Free Wifi will be a crowd puller for Retailers

I was at the Starbucks (SBUX) outlet in South Mumbai a few days ago. SBUX, in a JV with the Tata Group  opened their first outlet in India in South Mumbai a couple of months ago. We had a long day ahead and decided to start our first meeting at this location for the sheer purpose of convenience. And ofcourse, some good coffee. Not awesome coffee, atleast for me. For which I would go back to Café Coffee Day, India’s largest café chain with over 1,400 outlets across the country which in my opinion still brews the best coffee in town despite lapses in service levels here and there once in a while. I was pleasantly surprised that the SBUX outlet offers complimentary wifi to those who wish to have a sip or grab a bite and spend time around at their cafe. Ofcourse, for me it wasn’t the reason why I chose my meeting venue there. But then, anything complimentary is welcome in this mean world, I say. So there I was, connecting all my three devices – the laptop, the iPadmini and the iPhone on wifi sponsored by Tata Communications (I felt it was a great marketing opportunity for them although they didn’t seem to use it as well as they could). I was online for over half an hour, finished my emails for the morning and was all ready to step out for my next meeting. The staff at SBUX, as friendly as they were, cheered every customer who walked in or walked out with a customary welcome or thank you respectively. Even as I was walking out, I wondered how happy I was as a customer using complimentary wifi at the café. I have a USB Data Card for my laptop, 3G for my iPadmini and iPhone. But then, its sheer convenience and speed to use wifi.

I have been extensively travelling since Aug. 2012, ever since I joined Royal Enfield where I am responsible for Dealer Development and expansion of other key pet projects for the company. I book my hotels myself, mostly on my Make My Trip Mobile App for the iPhone or on their website although the former is quicker and handy. While most of the hotels provide complimentary wifi in their rooms, only a few work seamlessly. It is usually patchy and the front office staff are usually unable to resolve the connectivity issue blaming it either on the service provider or sometimes on my device! (Yes, at a Delhi hotel, the staff claimed my iPadmini was faulty). These days I look for reviews on sites like Trip Advisor while choosing a hotel that provides complimentary wifi. And most reviews are correct and genuine, as I have experienced.

That set me thinking, what if other Retailers provide Wifi to their customers. Would it bring additional walk-ins? Would it increase the stickiness? Would shoppers be showrooming – a term used for browsing the store for products and buying them simultaneously online, thereby increasing ECommerce? If so, would it help Retailers like Shoppers Stop and Landmark Book Stores which have a strong offline/online connect? I guess there are no immediate answers. Large Department Stores in the West have a café within their store so bored husbands and boyfriends could have a cup of coffee or a mug of beer while their wives/girlfriends are shopping. These days, my friends who live in the West tell me that Wifi is almost free everywhere around, which prompts them to choose a location for their need – be it a restaurant, a café , a book store or any other format of Retail. In India, unlike in the West internet bandwidth is minimal and the speed is not all that great. Cost wise too, it isn’t worthy for most Retailers to offer it free especially for those shoppers who just pass by and not really spend at their stores. Bangalore International Airport, where I worked many years ago was the first airport in India to offer free wifi for one hour to passengers passing through the airport. And most airports in India follow the trend albeit for a shorter duration. Atleast, large Indian Retailers should try this concept. With increased penetration of smartphones and tablets, there is abundance usage of data these days. Lousy 3G speeds by most Indian mobile networks mean an alternative connectivity which is what wifi is all about. Facebook and Twitter updates by the minute are not uncommon for those who are hooked on to their devices.

It’s just a matter of time that free wifi would become the thing of the day. Even now, I am sitting at another airport lounge while transiting from one city to another. And yes, this article would be published using the free wifi. Stickiness, I would say that I visit the lounge as often as I could, and just because of the complimentary boring food. If only the Lounge was more exciting with various marketing promotions other than the TV which is blaring music and bollywood gossip from one leading Indian channel just because they probably provide free Televisions!

EMIs are a way of living for the nextgen

I am not too surprised to see the two main distributors for Apple in India, namely Ingram and Redington jointly releasing full page Ads to promote the iPhone 4S and iPhone 5 in daily newspapers. There has been a huge Marketing blitzkrieg in this regard since Jan. 2013. No wonder, sales of Apple’s latest smartphones have seen a jump of over 100% across various Retailers such as Croma, EZone, etc. Until the launch of iPhone 5, Apple used to bundle their newest smartphones exclusively with mobile operators such as Vodafone, Airtel, Aircel, etc.Which means if a customer is not on one of the networks that has been bundled with, then he cannot buy the phone (one has to buy it with a particular network and then use the number portability option). All these changed with the launch of the iPhone 5 in India. During this time, Apple decided to release their phones to the broad trade channel through its two national authorised distributors mentioned above. Which meant that the iPhone 5 was readily available across major retail stores in the country right from its day of launch. Although there was an initial demand-supply mismatch, this was corrected soon. Apple executed the same flawlessly once again with the launch of its iPad Mini. What was more attractive is that these smartphones are available at attractive EMIs, for as low as Rs. 2,376 per month for 12 months along with a down payment of just Rs. 16,990/- The recent newspaper ads have drawn thousands of footfalls to Retail stores that stock and sell the iPhones. Although Samsung started this trend in 2012 for its Galaxy range of smartphones, the scheme has become more popular thanks to Apple’s initiative.

 

Recently, India’s top car maker Tata Motors launched a marketing promotion for its Nano range of cars. The Tata Nano which was launched with much fanfare a few years ago remains to be the cheapest car in the world with its base model touted to cost less than USD 3,000 (Rs. 1.50 lakh). The car didn’t take off well initially due to its stripped-down features but a prolonged grim economy forced fence-sitters to downgrade their purchases and this car seemed to fit the bill as far as a comfortable city drive was concerned. However, sales had come down still more over the past months. From 9,000 – 10,000 units a month in its hay days, sales have been hovering at about 2,000 units a month of late. So, the company decided to launch an EMI Scheme which is hassle free. At a equated monthly installment of Rs. 8,333 per lakh, a prospective customer can swipe his credit card from various banks such as ICICI, HSBC, Axis, Standard Chartered and Kotak Mahindra to avail this offer across dealerships. Add another Rs. 6,500 for fuel every month. Effectively for Rs. 15,000/- one can own and drive around comfortably with a family of four in the city in a small car such as the Nano. The initial market feedback seems to be good although one needs to wait and watch how things go along in the medium term. This is one of the most innovative promotions that the Indian Automobile industry has seen in recent times.

The younger generation which lives on what they earn today rather than save boatloads for future is spending happily on such promotions. I have personally observed so many of them earning less than Rs. 6-8 lakhs pa carrying such smartphones and showing off their ability to own them to those around. After all, their cost of acquisition is as low as Rs. 3,000 per month. They are probably cutting down their spends on other discretionary spends such as travel, food, cinema etc and rather investing on a wonderful smartphone for themselves. For a large middle class that thrives on day-today commute on their two-wheelers (the size of the Indian two-wheeler market is over a million vehicles a year), it is always a dream to travel in a four-wheeled vehicle, atleast on holidays and weekends when the entire family is outing. And such promotions actually help satisfy their needs. What needs to be seen is how long these promotions could sustain. For example, the typical target customer who would buy a Nano is one who is in the lower middle class and with the car being his first four-wheeler. But would he have a credit card to buy the car? If yes, would he have a credit balance of a few lakhs in his account, given that the entire money would get blocked if he had to swipe his card for purchasing a car and may not be left with any credit for other regular expenses such as monthly grocery, fuel, dining, etc.

Whichever way, the next-gen is hapy to live on EMIs. And Retailers should be happy!

Consumer Spend – a loot at Airports

Recently, the Chief Minister of Tamil Nadu launched a populist move in Chennai to commemorate her birthday – a Government funded canteen that serves one idly (rice patty) for Re 1 (1 USD is Rs. 53 approx.) Yes, you read that right, One Rupee for a Idly. The move is aimed to cater to the needs of those under the poverty line and the poor, the working class such as drivers of autos, taxis, trucks and so on. This was a way Amma (mother) as she is fondly known as, appeased the vote bank. It is not sure how much this scheme is going to cause to the State. Ofcourse, these so called welfare measures are out of the state’s coffers – tax payers money. It so happened that the very next day since this scheme was launched, I was travelling through the Chennai Airport which is managed by Airports Authority of India, a government body which also operates the Airport in Kolkata. These two airports faced stiff opposition by the unions when the Ministry of Aviation privatized the other major airports in India in 2005 located at Delhi, Mumbai, Bangalore and Hyderabad. These six airports contribute to over 70% or more of the total air travellers in the country which is estimated at 110 million pax per year. While the Kolkata Airport has been recently renovated at a cost of Rs. 3,000 Crores, the Chennai Airport has been renovated for aorund the same cost and was inaugurated recently although the terminal buildings havent been opened up to the public due to lack of passenger amenities, a move that the Commercial Department of AAI conveniently seemed to have forgotten while planning the terminal building.

I was taking an early morning flight, a long one that too to Ahmedabad via Mumbai, an arduous 5 hour journey. And I was flying Spicejet, India’s most preferred low-cost airline which doesn’t offer complimentary meals on board, rather “sells” Cashews and Sandwiches at exorbitant prices. So I chose to have a quick breakfast before the Security Check for which I had quite some time. I walked up to the nearest F&B Kiosk which was serving hot food items. I ordered a plate of idly consisting two pieces and a Vada. The damage was Rs. 100/-. Yes, you read that right. Most passengers like me had no option but to pay such steep prices at airports to quench their hunger and thirst. What was more surprising is that the staff do not issue bills for every item sold on their own. Rather, the consumer needs to insist one of they really need one. I demanded one. And bingo, the staff tore a piece of paper from the manual bill book which had pre-written “Breakfast” in many of the bills. A closer look and the TIN numbers which are mandatory were indeed printed. But VAT or Value Added Tax and other charges such as Service Charge, Service Tax, etc. were not explicitly mentioned in the bill. I couldn’t blame the staff because they were just doing their job. I quietly paid the bill and proceeded to the aircraft. Afterall, this is not an isolated case at Chennai Airport. Almost all airports managed by AAI have the same issues more or less.

So, why are airport food products so expensive? To begin with, it’s the way the places are leased out by AAI. They follow an age-old practice of an out-dated tender system wherein those who qualify should propose a base price for the said location. H1, which is the highest quote gets selected. The tender period is usually for 3-5 years and doesn’t specify the architectural look and feel of the outlet. And most often, there is no seating option that is provided. This is completely contrasted by the approach taken by private Airport operators such as GVK and GMR Groups which manage Mumbai & Bangalore and Delhi & Hyderabad Airports respectively. The chosen partners need to submit and discuss schematic drawings and layouts with the airports and thereafter finalized. The design is not just contemporary but also functional and convenient. During my tenure at Bangalore Airport (BIAL) in 2006, we launched a global tender for Retail and F&B which attracted top players in the world to compete on a level playing field. The selection process was touted as one of the most transparent and efficient processes by international media which tracks Travel Retail.

AAI’s outdated tender system is the mother of all troubles. Coupled with it is its terrible space planning with outlets spread haywire here and there. Add to it, unqualified commercial guys who have no clue of global best practices and arbitrarily follow the H1 route to choose partners. It is quite obvious that they quote higher fees in the tender and therefore over charge customers. Branded players like Café Coffee Day, Subway, Pizza Hut, McDonalds, etc who also operate at airports follow a corporate pricing policy and provide bills with all statutory requirements. Due to high entry costs and related operating costs such as complimentary snacks and beverages to airport staff, most organized players do not even venture into this arena.

A popular Indian Aviation Entrepreneur who successfully started and shut a low-cost airline often used to quip that there is a private mafia now in the form of private airport operators. But then, the government operated airports are no better.