­ers’ sus­tained con­tri­bu­tion in this as of now. An­other im­por­tant trend is that on-line retailing, steadily grow­ing at an an­nual rate of 35%, has taken the store be­yond phys­i­cal lim­its and trans­formed con­sump­tion pat­terns. Re­tail­ers are tak­ing cus­tomer cen­tric calls to in­te­grate the ‘click and brick’ mod­els and thus open­ing new op­por­tu­ni­ties to de­fine the to­tal re­tail ex­pe­ri­ence us­ing re­tail de­sign and fitout. There’s a huge need to align with this new and pop­u­lar cus­tomer trend to be rel­e­vant to the new age In­dian cus­tomer. The above clearly in­di­cate that the In­dia Re­tail In­dus­try, driven by cus­tomer de­mand, is grad­u­ally inch­ing its way to­wards a tip­ping point to be­com­ing the next boom in­dus­try. With the on­set of glob­al­iza­tion and the rest of the western world hav­ing slowed down, the at­ten­tion is on In­dia for in­ter­na­tional play­ers – re­tail­ers and col­lat­er­ally de­sign and fit-out prac­ti­tion­ers too. For the prac­ti­tion­ers, suc­cess will come by com­bin­ing the sci­ence of un­der­stand­ing cus­tomers (re­tail­ers and the end cus­tomers) and the art of de­sign­ing in­no­va­tive so­lu­tions for them. All this is eas­ier said than done! For them this needs go­ing be­yond fancy vi­sion state­ments and giv­ing se­ri­ous at­ten­tion, com­mit­ment and ef­fort to in­vest­ing in peo­ple, in­fra­struc­ture, tech­nol­ogy and knowl­edge. Study­ing the new age In­dian cus­tomer ex­pec­ta­tions and the op­por­tu­ni­ties aris­ing from FDI, will show that this is now a ba­sic manda­tory re­quire­ment to sus­tain and suc­ceed. It’s time now (why wait for FDI?) for the In­dian de­sign and fit-out in­dus­try to act on this and trans­form from be­ing ‘de­sign cen­tric’ to ‘cus­tomer cen­tric’ and de­liver con­sis­tent world class store ex­pe­ri­ence that helps ac­quire, en­gage and re­tain the new age In­dian cus­tomer for a life­time


In­ter­na­tional branded re­tail­ers

In­dian or­ga­nized re­tail­ers

The Col­lec­tive

Manav Gang­wani

Nan­dita Basu

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