Being Thrifty and still tempting to Consume - a paradox!

While I was browsing some other article today, I stumbled upon this one on Thrift – a new way of life for Americans who were once-upon-a-time avid shoppers but not any more. The author of this Book and Blog advocates Americans to spend less – rather ask themselves “Should I spend on this or that and why?”. And the subsequent tab on my IE was about the latest Fuel Price Hike in India. I was among the millions of (grumbling) Indians who filled fuel last evening as the price of Petrol was being hiked from last midnight, although I wasn’t fortunate to get my regular supply and had to feel good with the premium fuel that I was offerred. “No more right or left, Sir, it’s only one way now” – proclaimed the proud owner/franchisee of the Fuel Station where I filled full-tank last night. He was referring to the stable Central Government that we have been blessed (or rather we have chosen, sould I say). All major newspapers and news websites today have this topic on their Headlines – on how Fuel price has been hiked and its after effects.

For sometime, may I urge your to think for a few seconds (an electronic calculator would help) the cash flows that the OMCs – the Oil Marketing Companies would have made within six hours last evening. The numbers are mind boggling. Suppose if One million vehicles filled on an average 30 liters of fuel – and were paying approx. Rs. 2 more (since the lower variant was unavailable) and were filling their tanks (Salary Day, so more cash on hand coupled with the fear of the impending price increase), we are talking of 30 million litres filled and INR 60 million raked in additionally, in just a few hours. This, is just an example, if not exaggerated. At one, the Government lost a lot of public sympathy with this rude price hike (of 10%) on petrol. Another, was that it was on Salary Day, a day that most Indian families await for 29 days (no matter how many digits their salaries are) in the month. While the general belief was disbelief – that the hike was real, people were finding it difficult to cope with this hike. Just three days ago, India’s largest bank SBI decreased Home Loan lending rate of Interest by a substantial percentage – indicating that owning homes got a bit easier for middle class people. Everyone who is anyone who understands Economics has a opinion these days on what to expect from the Budget to be presented shortly.

Given this scenario, the increase in the price of Petrol & Diesel was a paradox, if not a shock. On one side, Retailers are trying to woo consumers to consume more – not as much as their American counterparts overconsumed sometime ago, but certainly to consume more than what they are already doing. And on the other hand, the Government does its bit by increasing the most basic ingredient that decides the prices of most other products sold in this country. It is really noteworthy to decode the background – fuel hike would first affect the price of vegetables, something we consume everyday. And then, fruits and other food products including Grocery. While Unorganized Retailers and hawkers would be the most affected, Organized Retailers would face similar challenges sooner than later. Cost of Operations would go up which would shrink the outflow planned by Retailers, including special offers and promotions.

The Festival seasons starts from mid July onwards and the general tendency to shop would increase around this time. But with a 10% hike in self- and public transportation costs, the monthly household income (that didn't grow much this year due to the economic slowdown and the recession effect) would shrink to that extent and this will surely decrease consumption. The GDP of every country is largely based on the outcome of a few key industries such as Agriculture, Manufacturing, Services including Aviation and Telecom, and importantly, Retail. It would be sad to see how people would wish to consume less due to this sudden and steep Fuel price hike, which could play spoil sport over the festive period. The Automobile Industry has been on a roll for the past five months and the growth story is back, albeit in single digits. This would also be affected a bit now.

It’s confusing to see the government’s stance on this issue – of increasing consumption. Experts believe that the GDP would grow only when people consume more, which would be directly impacted by Retail. However, it remains a BIG question of how we would achieve this. One one side, it’s being thrifty about spending and on the other, trying to woo consumers – it’s a paradox, awaiting to be unravelled.

AirPlay

“Play MJ Hits today and see your sales soar five times” – I told the young boy who was managing the music section at the Landmark Outlet. It was my first visit to this location – I wonder why people call this a Mall. It isn’t, in reality. It’s a building that houses some Retail, a food court and a few cinema screens. A first of its kind mall that I have known in the recent past without an atrium or a central area – no place to “hang around” – just do business or leave! I am referring to the recently inaugurated Swagat Garuda Mall, near or rather in Jayanagar. One would remember the infamous erstwhile Swagat cinema here, a place that was popular among the young and the old and credited with showcasing among the biggest hits of yester years.

The ground floor houses a Westside Store, from where you walk up to the first floor which opens into the Landmark Outlet, welcoming you with well segregated Books from across various categories. And this floor leads you to the second floor that begins with some pefumes and gifts and deep inside is the Music section. We were trying to reach the fourth floor which has the INOX multiplex – our main reason to visit this place was to watch the latest Hindi superhit, New York, based on the traumatic effect on people in the US from various religions and backgrounds after the fateful 9/11. We still had some 20 minutes and decided to walk through the store. While Westside was looking normal with its usual collections, Landmark was a bit better. Too many merchandise and too little ventilation and airconditioning makes these outlets stuffy. Wish the project guys doubled up as salesmen too or atleast visited these places as customers, that they don’t repeat such bad planning!

As I was walking past the western/pop section (and remebering my good’ol days at Musicworld), I was remined of the Pop sensation who breathed his last a few days ago. I called for assistance and said, “Where can I find the Best of MJ India collection”. The good samaritan took me to the section, searched for the album and handed it over on my hand. Wow. I was quite surprised with that – quite rare to see, honestly, that a sales guy actually gives you what you actually wanted and that too in a jiffy. I thanked him and was looking at the other collections. However, this was what I wanted and moved towards the billing area. While some other music was playing all along, I suddenly heard “Black or White” on the speakers. The same salesguy who assisted me, was preparing his day, planning his work, saw me again. And I said, “AirPlay MJ Hits today and see your sales soar five times” and I could see a wide grin on his face, for he knew I wouldn’t be wrong. It’s not just a commercial proposition that Retailers must cash in on, certainly not. That would be cheap and may not take them long. But, it’s great service to remind customers and highlight the collection of the world’s most popular pop singer and honor him atleast with that respect, after all that he went through before he finally died. Even as I write this piece, News channels are showcasing various reports, most of them their own thoughts with some facts thrown in here or there.

After billing, we walked up to the third floor, some food outlets bunched up in a low ceiling food court, which made us to test our fast-walking skills. And then, finally headed to the fourth floor. It was a delight to see the entrance of the cinema hall! But I must admit that the overall layout of this location was not all that bad – afterall it brought more customers through the shops and the food court, increasing footfalls and probably inducing conversions. And just then remembered why we were there. I asked myself if I would have bought the music CD of the movie that we were going to watch and the answer was yes. Just that I didn’t remember to. Probably because I wasn’t reminded. What a wonderful opportunity it was to sell music CDs at the Cinema Hall or even just before one entered. Such a simple thought which am sure would have stuck the area sales executive who went to check out stocks at the Landmark Outlet, but probably missed out. If not a great grand display, atleast an Airplay would have helped. Yes, I bet.

This was the first project that I undertook as a Management Trainee straight out of B-School 8 years ago. And the results were startling. Whenever a particular artist/album was played on Airplay (that’s the common music that you hear at the retail stores), chances of that particular album’s sales going up was over five times. And there were days when we have played the same CD for over 6 hours – continuously. One such example was K3G or Kabhi Kushi Kabhie Gham, a hindi movie released in 2001 that featured the Shahenshah and the Baadshah together (that’s Amitabh Bachhan and Shah Rukh Khan). After all, nothing better than AirPlay. It not only holds customers within the store, but also creates great conversions. Just that one must remember, to play. To AirPlay. If only.

Consumer “Driven”

After a long day’s work, I drove towards the city – to UB City; the most upmarket place in town with the likes of Louis Vitton, Zegna, Ferragamo and Rolex welcoming you from the entrance; a property that belongs to Mr. Vijay Mallya, the owner of the UB Group – from Breweries to Vineyards, from Race winning Horses to Yachts, from Force India Formula One Car Racing team to Kingfisher Airlines, he owns a long list of popular companies and marquee brands. No, I wasn’t there to shop, just to meet an old buddy of mine. After my friend arrived, we decided to move on to some Beer as it was already past 7pm. Hopped in to a place by the name Shiro – a gigantic Buddha statue in the middle of the restaurant that had a ceiling at over 10 meters! Wow. And the lighting and other aesthetics that have been so carefully designed by the people behind the project was quite appreciable. They have an area that’s covered (climate controlled, ofcourse) and an open area that’s part of the terrace, overlooking the beautiful surroundings of VM Road disecting Lavelle Road.

We choose to sit closer to the Bar with nice and comfortable wooden chairs while the well spread out seating area was meant for larger groups, we thought. Then we turned to the Bar man and asked for Beer; my friend said Carlsberg and I said Blue. He quite didn’t catch it for a couple of times until I said Kingfisher Blue. With a wide grin on his face, he replied that they don’t keep Kingfisher. I was shocked! At Mr. Mallya’s home ground, there is a restaurant that doesn’t stock and sell Kingfisher… India’s most sold Beer by quantity. So we ordered Carlsberg and started enjoying the beer, the company and the evening. But something was running at the back of my mind. Will I return to this place again, although they don’t serve my favorite Beer?

As I write this almost a day after, I still don’t have an answer – if people like me, if consumers like me would return to a place that doesn’t stock what they want but would rather pursue them to have something similar. I am not so much an expert about Beer-making that I could explain now in length about the origin, the process and the taste of various brands of Beer but what intrigues me is this – are consumers looking for just an emotional gratification while they buy or consume brands or are there some rational reasons attached to it as well. If Kingfisher was the most famous Beer and our state Karnataka being among the biggest markets in the country (and Bangalore leading the pack within the state), then how was it that the restaurant was almost full when we were leaving the place at 9pm? Was the environment, the ambience and the food so great that people were willing to desert their favorite Beer Brand for some other alternatives?

The logic that consumers visit such places not to get drunk (a pint is INR 180.00 ie., USD 4 and the food is mind-blowingly high on price notwithstanding the quality) but just to spend some good time sounds crazy, if not surprising. On a weekday, if that’s the crowd, then one could imagine how the place looks on a weekend. So, are such consumers (not just to this place) visiting their favorite places only to spend “time”? Then what value does a Brand carry? Somebody said Brand Loyalty? Naaah.

Let’s not confuse loyalty over popularity and availability. Loyalty would be built only when the Brand was available. Obviously. And it is possible to build Loyalty especially in a controlled market, where entry to external brands is not just difficult but impossible at times due to government guidelines. And if the consumer doesn’t get their favorite Brand more than twice or thrice, would they switch over to some other alternative? Whats interesting here is that consumers would continue to buy alternatives only till such time they don’t get their favorite ones. Or they may get used to newer Brands because of what they offer. So, availability leads to popularity which may result in Loyalty. I doubt if it would work in any other direction.

In this case, while comparing attributes, KF Blue and Carlsberg score more or less the same. But would someone switchover to Carlsberg in future leaving their favorite brand behind? May be not. However, the first time the Brand gets to interact with a consumer is when the decision is made. To use it again or not.

It was quite similar two decades ago when there were only three cars in India, forget variants – Ambassador, Fiat Padmini and Maruti 800. Today, they still exist. With a decent single digit market share, but they just “exist”. Possible in a country like India where the ever growing consumerism ensures that everytime a segment upgrades, there is another segment that fill their previous profile. And today, while Hyundai rules the roost, Maruti is still quite close and other brands such as Honda, Toyota, Fiat and GM are household names.

Cut to a Retail store: would consumers still come to a store that doesn’t retail their favorite Brands across categories? While private store labels give a run for the money to the domestic and international biggies, the consumers know exactly what they want. No wonder, private labels do not contribute over 20% to the store’s turnover. Consumers would come to the retail store only looking for their favorite brands. And may walk empty hand if they don’t find their choices. Convincing them with alternatives is not just through the ambience and environment – the product attributes must live up to their expectations. So, the equation runs as availablity -> popularity + Attributes = Loyalty. After all, Brands are expected to Drive Consumers into the stores, not drive out! Cheers.