Madras Memoirs...

This column comes straight from the heart of Madras – T. Nagar, to be precise, where I have been camping over the past week ever since our daughter was born last Thursday. The past weekend was not just hectic but also exciting and fulfilling for our business. Retailers of all sizes, shapes and geographic spread have reported an upswing in Sales during the just concluded Diwali festival. Mambalam aka T. Nagar in Madras houses the highest penetration of Retail outlets per sq. Km in South India. The estimated size of the Organized Retail business – Apparel, Jewellery and Household items, is expected to be over INR 10 Crores every day! This, from the top 20 large format Retailers such as GRT Jewellery, Prince Jewellery, Joy Alukkas, Singapore Mustafa, Pothys, Kumaran Silks and most importantly Saravana Stores –famously known as India’s very own Wal-Mart. This Retailer who has more than two locations spread over 300,000 sqft., spends a couple of Crores every year on Advertising – on TVCs, Radio, Hoardings at prominent locations near Railway Stations, Airport, etc. – with leading South Indian film stars as Brand Endorsers (and not just ambassadors). It may be recalled that Mr. Kishore Biyani (Founder and CEO of The Future Group) found inspiration for his most successful Hyper-business after spending a couple of hours himself looking at this store.

For the just-born, I was searching a nice cradle over the past days; I visited four to five outlets that carry children’s stuff but wasn’t satisfied with their collection. Home Centre, part of the Landmark Group doesn’t even keep cradles or kids furniture - that was disbelief. After a number of phone calls to friends and cousins, I landed up at “Saravana Stores” on North Usman Road (the newest location for the Retailer). Fully air-conditioned with two large elevators that could carry atleast 12 people at a time, it was amazing to see the way this Retailer conducts business. Parking was easy, as my visit was at 09.30 hrs, and a day after the Diwali festival. As we entered the store, there were half a dozen people near the automatic glass entrance to greet and guide us – something that’s rare to see at many large organized retail outlets. We enquired about our requirements and were directed to the third floor. Interestingly, the elevator stops every second floor – wow, what a strategy I thought. Great way to bring footfalls into the next floor as well as some savings of electricity! But most importantly, it proves efficiency – sometimes people use the elevator to go one level up or down and end up holding the equipment for long durations.

As we entered the shop floor – clear and white marble that show vividly even the smallest dust (or the one that shouldn’t be) - a sprawling 10,000 sft I guessed, I was simply awed by their collection. Over 20,000 or more products on a single floor! Every section neatly ear-marked with clear signage in black font/white background and atleast 60 staff members in just one floor – that’s a whopping “1 staff for every 150 sft” (usually it is 1 every 300 sft in India) – rather one for every customer who visits the section. The philosophy is simple – no provocative selling, but 100% service support. Ask for any assistance and bingo – its right there. And the cradles, as expected were at the end of the floor. After browsing through a dozen of them, we decided on one – a simple yet elegant design. In what I had researched over the past days, cradles could cost between INR 1,500 – INR 9,500. It could also get more expensive as the materials involved change/improve. Our case was simple. Buy something that looks classy, durable and most importantly worth its price since the usage is only for 12-18 months. Not to my surprise, the one that we chose was 30% cheaper than similar ones that I saw at many leading stores. I couldn’t take my eyes off the “Kids clothing” collection - hundreds of pieces stuffed alongside each other, yet the variety, and the design at such low prices was unbelievable.

So, how does this Retailer manage to procure the products at such cheap prices? The age-old philosophy of “volumes”. And the staff comes at a measly cost – they are mostly picked up from villages or smaller towns, brought to the city, put up in shared accommodations such as dormitories or hostels and also given food. Plus a monthly salary which is sometimes given on hand or credited into the accounts of their parents/dependents in their home town! Gradually, the staff picks the nuances of the trade and move on to other Retailers – for a better pay and future. Although attrition is not very high, the quality of the staff is not comparable to modern Retailers –but they serve perfectly to their key clientele (among which you and I are usually not).

During my stay in Madras, I also visited some of the famous F&B Outlets – Ratna Cafe & Saravana Bhavan most importantly among them. While the history of Ratna Cafe dates back almost three decades, Saravana Bhavan is over 10 years old with a good penetration in the city as well as abroad – Dubai, Singapore and the US. Ratna Cafe’s food is world famous – its recipe is every homemaker’s envy, customer’s delight and competition’s grudge. With such a lineage, they have a handful of outlets all across. I wonder, whether it is the financial backing (or the lack of it) or the family’s unwillingness to expand. Saravana Bhavan, which started as a small neighbourhood F&B outlet expanded massively – the basis of expansion was not merely availability of funds or willingness of the family that runs it; rather the acceptance of the concept by its patrons and customers. They changed the way people were dining in the late 90’s – self service fast food coupled with comfortable table-service dining – something that Madrasis were not used to in the pre-Pizza Hut/McDonald’s era and hence lapped up quite happily. And they enjoy some of the best locations in town – from neighbourhood residential areas to arterial roads, near Cinemas and popular shopping destinations. Ample parking for both two- and four-wheelers is an important plus point.

With so much Retail action and a couple of upcoming Malls, it’s tough not to miss this place. Look forward to coming back in my new avtar in 10 days from now!

When skill set takes over everything else!

If there is one activity that many urban men dread every month among others, it’s the thought of visiting his “personal groomer”. From a nonchalant corner shop that could seat not more than three people at a time to the more recent air-conditioned (sometimes unisex) salons, this business has come a long way. The Barbers are today better known as “Hair-stylists” and the profession is gaining acceptance as a popular vocation too and many youngsters are getting their hands “on” in this business. The recycled newspapers have been replaced with Filmfare, Femina, Vogue and even India Today! From waiting outside the shops to fixing prior appointments, from standing under scorching sun to comfy sofas, a lot has changed over the years, right in front of us!

While the beauty-care market in India is worth over Rs 5,000 Crores, growing at 25% pa, according to an L’Oreal study conducted in 2008, the services business accounts for 87% of this market. The estimated size of the men’s grooming market annually is over 1,500 Crores and has been growing at a CAGR of 12% over the past few years. But organised players command less than 5% of the pie. Every city or region in the country has a bunch of players, although many of them have aggressive plans to grow nationally in the years to come. YLG or You Look Good is the most recent entrant in this market, while Limelite promoted by Cavinkare is among the oldest. Other players like Bodycraft and Bounce operate with a limited reach within a particular geographical area.

The three most important things that men look for when they visit a Salon are Convenience to visit the Outlet including parking, Skillsets of the Staff and the Ambience of the place. While the order of priority may change from each person, the most important aspect to note here is the Skillset of the Staff. All things being great but a poor job done wouldn’t bring back the customer again. To ensure that the service delivery is consistent, many chains also have an in-house training academy. Before the staff starts attending customers (Go Live!), they are given an induction for 10-12 weeks. This largely includes training on using the right equipments, the SOPs to be followed (yes, afterall it is a complex activity), and observing some of the senior crew members performing the job.

It has been studied that over 70% of the customers prefer to be handled by the same stylist in their subsequent visits. This is because they believe that the staff already knows their preferences and thereby, the job could only get better over a period of time. According to a dip-stick survey conducted in a leading chain last year, atleast 9% of visitors walked away if their favourite staff was unavailable or busy (and were willing to wait for the same person if they had time).

The biggest drawback today is that there is not a single large chain in India that could boast of offering consistent service across a single city. And the reason is quite understandable – staff attrition. The stylists at the entry level are paid between Rs. 4,000 – Rs. 7,000 per month and earn and share tips worth Rs. 2,000 per person per month. Sooner than later, they tend to lose interest and start looking outside the window – either to hop on to another salon/chain or simply to pursue some other vocation. Unlike in the West, this is not a profession that many feel proud to be in.

Customers are charged between Rs. 50 and Rs. 500 per session that usually includes “Hair-cutting/trimming” followed by a wash. Certain Salons also offer package deals that include facials, massages, etc., and the staff are expected to “convince” their customers to take up one of them. Interestingly, if a staff speaks about a certain service to the customer for more than 4 minutes, the chances of him agreeing to experiment (if he is a first-timer) is over 90% according to survey in a popular salon. And once the customer is happy about this particular service, he would obviously frequent the place. Most chains however, do not sell branded personal grooming merchandise in a big way. Even if they do, the focus is minimal and its’ sales doesn’t contribute more than 10% to the total.

Two years ago, while we were still selecting operators for our Bengaluru International Airport, I had discussions with leading salon operators in Bangalore and in India. But no one was convinced that passengers would ask for such a service. Unsurprisingly, today the same people are willing to undertake this activity! While I feel happy that leading operators are looking up at the Travel Retail potential, it is sad that we don’t have a suitable space today at our Airport nor do I see such parlours coming up at other Airports in India in the short term. In this case, it is clearly convenience that a passenger looks for – trimming beard or a quick head massage or simply, a haircut and a wash and may even be willing to pay a handsome amount for the service! But necessarily, skillset would precede every other aspect – especially at the neighbourhood Outlets. This is one reason why many people keep shifting their salons regularly. After all, it’s an activity done once a month, but one has to sport the same look for the next four weeks!

National Coffee Day

The American National Coffee Association’s “National Coffee Drinking Trends” market research survey recently found that 82 percent of American adults drink coffee, and that those who drink coffee weekly are increasingly on the rise. The survey further reveals that the average coffee consumption in the U.S. is 3.1 cups of coffee per day. And yesterday, 29th September was celebrated as “National Coffee Day” across the US. Although it is not clear who started this and from where did this concept originate, the day is revered all over the country. Most coffee chains offer freebies on this day – the list is long, but let me give some snippets...

• At Starbucks, VIA instant coffee is introduced and the Tall cup is complimentary at select outlet
  
• At McDonalds, free cups of Newman’s Own Coffee at select outlets
  
• At Panera Bread stores, but 1 and get 1 for free
  
• At Dunn Bros, carry the published coupon and get a Coffee for free… And they also encourage you to forward the coupon as much as possible to family and friends and bring as many visitors as possible to the Cafe!

In India, to the best of my knowledge, there is no such thing (yet). It was the same with Valentine’s Day, Mother’s Day, Father’s etc. a decade ago. Also, I am unsure if we will follow something like this in future – I may be wrong. Traditionally, India has been a Tea consuming country, mostly in the North of India while Coffee has been an all time favourite in the South. This is largely because the North was always the tea growing belt (Assam and Darjeeling are world famous and even have a Geographic Indication) and coffee for South (from Chikmaglur & Coorg) – so for obvious reasons such as transportation, logistics and other factors, probably people were used to consuming a certain type of beverage (like how Rice is consumed more in the South and Wheat in the North). According to rough estimates, a family of four in Urban India consumes about 1.40 kg of coffee or tea every month – that’s two cups per person a day on weekdays with a higher frequency over the weekends. Ofcourse, we are talking about the traditional South Indian Filter Coffee or Tea that’s made using packaged tea powder, boiling water and milk. Indian Households usually do not consume Cappuccinos or Lattes or Espressos as these equipments are neither popular nor affordable in India for the time-being.

The Cafe culture started over a decade ago in India, in 1996 to be precise when a small coffee shop opened at the world famous Brigade Road in Bangalore. The outlet also had an internet centre - that’s around the time the Internet was launched in India and it used to cost over INR 60 for an hour of browsing compared to less than One Rupee an hour today (if you are in the best monthly plans). That was the beginning. Today, there are over 2,500 Cafes across the country and growing. The innovation of the Cafe culture was brought into India by Amalgamated Bean Coffee Trading Company Limited, headquartered in Chikmaglur, a nondescript yet beautiful locale on the foothills of the Western Ghats that grows most of the coffee in India, with its Head office in Bangalore. With the trade name “Cafe Coffee Day” and various other formats, the company today operates at over 810 locations and is expected to cross the 1,000 mark by next year as per media reports.

CCD as it is popularly known operates across the major Domestic and International Airports in India including “Bengaluru International Airport”, almost all the popular Malls in the country, various Offices and Establishments, IT Parks, Movie Halls and Multiplexes, Educational Institutions, Hospitals, Highways and High Streets and is also present in Pakistan and Austria. There are half-a-dozen national players in the market including Barista Lavazza, Cafe Mocha, Costa Coffee, Coffee Bean and Tea Leaf, Gloria Jeans, Illy, etc. and several regional/city-wise operators. The distinct feature among these outlets is that they provide the products and ambience of the Coffee Shops that are in Five Star Hotels but at reasonable prices with easy access. While many follow the service concept such as in Restaurants, some also follow the “take-away” model, both of which are equally popular and welcomed by consumers. The estimated market size of the Organized Coffee Outlets is approx. INR 800 Crores (USD 1 = INR 48) and has been growing at over 35% CAGR for the past few years. Starbucks, world’s largest coffee chain entered and exited India last year (due to FDI regulations) and is planning an entry soon. This makes India the fastest growing Coffee Retail market in the world.

While there are over 2,500 outlets across the country, we are talking about a country of a Billion people – so even if you assume 1% of this population (10,000,000) would be the most relevant target segment, assume they would each visit a cafe once a month (10,000,000 visits in a group of say, two people) and each outlet would service 500 customers every day on an average, we would still need over 10,000 Outlets across the country to meet the growing demand. Ofcourse, these are mathematical calculations and the reality maybe a little different, but still, the opportunity is HUGE. The whole world acknowledges that India is the youngest country on earth with over half of the country’s population under 35 years of age and this is the largest consuming class. With growing incomes and salaries, opening up of several industries, and early age of employment (Avg 22 years), coffee consumption at cafes is seeing unpredictable growth across the country. From pilgrim centres like Vaishnav Devi to exotic holiday destinations like Goa, Rajasthan and Kerala, from Kashmir to Kanyakumari (the northern and southern most cities), there are coffee shops coming up all over.

The focus segment however remains the Teens and Tweens. Tweens, as I call them are those in their Twenties – from beginning to work until they are 29, their lifestyle and habits are changing so much and faster by the day. The two segments contribute over 70% of the customer base at the Cafes. The reasons for this segment to visit the cafes are varied – from pursuing their college studies, to hang around with friends, the first “date”, and as they grow up, casual meetings and business meetings, and even serious discussions. After all, “A lot can happen over coffee!” In my case, a lot has happened. What about yours? If you are a teen or a tween or any one of those at heart, rush to the nearest cafe, and by popularity, most probably your choice would a Cafe Coffee Day. In India, we believe everyday is a coffee day. Cheers.