Low Cost: It’s all about perception!

There is a famous saying doing the rounds in recent times: 19^th Century globally was about roadways, 20^th century was about railways and the 21^st century is all about airways. How true!

Mainline media was abuzz over the past weekend about the most recent development in Indian Aviation – Sun Network owner Kalanidhi Maran had purchased a strategic stake in his personal capacity in Spicejet (IATA Code: SG), the second largest low-cost airline in the country by market share. While the deal has been on the table for over 3-4 months, the timing couldn’t have been better. Passenger and Cargo traffic is at an all time high since late – 2008 after the global recession and the US sub-prime crisis. Major airports such as Delhi IGI, Mumbai CSIA and Bengaluru International Airport are squeezed for space and the check-in / security queues during peak hours could take as high as 30 minutes per person. Spicejet, apart from other low-cost airlines such as Indigo, Go Air, etc. have been in operation for around five years, ever since the first low-cost airline in India, Air Deccan was launched. It has carved a niche for itself with its on-time performance and crew service standards just like its main competitor, Indigo. Jet Airways, India’s premier airline and Kingfisher, the only five-star airline in the country, also have their respective low-cost avatars, Jet Konnect and Kingfisher Red respectively, which directly compete in the same price segment.

So what’s with a media baron who is the leader in his own right in TV (Sun TV networks), Radio (S FM), DTH (Sun Direct) and many other related businesses got to do with Aviation? His critics slammed saying he lacks experience and exposure in the business to which he replied “CEO needs core competence; Chairman needs foresight”. Well said Mr. Maran. After all, he had purchased an entity which was operating in the low-cost segment. The concept of low-cost and low-fare have been misread in India for some time now. Air Deccan was actually low-cost and low-fare – the airline had minimal usage of resources (human and others) compared with many other scheduled airlines such as Air India and Jet Airways. The in-flight services were minimal and water for drinking was being sold – contrary to an almost Indian way-of-living “Athithi Devo Bhava” (Guests are treated like God). World over, low-cost airlines are the ones who are faring well even during the slowdown. That’s because their business model is like that. Scheduled airlines in India are competing on price but retain many other value-added services, which is what costs them and like how! A quick comparison between various airlines revealed that the fare difference on low-cost and scheduled airlines between Bangalore and Delhi if booked a week in advance is not more than Rs. 800/-. While Spicejet and Indigo offer the ticket at Rs. 5,476, Jetlite at Rs. 5,497/-, Jet Airways at Rs. 5,548/- and Air India at Rs. 6,210/-. 

There is a lot that can be compared between Aviation and Retail. Global experts on Macro-Economics say that for a buoyant economy, Aviation must grow twice the rate of the national GDP. That’s been the case in India since early 2000s, barring a few months of turbulence since mid-2008. The same applies for Retail. Both industries propel consumption and reflect growing consumerism and aspirational affordability; both bring in healthy competition and the uncompetitive are flushed out within a few years; both Industries grow only by scale – larger the number, higher the economies of scale. Both industries are a favourite for international players driving FDI into the country. Both provide direct and indirect employment for thousands of people (although aviation globally is reducing the number of staff per 1,000 pax, this number would continue to remain high in India due to localization issues). And both can work pretty much independently without Government support although policy decisions do affect the functioning of the industries.

Organized Retail has been growing at over 15% CAGR for leading retailers ever since they came into foray during the last decade. The highest growth has been for retailers nicknamed “Hypermarkets” led by Big Bazaar, a Future Group entity that commenced business in the year 2001 at a nondescript VIP Road, east of Calcutta. And the rest, as they say has been not just history, but historical! The group has managed to open over 140 outlets, over half of which were during the past 4 years. Other players in the same business include Hypercity (by the Rahejas), Star Bazaar (by the Tatas), Reliance Hyper, More (by the Birlas), Spar (by the Landmark Group of Dubai), Total (by the Jubilant Group), Easy Day (by the Bhartis) and many other local and regional players. The idea was simple – lease a big box location; project the business as low-cost, sell atleast 100 items at the lowest price possible and communicate the same en-masse. By attracting thousands of shoppers to visit the store, Retailers look to sell their products in large quantities thereby managing better economies of scale. The business would become profitable over a period of time, but only with more number of outlets selling more SKUs.  Not all the items in a Hyper are always low-cost; At the end of it, it’s all about perception – of Low-Cost. Hypers reinforce the fact that the key household items are below the selling price in the local markets; this acts as a bait to attract shoppers to visit the store. Over a period of time, consumers get hooked to the idea of shopping in a relaxed, convenient, hygienic environment where they could also save some money!

So whether it is a Low-cost airline or a Hyper, its all about perception. And there are many who are trying it hard. Only some will succeed. After all, those who do so will have people at the helm with foresight. It surely helps. 

Breitling Navitimer – Rs. 280338*; Heritage Cow Ghee – Was Rs. 275, Now Rs. 227.

Many of you who read the “Mint” tabloid daily would have seen a surprise over the past few weeks. There is more advertising than ever, naturally since that is what most newspapers are all about. Thankfully, the columns from WSJ (with whom the newspaper has a strategic alliance in India) remain intact although in the last four pages of the paper. There is so much clutter, lots of entertainment, cinema and theatre, et al, what one wouldn’t usually find in a business newspaper such as this. My days are counted, how long I would subscribe to this daily! 


One of the first things (eye-catchy and hence this article) that one would notice is the first-page silo – in advertising parlance, one of the highest money-spinners. Usually located on the right-side bottom of the first page of the newspaper, the rates for this spot are among the highest, given that they receive enormous attention from readers and browsers alike. One would usually notice Luxury Products advertised here as this creates utmost attention in the mind of the reader. While I can’t comment on the history and origin of silo advertising in newspapers, this trend is followed worldwide and is not new in India either.

During the upcoming wedding season in India, it is quite common to see many Watch Brands advertising to enthuse prospective brides and grooms (although the ratio of Women’s vs. Men’s advertisements would be 3:10). What was so catchy today was an advertisement for a wrist watch on Page One – Breitling, credited to be a Pilot’s watch and an aviation enthusiast’s prized possession, for its accuracy and perfection. While the watch itself is a bit intimidating, Big and Loud with so many features on the Dial and usually fits large wrists, it is indeed a trend that’s catching up in India too. Many brands are currently offering the non-traditional large dial that’s selling like hot cakes across models.

Although Breitling doesn’t have a long list of celebrities who officially endorse the Brand, many of them like Brand Pitt have worn them in private occasions and even in movies. What was a bit strange for me is that the advertisement carried the Price of the Watch, quite a rarity in Luxury Brand Advertising. Most luxury brands, especially watches do not mention the price, unlike mass advertising by hypermarkets who mention the prices of the top 20 SKUs so consumers would walk into their stores. Popularly called as “Loss Leaders” these SKUs do not yield higher margins for the Retailers but they attract higher footfalls, usually in the range of 10-15% than usual and eventually converting more of them into consumers.


Many others who regularly advertise such as Tag Heuer and Omega only show a picture shot of the watch with their respective brand ambassadors thereby creating an emotional connect and high aspiration among prospective buyers. While it is common to list the name and contact numbers of Retailers who sell the watches, it was surprising rather strange to see one of the leading watch brands of the world mention their prices on a newspaper!

These are ways suggested by some agencies to seek higher attention but by mentioning the price, not only they would be restricting the potential walk-ins into the store but would also be lowering the standards of the Brand. Hope this trend wouldn’t continue for long, lest we would see prices of Breitling and Cow Ghee both mentioned on the respective copies, one would restrict walk-ins and the other would improve. Retailer’s agencies - choose which one you want!

Learning from Levis; Collaborate, Cooperate and Succeed.

It’s quite rare to see (in the Indian context) Brands working very closely with Retailers or Malls. Most often, each Brand would like to leverage its presence within the large format, be it a Department Store or a Hyper or even a Mall by taking up pole position (read – prime locations at the entrance). Retailers cash in on this trend by charging a premium for such locations which Brands pay, albeit not happily. Many Brands, international, domestic and regional believe that a prime location within the store would attract footfalls and the Brand magic would result into higher conversions. In most cases, it is not so. Corner locations alone do not guarantee higher business potential. What’s important is for the Brand to work closely with the Retailer in mutual interest and both must make best use of each other.

A recent example is that of Levis. I have read somewhere that on an average an American owns 1.65 pairs of Levis. That’s very similar to the count on Wal-Mart, that over the past 40 years, over 90% of all Americans have visited the world’s largest Retailer atleast once in their lifetime. In India, of course we cannot share such figures with authenticity though. Back to Levis. The Brand was among the earliest entrants in the casual-wear denim wear segment in India during the early 90s and continues to remain among the most aspired affordable fashion brands in India. After a small lull during mid-2000 decade, Levis has bounced back in strength. A very strong merchandising and marketing team is at work and the results are on the face. After many successful campaigns over the past months, the most recent one is an encouraging trend set by the brand again. This time, its outright collaboration.

Levis and Lifestyle, the Department Store chain owned and managed by The Landmark Group of Dubai, have come together in what seems to be among the most talked about promo in town. The tagline, aptly named “Just4YOUth” targets the young by age and young at heart to enjoy the mood and spirit of youth. This at a time, when most first-timers enter their college days, an important part of growing-up. To have a bit of variety and participation from other brands, LEE and ARROW have also been roped in. The promo seems simple; an assured gift with a minimum billing and a chance to win a Mega Prize, VW Beetle, the newest and coolest Youth icon in the making in India. And there are other prizes to be won too, including a YAMAHA motorbike and voila, a chance to be the next model for the Department Store chain! This is seemingly similar to the promotion that was held a year ago at Bengaluru International Airport to celebrate its first anniversary. Although many sceptics believe that such promos do not offer tangible benefits, I refuse to believe so. Indian shoppers are value-seekers and if they see anything additional to their purchases, they would just grab it. It’s been so for many years now and will remain so for times to come. The simple promo is a great crowd puller into the Lifestyle Stores, especially for Levis fans to check out the latest collections. On similar lines, Levis has also partnered with Shoppers Stop, India’s largest Department Store chain with another exciting promo – “Denim Rocks”, attracting music lovers by offering a Promotion revolving around the most favoured fabric of rock stars, pop stars and rappers. Here, the associate partner is another fashion brand FLYING MACHINE.

Today, Brands should seek more prominence among shoppers by not just having a premium location but by experimenting such promotions from time to time. The mantra is clear – Collaboration between the various parties, i.e., Brands and Retailers. Cooperation among Brands within the store. And the result – Mutual success for all. Wish more brands understand this simple logic, rather advertising silos on supplement first-pages!