Monday, July 03, 2006

Increasing Sales in a Retail Store - An Indian Context

"Reliance to invest $6.5 Billion in Retail outlets spread all over India" - Voice of America
"Pantaloon plans rapid expansion of its retail outlets in India" -
Businessweek
"RPG RETAILING - THE SUCCESS STORY" - News
"Wal-mart’s Ambitions in India" - Businessweek

Retail sector in India is slowly opening up - and companies are already queuing up massive investments into retail stores all across India. In the next decade, the size of the organized retail sector will be 50 times the current revenues. Already retail sector in India accounts for nearly $1 trillion per year in sales - but almost 95% of this is unorganized mostly run by a local entrepreneur. Chain stores or organized retail sector accounts for only a small fraction of all the goods sold in the country. All this points to a massive expansion of Indian retail sector.

Today, I had been to one of the Indian super markets - Big Bazaar. While strolling along the store looking for things and waiting at the checkout line, I decided to write about the sales strategy of these retail super stores. The overall strategy of all retail stores is to improve shopping experience and encourage customers to buy more. But this strategy can be further be broken down to:

Attract Shoppers and keep them in store

The amount of time a customer spends inside a store is directly proportional to how much they spend. By making customers spend more time in the store, companies can increase their sales. A classic example of this is Barnes & Nobles book stores - they have a coffee shop inside the book store, they provide comfortable lounge chairs and sofas so that customers can browse books at leisure.

Wal-mart increases the time spent inside their store by having a wide range of goods and thus enticing customer to buy from them instead of going to another store.

Indian retailers are slowly getting into this act. The Big Bazaar store near my house has a restaurant, a snack bar and a coffee shop - to encourage people to stay longer and buy more.

Make Merchandise available for customers to touch & feel

It is very important for customers to see, touch and feel the product before they can buy it. The physiological impact on the customer is huge. Super stores allow people to touch & see before they buy. Traditionally, goods in an Indian stores were out of bonds for the customer. Customer could not touch and in most cases cannot even see the product before buying. This is now changing - superstores allow customers to see, touch & feel the products before buying. But Indian superstores prefer to have an attendant to help the customer in checking out the products. In many cases, the attendant is there only to help and refrains from making any suggestions - thus enabling the customer to take their own decisions.

Superstores must desist from keeping things out-of-reach of the customer - i.e., placing goods on the top of the shelf where customers cannot reach or keeping goods lockup with no store attendant nearby. If customers cannot touch/feel the products, they will resist buying it.

Make merchandise easily to find

Customers don’t like to hunt for products. Having all products clearly classified and displayed increases sales. For example, all Wal-Mart stores have a similar layout so that customers can directly go to the product they want to see & buy. Many big stores such as Macy’s, Dillards, Sears, Home Depot, Costco, Metro, Lowe’s etc., have a map of their store displayed prominently along with big sign boards. Indian stores have been slow to catch-up with this trend. Till date - I have seen only ‘Shopper’s Stop’ display their store layout. Other chain stores do not even have sign boards.

Create a route for customers to follow within a storeCustomers tend to slow down once they enter the store. Retailers can then utilize this by organizing the store in such a way that it
encourages customers to wind their way all through the store, see/feel different things before they proceed to the checkout counter.

Ikea is the classic example of this strategy. The Ikea store is designed in such a way that it encourages the customer to walk through all the departments of the store - and that encourages customer to buy more by reminding them of the things they need, or my making them buy things on impulse.

Indian retailers are yet to catch-on to this concept. Most Indian retail stores are space constrained. Even the biggest stores in India do not have enough space necessary to create a winding path for customers to follow.

Make Checkout Easy

Once customers have bought the products they need, they are eager to pay & leave the store. Customer patience at this point is very low. Retailers have multiple checkout counters to address this issue. Departmental stores have their checkout counters distributed all over the store to prevent crowding at the exit.

Another trick to increase sales is to prominently display magazines, chocolates, candies etc., at the checkout counter. These are high margin goods which people tend to buy on impulse. Shoppers with kids are particularly susceptible for this tactic.

Indian retailers are yet to catch-up on the customer service aspect at the checkout counter. Most Indian retail outlets are space limited - as a result, very few checkout counters are provided. This results in long lines and lost sales due to customers walking out without buying - because of the long wait. My personal experience is that I avoid Big Bazaar or other super stores on weekends & evenings. Instead I prefer to buy things at the convenience mom & pop stores instead. All this accounts to lost sales for the superstores

Men & Women have different shopping habits

Men tend to walk directly to the required shelf - if the product is not on the shelf, they tend to walk out. Men rarely ask for help from the store attendants. If the required product is not seen in that store, they move on to another store. This results in lost revenue. Savvy retailers know this behavior and in Home Depot, a attendant always makes sure he asks the customer if he found everything he was looking for. Note that the store attendant has to be proactive when dealing with male customers.

Women need more space around them while shopping. Women tend to avoid crowded stores or stores with narrow isles. Departmental stores such as Macy's, Dillards & Sears have learnt this well. The ladies section of the store has more space around the merchandise - when compared to men’s section.

Indian stores are yet to learn & implement this principle. Since space is a major constrain for Indian retailers, stores tend to be over packed with merchandise - leaving very little room to move around. As a result, many women prefer to buy at the local convenience or "Kirana" stores instead of the super-marts. This represents lost revenue for the retailers.

Closing Thoughts

As of today, organized Indian retail sector is in its infancy and companies are stumbling around - making mistakes and learning from it. However, the retail sector is all set for a dramatic change.
Retail sector in India is on a verge of a drastic revolution. Country’s legislation currently prevents global giants like Wal-Mart, Tesco, Costco etc. from entering Indian market. However this period of protection is being well utilized by Indian firms - RPG, Pantaloon, Reliance etc., Indian retailers are slowly learning the tricks of the trade and investing in the required retail infrastructure.

5 comments:

shweta said...

hello sir
u did a good job. with reference to ur article i must say u mentioned here unorganized sector in india is about 95% but it is 97% has organized sector is 3% only for this u can refer icwai.org or the magzine too. next is u said about sales is proportion to the spent in the srores means more time spent more sales but i think indians r much smarter than others they know what they have to buy and how expensive these stores are so i think they went there just for type pass and may be very short buying or can say limited buying.
and if u can plzz meantion some datas too.
thanks
god bless u

navdeep said...
This comment has been removed by the author.
navdeep said...

hey
i work in tommy hilfiger store pune. i totally agree wid ur views. one more thing i would like to add for increment of sales is i think v should not pressurise our staff for sales. the workin culture should be casual. By this the attendent will b relaxed n can put more potentials.

cheers...!!!
Navdeep.

Ashwin said...

Hi
I think this post comments will surely going to improve sales in my store
& and Im gone try each nd every thing mentioned in blog.

CHEERS
ASHWIN

Shoping mall consultant said...

Nice blog about the
retail stores in india
. The post is very informative.
Thanks for sharing the post..