The Changing Kiranawala!

80 Lakh Kirana outlets have been a number constantly quoted in various studies as the first consumer choice for shopping across India. They have distinct advantages that are obvious now; convenience, extension of credit, home delivery & leveraging personal relationships. But threats from outside & inside have ensured that they have evolved rapidly over the last 5 to 10 years.

Outside-threats are of course, the imminent opening up of the retail sector by the Government, with the introduction of 100% FDI in this sector. Opposition or not, perception is that the sheer size of the wastage our supply chain faces currently, will reduce once foreign players are in full-on.

Now, coming to the changing face of traditional retail, there are two aspects to it. One is the adaptation of the Kirana stores in light of organized competition & changing consumer preferences, and the other is the importance with which companies have started treating this traditional channel.

I feel the first aspect is a no-brainer; new Independent self-service formats within Kiranas, computerized billing, stocking niche & imported products, the health angle, a cold storage unit are few of the areas where they have evolved. But the next step is ‘Collective bargaining’ – i.e. when groups of big Retail outlets start creating a semblance of an ad-hoc DC (Distribution center) & start procuring centrally from every big company. They’ll ask for better margins, differentiated service, more visibility solutions; the list will become endless. I’ve seen instances of this concept being tried in a few key metros across India.

Now, lets us examine how companies are approaching this channel. Every FMCG company has realized that if Modern Retail is growing at a phenomenal growth rate, so is traditional trade. The projected numbers from various 3^rd party agencies are quite mind-boggling. Hence focus towards garnering a higher share from within this channel is soon becoming one of the biggest challenges faced by the top marketing minds in this country. 

In my previous article I had mentioned that HUL had already started treating its key Kirana outlets with the same service pack that they are offering Modern Trade. This is one big step towards acknowledging the importance of the oldest channel in this country. Other companies have also started offering differentiated service packs & levels to the top contributing outlets within each market.

Studying visibility as a separate section throws a lot of light on the importance of this channel. Decisions are made at Point-of-Sale; & companies are letting no stone unturned in capturing premium real-estate within these outlets. Shelf level Displays have become an essential part of any company’s strategy, whether they are for a launch, a re-launch, a new communication message, a new variant etc. This fight for this space has automatically made the retailer smarter, whose bargaining power has thus increased significantly. 

But, I still agree that such an important medium for communication is still under-leveraged at this current juncture.

 
To ‘end’ this small anecdote on the Kiranawala, it is very obvious that he/she is a constantly evolving & adapting entity & will continue to co-exist with other formats in many a years to come. The differentiation across outlets within this channel will soon become starker over the coming years, with different clusters of outlets getting formed basis the speed of evolution that each outlet undertakes.

Indian Loyalty examples

As in continuation of the previous post on Retail Loyalty programs: http://fmcg-marketing.blogspot.com/2007/10/loyalty-programs-in-india.html

Pantaloon Retail

• Pantaloon offers loyalty programs for three different retail store formats:

• “Shakti Credit Card” exclusively for housewives at Big Bazaar stores in association with ICICI Bank.

• They only need to show their Big Bazaar bill of more than Rs. 500 and a lifestyle proof like club membership card etc. to use this card (at Food Bazaar outlets too). The card carries no fee and comes with a credit limit of Rs 5,000 with 50 days' credit period.

• Central-ICICI Bank card for its Central Mall customers. Benefits: Reward points and a zero percent EMI option.

• Green card for its Apparel business which has exclusive discounts and privileges with Apparel, perfumes & cosmetics, toys, Planet Sports & accessories. They practice a 4 – tier (1, 3, 5, and 7- Star) approach to cater to different segments.
  

HUL

90% of HUL customers pay with cash. This fact prompted the behemoth to come up with a pilot of a loyalty program to drive consumption and build relationships with customers in this category. HUL test marketed the program in Southern India with plans for expansion.

The program will allow customers to earn points for all HUL products purchased with cash. The points can then be redeemed for rewards including HUL's own products, electronic items or travel tickets. The program will allow the company to track the buying habits of its cash customers, a technique crucial to maintaining market share by targeting low value transactions.

SBI Tie-ups

SBI cards and the retail chain Lifestyle announced the launch of a co-branded card to target

the frequent shoppers. The program offers four reward points for every Rs 100 spent at any of the eight Lifestyle stores, transaction fee waivers and reward points on fuel purchases above Rs 400 on IndianOil and IBP

gas pumps. SBI has also launched a co-branded card with Vishal Mega Mart.

Esprit

Esprit Privilege Card (EPC) has been launched in India as a variant of the company's loyalty card used in other countries. Any purchase at an Esprit store qualifies the customer to

enter the EPC Red Card, which grants cardholders a 10% discount at Esprit stores. Red Card holders also receive alerts to new products, special offers, and previews of seasonal collections.

Customers who make purchases of Rs.25,000 or more during a one-year period are upgraded to EPC Platinum Card membership. Benefits (Platinum level) include 10% off on every purchase made, invitations to VIP events, preview shows and special sales.

Loyalty Programs in India

1.5 million Customers since August 2006 have registered for i-Mint, an innovative co- branded loyalty program with partners like Airtel, Indian, ICICI, HPCL, and Lifestyle-International. In the program, cardholders earn points by shopping at any of the partner companies and will be made available to 5 million by 2007 end.

Similarly, the new Tata Credit Card offers cardholders the opportunity to earn and redeem loyalty points across 18 brand categories through one unit. The card, in association with the SBI card and MasterCard is a partnership of leading brands across all conceivable categories like airlines, books, departmental stores, durable goods, fuel, hospitality, telecom etc. The program is three tiered and features include: global acceptance, free insurance of up to Rs. 3 million, and zero-percent balance transfer charges for up to 75 days.

The above are just two examples of the new age loyalty programs emerging in the retail space in India. Loyalty programs will only get bigger and better with the anticipated entry of international retail giants.

Multi-partner coalition programs are the dominant loyalty model outside the U.S., and these two cases are signs of the accelerated pace of Indian marketing efforts in this arena.

Loyalty programs have been active in India since 1995, when British Airways launched the South Asia version of its Executive Club frequent-flyer program in India. That year, Shoppers’ Stop, launched its First Citizen Club (which has reached a headcount of 644,500 at the end of Q1-2007, one of India’s best known loyalty programs.)

Today, loyalty efforts have penetrated every major vertical: hospitality, travel, retail, telecoms, media outlets, and consumables.

The biggest challenge facing Indian marketers is the one facing marketers the world over: deriving actionable insight from customer data. While the more established sectors of fuel retail, travel are fairly established, most marketers still exist in a patchwork of segments with little knowledge of how to construct, administer and use loyalty programs.

The Indian loyalty industry is still in its infancy as most programs are very much standalone, points-driven or discounting schemes. They haven’t matured to the extent of providing differential treatment at all customer interface points. Without segmented databases, it’s difficult to benefit from a CRM program.