Monday, January 3, 2011

The Rocket Science of understanding “consumer INDIA”

 Science of shopping: The Indian context
Real innovations are usually hard to find. There are plenty of tomes that have been written about innovation. It means two simple things: Sharp consumer insights backed by courage of conviction. Of these, the latter is usually just as important in India. Would you agree?

Way back in 2001, Kishore Biyani tried his hand at big-box retailing. Till then, most retailers had stuck to the department store format — or opened supermarkets, particularly down South. In Kolkata, Biyani opened his first Big Bazaar, a soups-to-nuts hypermarket. Within the first week, Biyani knew that he had found the Holy Grail. In the very first week, the store pulled in one lakh customers generating a daily turnover of Rs. 1 crore on some days. “I’ve found the pan Indian model of retail,”. He was right.

An Irishman when asked to define trousers gave the following reply, “'trousers' was singular at the top and plural at the bottom!”. It also holds true for consumer India. From the top we are a one billion capacity consumer base, but when seen through multiple lenses we do find a great deal of diversification. There are many aspects like the demographic, cultural and the social trends and identifies the strategic themes and approaches that businesses must think about when addressing Consumer India.

Let us consider two identities, Balwinder Singh; a farmer who has devoted his life in agriculture to feed his family and himself. The second one would be Sumit Arora; an investment banker and an alumni of ivory league B-school. Now how important is the word SENSEX in Balwinder’s life, the answer is very simple… “zero”. Whereas for Sumit it’s a part of his bread & butter. Sumit again is least bothered if the monsoon delayed by a month or so, but ask Balwinder, his whole livelihood may change if there is a delay in monsoon. I quoted this example to brief you about how diversified India is as a country.

Keeping all the above aspects into consideration, imagine the amount of pressure various companies would be in, in order to make the consumer feel the tempt to buy its product. The bargaining power of consumer India is so high, that a small mistake could prove fatal. But still the companies fight & fight with one another and leaves no stone unturned in gaining consumers attention.

“Retailing” is the word which caught up pace in last three to four years. The events of the last 15-18 months have provided a steep learning for the retail and consumer product industry. While the last decade (2000-2009) has seen significant addition to consumption and retail market, it is expected that consumption is likely to double in India over the next 5 years, (nominal growth of Rs 33.75 lakh crore). There is going to be significant changes in the overall consumption basket hence brands in low involvement categories would be under the increasing threat of commoditization. Profitable growth would be the emphasis for retailers and investors in the time to come. We expect that in the next 5-10 years, the scale of business opportunity and pace of change would be fundamentally different from what it has been in the past. This calls for almost every company to go back to the strategy drawing board and develop a vision for the next decade in order to emerge as a successful player in the consumer and retail sector. Companies have switched gears and are targeting on this sector to maximize the sales & to brand them to the core. Important thing to consider here is that, out of all the footfalls generated how a company maximizes on its objective.There is a science involved in this. Now the brand manager of the company needs to understand this science to help the sales figure grow at a brisk pace. This science is well explained by Paca Underhill in this book “The Science of Shopping”. The book is divided into three parts: the mechanics of shopping – these involve how customers react to the physical layout and the staff activities in the store, etc; the demographics of purchasing – this part deals with different behaviors of segmented market based on sexes and ages; and the final part engages in the dynamics of shopping – how shoppers respond psychologically to the placement of merchandise, the packaging, and other product features

According to Paco;

1. The retail environment must tailor fit to the physical and anatomical abilities and other needs that are common to all people. Where shoppers go, what they see and how they respond determine the very nature of their shopping experience. In other words, build and operate the retail environment that fits the highly particular needs of shoppers and you’ve created a successful store

2. Underhill went all the trouble of getting his facts right through practical research studies such as observing actual shoppers’ behaviors and talking to the CEOs and retail managers. The result? Consumer behavior + economics = profitability.

3. Shoppers and potential customers have certain ways of walking through stores and how they look at the visual signs. They use the five senses and they want verification with their whole body before buying a product. If you understand such behaviors, you acquire huge competitive advantage.

4. Women and men shop differently. As quoted from the book, “men are from Sears’s hardware, women are from Bloomingdales’”. Men are likely to go into a store, look at a large shelf of items, pick one, and quickly leave. Women on the other hand are actually more information-intensive, reading the label before making a purchase

If we juxtapose the concept given by Rama Bijapurkar in her book “We are like that only” to that of Paco Underhill’s “ Why we buy”; we can say that things in India can be summon up if the companies have a thorough understanding of what exactly a customer wants and what factors influence him to take a decision. Easier said than done, companies are still finding it hard to understand this.

A consumer doesn't take anything away: he doesn't actually consume anything. Giving the same thing to a thousand consumers is not really any more expensive than giving it to just one.

……. “Linus Torvalds”

Blog written by "Anurag Chatterjee"
MBA Student
Mumbai Business School

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