Gift vouchers and spread smiles this festive season…

It’s very Indian to gift – we actually do not need a reason to gift. Be it a birthday or an anniversary, new addition in the family or a new job, gifting is a given thing. So much so that a famous confectionery brand had launched a campaign a couple of months ago to gift chocolates during the beginning of every month – as one get’s his or her monthly salary! It is also widely believed that gifting existed in our culture for very long. For example in our Kannadiga culture, guests who attend a wedding are actually given some money and food on the last day of the wedding – the idea being that once they return home, they don’t have to cook food and the money given to them is for their conveyance back. Strange, but is still practised. They are also gifted clothing or cash equivalent during the course of the wedding as a token of appreciation of their visit and guests would even wear the same new clothes during the wedding. Similarly, we have many other examples in each culture and community.

In modern times, gifting has taken a different route. It’s quite common to see women shopping for their men – father, brother, husband or friend. And similarly, men shopping for women in their lives – mother, sister, wife or friend. So much so that luxury diamond brand “Carbon” successfully created “guilt-shopping” where men buy diamonds for their women without even understanding the jewelry – it was fashion jewelry and hence, not to much of thinking or analysis (like how women would do while buying jewelry) was required. And the result – the concept is a great hit and their flagship outlet is now at the “Bengaluru International Airport” where over 80% of customers are men! Although Jewelry, watches and accessories are quite common to purchase as gifts, consumers tend to weigh back on apparel. This is mainly due to size inconsistency among people and the brands and their fits. And add to that, color preferences. So usually, apparel is refrained from gifting, except for t-shirts and other fashion wear.

This is where the concept of “Gift Vouchers” fit in. It’s quite common to see today people rushing to buy such vouchers from leading retail stores, especially Department Stores and Mono Brand Apparel/Accessories Stores. A few years ago, the Future Group introduced “Central Vouchers” which could be redeemed across the Central Malls in the country and sometime ago, launched vouchers that could be redeemed at their home improvement retail concept – Home Town. Even café chains like Café Coffee Day have vouchers that could be redeemed across the 800+ outlets in the country. If there is one segment where it is not yet present in full measure, it’s probably at the Supermarkets. However, these vouchers are usually sold through institutional sales – typically a B2B activity where the Retailer sells the vouchers at a discounted price to Corporates who in turn pass them on to their staff members on special occasions such as birthdays or anniversaries. And the common belief is that the user would buy more than the voucher value and the retailer would benefit from it. Well. If only it was so true! My friends in the business would agree that while the redemption is sure, the difference in the final purchase price and the cost of the voucher is not very high. It could also be because the consumer didn’t find anything as exciting or the validity of the voucher was shorter and he/she didn’t have anything to buy at that time.

While Shoppers Stop has created a big opportunity among its customers through branding and communication measures, many retailers haven’t done this yet. I would rather say, they haven’t “tapped” this yet. Imagine, Christmas and New Year is around the corner and you may want to be gifting something to your loved one – but may not know what to. So, that’s where the Voucher comes in. But do Indian consumers believe so? Probably not. And the reason is simple. When you buy a product and gift, it is generally perceived not to be valued monetarily. For example, if your give a flower bouquet and a vase, then there is no value that is attached. Instead, if you give a 500 Rupee voucher, then the receiver would “feel” the value of the gift – something that is not very much in our culture. Although, we contradict ourselves a bit in reality. In Indian marriages, its quite common to give some money as gifts. Probably for other occasions as well. This is usually instead of a product as gift. While this is commonly accepted, Retail gift Vouchers are not. Reason? They are probably not so well marketed. Starbucks recently had a scheme where when a person buys a gift voucher, the buyer gets rewarded… So, with a US $ 100 voucher, the buyer gets a US $ 20 voucher – that’s a 20% Discount. It still works to the benefit of the café chain as they make higher margins. This could be a bit of a challenge for traditional retailers but still, certainly worth a try.

And the key to this is marketing and communication. The concept must be communicated to potential consumers in such a way that it induces them to buy gift vouchers. I am already dreaming of a day when consumers would flock to their favorite Retail stores to buy vouchers during a particular day or week because of attractive offers like how they now buy during the End of Season Sale. I would imagine that consumers would stock up these vouchers at home and would use it as and when an occasion arises. Or they would find one where they could gift it. Whichever way, gifting is good – brings a smile to the giver, a bigger smile to the receiver and yes, helps us, the Retailers.

So, whom are you gifting this festive season? Make a list and remember to count me in…

Braving the Indian winter – Best of Luck…

Talk of global warming and every one around seems to have one common observation – winter this year is quite peculiar with unusual chillness during the nights and sharp sun rays during the day. I felt this myself when I was in Delhi last week. Thankfully, I was carrying a blazer at the insistence of my colleague, lest I would have certainly caught up with severe flu. Delhi winters are famous for their biting cold – in India, that’s 2-3 degree Celsius. (which is not the case in the US or in Europe!). During the months of Oct – Jan, sales of winter related merchandise see an increase substantially and premium brands such as Benetton and Tommy take advantage of this by bringing some of their iconic international collections that are otherwise non-saleable in Indian conditions. Sales of cold drinks, colas and even ice-cream take a dip during these months and the Brand owners try several promotions to entice consumers to buy their products. While it is usual for consumers in the western world to have ice-cream during winter months (temperature sub-zero), it is not the case in India. I remember the long discussions that we used to have while I was in Bengaluru International Airport – to have or not Ice-Cream as a concept as the sales in winter months was less than half the average in summer months. Though it made business sense (the summer’s steep sales offset the losses in winter), it was always a question on top of mind.

Branded Ice-Cream market in India, according to various estimates is in the range of INR 800 – 1,000 Crores and the super-premium bit is about 25% of the total. Haagen Dazs is the latest entrant in the market with its Indian franchise partner and is expected to open its first outlet in Delhi in Dec. 2009. Although the ice-cream varieties were present in India through gourmet stores and restaurants since quite sometime, it was out of reach even for the discerning middle-class due to its upwardly pricing, that’s 2-3 times than its Indian counterparts. This is mainly due to import restrictions, like in many other products that are brought into the country. The history of Haagen Dazs dates back to the 1920s when Mr. Reuben Mattus, the founder, worked in his mother's business in New York, selling ice-cream in horse-drawn carriages. Later, he spun off the business into a company and named it Haagen Dazs. The business grew rapidly and spread globally as distribution logistics and popularity of the brand increased. In 1983, Haagen Dazs was bought over by the Pillsbury Company of the US. Haagen Dazs has a range of traditional ice-creams, frozen yoghurt, gelatos, sorbets and frozen ice-cream bars in its product range and is the most favorite ice-cream for the Americans.

The prevailing popular international ice-cream brand “Baskin Robbins” story in India began in 1993, when it opened its first store in Mumbai. Today they are spread across the country with more than 300 outlets in over 60 cities and catering to other premium channels like star hotels, leading airlines, malls, multiplexes and top retail chains across the country. The Baskin Robbins story began with two brothers in law- Burton – “Burt” Baskin and Irvine – “IRV” Robbins. Burt and Irv strongly believed people should have choice, so they offered 31 flavours - one for every day of the month. And they believed people should be able to try any flavour without cost - a belief that led to the iconic pink spoons. Their ideals live on at Baskin-Robbins even today, where they now possess a flavour library that consists of more than 1,000 ice cream recipes. By the way, I used to be a scoping boy at Baskin-Robbins in Madras 14 years ago – my first job to say so! In my experience, 7 out of 10 customers who tried the ice-cream actually bought it. Those days, a scoop of 33 gms of ice-cream used to cost INR 45.00. And the sales were not bad at all. The franchisee used to make us try a scoop everyday (on the house) so we actually knew what it felt like and we could convince our customers to buy them. That parlour shut because a flyover construction began on the road opposite to it and the Location which was once considered lucrative turned into a dead spot.



Ice-Cream in India is available from as low as INR 5. Many local brands – some even city specific have been quite successful in this aggressive, yet challenging market. AMUL, part of the Gujarat Cooperative Milk Marketing Federation is the single largest popular Indian brand of ice-cream that’s available across the country while ARUN ice-cream is market leader in South India. McDonald’s single scoop is affordable available although only at a few places across the country. Walls, from Hindustan Unilever is the most popular packaged ice-cream brand, mainly drawn by the distribution strength of the core business. Nestle SA, which recently bought over the Movenpick Swiss Ice-Cream brand has not launched it officially in India although the previous India franchisee has several outlets across the major metros, many of which were shut due to poor patronage.

So, there are two main challenges in this business – Price and Climate. Even if one is favorable, there is no surety of success. And between the two, it’s almost impossible to say which one is riskier. Given the scenario, the big daddy of the business is venturing into India during the infamous Delhi winter with the highest price per ml. Bravo! I hope this venture takes off well, like how they have in many other countries. My sincere best wishes.

When LOOTing is legal and fuels consumption

This article comes after a long gap - mainly due to my hectic travel over the past week to the two most important markets in the country, Mumbai and Delhi. There is something very special about these two cities, the former is the financial capital of India and the latter, the political capital. (And all the states and their capitals beleive they are "the nerve centres" to the administration of governance in the country! hic). Both cities and their suburbs have a population of over 15 million people and growing! A great boon to Retailers of all shapes, sizes and pedigrees. During peak hours, the average time taken to commute from work to home and return is approx three hours in Mumbai. Both cities have the most terrible public transport systems which makes the usage of personal commute almost a necessity. So, higher sales of cars, car tyres and car freshners - with Godrej Ambipure leading the market with over 65% share. Delhi Metro is a saving grace and the new extension to Noida has been welcomed graciously by commuters. The influx of people from neighboring cities and states is so high that there is almost no control of who lives where.

The sheer number of people is such a great opportunity for us in business. While this is not specific to only these two cities, there is something special about consumers here. Most forms of modern retail were experimented here and have only proved successful that they have been replicated all across the country. And one such format is the Discount stores. Typically in Apparel and accessories. While the format is quite famous all across the world - even Hugo Boss sells on discount at Metzingen - it is quite recent in India - probably less than a decade. While it is a bit difficult to say which Brand/Retailer first established this concept, the biggies have been on it for quite some time - Madura Garments, Arvind Mills and other popular Indian and International Brands and smaller retailers. In the fashion apparel and accessories business (including where the brand is franchised), the franchisee usually pays the full cost price and buys the products from the Brand, on which he enjoys a margin of 20-55%. After the season is over (Spring-Summer from March to Aug and Autumn-Winter from Sep. to Feb.), the products must be marked down and sold as they cannot be carried over to the next season - simply because they are usually not the fabric that could be used. That's how the End of Season Sale or EOSS came in place. The average discounting for most brands during the EOSS is as high as 35% and what remains after the sale with the retailers is less than 10% of the original stock.

These usually remained with the Retailer for sometime until they were sold out. And that's where someone found an opportunity - to create seperate stores that could sell these merchandise at discounted prices throughout the year. If they were closer to the downtown stores, then the full-price business would get affected, hence they are usually located in the suburbs or outside the city. The stores are quite basic - no air-conditioning, no great fixtures and furniture, simple lighting and minimum staff. The cost of operation is very low since the margins are also low - between 10-15%. Consumers take an effort to go all out to shop as their savings in lieu of the effort taken is well deserved. One such Retailer in India is The Loot. Founded in 2004, this retailer opened its 100th store in Bangalore in May 2009 and currently has over 120 stores across the country with plans to cross the 200 mark in a year. This retailer roped in Bollywood's infamous bad boy Gulshan Grover as its Brand Ambassador with the store resembling doors and images of a jail. And the store aptly named The Loot with a rug sack pic along the main logo.

Last week, one of my cousins wanted to buy a shirt quite urgently and it was the only store located on the way while we were driving on the outskirts of Mumbai, at a place called Thane. Not that he was looking for a discounted product though, but we ended up here. The store has special schemes - Buy one and get one for free or Buy at 40% discount, etc. The store, which appeared like a franchised one had popular apparel brands such as Louis Phillippe, Arrow and other lesser known brands, and even stocks luggage, hand bags, belts, deodarants and perfumes. While my cousin had gone with an intention of buying just a shirt, he ended up buying a matching pair of denims as well... all in span of less than 30 minutes. And we were not alone; on a Sunday afternoon, there were atleast 5-6 families shopping together. We ended running a huge bill but when we walked out, it did seem like it was indeed a loot.

There are several lessons here - In India, families shop together. So, there must be something of interest to everyone - atleast to keep them engaged while the others in the group are shopping. Next, locate the store as close as possible to the consumer. If not for anything, they would end up just because the store is closeby or on the way. Adequate parking and management - a great boon to shoppers. Last but not the least, rotate merchandise as often as possible, what we call as Stock Turn. Even if it means selling at a lower margin, atleast the cost is recovered and there is fresh cash flow for new merchandise. Afterall, sometimes such a loot fuels consumption and brings back people seeking more.