Plastic Cards – Increasing consumption at Foodcourts

After getting into my Cab, I realised that I hadn’t collected the refund for the prepaid card I had bought at the Foodcourt a while ago. I quickly pulled out the bills to check the redemption and validity – to my surprise, the card had a validity of 365 days from the date of last usage! I realised I would be visiting Delhi atleast 6 times in this span and I would end up at DLF Promenade once again, the  upmarket mall in South Delhi which is the latest darling of shoppers in Delhi. Peacefully, I proceeded towards the airport. This was two months ago. During early Dec., I was in Chennai along with my colleague, the Head of Operations at the Express Avenue, the shocker landmark for Chennai’s conservative shoppers. Cafe Coffee Day operates three cafes within the mall, one each on the first, second & third floors almost on the same latitude. The Foodcourt here also has a plastic card which can be used at all the F&B outlets. Two weeks ago, I was with my childhood friend and both our family members to catch up the newest Kamal Hassan starrer at PVR Cinemas located within Ampa mall in North Chennai. We were just in time for the movie and decided to have a quick grub at the foodcourt (although I insisted people around that we could pick up something within the CCD inside the Cinema!). The place was jam-packed, a Friday evening, with people filled on almost every chair available. Though we were in a hurry, my friend chose to fill in more than what we had anticipated to consume. He said it could be useful during his next visit. Yesterday, I was at Mani Square, an upmarket Mall which opened a few months ago in Kolkata for a quick bite. When I approached the local food counter of Kolkata (Chinese), the guy smiled at me knowing I was a first timer and guided me to the prepaid card counter. Even the KFC doesn’t accept cash and I had to use the card for my favourite Mojito Crusher.

So, what’s with this prepaid card everywhere?

As Organized Retail is evolving and is in different stages of maturity across the cities, Mall developers have come to realise that there is no point proposing sky-high rentals as this would not just be a deterrent for serious players if not forcing them to move out sooner than later, but also have the wrong ones within the mall. So, more than two-thirds of mall developers now charge a Minimum Guarantee or a Revenue Share (on Sales) whichever is higher and to ensure that actual sales are reported, especially at the Foodcourt, they maintain a centralized counter. Customers must first fill currency of whatever denomination they wish to (subject to a minimum, which is usually Rs. 100 and includes a refundable security deposit of Rs. 25) and could then redeem it at any of the outlets in the foodcourt. Needless to say, the balance could be redeemed as and when they feel so. The POS is attached to a central server which records sales on real-time basis. The mall developer or the Foodcourt operator charges a small fee from each of the players for managing the connectivity and maintenance. Even Mumbai and Delhi airports follow the same philosophy to record actual sales.

So, how does it help & whom?

Retailers are immensely benefited as customers do not think too much while they are ordering using a prepaid card; since the card is loaded and there is no cash transaction (and thereby no need to tender exact change), they do not keep track of the exact spends. Also, there is a huge scope of upselling as customers are not really looking at the value of each product versus the money they pay. It helps customers as it simplifies the payment process. Usually when families visit a foodcourt, each member would have their own preferences. Thereby, the same card could be used across various outlets and counters. There is no need to carry cash since the main counter usually accepts Credit Cards. For students who frequent the mall and for employees of Corporates who work close by, it could be a boon as they may load currency in advance and keep using it through the month. It helps the mall developer to keep track of what’s happening across players – it can monitor sales regularly and promote those who are not attracting too many customers. Indeed, it is a win-win-win approach. But it does have its own drawbacks. Since there are too many choices, customers could keep moving and hence Retailers may be losing some of the customers, especially when there are long queues. When there are multiple members in the group, they may have to stand in Q at each counter which may deter them to use the card actively across counters. Over a period of time, if the process gets complicated for whatever reason, customers may avoid such places which may have an adverse effect on the whole area, which in turn would affect the Mall Developer.

All said, I guess this is the way forward to maximise consumption. Once the card is loaded, and usually there would be some residue left every time, shoppers would keep returning to the particular Foodcourt, thereby driving footfalls into the Mall. This plastic card would certainly change the way people consume, just a matter of time till this phenomenon spreads across the country. Given that we sell more prepaid mobile calling cards than postpaid ones, and given Indian consumer’s love to spend cautiously, I am quite sure this would spread like wild fire over time and may even form part of monthly budgets. It is also a great tool for parents to fill in the card and give it to kids instead of pocket-money and a great alternative to add-on credit cards. Soon, many F&B Brands could have such cards that could be used across their chain of stores. Well, these are not just my wishful thinking. I am sure somewhere someone is working on this and very soon, one of my columns would be discussing it. Look forward to. 

Summarising 2010

I read through my own article written exactly a year ago and I was able to realise the positive energy around me these days. Indeed, Retail is back in action and retailers are glooming. Employees of various Retail Companies are busy, scouting new locations, charting exciting Marketing Plans and working towards the best Customer Service possible. After all, consumers are happier too. The first instance where consumers stop spending during a slowdown as well as splurge their excess funds is in Retail and it was quite clear this year. Large Retailers have reported between 15-40% increase in Sales year on year. While the main challenge in 2009 for Retailers was to bring consumers to the Retail stores, it was increasing the wallet-share that was the key focus area in 2010. I should say that most Retailers have been successful in this regard, which is clearly visible basis the current mood in the economy.

The year started off a bit dull, until the union Budgets were announced. Housing Interests once again fell down drastically, pushing the economy at a higher pace. Automobile manufacturers passed on additional discounts and freebies encouraging consumers to buy now, buy more! Apparel Retailers witnessed higher throughputs, largely because the shopping cycles had reduced in the previous four seasons. F&B and Restaurant players witnessed the “bill values” go higher since people were spending more these days than earlier. Large international players such as Spanish Fashion Brand Zara and UK based toys retailer Hamley’s who had earlier shown interest in the Indian market, entered with large stores in Delhi and Mumbai and are expanding across other cities. French haute couture house Nina Ricci and shoemaker Christian Louboutin and Italian fashion label Max Mara are also eyeing India, according to Boston Consulting. Marc Ecko will launch the brand in the coming spring in a partnership with RPG Group’s retail flagship Spencer’s Retail Ltd, which plans to have in place at least five international alliances next year. Yesterday (on 30^th Dec. 2010), Carrefour, the world’s second largest Retailer from France opened its door for shoppers at the most unlikely location at Shahadhara, in East Delhi. "The opening of this first store marks Carrefour's entry into the Indian market and will be followed shortly by the opening of other cash-and-carry stores," Carrefour CEO Lars Olofsson said in a statement. Bharti-Walmart opened a handful of Cash & Carry stores this year at Zirakhpur, Kota, Ludhiana and Bhopal, with a dozen more lined up for the next three years.

Meanwhile, Indian Retailers have been keeping pace with the speed at which shoppers have been marching. India’s largest Retailer, The Future Group has opened several large format retail locations including Central Malls, Home Town, Pantaloon Fashion stores and most importantly, the company’s flagship Big Bazaar. At the India Retail Forum held in Mumbai in September, organized by Images multimedia, the father of Indian Retail Industry Kishore Biyani responded to a question and said “The biggest lesson learnt is we cannot be everything to everyone and have hence aligned our way forward accordingly”. Cafe Coffee Day, India’s largest cafe chain crossed an important milestone in its journey – the 1,000^th cafe and the numbers are growing month after month. Shoppers Stop, Hypercity and Crossword, all part of the K Raheja Group are expanding in a frenetic pace to reach out to the upwardly mobile whose incomes have rose 10-50% since the past year. Spar Hypermarkets and Lifestyle Department Stores are also expanding in their own right. Every Retailer in the country is on expansion mode and the overall optimism seems to be surging high. Airport Retail took a different dimension since the commencement of Terminal Three or T3 at Delhi. The largest airport in India at the moment, the Retail spread is something that’s indeed worthy a case study by itself in times to come. PVR and INOX are determined to entertain more cinema-goers this year with more screens & multiplexes.

Alllll izzz Welll, one of the most popular songs of the year from Amir Khan’s 3 Idiots seems to fit well into the current Retail scenario. Atleast, that’s what everyone around seems to believe! After all, group conviction is the best way to win self-conviction... The year 2011 is expected to be a much better year for Retailers and for us in this business. My overall take is similar although I am personally treading with caution. As an industry, we have committed some expensive mistakes between 2006-08 and we should ensure that same are not repeated. With that, I would like to Wish each one of you a very Happy and a Prosperous New Year ahead. Happy Retailing... 

A curious case of Autorickshaws and Kiranas!

The prepaid queue at the Bangalore City Railway Station was long, but we decided to wait patiently instead of choosing one of the touts who were continuously stalking us. After all, many auto drivers have been waiting patiently notwithstanding the early morning chillness for their turn to pick up a customer at the prepaid counter for a long time. In our city like many others, the night fare (10 pm – 5 am) is usually 1.5 times of the normal and is quite well accepted. So the prepaid fare to my house was Rs. 200/- as against the more luxurious Meru Cab which we took during the onward journey that cost us Rs. 350. While sitting in the auto this morning, I was thinking about need and necessity. At 5am, all we needed was a transportation to reach home safely. During the peak hours last Saturday we had chosen a taxi – we had time at our disposal and didn’t mind paying a bit more for the comfort of a/c during the day time. Is there a lesson or two, I was guessing if one had to compare autos and kiranas. Just after sometime, the headline of a leading English newspaper claimed that 15,000 additional autorickshaw permits were being issued shortly and the total number of such vehicles plying in the city would touch close to 95,000 vehicles!

That’s a lot for a city of size of Bangalore, many would argue. I disagree a bit. It is based on the age-old principle of demand and supply, according to State Transport Commissioner Bhaskar Rao. The power of permit makes the auto driver a ruler. We need more autorickshaws to reduce the nuisance. Liberalising the over-regulated permits will no doubt increase their numbers on road but the good part is that it will also increase options for the commuting public. Auto drivers will have to oblige then, he said. Quite true. In the long run, with personal mobility becoming a compulsive habit and the acceptance of public transport as a sustainable and viable mode of commute, Autos will become more of fillers – running short distances and acting as the last mile connectivity – be it from bus stands or Metro stations while taxis could turn out to be the preferred mode while travelling from home to airport or railway station.

Cut to the real Retail Story. In spite of the increasing number of Organized Retailers, especially in the food, grocery and household segments, it’s quite common to see so many Kirana Stores coming up in smaller neighbourhoods. As is the case of “Bottom of Pyramid”, the consuming class is right there and is expanding its base as well as its propensity to consume. They are moving upwards from the Govt. run – Public Distribution Stores (PDS) to the neighbourhood kiranas whose regular clientele is moving towards neighbourhood Supermarkets, and in turn whose regulars are moving towards the large-format Hyperstores. However, all these consumers, when they need a pack of salt or sugar, vermicelli or Maggi, reach out to the neighbourhood kirana!

The case here is logical and comparable. When the product becomes a bare necessity, consumers would reach out to what’s close by and cheapest as a measure of time – the ubiquitous kirana while the monthly pantry filling or a weekend party shopping would be at a large format organized Super market or Hypermarket. The consumer is fully aware that one doesn’t derive the benefits of organized retail such as bulk discounts, buy one get one, and price-offs at the local kirana, but they know that time is of essence and hence reach out.

I have always remained a proponent of Retail FDI in the hope and faith that it would only do good to Kiranas as well as end users and consumers in the long term. Such anecdotes make our hypotheses stronger.

Long Live Kiranas; Long Live Organized Retailers!