L for Learning - from The Chennai Silks Fire Incident

Chennai’s T. Nagar, which is world-famous for its shopping hub has been in the news for a wrong reason since the past few days. One of the largest Retailers from Tamil Nadu, The Chennai Silks’ retail showroom had a minor fire on the wee hours of Thursday, 31^st May 2017. And gradually the fire spread all through the building eventually burning the entire building down. The building constructed over seven floors had a floor-plan violation and a case is pending in the Indian Courts for a long time now to decide whether their violation was acceptable or otherwise. The Ministers, Corporation Officials and others in the Government who were hand in glove all this while have distanced themselves suddenly and alleging that the Retailer did not take adequate measures which led to this tragic incident. Fortunately, and as per media reports, no one was injured nor any casualty was reported in this tragedy since the fire was first observed at 4.30am and apparently the Fire Tenders reached by 6am. It had taken about a day and half and over 100,000 litres of water to douse the fire completely. As I write this column, the Government has decided to demolish the building as a safety measure for the entire area – including residences on the rear side as well as the hundreds of shops around this structure.

This was a nightmare that I have envisaged over the past 20 years of my active life in Indian Retail and this sad event actually occurred which I am unable to come to terms with. The callousness of business houses as well as the attitude and apathy of the officials in allowing such illegal structures without adequate safety norms, especially fire safety, is to be abhorred.  How on earth can a seven storeyed structure come on up a narrow 50 feet road and which has a flyover right opposite it’s fascade? No wonder the Fire tenders were unable to do much due to lack of space for this purpose which is one of the prerequisites of seeking approvals while constructing such a large structure. And a minor fire couldn’t be doused by the 14 staff who were in the shop at the time it occurred goes to show how much importance some of us Retailers give to fire-safety norms.

It is being widely discussed on social media through messages on Whatsapp that the Retailer paid Salaries exactly on 1^st June to its employees and also creditors were paid their dues. As a retail chain of 50 years with 17 stores across 14 cities, I would expect them to have these simple systems and processes in place. While I respect the fact that the Retailer went about disposing it’s duties, how would the Retailer compensate the loss and livelihood of thousands of people involved in their businesses who have their outlets in and around the building where tragedy stuck? The Secretary of the Association of Shops in T. Nagar pegs the loss at Rs. 50 Crores per day. While the Retailer itself would have insured for the stocks, property and losses, who will compensate the losses of others who have been disturbed by this incident?

To give you a perspective, the Sales turnover in and around Usman Road, T. Nagar is pegged at about Rs. 18,000 crores pa. Yes, you read that right.  It’s not just the sheer volume of sales that occur here but the livelihood of the people who are part of the ecosystem here. Will the Courts take a cognizable view in this front and punish those guilty and set an example? Time will tell.

K for Kleptomaniacs

People who steal at retail stores are otherwise known as Kleptomaniacs. Store Pilferage, as it is also known accounts for about 10% loss on Turnover each year across Organized Retail in India. Worldwide, the numbers vary but is perhaps the highest only in India. From shaving razors to condoms to shoe laces to mobile phones, people steal anything and everything from retail store shelves. For Retailers who make a paltry margin on Sales, they lose their whatever little profits they make because of such losses. It is estimated that in 6 out of 10 such cases, the store employees are involved in store thefts.

Kleptomania is a disorder among several people in the world. It is the urge to steal a product especially from a Retail store. There are various reasons why people do so. Here are some key points;

Ego Trip: Customers steal at Retail Stores mostly to satisfy their Ego trips. They may even steal items that are not required for them or someone they may know.

Bet with Friends: This happens most often, especially among the younger lot when they place bets among friends to bring a prized catch from a Retail store.

Need Vs. Want: Many times, the person who is stealing may have a genuine need for such a product and may not have the means to acquire them lawfully.

Compulsive Urge” At times, for kleptomaniacs, it’s just about stealing something from somewhere which may have less or no value at all.

So what should Retailers do about it?

Worldwide, Retailers are fighting a losing battle against Kleptomaniacs. For each case that gets caught, there are liberals and human rights activists who fight for the Kleptomaniac’s justice. Things are worse for juvenile offenders. In most cases, the Retailers simply ask the person who steal to just pay the amount of the products and leave the place. A few of them take law unto their own hands and provide third-degree treatment by getting physical and abusing them. In a few more cases, the local police is called and the person is handed over. Sadly, there is no specific law in India against kleptomaniacs. This keeps the Retailers worried all the time about what action must be taken against them.

Quick Fixes;

CCTv: Retailers may install CCTv cameras across the store. However, this is just a deterrant. A mere signage that the store has CCTv cameras or even dummy cameras usually deter potential customers who want to steal to recede.

Watchful Eyes: The store staff must be watchful all the time and keep looking for those who may have come to steal the products

Strict Policy: A display of the policy against Kleptomaniacs may again deter them to avoid stealing, such as causing public embarrassment through photos.

J for Jacking up Prices

Worldwide, it’s a common practice for Retailers to increase the “Selling Price” of products and then offer a huge discount to Customers. This works well in most countries where there is no MRP regime – Maximum Retail Price. MRP is fixed in certain countries like India and even has an Act passed by the Parliament. According to the MRP Act in India, any product that has been packed and sealed must carry an MRP – a price that’s the maximum fixed for that product. The manufacturer or the seller is free to fix the price but there are a lot of governance issues around this. For example, a product that has to be sealed must go through certain formalities with various Government Departments. Although prices keep fluctuating from time to time, especially for essential items such as Grocery, the Retailers can keep changing the price but after prior information to the concerned Government Authorities.

A packed product could mean a premium shirt from Louis Philippe or 1 kg of Rice or Atta and everything in between. This applies for Cars, Bikes, Consumer Durables, Alcohol, Packaged Drinking Water and almost everything that can be packed and sold. However, there are exceptions for Fruits & Vegetables, Meat, Flowers, etc. which are not covered under the MRP guidelines. Therefore it is quite common to see Organized Retailers playing around with the F&V category which is not only demand & supply dependent, but also on various other external factors such as a Traders strike or a Truckers strike.

Small Retailers, especially the semi organized ones do not follow the MRP guidelines strictly. I had an experience just yesterday at a premium Toy Shop in Chennai. Being summer time with holidays for kids, I visited the shop to pick some board games and toys for my kids. There were items which were pegged at high discounts – 30% - 50%. But most of these items didn’t have an MRP. It seemed most of these items were being imported by the Retailer directly from the Manufacturer or an International source. And therefore had the liberty to adjust the prices. Interestingly, the law allows Retailers to do so. The prices can be arbitrarily changed for most products (except alcohol which is governed by the State in TN) by the Retailers and hence the practice of “jacking up prices” is quite common during such times.

While there was no real discount to the customer, it was a sort of a “made-up” discount that the Customer is expected to perceive as a value offering. With the increasing availability of products, customers are quite aware of such malpractices and have taken the Retailer/Seller to the courts. One such recent example was how a consumer in Hyderabad won a case against INOX multiplex for selling Drinking Water above Market Prices although with a different price printed on it. The Court was of the view that the same product cannot be at different prices in different locations and the Customer won hands down.

So how does the Retailer manage to still offer huge discounts (especially to match online prices) and still be profitable? Indeed, it’s a tough call. With markets still in a limbo, it has been a challenge for Retailers to survive but they come up with various tactics such as product diversification or even a new format. Some have pulled down their shutters but the show goes on.