Gift Cards - The talking point in Organized Retail

Retailers in India have already started the concept of co-branded credit cards. A current example would be the aggressive salesperson in any Spencer’s store showcasing the HSBC-Spencer’s offering.

Another vivid example would be the Future Group credit card which had TV ads across channels for quite some time. The response though had been lukewarm.

With organized retail sales looking downward over the last year, especially in Q3 and Q4 of 2008-09, these offering had disappeared from the table. But, Q1 & Q2 of 2009-10 have been particularly good, with around 15% growth in the sector on the back of a successful festive season.

The new buzz word that is coming up in Retail circles is the Gift card, which is basically gift vouchers/certificates in the form of smart cards.

They will be profitable for retailers as it will breed loyalty through repeat purchases. There will also be a significant portion of card value (10% in America: Economist) which are never redeemed.

Retailers in India are still nascent when it comes to maintaining a comprehensive customer database, and this will be a small, yet significant step towards the same.

The future for gift cards will yield many innovatively packaged offerings similar to the trends in America.

A few examples from the Economist:

1) Target: Gift cards that double as wind-up toys

2) Gift cards through email

3) Best Buy: multiple people can contribute small amounts for an expensive gift card to be created

4) Time based gift cards during the day. E.g. Happy hour shopping times for Gift card redeemers

Expiry dates in gift cards will foster consumers to buy within a specified period and this will always help the retailer waiting on the other end. If not redeemed this goes directly into the company’s kitty. But a lot depends on how the retailer will handle consumers who arrive at their store with expired gift cards. A balanced act will go a long way in establishing the customer friendly side of a retailer.

Another interesting trend in America would be the auctioning of such gift cards online. E-bay is estimated to sell 100,000 gift cards every month through the second-hand route. Consumers give up gift cards that they are unable to redeem online at almost half their price.

All this leads to a overall healthy trend for the gift card concept.

Manufacturers are already present in India for smart cards, who are currently in advanced talks with retail biggies.

The advantage for consumers is pretty obvious; a gift card would be the ideal choice for any wedding, birthday and other such occasions.

Volkswagen 'Road-block' for India

“German Engineering, Made for India”
An entire Times of India edition blanketed with only Volkswagen, over and over again as each page was turned on by surprised readers & confused marketers. Confused & in awe only because of the gravity of the money that had been spent for the day, 11th November 2009.

This is the kick start of a 40 crore campaign by Volkswagen India, who have also come up with a Television ad recently, showcasing their brands.

The print ads introduced and appraised readers to the various Volkswagen brands that are currently available (Passat & Jetta) & the ones that are lined up for India (Polo, Beetle, Touareg).

Each brand of Volkswagen caters to a different target group, and the company is hoping that the 40 cr. media spend will help establish all its brands; they certainly got people talking for almost a week now.

The media spend will include print, TV, outdoor & the internet.

Expect the internet & outdoor impact to be similarly innovative-Mudra Group


The 40 cr. question?
is whether this will boost their numbers, which were poor in Oct' 2009. They operate in the very niche top end of the business, which accounts for less than 2% of overall car industry sales. India is touted as one of the growth markets for Volkswagen and they are not that far behind Mercedes or BMW in their numbers. Apr to Oct sales show that they are only around 700-900 cars behind.

The main question is the relevance of such a blitzkrieg campaign in a daily known for being friendly (readers may spell irritating) to full page print advertising. Is this the best channel for a niche top end brand like Volkswagen? Would it do any good if the word-of-mouth continued in the lower floor circles of an office?

Brand building, definitely yes! & a good job at it too, but at what cost, is the 40 cr. question. Meanwhile entertainment galore for readers & marketers alike, let’s hope the numbers look up, while people look forward to the Beetle & Polo hitting the hard Indian roads.

The Coca-Cola University: Parivartan

FMCG companies in India are all looking towards increasing their penetration into rural markets. Coke, the world's largest non-alcoholic beverage company is looking at semi-urban and rural markets as its future growth paths.



The 'Parivartan' program- targeting retailers

Coke's new strategy involves training retailers in a program launched by the Coca-Cola University. In 2007, the company launched Coca-Cola University — a virtual, global university for all learning and capability-building activities.

The company calls this the "parivartan" program (meaning "Change" in English). Shop owners (traditional retailers) are given training on displaying and stocking products well. The goal of the innovative training program is to provide traditional Indian retailers with the skills, tools and techniques required to succeed in a constantly changing retail scenario.

Presentations (including audio/visual technology) in local Hindi language help small retailers (with stores less than 200 square feet in average size) to better understand the concepts involved. Each retailer also receives a Coca-Cola "Certified Retailer" certificate at the conclusion of the program.

The program, which debuted on Dec. 18 in Agra, will equip "mom-and-pop" shop owners with the skills, tools and techniques required to succeed in India's evolving retail landscape. All invited retailers attended the session, which allowed them to learn in a formal setting using leading-edge audio/visual technology and engaging presentations conducted in the local Hindi language.

Here are some of them: print a visiting card with your telephone number; around 80% of your business comes from 20% of your products, so build up visibility for these; try and display posters of discounts; organise a home delivery facilty; be courteous to your customers-SundayET. The content is structured around the four pillars of retail—customer, shop, stock and finance.

And this seems to be just the tip of the iceberg. The programme has covered 20,000 retailers in North India so far. “Based on their feedback we are developing ‘Advanced Parivartan’ that will cover issues like shop layout and location, display, basics of finance, knowledge of credit card transactions, people management skills, among others.

For Coca-Cola it’s a big pie. There are around 12 million retailers in the country, out of which kirana stores account for over 90% of the Rs 7,40,000-cr retail business in India. But a company official maintained that these retailers would not be pushed to stock Coca-Cola products through this programme. Some of these retailers don't even stock soft drinks.

The idea was supposedly born out of a meeting at the World Economic Forum in Davos around two years ago when Coke’s global chief met the commerce minister of India and suggested running the programme in India. Also, as a token of goodwill gesture, an accidental death insurance of Rs 1 lakh is being provided free of cost to all the attending retailers as a protection against any eventualities.

In bigger cities the company has conducted Parivartan programme in classrooms or by hiring hotels. The classroom Parivartan programme has been organised across cities in UP and Punjab -Agra, Ludhiana, Chandigarh, Amritsar, Gorakhpur, Lucknow, Bareilly, Haldwani, Bilaspur, Kolkata, Faizabad, and Rajamundry.

The ‘Coca-Cola University on Wheels’ has also covered small towns such as Hoshiarpur, Mukeria, Nakodar, Phagwara, Nawanshahar, Malerkotla, Barnala, Khanna, Moga, Jalandhar, among others. Going forward in the future, Coca-Cola’s plan is to scale up this initiative by taking it across India.

http://article.wn.com/view/2009/05/03/CocaCola_India_launches_CocaCola_University_on_Wheels/

http://economictimes.indiatimes.com/Features/The-Sunday-ET/Coca-Cola-India-launches-Coca-Cola-University-on-Wheels/articleshow/4477620.cms

http://www.casestudyinc.com/Articles/Coke-Strategy-Training-Retailers.html

http://www.thecoca-colacompany.com/citizenship/news_india_retailers.html

Pepsi's Biscuit Challenge: 50-50?

Parle, Britannia, ITC and now Pepsi. Pepsi foods is seriously contemplating its entry into the 6000 crore plus organized biscuit market. Taste tests are on in various urban markets across India.

They are still yet to come up with an official brand name for their new portfolio. It would be interesting to note if they would follow either a Parle/Britannia strategy or an ITC strategy. ITC typically follows a branding strategy under the umbrella name "Sunfeast". With multiple sub-brands created under this banner. This has been logical for ITC due to its late arrival into this category. A common brand name across its portfolio would ensure better recall among the consumers.

Parle/Britannia have multiple brands that are well established, e.g GoodDay, Tiger, Milk bikis, Monaco, 50-50, Krackjack, Hide&Seek etc. Glucose biscuits have always been a price game with little money being made by each of the 3 existing players. A price increase of even a rupee will involve significant risk with respect to the response that would ensue from the consumers. Hence these 3 companies have been constantly tinkering with their weight/grammage during the period when input costs have risen.

Pepsi would mostly enter first into the salted biscuits category as per their information given to the Financial Chronicle. There are strong household names like 50-50, Krackjack and Monaco in this sub-category. Even ITC is trying to eat into this pie with their Snacky label. Innovation with salted biscuits have included products like Salt & Sweet, Salt & Chilli Cracker, Maska Chaska etc.

Pepsi food's products, locally distributed by Frito Lays include namkeems and finger snacks. Their foray into the biscuits market would be their first across the world, in the various markets that they operate in.

Pespi is already against ParleAgro (separate entity) in the beverages market and head-on-head with ITC in their snacks category (Lays Vs. Bingo) The biscuit market is estimated to register a 10% growth every year.

Pepsi has a well established distribution system in India, made robust by being in the complex bottling business, but whether it would invest huge amounts into establishing their biscuit brand remains to be seen. The other 3 companies are all currently heavily focused on increasing their market size in India. Hence taking them on would not be a easy feat.

We will have to wait and see what kind of response it would get from Organized Retailers, who all have their private labels like Tasty Treats, Feasters etc. But like ITC leveraging on its other brands, Pepsi could very well give its biscuit business a push by leveraging on its very well established beverage portfolio.

The Great Indian Shopping Festival

A target of 700 crores during the 2 week period from Dec 13th '08 to Jan 4th '09, this was how much the Future Group had anticipated. It's true that Big Bazaar is one of the best Marketing success in India, but this festival took it a tad too far.

The number of press ads released were unprecedented. 'Times of India' carried a separate supplement with only Future Group ads, with every page & line screaming discounts. If these didn't get to the consumers, I don't know what will.

e-Zone, Pantaloons, Food Bazaar, Big Bazaar, Collections,Central etc all had % offs. But after a point the Retailer forgot about his customer. I strongly believe in maintaining a distinct identity that each retail brand should maintain because the primary base of customers visiting each of them are different. Future Group created 'Central' and its success was riding on the fact that it was a lifestyle fashion brand. The money rolled in as future group placed it's brands like 'John Miller' near much bigger players and earned higher margins on the same.

Now consumers have started associating 'Central' with the Future Group, whose primary success has been 'Big Bazaar', a discount retail brand, because of the umbrella advertising by Future Group as a whole.

From the Retailer's perspective, creating a property like the 'Indian Shopping festival' would have been a monumental task, whereby the back-ends of various other retailers would have been linked.

This similar to the 'Future group' Credit card which is years ahead of its time, but a concept that would surely pick up in the coming years as consumers realize actual hands-on benefits. This is nothing but credit from the retailer through an indirect route.

Future group may not be the best process oriented organization according to other retailers in the market who might comment that a time will come when Future Group's bubble might burst because of inventory, obsolescence etc, but the fact remains: no one else has managed to hit it big in Retail, at least from the customer's perspective.
They still remain the most flexible retail organization in India. Let us see if the trade-off works.